Who will finance Edi Rama's dreams for tourism infrastructure?

2024-06-13 11:12:00, Opinione Klodian Tomorri

Who will finance Edi Rama's dreams for tourism infrastructure?

Prime Minister Edi Rama, source: LSA

Prime Minister Edi Rama declared that Albania will build a spectacular infrastructure for tourism. Referring to the completion of the Thumanë-Kashar road, Rama mentioned that very soon the work will start on the construction of two other axes, Kashar-Lekaj and Lekaj-Fier.

In the same way, the government intends to tender within the month the remaining two segments of the country's Tourist Corridor, those from Miloti to Muriqan to connect the border from Montenegro to Vlora with a high-speed highway.

Beyond road investments, the head of government said that there will be massive projects in ports and airports to enable the Albania of 2030 to have an absolutely spectacular tourist offer in terms of transport, in terms of flows going to the coast.

Prime Minister Edi Rama, source: LSA

The construction of infrastructure is indeed a necessity to cope with the flows of the country's tourist boom. The government has chosen the concession form to realize this. All segments of the Blue Corridor from Shkodra to Vlora have been tendered or will be tendered with a concession. Investments in ports and airports are also private concessions. This begs a question. Who will finance these projects? And the answer to this question is anything but easy.

Now two simple calculations. The entire capital of the banking system in Albania is around 1.8 billion euros. The current regulatory framework stipulates that banks' exposure to a company or group of related companies cannot exceed 20 percent of regulatory capital. In short, even if all Albanian banks come together in the form of a syndicate, they cannot lend a single company more than 360 million euros. Only some of the concessioned infrastructure projects are even larger than this figure.

For example, the concession of the Kashar-Lekaj segment, which was given to the Gjoka company, costs 474 million euros, while that of Lekaj-Fier costs 320 million euros. These are projects that require massive financing, which would go beyond the regulatory limits of the entire financial system. But that's not all.

Image taken from Google

Some of the banks, especially those with foreign capital, seem to have no appetite to finance infrastructure concession projects or have restrictions from their headquarters to get involved in them. These are mainly the country's largest banks, the ones that have the largest spaces to finance exposures of this size.

Albanian banks, even if they had all the will or interest, will find it practically impossible due to regulatory restrictions, as well as their small size. In this situation there are two main risks. Either the projects will be held hostage by the winning companies for lack of financing as happened with the first Milot-Balldren concession, or there will be increased pressure on the financial system to violate regulatory lending restrictions.

Both of these risks have a high probability of materialization. If they haven't materialized yet, they will undoubtedly materialize very soon. As long as the government or the market will not offer a solution beyond the existing framework.