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sharing in governance of extractive industries

Albania: Facts over rumours in the extractives

Establishing an evidence-based approach to reforms, in a land where rumours are rife.

In Albania, citizens are unaware of how much extractive companies have been paying and contributing to local communities.

EITI reporting revealed local government units (LGUs) have often not been receiving their statutory share of royalties. In the past, the transfer of 25% of royalties to LGUs was contingent on LGUs receiving 120% of their budgeted local taxes. This was nearly impossible to achieve on a consistent basis. Following the EITI reporting, in 2014, the allocation formula and share of royalties were changed, make it easier and more timely to get the transfers. In 2015, for the first time, all USD 1.6m was allocated to LGUs.

Reforming and enabling transfers to local governments and communities 

Before 2014, LGUs were entitled to 25% of royalties paid by mining, oil and gas companies to the national government. In a reform of the Law on National Taxes effective from January 2015, the Ministry of Finance now transfers 5% of royalties to LGUs without conditions other than the funds be used to fund investment. However, individual LGUs must request these transfers.

To find out more about community priorities, Albania EITI conducted three opinion surveys on EITI impact amongst 13 communities living in the extractive regions. The surveys, undertaken in January 2016, showed that 90% of respondents were aware of the extractive operations in the regions but knew little about the payments that companies made, including the 5% set aside for subnational royalties. Moreover, according to the surveys, citizens thought, that while the extractive industries should serve the economic, social and cultural development of communities, this was not usually the case. Only a quarter of respondents knew that public works carried out in many Albanian cities were financed through the income generated by extractive industries.

However, the EITI has yet to test how the new subnational reform is being implemented as in 2015 only 3.6% of royalties out of an expected 5% were actually transferred, according to Albania’s 2015 EITI Report. In the meantime, civil society’s role is acting as a watchdog to ensure that reforms have a positive and tangible impact.

Albania is the only country in the Balkans to implement the EITI. The country became known to the world after decades of isolation under the communist regime. Its unique and untouched beauty, variety of resource and opportunities bought it to the attention of both tourists and investors. Reflecting that, Albania EITI was the first country to include hydro and other sources of renewable energy in their reporting.

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