Andorra and the covid-19 crisis: the plan

To the Principality of Andorra, as to most European countries and especially to its neighbors Spain and France, the health crisis of the covid-19 coronavirus pandemic has hit it pretty hard. However, being a country highly dependent on the tourism that these two countries provided and after a year of brutal restrictions on mobility and permitted activities, the economic crisis is going to be deeper and relevant.

For example, Andorra had approximately 1,300 unemployed in July, the highest registered number of unemployed in the country's history. On the other hand, the year 2020 closed with a calculated deficit of around 100 million euros, which represents around 10% of GDP. With a forecast in addition to the closing of 2021 with 65 million more public deficit, the accounts would be closed with a public debt of between 40% and 45% of GDP, in a country that comes from approximately 35%.

Horizon 2023

It is because of that, already since July 2020, the government headed by Xavier Espot has planning the execution of an action plan called "Horitzó 23" (in reference to the 2023 horizon) so called because it would shape the government's way of acting during the rest of the Executive legislature, which ends in 2023. The plan consists of 77 actions to be carried out and has obviously been prompted by the new scenario that has raised the pandemic.

These 77 actions are framed in a total of 20 initiatives, which in turn are of three types that function as the three pillars of the plan: welfare and social cohesion, economy and innovation, and alliances for change. The objective, for its part, is to diversify the Andorran economy and turn it into a resilient, sustainable and global country with a series of transversal but realistic projects with return for citizens.

Assets and points of improvement of the country

One of the first things we see in the plan is, in an attempt to exercise self-criticism on the part of the government, to raise the valuable assets that Andorra has that make it attractive and unique, and on the other, those areas in which it would be convenient to improve. Thus, they conclude that its main assets to protect are the health and social protection system, the educational model, citizen security, historical singularity, the natural environment and cultural diversity.

On the other hand, the points for improvement that the government considers are administrative agility, connections, sources of financing, competitiveness and diversification of activities. Thus, in general, the objectives are to diversify the economy, bet on new innovative sectors, modernize and digitize the administration, reinforce environmental measures and improve international cooperation to improve state financing and the country's image.

All this while maintaining social protection and its pioneer healthcare system, its attractive fiscal framework, the traditional economic sectors of Andorra, regional policies and the efficiency and rationalization of public spending. As we see, in summary, take advantage of the crisis to delve into the transformation already initiated by previous governments that they have made Andorra what it is today and that they have given it so much good.

The structure of the plan

As we have already indicated, the plan is organized on three pillars that make up 20 initiatives each with various actions to be carried out up to 77. Well, in addition to naming them in the document, all of them are also classified according to three positive consequences:

  • Economic impact
  • Social impact
  • Impact speed

And also according to the different means required for them:

  • Economic resources
  • Human Resources
  • Technological resources

In this way they can order the actions to be taken according to priority and according to the positive consequences / costs required for each action. The naming of all the actions of each initiative far exceeds the objective of this article. However, we are going to highlight some of the most interesting ones so that you can get a better idea of the Andorran government's intentions.

Welfare and social cohesion actions

Two of the most relevant actions in this section are "to advance the energy transition by increasing domestic energy production" and "To encourage private investment in housing to improve the energy efficiency of buildings", which show the intention of the government to put the focus more on the point of consumption (households) than on the point of generation to obtain clean and environmentally friendly electricity and energy.

Another that is quite relevant is the intention of not only promoting public transport but also try to implement a free system, in the style of what was done in Estonia (Tallinn, specifically). They also want to improve the profits of the mobile app MOU-T B (move well in Catalan), which already allows you to consult the itineraries, maps, schedules and duration of the trip in real time, public electric chargers, parking lots, etc. and buy bus tickets. The new thing they want to implement is to be able to pay for parking through it and to be able to consult the stations of the electric bikes and pay through them or charge the cards of Cicland.

Regarding biodiversity and quality of life, they intend encourage certified and organic agricultural and livestock production and reinforcing actions for animal welfare and the preservation of biodiversity, as well as cultural and rural landscapes. They also want to promote local consumption among the population and promote Andorra as a good destination for professional athletes and federations and adjust the subsidies to sports entities according to the results obtained.

Regarding social issues, the first thing that stands out is the deployment of programs to protect and assist children, the elderly and the disabled and the second to adapt the labor market and labor policies to the post-COVID scheme, seeking to create jobs in the private sector. And in health, invest in infrastructures, adapt the system to the post covid scenario, digitize it and make it preventive, predictive and personalized, and implement contagion detection technologies for the tourism sector.

Economy and innovation

With regard to the economy, the first measure to be highlighted is the intention of the government of create a free zone for certain innovative business models, and e-commerce is an example. In our article on digital entrepreneurs We mentioned that Andorra is a good destination for this type of company, but that is as long as the business model is one of "commission agents": the customer pays the supplier and the supplier issues an invoice to both the customer and the e-commerce, and takes care of all the logistics required.

However, when the business model is about a sale and purchase triangulation, things become more complex since, on the one hand, it is e-commerce that sells and the operation is carried out at the place of destination of the sale, and on the other hand, e-commerce is usually in charge of managing the stock and logistics, having to import and export that make Andorra stops being interesting and attractive for them as jurisdiction. This well-implemented action would solve this issue and attract more business of this type..

Another measure similar to this and in our opinion complementary to it is the study of building a technology park dedicated to specific sectors (digital, health, biotech) with public-private innovation and development initiatives and seeking to attract investment from these sectors. This measure, however, requires a huge investment in infrastructure and legal procedures, which is very likely to be for the long term. We also believe that they will have set their sights on Liechtenstein to study this action.

The third very important measure is the simplification of bureaucracy for business creation. As we comment hereCurrently creating a company in Andorra requires a period of two to three months and the physical processing of almost all the documentation, which makes the process more expensive and makes it inefficient and more difficult to manage even for the administration itself. Simplifying the process and digitizing it with a model similar to the Estonian one, the Principality would be a true business magnet and societies of all kinds. In addition, they want to reduce the criteria for granting residence for professionals or people without economic activity.

Following is a series of measures aimed at training and attracting entrepreneurs: training, individualized advice for certain companies, public aid or institutional support or improving co-working spaces and implementing a co-living system for entrepreneurs and interested digital nomads. As we can see, it is generally about building an entrepreneurial environment and a space for innovation in the digital, pharmacy and laboratory, and health and biotechnology sectors.

Finally they are raised actions to improve tourism activity: study the location for a National Heliport and promote the Andorra-La Seu airport for regular flight lines, study the development of a trans-Pyrenean railway connection, seek proximity tourism offering mountains, culture, sports, safety and health, focusing on in the gastronomic heritage and agricultural and artisan products of Andorra and organize sporting and cultural events of great relevance in the country.

Alliances and international cooperation

The last block is comprised of foreign policy actions related to international alliances that allow Andorra to open up to new markets and diversify it. In this sense, the first thing the plan highlights is the need to modernize the Administration and carry out a «digital transformation», especially with regard to economic activity. In this sense, they will also seek to prioritize and encourage both public and private projects to digitize the business fabric and collaborate with Andorra Telecom to digitize the country.

Then they mention actions aimed at reinforcing the weak points of the state: make a State Pact for the sustainability of the pension system and put measures to correct its expected future deficit, restructure the public debt and seek sources of financing such as the IMF (to which they joined in October of last year), issue green bonds or impose a final tourist tax to monetize said sector at the state level in a more resounding way.

Regarding international collaboration propose to deepen collaborative projects with Spain and France, include elements of Andorran heritage in UNESCO lists and further improve relations with the EU in order to make an association agreement that allows the Principality to access the union market after a binding referendum to vote on its approval. They also propose to capitalize on Andorra's membership of the Ibero-American General Secretariat (SEGIB).

Finally as regards the efficiency and rationalization of public spending, especially considering that some of the proposed actions already require enough public resources, is to postpone planned public investments due to the COVID crisis, optimize the maintenance of public infrastructures and take advantage of their economies of scale and rationalize the resources of the medical transport.

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Andorra and the covid-19 crisis: the plan
Jose Sanchis, Abast Technology and Systems Specialist, Andorra Insiders
Jose Sanchis

Supply Technology and Systems Specialist

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Andorra Insiders is an information platform about Andorra managed by Abast Global, an Andorran professional consultancy firm for legal, tax and accounting services specializing in the establishment of people and businesses in the Principality of Andorra. More information here.

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