The year in review
With per capita GDP in 1998 of around EUR 675, Albania remains the poorest country in Europe. Following the dramatic fall in economic output that accompanied the collapse of the centrally planned economy, when real GDP fell by almost 40 per cent between 1989 and 1992, Albania entered a period of rapid recovery, recording among the highest economic growth rates in Europe. Real GDP increased by over 45 per cent between 1992 and 1996, and had reached 90 per cent of 1989 levels by the end of 1996. The 1997 crisis resulted in a drop of real GDP of 7 per cent as compared to 1996. Growth resumed in 1998: it is estimated at 10 per cent in real terms and at a reduced rate of 7 per cent for 1999. Albania’s success in reducing inflation, from a high of 237 per cent in 1992 to 8 per cent in 1998, has been an outstanding achievement. Foreign direct investment, mainly from Italy and Greece, remained at around EUR 42 million in 1998.
Progress, in terms of macroeconomic stabilisation, was confirmed throughout 1998, but economic development is vulnerable to continuing political instability and lack of public order and security. First steps towards structural reforms with respect to institutions and public administration are encouraging, but should be confirmed and completed by sustained efforts in the fight against fraud and corruption.
The process of stabilisation, recovery and democratisation in the country continued to develop rather unevenly and is still confronted with severe problems. Political life remained highly confrontational and public order rather volatile, as highlighted by renewed turmoil in September 1998 followed by a new government in October 1998. The continued high levels of corruption in public administration and the judiciary together with organised crime have considerably undermined the efforts of the government. The worsening of the situation in Kosovo and the arrival of forcefully displaced persons have placed additional demands on the government and have adversely affected the security situation in north-eastern Albania.
With regard to Albania-EU relations, Albania benefits from the Generalised Preference Scheme (GSP) treatment and from a Trade and Cooperation Agreement since 1992. Albania has requested an association agreement since 1995, but further strengthening of relations are subject to the EU’s Regional Approach and real progress in terms of stabilisation and development.
Phare in 1998
In 1998, as in 1997, Phare resources were concentrated in four main areas of interest:
• public administration and institutional reform
For 1998, Phare has committed EUR 30.5 million in national and EUR 12.0 million in cross-border cooperation programmes.
In the area of public administration reform, technical assistance has been deployed in 1998 in different fields (Supreme Audit Institution, DOPA/Department of Public Administration, etc.).
In the area of judiciary reform, considerable efforts have been made, to a substantial extent with the support of the Council of Europe, whose involvement is funded by Phare. Two Joint Programmes have already been implemented.
Since late 1997, the Commission has been providing support, in cooperation with WEU/MAPE, for advice and equipment for the Albanian police. Up to 1998, almost EUR 8 million has been committed and implementation of the programme is ongoing. This support is targeted to equipment (special police equipment, uniforms, vehicles and spare parts) and to rehabilitation of the Police Training Centres.
In the area of customs, a Customs Assistance Mission (CAM) was established in June 1997 for a nine-month period and was still ongoing in 1998. Its main task is to assist the Albanian customs authorities with restoring their ability to efficiently collect customs and excise revenue. During 1998, activities that concentrated on the reform of the customs service and computerisation (ASYCUDA) have been delayed due to civil unrest.
In the sector of local community development, the 1998 programme included development of pilot projects for urban regeneration in Tirana which consist of labour intensive works for the maintenance of public space or buildings.
The water sector is recognised as a key area for infrastructure development by both the Albanian Government and the donor community. Water supply and distribution networks continue to deteriorate. Phare’s PMU continued to play a key role in 1998 in stimulating and coordinating donors’ intervention in this crucial sector.
In the sector of agriculture, efforts were concentrated on extension services, land mapping, veterinary services and fisheries. In late December 1998, the Government of Albania approved a strategy for the development of Albanian agriculture – the Green Strategy – which will be very useful in the future development of agriculture.
Albania also received a budget of EUR 0.7 million for Tempus, allowing for the funding of 6 Joint European Projects.
Over the period 1991-1998, Phare assistance to Albania has exceeded EUR 500 million. Despite delays in programming and implementation due to the situation in Albania, overall implementation of Phare assistance remains satisfactory, with a level of contracting of 66 per cent of total funds allocated in 1991-1998. 1998 saw an acceleration of implementation, in particular with regard to large infrastructure projects. A good example of this is the construction of the Durres-Roghizina road. In 1998, the target to contract EUR 120 million was very nearly reached.
Phare conditioned its budgetary support to the Government’s public administration reform programme on a certain number of measures. Thanks to this leverage, the following measures have been taken: adoption of the Organic budget law, transformation of the State control service into an independent Supreme Audit Institution, adoption of the Decree on transitional measures of recruitment and dismissals, creation of the State publication office, etc.
In the field of support to the Albanian police, several targets were met in 1998: 13 police stations have been rehabilitated, more than 100 hand-held radios with transmitters have been distributed, rehabilitation of the training centre at the Tirana police academy has been completed, spare parts for police vehicles have been delivered, etc.
Water and waste strategies funded by Phare were finalised in line with the recommendations of the Albanian National Environment Action Plan. This will serve as a basis for further infrastructure investments in sectors which are critical for both health and the environment.
Case study: Customs
The Customs Assistance Mission to Albania (CAM-A) has been one of the most successful technical assistance programmes in Albania as demonstrated by the strong increase in the revenue collected by customs. CAM-A was originally conceived as part of the international response to the pyramid investments crisis in Albania in 1997. The customs services in particular had suffered badly from the civil unrest. This had particularly serious consequences for the public finances, as the majority of the budgetary revenues are collected by the customs service. The CAM-A deployed a team of specialists in order to help the government restore its ability to combat fraud and to collect revenue, as well as to modernise and grow into a self-sustaining viable service. This mission has been very successful. Revenues from duty fees have increased substantially and have reached about 150 per cent of the pre-crisis level. In 1998, CAM-A turned into a modernisation and development programme, but was hindered by civil unrest in September 1998. The International Conference held in Tirana in October 1998 highlighted the importance of this mission.