The association of businessmen of Andorra (CEA – La Confideració Empresarial Andorrana) summed up the work results for 2014. The president of Association Xavier Altimir Planes told in the interview for all-andorra.com about the results and plans of its activity and answered many other questions connected with policy and economy of Andorra.
Interview: Silvia Monet
What CEA is? What are the main results of the activity of the association for 2014?
CEA – La Confideració Empresarial Andorrana (Association of businessmen of Andorra) was created in 2006 for coordination of interaction between business structures of Andorra and authorities. Other important aim of association – lobbying of interests of the principality on the international business level. Today the association includes 558 companies of Andorra, including all five banks of the country (Andbank, Credit Andorra, Bank Sabadell, Morabank and Banka Privada d’Andorra) and also companies – representatives of the most various segments of the market (travel agencies, jewelry stores, real estate agencies, the companies specializing on retail trade, etc.) .
Every year the management of CEA reports to the members of the association, summing up the results of the last year. In March we summed up the results for 2014. In particular, CEA took part in 59 conferences. It alsoheld 47 meetings with businessmen of Andorra and representatives of the foreign enterprises that are potential investors in the economy of Andorra. The main objective of this activity is to tell about the advantages and optimal ways of business development in Andorra. We also set ourselves the purpose to inform the public on tax preferences of Andorra. Last year the management of CEA also participated in 34 meetings with representatives of the government of Andorra. Ways of further improvement of economic model of the principality were discussed at these meetings and interests of representatives of business structures were taken into account.
According to department of statistics of Andorra, last year more than one thousand permissions to implementation of investment activity in the territory of the principality euros were given out. The total amount was more than 100 million. What are the main projects? Which countries prefer to invest in the economy of Andorra?
If to speak more precisely, last year 1215 permissions were given out. Generally it is in such sectors of economy as trade (28%), real estate (22%), consulting services (17%), financial sector (11%), services (8%) and medicine (6%). Other projects — innovative development, educational institutions, intermediary services and travel business. The vast majority of investors are businessmen from Spain (50%). On the second place – businessmen from France (28%). Further — investors from Russia, Belgium, Great Britain and other countries. As for the volume of investment, this concept is relative. A company can invest at first the minimum sum, and then increase investments many times. We expect the main inflow of investments within the next 5-7 years.
What changes happened in Andorra after adoption of the new law “About Foreign Investments” of 2012 from the point of view of investment attractiveness of the principality?
The main change is opportunity to register the enterprises in the territory of Andorra with 100% of the foreign capital. The first such legislative changes took place in 1990. The government of Andorra allowed foreign shareholders to own 33% of shares of a company, registered in Andorra. It didn’t bring expected result. In 2008 the government allowed to increase a share of the foreign capital to 49% of the controlling stake, but the main stake still had to belong to the shareholder of Andorra. And only 4 years later Andorra completely opened its economic borders, giving the chance to foreign investors completely to control activity of their company.
What are the biggest investment projects with participation of the foreign and Andorran capital are being executed in the principality now?
One of the largest projects is construction of the new business center and office building of Andorra Telecom company. 100% of this company belong to the government of Andorra. The beginning of construction is planned for 2015. Estimated completion dates of construction — 2017. The cost of the project is 33 mln euro. Besides the office of Andorra Telecom, conference hall, numerous office squares and also modern telecommunication center are planned to construct in this building.
It is important to note that Andorra Telecom intends to carry out expansion in the international markets soon. Now the company is presented only in the market of Andorra. At the same time, it intends to develop and to export «know-how» technologies. So far it is about the countries of Africa. Similar projects will promote the image of Andorra not only as a resort located in the Pyrenees but also as an owner of its technologic innovations.
There is one more large project — construction of an aqua park. An investor from Russia, who owns now one of aqua parks in Moscow, bought the land in a center of Andorra la Vella with a total area of 4 hectares two years ago. The sum of investments made up 11 mln euro. The whole project is estimated by 80 mln euro. Now he looks for partners including businessmen of Andorra.
Among big projects are Skydream (air tunnel) which realization, perhaps, will begin next year, and also a modern sports complex in one of the administrative districts of Andorra — Ordino. It has a total area of 17000 sq.m. Construction of sports complexes for Andorra is a regularity. Many sports organizations prefer to train their athletes in Andorra because of the developed infrastructure and good climatic conditions. The complex will include the football field calculated for 500 people, a tennis court, fitness center, pool, etc.
There are also some projects in the educational sphere —opening of private schools and universities in Andorra. There are as well projects in the field of medicine: private clinics, the centers of esthetic medicine etc.
What spheres of Andorran economy could be especially attractive for the foreign capital?
In my opinion, first of all, there are projects connected with purchase of land and also with real estate — construction of office buildings and commercial property of any type. Now in Andorra there aren’t enough property objects which could meet requirements of foreign clients. At the same time the number of such clients grows every year. Therefore, there is a need for building of bigger quantity of luxury real estate objects.
Now investments into real estate market are very timely According to our forecasts, within the closest years property market price in Andorra annually will grow approximately for 5-7%.
Whether there are any investment projects important for development of economy of Andorra which can get additional support from the government of Andorra in the form of tax privileges, for example?
The tax system of Andorra is very attractive by itself in comparison with other European countries. For example, any trading holding can have headquarters in Andorra and be engaged in business worldwide, paying only 2% profit tax. The maximum rate of profit tax now — 10%.
What changes in the legislation of the country do you expect after the elections of parliament which have passed in March, 2015?
The government of Andorra was re-elected again, therefore any radical changes are not expected. Andorra will follow a course on further international openness of economy. The prime minister should realize a lot of the drawn-up plans. After all, it is the last four years when he is able to be in power (the maximum term for which the prime minister of Andorra is elected — 8 years). It is planned to make some changes to the legislation of Andorra which regulates internal financial relationships with administrative districts. Also social reforms are expected.
It is important also that Andorra will continue negotiations on integration with the European Union. In the closest plans of Andorra is also a conclusion of agreement about the double taxation with several European countries (such agreements are already signed with France and Spain).
Please, comment on a situation with Banca Privada D’Andorra. How it can affect investment climate Andorra? What measures have to be taken to avoid a similar situation in the future?
The most important aspect of the situation is how the government of Andorra reacts. It tries to resolve an issue as fast as possible, cooperating with the international organizations. Last information: the government of Andorra made the decision to open BPA a credit line up to 45 mln euro with possibility of increase to 100 mln euro for restoration of operating activities of bank and its solvency. Thus the government of the country acting as the guarantor in the first instance, it intends to minimize financial risks at the time of carrying out investigation and making decision on the future of the bank.
At BPA case there is only a criminal component — specific people who are accused of cooperation with the criminal organizations. Already the chief executive officer of BPA Joan Pau Miquel Prats, and it is only the beginning, is imprisoned.
The situation with a bank can be solved in two ways. The first way — the restructuring which means change of the team, change of the name of BPA, and also the process of isolation of the “infected” bank accounts. The second way – liquidation of the bank as the legal entity, which present system risk for a whole economy . In my opinion, the first option is more preferable, as it will help to keep numerous workplaces and also relationships with clients and partners.
Within two next weeks the law which will allow resolving an issue on one of two scenarios will be adopted. This law is based on the directive of the European Commission, which purpose is implementation of effective crisis management. Now in Andorra there is no relevant law, as a case with BPA is unprecedented.
What structural (and other) features of the banking system of Andorra promoted emergence of a such problem?
I consider that the situation with BPA arose because of insufficient control from the government and absence of the legislation prescribing punishment. As I already told, the government actively works in this direction. For Andorra it is excellent opportunity to eliminate gaps of the existing legislation and not to allow a similar situation in the future. It is also an opportunity to show to the world financial community that Andorra is able to cope with such a problem quickly and effectively.
In connection with downgrade of the credit rating of Andorra by S&P agency, the banking sector of the country lost the former attractiveness. Whether it is possible to restore it?
The banking system of Andorra before the case with BPA had faultless reputation. It is sure that we will be able to avoid mistrust from clients in the future. A situation with BPA — the only case, and everybody who is guilty, will be punished.
Downgrade of the rating of the country in these circumstances — is an objective and fair decision. At the same time, the agency notes fast reaction of the government of Andorra and its desire to cooperate on this matter with the interested structures. It is a positive sign which allows us to hope that within next three months the credit rating of Andorra will be reconsidered.
One of the advantages of a banking system of Andorra is preservation of bank secrecy. How strong is this point?
Very soon, since January 1, 2017, the bank secrecy in Andorra will disappear absolutely. Andorra signed the agreement with OECD providing exchange of information between the countries. It will be impossible to hide money in the banks of Andorra. It is important that this change will concern only non-residents. The banks of Andorra will keep bank secrecy for residents of the principality. For reference: Switzerland signed such agreement in 2008, Luxembourg — in 2015. Remained only some countries which refused to sign OCDE: among them Panama, Bahrain, Republic of Nauru, Republic of Vanuatu and Cook Islands. These countries will be isolated and won’t have opportunity for carrying out the international transactions.
There are only 5 banks in Andorra. There are no foreign banks at all. Why? Are there any legislative restrictions?
There are no any restrictions about it. The banking market of Andorra is open since 2012. The minimum size of authorized capital for the bank opening representation in Andorra is 30 mln euro. It’s not a big money for international bank groups. The question is that Andorran market is not very interesting for them.
Why the institute of the state monopolies is still developed in Andorra? For example, Andorra Telecom — the monopolist in the market of telecommunications, FEDA — the monopolist at the energy market. Whether are there any plans to reform these companies and to sell them?
It is a question not of today. The main reason is that citizens of Andorra aren’t interested in acquisition of stocks of these enterprises. Sale to foreign shareholders so far is also not discussed.