Promotion or credit agency for Albanian export?

The government’s main motivation must obviously be to stimulate exports which otherwise means doing homework that should have been done long ago.

The whole approach to stimulate exports is the objective of their growth, to have economic and industrial benefits related to protection or in the case of success also the creation of jobs, as well as political benefits (for the government in power).

Added to this necessary policy are the hoped-for benefits of increased foreign trade, through the strengthening of diplomatic relations with trading partners. So far all this is known and efforts of various natures have been made, even as a policy objective to fill a gap in the foreign market.

Based on the way of organizing the promotion and stimulation of export growth, seen from the experiences of different countries of the world, it can be seen that they are oriented towards policies implemented through (a) export promotion agencies [1] dhe (b) export credit agency [2].

The new modeling for Albania should start by studying the practices of countries around us and then also from countries that have created a tradition in this direction to adapt the most valuable model for increasing exports.

In any case, there should be a clear overview of the problems to be solved and the challenges to be addressed. This approach helps even better in choosing the model required by the market and the objectives of the economy to reach those levels that are comparable to good experiences.

Export incentives are basically regulatory, legal, monetary and/or tax programs. From the analyzes that should be carried out by the government or by local or foreign consultants and experts, a full feasibility study should be made to answer some questions, such as:

– What market can be involved and how they should be designed to encourage businesses to export certain types of goods or services.
– Which exports are the priority?
– What should the government fulfill from its tasks, to create the premises for a full function of the policy of export stimulation?
– Is the service of the current agencies successful in the Albanian market?
– Do Albanian companies have the capacity to carry out all the processes and procedures for the markets with the resources they have (personnel, time, financial and legal resources sufficient)
– Is the management of Albanian companies oriented to expand in the export markets or otherwise do they function according to the corporate governance model?
– Do companies have a concrete strategy on how to export, including a comprehensive financial/fiscal/marketing/business plan with clearly defined goals in view of exporting to EU markets and beyond?
– Do Albanian companies have the necessary intellectual property protection abroad?
– Do Albanian companies have the capacity and expertise to adapt their product, according to cultural preferences or different standards in EU countries?

These questions and others that arise from the practice of the businesses themselves must be addressed for treatment, and so far the Albanian exporters have realized this as much as they could alone. But imagine how organized the world around us is [3] starting with our border neighbors.

Thus,

The public Export Credit and Insurance Agency, established by the government of Serbia since 2005, is primarily focused on insurance and export financing for export-oriented Serbian companies [4].

The Development Bank of North Macedonia (Export Credit Agency) is a development and export bank whose strategic goal is to provide support and facilitate the development of the Macedonian economy by providing finance to small and medium-sized enterprises and companies of export oriented [5].

The Export Credit Agency (IGA) of Bosnia and Herzegovina supports exports from Bosnia and Herzegovina through specially designed financial products and consultancy aimed at encouraging exports and based on the knowledge of foreign markets that IGA has gathered for more than 10 years [6].

Although it does not have a specific agency for exports, Montenegro has established the Investment and Development Fund of Montenegro (IRF Montenegro), the purpose of which is to encourage and accelerate the economic development of Montenegro, as a efficient mechanism for supporting economic development, especially given the current economic and financial crisis.

Through the export window offered by the Kosovo Credit Guarantee Fund in partnership with local banks, it offers opportunities for export-focused businesses. The export window is a guarantee scheme, enabling business access to the financial system through risk sharing with partner financial institutions.

The Albanian Investment Development Agency (AIDA) [7] is an institution that is part of the Ministry of Finance and Economy, where the focus is on promoting the country’s tourism potential and strengthening the country’s export potential, as well as encouraging/supporting foreign investments. direct foreign exchange in Albania, as well as increasing the competition of the private sector.

From the above it appears that Albania, Montenegro and partially Kosovo still do not have a clear policy and structure of stimulating orientation for exports, without going into the analysis and effectiveness of the work of the institutions of each country.

Export incentives should be one form of assistance as above that the government should provide to businesses or industries within our national economy in order to help producers secure foreign markets. The government is tasked with this policy as it is needed to keep local products competitive in the global market and not as it is today. Export protection may create market inefficiencies for imports, but the interest of the national economy prevails under the Constitution of Albania to protect certain key industries so that the government can promote economic growth and welfare, as well as better standards for its citizens.

Although less of a concern than import protection, such as tariffs and taxes and regulatory policies, export incentives are still discouraging to exporters, who claim that the situation in recent years has artificially created barriers and costs to free trade and thus all this can lead to market instability and a domino effect in terms of production decline and the effects that come from it.

Although Albania has already invested in several free trade agreements, the experience that many countries had with the post-pandemic periods should also serve for the Albanian market, as a moment of reflection and reaction to the challenges brought by the increase in imports and the decrease in exports.

The export incentives are looking for time and momentum in the current economy to make local exports competitive by offering a kind of return for those values that the exporters have invested over the years.

Thus, among the regulatory measures are all those that the businesses of each production sector have requested and have not yet received a final solution.

Regarding the way of financing and subsidizing, a specific sectoral analysis is needed and models should be built to serve certain businesses and activities according to the categorization of the nature of the export[8].

As far as the fiscal policy is concerned, the government can collect less taxes, to reduce the price of products to be exported (temporary relief reduction of profit tax and taxes that weigh more on costs). Thus, increased product competition in the global market ensures that domestic goods have a wider reach. This means that the increase in export turnover is a guarantee for more taxes and duties in the future, but also increased contributions for social and health insurance, as well as the release of pressure for social payments from the budget.

Meanwhile, the monetary policy, together with local producers, better analyzes and orients those parts related to guaranteeing future contracts and adapting to fluctuations and the destabilized foreign exchange market.

If the government is discussing this approach proposed by our experts some time ago in meetings with high levels of government, it is necessary to exhaust the analysis as for the approach related to the organization of a national agency for the promotion of exports [9] of the products of country (agricultural or industrial).

However, the possibility of organizing an Agency for the motivation of competition through lending to producers should also be studied and consulted [10]. This second is acceptable as a logic based on its absence in the banking market, in which there is still no segment with investment banks inspired by the models in the countries that surround us in Europe and beyond. These banks would best fill that gap in the Albanian banking market, which would not compete with the existing banks, but would fill that part of the market, which they do not offer in their services until today.

Most countries have export credit agencies, which provide loans, loan guarantees and insurance to eliminate the uncertainty of exporting to other countries. [11]

At the end,

starting from the object of action of the two types of agencies (promotion vs. credit),

as well as taking into consideration the experience of neighboring countries and

what has been achieved so far in Albania with the agencies that have had the goal of promoting exports,

but considering that the banking market to date does not have an approach towards financing exports in the role of a development bank

it seems that the way to look carefully is the one that is oriented towards an export credit agency, where production insurance is also included.

By the very nature of the agencies that offer credit, this way makes the role of government policy even more responsible and forces it to be transparent as part of the “Made in Albania” product package, which is financed with credit lines. This package also addresses the concerns of orienting the exporter with information and connections/meetings in foreign markets, as a local manufacturer. But this way of organization also collects in one package the stimulating policies as above.

All this can be done efficiently according to the principle, “Right from the start”.

[1] Export promotion agencies (EPAs) serve as a bridge between businesses and international markets. They offer a wide range of services and support to exporters, including market research, trade missions, business match making and export training programmes. These agencies help businesses identify potential markets, understand market dynamics, and connect with international buyers and partners. They also provide valuable insight into trade regulations, customs procedures and documentation requirements, ensuring exporters are well equipped to navigate the complexities of international trade.

[2] An export credit agency (ECA) can be private, public or a private-government partnership and acts as an intermediary between governments and exporters to guarantee export insurance solutions and financing guarantees. Funding can take the form of loans (financial support) or insurance and loan guarantees (covering them by the government) or both, depending on the mandate given to the agency. This does not differ from normal banking activities. Some agencies are government-sponsored, others private, and still others a combination of the two.

[3] https://trade.ec.europa.eu/access-to-markets/en/content/guide-export-services

[4] https://www.tradefinanceglobal.com/export-finance/export-credit-agencies-eca/serbian-export-credit-and-insurance-agency-serbia-eca/

[5] https://www.tradefinanceglobal.com/export-finance/export-credit-agencies-eca/development-bank-of-north-macedonia-macedonia-eca/

[6] https://iga.gov.ba/en/o-nama/ 

[7] https://www.tradefinanceglobal.com/export-finance/export-credit-agencies-eca/albania-investment-development-agency-albania-eca/

[8] https://howtoexportimport.com/Which-category-of-exporter-are-you-Merchant-Export-162.aspx

[9] https://tradecouncil.org/export-promotion-agencies-and-government-support/

[10] https://en.wikipedia.org/wiki/Export_credit_agency

[11] https://www.investopedia.com/terms/e/export-credit-agency.asp