% of GDP
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In 1990 Albania ended 44 years of xenophobic communist rule and established a multiparty democracy. The transition has proven difficult, as corrupt governments have tried to deal with high unemployment, a dilapidated infrastructure, widespread gangsterism, and disruptive political opponents.
Albania has long been thought of as a freak country. Actually it is one of the most beautiful in Europe, with a magnificent climate, warm but never getting too hot, given its mountainous and hilly topography. It is merely a matter of time before it becomes a great tourist attraction.
That has been prevented of late by its well-deserved reputation for gangsterism and kidnapping. It is worth giving a historical survey to see why things may shortly change.
The country was ruled in the interwar period by highland chieftains with resonant names like King Zog and his son, Leka. The last reigned as an infant for a few months in 1939 before Italy under Mussolini invaded and occupied the country. He is still alive and attempted a comeback in an election in 1997. But he made the mistake of standing as a prospective premier, clearly wanting to be a king. Despite his pedigree and majestic height of 6ft 9ins, he failed to impress his subjects-to-be with his hereditary right to rule. He came nowhere in the election.
In the interim between the infant Leka and the events of 1989, the Albanians were ruled for fifty years by the communists. This meant in effect the personal dictatorship
of Enver Hoxha, an extraordinary character, perhaps the most extraordinary the communist world threw up. He kept his country in virtually complete isolation. It became the poorest in Europe.
Albania had a severe crisis in the 1990s, with a financial crash in mid-decade. The population took a while to understand the rules of the capitalist market-place. Thousands lost their savings in pyramid investment schemes. But from the turn of the millennium it has done well, compared with its bleak past. GDP has been rising by 7-8% per year, albeit from a very low base. The Albanians are no longer the poorest people in Europe. That dubious distinction now belongs to the Moldovans. The Socialist Party is benefiting, in power since 1997, and was re-elected comfortably in 2001. Tirana is 100% behind the US anti-terrorist campaign, having no truck with ethnic Albanian secessionists next door in Macedonia and Kosovo. The last thing the Albanians want is a war of any sort. With Milosevic gone there is no reason to quarrel with the Serbs.
The Albanians blotted their copybook, however, with the French and the EU by supporting the US over Iraq. Indeed they have even agreed with the US not to extradite Americans to the International Criminal Court.
The two leading premiers of the PS government have been Pandeli Majco (now defence minister) and Fatos Nano, the current holder of the post. Both are very highly regarded in Washington, which sees Albania as its closest ally in the region, now that the Turks have refused cooperation over Iraq. The grimness of the Hoxha years have made the Albanians no friends of dictators.
Update No: 082 - (01/03/04)
Drama in Tirana
Opposition demonstrators tried to storm government offices in Tirana on February 7th, but were stopped by riot police and special troops of the Republican Guard. The demonstration was led by opposition leader and former premier, Sali Berisha. The target was the office of Premier Fatos Nano, plus several of his ministers' offices too.
The incidents began when thousands of people gathered in Tirana's main Scanderbeg square to hold an anti-government protest. Shouting slogans against Nano and the ruling Socialists, they marched through the town and later stopped in front of the government's main offices. The commander of the Republican Guard, which is responsible for the protection of state leaders and their offices, was slightly injured from a stone thrown by the demonstrators. There were no other casualties. The demonstrators threw stones at the police and Republican guards and tried to storm the building, but were forced back after the guards fired several shots in the air.
Poor economic situation
Despite good figures for GDP growth, more than 7% pre year in this decade, the economy is in poor shape, explaining the opposition turmoil. In recent weeks, Albania's power grid has been strained past its breaking point. Restrictions on electricity consumption and blackouts paralyse business for 20 hours a day. Many fear that if these problems are not resolved quickly, the country's government may face a total collapse.
More than 10 years after the collapse of the Soviet Union, Albania's fledgling democracy and capitalist economy are clearly not working. After a long, public, and acrimonious power struggle within the Albanian government, Albanian Prime Minister, Ilir Meta, resigned, leaving the ruling Socialist Party, and therefore Albania's government, split into warring factions.
Nano took over as premier. But as the politicians bicker, bankers complain that the instability is scaring foreign investors off at a time when the country needs all the foreign capital it can get. Foreign investors already had reason to be wary: bribery and graft had already inflated the cost of doing business in Albania.
IMF in town
The IMF puts an emollient gloss on the situation for all that. A three-year IMF Poverty Reduction and Growth Facility Programme (PRGF) programme of $41.5m is being disbursed with perhaps unfortunate timing.
"Albania's performance during the first half of the three-year PRGF-supported programme has been satisfactory overall, in spite of some delays on the structural side. Growth has recovered, inflation remains low, and the exchange rate has strengthened. However, revenue shortfalls persist, and could compromise the programme's poverty reduction objectives," said Agustin Carstens, deputy managing director and acting chairman.
"Improving revenue mobilisation is therefore a policy priority, requiring not only improvements in tax administration and in tax policy design, but also actions to enhance governance and the business climate in order to reduce the size of the informal economy and widen the tax net. The programme includes significant tax administration measures which, taken collectively, are expected to improve the efficiency, equity, and volume of tax collections," Carstens added. "Governance issues are being addressed through a series of measures, including civil service reform, improvement of the capacity to combat money laundering, and a concerted effort to remove administrative barriers to investment.
"Over the longer term, these reforms will be essential for higher levels of foreign and domestic investment, with positive effects on the sustainability of growth, revenue, and the balance of payments. However, success will also require the authorities to take strong action on other governance issues, such as judicial reform and improvements in the rule of law. Similarly, agreement with domestic and foreign creditors to regularise government financial obligations will be critical. In view of the authorities' strong commitment to the programme and ownership of the policy package, the executive board granted a waiver for the non-observance of a structural performance criterion-which has since been implemented - and completed the third review under the arrangement and the Financing Assurances Review," Carstens said.
Albania concludes negotiations on construction of power plant
The Albanian government has successfully completed technical and financial negotiations on the construction of a power plant in Vlore. The negotiations were conducted in Washington between an Albanian delegation (consisting of representatives of the Ministry of Economics, the Ministry of Energy and Industry, the Albanian Energy Corporation [KESh]), the World Bank, the European Investment Bank [EIB] and the European Bank for Reconstruction and Development [EBRD], Koha Jone reported.
The negotiations centred on a credit for the construction of the first phase (125 MW) of a power plant in Vlore. This scheme of major importance for the Albanian power industry will represent an investment of US$112m. The Council of Ministers considers this agreement, which was among the priorities it presented to the public past year, a major achievement for the Albanian government. Funding for the power plant will be staggered Government spokesman, Aldrin Dalipi, said at a news conference, the sides that negotiated the terms of a US$100m credit, the three banks mentioned, will grant for the construction of the power plant. "The World Bank will contribute US$25m, the ERDB US$37.5m, the EIB US$37.5m and the KESh US$12m," the government spokesman said. He also said that work for the construction of this important power plant would start in June this year and that the first phase would be completed in about 18 months.
Investment in the power plant in Vlore is seen as the first important investment in the last 20 years. "The new power plant will have a noticeable impact on the improvement of the power supply in the country," Dalipi stressed. He added that the Albanian minister of finance and representatives of the three financing banks would sign in Tirana an agreement on a US$100m credit for the construction of the power plant.
Also, he said that the Council of Ministers would carry out the annual analysis of the government activity, following the conclusion of the analyses in every ministry or central institution. At this meeting the Council of Ministers is to finalize its programme for the year 2004, the priority activities of the executive, and the terms of their implementation according to the relevant sectors public. "We have consistently stressed that particular attention will be attached to problems relating to negotiations on a stabilization and association agreement with the European Union and NATO integration. A routine round of talks with EU specialists was recently concluded," Dalipi said.
FOREIGN ECONOMIC RELATIONS
Macedonian foreign minister, Albanian Speaker discuss bilateral, regional ties
Macedonian Foreign Minister, Ilinka Mitreva, met Albanian parliament Speaker, Servet Pellumbi, recently. Mitreva expressed her satisfaction from the degree of political relations between both countries, emphasizing that good neighbourly relations and cooperation remain one of the most important priorities in Macedonia's foreign policy, MIA News Agency reported.
Mitreva emphasized Macedonia's exceptional significance in the regional cooperation, while the implementation of the constitutional reforms contributed to the stabilization of the region, and its reaching of European standards in the respect of the rights of the ethnic communities. According to her, this is a successful model for resolution of the situation in interethnic relations, based on European experiences.
Mitreva estimated that the signing of the Adriatic Charter was not only a significant moment in regional cooperation, but a strong incentive in reaching the common objective of both states, full-fledged NATO membership.
Macedonian foreign minister underlined that one of the priorities on the cooperation should be the economic dimension. Therefore, she emphasized the significance of Corridor 8 and Project AMBO [Albanian-Macedonian-Bulgarian Oil Company - trans-Balkan oil and gas pipelines engineering project], as well as the signing and ratification of the agreement on friendship, good neighbourly relations and cooperation.
Mitreva also stated that the ethnic communities that live in both countries present an important bridge in mutual relations, stressing the necessity for improvement of the conditions in mother tongue education of the Macedonian ethnic community in Albania.
Albanian parliament Speaker Pellumbi estimated that there were great political relations with a new dynamic cooperation, emphasizing the personal contribution of Minister Mitreva.
FOREIGN LOANS & AID
Albania receives more international financial aid
Albania recently received additional funds from the International Monetary Fund (IMF) and World Bank to support programmes aimed at reducing poverty and developing the country's infrastructure, reported New Europe recently.
The IMF announced that its board had approved disbursement of a US$5.9m loan. That comes on top of US$18m that the Fund has already granted for the same project. The Fund made its decision after completing an examination of Albania's economic performance and the financial review under Albania's Poverty Reduction and Growth Facility (PRGF) arrangement. "Albania's performance during the first half of the three-year PRGF-supported programme has been satisfactory overall, in spite of some delays on the structural side. Growth has recovered, inflation remains low, and the exchange rate has strengthened," said IMF Deputy Managing Director and Acting Chairman Agustin Carstens. "However, revenue shortfalls persist, and could compromise the programme's poverty reduction objectives," he added. Carstens said improving revenue mobilisation was a policy priority, requiring not only improvements in tax administration and in tax policy design, but also actions to enhance governance and the business climate in order to reduce the size of the informal economy and widen the tax net. The programme includes significant tax administration measures which, taken collectively, are expected to improve the efficiency, equity, and volume of tax collections.
In 2002, Albania signed a three-year agreement with the IMF on poverty reduction. The document envisaged US$41.5m in financing. Finance Minister, Arben Malaj, said the agreement demonstrates the country's macro-economic stability. The Albanian government is committed to economic reforms, reducing the informal economy, strengthening its fight against corruption and supporting the private sector, Malaj said.
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