Steve Forbes: Prime minister, it's really a great honor to have you with us today. And even though Albania may be a small country, it was very distinguished in Europe as being about the only country that had economic growth in 2009 and is growing again in 2010. How did you do it?
Sali Berisha: First, allow me to thank you from my heart, Mr. Forbes, for having invited me. It's a great honor for me. Yesterday I was at the U.N. and listening to heads of states and prime ministers. The debate on millennium development goals. What came to my mind was September '92 when I came in this room there and I addressed to the audience as a president of a country which was, at that time, the third or the fourth most poor country in the world, with 204 U.S. dollar per capita as income. A country almost entirely under starvation with 80% unemployment. There has been no country devastated more than my mine from hyper-collectivization and dictatorships.
But now, yesterday, I sat there representing really a different country. A country which went from the abysses of poverty and misery to a middle-upper-income country. A country which has had a total collapsed economy to a country which last year has had the highest growth in Europe. A country which was producing totally from the public sector, a country which produced now 80% of its GDP from the private sector. A country which has a long way to do but still, in all the ways of globalism, definitely is achieving, one by one, high roads that are crucial for the future.
If you look at our education system, it's totally different. I was very pleased to see that this year was marked by more than 90% of those who have elementary school went to high school. Seventy percent of those who have had high school went to universities. Every Albanian school has now Internet and computer cabinets. It is a country marking its path and its journey, achievements, building the future. But it is very important that it is building the future. And if you look at the longevity, it's only zero, 15 years behind the United States today. It comes in my mind, and it comes all as it comes, a famous sentence of then Secretary of State Jim Baker when he came to Albania and found there the most devastated country from dictatorship. But he told Albanians that freedom will work, and freedom is working in my country. That's all I could tell about.
Introducing Flat Tax
Forbes: Some of the things you have done in Albania, several years ago you put in the flat tax. Only 10%. And it's worked.
Berisha: You know, my background is cardiology. And I assure you that 20 years ago when I started politics, my knowledge on economy were zero.
Forbes: That's true of most economists.
Berisha: But what happened once I started politics, I started also to acquire some knowledge. But also I was very much influenced by Ronald Reagan. He was an ideal to me as a leader who fought so successfully against companies. And that's why I have a deep belief for him.
He was a low-tax president. And he wrote that low taxes, money, more or less, money in the accounts of the investors, of private people, are much more efficient than in public cases. And that was absolutely true for Albania, because the mandrell capacity of the public sector was almost inexistent.
That's why I started the career as a low-tax man. I put, at that time, the lowest fiscal burden country on Europe. But it worked. My country jumped in '95 as a two-digit-growth country. I went in opposition. Then government adopted progressive taxation.
Back in power, the first thing that I did I diminished by half the small business taxes. I diminished this by the corporate tax from 25 to 10%. The personal income tax from 23% to 10%. The Social Security contribution from 32% to 15%. I did it convinced that the money's worth [more] in the accounts of the investors than in the public cases. But I never expected such a growth of revenue. The revenues in Albania, budgetary revenues, doubled. They were $50 billion from taxes and custom in 2004, from they got $104 billion from taxes and custom in 2009.
The crisis came. Still I kept my basic idea of the best immunity from this crisis is to help business. To enlarge the spaces and freedoms for it. That's why we simplified the tax system from 26 national taxes to six national taxes.
We try to, we removed taxes for private education. We dropped so many tariffs. And also we managed to modernize the business registration. We rank now 27% higher than the average of OECD in business initiation. We rank now several points higher than the average of OECD in investing cross-sectors in the country. We focus very much on a friendly business climate.
Improving Biz Registration
Forbes: So on registering a business, you brought in one-stop shop?
Berisha: One-stop shop for 30 minutes. Now we are doing online business registration. We drop two-thirds of all license and permissions, and one-third we assembled it in a one-stop shop for licenses and permissions. It had diminished many times the time required for a license and the permission, but also the cost. There have been two basic projects from Reagan's challenge corporation actually implemented by U.S. aid. The United States [was able] to work with the international agency very successfully.
And now we have really a good climate for investors. The economy is doing quite well. Exports this year have increased by 62%. And this year the revenues are increased by 13%. We cut in June 25% of expenditures, being somewhat afraid that we will be affected by the Greek crisis. We were wrong. At the end of August, we saw that 99.6% of the plan was realized, but we are not going to enlarge more. [We're] keeping it because we must be somehow cautious.
Forbes: What other reforms have you introduced to strengthen property rights?
Berisha: Yes. We passed during these days a very important law. The law says every investor who has got the land from private people with original, official documents never could be disturbed further. Whatever claim must be addressed to the state. And the state doesn't prevent people to claim that, but it is considered as nationalized the land the private investors had owned, and the state deals with those who claim.
It was very important, this law. It's unique, but it's also very important. No one could make or could disturb investors with fixtures or falsities. This was the aim of it. And also, in the case that it is public land, investors will have it for one euro. The entire contract. And it is working very well.
Forbes: So explain your one-euro districts?
Berisha: One euro. Whoever is building a plant or whatever or wherever [they] would like to have for agriculture purposes, let us say planting olive trees or planting hazelnuts or walnuts or whatever, and the land is public, is going to have it for one euro. Whoever would like to build a touristic resort, and it's public land, will have it for one euro. We do not change. We put this initiative three years ago. It's working. We integrated the cement plant 10 days ago. They got the whole piece of, the whole of the land for one euro. It's working.
Increasing Outside Investment
Forbes: Foreign direct investment. The volumes are even greater than selling or privatization?
Berisha: Yes. Much greater. They are much greater. Last two years, especially after NATO membership, Albania has become very attractive for foreign investors. There have been more than $6 billion in European contracts signed, mostly on energy matters but also in tourism and other matters. Now the concessional law that we passed with a special Swiss article is working very, very well. In two years we signed contracts for 220 hydropower stations. Among them one is the biggest--a 1 billion euro investment in cascade of Divol. And the other foreign companies, like Verbund and others, are constructing hydropowers in Albania. There are to be built more than 400 hydropower stations in my country, but also large wind parks.
Look, it's a small country, but with a really enormous--extraordinary potential for [the] biggest world compan[ies], and it's situated in the very heart of Europe and at a very large market. That's why I profit from this occasion to invite investors to seriously consider investing in my country.
Becoming Part of the E.U.
Forbes: And you mentioned your membership in NATO. How are your relations with the E.U.? How are you coming on becoming a member of the E.U.?
Berisha: Last year during 2009 we had a general elections. They were assessed as free and fair elections by all international observers. These elections did [make it] possible that the E.U. foreign minister decided on Nov. 16, 2009, to grant Albania the opening of negotiation for candidate status. Later we were provided the questionnaire of 2,284 questions.
Forbes: Three-hundred eighty-four pages?
Berisha: Yes. And we sent that--there are 3,000. Three thousand 854-page books. The largest book published ever in my country. It's under review from the E.U. commission. ... There [have been] several missions from the E.U. commission and E.U. member countries to see the development.
And definitely most of them found a totally different country [than] what they thought ...[they would]. That's positive one. And 10 days ago, the commission had given its definitive opinion about the removal of visas for Albanian, Bosnia-Herzegovina, member countries. We'll look on review. I am an optimist. I am sure that in months to come this process will happen.
Forbes: So that means you just need what they call bio-passports?
Berisha: That means Albanians for 90 days could move freely in all European [countries and] in all Shangen area with no visa. This is but 90 days. And after 90 days they must be back, and they could go back after a time.
Forbes: The battle against corruption. How is that going?
Berisha: I think among all reforms the reforms against corruption are fundamental for the success of all other reforms. Now we were very tough in fighting corruption. First we promised Albanians small government in '95. And it happened. We shortened it by 33%.
We promised Albanians a review of the whole Kolfe of interest legislation. It happened. And now a serious institutional review, the assets and the revenues of all officials. And it takes serious measure in any break.
We promised Albanians new rules on operating expenses of public administration, and we managed to shorten it from 2.2% of GDP to less than 1% of GDP, because corruption [is something we] should fight. I told you we'll start from ourself. We'll support new rules on transport of officials--that is from 3,000 drivers and cars. Now there are only 31 official drivers and cars. Yes. Because there have been abuses.
We lowered taxes. It was really very helpful. We privatized all major enterprises which were nests of corruptions. We are digitalizing. The transparency. We [have] become the first country in the world with 100% e-procurement. And that's why U.N. rewarded us with a second-prize reward for that project. But it was very kind to reward us. But it was also very important that now there is no other [option] than e-procurement in my country. There is a strong stand of the judiciary against corruption. I believe these were fundamental [changes], helpful for what we achieved. Now we have almost a double budget compared to five years ago.
Beefing Up Tech
Forbes: And in terms of what you did in bringing the high-tech age to procurement, you worked with Estonia on that?
Berisha: I'm working with Estonia, and they were very helpful. Very helpful to me was also UNDP. I have had very special relations with computer in my youth days. That's why I remained always convinced that it is a way to change a life. And '95, '96, I took this initiative for Internet in every school. It was Costa Rica's president applying it. But I went to opposition. Back in power I took the project. And I found my country very low in IT penetration. It was a terrible low. And now it's jumped several times. It was 4.8. Now it's 32. But my ambition is--and I will proceed--to catch the average of E.U. and growing faster. Estonia is helping very much. Austria is helping us very much. UNDP was very helpful to us. But the digital age is, if you look at the biological age of my country, it's digital one. Our people should be little age in technical point of view.
Forbes: Great. How did you privatize the farms? Your agriculture? Since you're so heavily agriculture.
Berisha: Yes. It was a very fast process. Based in the Jeffersonian principle of the land to those who are living in and working in. This principle was applied. We have not chosen applying other principles because of what happened in my country. Fifty years long people were banned to move from their birthplaces. To be in town. And entire districts become real [human] reservoirs. We are obliged to apply this reform. And we created in one year 460,000 small farms. One hectare. But they tremendously changed the production and the life of these people.
Now still I am focused on agriculture. We are a blessed country in many aspects. We are an olive tree country, and we tend to multiply by five the number of olive trees in four years, and the project is going on. Now [there] is a new project based mostly in nuts. Chestnuts, walnuts, hazelnuts and pomegranates. That we could become a real, very serious producer and also exploit tens of thousands of hectares of land which is not used for the moment. This is very ambitious project which aims mostly to fight bitter poverty in the mountainous and the rural areas.
Forbes: And you're also not only exporting nuts and agriculture products; you are doing shoes. You have a company that's exporting shoes?
Berisha: Fifty-two percent of our exports are shoes, textiles, manufacturing.
Forbes: And now frogs' legs.
Berisha: Yeah. Yes. Seventeen percent are minerals. You know we are a very important country in mineral deposits. In chromium, nickel, copper, pherum, pherum nickel, ore, iron ore, and we are working to better organize our mineral sector.
An American Ally
Forbes: Terrific. And you remain a strong ally of the U.S.?
Berisha: Definitely. I know no other country which is more in hearts and feelings more friendly to the United States.
Forbes: And Americans should know you're primarily a Muslim nation?
Berisha: Yes. But multireligious. Where I think the greatest asset of my nation is an excellent religious tolerance, but which is a long day one. This is a very great heritage. Never in my nation have we had the smallest conflict or incident [that was a] religion-based one. But we were like that. And they have this great heritage. They have had a very difficult history. Very, very difficult. But they were blessed also because in some very crucial moments of their existence, of their freedoms, the United States has helped them. Helped us. This was the very moment that we managed to succeed.
Forbes: Thank you, prime minister.
Berisha: Thank you, Mr. Forbes. Thank you very much. Thank you. Was pleasure.