Albania publishes its 2012 EITI Report

Albania publishes its 2012 EITI Report

EITI Albania, as part of the global Extractive Industries Transparency Initiative and on behalf of the Albanian Government, published its 4th EITI Report on the contributions of oil, gas and mining industries to the State budget as well as the allocation and spending of such revenues with the ultimate goal of promoting transparency in order to prevent corruption and increase public awareness to hold their government to account for the appropriate use of fiscal and non-fiscal revenues generated by the exploration and exploitation of mineral resources in Albania.

The report includes data from the monitoring period 1 January, 2012-31 December, 2012, and has been prepared by an Independent Administrator, represented for the second consecutive year by Deloitte Albania. This is the second report for Albania issued in compliance with the new EITI Standard.

The speech of Deputy Minister of Energy and Industry, Mr. Ilir Bejtja, at the ceremony held for the presentation of the report:

Hello to everyone,

The key element that I would like to point out is the relationship that we have established not only with our community of extractive industries, but also with the international community of extractive industries.

I want to emphasize that there has been a total neglect, at least during 2013, in fulfilling the obligations that we have as an EITI member towards reporting on extractive industry activity and ensuring transparency regarding its contributions to the national economy, but also at the sub-national level where the exploitation of raw materials, minerals or any other materials considered part of the extractive industry takes place.

It should be noted that the neglect is not linked to the ability to find data. It has not been impossible to guarantee these data, despite the fact that we have carried a selection regarding companies’ volumes. The 78 companies that were taken into consideration yield the major part, over 80% of the extractive industry volume in our country.  We think that the report covers about 90% of the extractive industry final volume, without taking into account the data received by customs. So we didn’t face any problems in gathering the data.

I would say that this is related to the level of transparency required by the Albanian government with regard to extractive industries in recent years, and to the high level of informality which is also slightly reflected in the employment rate shown by the data. As a matter of fact, it is not that low, i.e. 0.8% of total employment, since there has been a high level of informality. Everyone has been informed on the measures we have taken to formalize the extractive industry, especially the mining sector, not the oil sector, in order to increase accuracy on the volumes yield by this industry, as well as its impact on the economy, and on the standard of living through employment.

We will notice that in the next years, the reports will present other data, will enrich them with additional information related to the current comparability of data of the reporting year with what we currently have. It is understandable that we will not depart from the methodology, therefore the basis will be the data of the reporting year and the main goal is to inform the public on how its natural wealth is used. Although this natural health is primarily used through private initiatives, almost 100% of it is public good.

We will broaden the scope of reporting, including in the reporting other activities like fishing or electric power generation, which are also part of the extractive industries, i.e. income that is guaranteed by the use of our natural resources. We will be able to assess the contribution of our natural resources in the Albanian economy and be able to prioritize those branches and sectors of the economy or the extractive industries which have a future and have the opportunity to increase the contribution of these industries in national income.

Another important element is the impact that these industries have on the environment where they operate. We already aware through the media reports or through reports that we have regularly prepared, that these industries, in addition to the positive effects that bring to employment or growth of economic income, cause environmental problems. Starting from the vibrations arising due to oil exploitation, we have not yet found the reason of these vibrations. It still remains a dilemma, a technical problem in measurement, to know whether these vibrations are due to the industry or not. We have environmental pollution problems caused by the extraction of minerals or hydrocarbons from underground, environmental rehabilitation. We have amended the current mining law, and now we do not wait for the 10thor 15th year of the expiry of the concession for exploitation of mineral to deal with environmental rehabilitation. The most recent legislative changes provide that the environmental guarantee can be used at the end of each year, in order to progressively rehabilitate any used part of the natural environment, and any damage caused by these works. We also want to monitor or to have a clearer reward mechanism for places, local units that are affected by the use of subsoil.

In this regard we have amended the law on national taxes, by changing the inapplicable formula to transfer their rights from the national income to the affected municipalities or cities. The previous formula consisted on the transfer of 25% of mining royalties to the local governments, but these local governments were required to realize 150% of local revenues, i.e. this was a mechanism that practically didn’t transfer any money to local governments, except to the state budget, although the impact would have been much higher if the money would be transferred directly to local governments. This would fulfill a sufficiently large part of their modest requests to improve the quality of life. This was not the best option, as the money was concentrated in the state budget and was then politically and disproportionately allocated to the municipalities and communes, under the justification that the local governments do not have adequate capacity to manage of their revenues.

This mechanism is inconsistent with the philosophy of decentralization that is already evident, and clear. Local governments have also obligations regarding rigorous planning, budget allocation, and itemized planning; therefore the head of the local government or any other person cannot change the destination of the entries, without the prior approval of the council. So given that the philosophy of local government budget planning has improved enormously, the Government has taken a qualitative step, I would say, and has decided that5% of mining royalties from the national taxes to be transferred, immediately after  their collection, to the local governments, without any limitation associated with the realization of the local revenues.

So this will be another novelty and direct support for the local governments. I do not know if the percentage is the appropriate one, should it be less or should it be more than the approved level, as this will have to be verified over the next years, but at least now we have the legal framework, which enables the immediate transfer of the mining royalties and the obligations that these industries have for recovery or to influence the local communities where they operate. Perhaps, in the future, after reviewing their impact, we will have the opportunity to consider the change of this fee. Now we don’t have the problem of not having a law provision, as it already exist now, the issue will only be to amend the proportion of the national income and how it will be immediately transferred to local authorities, without any budget planning as it is done already with all the rest of the national income. This report will constantly assist us to calculate not only how much of these revenues will go to local government, but also the local authorities will have the obligation to report on how they use these revenues.

There have been cases before a considerable proportion of the mining royalties was transferred directly to certain municipalities or communes. For example, Patos Municipality, receives 1 million and 200 thousand dollars a year mining royalties, when its total budget is less than 300 thousand dollars. The impact of these money from mining royalties in the municipality of Patos is not known, especially when you take into account that this municipality is smaller than a block of apartments in Tirana. As the impact is not clear, it means that we cannot tolerate this either. Therefore, an important part of the transparency will be the way how the local government uses this revenue. The local governments shall not use this revenue as they please, for their bonuses and salaries, but shall use them explicitly to recover damages caused by extractive industries.

In this regard I’d say that EITI initiative is a necessity for all countries that have extractive industry operating in their countries. The latest knowledge exchanges with 150 countries which adhere to the initiative of the extractive industries, have shown that the effects of this transparency are quite considerable. All European Union member countries already participate in EITI, and EITI will not simply be a reporting arrangement of countries that have interest to share their experience with each other, but it will be a global mandatory reporting in all extractive industries to see where the world is today, where we stand in this initiative, showing the impacts of the extractive industries in biophysical productivity of countries where they operate. It is known that these industries decrease the biophysical productivity, but what is the size of the positive effect that they bring in at least in the shape of environmental credits to the environment where they cause damage, in the shape of goods that can use the environment (sites) where they operate.

The point is that these industries should become environmentally friendly and friendly to local communities and their development can no longer continue simply in two pillars approach. Since 2002 Albania is an accession and signatory country of Johannesburg declaration for development and development requires the third pillar for environmental focus, i.e. sustainable environmental development and we can no longer continue with the approach that economic development is any kind of development that increases income, regardless of how it affects the environment or the local community.

In this respect, I’d say that we should acknowledge the very good work done by Albania EITI and by the independent audit. I’d like to congratulate them and hope that they will perform such good work also for the 2013 and 2014 reports, and that they will broaden the range of products of the reporting and analytical activities of the extractive industry. Therefore, they should prepare not only an annual report, but also other intermediate reports, sectorial or territorial based, which specifically highlight in more depth the problems of any activity related to extractive industries.

Therefore, this is our main focus or goal for the future of this institution.

Thank you!