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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 6,124 4,695 4,100 109
GNI per capita
 US $ 1,740 1,380 1,340 120
Ranking is given out of 208 nations - (data from the World Bank)

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Alfred Moisiu

Update No: 100 - (25/08/05)

Albania's Nano Denounces Extremist Elements in Macedonia
Outgoing Albanian Prime Minister, Fatos Nano, met with leaders of Macedonia's main ethnic Albanian parties in mid-August and denounced activities by extremist elements in Macedonia. According to media reports, Nano held separate talks with Democratic Union for Integration leader Ali Ahmeti and the Democratic Party of Albanians' Arben Xhaferi in settlements on the Albanian-Macedonian border. 
Nano reportedly condemned extremist elements in the Kondovo region in particular and repeated that regardless of who assumes power in Tirana, Albania stands for stability in Macedonia and the region. 
However, responsibility for these matters will soon no longer be his.

Berisha is back
Albanian politics has long been a contest between two dominant personalities, Sali Berisha and Fatos Nano himself. The opposition Democratic Party of Albania (DPA), led by Berisha, and its smaller allies are preparing to return to government following Albania's parliamentary election on July 3rd, although complaints by the losers are delaying the handover of power. The result is a triumph for Berisha, who had pledged to retire from politics if he suffered a third straight general election defeat at the hands of the ruling Socialist Party of Albania (SPA), led by Nano.
Mr Berisha's previous period in office in the 1990s was marked by autocratic rule and financial collapse, and the outside world is wary at the prospect of his imminent return to power. The performance of his new government will be crucial in determining how quickly Albania can conclude an EU Stabilisation and Association Agreement (SAA).
The DPA and its smaller allies appear poised to secure a workable majority in Albania's 140-seat parliament in the wake of the general election on July 3rd. Results from the Central Election Commission (CEC) show that the DPA has won 55 of the 100 single-member constituencies, compared to 40 for the SPA. Meanwhile, thanks to tactical voting agreements, the DPA's smaller partners look set to pick up at least 18 of the 40 seats allocated proportionally, thereby giving the opposition forces an overall majority in parliament.
The SPA, led by Fatos Nano, the prime minister, has so far refused to concede defeat, and says that it intends to challenge the results in about 30 constituencies. The Socialist Movement for Integration (SMI), an SPA offshoot, and some other small parties want the proportional vote to be rerun on the grounds that the tactical voting agreements used by the DPA (and, to a somewhat lesser extent, the SPA) were unconstitutional.
Although these protests are unlikely to alter the result, a protracted dispute over the outcome would delay the formation of a new government and could harm Albania's prospects for EU and NATO integration. The election was largely free of violence but "complied only partially" with international standards, according to the Organisation for Security and Co-operation in Europe (OSCE). The outside world has refrained from commenting further on the election, since the process has yet to be completed; a messy handover of power could cause the EU in particular to take a gloomier view.

Bad memories
The close international scrutiny that Mr Berisha will face when he takes office is a consequence of his previous spell in power from 1992-97. As a strong anti-communist leader in what had been the most repressive one-party state in Eastern Europe, Mr Berisha was feted in western capitals in the early part of that decade. However, his period in office was marred by hostility toward certain sections of the media, and then in 1997 by the collapse of pyramid savings schemes whose rapid growth he had tolerated.
During his long period in opposition Mr Berisha retained both his tight grip on the DPA and a capacity to worry foreign onlookers with unpredictable behaviour. In February 2004, for example, he led street protests in the capital, Tirana, calling for Mr Nano to resign. One such rally ended with protesters throwing objects at the windows of the government headquarters building, prompting police and members of the national guard to fire warning shots into the air to disperse the crowd. Western diplomats subsequently urged the opposition to voice its concerns in parliament rather than on the street.
In recent months the risk of a third straight general election defeat at the hands of the SPA seemed to have concentrated Mr Berisha's mind. With the help of a US political consulting firm, the DPA held a slick party convention in April at which Mr Berisha made specific policy proposals (on tax, for example) rather than personal attacks on Mr Nano. The DPA leader also tried to make the party appear more inclusive by bringing in young professionals to draft much of the party's election manifesto; and by welcoming back onetime allies such as Genc Ruli, a former DPA finance minister, who had left the party during the 1990s in protest at Mr Berisha's domineering style.
Nevertheless, international observers remain wary and want to know whether these apparent changes are more than cosmetic.

Cause for concern?
Mr Berisha has repeatedly said that his priority as prime minister in a DPA-led government would be to fight corruption, organised crime and illegal trafficking, and destroy unlawful monopolies. He considers corruption to be Albania's biggest problem, describing it as "the cancer of this country". A serious anti-corruption drive would be both welcome and overdue. Several prominent members of the outgoing SPA-led government are widely regarded as corrupt, and a Berisha-led government will need to show signs of real progress in this area if the EU is to conclude a stabilisation and association agreement (SAA) with Albania. The fear, however, is that possible high-profile cases against Mr Nano and other senior SPA officials could provoke a backlash among SPA militants and put too much pressure on a judiciary whose independence and competence are in doubt.
Another worry is the mutual loathing between Mr Berisha and Edi Rama, the popular mayor of Tirana who is regularly the subject of flattering coverage in the international media. Failure to establish a working relationship here could have serious consequences for the capital's development and Albania's image abroad. In light of Mr Berisha's increasingly authoritarian rule when he was in power in the 1990s, there is also scepticism about his claim that, once in power, the DPA will respect the media and drop all civil and criminal cases against journalists.
The main regional question is whether Mr Berisha, who is said privately to be a staunch defender of ethnic Albanians living abroad, will, once in office, continue to act with restraint over Kosovo. Like Mr Nano, the DPA leader has so far largely endorsed the UN mantra for the province of "standards before status", and western diplomats were encouraged by Mr Berisha's moderate reaction to the violence in Kosovo in March 2004. The hope is that Mr Berisha will continue to toe the international line, emphasising the need for regional stability rather than advocating immediate independence for the province.

Economic policy
The economic policy framework under Mr Berisha will continue to be determined in large part by the IMF and the World Bank. A new DPA-led government will almost certainly seek to conclude a new three-year IMF agreement after the current deal expires later in 2005, but the negotiations may not be easy. Mr Berisha's insistence that his government will cut the tax on small businesses within two weeks of taking office has caused some concern at the IMF, although the Fund may agree to this if the government can come up with offsetting spending cuts. However, the IMF strongly opposes the DPA's plan to introduce a two-tier value-added tax (VAT) system, including a new lower rate of 6%, on the grounds that the tax administration would not be able to handle such a regime. The independence of the Bank of Albania (the central bank) is more firmly entrenched than in the 1990s, and monetary policy is unlikely to change significantly following the transfer of power.
There are also signs that a DPA-led government may endorse two controversial deals that were approved by the outgoing SPA administration but will need to be ratified by the new parliament. Until recently DPA officials had threatened to annul the sale of state-owned Albtelecom to a Turkish consortium (the sole bidder), on the grounds that the tender for the country's dominant fixed-line operator had been uncompetitive and had generated too low a purchase price. Mr Berisha is now taking a softer line, saying that his government will "review" the privatisation. Nor is the DPA likely to oppose a US$95m rail link from Tirana to Durres, on Albania's Adriatic coast. The project has been criticised by the IMF and World Bank on the grounds of cost and a lack of transparency, but it has strong US support.

Looking ahead
The new government's performance will be crucial in determining how fast Albania moves ahead with its EU integration efforts, and how quickly it can conclude an SAA. Since the next annual progress report from the European Commission, expected in November 2005, will most probably come too soon to contain a meaningful assessment of the new government, the Commission is unlikely to make a recommendation until early 2006 regarding Albania's readiness to sign an SAA.

Albania police launch anti-cannabis operation in south
Special Forces of Albania's Public Order Ministry, in cooperation with units of police directorates of Vlore and Fier, held on July 22nd a wide raid in some villages of Vlore District identified as places where narcotics are cultivated, reported. Official sources of the local police told ATA that during this raid, which continued until late across the villages of Peshkepi, Treblove, Sevaster, Vllahine, and Karbunare, the police destroyed 17,990 roots of cannabis, as well as there were indicated 12 people alleged of implication in the cultivation of narcotics. This raid started again early the following morning and continued throughout the day.

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Albania business confidence in construction sector up 

Business confidence in the Albanian construction sector rose to 18 points in July, from zero a year earlier, according to a survey conducted by the independent and non-profit Centre for Research and Development, cited by The Reporter recently. 
But the index was five points lower than it had been in April. In January, the index stood at nine points. The indicator, which is released on a quarterly basis, is based on manager expectations about the number of orders, employment in the sector and assessment of business activity. 
According to business managers in Albania's construction sector, clumsy licensing procedures, unfair black market competition, inconsistent fiscal legislation and macroeconomic factors were the main impediments to further development in the sector.

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New Kosovo electricity plan gets off the ground 

The Kosovo Energy Corporation implemented a new system of distribution as of July 25th, B92 said in a report. 
The new system, called the ABC Plan, offers 24-hour availability of electricity for those citizens who have paid over 55 per cent of their monthly electric bill. The second group of consumers, who have paid 35 to 55 per cent, will have electricity for five hours at a time with one hour in between these five to live without electricity, and those who have paid less than 35 percent will have electricity for four hours at a time with breaks of two hours in between each block. KEC official Palok Berisa said that there will be an assigned group of KEC workers on the field who will divide all citizens into the corresponding groups.

World Bank lends Albania funds to upgrade equipment 

Albania signed an agreement with the World Bank on July 25th for a loan of US$27m (22m Euro) to upgrade its electricity distribution and transmission network, as part of funding in a regional project to create an integrated energy market, Forbes said in a report. 
The 20-year loan, with a 10-year grace period and an interest rate of 0.75 per cent, will be used by Albania's state-owned electric company, Albanian Electro-Energy Corp (KESH), to upgrade eight aging distribution and transmission substations, the bank said. Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, Serbia and Montenegro, Turkey and Kosovo have been urged by the European Union to develop a functioning regional electricity market and later integrate it into the electricity market of the EU. 
Post-communist Albania has suffered frequent power cuts because of lack of rain for hydroelectric stations, which provide the bulk of energy output, as well as poor management, an outdated distribution system and outstanding consumer bills. 
Following improvements in its management over the past two years, KESH has received hundreds of millions of Euro in loans to be invested in the power system. 
The public auction of a 10,000 sq m construction site located opposite Macedonia's National Bank will be repeated, Minister of Transport and Communications, Xhemali Mehazi, said recently, Makfax reported. 
The companies which participated to the first auction, that is Greek Veropoulos, Slovene Merkator, Serbian Delta M and domestic Inter Engineering, are entitled to participate to the second one as well. The auction will be conducted with full transparency, under the same rules and conditions as the first one, Mehazi said.

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IMF says Albania's economy better but reforms needed 

During recent years, macroeconomic performance of the Albanian economy has been good overall, with sustained growth and low inflation, said the International Monetary Fund (IMF) in its latest report that foresees a six per cent GDP (gross domestic product) growth. Weak infrastructure and institutions, however, hold back export performance and the economy remains dependent on migrant remittances to finance a large trade deficit, New Europe has reported. 
The 2005 macroeconomic outlook remains at 6 per cent growth and about 3 per cent inflation. Weak partner country growth, and high commodity prices, point to a slight deterioration of the current account to seven per cent of GDP. However, rising incomes, remittances, and deepening financial intermediation should sustain domestic demand, while the ongoing supply expansion will aid price stability. Total and external public debts have been fallen to 55.5 and 18 per cent of GDP respectively - but failure to boost competitiveness could substantially worsen sustainability prospects. Slow political reform and weak rule of law have delayed a Stabilisation and Association Agreement with the EU. 
Policy discussions continue to be focused on measures to maintain macroeconomic stability and the pace of structural reforms. Both the government and opposition have expressed interest in discussing a successor arrangement with the Fund. 
Following a gradual monetary easing, Bank of Albania's adoption of a neutral bias stance is appropriate, given electoral and seasonal uncertainties. Strong bank credit growth warrants close monitoring, but greater financial intermediation-from a low base-is welcome, and has not eroded macroeconomic or financial stability. The 2005 budget is on track to deliver Albania's first surplus in current operations and budget implementation has improved. 

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Besa ready to offer SMEs loans 

Albanian lending institution for small businesses Besa Foundation intends to extend US$25m (20.7m Euro) in loans this year to small- and medium-sized enterprises (SMEs) a foundation official said, reported recently. 
The foundation's full-year target is to have 6,500 active clients and outstanding loans of US$21.5m, according to a foundation official. Besa had a roster of 5,887 active clients as of June 30, up from 5,444 six months earlier. Outstanding loans reached US$22.25m as of the end of last year.

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Albania approves telecom sale 

The Albanian government recently approved the sale of a 76 per cent stake in the country's state telecom provider, Abltelecom, to Turkish Calik Enerji Telekomunikasyon, a consortium consisting of Calik Enerji and Turk Telekom, Ansamed reported on July 11th.
The deal was to be approved by the new parliament set up after the July 3rd general elections. The opposition Democrats of former President Sali Berisha, which won potentially decisive gains in the elections, announced during their pre-election campaign that they were willing to revise the clauses of the contract that they consider "humiliating." The Turkish consortium bought the Albanian telecom following an international tender.

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