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Daredevils of the law, strategic investors pin their hopes on loans

2022-11-01 12:07:19Fokus SHKRUAR NGA OLA XAMA

Daredevils of the law, strategic investors pin their hopes on loans

They received public property for free, but 80% of the companies, which have benefited from the "strategic" status, do not have enough capital to realize the investments. The documents provided by Investigative Network Albania also show that more than half of the strategic investments, approved in the field of tourism, have submitted bank loans as guarantees to KIS (Committee for Strategic Investments).

The family of Sose Dhima has been waiting for 3 decades for the registration of a plot of land on 1 Maji Street in Himara Municipality. It is about 3300 m2 of land, where he cultivates olives. Today, Sosja lives on the edge of poverty with her modest pension and that of her daughter, who is ill.

Even after 30 years, as at the doors of the municipality and the Cadastre, the elderly woman from Himara says that she does not have an answer, if she will be provided with the ownership certificate.

The 73-year-old woman explains that the land has been part of her husband's family since 1936. Then it was divided with Law 7501, where again her family was the beneficiary, because her sister-in-law had worked in an agricultural cooperative.

" My sister-in-law made a deed of donation for us, so that we would not be left without property, as we have an understanding with each other. Although we have all the documentation in order, I don't know why they don't register it for us ", Sosja complains.

The biggest concern she has is with a neighbor of hers, who has made several attempts to take the plot from her.

"It is a neighbor of ours who wants to get the land, but has submitted documents that have nothing to do with the coordinates of our plot. It has confused the north with the east and the restrictions of the owners have no relation to those who border our land. He goes every day and collects the olives I have. Although I have complained to the municipality, they have not given me any solution", says the elderly woman, left alone.

Disappointed with the way the institutions treat the real owners, Sosja asks the state to give her justice and the Cadastre Agency to register her property.

"Artan Lame came a week ago, but gathered only 10 people, none of us were there. Before him were the thieves, the ones who stole the entire Meadow. I want to get my plot, collect the olives, because I live with them and my daughter, who is disabled, has mental health problems", she concludes.

Contacted by Investigative Network Albania, officials of the State Cadastre Agency said that the documentation has been reviewed and specialists are working to update the area.

"Since the initial registration has not been done yet, some patience is needed," they said. Quite unlike Sose Dhima, who even after 30 years is not able to recover a property that belongs to him since 1936, dozens of Albanian and foreign companies have been able to benefit from thousands of free meters in the pearls of the coast. This "gift" was given to him through the status provided by the Law on Strategic Investments.

Two other natives of the Municipality of Himara, Milo and Florenc Gjikuria, benefited from 9157 m2 of state land on the coastline of Gjileka near the village of Dhërmi. They rented this large property for 1 euro for 99 years.

The "golden egg" in this case too is the Law on Strategic Investments. Gjikuria Company applied to the Strategic Investments Committee to obtain the status of "strategic investor, with assisted procedure" for the construction of a hotel with 150 rooms, including restaurants, bars and SPA center. In total, the area to be built is 12,157 m2 and only 3000 m2 are private property of the company that will invest in the project worth 10 million euros.

On August 29 of this year, the Council of Ministers authorized the transfer of cadastral area 1739 for real estate, owned by the Albanian state, to the Real Estate Fund for the Support of Strategic Investments.

This is not the only strategic status that the Gjikuria firm has managed to obtain. A year ago, the Committee of Strategic Investments granted the status of "strategic investor, special procedure" for the Coast to Coast project. The construction of 3 hotels, residential villas, the renovation of 40 traditional houses and the construction of a farm with agricultural products are planned there.

Coast to Coast will be spread over a total area of ​​20.9 hectares in the village of Gajtanitika and Perivolo in Himare. The spaces of the state plots will be rented for a symbolic 1 euro as a strategic investor in this area. The transfer of the land has not yet been made by the Council of Ministers, as the State Cadastre Agency must complete the initial land registration once.

For both projects, Coast to Coast and White Roads Hotel, the firm has promised to invest 66.9 million euros, which will be taken as loans in Albanian banks.

INA MEDIA learns that in order to fulfill the condition of the financial guarantee of the project, the company has submitted a confirmation from Credins bank, where the value of a loan of 3.6 million euros and its financial statements have been approved. The profit of the company in 2021 was 3 million euros and the capital of the firm is 2.3 million euros.

The law on strategic investments requires that, the investor who receives the strategic status, guarantees at least 10% of the investment value. Although 10% of this value is provided by the bank and a part from the capital, it remains unclear where the other 60 million euros will be found to complete the project; this is also due to the fact that the company is exposed to a union loan worth 25.6 million euros in three banks, OTP, Intesa San Paolo and Tirana Bank. The Gjikuria company itself did not respond to a request for comment by the time of writing.

On the other hand, in a response to Investigative Network Albania, the Investment Development Agency justifies that the law itself "requires that companies choose to guarantee only 10% of the investment value through their balance sheets, loans from banking and financial institutions foreign or Albanian with high reliability, criteria that have been applied by the Strategic Investments Committee during the examination of the requests", this agency explains.

Just like this firm, dozens of other companies, which have been awarded the status of strategic investor in the field of tourism, have acquired thousands of meters of land in the coastal areas of the country. The data provided by Investigative Network Albania through balance sheets, confidential documents and part of a request for information addressed to the Investment Development Agency, show that the value they have in capital, assets or reserves of the balance sheets, does not cover the investment they have undertaken to perform. More than half of them have submitted loan agreements with banks or insurance contracts with private insurance companies as guarantees, but again this value covers only one tenth of the project.

The law, tailored for businesses close to the government

The Law on Strategic Investments, approved in 2015, aimed at absorbing foreign companies and their money in Albania. It is enough for strategic investors to invest at least 5 million euros and employ 80 people.

Accused from its inception of cronyism and favoring a small group of businesses, the Law on Strategic Investments rewards these VIP investors with free land for the construction of the project, reduced income tax and VAT, as well as 0 infrastructure tax.

Those who invest in tourism, identified as one of the priority areas of this law, also benefit from the use of the coasts, as well as support in public infrastructure: roads, sewers, energy network and water supply.

The law charges the Strategic Investments Committee with many powers, which is led by the prime minister and members - important cabinet ministers - who decide who will receive and who will be denied this status full of benefits.

Also, the law leaves room for companies with modest balance sheets and that do not justify the value of the investment, to receive a letter of interest from the bank for loan financing and remain in the hands of the Strategic Investments Committee, whether or not they deserve the status.

The law provided that the deadline for submitting requests for investment entities was December 31, 2018, but the government has so far postponed the deadlines of this law 5 times. Currently, this law extends its effects until December 31, 2023. The responsible institutions have justified this procedure with the fact that the Ministry of Finance is in the process of drafting a special draft law "On investments".

Contrary to the purpose presented in its introduction, in practice this law turns out to have been used as a clientelistic mechanism, to give big favors to businesses with family ties to the government and that do not guarantee the progress of the investment.

Doubts about clientelism and favoritism increase even more, if we see that the number of projects and the value of investments by foreign investors is completely modest.

The data analyzed by Investigative Network Albania show that in total the Committee of Strategic Investments has granted this status in the sector of accommodation and tourism structures for 24 projects, where in 22 cases the companies are Albanian and in 2 cases they are foreign, related companies with local companies. Of these projects, 1 of the statuses was given "conditionally", since no financial guarantee was presented, in 10 projects a bank guarantee was presented, covering only 10% of the investment value, which is the minimum condition required by the law, in 3 cases the companies have submitted a guarantee agreement with the insurance companies and for 10 projects the balances of the last 3 years were presented.

"Albanian companies do not own such large assets in the financial statements, as they report in these investments, with several tens of millions of euros. What makes a difference in the quantitative part is that the proposals made by investors exceed these values", says the expert, Eduart Gjokutaj, from the Altax center.

"The essence of the law was to provide foreign firms and capital that had the expertise and workforce to develop sectors that would move the economy forward. This was the principle, but, in the conditions when the government wanted to empower its clients and family members of political leaders, it diluted these rules and created paths for their capital or its source", - argues the director of the Research Center. Economics, Zef Preçi.

Strategic investors with credit

The value of investments, which are promised in the projects of accommodation structures of the coast, is 1.53 billion euros, but experts are skeptical about the source of a significant part of these investments.

The data provided by Investigative Network Albania prove that some of the companies, which have received the status of strategic investors, do not justify the potential to invest through the capital and income of their companies, questioning the provision of financing, such as from banks , as well as in the real value that the project will cost.

As a consequence of this "impasse" in securing financing, there is a risk of financing through dirty money or of a fictitious increase in the value of the project in order to benefit from the benefits that come from the status of the strategic investor: free state land in touristic places and construction without paying tax infrastructure, as well as reduction of VAT and profit tax.

Who are the strategic investors in the field of tourism and do they have the money to fulfill their projects?

According to the data of Investigative Network Albania, the Marina Hills project with investor Finsec Development has presented a confirmation from the investment fund, Cime Capital AG, that it will receive 160 million euros to invest in a tourist village in Synej of Kavajë for a project with worth 450 million euros. Founded in 2020, with an initial capital of 1.2 million lek, it is unclear where it will find another 290 million euros to realize the project.

For the Green Coast project, the Mane TCI company owned by Samir Manen has submitted two loan contracts with a total value of 16 million euros with the Raiffeisen bank, while for the Green Coast 2 project, the financial statements of the last 3 years have been submitted. The company's capital exceeds the minimum required as a guarantee for the investment. The Mane TCI company has received the status of strategic investor for the New Born project in Lalz, where it has submitted the balances of the last 3 years as an investment guarantee. In total, the investments of the Mane TCI company amount to 139.3 million euros.

Kompania Shijaku sh.pk, received in December of last year the status of "strategic investor" for the construction of a complex with villas and hotels in the area of ​​the General Beach in Kavaje and promises to invest 60 million euros. The company has submitted the balance sheets of the last 3 years and the potential of the Shijaku sh.pk company to obtain bank loans, but the documents provided by Investigative Network Albania show that this company is exposed to two large credit lines of 12 million euros: one with Credins Bank for the purchase of the assets of the Oil Refinery Plant in Ballsh and the other with Raiffeisen Bank. However, the company plans to approach the banks again for the construction of this project, as well as a photovoltaic park, which will cost nearly 30 million euros, near the former Ballsh Combine.

The AlbStar company has submitted the balance sheets of the last 3 years to realize the investment worth 28 million euros in the vicinity of the Butrint National Park in Saranda, under the name Manastir Resort. The profit of the company at the end of last year was 500 thousand euros, but it is planned that future profits will increase from sales and rents at the Air Albania stadium.

The Dreamades Luxury Suites project, worth 5.5 million euros and with the investor company AG.TÇ of the husband of the Minister of Foreign Affairs, Artan Gaçi, has submitted as a guarantee the financial statements and an insurance contract with the Albsig company. The capital value of the company of Mr. The salary is 500 thousand euros, while the income during the last years is modest. In 2021, the realized profit was 100 thousand euros, a completely negligible figure for the great value of the investment it promises to realize.

The Premium Invest Finance company will build a complex with villas, hotels, a water park and a winery in Cape Rodon. The shares of the company, which will implement the Cape of Rodon project, Phase 1, with an investment value of 51.3 million euros, are controlled by Sig Holding, a company that has been operating for several years in two casinos located in the capital. Balance sheets and contracts with the Albsig company were presented as financial guarantees for the project.

Another hotel will be built in Dhërmi. Drymades Beach Resort has as a strategic investor the Blue Bay company owned by Mentor Mezin. The project is estimated to cost 6.3 million euros and the company has submitted a guarantee agreement with Fibank, which undertakes to finance 800 thousand euros. Established in 2019, this company has declared 100 new ALL as capital, while the rest 21 million 120 thousand ALL is capital in kind, declaring the value of the land. Although with a strategic status, Blue Bay has not submitted the audited balances for 2021, while the 2019 and 2020 balances result in losses.

Delta Company, which operates in the field of construction materials and hydrosanitary, has received the strategic status for a complex with hotels and villas, which will be located between Palasa and the village of Dhërmi, in a space of 258 thousand m2, where 26 thousand m2 are land bought by her and the rest is claimed to be benefited for 1 euro from the state. The company owned by Luan Muça will extend the project in 5 phases, promising a total investment worth 206 million euros. Delta has a capital worth 12 million euros and the profit of the previous year amounts to 2 million euros. Despite this, these capitals are insufficient to realize the entire project. The firm has submitted a letter of interest from OTP bank, which is interested in financing 41 million euros in this project. Luan Muça has been awarded with the "strategic" status for the construction of a resort called Banyan Tree in this area for an investment value of 24 million euros by his other company, Dast. In this case, only the company's balances were submitted as a guarantee for the realization of the project.

Imperial Group in Shkodër wants to invest 52 million euros in a tourist complex on the beach of Shengjin. Silver Sand Resort has received the status of strategic investor and the company has submitted financial statements. The firm is partly owned by Kolë Gjoka, the Albanian entrepreneur and politician in the German Christian Democratic Party. The value of its capital is 14 million euros, while the income of the last years is at low levels. Most of the capital value consists of the land along the beach of Shengjin, which is estimated at around 8 million euros.

In the Perivolo area in Dhërmi, Concord Investment, owned by brothers Artan, Ardian and Genci Dulaku, will build a tourist complex with villas and hotels. The complex will cost 32 million euros. The company has received the status of a strategic investor for the construction of the San Pietro project in the Lalzi Bay worth 88 million euros. In both cases, Concord Investment has submitted the balance sheets of the last 3 years. The company has had a good financial result with 12 million euros profit in 2021; the value of the assets on the balance sheet is high, but the liabilities are also high, since part of the constructions were financed with loans.

The Chaoinias Deluxe Hotel, which is being built by Ilir Trebicka, received strategic investment status in February of last year. The value of the investment is 5.5 million euros and the company has submitted as a guarantee its balance sheets and an insurance contract with the firm Albsig.

In Fushë-Arrëz Lajthiza Invest, which has a concession for the Lajthiza water source in this area, has received the status of a strategic investor to build a complex with villas, a hotel and the new water bottling plant. The value of the investment reaches 20 million euros and balance sheets have been submitted as financial evidence. The capital of the company is 4 million euros and the balances of the last years are positive.

The Stratek and Echotek Energy System consortium, owned by Lulëzim Mehmetaj and Gazmend Paja, has been announced as a strategic investor for the construction of a hotel in Dhërmi worth 13.8 million euros. As a guarantee for the realization of the Dhërmi Resort project, a letter of interest from the National Commercial Bank and an insurance contract from Intersig Vienna Insurance Group have been presented.

Another investor in the field of tourism is the White Rocks complex in Dhërmi. The Eurocol company owned by Pandeli Carapul has presented the financial statements for the project worth 6.8 million euros. Despite this, the firm has not proposed the construction of hotel structures and in other cases the Strategic Investments Committee has rejected such proposals, arguing the reason for the lack of accommodation structures.

Even the Kep Merli complex has been declared a strategic investor. The firm Boiken sh.pk has submitted a verification act of the works performed and a loan agreement with the Intesa San Paolo bank.

At a time when strategic investors seem to have pinned their hopes on loans, the Association of Banks told Investigative Network Albania that second-tier banks "cannot lend more than 20% of their regulatory capital to a single firm and will strictly implement the rules".

This rule makes it difficult to find full value for these investments in the form of credit. Even OTP Bank for the loan worth 41 million euros, promised to the company Delta in cooperation with the parent company, OTP Bank, emphasizes that it is a letter of interest and not necessarily a loan contract.

For experts, these investments were given in flagrant violation of the law, as they do not meet the main criterion, the financial one.

"If bank guarantees or insurance companies have been submitted, it is obvious that these companies cannot fulfill the criteria to become strategic investors. The heart of these criteria is the financial one", says Eduart Gjokutaj from Altax.

"If we compare with North Macedonia, the criteria to be strategic are strong and require investments in an absolute value of 100 million euros", he adds.

 

Exposure risk of the banking sector

Financing investments through banks is a practice that is also followed in developed countries, but in contrast to the case of Albania, the market rules work differently. The criteria for loan approval by the Bank of Albania are stronger than in European countries due to the risk of non-payment of the loan. By 2014, the level of bad loans in the banking system reached ¼ of the entire loan portfolio, and most of the non-performing loans were taken by 35 large corporations.

In the case when the company's capital is low and the cash flows that the firm collects do not correspond to the value of the loan requested, banks usually refuse to grant the loan; but in the meantime, the state comes into play, which appears as the guarantor of the investment.

"The guarantee is not the balance of the business with ridiculous capital, but the presence of the state, which shows a very close connection with these businesses, supporting them, except for certain cases, which may have capital for financing", - thinks the expert of economics, Eduart Gjokutaj.

Even Zef Preçi doubts whether the guarantee agreement with the bank or the expression of interest to credit the project will materialize. According to him, the offered letter-guarantees exceed the maximum loan amount that can be given against the risk analysis.

"I think there is fictitiousness and I doubt that it can be concluded with the issuance of loans even in the letter-guarantees issued by the banks", - says Preçi skeptically.

For the experts, the Law of Strategic Investments has deformed the competition and is not giving the expected impacts in the economy, such as in the development of tourism, the increase in employment or the attraction of well-known companies.

"Investments themselves lack feasibility. They may have submitted business plans with the criteria set by the law, but they lack effectiveness in economic terms and in terms of public interest, which is established in the essence of the law, because they have a differentiated status and competition is distorted. The Competition Authority's own voice in this regard should have been very strong", explains Gjokutaj.

According to data from the Bank of Albania, individuals own the majority of deposits in the banking sector, which are then given loans by banks. Deposits of individuals reached 8.1 billion euros at the end of last year, while total business accounts amounted to 1.9 billion euros. But, in relation to loans, loans are concentrated in the private sector 9 times more than in the resident sector. Even the conditions for loan approval for individuals are stricter, since in loans with large values, collateral is required, which must cover 100-130% of the value received.

Are there pathways for the infiltration of dirty money?

One of the two foreign companies, to which the strategic investor status has been attributed, is the Finsec Development consortium, which pledges to invest 450 million euros in the Marina Hills project on the coast of Synejit Kavajë. The company is 70% owned by the Swiss Finsec ltd, and 30% is owned by 25-year-old Greg Xhillari, the son of businessman Alban Xhillari. Finsec ltd, in co-ownership with Victoria Invest, manages since 2013 the concession for the construction and operation of a tourist marina near the Turra Castle, a few meters away from the place where the construction of the complex is claimed.

In violation of the deadlines and with low and disputed works values, the Ministry of Infrastructure and Energy broke the contract, due to the abandonment of the works in 2018, but in 2019 the company managed to regain the right to the concession together with the postponement of the permit of works.

The port will be built on one of the most beautiful beaches of the Adriatic, but the capital value of the Swiss company is only 100 thousand francs, too low to meet the investment of 39 million euros required in the marina. The lack of money has also brought clashes with the other concession partner, the firm Viktoria Invest.

Several years of clashes have faced both companies in the Court of Kavaja, whose experts have found that the 13 million euros of works, declared by the company Finsec Port, were fictitious and did not correspond to the situation on the site, but were included as an expense on the balance sheet .

Doubts about benefiting from contracts with a favorable status through connections with politics are increased even more by a statement according to the minority partner, Flamur Kuçi, that the Swiss side has admitted before the Court of Kavaja that it paid 500 thousand euros for lobbying the Albanian government.

"The majority shareholder has declared in court that he lobbied the Ministry of Energy at a cost of around 500 thousand euros and the minority shareholder was not informed at the right time", - it is stated in a document of the meeting of the assembly of the Finsec Port company.

This statement is not accepted by the administrator who was in charge of this company until August of this year. Artan Kraja said in an answer to Investigative Network Albania that "during my mandate as an administrator, no payment was made in favor of the Ministry of Infrastructure and Energy, neither in the form of lobbying nor in any other form, whatever, not even by myself Finsec Port sh. a., and by no third party, whoever, on behalf of the latter."

But, for experts, such accusations best illustrate how concession contracts or special statuses are given in Albania.

"Lobbying in Albania is not legal. Political, ideological affiliation with the government and corrupt interests are dominant in most decisions. A serious investor does not believe in the integrity of the institutions for legal and financial security, and therefore come companies that are created specifically for this work or have paid shares or capital to the decision-making body, as well as in the case of concession contracts", - explains Zef Preçi.

Such cases in the deviation of the values ​​of the works make economists skeptical about the spaces that can be created in these investments for the penetration of informal money.

"Today there is an offer of money. It is dirty money, informal and corruption money that wants to be cleaned with public money. It must be admitted that there is a tendency for dirty money to penetrate into public infrastructure or into works blessed by the government", explains Preçi.

"A good part of the capital is not inside the companies' balance sheets, but outside their balance sheets due to informality. At the moment when the investments do not have diversification, but have remained only in the simplest to do, the construction of accommodation complexes, it seems that there is a problem in this whole strategy", - says the expert, Eduart Gjokutaj./ InaMedia

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