## _cr0623 ## Source details **Canonical URL:** [_cr0623](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr0623.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr0623.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr0623.pdf.json) --- ### Planning architecture and institutional reforms - Albania established a Technical Secretariat for donor coordination in April 2004 to develop a strategic, integrated, and accountable planning architecture. - Objectives of the Secretariat: - better enable the Council of Ministers to provide strategic policy direction within a sound fiscal framework; - harmonise and streamline existing systems within a new, integrated planning system; - ensure that external assistance effectively supports the Government’s strategic priorities; - realign organisational structures to deliver the new system; and - identify implementation requirements to phase in the proposed changes. - Composition: six members representing the Prime Minister’s Office, the Ministry of Finance, the Ministry of Economy, the Ministry of European Integration and the Department of Policy Development and Coordination at the Council of Ministers. - Timeline milestones: - Final proposal prepared in January 2005. - Reviewed and approved by the Economic Policies Committee in March 2005 and by the government in April 2005. - Joint conference to launch the document in May 2005. - Action plan for implementation to be prepared and approved in June 2005. - Design parameters (selected): - Decision makers must be engaged early and provided with high quality policy options that identify fiscal impacts. - NSSED must shift focus to medium to long-term planning while retaining poverty reduction emphasis. - Policy and financial planning must be components of a single planning system; public investment and external assistance must be recognised as key contributors. - Annual external assistance priorities document to be developed to link donor deliberations to government priorities. - Clarify roles of decision makers and ensure meaningful statements of expected results for each programme. - NSSED Department functions to evolve to: - identify linkages to national goals (EU and NATO membership, MDGs, governance, decentralisation); - develop and monitor high-level indicators; - oversee indicative costing of medium- and long-term strategies; - oversee cross-cutting and sector strategies; - develop poverty reduction policy directions; - advise on policy implications of MTBP expenditure ceilings. - Revision process: expected to begin in late 2005 and run throughout 2006; capacity constraints noted. ### Macroeconomic conditions, balance of payments and projections - 2004 summary key outcomes: - Real GDP growth: about 6% in 2004. - Inflation (annual): 2.9%. - Government budget deficit: down to 4.6% of GDP (2003) and reported -4.9% in 2004 in indicators. - Balance of payments overall surplus: $288 million in 2004 (compared with $100 million previous year). - Reserves increased to $1374 million, sufficient for 5.2 months imports. - Exchange rate average annual: 102.76 Lek/$ in 2004; cited 127.66 Lek/Euro reflecting dollar weakness. - Main macro indicators (selected, 1998–2004; preserved): - Population (Million): 1998 3.35; 1999 3.37; 2000 3.23; 2001 3.08; 2002 3.10; 2003 3.10; 2004 3.12 - Inflation (average) (%): 1998 20.9; 1999 0.4; 2000 0.0; 2001 3.1; 2002 5.2; 2003 2.4; 2004 2.9 - Exchange rate Lek / $US: 1998 150.6; 1999 137.7; 2000 143.7; 2001 143.5; 2002 140.2; 2003 121.9; 2004 102.8 - Gross Domestic Product (Lek billion): 1998 412.3; 1999 474.3; 2000 530.9; 2001 588.7; 2002 630.0; 2003 695.1; 2004 780.1 - Gross Domestic Product ($ billion): 1998 2.7; 1999 3.4; 2000 3.7; 2001 4.1; 2002 4.5; 2003 5.7; 2004 7.6 - Real GDP growth %: 1998 12.7; 1999 10.1; 2000 7.3; 2001 7.2; 2002 3.4; 2003 6.0; 2004 6.0 - GDP per capita $: 1998 816; 1999 1021; 2000 1143; 2001 1334; 2002 1450; 2003 1837; 2004 2431 - Total revenue % GDP: 1998 24.9; 1999 26.0; 2000 24.6; 2001 24.7; 2002 24.5; 2003 22.4; 2004 23.6 - Total expenditure % GDP: 1998 34.3; 1999 34.9; 2000 32.1; 2001 31.6; 2002 30.6; 2003 27.0; 2004 28.5 - Overall deficit % GDP: 1998 -9.5; 1999 -9.0; 2000 -7.5; 2001 -6.9; 2002 -6.0; 2003 -4.6; 2004 -4.9 - External debt % GDP: 1998 36.9; 1999 32.3; 2000 31.6; 2001 28.2; 2002 24.4; 2003 23.3; 2004 18.3 - Exports $ million: 1998 208; 1999 275; 2000 255; 2001 305; 2002 330; 2003 447; 2004 603 - Imports $ million: 1998 812; 1999 938; 2000 1076; 2001 1332; 2002 1485; 2003 1783; 2004 2182 - Trade balance $ million: 1998 -604; 1999 -663; 2000 -821; 2001 -1027; 2002 -1155; 2003 -1336; 2004 -1579 - Reserves $ million: 1998 384; 1999 482; 2000 608; 2001 754; 2002 860; 2003 1026; 2004 1374 - Reserves – Import cover (Months): 1998 3.7; 1999 3.8; 2000 4.2; 2001 4.3; 2002 4.3; 2003 4.7; 2004 5.2 - Balance of payments 2004 highlights: - Exports $603 million (35% increase). - Imports $2182 million (22% increase). - Trade deficit worsened to $1579 million in 2004. - Service balance deficit about $24 million (improved from $83 million in 2003). - Net private transfers increased by 25% to $978 million (dominated by remittances). - Financial account surplus $399 million, up 97.5%. - Macroeconomic projections (MTBP 2005-2007; selected 2004–2005 indicators preserved): - GDP at current prices Lek million: 780100 (2004); 857300 (2005); Growth rate 9.9. - Real GDP growth rate: 6.0 (%) (2004); 6.0 (%) (2005). - GDP per capita: $ 2431 (2004); $ 2575 (2005); Growth rate 5.9. - Inflation (average): % 2.9 (2004); % 2.4 (2005); Change -17.2. - Exchange rate Lek/$: 102.8 (2004); 106.0 (2005); Change 3.1. - Trade balance $ million: -1579 (2004); -1981 (2005); Change 25.5. - Exports $ million: 603 (2004); 766 (2005); Change 27.0. - Imports $ million: 2182 (2004); 2747 (2005); Change 25.9. - MTBP fiscal assumptions for 2005: - Total budget revenues projected 23.6 -> 24.1 (% of GDP). - Total expenditure projected 28.5 -> 29.0 (% of GDP); deficit -4.9 (2004) -> -4.9 (2005). - Monetary/credit developments 2004: - Money supply annual growth: 13.1% at end-2004. - Credit expansion: 30%, reaching Lek 70 billion. - 82% of credit still in foreign currency. - Annual inflation 2004: 2.9% (2003: 2.4%). ### Growth drivers and sectoral performance (2003–2004) - Sectoral structure and real growth (2003, 2004 preserved): - Total: Structure of GDP (%) 100 (2003), 100 (2004); Real growth rate (%) 6.0 (2003), 6.0 (2004) - Industry: Structure 10.2 (2003), 9.9 (2004); Real growth 2.7 (2003), 3.1 (2004) - Agriculture: Structure 24.7 (2003), 24.0 (2004); Real growth 3.0 (2003), 3.0 (2004) - Construction: Structure 9.1 (2003), 9.5 (2004); Real growth 11.3 (2003), 10.6 (2004) - Transport: Structure 10.0 (2003), 10.4 (2004); Real growth 10.8 (2003), 10.1 (2004) - Services: Structure 46.1 (2003), 46.3 (2004); Real growth 6.4 (2003), 6.4 (2004) - Notable sectoral details: - Agriculture: 24% of GDP and 58% of employment in 2004; real growth ~3%. - Industry: overall growth ~3%; energy sub-sector grew ~48.9%; metallurgical industry declined by 68.3%. - Construction: real growth 10.6% in 2004; private sector finance ~81.6% of private construction financing; state engineering constructions 84.8% of state financed construction. - Transport: growth 10.1% in 2004; railway traffic volumes declined (railway volume -24.2%, passenger value -15%, goods -19.3%). - Services: contributed 46.3% of GDP; tourism estimated revenues $673m in 2004 (increase >29% vs 2003). ### Public finance, revenues and expenditure (2004) - Revenue and composition: - Budget revenues 2004: 23.6% of GDP; nominally 10.2% higher than 2003. - Total revenue achieved: 93.1% of budget; tax revenues at 97.3% of budget. - Tax revenues account for 90% of total revenues and increased from 20.9% to 21.3% of GDP. - VAT: increased by 15% in Lek terms and about 1.8% above budget. - Excise collection: increased by 29% in Lek terms but was 97.3% of budget. - Profit taxes: increased by 24% in Lek and were 7.3% above budget. - Personal income tax: increased by 6.8% nominally; was 84% of budget. - Customs administration revenue: 10.5% higher than last year; about 97.8% of budget. - If exchange rates had matched budgeted levels, customs revenue would have been ~8% higher and total public revenue would have been 24.3% of GDP. - Local government revenues: in 2004 15.3% lower than budget but 21.3% higher than last year; local government revenues increased to 1.2% of GDP from 1.1%. - Constraints to raising taxes: - Informal economy estimated at least 30% of GDP. - Behavioral/institutional factors: pessimistic attitudes toward institutions correlated with higher tax evasion in Tirana household survey. - Expenditure and debt: - Current expenditures 2004: about 8.5% higher than previous year; 99.2% of budget. - Capital expenditures 2004: 70% of budget; 21.6% higher than 2003 in nominal terms; foreign-financed investment 46% below budget and 19% lower than in 2003. - Public deficit proportion of GDP declined from nearly 10% in 1998 to -4.9% in 2004. - Domestic government debt declined from 42.6% of GDP in 2000 to 37.8% end-2004. - Interest cost savings to end-2004: Lek 1.9 billion (internal debt) and Lek 720 million (external debt). ### Poverty, social indicators and MDG linkages - Poverty measurement and monitoring: - Poverty headcount 2002 (LSMS national sample 3600 households): 25.4%. - Monitoring method for 2002→2003: statistical prediction using variables common to both years. - Panel estimates: - 2002 Actual: Total 25.4%; Urban 19.5%; Rural 29.6%. - 2002 Estimated (panel sub-sample): Total 20.4%; Urban 13.2%; Rural 24.3%. - 2003 Estimated (panel sub-sample): Total 17.1%; Urban 10.7%; Rural 22.9%. - Percentage change 2002→2003: Total -16.2; Urban -18.9; Rural -5.8. - Per capita consumption change 2002→2003 (Lek per month): - 2002 Total 7,679; 2003 Total 8,116; Difference 437; Difference (%) Total 5.7. - Child poverty and health (selected): - About 32.8% or 293,000 children live below minimum standards (< $2 per day). - 2000 MICS (children under 5): moderate underweight 14%; significant underweight 4.4%. - Infant mortality decreased from 30.8 per 1,000 live births in 1989 to 16 deaths in 2003 (source reported). - Early childhood education enrolment (3-6 year olds): 44% in 1990; 28% in 1992; 34% in 2001. - National Strategy for Children approved June 2005; Action Plan expected later in June. - MDG selected indicators (preserved figures): - Absolute poverty headcount rate (%): 2001 = 25.4; 2002 = 20.0; Target 2015 = 10.0 - Under-5 mortality per 1000: 2001 = 20.1; 2002 = 20.7; 2004 = 18; Target 2015 = 10 - Net primary education enrolment rate (%): 2002 = 92.5; 2003 = 94.0; 2004 = 98.5; Target 2015 = 100 - Foreign direct investment ($ million): 2002 = 153; 2003 = 178; 2004 = 341; Target 2006 = 300; Target 2015 = 600 - Population with access to safe drinking water (%): 2001 = 69.0; 2002 = 75.4; Target 2015 = 98 ### Labour market, migration and remittances - Labour market indicators and dynamics: - Unemployment estimated at 14.4% in 2004; 15.0% in 2003; 18.4% in 1999. - Labour force (2001 Census): 1.3 million (15% lower than 1989). - LSMS 2002 employment status (working age): - Total: Employed 61.7; Unemployed 16.0; Inactive 22.3. - Sectoral distribution: agriculture 53%; construction 10%. - Job transitions (LSMS panel 2002→2003): - Employed in 2002: 87.5% remained employed in 2003; 4.8% became unemployed; 7.7% became inactive. - Unemployed in 2002: 39.6% became employed in 2003; 39.3% remained unemployed; 21.1% became inactive. - Migration and remittances: - Remittances (Bank of Albania): 2000 531; 2001 615; 2002 632; 2003 778; 2004 966 (million $). - Forms of migration (2002 LSMS): 20% of households had temporary migrants; 33% had permanent migrants. - Uses of remittances: basic necessities and durable goods; potential for productive investment noted as policy question. - Policy work underway: migration strategy with IOM support to channel remittances into business activity. ### Governance, justice, decentralisation and anti-corruption - Governance priorities: strengthen institutions, increase programming capacity, improve fiscal efficiency, strengthen accountability, reduce corruption, deepen decentralisation. - Justice sector reforms and performance: - Case management system automated in three pilot courts in 2004; High Court decisions published for the first time. - Bailiff’s Offices executed 61% of registered cases in 2004 (33% in 2003; 20% in 2002). - Prisons investments added 610 places in 2004; planned 700 places expected to solve overpopulation in 2006. - Public order, policing and anti-crime measures: - Separation of political and technical police levels; Border and Migration Department established. - Fight against drugs: cultivated/eliminated plants (roots) 186,000 (2003) and 77,000 (2004); Heroin seized (kg) 114.7 (2003) and 240.6 (2004). - Decentralisation framework and fiscal arrangement: - Local government units: 309 communes and 65 municipalities in 12 regions. - Local government expenditure 2004: 2% of GDP; MTBP projected increase to 2.1% of GDP in 2006. - Own local government revenues: Lek 9.6 billion in 2004 (up from Lek 7.9 billion in 2003). - Proposed revenue sharing: 15% of personal income tax to communes/municipalities and 5% of company profit tax to communes, municipalities and regions. - Transfers and conditionality: conditional transfers proportionally larger than unconditional transfers, limiting revenue autonomy. - Anti-corruption indicators (selected): - Disciplinary measures against police authorities: 1715 (2003) -> 2334 (2004). - Sanctions by High State Control convictions: 138 (2003) -> 323 (2004). ### Private sector, trade, FDI and SMEs - SME and enterprise development: - Over 7,500 new businesses created in 2004; expectation up to 8,000-9,000 in coming years. - Fund for Guaranteeing Credits to SME expected in 2005 supported by Italian government €30 million loan: €25 million soft credit; €2.5 million soft credit for Guarantee Fund; €2.5 million grant technical assistance. - Foreign direct investment: - FDI 2004: $341 million (2003: $178 million). - Number of foreign companies operating in 2004: 1755 employing 4408 persons. - Trade liberalisation and exports: - EU countries absorb 90% of Albania’s exports and provide two-thirds of imports. - Free trade agreements expanded regional markets (exports to Kosovo and Macedonia increased substantially 2003→2004). - ASYCUDA installation in most customs branches in 2004; customs clearance time reduced by more than half vs 2002. - Study estimate: further trade facilitation measures could potentially achieve benefits up to $200 million. ### Infrastructure, energy, transport, water and telecoms - Energy and mining: - National Strategy of Energy approved July 2003. - Investments in energy sector in 2004: Lek 12.7 billion. - Network losses: 2004 36.6%; 2003 39.3%; 2000 53.5%. - Electrical energy production 2004: hydro power 98%; thermo energy 2%. - Transport (2004 outcomes): - Road: 100 km constructed; 373 km rehabilitated; 730 km maintained. - Rail: rail link with Montenegro reopened; goods transported 57,400 tonnes (2004). - Ports: Durres port rehabilitation completed after $23 million project; maritime transport volumes increased (Total volume loaded/unloaded thousand tonnes: 2002 3114; 2004 3627). - Air: Passengers 649,750 (15.7% growth); Flights 6,757 (16.3% growth); Flyovers 90,655 (11.5% growth). Concession for Tirana airport signed Nov 2004 with consortium investment commitment €82 million over 20 years. - Telecommunications (2004): - Mobile network coverage: 74% of Albania and 87% of population. - Mobile phone ownership: 39% of population. - Fixed line telephone ownership: 7.5% of population. - Mobile line subscribers: 1,283,000 (16% growth relative to 2003). - Fixed line subscribers: 265,000 (7% growth). - Water and sanitation: - Average piped water supply to population in 2004: 14 hours a day (increase of 3 hours from 2003). - Operational subsidies in budget: Lek 1.7 billion. - Donor + government investment grants/loans to water utilities: $48 million. - Meters installed in 2004: 1600 private enterprises, 500 public institutions, 12,500 households. - Of 54 water utilities, 8 transferred to local government by 2004 (inclusive of 131 systems). - Pilot lifeline service proposed: 20 litres per person every day for free (implementation constraints noted). ### Infrastructure and service delivery — social impacts and poverty links - Electricity outages (2003 reported): - Mean hours without electricity: 4.8 hours per day overall; Urban 3.5 hours; Rural 6 hours. - Perception of electricity service: Improved 52%; Stayed the same 28.5%; Worsened 17.5%. - Water service delivery and distributional impacts: - Poor urban households: less likely to pay for water; up to 4 days/month shorter supply; more likely to have illegal connections; less likely to afford meters. - Lifeline proposal issues: meter-installation cost prohibitive; poor household identification mechanisms weak. - Flat rate billing needs discontinuation to control abuses and cover O&M costs. - Education resources and disparities: - Education expenditure 2004: Lek 25.281 billion (10.7% of total budget or 2.8% of GDP). - Average cost per student 2004 (Lek): Primary 28000; General secondary 25000; Vocational secondary 54000; Tertiary 81000. - Two types of inequality in basic schools: bottom fifth received on average Lek 20 per pupil per year vs top fifth > Lek 5,000. - Pre-tertiary teachers increased salaries by 8% (2004); university staff increases 30-70%. - Health sector highlights: - Public health expenditure 2004: Lek 19.507 billion (8.67% of total budget or 2.31% of GDP). - Immunisation coverage: DPT 97% (2004); Polio 97% (2004). - Health service infrastructure: approximately 640 health centres; 171 new outpatient clinics built in 2004; 900 outpatient clinics network ~50% completed. - Hospital beds ratio: 3.1 beds per 1000 inhabitants; bed occupancy 2002: 50.5%. ### Natural resources, agriculture and rural development - Natural resources priorities: sustainable management, transfer of forests/pastures to communes, anti-erosion, institutional strengthening. - Forestry and anti-erosion in 2004: - Reforestation: 180 ha; 460,000 saplings. - Mountain dams: ~800 metres constructed. - Forest area improved: ~820 ha. - Agriculture outcomes 2004: - Agriculture contribution to GDP: 24%; annual growth rate 3.1%. - Irrigation/drainage rehabilitated: about 20,000 ha irrigation improved; 25,000 ha drainage improved; 5,000 ha flood-protected. - Mechanisation 2004 sales: 651 tractors; 1200 agriculture engines; 7 combine harvesters. - Greenhouse investment 2004: Lek 1.6 billion; greenhouse area increased by 107 ha. - Agro-processing output grew by 11.7% in 2004; olive oil production increased by 120.7%; beer production +92.2%; soft drinks +41.4%. - Rural finance and saving-credit associations (Table figures preserved): - Number of Saving-Credit Associations: 2000 = 21; 2002 = 88; 2004 = 89 - Number of members: 2000 = 506; 2002 = 5,285; 2004 = 10,430 - Union portfolio (thousand): 2000 = 421; 2001 = 1837; 2002 = 5060; 2003 = 7980; 2004 = 9314 - Average credit: 2000 = 605; 2001 = 698; 2002 = 851; 2003 = 1012; 2004 = 1258 - Delay Credit (30 days) / Total of Credit: 2000 = 3.64% ; 2001 = 2.41% ; 2002 = 1.10% ; 2003 = 0.85% ; 2004 = 0.70% ### Monitoring, statistics and indicators - Monitoring system orientation: - Shift from outputs/inputs to outcomes and impacts; reduced number of indicators per ministry to focus on highest-priority policies. - Management Information System (DPDC) to be primary short- to medium-term monitoring system; MIS structure to be harmonised with MTBP classification; redesigned system implementation in 2006. - Annual monitoring plan to be negotiated with ministries; DPDC to develop standards in 2005. - Long-term evaluation: use administrative data, household surveys, Census, national accounts; strengthen collaboration with INSTAT. - Selected monitoring indicators (growth, education, health, social, agriculture, energy — preserved values): - Domestic public investment / GDP: 2000: 6.8; 2001: 7.4; 2002: 6.0; 2003: 4.6; 2004: 5.8* (*Provisional data for 2004) - Remittances (million $): 2000: 531; 2001: 615; 2002: 632; 2003: 778; 2004: 966 - Number of tourists (thousand): 2000: 151; 2001: 165; 2002: 196; 2003: 207; 2004: 246 - Life expectancy at birth: 2000: 74.6; 2001: 74.9; 2002: 74.9; 2003: 74.4; 2004: 75.4 - Student-teacher ratio primary: 2000: 18.7; 2001: 18.9; 2002: 18.9; 2003: 18.8; 2004: 18.8 - Hydroelectric energy generated (GWh): 2000: 4736; 2001: 3684; 2002: 3123; 2003: 586; 2004: 5417 ### MTBP recommendations, priority actions and institutional reforms (selected) - Strengthen links between NSSED and MTBP; NSSED Department to advise MTBP during three-year budget design. - Improve costing and prioritisation of NSSED public actions; ongoing Poverty Reduction Strategy Trust Fund work to strengthen capacity of five line ministries (Labour and Social Affairs, Health, Education and Science, Transport and Telecommunications, Agriculture and Food). - Reconcile discrepancies between line ministry programme definitions and Ministry of Finance budget programmes. - Balance poverty reduction and European integration priorities using Integrated Planning System. - Sectoral priorities highlighted: - Water and sanitation: renewed investment, address decentralisation management problems, phasing out state subsidies in pilot cities by 2007. - Energy: implement electricity strategy; KESH restructuring (separate generation/transmission/distribution); monitor lifeline tariffs. - Transport: accelerate road projects, priority horizontal and vertical axes. - Education: attract and retain students in general secondary education; align vocational training with labour market needs. - Health: strengthen prevention and surveillance; address outpatient clinic and rural medical personnel shortages. - Rural development: map complementarities between MADA/MAFF and proposed Rural Development Agency; address declining Ministry of Agriculture budget allocations. - Donor coordination and quick-win initiatives: - Integrate Millennium Project recommendations into NSSED; quick-wins examples: school buses, afforestation, solar panels, regional waste management, mobile health clinics, one-stop public service shops. ### Annex and implementation calendars (selected) - Structure of Progress Report relevant sections: - Chapter 2: macroeconomic developments and projections. - Chapter 3: socioeconomic conditions (LSMS 2002/2003). - Chapter 4: line ministry responses on NSSED implementation, decentralisation, European integration. - Annexes include: Annex 1 Selected monitoring indicators; Annex 2 Mid-term plan of priority actions; Annex 3 Sector and crosscutting strategies; Annex 4 Public expenditure management calendar. - Public expenditure management calendar components preserved: MEDIUM-TERM BUDGET PROGRAMME; ANNUAL BUDGET PREPARATION; MTBP preparation forms; Draft MTBP document and MTBP expense ceilings; Draft Annual Budget; Budget negotiations; Proposed State Budget and Budget Law. *Source: National Strategy for Socioeconomic Development – 2004 Progress Report (excerpts provided).* ### Annex 1 Selected monitoring indicators ....................................................... 98 ### Annex 1 Selected monitoring indicators ### Planning architecture and institutional reforms - Albania established a Technical Secretariat for donor coordination in April 2004 by order of the Prime Minister to develop a strategic, integrated, and accountable planning architecture. - Objectives of the Secretariat: - better enable the Council of Ministers to provide strategic policy direction within a sound fiscal framework; - harmonise and streamline existing systems within a new, integrated planning system; - ensure that external assistance effectively supports the Government’s strategic priorities; - realign organisational structures to deliver the new system; and - identify implementation requirements to phase in the proposed changes. - Composition of the Technical Secretariat: six members representing the Prime Minister’s Office, the Ministry of Finance, the Ministry of Economy, the Ministry of European Integration and the Department of Policy Development and Coordination at the Council of Ministers. - Timeline milestones reported: - Final proposal prepared in January 2005. - Reviewed and approved by the Economic Policies Committee in March 2005 and by the government in April 2005. - Joint conference organised by the Government and Donor Technical Secretariats to launch the document in May 2005. - An action plan for the implementation will be prepared and approved in June 2005. ### Proposed planning architecture (functional elements) - National goals and consensus-building exercise: - Linkages to goals; - Government long-term planning/indicators; - Macro option costing. - Medium to long-term strategy: - Crosscutting strategies; - Sector strategies; - Strategy costing. - NSSED and MTBP linkages with public investment and external assistance project proposals. - MTBP and Annual budget elements: - Policy goals/objectives; - Programmes; - Expected outputs; - Activities; - Programme budgets. - Action plan instruments: - Ministry integrated plans; - Council of Ministers work programme; - Legislation plan; - Annual external assistance priorities; - Ministry monitoring plan. - Implementation instruments: - Progress reports; - Council of Ministers proposals; - Public investment project appraisals; - Annual results report; - Evaluations. - Macro crosscutting strategies with medium to long-term horizons include EU integration, NATO membership, MDGs/Poverty reduction, Macroeconomic strategy, Regional strategies, Decentralisation. - Government programme positioned as a medium-term horizon instrument. ### Design parameters for a more strategic planning system - Decision makers must be more actively engaged at the outset and be provided with high quality policy options that clearly identify the fiscal impacts of various choices. - NSSED must shift focus from short- to medium-term ministry action plans to medium to long-term planning for all national priorities without losing its poverty reduction emphasis. - NSSED must create a policy-driven system in which a medium-term policy framework, comprising mutually consistent sector and crosscutting strategies, supports long-term national goals and advises the government on strategic priority options. - The government must annually establish strategic policy priorities within the context of the government’s macroeconomic framework to guide ministry medium-term budget ceilings. - The NSSED and MTBP priority planning process should be formulated within the programme budget structure; programme expenditure decisions will depend on related policy goals/objectives and expected results. - Public investment (domestic and foreign-funded) and technical assistance projects must be identified in advance of specific planning exercises and be derived from sector strategies. - An annual external assistance priorities document must be developed as a product of the planning process to enable informed deliberations with donors that link external assistance needs to government priorities. - The Council of Ministers’ annual legislative and decision-making programme must similarly derive from the strategic planning process delivered through the NSSED and the MTBP. ### Design parameters for an integrated planning system - Policy and financial planning must be presented as components of a single planning system. - Public investment and external assistance must be recognised as key contributors to policy goals and objectives within the NSSED and MTBP frameworks. - European Union integration planning must be reflected in all phases of the planning process. - The Government Programme and cross-cutting strategies (e.g. decentralisation, anti-corruption) must be incorporated within the planning architecture. - Monitoring must be designed to track performance against major priorities of all frameworks. ### Design parameters for an accountable planning system - Clarify roles of decision makers, central institutions, and line ministries in overseeing and delivering the new architecture. - Provide clear, meaningful statements of expected results for each programme. - Ensure sufficient resources are allocated to approved legal commitments; unfunded legislative mandates will not proceed to Parliament. - Provide accurate, timely information on achieved versus expected results in an annual report made available to Parliament and the public. - Adapt and strengthen consultations with civil society and expert external groups as an essential component of policy development. - Centre must actively monitor only significant commitments. - Delegate sufficient authority and resources to line ministries to manage effectively. ### Implications for NSSED and next steps - NSSED will evolve into a comprehensive strategic planning framework with a focus on medium to long-term planning and on ensuring coherent, costed, mutually consistent sector and cross-cutting strategies that support the national vision and serve as the policy basis for the annual MTBP process. - NSSED Department primary mandate while retaining poverty reduction responsibility: - ensure all national goals, including EU and NATO membership, the MDGs, good governance and decentralisation, are appropriately reflected; - identify high-level indicators and use specialised research to determine progress toward medium- and long-term goals; - clarify its own planning architecture, focusing on medium to long-term planning and expanding scope to cover all national and government priorities; - develop a transition plan to review existing sector and crosscutting strategies for ongoing relevance and adherence to newly-developed standards; - oversee indicative costing of medium- and long-term strategies while acknowledging indicative costing at this level is far from precise and that detailed tradeoffs will emerge through the MTBP process; - initiate a multi-year process to assess and adapt existing sector strategies and work directly with ministries on developing new ones. - Summary list of NSSED Department functions in the new system: - identifying linkages to national goals; - developing and monitoring high-level indicators; - overseeing indicative costing of medium- and long-term strategies; - overseeing cross-cutting strategies; - overseeing sector strategies; - developing poverty reduction policy directions; - integrating coherent regional and decentralisation strategies; - advising on policy implications of MTBP expenditure ceilings. - A process to revise the NSSED is expected to begin in late 2005 and run throughout 2006; the extent to which all functions can be fully carried out will depend on institutional changes to build NSSED Department capacity. ### Structure of the Progress Report (sections relevant to monitoring indicators) - Chapter 2: macroeconomic developments and macroeconomic projections of the Ministry of Finance, with discussion on developing alternative macroeconomic scenarios. - Chapter 3: overview of socioeconomic conditions based on the 2002 and 2003 Living Standards Measurement Survey and FAO analysis of poverty profile. - Chapter 4: line ministry responses on NSSED implementation, decentralisation and European integration strategies, and results of two studies using statistical data to inform policy questions. - Annexes listed include: - Annex 1 Selected monitoring indicators; - Annex 2 Mid-term plan of priority actions; - Annex 3 Sector and crosscutting strategies; - Annex 4 Public expenditure management calendar. *National Strategy for Socioeconomic Development – 2004 Progress Report (excerpts provided).* ### Chapter 5 summarises the progress in the implementation of the NSSED in terms of the key ### _cr0623 - Chapter 5 summarises the progress in the implementation of the NSSED in terms of the key ### NSSED Progress Report and MDG linkage - This year, the NSSED Progress Report also doubles as the MDG Progress Report. - The Report shifts focus to outcome and impact indicators; the process will be completed during the revision of the NSSED. - Annex 1 includes a supplementary list of indicators to inform monitoring discussions over the next few months. - The NSSED Department and Budget Department coordinated to link NSSED priority matrices to the first planning stage of the MTBP process (Programme Policy Review / Sector Expenditure Strategy). - Annex 2 presents the ministries’ priority matrices; the process is incomplete but represents a marked improvement in linking policies to the budget. ### Key macroeconomic conditions (2004 summary) - Relatively high economic growth (at about 6% in real terms). - Low annual inflation (at 2.9%). - Decreasing deficit of the government budget (down to 4.6% of GDP). - Improvements in the balance of payments, with an increase in reserves. - Strong exchange rate. - Projection/expectation: If current progress is maintained over the next decade, relative poverty should be halved, absolute poverty eliminated, average incomes nearly double current levels, and the gap with neighbouring countries substantially reduced. ### Key statistics (main macro indicators, 1998–2004) - Population (Million): 1998 3.35; 1999 3.37; 2000 3.23; 2001 3.08; 2002 3.10; 2003 3.10; 2004 3.12 - Inflation (average) (%): 1998 20.9; 1999 0.4; 2000 0.0; 2001 3.1; 2002 5.2; 2003 2.4; 2004 2.9 - Exchange rate Lek / $US: 1998 150.6; 1999 137.7; 2000 143.7; 2001 143.5; 2002 140.2; 2003 121.9; 2004 102.8 - Exchange rate Lek / Euro (selected years shown): 1999 147.0; 2000 132.6; 2001 128.5; 2002 132.4; 2003 137.5; 2004 127.7 - Gross Domestic Product (Lek billion): 1998 412.3; 1999 474.3; 2000 530.9; 2001 588.7; 2002 630.0; 2003 695.1; 2004 780.1 - Gross Domestic Product ($ billion): 1998 2.7; 1999 3.4; 2000 3.7; 2001 4.1; 2002 4.5; 2003 5.7; 2004 7.6 - Real GDP growth %: 1998 12.7; 1999 10.1; 2000 7.3; 2001 7.2; 2002 3.4; 2003 6.0; 2004 6.0 - GDP per capita Lek thousand: 1998 122.9; 1999 140.6; 2000 164.3; 2001 191.4; 2002 203.4; 2003 223.9; 2004 249.9 - GDP per capita $: 1998 816; 1999 1021; 2000 1143; 2001 1334; 2002 1450; 2003 1837; 2004 2431 - Total revenue (Lek billion): 1998 102.5; 1999 123.2; 2000 130.6; 2001 145.6; 2002 154.6; 2003 167.2; 2004 184.4 - Total expenditure (Lek billion): 1998 141.6; 1999 165.7; 2000 170.6; 2001 186.1; 2002 192.5; 2003 201.2; 2004 222.4 - Overall deficit (Lek billion): 1998 -39.1; 1999 -42.5; 2000 -40.0; 2001 -40.4; 2002 -37.9; 2003 -33.9; 2004 -38.1 - Total revenue % GDP: 1998 24.9; 1999 26.0; 2000 24.6; 2001 24.7; 2002 24.5; 2003 22.4; 2004 23.6 - Total expenditure % GDP: 1998 34.3; 1999 34.9; 2000 32.1; 2001 31.6; 2002 30.6; 2003 27.0; 2004 28.5 - Overall deficit % GDP: 1998 -9.5; 1999 -9.0; 2000 -7.5; 2001 -6.9; 2002 -6.0; 2003 -4.6; 2004 -4.9 - Internal debt % GDP: 1998 36.2; 1999 37.4; 2000 42.6; 2001 39.6; 2002 38.8; 2003 38.0; 2004 37.8 - External debt % GDP: 1998 36.9; 1999 32.3; 2000 31.6; 2001 28.2; 2002 24.4; 2003 23.3; 2004 18.3 - Trade balance $ million: 1998 -604; 1999 -663; 2000 -821; 2001 -1027; 2002 -1155; 2003 -1336; 2004 -1579 - Exports $ million: 1998 208; 1999 275; 2000 255; 2001 305; 2002 330; 2003 447; 2004 603 - Imports $ million: 1998 812; 1999 938; 2000 1076; 2001 1332; 2002 1485; 2003 1783; 2004 2182 - Transfers $ million: 1998 520; 1999 353; 2000 533; 2001 571; 2002 613; 2003 842; 2004 1043 - Reserves $ million: 1998 384; 1999 482; 2000 608; 2001 754; 2002 860; 2003 1026; 2004 1374 - Reserves – Import cover (Months): 1998 3.7; 1999 3.8; 2000 4.2; 2001 4.3; 2002 4.3; 2003 4.7; 2004 5.2 - Trade balance % GDP: 1998 -22.1; 1999 -19.2; 2000 -22.2; 2001 -25.0; 2002 -25.7; 2003 -21.9; 2004 -20.8 - Export growth rate %: 1998 31.1; 1999 32.3; 2000 -7.2; 2001 19.3; 2002 8.4; 2003 35.4; 2004 35.0 - Import growth rate %: 1998 17.0; 1999 15.5; 2000 14.8; 2001 23.7; 2002 11.6; 2003 20.1; 2004 22.4 ### Economic growth—drivers and sectoral performance - 2004 real GDP growth estimated to be 6%. - Population decline: resident population down by about 3.4% since the year 2000; combined with high growth this doubled per capita incomes in Lek over 7 years. - Sectoral shares and real growth (2003, 2004): - Total: Structure of GDP (%) 100 (2003), 100 (2004); Real growth rate (%) 6.0 (2003), 6.0 (2004) - Industry: Structure 10.2 (2003), 9.9 (2004); Real growth 2.7 (2003), 3.1 (2004) - Agriculture: Structure 24.7 (2003), 24.0 (2004); Real growth 3.0 (2003), 3.0 (2004) - Construction: Structure 9.1 (2003), 9.5 (2004); Real growth 11.3 (2003), 10.6 (2004) - Transport: Structure 10.0 (2003), 10.4 (2004); Real growth 10.8 (2003), 10.1 (2004) - Services: Structure 46.1 (2003), 46.3 (2004); Real growth 6.4 (2003), 6.4 (2004) - Agriculture: - Contributed 24% of GDP and 58% of employment in 2004. - Real growth in agriculture estimated at 3%. - Constraints: emigration from rural areas and the legal framework on property; need to promote commercialisation and new technologies. - Industry: - Growth about 3%, dominated by energy sector which grew by around 48.9 %. - Metallurgical industry declined by 68.3 % in total. - Manufacture of leather-shoes grew by 25.3 %; chemicals grew by 19.2 %; wood processing declined by about 4.3 %. - Petroleum sub-sector grew at 7.6 % (despite decline in volumes). - Textile and confectionary industries grew at about 3.4 %. - Transport: - Grew by 10.1 % in 2004, dominated by road transport. - Port activity grew by 5.9%. - Railway traffic declined by 24.2% in volume; passenger traffic value declined 15%; goods traffic declined 19.3%. - Construction: - Real growth of 10.6% in 2004. - Private sector construction financing comprises about 81.6% of total private construction financing. - State participation: engineering constructions constitute 84.8 % of total state financed construction and are 69 % above the level achieved in 2003. - Future prospects based on construction permits issued in 2004 are not optimistic due to limited permits and constraints on state investment. - Services: - Contributed 46.3% of GDP and grew at 6.4% in 2004. - Post and telecommunications increased rapidly; Albtelekom reforms and restructuring remain a priority for privatisation. - Tourism: estimated to have generated $673m in revenues in 2004, marking an increase of over 29% compared to 2003. ### Public debate and policy emphasis - NSSED Department organised a public debate in March 2005 on sources of economic growth and impact on poverty; about 50 participants from public, private and voluntary organisations. - Consensus: growth must incorporate social dimensions to be sustainable — increased emphasis on human development, civil society and government transparency. - Divergent views highlighted by groups: - Financial sector priority vs limited short-term impact until financial services broaden. - Modernising and commercialising agriculture as highest priority vs continuing shift to more productive sectors. - Administrative/regulatory enforcement: some argued top priority, others argued growth occurred despite weak enforcement. - Mixed views on free trade and exports as a priority. - Property status and use for collateral noted as important by some individuals. - Tourism seen as key source of growth; debate on supporting tourism with wide local benefits; environmental issues raised only as a constraint for tourism. - On poverty reduction: broad support that economic growth is main priority; some groups highlighted education and debates about types of skills needed. ### Balance of payments and exchange rate developments (2004) - Overall balance of payments: surplus of $288 million in 2004, compared with $100 million in the same period the previous year. - Current account trends: - Exports $603 million, increasing by 35%; fastest growing exports in minerals, fuel and electrical power and in construction materials and metals; textiles and shoes grew modestly; wooden and paper products least successful. - Imports $2182 million, increasing by 22%; highest increases in machinery, equipment and spare parts and in chemical and plastic products; decline in imports of minerals, fuel and energy due to recovery of domestic electricity production. - Trade deficit worsened to $1579 million in 2004, 21% higher than the previous year (note: picture exaggerated by weak dollar). - Service balance deficit about $24 million, compared with a deficit of $83 million for the same period in 2003 (improvement largely due to rapid increase in tourism receipts). - Net factor income positive balance $168 million (almost unchanged since 2003). - Net private transfers increased by 25% during 2004, to $978 million (dominated by remittances). - Capital and financial accounts: - Capital transfers surplus $132 million in 2004, down 16% on 2003. - Financial account surplus $399 million, up 97.5%. - Reserves: - Currency reserves increased by $348 million during 2004 to $1374 million. - Reserves sufficient to cover 5.2 months imports of goods and services. - Exchange rate: - Continued appreciation of exchange rates; during 2004, the average annual exchange rate reached 102.76 Lek/$. *Source: National Strategy for Socioeconomic Development – 2004 Progress Report (Chapter excerpts provided).* ### 127.66 Lek/Euro, reflecting the weakness of the dollar on international markets. In addition to ### 127.66 Lek/Euro, reflecting the weakness of the dollar on international markets. In addition to ### Exchange rate and currency strength - Exchange rate cited: 127.66 Lek/Euro, reflecting weakness of the dollar on international markets. - Strengthening of the Lek in recent years attributed to: - greater public trust in the financial system, - high real interest rates, - lower demand for government financing. - Consequences of Lek appreciation: - Negative: reduced trade competitiveness; lower export earnings; lower earnings from foreign exchange savings and remittances; lower customs revenue. - Positive: lower inflation due to cheaper imports; greater trust and investment in the economy; cheaper debt service; incentives to sell locally rather than export. ### Export structure and markets - Export concentration: increasingly concentrated in 5 sectors; textiles peaked in 2000 and then declined in relative share; mineral (petroleum) and metal (chromium and locks) exports declined in the 1990s but returned to positive growth. - Footwear: - Single biggest exported item; share remained constant since 2000. - All exports from this sector during 2004 were directed to Italy. - Potential for increasing footwear exports to European markets due to geographic advantages and cheap labour. - Trade partners: - European Union countries absorb 90% of Albania’s exports and are the source of 2/3 of its imports. - Regional markets expanded after free trade agreements signed between 2002 and 2004; exports to Kosovo and Macedonia increased substantially between 2003 and 2004, reducing Albania’s overall trade deficit with South-East Europe. - Agricultural and agro-industrial export composition changes (2002 to 2004, figures for 2004 refer to January-September): - Prepared meat sector: no exports in 2002; one third of total in 2004. - Beverage exports (notably bottled water and juices): increased almost fivefold between 2002 and 2004. - Need to focus on gaining access to foreign markets and developing business practices. - Source for exports data: Albanian Centre for International Trade, Albanian Foreign Trade Report. ### Public finance — revenue performance and composition (2004) - Budget revenues in 2004: 23.6% of GDP; nominally 10.2% higher than 2003. - As proportion of GDP, public revenues declined from 24.1% in 2003 to 23.6% in 2004. - Total revenue achieved: 93.1% of budget; tax revenues at 97.3% of budget. - Customs revenue reduced, associated with the weak dollar. - Tax revenues account for 90% of total revenues and increased from 20.9% to 21.3% of GDP; actual tax revenues were 97.3% of budget. - Specific revenue items: - Revenue from foreign grants: about the same in dollar terms as 2003, but fell from 0.38% to 0.31% of GDP. - VAT: increased by 15% in Lek terms and about 1.8% above budget. - Excise collection: increased by 29% in Lek terms but was 97.3% of budget. - Profit taxes: increased by 24% in Lek and were 7.3% above budget. - Small business taxes: 38% higher than in 2003; roughly in line with budget. - Personal income tax: increased by 6.8% in nominal terms; was 84% of budget. - National tax revenues: 3% lower than in 2003; 85.6% of budget. - Customs administration revenue: 10.5% higher than last year; about 97.8% of budget. - If exchange rates had been maintained at budgeted levels, customs administration revenue would have been about 8% higher and total public revenue would have been 24.3% of GDP. - Non-tax revenues: 76.8% of budget; main shortfall caused by low profits from the Bank of Albania. - Local government revenues in 2004: 15.3% lower than budget but 21.3% higher than last year. - Shortfalls in: property tax (640 million), agricultural land tax (206 million), vehicle registration tax (239 million), local taxes (662 million). - Only small business taxes exceeded budget by Lek 16 million; local government revenues increased to 1.2% of GDP from 1.1% in the previous year. ### Constraints to raising taxes — institutional perspective - Estimate of informal economy: at least 30% of GDP (alternative methods referenced). - Government plans: modernise tax administration with advice and technical assistance; IMF report suggested changes in VAT and profit tax coverage, simplification of personal income tax rates, and increases in excise taxes on vehicles, alcohol, tobacco, and petroleum products. - Behavioral/institutional constraints: - A study based on a household survey in the Tirana area found that pessimistic attitudes toward formal institutions correlated with higher likelihood of evading small business income tax. - Conclusion: revenue strategies must include efforts to build confidence in public institutions to be effective. ### Public expenditure and debt (2004) - Public expenditure growth: steady over last 7 years but declined as a proportion of GDP. - Current expenditures in 2004: about 8.5% higher than previous year; 99.2% of budget. - As proportion of GDP, current expenditures declined from 24.4% in 2003 to 23.6% in 2004. - Salaries: 97.5% of budget. - Operational expenses: 107.6% of budget. - Social and health insurance: 101.5% of budget. - Other expenses: 114.7% of budget. - Subsidies: 122.8% of budget (largely due to use of contingency funds to clear old obligations for KESH); without contingency use, subsidies would have been 6% below budget. - Local government expenditure: about 90.3% of budget due to delays in approving local council budgets. - Capital expenditures in 2004: 70% of budget; 21.6% higher than 2003 in nominal terms. - Foreign financing of investment: 46% below budget and 19% lower than in 2003. - Domestically financed investment: 51% higher than last year, but only 89% of budget. - Slow domestically financed investment mainly in Ministries of Foreign Affairs, Justice and Public Order. - Public deficit as proportion of GDP: declined from nearly 10% in 1998 to -4.9% in 2004. - Internal financing of the budget deficit reduced due to increased revenue from privatisation. - Domestic government debt: declined from 42.6% of GDP in 2000 to 37.8% at the end of 2004; terms improved. - Interest cost savings to end-2004: - Lek 1.9 billion for internal debt. - Lek 720 million for external debt. - Main factor for savings: continuous reduction of short-term and mid-term instruments. ### Monetary policy, money supply, credit, and inflation (2004) - Annual growth rate of money supply at end-2004: 13.1%, higher than in 2003. - Main monetary ratios (M2 to foreign currency and M3 to money outside banks) remained stable; banking sector sound. - Base interest rate: gradual decline during 2004; decreased cost of borrowing. - Credit expansion in 2004: 30%, reaching Lek 70 billion. - Credit structure oriented towards mid-term and long-term credits. - Trade, construction and real estate dominate borrowing. - Some increase in credit supply to agriculture and agro-processing; some decline in credit for trade. - Increase in proportion of credit in Lek; but 82% of credit is still in foreign currency. - Inflation: - Annual inflation in 2004: 2.9%; in 2003: 2.4%. - Low inflation attributed to lower seasonal prices of agricultural products, control over budget expenditure increases, and appreciation of local currency offsetting risk of imported inflation from higher oil and other imported prices. - Low inflation achieved despite some increases in administered prices and some market-based price increases (notably during vacation periods). ### Labour market (2004) - Unemployment estimated at 14.4% in 2004; 15.0% in 2003; 18.4% in 1999. - Private non-agricultural sector employment accounts for 22% of total employment. - Public sector salary policy: average annual increases of 5-10% in recent years; priority given to education, health and defence. - Average public sector salary in 2004: Lek 24957, which is 14% higher than in 2003 and double the average salary in 1998. - Persistent problem: low levels of payment of social insurance contributions by employees and employers, especially in the private sector. ### Macroeconomic projections (Medium Term Budget Programme 2005-2007 and 2005 outlook) - MTBP targets and assumptions: - Sustaining economic growth at a level of 6 %. - Maintaining an annual inflation rate at the interval 2-4%. - Preserving foreign currency reserves at the level 4 to 4.5 months import cover. - Reducing the deficit of the balance of payments current account, with exports growing faster than imports. - Expected sectoral drivers for 2005: services and construction, accompanied by increases in transport, agriculture and industry. - Selected main macroeconomic indicators for 2004 and 2005 (Table 2.3): - GDP at current prices Lek million: 780100 (2004); 857300 (2005); Growth rate 9.9. - Real GDP growth rate: 6.0 (%) (2004); 6.0 (%) (2005). - GDP per capita: $ 2431 (2004); $ 2575 (2005); Growth rate 5.9. - Inflation (average): % 2.9 (2004); % 2.4 (2005); Change -17.2. - Exchange rate Lek/$: 102.8 (2004); 106.0 (2005); Change 3.1. - Trade balance $ million: -1579 (2004); -1981 (2005); Change 25.5. - Exports $ million: 603 (2004); 766 (2005); Change 27.0. - Imports $ million: 2182 (2004); 2747 (2005); Change 25.9. - Fiscal projections and assumptions for 2005: - Total budget revenues projected to increase from 23.6% to 24.1% of GDP (equivalent to an 11.9% increase in revenue in nominal terms). - All forms of revenue expected to increase, with tax revenues (notably personal income tax) and social contributions increasing slightly faster. - Total expenditure projected to remain constant as a proportion of GDP, allowing for a 6% real increase in public spending. - Table 2.4 main fiscal indicators (% of GDP): Total revenues 23.6 (2004) -> 24.1 (2005); Total expenditure 28.5 (2004) -> 29.0 (2005); Deficit -4.9 (2004) -> -4.9 (2005). - Monetary policy objective for 2005: preserve annual inflation rate at 2-4% by aligning money supply growth with nominal GDP growth and assuming progress in rate of money circulation; expect continued decline in interest rates and expansion of credit. - Macroeconomic projection methodology: - Model uses independent projections of final demand (government spending, exports of goods and services including tourism, private spending on investment and consumption) and input-output analysis to calculate domestic output needed to meet demand. - Projections specifics: - Government spending projected by Budget Department at Ministry of Finance via MTBP. - Exports of goods projected by Ministry of Finance with IMF discussions. - Exports of services (mainly tourism) projected to grow at 10% per year by Macroeconomic Department at Ministry of Finance. - Government transfers projected from budget and MTBP data. - Private income from overseas (mainly remittances) projected from Ministry of Finance and IMF figures. - Independent projections of private investment and food consumption; residual private income allocated to other consumption goods. - Sectoral composition of each element of final demand assumed constant. - Model iterates to produce government revenue and projected government deficit; expenditure re-specified to achieve desired deficit. - Government work in progress: - Extending medium-term projections to 2008 and additional years. - Comparing Ministry of Finance macro model conclusions with macroeconomic consistency frameworks used by IMF and World Bank. - Defining scenarios to illustrate range of possible macroeconomic outcomes and set revenue projections within a range to plan government expenditure at different rates of progress. _Excerpted from National Strategy for Socioeconomic Development – 2004 Progress Report_ ### 3.1 POVERTY ### 3.1 POVERTY ### Poverty measurement and monitoring - Poverty headcount in 2002 (LSMS national sample of 3600 households): 25.4%. - Poverty defined as proportion of individuals consuming below the amount necessary to cover basic food and non-food items (consumption-based measure preferred to income-based measures). - INSTAT collected consumption information in 2002 and next in 2005; interim monitoring relies on statistical techniques applied to a panel with reduced consumption data. - Method used to monitor changes between 2002 and 2003: - Step 1: identify variables collected in both 2002 and 2003. - Step 2: estimate statistical association (coefficients) between 2002 household consumption and household characteristics found in both years (e.g., ownership of a washing machine associated with lower likelihood of low consumption). - Step 3: use 2002 coefficients to predict household consumption in 2003 from 2003 household characteristics (national sample and urban/rural sub-samples). ### Headcount poverty changes between 2002 and 2003 (panel sub-sample predictions) - 2002 Actual: Total 25.4%; Urban 19.5%; Rural 29.6%. - 2002 Estimated (panel sub-sample): Total 20.4%; Urban 13.2%; Rural 24.3%. - 2003 Estimated (panel sub-sample): Total 17.1%; Urban 10.7%; Rural 22.9%. - Percentage change between 2002 and 2003 (%): - Total: -16.2 - Urban: -18.9 - Rural: -5.8 - Note: these are predicted estimates, not actual levels; a precise estimate awaits the 2005 LSMS consumption data. ### Changes in estimated per capita consumption between 2002 and 2003 - Per capita consumption in 2002 (Lek per month): Urban 8,311; Rural 7,072; Total 7,679. - Per capita consumption in 2003 (Lek per month): Urban 8,844; Rural 7,249; Total 8,116. - Difference in consumption (Lek per month): Urban 533; Rural 177; Total 437. - Difference in consumption (%): Urban 6.4; Rural 2.5; Total 5.7. - Calculated average per capita consumption in 2002: Lek 7679 (matches table total). - The estimated 5.7 percent increase in per capita consumption between 2002 and 2003 is consistent with observed rates of economic growth at the level of 6% in recent years. ### Subjective poverty - LSMS asks respondents to place themselves on a ladder from poorest to richest (self-assessed welfare). - Subjective and objective measures are not perfectly correlated; subjective measures capture factors beyond consumption (risk exposure, vulnerability, non-monetary deprivation) and relative comparisons. - Study using 2002 LSMS found objective poverty helps explain subjective assessment to a large extent, but substantial differences exist across household size: - Single-person households: highest incidence of subjective poverty but lowest incidence of objective per capita poverty. - Composition of single-person households: 75% old pensioners living alone; mean age 63 (total sample mean age 48); 69% headed by women (total sample 12%); 54% single female pensioners; 56% female widows; 64% suffer from chronic illnesses (total sample 28%). - Panel comparison of 2002 and 2003 subjective welfare shows perceptions improved between 2002 and 2003, with a higher proportion of respondents placing themselves among the better off in 2003. ### Protection of children’s rights and child poverty - A third of children in Albania live below the poverty line (higher than national average because poorer households tend to have more children). - According to the 2000 Multiple Indicator Cluster Survey (children under age 5): - 14% was characterised by moderate underweight and 4.4% by significant underweight. - 31.7% had minor and 17.3% had significant shortcomings in development. - 11% had minor and 3.6% had significant shortcomings in nourishment. - Children of mothers with secondary or higher education were less likely to be underweight; problems more common among children aged 6-11 months and among boys. - By 2002, LSMS found rates of malnutrition slightly decreasing, but anaemia (iron deficiency) is of concern. - Early childhood education: - Enrolment in preschool education among 3-6 year olds: 44% in 1990; fell to 28% in 1992; 34% in 2001. - Enrolment of children in poor families is about half that of children from well-off households. - Number of kindergartens fell by 60% in urban areas and by 49% in rural areas in 2004 compared to 1990. - Only 5% of the total budget of education is allocated to pre-school education. - Child deprivation and risks: - About 32.8% or 293,000 children in Albania live below minimum standards (less than $2 per day). - Children face additional transition-related dangers: dropouts, violence, blood-feud, trafficking, exploitation, criminality. - Child health indicators: - Infant mortality decreased from 30.8 per 1,000 live births in 1989 to 16 deaths in 2003. - Infant mortality rates and number of underweight births indicate deterioration of mothers’ health and nutrition; increased anaemia linked to iron deficiency. - Increase in deaths in children under five related to environmental conditions (pollution, deteriorated sanitation) observed. - Policy response: - National Strategy for Children approved in June 2005; Action Plan expected to be approved later in June. - Strategy envisages establishment of a State Committee for Children to monitor and coordinate child-rights activities at national and local levels. - Strategy aims to create institutional structures, ensure financial and human resources, and implement obligations from the Convention On the Rights of the Child. - Priority groups: marginalised social groups lacking parental care, exploited or ill-treated children, children with disabilities, street children, children from poor families. - Planned reforms: protect children from violence/exploitation, ensure family-based care or alternative care prioritising social families, equal opportunities for children with limited abilities, improved maternal and child health services, modern educational system to ensure completion of obligatory education, services to protect working children. - A system of indicators and a database will be created, aligned with NSSED and Millennium Development Goals monitoring; annual progress reports planned. *Source: National Strategy for Socioeconomic Development – 2004 Progress Report (section 3.1).* ### 3.3 HEALTH ### 3.3 HEALTH ### Self-rated health - Overall self-assessment (respondents aged 15 and over, 2002): - 69% rated their health as very good or good. - 19% rated their health as average. - 12% rated their health as poor or very poor. - Gender differences: - Of those rating their health as poor or very poor, 35% were men and 65% were women. - Men were less likely than women to rate their health as average or poor/very poor. - Age and chronic illness: - Older age groups were more likely to rate their health as poor or very poor. - Those with a chronic illness or disability were significantly more likely to rate their health as poor or very poor: 85.4% (with chronic illness) compared to 14.6% (with no chronic illness) in the poor/very poor category (see Table 3.3 counts). - Housing and poverty associations: - Of those saying they had poor health, 15.5% were living in poor housing conditions compared to 11% reporting good health. - 25% of those with poor health lived in a poor household compared to 22% of those who had good health. - Table 3.3 (Self-rated health status of individuals aged 15 and over, 2002 (%), totals and observations preserved): - Suffers from chronic illness - Yes: Very good/Good 4.2, Average 45.3, Poor/Very poor 85.4, Total number of observations 1095 - No: Very good/Good 95.8, Average 54.7, Poor/Very poor 14.6, Total number of observations 3911 - Housing conditions - Good: Very good/Good 89.4, Average 87.0, Poor/Very poor 84.5, Total number of observations 4417 - Poor: Very good/Good 10.6, Average 13.0, Poor/Very poor 15.5, Total number of observations 582 - Poverty status - Non-poor: Very good/Good 77.7, Average 78.9, Poor/Very poor 74.7, Total number of observations 3865 - Poor: Very good/Good 22.3, Average 21.1, Poor/Very poor 25.3, Total number of observations 1134 - All: Very good/Good 68.8, Average 19.4, Poor/Very poor 11.8, 100 - Number of observations: 3440 (Very good/Good), 972 (Average), 594 (Poor/Very poor), Total 5006 ### Health status in urban and rural areas - General patterns: - Urban residents reported better health and better housing conditions than rural residents. - Urban area specifics (2002): - 69.5% of those in good housing conditions rated their health status as very good/good compared to 62% of those in poor housing. - Indoor running water and indoor sanitation were associated with better self-rated health in urban areas. - Rural area specifics (2002): - 16.5% of rural households were living in poor housing conditions compared to 6% in urban areas. - In rural areas, 23% of respondents lived in a house with no indoor water compared to 12% in urban areas. - Just 38% of people in rural areas lived in a house with an indoor toilet compared to 86% of those in urban areas. - In rural areas, 59% of respondents living in good housing conditions had good health compared to 53% in poor housing conditions. - Of those with no indoor water in rural areas, 18.5% rated their health as poor/very poor compared to 12% of those with indoor running water. - Those with an indoor toilet rated their health better than those with some other type of toilet. ### Usage of health services - Overall service usage: - In 2002, 38.8% of all respondents had used at least one of the surveyed health services. - In 2003, 36.5% had used at least one. - In 2002, 23.5% had gone to the dentist in the past twelve months. - In 2002, the public ambulatory service was the most frequently used in the past 4 weeks: 15.7% used this service. - In 2003, 22.3% visited the dentist in the past twelve months and 11.3% used the public ambulatory service in the past 4 weeks. - Table 3.4 Mean usage of health services, 2002 and 2003 (preserved exactly): - In past 4 weeks: - Public ambulatory: 2002 mean number of visits by the population 0.24; mean number of visits by individuals who used the service 1.54. 2003 mean number of visits by the population 0.16; mean number of visits by individuals who used the service 1.36. - Private doctor: 2002 mean number of visits by the population 0.03; mean number of visits by individuals who used the service 1.45. 2003 mean number of visits by the population 0.03; mean number of visits by individuals who used the service 1.38. - Nurse / Paramedic / Midwife: 2002 mean number of visits by the population 0.16; mean number of visits by individuals who used the service 5.78. 2003 mean number of visits by the population 0.11; mean number of visits by individuals who used the service 4.62. - Outpatient visit to hospital: 2002 mean number of visits by the population 0.01; mean number of visits by individuals who used the service NA. 2003 mean number of visits by the population 0.07; mean number of visits by individuals who used the service 1.52. - In past 12 months: - Admission to hospital: 2002 mean number of visits by the population 0.06; mean number of visits by individuals who used the service 1.28. 2003 mean number of visits by the population 0.06; mean number of visits by individuals who used the service 1.25. - Dentist: 2002 mean number of visits by the population 0.66; mean number of visits by individuals who used the service 2.79. 2003 mean number of visits by the population 0.56; mean number of visits by individuals who used the service 2.48. - Socioeconomic patterns: - Those living in poor households had a lower mean usage of health services than non-poor households in both 2002 and 2003, although differences were not substantial. - Mean usage of health services in 2003 was slightly lower than in 2002. ### Smoking - Survey findings (men, 2003): - Almost one third of men smoke: 31%. - Smokers were less likely to report having good health than non-smokers: - Very good / Good: Non-smoker 76.1, Smoker 69.6, Total number of observations 1703 - Average: Non-smoker 15.3, Smoker 19.8, Total number of observations 385 - Poor / Very poor: Non-smoker 8.6, Smoker 10.6, Total number of observations 217 - Total number of observations: Non-smoker 1579, Smoker 726, Total 2305 - Note: Data are reported for men only because the percentage of women reporting smoking in the survey was very low and may not be reliable; social desirability may affect women's reporting. *Source: _cr0623 - 3.3 HEALTH* ### 3.4 LABOUR MARKET ### 3.4 LABOUR MARKET ### Labour force participation - The labour force in Albania was calculated to be 1.3 million in the 2001 Census or lower by 15% since 1989. - Workforce composition changes 1989 → 2001 (thousand; percentages presented in source tables): - 1989 (in thousand): Employed — Male 779, Female 664, Total 1443; Unemployed — Male 62, Female 94, Total 157; Total active — Male 842, Female 758, Total 1600; Inactive — Male 249, Female 283, Total 532; Total (aged 15 years or more) — Male 1090, Female 1041, Total 2132. - 2001 (in thousand): Employed — Male 650, Female 392, Total 1042; Unemployed — Male 150, Female 155, Total 306; Total active — Male 800, Female 548, Total 1347; Inactive — Male 269, Female 554, Total 823; Total (aged 15 years or more) — Male 1069, Female 1101, Total 2170. - 1989 (as percentage): Employed — Male 71.5, Female 63.8, Total 67.7; Unemployed — Male 5.7, Female 9.0, Total 7.3; Total active — Male 77.2, Female 72.8, Total 75.0; Inactive — Male 22.8, Female 27.2, Total 25.0; Total (aged 15 years or more) 100 100 100. - 2001 (as percentage): Employed — Male 60.8, Female 35.6, Total 48.0; Unemployed — Male 14.0, Female 14.1, Total 14.1; Total active — Male 74.8, Female 49.7, Total 62.1; Inactive — Male 25.2, Female 50.3, Total 37.9; Total (aged 15 years or more) 100 100 100. - Key observations: - The workforce lost more than a quarter of women and 5% of men in absolute terms since 1989. - By 2001 only half of adult women were active in the labour market; proportion of inactive women had doubled. - Male labour force participation remained roughly the same in percentage terms but employment share fell (61% relative to 71% in 1989) and unemployed share rose (14% relative to 6%). - The size of the male labour force was reduced in absolute numbers as a result of emigration. - Explanatory factors for female participation decline: - Closure of factories. - Increasing significance of male-oriented activities such as trade and construction. - Internal migration to urban areas where women face more problems entering the urban labour market. - Data comparability note: Notions of employment and unemployment changed since 1989 and are not easily comparable; however the drop in female participation is unambiguous. ### Employment - Census versus LSMS measurement issues: - Census responses under-report informal-sector activity; respondents may misreport employment status (example: employment rate of 46-year-old women jumps by 20 percentage points relative to 45-year-old women, attributed to social insurance/pension incentives). - LSMS direct and probing interviews aim to better capture employment status. - LSMS 2002 findings (employment status of working age individuals): - By gender (percent): Employed — Male 54.9, Female 45.1; Unemployed — Male 46.8, Female 53.2; Inactive — Male 30.9, Female 69.1. Number of observations: Male 1997, Female 2176. - By age (percent): 15-34 — Employed 54.0, Unemployed 13.2, Inactive 32.8, observations 1901; 35-54 — Employed 52.4, Unemployed 36.6, Inactive 27.3, observations 1874; 55-over — Employed 9.1, Unemployed 2.8, Inactive 19.6, observations 398. - By highest qualification (percent; observations): Up to 8 years — Employed 57.6, Unemployed 58.6, Inactive 69.5, observations 2179; Secondary / Vocational — Employed 31.5, Unemployed 36.8, Inactive 26.7, observations 1170; University — Employed 10.9, Unemployed 4.6, Inactive 3.8, observations 309. - Total (percent): Employed 61.7, Unemployed 16.0, Inactive 22.3. - Note: Working age defined as 15-64 years for men and 15-59 years for women. - Additional employment composition: - Of those employed: 58% had up to 8 years education, 31% had a secondary or vocational education, and 11% had a university qualification. - Sectoral distribution: agriculture 53%, construction 10%. - According to the 2001 Census, about a third of all jobs were temporary, seasonal or occasional. ### Unemployment - Census vs LSMS: Census produced a lower unemployment rate for women because many women were not systematically searching for a job; LSMS better distinguishes discouraged unemployment from inactivity. - Trend 2002 → 2003 (LSMS): Unemployment rate fell by 2 percentage points under both INSTAT definitions (standard and relaxed). - Definitions: Standard — individual actively engaged in some type of job search; Relaxed — includes seasonal workers or discouraged job seekers. - Reduction of 2 percentage points between the 2 years noted as substantial and tied to current rates of economic growth. - LSMS panel movement (2002 → 2003) — employment status stability and transitions (percent): - For individuals employed in 2002: 87.5 remained employed in 2003; 4.8 became unemployed; 7.7 became inactive. - For individuals unemployed in 2002: 39.6 became employed in 2003; 39.3 remained unemployed in 2003; 21.1 became inactive. - For individuals inactive in 2002: 20.6 became employed in 2003; 11.2 became unemployed; 68.2 remained inactive. - Job search behavior (2002): - Of those not working who were asked about job search methods: 64% looked through friends or a relative, 26% through a labour office, 4% through contacting the employer. - Duration of job search: In 2002, 32% of respondents not in work had been looking for work from between 12 to 23 months; in 2003, 42% had spent up to 2 years looking for work. - Risk: Long periods of unemployment raise the danger that people may stop trying to find work. ### Investing the earnings from international migration - Migration decision: Treated as a household joint decision; migrants remit earnings to household members. - Forms of migration and prevalence (2002 LSMS): - A fifth of households have members who have been temporary migrants (abroad at least 3 months between 1997 and 2001 but in Albania at survey time). - A third of households have members who are permanent migrants. - Characteristics of households with temporary migrant members (values preserved as presented): - Household size (members): No migrants 4.2; Migrants to Greece 4.7; Migrants to Italy 4.5. - Average education (years): No migrants 8.6; Migrants to Greece 8.4; Migrants to Italy 9.4. - Monthly consumption per capita (Lek): No migrants 7841; Migrants to Greece 7019; Migrants to Italy 9205. - Living in rural areas of the coastal zone (%): No migrants 80; Migrants to Greece 13; Migrants to Italy 7. - Living in rural areas of the central zone (%): No migrants 77; Migrants to Greece 20; Migrants to Italy 3. - Living in rural areas of the mountain zone (%): No migrants 76; Migrants to Greece 19; Migrants to Italy 5. - Proportion of households (%): No migrants 82; Migrants to Greece 13; Migrants to Italy 5. - Findings from regional studies: - Korca region study: Households without migrant members were less efficient in farming than those receiving remittances; potential behavioral effect where remittance recipients may lower effort because remittances guarantee a certain level of welfare. - Uses of remittances (LSMS evidence): - Most commonly used to pay for basic necessities and durable goods, though remittances may also be invested outside agriculture. - Policy considerations: - An important policy question is how to steer migrant income (temporary or permanent) into productive activities to create jobs in rural areas and potentially reduce migration flows. - Government actions under formulation: migration strategy with International Organisation of Migration support, including actions to facilitate the flow of remittances into business activity. - Building confidence and increasing the efficiency of the banking sector is considered a necessary step. *Source: National Strategy for Socioeconomic Development – 2004 Progress Report (section 3.4, Labour market).* ### 7.2 hours per day and rural households for 9.5 hours per day. ### _cr0623 - 7.2 hours per day and rural households for 9.5 hours per day. ### Electricity outage durations (reported) - Mean number of hours households had no electricity in 2003: 4.8 hours per day. - Urban mean hours without electricity in 2003: 3.5 hours per day. - Rural mean hours without electricity in 2003: 6 hours per day. - (Header text: "7.2 hours per day and rural households for 9.5 hours per day.") ### Perception of electricity service quality (2003 vs 2002) - Share of households who thought the electricity service had improved over the past year: 52%. - Share who thought the service had stayed the same: 28.5%. - Share who thought the service had worsened: 17.5%. - Figure 3.5 shows distribution by urban and rural areas with categories: Improved, Stayed the same, Worsened (share of households (%)) and series for Urban, Rural, Total. ### Urban–rural differences in perceptions - Households in urban areas were more likely than those in rural areas to say that the electricity service had improved in the past year. - Households in rural areas were more likely than urban households to say the service had remained the same or worsened. *National Strategy for Socioeconomic Development – 2004 Progress Report, page 37* ### 4.1 GOVERNANCE ### 4.1 GOVERNANCE ### Governance framework and institutional reform priorities - Success of institutional and legal reforms is considered an indispensable condition in achieving mid-term growth and poverty reduction objectives (NSSED). - Institutional reform aims: - (i) further improving the balance between different levels of powers; - (ii) increasing programming capacities of institutions; - (iii) increasing their efficiency in implementing policies and legislation; - (iv) increasing fiscal efficiency; - (v) strengthening accountability and improving public services; - (vi) democratisation, increased transparency and reduction of corruption. - Mid-term government priorities to increase efficiency of public institutions: - (i) establishing/strengthening responsible institutions specialised in drafting, implementing and monitoring policies and laws; - (ii) strengthening institutional interaction; - (iv) strengthening public accountability of functionaries and institutions; - (v) adopting instruments to motivate public functionaries; - (vi) improving available means and technology. - Priority directions of institutional and legal reform (NSSED): - (i) strengthen public order and fight against organised crime; - (ii) fight against corruption at all levels of administration; - (iii) reform the judicial system; - (iv) deepen the reform in public administration; - (v) radically improve fiscal management; - (vi) deepen the reform of government decentralisation. - Foreign policy priorities: - (i) intensification toward European and Euro-Atlantic integration; - (ii) encouragement and strengthening of bilateral and multilateral co-operation at European and international level; - (iii) development of regional moderating role and intensification of relations of all-round cooperation with all countries in the region; - (iv) development of dynamic diplomatic action to generate an increasing positive image of the country and extension of the country’s presence and role in international forums and organisations; - (v) development of legal framework of bilateral and multilateral co-operation; - (vi) further strengthening of diplomatic action to facilitate free movement of people; - (vii) increased interest about Albanian diaspora. - Noted gap: despite positive progress, institutional ability to effectively implement the law needs further improvement. ### Justice - Judicial reform directions (NSSED): - (i) improvement of the quality of judicial/legislative process through developing the quality of normative acts; - (ii) improvement of professional level of judges, attorneys, advocates, court administrators and mechanisms of their motivation; - (iii) strengthening and institutional improvement of the justice system (self-organisation and self-control of the judiciary), rationalisation of organisational/territorial/functional structure and strengthening of related institutions (Ministry of Justice, Office of the Attorney General, Bailiff’s Office, judicial police). - Case management and transparency: - In 2004 a management system of court cases was established and automated in three pilot courts; planned roll-out to other courts during 2005. - Decisions of the High Court were published for the first time; publication of decisions of regional appeal courts pending. - Unified statistics collection: Ministry of Justice statistics sector collects procedural, administrative, investigative and judicial data from first instance courts, courts of appeal, the High Court, the Office of Attorney General, the General Directorate of Prisons and the Bailiff’s Office. - Judicial execution and bailiffs: - Internal Regulation of the Execution Service and the Evaluation System of Judicial Bailiffs approved in 2004. - A guiding commentary prepared “On unified modules of procedural activity of judicial execution service”. - High Court reviewed 58% of 3033 submitted cases in 2004 (3747 in 2003), against 54.5% of cases in 2003. - Bailiff’s Offices executed 61% of registered cases in 2004, compared to 33% in 2003 and 20% in 2002. - In 2004, Bailiff’s Offices executed 3355 cases where creditor/debtor is the state, out of 6870 registered; in 2003, 579 executed out of 6500 registered. - Legal framework of the Judicial Execution Service remains incomplete, hindering execution where debtor or creditor is the state. - Prisons and detention: - About 760 persons detained in Ministry of Justice institutions in 2004 (less than half of total detained persons; remainder held in police station premises under Ministry of Public Order). - Investments in 2004 added 610 places in prison system; planned investments expected to add 700 more places according to EU standards and solve overpopulation definitively in 2006. - Investments also made to improve heating and sanitation systems. ### Public order and policing - 2004 government priorities: (i) institutional reform; (ii) prevention and fight against crime; (iii) prevention and reduction of conflicts and illegitimate actions; (iv) increased security for citizens in exercising guaranteed rights and freedoms. - Internal police reorganisation in 2004: - separation of political from technical level; police managed its own budget; - establishment of the Border and Migration Department; - establishment of the Department of Coordination and Control of Territory. - Anti-trafficking and drugs: - Main directions: improving legal/organic structures; identifying geographic extent and criminal nature of trafficking; increasing cooperation/coordination across public administration; strengthening cooperation with Serious Crimes Attorney’s Office; drafting Action Plan of Anti-trafficking for the National Strategy for Children. - National Strategy Against Drugs (2004-2010) and Action Plan drafted in 2004. - Table 4.1 Fight against drugs (2003 and 2004) - Number of cultivated and eliminated plants (roots): 186,000 (2003) 77,000 (2004) - Heroin seized (kg): 114.7 (2003) 240.6 (2004) - Prosecuted: 281 (2003) 395 (2004) - Arrested: 247 (2003) 297 (2004) - Tried: 9 (2003) 39 (2004) - Escaped: 29 (2003) 59 (2004) - Source: Ministry of Public Order - Economic and financial crime: - In 2004, 1339 offences identified and 1323 revealed, involving 31 criminal groups with 114 members, out of which 80 were arrested. - Focus: reorganisation to fight money from criminal activities; identification of assets from criminal activity; Approval of Action Plan on ‘Prevention and fight against corruption 2003-2004’. - Terrorism: - In 2004, 5117 penal offences identified, or 1452 more than in 2003; 3352 (69%) of them were revealed. - Strengthened service measures and cooperation with police regarding control in diplomatic missions of Western countries. - Police personnel and discipline: - In 2004, 323 critical reports sent to the Attorney’s Office related to 307 police subjects (24 high ranks, 88 middle ranks, 211 basic ranks); of them 52 were arrested. - Border control and regional cooperation: - Law ‘On entry, stay and treatment of foreign citizens in the Republic of Albania’ approved. - About 456 foreign subjects were refused entry in Albania in 2004, compared to 425 refusals in 2003. - Regulation ‘On administration, maintenance, and use of services of floating and radio locative means’ drafted and approved; regulation on organisation of work in airports and ports revised. - Road safety (2004): - 734 road accidents causing death of 282 citizens and injury of 186 others. - About 440,176 fines amounting to Lek 414,782,568 were issued; about 91% of total volume and 87% of total value of these fines was collected. - Procurement of speed and alcohol measuring instruments countrywide. - Radio-communication: - Full computerisation objective for State Police and electronic management of information. - Functioning data transmission network in Border Police Departments completed. - National System of Communication in HF frequency established for Regional Police Departments; mini UHF systems established; automatic surveillance and recording systems built in border posts. ### Public administration reform - Reform aims (NSSED): - (i) clearly determining responsibilities, authority and accountability of public institutions and functionaries; - (ii) strengthening separation of political and civil service levels and ensuring sustainability of the civil administration. - Main reform directions: - (i) complete reform of institutional structures; - (ii) reform internal control; - (iii) fully implement status of civil servant and re-draft status of political employee; - (iv) improve public information. - Civil service statistics and changes (2004): - Total number of positions in the civil service was 1697 or 0.8% more compared to 2003. - 330 new civil servants appointed in 2004, against 277 appointed in 2003; vacant positions reduced by 10.7%. - Civil Service Commission annulled 2.1% of competitions in 2004 for not observing rules. - Average number of applicants per procedure: 10 candidates (2004), against 8 candidates (2003) and 5 (2001). - Institutional restructuring: - Ministry of European Integration created in 2004. - Ministry of Justice, Ministry of Territorial Adjustment and Tourism, and Ministry of Education underwent radical functional changes. - Internal auditing unit structures in line ministries changed in compliance with law on internal control. - Small IT units established/strengthened to implement the National Strategy of Information and Communication Technology. - Terms of reference and classification of supporting structures in line ministries unified in 2004. - Department of Public Administration established inventory of all Council of Ministers dependent institutions, line ministries and independent institutions in 2004 to enable functional/structural review in 2005. - Civil service application expansion and training: - Law on civil servants applied in 2004 also to employees of Public Procurement Agency, tax, customs and other authorities. - Civil service training attendance increased to 2090 persons in 2004, up from 1215 in 2003. - Wage reform: - Categories of ‘specialist’ and ‘head of division’ established in line ministries and in ten Council of Ministers dependent institutions and ministries in 2004 (except Ministry of Youth, Culture and Sports where to be introduced in 2005). - A separate fund for wage reform included in the Medium Term Budget Programme. ### Decentralisation - NSSED emphasises decentralisation as important for growth and poverty reduction; approach: cautious, step-by-step, integrated across sectors, with readiness required from local government and legislative framework. - Three NSSED objectives by 2004 (summarised): - Decentralisation of exclusive, shared and delegated functions with appropriate legislation and increased local decision making; - Increased opportunities for resourcing local government including improved distribution of national financial resources and transfer of immovable property; - Application of same governance, administrative and financial reform principles by local and central government (status of civil servants, financial management, community inclusion, anti-corruption measures). - Law on Functioning and Organisation of Local Governments distinguishes 3 function types: - Exclusive functions: full administrative/service/investment/regulatory authority; financed primarily from local government general budget. Typical areas: local infrastructure, social/cultural/sporting activities, local economic development activities. - Shared functions: undertaken jointly by central and local governments; often financed by conditional transfers when performed to national standards. Include pre-tertiary education, primary health services, social assistance, public order and environmental protection. - Delegated functions: local governments perform as agents of central government; wholly financed by transfers from central budget. - Progress and assessments: - World Bank study ‘Albania: Decentralisation in Transition’ (August 2004) concluded considerable progress in basic institutions and legal framework and policy implementation, but that Albania is far from completing full decentralisation design. - Local government fragmentation and property: - Ad-hoc Parliamentary Commission set up to facilitate territorial divisions prior to 2006 local elections. - Local government structure: 309 communes and 65 municipalities in 12 regions. - Twelve local government units completed inventory and transfer of designated local government premises. - Legal framework: - Organic laws in 2000: ‘On the organisation and functioning of local governments’ (8652/2000) and ‘On the administrative-territorial division’ (8653/2000). - 2004 amendment to Law 8652 to increase competencies of village heads in Commune Councils. - Assignment of responsibilities and expenditure allocation: - MTBP (2004-2006) projected local government expenditures (excluding conditional transfers from line ministries) to increase from 1.9% of GDP in 2002 to 2.1% of GDP in 2006. - In 2004, local government expenditure was 2% of GDP. - Table 4.2 Local government spending, in Lek million (selected entries as presented) - Local government grant: 5134 (1999) 4595 (2000) 4943 (2001) 9073 (2002) 6627 (2003) 6622 (2004) - Local revenues: 885 (1999) 1315 (2000) 2038 (2001) 2676 (2002) 4979 (2003) 5553 (2004) - Small business tax: 1188 (1999) 1641 (2000) 1974 (2001) 2548 (2002) 2944 (2003) 4060 (2004) - Source: Ministry of Finance - Note: in 2002 health O&M expenditure was allocated as an unconditional grant; converted back into a conditional transfer in 2003. - Exclusive function highlights (2004): - Water supply and sanitation: decentralisation policy for water approved in 2002; inventory completed but only 8 water utilities inclusive of 131 systems were transferred to municipalities/communes by 2004; planned completion in 2005. - Urban public transportation and traffic regulation: public transport licensing a local government competency since 2003. - Urban planning and land management: legal framework does not allow full local responsibility; new law on urban planning planned for 2005/06. - Housing: law ‘On social programmes for housing of city dwellers’ passed in 2004; financing through central government contribution and municipal taxes on immovable property. - Shared and delegated functions: - Delineation of specific competencies still developing; policy papers in 2004 in health, education and social services should lay basis for future decentralisation. - From 2005 local government to have competence to administrate social assistance funds (cash payments or payment for work/community services). - Local government had little decision making power in education or health in 2004; ministries developing regional structures to enable greater delegation. - Local government to be transferred property rights over health clinics and schools with proviso buildings remain used for original purpose. - Revenue autonomy and fiscal equalisation: - Local revenues consist of local revenues and national revenue sharing (unconditional transfers, conditional transfers, shared taxes). - Conditional transfers proportionally larger than unconditional transfers → limited revenue autonomy. - Own local government revenues were Lek 9.6 billion in 2004, up from Lek 7.9 billion in 2003. - Proportion of revenues from state budget (local government grant) decreased over past 5 years. - Small business tax revenues concentrated in Tirana, Durres, Elbasan and Korçe. - Special fiscal equalisation measures in 2004 for 156 mountain communes and 37 municipalities; in 2005 to be extended to a quarter of mountain communes and 45 municipalities; extra compensation for 80 of the poorest communes. - In 2005, responsibility for investment funds in pre-tertiary education and primary health care to be transferred as a block grant. - Decentralisation strategy proposed sharing 15% of personal income tax to communes and municipalities and 5% of company profit tax to communes, municipalities and regions. - Role of Regional Councils: - Revenues sources: unconditional block grant from state budget (Lek 941 million in 2004 or 15% of total unconditional block grant to local government) and transfer from municipalities/communes of 4% of their revenue collection (not enforced). - Regional Councils cannot raise own revenue. - Regions lack responsibility/financial means to implement regional development strategies. - Institutional strengthening and citizen participation: - Pilot projects used to test decentralisation; Tirana municipality pilot preceded transfer of capital expenditure budgets. - Citizen perception surveys conducted in at least eleven municipalities in 2004; participatory budgeting pilots in 2 communes and 2 cities. - Community Works Project second phase began in 2004. - Training Agency for Local Government approved in 2004 but not sufficiently funded; human resource development centres operating in Fier, Kukes and Gjirokaster with UNDP support. - Draft law on internal audit for local government planned for 2004 not yet completed. - Donor coordination: - Thematic Group on Decentralisation established in 2004 with an online database for donor programmes. - Recommendation/need: - Update 1999 decentralisation strategy based on achievements, ensure integration with sector strategies, focus on fragmentation, assignment of responsibilities, strengthening local institutions (including regions), capacity building for implementation and monitoring, ensuring local revenue autonomy and improving transfer/grant system. A medium term work plan drafted by the National Committee for Decentralisation and presented to the Council of Europe. ### Anti-corruption - Anti-corruption strategy focuses on: - (i) strengthening of the rule of law; - (ii) prevention; - (iii) education and public participation. - Monitoring: - In 2003-2004, out of 119 planned measures, 105 or 90% were accomplished. - Institutional strengthening in 2004: - High Court of Serious Crimes and respective local courts and attorney’s offices established. - Task force to investigate organised crime penal offences and department for fight against organised crime and protection of witnesses set up in General Department of State Police. - National Committee of Coordination for the Prevention of Money Laundering created. - Legal reform in 2004: - Improvements in public procurement, declaration of wealth, financial obligations of elected persons and some civil servants, competition, rules of ethics, procedures for external activities of civil servants and donations, and conflict of interest. - Penal code of procedures improved on special investigation means; law on protection of witnesses and collaborators of justice; law on organisation and functioning of courts dealing with serious crimes; ratification of the additional protocol to the penal convention on corruption; measures against financing of terrorism; implementation of European Penal Convention on Corruption; law on prevention and fighting organised crime. - Table 4.3 Selected performance indicators of the anti-corruption action plan (selected entries as presented) - Disciplinary actions against judges: Dismissed 4 (2003) 4 (2004); Disciplinary measures 8 (2003) 4 (2004) - Sanctions against police authorities: Disciplinary measures 1715 (2003) 2334 (2004); Administrative measures 326 (2003) 729 (2004) - Sanctions by the High State Control: Disciplinary measures 344 (2003) 196 (2004); Administrative measures 142 (2003) 73 (2004); Convictions 138 (2003) 323 (2004) - Offences in exercise of public duties: Accused 224 (2003) 258 (2004); Prosecuted 111 (2003) 159 (2004); Convicted 11 (2003) 25 (2004) - Sanctions by General Department of Audit: Disciplinary measures 696 (2003) 1713 (2004); Administrative measures 2012 (2003) 2309 (2004); Convicted 76 (2003) 47 (2004) - Offences related to customs and tariffs: Accused 145 (2003) 123 (2004); Prosecuted 185 (2003) 291 (2004); Convicted 141 (2003) 233 (2004) ### European integration - SAA negotiations in 2004: - 6 rounds of negotiation concluded: 2 political and 4 technical. - Albania close to finalising SAA negotiation; first reading of the Agreement finalised. - Achievements: - First reading of 135 articles of the SAA completed. - Negotiated issues of trade in primary and agro-processing products; agricultural liberalisation expected to progress over next 5 years. - Calculated financial effects on Albanian economy from implementing liberalisation of custom tariffs. - Treatment of Title 8 ‘Cooperation policies’ containing 25 articles negotiated. - Improved quality of technical negotiations supporting government proposals and transition periods. - Consultative Task Force and Technical Working Groups focused on: 2005 parliamentary elections preparation, fight against organised crime, migration, human rights and minorities, freedom of expression and media, compensation and restitution of property. - Since November 2004 SAp countries included under Directorate General Enlargement. - European Partnership: - Government prepared Action Plan for Implementation of European Partnership Priorities approved by Council of Ministers Decision 634 in August 2004. - Action Plan for Approximation of Legislation drafted; expected approval in first half of 2005; covers ten-year period divided into short-term and medium-term phases; task force established to monitor it (Council of Ministers Decision no. 634). - Bilateral collaboration protocols signed with Croatia, Macedonia, Poland and Hungary to promote relationships and accelerate membership. - EU support instruments and figures: - CARDS programme financial support 2001-2006 will reach €278.4 million concentrated in five directions: - justice and home affairs - €119.1 million (42.7%); - economic and social development - €90.1 million (32.4%); - strengthening of administrative capacity - €37.5 million (13.5%); - environment and natural resources - €18.5 million (6.7%); - democratic stabilisation - €9 million (3.2%); - other - €4.2 million (1.5%). - CARDS to be substituted by Pre-Accession Instrument for 2007-2013. - EU Council decided in April 2004 to offer additional assistance of €25 million direct budget support to Albania (€16 million grant component and €9 million credit component). - Regional CARDS programme finances regional projects in which 2 or more Western Balkan countries participate; Albania to continue participation in 2005-2006. - Funds from Neighbourhood Programmes to coordinate cross-border cooperation with Italy and Greece border regions. - Albania can participate in 25 Community Programmes and in the TAIEX Programme for legislative approximation. - Public awareness: - Strategy of Information and Communication with the Public drafted and approved in December 2004 to raise public awareness of integration process, commitments and rights. ### NATO membership and regional cooperation - Mid-term Strategy of NATO Membership completed to coordinate and plan activities to achieve membership. - Regional cooperation: - 49 high and very high level visits conducted in 2004. - Seven rounds of diplomatic consultations and 23 documents related to bilateral relations signed. - Three sessions of joint commissions on border, economy and free trade convened. - Albania became a member of the United Nations Economic and Social Council for period 2005-2007. - Completion of national reports on implementation of six major UN human rights conventions. - New Action Plan to Facilitate Movement of Citizens drafted and approved; reflected in issuing of passports for Albanians in other countries. - Ministry of Foreign Affairs completed matrix of draft-acts: about 71 agreements, 25 draft decisions and 54 draft laws signed and sent to Council of Ministers for approval. ### Statistics - Statistical law approved in 2004; INSTAT designed a 5-year programme for official statistics to be submitted to Council of Ministers and approved by Parliament in 2005. - Programme objectives: - Build and empower system identity and image of official statistics; - Develop statistical culture and promote use of statistical methods within public administration; - Disseminate statistical culture and stimulate need for statistical information; - Integrate and harmonise methods with European and international requirements; - Ensure statistical cooperation between agencies; - Improve dissemination and statistical structures. - Economic statistics: - INSTAT carried out structural survey of economic enterprises in 2004 (results published in 2005). - Introduced improvements in methodology for macroeconomic aggregates and national accounts following European System of Accounts 1995. - Started piloting quarterly estimation of GDP to assist decision makers; full implementation of methodology to be completed in 2006. - Social statistics: - INSTAT carried out third wave of LSMS in 2004 and began preparations for full-scale LSMS in 2005. - Line ministries began using LSMS data; in 2004 two line ministries carried out policy impact analyses using LSMS and administrative data. - Collaboration and data access: - INSTAT worked with General Directorates of Taxation and Customs, Ministry of Agriculture and Food, and Bank of Albania. - Memoranda of understanding to allow INSTAT access to primary data and microdata for improvements. - Funding risk: - Despite approval of Statistical Law and programme, government funds for implementation of LSMS, household budget survey, labour force survey are not guaranteed. These surveys were intended to complete individual and household data collection for policy analysis. *Source: National Strategy for Socioeconomic Development – 2004 Progress Report* ### 4.2 PRIVATE SECTOR ### 4.2 PRIVATE SECTOR ### Development of small and medium-sized enterprises - During 2004 over 7500 new businesses were created and it is expected that up to 8,000-9,000 businesses will do so in the coming years. - The implementation of the European Charter for small and medium-sized enterprises is a priority; its principles include: - improvement of legislation and regulatory framework of SME; - improvement of tariff and fiscal systems; - reduction of initial costs of setting up a new business; - development of training system for entrepreneurship; - improvement of electronic communication of businesses; - increase of efficiency of representation of interests of business. - Actions in 2004 to support SMEs: - Extended schemes of micro-credits in urban and rural areas. - Increased volume of credit for SME; improved portfolios of micro-credits. - Strengthened institutions of micro-credit by transferring funds to Foundation BESA and the Rural Development Fund. - Banking network enlargement and an increase in the number of private banks spreading throughout the country. - A Fund for Guaranteeing Credits to SME is expected to be set up in 2005 with support of an Italian government €30 million loan to be used as follows: - (i) €25 million soft credit to build up a credit line; - (ii) €2.5 million soft credit to establish a Guarantee Fund; - (iii) €2.5 million grant, as technical assistance for creation of the Fund. ### Albanian Development Fund - Active since 1993, carrying out projects to improve local infrastructure and promote private sector development, especially among the poor. - In 2004 activities were based on agreements with: the Islamic Development Bank (rural infrastructure), the CARDS programme (local community development), KfW (social investment), the World Bank (community works), and the Council of Europe Bank. - More than 150 investment sub-projects worth Lek 1.8 billion were contracted. - Allocation of resources in 2004: - Road projects: 57% of resources. - Water supply projects: 11% of resources. - Operational changes in 2004: - Manual of procedures updated to reflect strategy and structure changes and commitment to align priorities with the NSSED. - About 300 local infrastructure priorities re-evaluated by specialised social inspectors in collaboration with local government units. - Developed a participatory methodology for sub-project preparation, implementation and evaluation. - Began organising tenders in communes/municipalities to increase responsibility and capacity of local representatives. - Main problems affecting operations in 2004: - Late disbursements of funds by some donors. - Delays in signing the contract for the community works project due to the new manual of procedures changing bidder eligibility criteria. - Failure of local units to plan expenditure for sub-projects in their 2004 budget (up to 10% of the total). - Negative role of some commune representatives in procurement and maintenance. - The Fund aims to ensure projects are embedded in longer-term community development vision and include robust community-based monitoring and evaluation components. ### Foreign direct investment - Foreign direct investments in 2004 amounted to $341 million, the highest figure in the last five years, as against $178 million in 2003. - Growth attributed to privatisation of strategic sectors and concessionary contracts. - In 2004 there operated in Albania 1755 foreign companies, which have employed 4408 persons. - SACE evaluation: Albania moved from business risk level 7 to level 6. - Government actions: - Approved the study of FIAS in August 2003 and started implementing it in 2004. - Action Plan progress areas: tax and tariff sector, enlarging the basis of taxpayers, simplifying custom procedures, precipitating clearance, facilitating physical infrastructure of land and construction procedures, approval of legal acts on property and restitution and legalisation of immovable property. - Implementation difficulties: - Administrative appeals: certain legal aspects not implemented and respective structures not established. - Lack of urban regulatory plans throughout the country; National Strategy of Urban Development to be accomplished with World Bank assistance. - Timely reporting shortcomings prevented information reaching the Prime Minister’s cabinet and international institutions concerned in time. ### Trade liberalisation and export promotion - Eight free trade agreements were ratified in March 2004, adding to 29 agreements concluded in the region. Full implementation started in December 2004. - Exports of Albania to South East Europe countries of free trade reached €32.5 million in 2004 as against €16.7 million in 2003. - Trade with countries of the region increased 6.7%. - The import-export ratio was 1.9 as against 8.8 in 2003. - Successful export partners included Bulgaria and Kosovo, with a quite positive balance. - Imports from countries of the region: - €116.4 million in 2004 as against €98.6 million in 2003; in percentage terms growth was 5.7% as compared to 6.1% the previous year. - Quota usage in agricultural production in 2004 was very low in both exports and imports. Examples: - With Bulgaria, 85% of the vigna mungo beans quota was used. - With Kosovo, 50% of the beer quota was used. - With Croatia, 74% of plants and fruit trees quota was used. - With Macedonia, 50% of the quota for products such as tomato, cucumber, and fruits was used. - Almost no quotas were used in trade with Romania, and Serbia and Montenegro. - Since free trade agreement with Macedonia (came into force in July 2002): - Albanian exports doubled with 24 new products in 2003 and 30 new products in 2004. - Exports to Macedonia increased by 149% in 2004 relative to 2003, reaching €624 thousand. - Export-import ratio improved from 1:22 in 2002 to 1:9 in 2003. - Only product whose exports fell: medicinal plants. - Other country trade highlights: - Exports to Romania increased and imports decreased by 26% in 2004, improving the trade deficit for the first time since 1997. - Trade deficit with Bosnia fell by 23% compared to 2003. - Kosovo and Macedonia represent the largest market for Albanian exports. - Exports to Kosovo increased to €12 million. - Imports from Kosovo reached €8.4 million or six times more than a year ago. - Exports with Croatia reached €300 thousand in 2004, or six times more than in 2003; imports increased by 23.5% reaching €2 million. - Data sources for monitoring free trade agreements: General Directorate of Customs, INSTAT, the Trade Bulletin, the WTO Secretariat, the Department of Promotion of Business, the Ministry of Economy, and the Albanian Centre for International Trade. - ASYCUDA system developments: - Installation in most branches of customs in main cities in 2004. - Opens the way for deeper analyses of quotas and implementation of negotiated parameters of open agricultural trade in 2005. ### Facilitation of customs procedures - Study by the Albanian Centre for International Trade (published 2004) based on a survey of 250 companies involved in import and export activities, customs and transportation agencies. Main conclusions: - Custom clearance time has been reduced by more than half compared to the 5.3 days recorded in an Administrative and Regulatory Cost Survey by FIAS in 2002. This is mainly credited to new information processing technologies such as the ASYCUDA system. - Scope for further reduction exists through simplification of documentation requirements, improvement of information systems and adoption of best international practices. - Businesses continue to incur higher operation costs by approximately 5% because of perceived discretion in the application of customs legislation, especially with respect to reference prices. - Study estimates about 70% of the total import volume is cleared through reference prices, which is against GATT Article VII. - Poor communication practices and lack of transparency regarding information are important business concerns. - Albanian customs legislation has been adapted to the EU legislation. - Further trade facilitation measures, notably investments in physical and human infrastructure of institutions involved with trade policy implementation and especially the customs administration, could potentially achieve benefits amounting up to $200 million. - Source: S Xhepa, N Begaj and A Gugu, Facilitation of customs’ procedures and business relations with the customs’ administration, November 2004, Albanian Centre for International Trade. ### Banking system activity and supervision - Lending activities entered a stable expansion phase. - Central Bank of Albania data: the ratio of credit to GDP increased from 6% in 2002 to 9% in 2004 (or Lek 70 billion). - Development drivers: banks’ growing management experience, improvements in general socioeconomic conditions, and regulatory legislation. - Change in credit composition towards longer-term credit during the same period. - Credit re-direction: being re-directed away from commercial activities; sector share changes include growth in unclassified, miscellaneous activities since 2002. - Bank of Albania observations (from published annual report): - The level of credit risk may be increasing following strengthening of competition after privatisation of the Savings Bank, the large number of potential new clients, and the fact that lending is mainly done in foreign currency at a time of continuing appreciation of the Lek. This calls for portfolio diversification by economic sector. - Possibility of banking market saturation in terms of number of operating banks. - Attention should focus on risk control and monitoring arrangements. - Sources: - Bank of Albania, Monetary Policy Report, March 2005; - Bank of Albania, Banking Supervision Annual Report 2003, July 2004. ### State aid - State aid is a priority area in the framework of the European integration process. - Obligations determined in articles 70 and 71 of the Stabilisation and Association Agreement require preparing legal framework harmonised with the acquis communautaire and establishing an independent structure to monitor financial schemes of state aid and individual assistance implemented in Albania. - Actions taken: - Department of State Aid established in the Ministry of Economy. - Law no. 9374 ‘On state aid’ was approved. ### Tourism - In 2004 the Tourism Development Strategy and Action Plan were approved. - Major 2004 development: approval of the project on ‘Integrated coastal zone management and cleanup’. Objectives include: - zoning strategies, - environmental analysis, - planning for tourism development, - design of regulations, - investment strategies for infrastructure, - application of geographic information systems. - Implementation of the strategy intended to open the way to stable tourism development in Albania. - 2004 promotional activities targeted international markets (mainly Western Europe) and the region, with particular attention to Albanians from Kosovo and Macedonia. - Activities included: - A Pavilion of Albanian Tourism organised in Prishtina to present tourist options to the Kosovo market. - A tour of tourist agency representatives from Kosovo in Albania, organised by the Ministry of Territorial Adjustment and Tourism in co-operation with the municipalities of Durres and Vlora. - Support and financing: - All actors widely supported tourism promotion in 2004 and financial support doubled since 2003. - The Ministry of Territorial Adjustment and Tourism financed provision of cleaning equipment to assist local government in cleaning beaches. - 2004 season outcome: - The 2004 tourist season ran well due to cooperation between central and local institutions providing regular water and energy, waste cleaning, transport safety, health service and intensive information by media. - There was marked growth in the number of tourists and tourism revenues in 2004. - Figure referenced: Number of tourists and revenue from tourism, 2002-2004 (number of visitors and Revenues, $ million). *Source: National Strategy for Socioeconomic Development – 2004 Progress Report (section 4.2 PRIVATE SECTOR).* ### 4.3 INFRASTRUCTURE ### _cr0623 - 4.3 INFRASTRUCTURE ### Energy and mining - National Strategy of Energy approved in July 2003 aims to: - rehabilitate and strengthen existing power stations; - rehabilitate and strengthen the Fier thermo power plant; - enable conditions for construction of new generating sources; - give concession in cashing electrical energy invoices as a measure to improve liquidity; - prepare privatisation / concession of distribution. - Investments in the energy sector in 2004: Lek 12.7 billion. - Network losses: - 2004: 36.6% - 2003: 39.3% - 2000: 53.5% - Electrical energy production in 2004: - hydro power: 98% - thermo energy: 2% - Legal and institutional reform: - tariff reform ongoing for three years to achieve gradual increase in price of electric energy to cover costs; - law on the sector of electrical energy grants full competencies to the Regulatory Agency of Electrical Energy and removes the state’s previous price- and tariff-determination rights. - Restructuring measures: - Division of Albanian Power Corporation (KESH) into legally separate units separating production, transmission and distribution to attract lowest-cost investments. - Hydrocarbons strategy initiated in 2004, to be completed in two phases, main objective to align development with National Strategy for Energy and to privatise public oil companies. - 2004 hydrocarbon-sector actions: - tender for Servcom in Fier announced; - auction for Transnafta in Patos prepared (to take place during 2005); - privatisation processes begun for Mechanical Oil Plant in Kuçovë, Mechanical Plant in Patos, and the shares of ARMO and Albpetrol by competition. ### Transport and telecommunications - Transport and telecommunications sector share of GDP: - 2003: 10% - 2004: 10.4% - National Transport Master Plan submitted to the Council of Ministers; commercialisation of transport services is government strategy. Road transport - 2004 accomplishments: - 100 km of national roads constructed; - 373 km rehabilitated; - 730 km maintained. - World Bank loan for road maintenance: $30 million (2002-2007) covering maintenance of 1000 km of national roads and 1000 km of rural roads. - 2004 maintenance contracts signed: - 24 contracts for national roads and 18 contracts for rural roads worth $21 million. Railway transport - Rail link with Montenegro reopened: goods transported in 2004: 57,400 tonnes (up from 16,900 tonnes in 2003). - Rehabilitation cost for the 36 km rail line to Montenegro: Lek 383 million; completed in 2004. - Feasibility for rail link to Macedonia: requires construction of 3 km of railway at estimated cost of €5-6 million co-financed by Italy and Albania. - Note: this recommendation contrasts with National Transport Master Plan which recommends closing the line between Lin and Pogradec. Maritime transport - Port rehabilitation: completion of Durres port rehabilitation after a $23 million project. - Progress on Vlora port improvement studies; reduced use of Vlora due to lower imports of construction materials. - Privatisation of Durres Port Authority improved services and volumes; operations privatised include loading/unloading, piloting, shipping agent services and cleaning. - Maritime Code approved by the Council of Ministers and parliamentary commissions; Albanian Maritime Authority planned for 2006. Table 4.4 Maritime transport indicators (preserved layout values) - Ports: Durres, Vlora, Saranda, Shengjin, Total - Number of ships processed: - 2002: Durres 1098; Vlora 365; Saranda 46; Shengjin 223; Total 1732 - 2004: Durres 1274; Vlora 240; Saranda 81; Shengjin 192; Total 1787 - Processing capacity (in thousand tonnes): - 2002: Durres 3320; Vlora 500; Saranda 60; Shengjin 350; Total 4230 - 2004: Durres 3500; Vlora 500; Saranda 108; Shengjin 400; Total 4508 - Volume loaded and unloaded (in thousand tonnes): - 2002: Durres 2181; Vlora 504; Saranda 82; Shengjin 347; Total 3114 - 2004: Durres 2960; Vlora 301; Saranda 73; Shengjin 293; Total 3627 Air transport - 2004 indicators and growth relative to 2003: - Passengers: 649,750 (15.7% growth) - Flights: 6,757 (16.3% growth) - Flyovers: 90,655 (11.5% growth) - Concession for Mother Theresa Airport (Tirana) signed in November 2004 with consortium ‘Tirana Airport Partners’; investment commitment: €82 million over 20 years. - Planned improvements include: new passenger terminal (capacity up to 3 million passengers per year), enlargement of runway, completion of perimetric fencing, provision of operating equipment, increased security capacity. - Air Traffic Master Plan prepared and awaiting Council of Ministers’ approval; recommendations include increasing number of airports despite National Transport Master Plan findings that internal air transport is generally non-economic. - Kukes Airport construction in 2004: $18 million spent; completion expected in 2005. Telecommunications - Government strategy: introduce competition and implement EU framework for electronic communications. - Coverage and subscribers in 2004: - mobile network coverage: 74% of Albania and 87% of the population; - mobile phone ownership: 39% of the population (up from 32% in 2003); - fixed line telephone ownership: 7.5% of the population (no real change since 2003); - internet users: exceeds 40,000 (up from 30,000 in 2003). - Operators and market changes: - over 55 operators providing services including internet access, prepaid cards, and data transmission. - National Telecommunications Regulator declared interconnection agreements between Albtelecom and AMC and Vodafone Albania partly invalid. - Government removed Albtelekom’s exclusivity in offering international calls. - Regulatory framework still prevents licensing additional operators for national and international phone services and prevents licensing of agents to provide fixed line services in urban areas. - Terms of reference prepared for consultancy to align policies and regulatory framework with European Union directives of 2002. - Regulator noted AMC and Vodafone are very powerful operators. - License approved for a third mobile phone operator, Eagle Mobile, owned 100% by Albtelekom. Table 4.6 Telecommunications sector indicators (2004 and growth relative to 2003) - Fixed line subscribers: 265,000 (7%) - Public telephones: 320,000 (15%) - Mobile line subscribers: 1,283,000 (16%) Postal services - Number of post offices: - 2003: 565 - 2004: 613 - Licensed postal operators: 11 (2 more than last year). - Volume of mail delivered: 5.9 million pieces (up from 5 million). - Objective: full liberalisation of the postal service by 2009. - Amendment to law ‘On postal services in the Republic of Albania’ passed in 2004. - Postal Regulatory Authority decision taken in August 2003 has not yet been implemented. ### Water and sanitation - Water Supply and Wastewater Strategy (2003) objectives: tackle intermittent water supply and poor water quality; notes excessive water losses estimated to be greater than 43% of water production in all cities. - Average piped water supply to population in 2004: 14 hours a day (increase of 3 hours from 2003). - Number of clients for piped water: - 2004: 24,000 - 2003: 11,000 - Fiscal support and investment in 2004: - operational subsidies in budget: Lek 1.7 billion; - donor and government combined investment grants and loans to water utilities: $48 million. - Policy goals: - phase out state subsidies for operation and maintenance in the 4 cities in the Municipal Water and Wastewater Project by 2007. - Metering and billing: - households listed for social assistance qualify for water allowance once a meter installed; allowance in pilot project set at 20 litres per capita. - meters installed in 2004: 1600 in private enterprises, 500 in public institutions, and 12,500 in households. - meter coverage: 90% in Korca, Kucove and Kruja districts; 60% coverage in Tirana, Kavaja, Saranda, Vlora, Fier, and Burrel. - computerized billing systems being introduced; metering plus public information campaigns helps increase payments. - Private sector participation: - one private concession contract awarded (Elbasan) including special tariffs for 1300 households receiving social assistance. - 2 management contracts let to private operators in 2003: one for Kavaja and one for 4 cities (Durres, Fier, Lezha and Saranda). - Water quality and institutional roles: - Albania has adopted international water quality standards but faces difficulties due to aging infrastructure, lack of wastewater treatment facilities, and lack of technical expertise and equipment. - Sanitation Inspectorate (Ministry of Health) inspects water quality; Ministry of Environment responsible for wastewater and sewerage quality. - Decentralisation of water utilities: - Council of Ministers approved guidelines on transfer of water and sewerage system property to local government in 2004. - Of 54 water utilities, 8 were transferred to local government, inclusive of 131 systems of water supply. - Transfers contingent on settlement of water utility obligations (mainly to KESH) by central government. - Governance arrangements for water utilities will not change for 2 years post-transfer; local government then may determine privatisation. - Action plan prepared between Ministry of Territorial Adjustment and Tourism, Ministry of Economy and Ministry of Finance to speed up transfers. - Transparency and eligibility criteria for support to water utilities implemented. ### Decentralisation and water sector reforms: a poverty and social impact analysis - Reforms initiated under decentralisation law and water supply and wastewater strategy involve: - transferring powers from central to local government, including responsibilities for investment, operational decision-making and tariff-setting; - clarifying the financial situation of each water utility to facilitate transformation into financially sustainable corporations. - Key constraints to transfer of utilities to local government: - outstanding debts to KESH; - limited ability of local governments to generate investment funds beyond the block grant; - weak administrative and technical capacities. - Municipal Water and Wastewater Project support: - finances management contract costs awarded to a private operator in 4 towns to improve service delivery incentives and serve as a positive example; - target towns characterised by high internal migration and large unplanned settlements, increasing illegal connections and worsening service quality (duration, quality, pressure). - World Bank and United Nations Development Programme sponsored poverty and social impact analysis: - study compared 4 target towns with 4 towns under traditional public management; - survey components included interviews with central and local government informants, focus groups with representative customer groups, and about 700 households surveyed during 2002-2003. - study had 3 objectives (objectives listed in source beyond this excerpt). *Source: _cr0623 - 4.3 INFRASTRUCTURE* ### 1. Set baselines to assess consumer perceptions of water service delivery and measure the ### _cr0623 - 1. Set baselines to assess consumer perceptions of water service delivery and measure the ### Water service delivery, consumer perceptions, and distributional impacts - Objective: Set baselines to assess consumer perceptions of water service delivery and measure the distributional impacts of reform on the well being of the urban poor with respect to access to water and wastewater services and likely tariff increases. - Key findings on poor urban households: - Poor households, settled in city fringes and new settlements, are less likely to be paying for water services. - They face shorter water supply by up to 4 days per month compared to non-poor households. - Poor households are more likely to establish illegal connections, travel to get water and dig wells in their yards. - Poor households are less likely to use coping mechanisms such as purchasing water tanks, water pumps, or water from vendors, and instead use buckets or basins to store water. - Proposed lifeline service: - Provide 20 litres per person every day for free. - Drawbacks noted by respondents: 1. The measure depends on meter installation but its cost is prohibitive for poor families; 2. Existing mechanisms to identify poor households are not well developed. - Tariff and billing considerations: - The current flat rate billing system needs to be discontinued if water abuses are to be controlled and operational and management costs to be covered. - Institutional and information issues: - Insufficient provision of information accounts for ambiguities and tensions among stakeholders. - Despite several institutional tools, local government authorities are not yet exercising the new rights and competencies assigned by law. - Source cited: Decentralization and water sector privatization in Albania, World Bank and UNDP, December 2004. ### Rural water strategy and water resources - Rural Water and Sanitation Agency: - Established in 2004 as part of the General Directorate of Water and Sanitation to support formation of community water associations for water supply. - Agency will become independent in future while retaining liaison with the Directorate. - Will establish 6 branches to examine applications from community water associations for funds and assistance. - Water reserves: - The National Strategy for Water Resources was updated in 2004, resolving conflicts in the 1996 strategy and clarifying competencies for different levels of government and agencies. ### Urban development, land management, and property registration - Urban development objectives: - Long term objective: sustainability in urban development. - Medium term priorities: halting urban degradation, reducing urban poverty, creating conditions for long term urban development. - High-growth urban areas and planning: - In 2002 an order was passed enforcing the 14 largest cities to prepare urban plans. - By the end of 2004, 4 plans have been completed, and 12 cities have completed a plan for their inner-city area. - In 2004 the law ‘On legitimisation of informal areas’ was passed and an agency established for its implementation. - Urban land management and registration statistics: - Registration of public properties is not completed. - Registration of private property in accordance with the Immovable Property Registration Project has been completed in 90% of rural areas but only 10-15% of urban areas. - Immovable Property Registration System findings: - Since the mid-1990s Albania opted for a modern Immovable Property Registration System to resolve ambiguities and establish a functional land market. - Despite almost 90% of properties in rural areas registered, the proportion in urban areas is only 10-15%. - Increasing trend for land transactions to be conducted outside Registration Offices. - Problems identified by an expert review: - Registration Office staff not sufficiently trained to develop a professional attitude in interactions with citizens. - Digital database procedures for use and updating largely ignored. - Costs for individuals to register property, including transaction tax, are too high. - Kartelas (property registers) are not reliable sources of information about ownership; interested individuals need extra steps for verification. - Suggested radical steps if public confidence is eroded: - Transfer responsibility for registration functions to institutions with intrinsic interest in preservation of the system (examples: local government officials or private registration offices). - Source cited: J. David Stanfield, The creation of an Immovable Property Registration System in Albania, Symposium on land administration in post conflict areas, Commission 7 of the International Federation of Surveyors and UN-Habitat, April 2004. ### Urban waste and housing - Urban waste / landfills: - Plans to establish 3 landfills in Lezha, Durres and Tirana have not yet been completed. - Lezha landfill started in August 2000 with Italian funds ran into technical difficulties requiring additional funding; donor issues unresolved. - Negotiations for concessionary agreements in Durres and Tirana began in 1997 but have not been finalised due to lack of direct funds and a sustainable funding arrangement. - Feasibility studies being conducted in Korca and Vlora for landfills. - An agreement signed with the Government of Italy for management of urban waste in Tirana. - Imposing taxes for managing urban waste is proving difficult due to economic and social conditions. - Government committed to progressive integration of environmental policies to European standards and to adopting the principle ‘who pollutes pays’. - Housing strategy and priorities: - National Housing Strategy (2001) proposes legal, financial and administrative measures with priorities: - Support the poor to ensure access to adequate housing through housing programmes. - In 2004 the law ‘On social programmes for the housing of city dwellers’ was passed. - Programmes include: controlled social rental housing programmes and – in special cases – rent subsidies, low cost housing programme (through cost control and credit), and sales of land with necessary infrastructure to municipalities for implementation of social housing programmes. - Develop financial mechanisms (credit for low-income families, private and institutional savings mobilisation, community savings schemes, credit mechanisms for joint ownership associations etc.) and public-private partnerships to expand access to housing. - No credit line has yet been established, although foundations were set for a pilot project to be implemented in 2005 to test alternatives without drawing down on central or local government budget by using credit lines with banks. - Support urban renewal and building maintenance. ### Human resources — Education sector (expenditure, costs, reforms, and outcomes) - Education sector financing: - In 2003, public expenditure in education sector was Lek 21.237 billion, equivalent to 10% of total budget or 2.9% of GDP. - In 2004, education expenditure increased to Lek 25.281 billion, equivalent to 10.7% of total budget or 2.8% of GDP. - Table of average cost per student in 2004, in Lek: - Primary education: 28000 - General secondary education: 25000 - Vocational secondary education: 54000 - Tertiary education: 81000 - Budget per student for 2005: - General secondary school student: Lek 29,000 - Vocational education student: Lek 69,000 (excluding technical equipment and furniture provided by donor investment and publishing costs of new textbooks) - Administrative and financial reform measures: - In 2004, 12 Regional Education Departments were established to monitor education standards and inspect schools. - New inspection system introduced for quality assessment. - EMIS system being used for improved communication with districts; specifications for data inputs designed. - Policy paper for decentralisation of functions in education approved by the Council of Ministers. - Capital expenditure for pre-tertiary education given as an unconditional grant to the Tirana Municipality in 2004; extended to all local government in 2005. - Printing of school textbooks went to competitive tender in 2004. - All education salaries increased by 3.4%. - Pre-tertiary teachers received an additional 8%. - University staff received additional increases of between 30-70%, widening the gap in salary levels. - Institute of Pedagogical Studies divided into 2 semi autonomous agencies: the Institute of Curricula and Standards and the Centre for Training and Qualification in Education. - In the framework of the Bologna Declaration, a new curriculum framework was launched in 2004. - Distribution of resources across schools: - Schools are not financially autonomous; they receive resources as: - Salaries: funded out of the Ministry budget and transferred to municipalities and communes through Regional Education Departments (conditional grant). - Supplies and teaching materials: funded by the Ministry budget, transferred to Regional Education Departments, distributed in kind based on demands (conditional grant). - Operation and maintenance expenses and small repairs: directly funded by municipalities and communes (unconditional block grant – plus local resources, if any). - Investments (construction, rehabilitation and equipment): funded by the Ministry budget; procurement by District Education Office if amount < Lek 10 million, otherwise by the Ministry. - Study findings on inequalities: - Two types of inequality in distribution: 1. Disparities in distribution of supplies and teaching materials across basic schools: - Schools in the bottom fifth received on average Lek 20 per pupil per year, schools in the top fifth received more than Lek 5,000. - Pattern same in 2002 and 2003. 2. Differences in share of the unconditional grant allocated to education: - Municipalities spent 23% of the grant on education compared to communes which spent 13%. - Within local government units, bottom fifth spent as low as 5% of its grant on education, top fifth spent 31%. - Finding: level of block grant per student in municipalities partly explains the share of the block grant allocated to education, suggesting education expenditure partly determined by available resources, not only need. - Recommendation: decentralisation should be accompanied by funding mechanisms promoting equity and efficiency and quick progress in EMIS to report personnel, salaries, operations and maintenance expenses to the Ministry. - Source cited: Ministry of Education and Science, Public expenditure tracking survey, October 2004. - Pre-tertiary education strategy and access: - National Education Strategy for Pre-Tertiary Education developed in 2004 with 4 priority areas: governance and management of education, quality of teaching and learning, financing of education and capacity development. - Action plan to be integrated into the medium-term budget plan. - Average Albanian child expected to spend 7.5 years less in school than the OECD average. - Factors for leaving school: poverty, lack of public security, blood-feuds, poor teaching quality, low quality of school buildings, lack of value placed on education, lack of enforcement by local authorities. - Initiatives in 2004: - Compulsory education extended from 8 to 9 years for new enrolments in 2004. - Some smaller schools merged with larger schools. - Free textbooks provided to primary schools (and to the secondary schools of 80 poor communes). - Additional scholarships awarded. - Regional Education Departments and District Education Offices required to report every 6 months on efforts to attract Roma students to school. - Psychological service initiated for school age children. - Late in 2004, project ‘Second Chance’ initiated to re-enrol students who have dropped out. - Enforcement of sanctions for non-attendance proving difficult. - Teacher training and qualifications: - Out of 36,000 teachers in pre-tertiary education, there are 8,000 teachers without tertiary education qualification. - Of these, 5,246 are employed in compulsory education. - Since 2002-03, a part-time year-long training programme was held for 1,470 of these teachers in 10 districts. - Of these, 980 received a certificate, making them eligible for permanent appointment and giving them entry level 2 in 2003-04. - Reorganisation caused suspension of the programme; plan to continue in future. - Improvement in teaching standards and motivation observed among those on the programme. - Effects of teacher qualifications on school performance (urban vs rural statistics and results): - Urban / Rural comparisons (as presented): - Average Grade 8 exam score in language [maximum = 100]: 58.1 / 48.8 - Average Grade 8 exam score in mathematics [maximum = 50]: 26.5 / 23.4 - Proportion of teachers with secondary school education (%): 6.2 / 11.0 - Proportion of teachers with pedagogical secondary school education (%): 17.7 / 33.3 - Proportion of teachers with university education (%): 76.1 / 55.7 - Average age of teachers (years): 42.1 / 40.4 - Proportion of poor households in municipality / commune (%): 18.6 / 37.5 - School years attained by women aged 30-55 in municipality / commune: 10.9 / 8.5 - Study results: - School performance in Grade 8 examinations was negatively related to the proportion of teachers in the school that only possessed secondary education qualifications; stronger effect in language and in rural areas. - Proportion of teachers with pedagogical secondary education did not affect school performance negatively; for mathematics in rural areas the effect was even positive. - Suggestion: among teachers without a university degree, training activities should focus on those without a pedagogical secondary education certificate. - Study intended to evaluate effect of teacher training programme on school performance, but Ministry does not record teachers who receive training. - Recommendations: - Keep a database at the central level to allow evaluation of the programme. - Ministry and INSTAT should agree on a common identification number for schools to facilitate merging existing data sets. - Sources cited: - Ministry of Education and Science, Policy impact analysis: Impact of teachers’ qualifications on student performance; - INSTAT (2004) Poverty and inequality mapping in Albania. - Secondary vocational education: - In 2004 there was growing student motivation to enrol in vocational education. - Number of students enrolled grew from 20,333 in 2002-03 to 21,909 in [text ends here]. *National Strategy for Socioeconomic Development – 2004 Progress Report* ### 2004. The vocational schools sometimes operate in excess of full capacity. The vocational ### _cr0623 - 2004. The vocational schools sometimes operate in excess of full capacity. The vocational ### Vocational education - Vocational schools sometimes operate in excess of full capacity in 2004. - The vocational education budget for capital investments was increased in 2005. - Labour market demand is increasingly for students from vocational schools (mainly plumbers, mechanics and tourism professions). - The Ministry of Education delegated the budget to a number of vocation schools; practice has shown these schools are more effective than ones managed by the local government. - A Vocational Education Agency was established in 2005 to increase the system’s responsiveness to labour market needs. Expected functions: - establish a framework of professions; - improve curricula; - provide equipment and furniture for 4 schools and 4 centres for vocational training. - Main constraint for decentralisation: lack of capacity to support vocational education. ### Higher education and scientific research - Strategy objectives: - increase the autonomy of universities; - improve the quality of teaching; - align qualifications with European standards; - increase the level of research. - Budget allocation: - The budget for universities is 17.6% of the total education budget (0.6% for research). - Developments in 2004–2005: - increase in financial autonomy for universities in 2004, restricted by the current organic budget law; - a new funding formula introduced to reduce disparities in funding between universities based on disciplines offered and professional qualifications obtainable; - research budget allocated based on research projects being conducted by universities; - curricula for new entrants in 2005 revised. ### Health — sector overview - Health identified as a priority sector in the NSSED since 2001. - Target: public expenditure in health to increase from 3% of GDP in 2001 to 3.2% by 2004. - Public expenditure figures: - In 2003, public expenditure in the health sector was Lek 15.699 billion, equivalent to 7.8% of total budget or 2.11% of GDP. - In 2004, public expenditure in the health sector increased to Lek 19.507 billion, equivalent to 8.67% of total budget or 2.31% of GDP. - Key plans and strategies (dates preserved as in source): - Mental Health Policy (2003); - Strategy for Public Health Promotion (2003); - National Strategy for Integrated Management of Childhood Diseases (2003); - National Strategy for Prevention and Fight against HIV-AIDS (2004); - Long Term Strategy for the Development of the Albanian Health System (2004); - Health Insurance Institute Plan (2004). - Law development: - The Law ‘On health services financing through health insurance’ submitted for approval to the Council of Ministers and should be passed in 2005. Objectives include: - (i) increase in effectiveness and efficiency in the use of resources; - (ii) increase in access to and equality in health services nationwide; - (iii) improvement of health indicators through interventions in specific areas. ### Planning, resource distribution and monitoring - Criticism: health service budget allocations have not been linked to need or to outputs. - Developments in 2004: - Ministry of Health developed a medium term budget plan for 2005-2007, used to prepare the annual budget; - a national health information system for human resources was established and used for appointments and training needs analysis; - studies being completed in primary health care units and hospitals to inform future budgeting; - Ministry of Health centralised procurement of goods and services in 2004, resulting in lower costs and greater efficiency. ### Governance - Informal fees to health service providers reinforce inequality and reduce access to health care. - Poor working conditions, including low pay, have led to loss of a large number of health sector personnel. - Informal charging of fees is supported by patients seeking services or medicines not available on the national drugs list. - Measures implemented to reduce corruption include: - Ministry increased health service provider salaries by 12% in the past year; - 70% of additional revenues collected (from non-insured patients) given to health personnel as bonuses or direct remuneration; - remaining 30% retained by the institution (equally split for capital investment and operational services). ### Private sector regulation - Private sector has expanded rapidly (licenses issued between 2001-2004 shown in Figure 4.5 in source). - Regulatory actions in 2004: - joint order by the Ministry of Health and the Ministry of Finance obliging private practitioners to produce their licence when registering for tax purposes; - new rules and regulations written for diagnostic laboratories governing function and setting service standards; - new law ‘On medicines and pharmaceutical services’ requires pharmacists to gain a license which will last 5-10 years; Ministry of Health responsible for inspections. ### Access to health services - Primary health care delivery: - provided through an extensive network of urban and rural health centres offering basic health care including preventative programmes. - Infrastructural development in 2004 completed construction of the network of health centres; in total, approximately 640 health centres give total coverage. - 171 new outpatient clinics were built; the network now has approximately 900 outpatient clinics and is only 50% completed. - Table 4.8 — New and reconstructed health centres and outpatient clinics (preserve numbers and currency) - New health centres: 21 — Cost in million Lek: 66.4 - New outpatient clinics: 171 — Cost in million Lek: 217.2 - Reconstructed health centres and outpatient clinics: 45 — Cost in million Lek: 63.2 - Total: 237 — Cost in million Lek: 346.8 - Service usage and staffing: - Increase in number of patient contacts with the doctor at health clinics and outpatient clinics; data on substitution for hospital visits collected by the Living Standard Measurement Survey. - Needs’ assessment, relocation or hiring of general practitioners reduced communes not covered by doctors from 16 to 9. - General practitioners contracted to the Ministry of Health increased from 1567 in 2003 to 1593 in 2004. - Incentives for working in remote and rural areas being applied. - Hospital capacity and expenditure: - Albania has a ratio of 3.1 beds per 1000 inhabitants. - Bed occupancy in 2002 was 50.5% (the European average is 77%). - Of the total health budget, 60% was spent on hospitals in 2004, down from 65% in 2003. - To improve hospital performance, 6 hospitals are measuring performance indicators as part of a pilot project initiated by the World Health Organisation in [text ends]. *National Strategy for Socioeconomic Development – 2004 Progress Report* ### 2002. This project will be evaluated at the end of 2005 and if successful, extended nationwide. ### _cr0623 - 2002. This project will be evaluated at the end of 2005 and if successful, extended nationwide. ### Pharmaceuticals - National pharmaceutical policy: provide safe and effective drugs at affordable prices. - Pharmaceutical services are privatised and supply the market with a variety of drugs; problems identified: - quality control issues; - medicines labelled in foreign languages; - abuse of drug pricing; - lack of qualified pharmacists. - Legal and regulatory developments: - 2004: law ‘On medicines and pharmaceutical services’ passed in line with EU standards. - Law specifies all pharmacies must be licensed and medicines provided by a technical manager or qualified pharmacist. - From 2005: medicines will have to be labelled in Albanian with the retail price indicated to reduce contraband and improve safety. - Institutional changes: - National Centre for Pharmaceutical Control reorganised with 2 new divisions: - division distributing information on medicine through the pharmaceutical network (e.g., whether they are imported, locally produced, registered or not); - division responsible for registration of the effects and side effects of available medicines. - Centralisation of procurement has allowed greater control over purchasing contracts and distribution. ### Improving health indicators through specific interventions - Long Term Strategy for the Development of the Albanian Health System identifies public health challenges: - cardiovascular diseases and cancer; - traffic accidents; - social and domestic violence; - mental illness; - communicable diseases. - NSSED objective: achieve 90-100% immunisation rates for vaccine preventable diseases in children and ensure safe drinking water and foodstuffs. - Contagious diseases remain a concern, especially for poor and marginalised groups. ### Immunisation, TB, and surveillance - Immunisation: - Government achieved 95% immunisation rates for basic EPI antigens. - Total cost of the immunisation programme is $4.6 million with 90% funded by the government and 10% by UNICEF and GAVI. - Tuberculosis: - National Programme for Tuberculosis control implements DOTS. - Incidence for TB since 2000 has been 20-22 for 100,000 inhabitants. - Surveillance: - Plans for surveillance of meningitis and German measles being introduced. - Challenges to coverage: supply chain management at local level and tracking a migrating population. - Albania has a surveillance system for communicable disease (ALERT). - Reported incidence of diarrhoeal diseases fell in 2004 from 1875 to 1722 per 100,000 inhabitants. - Incidence appears correlated with areas that have potable water; surveillance can be improved but causal factors need addressing. ### HIV-AIDS - 2004: National Strategy for Prevention and Fight against HIV-AIDS and action plan approved. - Antiretroviral medicines supplied for the first time with UNICEF support. - Institute of Public Health: diagnostic capacity and an action plan for establishing counselling centres and promoting voluntary testing. - Awareness campaign conducted in schools. - Sentinel surveillance used to identify problems among high-risk and marginalised groups. ### Infant mortality and childhood diseases - 2003: National Strategy for Integrated Management of Childhood Diseases developed. - 2004: pilot projects initiated in 8 districts. - Early evaluation indicates improvements in diagnosing, treating and following up children by medical personnel and improved home care by parents. - Strategy to reduce infant mortality will be multi-pronged: training of health personnel, referral, health and nutrition education for families and community. - Coordination difficulties among stakeholders noted. ### Drugs, alcohol and tobacco - Quantitative data limited; indications that smoking, drug and alcohol abuse are increasing, especially among young people. - June 2004: government signed the Convention on Tobacco Control. - Draft anti-smoking legislation prepared and with the Council of Ministers. - Institutional weaknesses in prevention and treatment of drug addiction. - 2004: national strategy against drugs launched. - SOROS foundation financing a community-level methadone treatment programme not currently provided by the government. ### Mental health - 2003: national Mental Health Policy developed to provide access to international standard services. - 2004: action plan for implementation drafted. - Need to create institutional framework for delivery; psychiatric hospitals' action plans include objectives for deinstitutionalisation requiring community-based mental health care. - Six pilot mental health centres in 5 cities using a multi-sectoral approach are being evaluated. - Around 60 general practitioners have been trained in these cities. - Monitoring suggests needs to: - increase number of community services; - staff them appropriately; - increase number of reimbursable medicines for psychiatric illnesses; - provide long term accommodation in sheltered care. ### Health insurance - Health Insurance Institute covers just over 80% of the population. - In 2004, 14% of the population is direct contributor and 69% is insured by the state. - From 2003, Health Insurance Institute responsible for employment of general practitioners. - Ministry of Health determines vacancies and performs quality control; - Regional Health Authorities included on the selection panel. - 2004: Health Insurance Institute began funding a selection of medical interventions in the 4 tertiary hospitals. - Draft laws in pipeline: - ‘On financing health services through the health insurance system’; - ‘On funding health insurance’ — to allow the Institute to have contracts with health providers for insured people. - 2003: voluntary contribution scheme started targeted at Albanians who work abroad and uninsured Albanians; 2000 people are contributing to this scheme. ### Labour market policy - Employment promotion is a key NSSED component; unemployment is a main component of poverty. - Long term employment should rise with economic growth and private sector development. - Unemployment trends: - Long term unemployed made up 66% of the total in 2004 compared to 68% in 2003. - Unemployment is 17.5% among women and 12.4% among men. - Unemployment higher in urban areas; under-employment in rural areas reflected in large numbers of farming households receiving partial economic assistance (71,882 in 2003 and 71,354 in 2004). ### Vocational training - Objective: encourage increased employment through vocational training and professional development aligned with market needs, improved employment services, and formalisation of the labour market per National Strategy on Employment and Vocational Training (2002). - Targeting: vocational training aimed at registered unemployed and minority groups; also offered to employed people to adapt to changing labour market. - Shortage of institutions for vocational training in Albania. - 2004: two new centres constructed in Elbasan and Fier, co-financed by public budget and the CARDS programme. - Nationwide needs assessment for professional skills conducted; work started on improving curricula and setting standards for professional qualifications acceptable internationally. ### Economic assistance - Economic assistance remains essential for the poor; policy updated to improve coverage, level and effectiveness. - Total payments in 2004 remained at same level as in 2003 (Lek 4 billion). - Recommendations from the ‘Assessment of the criteria and indicators for the distribution of economic assistance’ yet to be implemented. - Abuse of economic assistance declining and targeting improving. - Recipient families: - 2002: 133,000 families; - 2004: 125,000 families with 60% receiving partial assistance. - Beneficiary distribution: - Beneficiaries mainly from rural areas; recipients of full assistance tend to be unemployed in urban areas. - Half of all beneficiaries are in Shkoder, Kukes, Diber and Elbasan regions; these regions receive 45% of total resources. - 2004: draft law ‘On assistance and social services’ prepared to expand eligibility and benefits (e.g., people with disabilities). - Pilot scheme to assist recipients back to employment: - 16 public works projects implemented in 3 municipalities and 2 communes; - full time employment provided at minimum salary to beneficiaries. ### Distribution of economic assistance block grants to local government units - NSSED priority: reassess mechanism for distributing economic assistance to improve targeting. - Two-stage allocation: 1. Central government allocates block grants to municipalities and communes. 2. Local government units distribute economic assistance to deserving families. - Study by Ministry of Labour and Social Affairs examined targeting of first-stage allocation. - Existing block grant allocation: - Based on a 1999 Council of Ministers decision using 8 indicators possibly related to local poverty. - No explicit formula links indicators to grant levels; deficient data prevents implementation. - In practice, calculation based on requests and influenced by previous allocations. - Statistical system improvements: - Since 2001, programme to collect socioeconomic data: 2001 Census and LSMS. - 2004: INSTAT published a study ranking local government units by extent of poverty. - INSTAT methodology: model predicting household consumption from 2002 LSMS projected to all households using Census data. - INSTAT ranking uses rich sources and internationally accepted methodology, though not definitive. - Comparative finding: - Study compares poverty levels by local government unit from State Social Services index versus INSTAT index; the two sources are positively related but diverge in many cases. - Conclusion: scope for revising methodology for block grant calculation and improved use of statistical data for policy. ### Social services - NSSED suggests harmonisation of economic assistance with other social services and the following directions: - residential care to move gradually to community-based and mobile services; - expand range and location of services according to need; - increase participation of local government and civil society in planning, funding and provision; - increase sustainability, continuity and quality of services; - promote participation of social business in financing and service provision. - 2004 reforms: - Law ‘On assistance and social services’ approved to decentralise and modernise certain social services: - transfer residential care to local government; - establish new social services in properties transferred from central government as determined by local government; - move from residential care to community service or improve residential care where not feasible. - Establishment of a Social Fund to support decentralisation of social services. - Pilot application of general service standards in 4 regional councils, including standards for residential services for children and for people with disabilities. - Development of service standards aimed at improving licensing of private providers. ### Gender - Three major areas of concern for women: - Equality: - July 2004: law on ‘Gender equality in the society’ approved, covering employment, education, decision-making, discrimination and sexual harassment. - Ministry of Education and Ministry of Labour and Social Affairs staff underwent gender mainstreaming training to increase gender analysis in policy formulation. - Trafficking: - Reports suggest trafficking of women, mainly for sexual exploitation, continues. - March 2004: law on ‘Witness protection’ adopted to aid indictment and punishment of traffickers. - December 2004: UNIFEM, Gender Alliance for Development Centre, and INSTAT initiated project ‘Creating economic opportunities for women in Albania: A strategy for prevention of trafficking’ to analyse women’s economic rights and labour market status to create economic opportunities to prevent trafficking. - Continuing weaknesses in preventing trafficking, enforcing legislation and rehabilitating victims are recognised. - Domestic violence: - October 2004: Albanian non-profit organisations formed an alliance to promote the legal framework against domestic violence, focusing on drafting a law, organising public discussions and making representations to decision-making institutions. ### Social insurance - Strategy objectives: - aim for sustainability (reduce dependency ratio from 1.04 beneficiaries per contributor in 2000 to 0.82 in 2020); - increase real level of benefits; - increase contribution from people living in rural areas; - extend social insurance to cover people employed outside the country; - reduce evasion. - 2004 measures: - Responsibility for collection of contributions partially transferred to the General Directorate of Taxation; to be completed in 2005. - Revenues from voluntary social insurance scheme were 70% of those forecasted in 2004. - 2005: organisational measures planned for publication and inclusion in voluntary insurance scheme of all persons not included in compulsory scheme. - Contribution trends: - Level of contributions increased 36% from 2002 to 2004; biggest increase from self-employed in agriculture. - Improvements expected via public awareness campaigns and targeting by the Social Insurance Institute. - Employment promotion policies and increased control over the informal labour market increased number of contributors. - Ratio of social insurance scheme deficit to GDP reduced from 0.28% in 2003 to 0.26% in 2004. - Government reduced contribution rate of businesses from 42.5% to 38.5% to increase contributors. - Law ‘On exoneration of penalties for delays to social insurance’ (passed 2003) led to reduction in debts to social insurance scheme from Lek 1.8 billion in 2003 to Lek 0.4 billion. - Revenues from contributions increased 10.2% in 2004 (Lek 3 billion) compared with 2003, improving the dependency coefficient for the urban pension scheme, but below target due to teething problems in transfer of collection responsibility. - Number of compulsory and voluntary contributors to social insurance (Table 4.9): - 2002: - Urban: 342,438 - Rural: 126,559 - Total: 468,997 - 2003: - Urban: 342,374 - Rural: 261,462 - Total: 603,836 - 2004: - Urban: 358,295 - Rural: 280,500 - Total: 638,795 - Public budget subsidy to pension fund: - 2004 subsidy was Lek 964 million, a decrease of 52.3% compared to 2003. - Increased expenditure in 2004 included: - increase in number of pensioners by 1700; - funding policy to increase and equalise urban and rural pension with an 8% increase for urban pensioners and a 15% increase for rural pensioners and equalisation measures for those operating under different laws dependent on year of retirement. *National Strategy for Socioeconomic Development – 2004 Progress Report* ### 4.5 NATURAL RESOURCES ### 4.5 NATURAL RESOURCES ### Government priorities and legal framework - Priorities: sustainable management of natural resources; rebuilding and enhancing local government structures for environmental management; control of illegal harvesting operations; transferring of forest and pasture areas to the communes either in ownership or utility title; completion of legal framework on management; finding ways for common state-community management of forest and pasture areas, especially for long-term lease of pastures; land protection from erosion through trees planting and mountain barrages; enforcement and extension of national and regional environmental and fishing organisations. - Strategy and law approved in 2004: Strategy of Forest and Pasture Areas Development and Institutional Reform and the law ‘On forests’ were approved in 2004. ### Strengthening natural resource management at local level - Registration process of forest and pasture areas at local government units was finalised in 2004. - Valleys transferred to local authority: valleys of Mat, Dibra, and the Liqenas commune in Korca were transferred under the authority of local government. - Community engagement: significant community interest led to better development of forest area during recent years. ### Enhancement of structures and anti-erosion actions - Reforestation in 2004: 180 ha of land forested in degraded areas most affected by erosion: 50 ha in Gramsh, 20 ha in Korça, 15 ha in Puka; total 460,000 saplings. - Mountain dams: About 800 metres of mountain dams were constructed by DPPK as a primary action to prevent erosion. - Forest improvement and protection in 2004: - About 820 ha of forest areas were improved (felling, rarefactions etc). - Projects on forest protection from fire in 50 ha. - Building of water mucks: 30 pieces. - Pastures improvement: over 90 ha. ### Environment — institutional strengthening and monitoring - Institutional focus: enhancement of Ministry of Environment, the Environment Inspectorate, the monitoring network and Institute of Environment; raising awareness; including local communities, civil society and business into consultative and decision-making structures at local, regional and national level. - Inspectorate implementation: Implementation of Inspectorate’s Manual was piloted into three Regional Environment Agencies in 2004. - Control transparency: Environment Inspectorate strengthened control; all results of control and undertaken measures by the inspectors have been announced in media. ### Activities of the Environment Inspectorate in 2004 (Table 4.10) - Total number of inspections conducted: 2495 - Orders to suspend activities: 72 - Total of number of settled penalties: 36 - For failure to pay penalties in 2003: 34 - Total value of settled penalties (Lek million): 9.65 - For failure to pay penalties in 2004: 18 - Total number of collected penalties: 9 - For not providing the Environment License: 20 - Total value of collected penalties (Lek million): 0.74 - For other reasons: 10 - Percentage of penalties collected (%): 11.2 - Orders to close activities: 3 ### Environmental legal framework, reporting and awareness - In 2004 Ministry of Environment prepared a package of internal orders, guidelines and rules defining standards of control, public participation, environmental permissions, licensing regulation, monitoring, and protection of air quality and vehicle discharge levels. - Rules and procedures for Regional Environmental Agencies were defined. - Approximation to acquis communautaire began in 2004. - Reporting to European Environmental Agency: Albania started reporting priority data; performance for 2004 was estimated at 17%. Reporting includes CDDA and stocktaking of greenhouse gases. - Establishment planned: Environmental Monitoring Centre expected to be established in 2005 to ensure necessary information for policy makers according to European Environmental Agency standards. - Public awareness: comprehensive sensibility campaign through electronic and written media continued during 2004; public meetings on licensing procedures for major projects (Bushati Hydroelectric station, Vlora TES, KURUM scrap import authorisation) and preparation of strategy for implementing the Aarhus Convention. ### Reduction of existing pollution and hot spot rehabilitation - Urgent rehabilitating interventions: (a) intervention in hot spot areas; (b) elimination of toxic materials; (c) reduction of industrial pollution; (d) reduction of dust in the air in some urban areas. - Nitrogen factory in Fier: installed plant for arsenic treatment in 2004; result: 1000 m3 of arsenic by River Seman have been concentrated. - Porto Romano (Durres): range of feasibility studies conducted in 2004 for hot spot rehabilitation. - Anticipated 2005 interventions: encapsulation of polluted area; pre-investment study for rehabilitation of hot areas of Vlora; plan for rehabilitation of the PVC plant; plan for urban waste management. - Hazardous waste landfill: feasibility study and project implementation identified ten appropriate zones for its construction. - Ozone-depleting substances: legal framework improved; quantity of ozone depleting materials for the year 2002 has been reported. - Training in 2004: courses for environment technicians and customs officials on best practices to reduce ozone depleting materials in refrigerators and air conditioning; capacity building for General Directorate of Customs to control imports/exports of ozone depleting substances/equipment; monitoring of ozone depleting substances. ### Sustainable use of resources and protected areas - NSSED high priorities: (a) determining and ensuring rights of ownership and utilisation, including transfer of ownership rights at regional level concerning forests, pastures etc; (b) re-classifying and expanding protected areas and establishing structures for their protection; (c) investing and intervening for rehabilitation of degraded areas. - Protection of Lake Oher: legal framework on protection of cross-border lakes improved; all illegal activities around Lake Oher identified and closed; lake monitored by laboratory providing data for environmental report; report data for period 2003-2004 verify that main parameters of water quality remain stationary. - Coastal and lagoon ecosystems (Mediterranean region): activities undertaken include management plans, mapping of land usage, habitats and homes, analyses through GIS; 2004 studies to estimate chemical pollution in the Gulf of Vlora, assess alternatives for sustainable management of medicinal plants, analyse stakeholders and governance problems, and provide logical framework for monitoring a programme of lagoon ecosystems. ### Bio-security - Project started in June 2004: evaluated existing legislation affecting use of modern technology, in terms of national, bilateral, and multilateral collaboration to strengthen capacities and application of bio-technology. - Activities in 2004: impact evaluation on permitting genetically modified organisms as marketable products; database established on biotechnology, bio-security and risk management/evaluation. - Final results of the project expected in 2005. ### Agriculture and rural development — strategic framework and objectives - Strategic frameworks: NSSED and the Food and Agriculture Strategy aim at integrated rural development for poverty reduction through ensuring: - (i) sustainable increase of the production and yields from agriculture, livestock and agro-processing; - (ii) improved use of natural resources; - (iii) increased access to and quality of rural services (education, health, social protection), potable water supply and sanitation, as well as rural transport infrastructure; - (iv) diversification of rural economy and increasing employment and revenues from non-agriculture activities in rural areas. - 2004 sector outcomes: - Agriculture sector contribution to GDP: 24% - Annual growth rate (agriculture sector): 3.1% - Annual growth of agriculture sector including agro-processing and fishing: 4.4% - Exports of agricultural and livestock products increased by 14.7% - Imports increased by 2.1% - Key constraints: fragmentation of individual farms; return and compensation of former owners; insufficient credit for agricultural sector; advertising and market access; lack of land ownership certificate. ### Increase agricultural production — land market and farm consolidation - Land reform outcomes: - 450,000 farms established with an average size of 1.2-1.3 ha. - About 300 agricultural companies covering in total 3421.7 ha with an average size that varies between 2.5-400 ha. - Until December 2004, 98.9% of the total planned surface for land distribution was privatised. - In 97.6% of cases a land certificate was provided. - In 2004, 277 cadastral zones completed the first registration, increasing the level of registration of rural cadastral zones at 2437 or 83.2% of the total (82.4% of total cadastral zones). - Land transfer taxation: tax on land transfers reduced in November 2004 from 2.5% to 0.5% of land price. - Land transactions: - In 2003: 3500 land transactions realised. - Forecast for 2004: 4000 transactions. - Institutional land management: land commissions working on disagreements and documentation errors; each region established land management and protection departments; each commune/municipality established a land management office; each district established real estate registration offices; 7 communes and 1 municipality have digitalised land information. ### Investments in irrigation/drainage systems and water user organisations - Priorities: rehabilitation of irrigation and drainage systems; restructuring of water enterprises and strengthening of Water Users Associations; transferring responsibilities to Draining Boards; support to farmers undertaking irrigation scheme management. - Management transfers: responsibility transferred under 15 Draining Boards created by end-2004. - Infrastructure rehabilitated/improved in 2004: - About 20.000 ha in irrigation improved and rehabilitated. - 25.000 ha in drainage improved and rehabilitated. - 5.000 ha protected from flood. - Hydrography protection capacities increased by 10%. - Ten barriers of reservoirs rehabilitated. - Water Users Associations: - 18 Water Users Associations established in 2004; total number reached 580. - 4500 ha transferred under the authority of Water Users Association in 2004, increasing total surface to 180.000 ha. - Capacity gaps: Water Users Associations lack self-management and self-financing capacities; state budget and foreign financing still provide financial and technical assistance. - Impact: improvement in irrigation and drainage infrastructure has gradually increased agricultural and livestock production, improved quality, and increased sector competitiveness. ### Agriculture mechanisation, technology adoption and inputs - Priorities: introduction of new technologies in production; support to private sector; restructuring and strengthening of control institutions; certification of seeds and saplings. - 2004 mechanisation and equipment sales: - 651 tractors (30-100KF) sold through interest credits. - 1200 agriculture engines sold through interest credits. - 7 combine harvesters (100KF) sold through interest credits. - Grants and investments: - About 220 persons benefited from 10 grants delivered through competition for technological items valued at $146,627. - Greenhouse investment in 2004: Lek 1.6 billion; greenhouse area increased by 107 ha. - Fuel policy changes: - Petrol excise tax in agricultural sector cancelled in April 2004, decreasing petrol price by 45.26% and overall costs by 25-30%. - Volume of mechanisation activities increased by 15%. - Land area under cash crops increased by 15-20%. - 43,500 farmers profited from the implementation of this policy. - Quantity of petrol attracted: 1700 tons; of which 65 owners of greenhouses with a surface of 28.9 ha used 750 thousand litres. - Dairy and livestock modernisation: - Nine new farms started to apply new technologies in milking cows, contemporary housing systems, and mechanisation of fodder producing; total farms applying this technology increased to 38. - During 2004, 21 new stations in cattle, 2 in X and 1 in pigs, were opened. - About 43% of the cow population was artificially inseminated. - Artificial hybridisation was applied to 32% of the inseminated population, which increased meat production by 10%. - Feeding technology shifts: fodder patterns shifted to corn (energy source) and alfalfa (protein source). - Processed feed makes up 50% of food consumed by the livestock. - Processing and laboratory infrastructure: - Four factories for livestock, 66 food processing centres, and 246 sale points of foods are operating, where around 85 million gross tons of foods are being prepared. - Nine regional laboratories, 4 auto-control factory laboratories and one reference laboratory in IKZ are operating. ### Supporting agriculture and livestock services, research and extension - Priorities: rehabilitation and strengthening of agricultural research institutions; establishment of a national centre of scientific research and agricultural advice; inclusion of beneficiaries in formulation of research priorities; expansion of extension service in all districts; improvement of laboratory infrastructure and financing. - Institutional developments in 2004: - Regional agriculture and food directorates established. - Extension services reorganised and used by 110,000 farmers (one third of total). - 23 information centres set up and used by 59,770 farmers; 17 of them were equipped. - Extension activities and training in 2004: - 999 demonstrations with participation of 9,636 farmers. - 694 field days with participation of 5,193 participants. - 227 days of training with participation of 1,689 individuals (534 from private sector). - 867 days of training with participation of 10,296 farmers. - Adoption and impacts from surveys: - Around 60% of interviewed farmers increased capacities and extended skills; 23% applied recommendations. - In Dibra, Tirana and Durres: 77.9% of farmers were aware of extension; each specialist trained on average 63 farmers in a year; 58.6% of farmers adopted recommended practices in 2004; productivity increase after advice: 11%; production grew by 11.2%; revenues increased by 11.8%. - In Shkodra, Lezha and Kukes: productivity increase 8.5%; growth of production 8.2%; revenues increased by 6.9%. - Research outputs and laboratory upgrades in 2004: - 35 research projects implemented; 31 conducted in several farms based on direct needs of farms. - State Institute of Seeds and Plants, variety testing laboratory and in-vitro laboratory of the genetic bank restructured and provided with necessary equipment. - Three regional laboratories on seeds testing were set up. - Animal disease control: to control animal diseases and maintain epidemiological situation clear from infection and zootechnical diseases, 100% of animals were vaccinated against anthrax (over [text ends]). *National Strategy for Socioeconomic Development – 2004 Progress Report, section 4.5 NATURAL RESOURCES* ### 800.000 heads); 100% were tested for brucelosis (over 700.000 heads), while 5000 heads were ### _cr0623 - 800.000 heads); 100% were tested for brucelosis (over 700.000 heads), while 5000 heads were ### Veterinary, livestock and animal health - 100% were tested for brucelosis (over 700.000 heads); 5000 heads were found to be infected, were eliminated, and farmers compensated. - 100% of tuberculosis search were completed (over 37.000 heads). - The veterinary legal framework was improved and approximated with the EU standards. ### Management of fishing and aquaculture activities - Priorities: enforcement and expansion of national and regional fishing associations; enhancement of legal and institutional framework for monitoring and controlling fish resources. - In 2004, 9 Fishing Management Organisation were established in full structure. - These organisations redirected coastal aquaculture toward wrape and bass and inland aquaculture toward trout and shrimps. - Spawns distributed: 1.2 million in 2004 compared to 1.03 million spawns distributed in 2003. ### Forest and pasture management - Preparation and approval of the Strategy of Forest and Pasture Area Development and Institutional Reform. - Approved law ‘On forests’ to enhance structures of forest and pasture management. - Registration of forest and pastures in all local government units completed (2004) in collaboration with the Ministry of Local Government and Decentralisation. - Application challenges: Law no.8744 ‘On transferring the public real estates under the authority of Local Governmental Units’. - Anti-erosion works completed in 2004: 180 ha foresting and 800m3 mountain barriers. ### Increase access to financial services (rural) - Government priorities: promote bank system provision in rural areas, develop sustainable intermediates, establish private networks of saving-credit associations based on credit funds. - The Albanian Saving-Credit Union (technical and financial support) during the 12 year rural credit programme has distributed over 30,000 credits for rural area inhabitants. - The Albanian Saving-Credit Union offers financial services for 41% of the villages in 8 districts (Tirana, Elbasan, Durres, Kavaja, Lushnja, Fier, Vlora, Gramsh). Key statistics (Table 4.11: Access to financial services in rural areas) - Number of Saving-Credit Associations: 2000 = 21; 2002 = 88; 2004 = 89 - Number of members of Saving-Credit Associations: 2000 = 506; 2002 = 5,285; 2004 = 10,430 - Number villages covered by Saving-Credit Associations: 2000 = 21; 2002 = 160; 2004 = 372 Key activities and portfolio (Table 4.12: Activities of Saving-Credit Associations) - Union portfolio in Saving-Credit Associations (thousand): 2000 = 421; 2001 = 1837; 2002 = 5060; 2003 = 7980; 2004 = 9314 - Total number of active credits: 2000 = 4423; 2001 = 5277; 2002 = 6380; 2003 = 7621; 2004 = 7400 - Average credit: 2000 = 605; 2001 = 698; 2002 = 851; 2003 = 1012; 2004 = 1258 - Portfolio of Saving-Credit Associations networks (thousand): 2003 = 9413; 2004 = 1227 - Individual funds in Saving-Credit Associations networks (thousand): 2000 = 168; 2001 = 468; 2002 = 1078; 2003 = 1645 - Portfolio of deposits in network (thousand): 2000 = 9; 2001 = 121; 2002 = 374; 2003 = 1030 - Delay Credit (30 days) / Total of Credit: 2000 = 3.64% ; 2001 = 2.41% ; 2002 = 1.10% ; 2003 = 0.85% ; 2004 = 0.70% Other financial notes: - During 2004, the associations provided about Lek 1.3 million of financial resources. - Financial results of these institutions: about Lek 1.2 million (2004). - New low-cost financial resource agreements in 2004 with: the Albanian Government, Swiss and Spanish Cooperation, UMCOR, RABOBANK and CEFA. - In 2004, MADA restructured its central staff to increase operational efficacy and cost effectiveness. ### Increase agro-processing activities - Strategic decision: support agro-processing to increase agricultural productivity. - 2004 agro-processing output grew by 11.7%. - Contribution by product: bread = 15.3%; soft drinks = 11.7%; cheese = 8.8%. - Production changes (2004 vs 2003): - Soft drinks production increased by 41.4%. - Beer production increased by 92.2%. - Olive oil production increased by 120.7%. - Other increases: production of conserved fish, fruits and vegetables, and milk grew. - Investment: In 2004, Lek 2 billion invested in agro-processing industry (new lines: olive oil production, milk processing, refining of vegetable oil, fruit and vegetable processing). ### Support marketing of agricultural food production; markets and trade facilitation - Lushnja and Korca markets (constructed June 2003) raised domestic production and reduced prices by 5%. - In 2004 these markets traded 500 tons of agriculture products. - In 2004, 10 collection centres were established, reducing transport costs by 20%. - Preparation for markets in Vlora and Shkodra finalised. - 2004 fairs: Agribusiness 2004 in Tirana; International Fair in Bari. - Tax and tariff measures: excise tax for alcoholic drinks reduced; discriminating fuel price applied for fishing and agriculture; lower VAT rates applied on some agricultural and livestock articles (milk, wheat, grapes, olive etc). ### Legislation, food quality control, consumer protection - Harmonisation of legislation on agricultural products with the EU improved. - Food Inspectorate restructured; expansion/improvement of food laboratory network at district level. - Food Control Regional Laboratory in Durres and Analysis Department in IKU certified with ISO 9001. - Technical assistance provided on HPLC for gas chromatograph and spectrophotometer and for atomic absorbent. - Number of conducted analyses increased by about 9% in 2004. Food quality controls (Table 4.13, 2003-2004) - Number of conducted analysis in food laboratories: 2003 = 37928; 2004 = 41800 - Number of controls: 2003 = 18150; 2004 = 19509 - Number of violations: 2003 = 165; 2004 = 168 - Blocked and eliminated goods (kv): 2003 = 3810; 2004 = 6255 - Total revenues (Lek million): 2003 = 7.382; 2004 = 44.913 ### Policies for the development of mountain areas - National Forum for the Development of Mountain Areas established in 2003 (support: IFAD and MADA; technical assistance: Institute of Contemporary Studies and Centre for Rural Studies). - Objective: formulate new vision, lobby decision makers, define priorities, identify/design/implement social and economic development projects. - Strengthening forums in 7 pilot districts: Kukes, Diber, Mirdite, Librazhd, Berat, Korça, Permet; expansion and integration into one national Forum by end-2005. - Successful lobbying outcomes (2003-2004): - Strengthening of MADA and the Mountain Areas Finance Fund (MAFF). - Adoption of fiscal equality rules in unconditional transfers to local government in mountain areas. - Public investment on infrastructure and priority services in these areas. - Attraction of donor attention to initiate development programmes. - National objectives for 2005: - Develop a vision for mountain areas in the NSSED. - Influence the MTBP and the draft 2006 budget in favour of mountain areas. - Influence strategic documents and action plans to shift focus from relief to development. - Improve information to business and donors on development opportunities, existing capacities, potential for partnerships. Assessment results summary (Permet, 2004) — categories: Satisfactory / Moderate / Not satisfactory - Satisfactory examples: Veterinary prophylaxis; Rehabilitation of national roads; Electrical power supply; Urban planning / administration; Start-up of investments in agriculture, especially irrigation; Reconstruction of schools and hospitals in urban and peri-urban zones; Viniculture and arboriculture; Training health care providers, especially at auxiliary level; Short-term training of teachers; Infrastructure of health centres; Promotion of cultural works; Facilitation of administrative procedures for business. - Moderate / Not satisfactory examples include (non-exhaustive list): Farming production; Road network for communes; Decentralisation; Rehabilitation of rural and tourist roads; Teaching materials in rural schools; Ambulances in rural areas; Support to agro-industry and marketing; Mechanisation and introduction of new agricultural technologies; Protection of land from erosion; Provision of health care and ambulatory centres with necessary equipment; Access of farmers and business to credit; Local government capacities; Restoration of cultural monuments; Prevention of forest and pasture degradation. Context and observations - Mountain areas: constitute more than 2/3 of the country and comprise more than 35% of the population. - Strengths: important natural and human resources, handicrafts tradition, high opportunities for tourism (agro-tourism, natural tourism, historical and cultural tourism). - Forum concerns: - Albania lacks a specific policy on mountain area development. - Mountain areas are not featured in socioeconomic or environmental analyses for mid/long-term policies. - Low sensitisation of Parliament, government, political parties, public and international institutions, and civil society regarding mountain area problems. - Population of mountain areas feels lack of government/international support and is pessimistic about future opportunities. Forum requested actions - Policies, initiatives and specific projects to improve life and working conditions (with focus on women). - Investment, credit and projects to ensure sustainable production-land links, favour indigenous development, protect diversity of products/services. - Greater cohesion among agriculture, integrated rural development, environment and infrastructure policies for integrated development. - Deepening of the ‘subsidiary’ principle for local government. - Encouragement of agro-tourism and handicrafts. - Appropriate social services (schools, health centres and hospitals, cultural centres, telecommunication, transport and postal services). - Institutional acknowledgement and incorporation of mountain areas into development and integration agendas and policies. - Support to partnerships among local/regional authorities near mountain areas in Eastern Europe and EU member countries. Forum recommendations (selected) - Improve road infrastructure, especially rural and tourist roads. - Accelerate rehabilitation of national and regional road axis: priority Durrës-Kukës-Morinë and the Arbëri road. - Increase investment in education and health (teaching infrastructure, train teachers in rural areas, improve teaching quality). - Increase support to private sector in mountain areas (agriculture, processing, trade). - Increase support to develop cultural, mountain and ecological tourism. - Increase access of farmers and businesses to credit and market. - Increase financing for protection of environment and natural resources (protect forests and pastures, reduce erosion). - Accelerate decentralisation process and increase capacities of local government staff. ### Monitoring and evaluation — progress and indicators - Albania achieved all its growth targets for 2006 two years earlier (statement in report). - Poverty monitoring: 2002 LSMS had consumption module; 2003 and 2004 LSMS waves did not include consumption questions. 2005 LSMS will include a consumption module to allow new poverty estimates. - Unemployment measurement issues: large informal sector, agricultural employment, seasonal jobs abroad; no Labour Force Survey; discrepancies between Census and LSMS estimates. - Official unemployment rate (Labour Offices administrative definition) fell to 14.4% in 2003. - Health indicators based on Ministry of Health administrative data; maternal mortality for 2004 corresponds to 3 deaths during the year. - Discrepancies with WHO Europe figures: example infant mortality per 1000 live births for 2003 — WHO Europe reported 8.4, Ministry of Health figure is 17.3. - Education indicators largely administrative; literacy figures from Census not updated. Net secondary education enrolment rate has already exceeded the target but share of vocational enrolments in secondary education remained constant. - Albania subscribed to World Bank governance indicators (published every two years; last published May 2005). Governance indicators are relative, subjective, and lagged. Example: voice and accountability = 48.1 in 2004 (meaning 48% of 209 countries rated below Albania). - Modest progress in governance indicators between 2002 and 2004 noted. Main NSSED objectives (selected figures from Table 5.1) Growth - GDP per capita ($): 2001 = 1386; 2002 = 1557; 2003 = 1950; 2004 = 2604; Target 2006 = 2660 - GDP growth rate (%): 2001 = 7.6; 2002 = 4.7; 2003 = 6.0; 2004 = 6.0; Target 2006 = 6.0 - Budget deficit as proportion of GDP (%): 2001 = 6.6; 2002 = 5.6; 2003 = 4.4; 2004 = 4.6; Target 2006 = 5.0 - Inflation rate (%): 2001 = 3.1; 2002 = 5.2; 2003 = 2.4; 2004 = 2.9; Target 2006 = 3.0 Poverty - Absolute poverty headcount rate (%): 2001 = 25.4; 2002 = 20.0; Target 2015 = 10.0 - Extreme poverty headcount rate (%): 2001 = 4.7; 2002 = 3.0; Target 2015 = 0 - Unemployment rate (%) [3]: 2001 = 16.4; 2002 = 15.8; 2003 = 15.0; 2004 = 14.4; Target 2006 = 12.0 Health - Infant mortality per 1,000 live births [12]: 2001 = 17.4; 2002 = 17.5; 2003 = 15.5; 2004 = 15.1; Target 2006 = 15.0; Target 2015 = 10.0 - Maternal mortality per 100,000 live births [13]: 2001 = 22.7; 2002 = 25.9; 2003 = 21.3; 2004 = 12.0; Target 2006 = 15.0; Target 2015 = 11.0 - Diarrhoeal diseases per 100,000 people: 2001 = 1509; 2002 = 1623; 2003 = 1612; 2004 = 1448; Target 2015 = 600 Education - Literacy rate of people aged 15-24 (%) [8]: 2001 = 98.4; Target 2006 = 98.8; Target 2015 = 100 - Basic education completion rate (%) [8]: 2001 = 97; 2002 = 98; 2003 = 98; 2004 = 97; Target 2006 = 99; Target 2015 = 100 - Secondary education net enrolment rate (%): 2001 = 38; 2002 = 42; 2003 = 50; 2004 = 55; Target 2006 = 50; Target 2015 = 90 - Share of vocational enrolment in secondary education (%): 2001 = 16; 2002 = 16; 2003 = 16; 2004 = 16; Target 2015 = 30 - Average number of years of schooling [8]: 2001 = 9.5; 2002 = 10.5; 2003 = 10.8; Target 2015 = 13.5 Governance (0-100) [19] (selected) - Voice and accountability: 2001 = 47.5; 2002 = 48.1; Target 2015 = 81 - Political stability: 2001 = 29.7; 2002 = 16.5; Target 2015 = 71 - Effectiveness of governance: 2002 = 37.3; 2004 = 40.9; Target 2015 = 76 - Rule of quality: 2002 = 42.9; 2004 = 48.3; Target 2015 = 83 - Rule of law: 2002 = 17.9; 2004 = 25.1; Target 2015 = 74 - Control of corruption: 2001 = 23.5; 2002 = 29.1; Target 2015 = 73 ### Millennium Development Goals — selected indicators and assessment highlights Table 5.2 selected indicators (2002-2004; targets 2006 / 2015) - Poverty gap (%) 2002 = 5.7; Target 2006 = 5.0; Target 2015 = 3.0 - Share of poorest 20% in national consumption (%) 2002 = 12.7; Target 2015 = 6.3 - Prevalence of underweight in children under 5 years (%) 2002 = 14.0; Target 2015 = 8.0 - Youth unemployment rate (14-25 year olds) (%) 2002 = 22.8; 2003 = 21.0; Target 2006 = 15.5; Target 2015 = 15.0 - Foreign direct investment ($ million): 2002 = 153; 2003 = 178; 2004 = 341; Target 2006 = 300; Target 2015 = 600 - Fixed telephone lines per 100 inhabitants: 2002 = 5.5; 2003 = 6.1; Target 2015 = 58 - Cellular telephone subscribers per 100 inhabitants: 2004 = 27.1; Target 2015 = 78 - Personal computers in use per 100 inhabitants: 2002 = 2.4; 2003 = 4.5; Target 2015 = 35 - Internet users per 100 inhabitants: 2002 = 0.2; 2003 = 2.4; Target 2015 = 35 - Power generation (GWh): 2002 = 5406; 2003 = 5819; 2004 = 5971; Target 2006 = 6765; Target 2015 = 9342 - Annual power transmission losses (%): 2002 = 4.2; 2003 = 5.7; 2004 = 2.4; Target 2015 = 2.0 - Net primary education enrolment rate (%): 2002 = 92.5; 2003 = 94.0; 2004 = 98.5; Target 2015 = 100 - Primary education completion rate (%): 2003 = 88; 2004 = 92; Target 2015 = 100 - Under-5 mortality rate per 1000: 2001 = 20.1; 2002 = 20.7; 2004 = 18; Target 2015 = 10 - Proportion of children vaccinated against measles (%): 2002 = 95; 2003 = 94; 2004 = 95; Target 2015 = 95 - Proportion of first prenatal visits by first trimester (%): 2002 = 42; 2004 = 47; Target 2006 = 50; Target 2015 = 70 - Promotion of births attended by skilled health personnel (%): 2002 = 98; 2004 = 90; Target 2006 = 98; Target 2015 = 98 - Tuberculosis notification rate per 100,000: 2002 = 20; 2003 = 20; 2004 = 19 - Land area protected to maintain biological diversity (%): 2000 = 3.6; 2002 = 5.8; 2004 = 6.3 - Population with access to safe drinking water (%): 2001 = 69.0; 2002 = 75.4; Target 2015 = 98 - Population with access to improved sanitation (%): 2001 = 63.8; 2002 = 68.3; Target 2015 = 95 MDG assessments (selected) - MDG 1 (poverty & hunger): Assuming real growth 6-6.5% p.a. and proportional relationship with poverty reduction, Albania is on track to halve absolute poverty by 2015. Poverty gap and unemployment trends on track; foreign direct investment per capita low at $57. - MDG 2 (education): Net primary enrolment and dropout rates not fully on track; substantial inequalities (poor and rural less likely to attend); share of education budget allocation issues. - MDG 3 (gender): Mixed results; no progress in primary education gender parity; some progress in secondary; low representation of women in decision-making. - MDG 4 (child mortality): Good progress; child mortality dropped from 42 (1990) to 21 (2002); infant mortality from 28 to 17.3 (2002); concerns about under-reporting in remote areas. - MDG 5 (maternal health): Maternal mortality decreased from 37.7 to 22.7 (1990 to 2001); higher rates in rural northeast (5-6 times national average); Albanian 2015 target less ambitious than EU averages. - MDG 6 (HIV/AIDS & TB): Albania low-prevalence HIV/AIDS country; by end-2003, 117 reported HIV/AIDS cases (42 developed AIDS; 37 died). SPECTRUM estimate (July 2003): 400 to 700 infected; without intervention could rise to 4000 by 2010. TB notification rate perceived as threat despite rate of 20/100,000; 2002 registered patients = 612 (571 new, 28 relapsed); 225 started treatment; mortality rate 4.5% among treated cases. - MDG 7 (environment): Forest coverage fell by 8% in the 1990s (1.07 million hectares in 1990 to 0.99 million hectares or 37% of total area in 2000). Land area protected for biodiversity increased. Air pollutants (NOx, SO2) doubled in late 1990s. Access to drinking water low and lower for poor (57% poor vs 70% non-poor in 2003 LSMS). ### Recommendations for the MTBP 2006-2008 (selected and prioritized) - Strengthen links between NSSED and MTBP; NSSED Department to advise MTBP during three-year budget programme design via technical notes. - Improve costing and prioritisation of NSSED public actions: ongoing project (Poverty Reduction Strategy Trust Fund) to strengthen capacity of 5 line ministries — Labour and Social Affairs, Health, Education and Science, Transport and Telecommunications, Agriculture and Food — to prioritise and cost public actions. - Address discrepancies between line ministry programme definitions and Ministry of Finance budget programmes to improve correspondence between priorities and funded activities. - Balance alternative public expenditure demands: reconcile poverty reduction and European integration priorities using Integrated Planning System. - Sectoral priority alignment (examples): - Water and sanitation: renewed investment needed; address decentralisation-related management problems; improve project information for efficiency evaluation. - Energy: implement electricity strategy; reform KESH (split distribution, transmission, generation); monitor lifeline tariffs; reconsider declining budget share to energy. - Transport: accelerate road projects, priority on main horizontal and vertical axes; support increasing share of investment. - Education: prioritise measures to attract and retain students in general secondary education; coordinate vocational training and National Agency for Education and Professional Development with poverty-reduction priorities. - Health: strengthen prevention, surveillance (European integration focus) and address shortages in outpatient clinics and medical personnel in rural areas (NSSED focus); strengthen monitoring of initiative results. - Rural development: map complementarities between Mountain Areas Development Agency / Mountain Areas Finance Fund and proposed Rural Development Agency (pre-integration funds administration); address declining Ministry of Agriculture budget allocations. - For Stabilisation and Association Agreement commitments, prioritise low-cost interventions in environment, justice and public order to demonstrate political commitment and postpone costlier measures until European funds available. - Strengthen line ministries' commitment to policy evaluation and evidence-based review; encourage ministries to engage in policy impact analyses; change attitudes in forthcoming NSSED revision to focus on improving public expenditure value. Budget execution and expenditure trends (figures discussed) - Spending directed to priority sectors in 2003 and 2004 budgets. - Shift in composition of total spending toward capital investment in priority sectors between 2001 and 2004. - In 2004, proceeds of the sale of the Savings Bank increased public investment; provisional estimate of public investment reached 5.5% of GDP (2004). Donor coordination and quick-win initiatives (workshop outcomes) - Workshop (May 2005) with NSSED and UNDP: advocates integrating Millennium Project recommendations into NSSED and pursuing quick-win initiatives. - Quick-win examples: provision of school buses; afforestation with fast growing species; promotion of solar panels; regional waste management systems; mobile health clinics for remote areas; one-stop shops for public services. - Paris Declaration principles endorsed: donors to respect government priorities including local government; use government systems for aid disbursement; direct financial support for regional strategy implementation; permanent donor coordination and information sharing (e.g., environment). ### Parliamentary engagement and institutional recommendations - Roundtable May 2005 (MPs, parliamentary commissions, OSCE, line ministries) — need to move from programmes/projects to a national strategy with clear options and budget reflection. - Strengthen Parliament's role across NSSED phases; institutionalisation of NSSED drafting, approval and implementation linked to budgeting. - Recommendation to draft a unique National Strategy (2005-2006) — Strategy of Development and Integration (medium-term, integration focus). - Sectoral concerns raised by MPs: teacher training, decentralisation capacities in education, school closures and transport alternatives, distribution of free textbooks (suggest subsidy), psychological services in schools, rural health infrastructure financing, environment project coordination, regionalisation of agricultural production, targeted subsidies for maintenance and rural areas, standards and credit for regional development. - Need to improve INSTAT data accuracy and the system of indicators for correct analysis and forecasting. *National Strategy for Socioeconomic Development – 2004 Progress Report* ### Annex 1 Selected monitoring indicators ### Annex 1 Selected monitoring indicators ### Monitoring system and institutional arrangements - The NSSED will focus on medium and long-term strategic planning and will be extended to cover all government priorities. - Monitoring is shifting from short-term outputs/inputs to outcomes and impacts; this Progress Report has reduced the number of indicators per ministry to focus on highest-priority policies. - The Management Information System at the Department of Policy Development and Coordination (DPDC) at the Council of Ministers will be the primary short- to medium-term performance monitoring system for central institutions and ministries. - The MIS database structure will be harmonised with the MTBP classification system; implementation of the redesigned system occurring in 2006. - The MIS will capture all approved ministry outputs and output targets, specially coded to enable monitoring of sector and crosscutting strategies. - An annual monitoring plan will be negotiated with ministries to identify which major outputs and output targets will be centrally monitored versus internally monitored by ministries. - Ministries will be directed to update the MIS on a timely, accurate and periodic basis; DPDC will develop standards in 2005. - For long-term strategic evaluation, the NSSED Department will use administrative data, household surveys, the Census, and national accounts and will strengthen collaboration with INSTAT. - Cooperation with INSTAT during 2004 continued on the LSMS questionnaire to address national policies on labour and social affairs, health, education, agriculture, and land. - National statistical outputs were used to evaluate the impact of two selected policies: the distribution of economic assistance block grants to municipalities and communes; and the impact of teachers’ qualifications on student performance. - A definitive list of monitoring indicators will be developed in the framework of revising the NSSED; stakeholders will agree on indicators with new target levels embedded within the resource envelope. - An agreement will need to be reached with INSTAT to ensure timely and accurate submission of updates each year. ### Growth - Domestic public investment / GDP: 2000: 6.8; 2001: 7.4; 2002: 6.0; 2003: 4.6; 2004: 5.8* — Source: Min of Finance - *Provisional data for 2004 - Remittances (in million $): 2000: 531; 2001: 615; 2002: 632; 2003: 778; 2004: 966 — Source: Bank of Albania - Number of tourists (excl. ethnic Albanians) (in thousand): 2000: 151; 2001: 165; 2002: 196; 2003: 207; 2004: 246 — Source: INSTAT ### Education - Student-teacher ratio in primary education: 2000: 18.7; 2001: 18.9; 2002: 18.9; 2003: 18.8; 2004: 18.8 — Source: Min of Education - Student-teacher ratio in secondary education: 2000: 17.9; 2001: 18.8; 2002: 20.7; 2003: 21.6; 2004: 22.0 — Source: Min of Education ### Health - Life expectancy at birth: 2000: 74.6; 2001: 74.9; 2002: 74.9; 2003: 74.4; 2004: 75.4 — Source: INSTAT - Proportion of one-year olds fully immunized against: - Diphtheria, pertussis, tetanus: 2000: 95.5; 2001: 97; 2002: 96; 2003: 97; 2004: 97 — Source: Min of Health - Poliomyelitis: 2000: 96; 2001: 96; 2002: 96; 2003: 96; 2004: 97 — Source: Min of Health - Tuberculosis: 2000: 85; 2001: 91; 2002: 91; 2003: 95; 2004: ... — Source: Min of Health - Ratio of doctors per 1,000 inhabitants: 2000: 2.2; 2001: 2.3; 2002: 2.1; 2003: 2.1; 2004: ... — Source: INSTAT ### Social policy - Dependency coefficient of old age pension plan (contributors / beneficiaries) (urban and rural): 2000: 1.05; 2001: 1.06; 2002: 1.16; 2003: 0.91; 2004: 0.79 — Source: Institute of Social Insurance ### Agriculture, environment and natural resources - Agricultural sector production growth rate — Source: INSTAT - Agriculture — Source: INSTAT - Livestock — Source: INSTAT - Fisheries — Source: INSTAT - Irrigated land area (in thousand hectares): 2000: 69; 2001: 72; 2002: 93; 2003: 108; 2004: ... — Source: Min of Agriculture - Mechanisation rate (2000=100): 2000: 100; 2001: 97; 2002: 96; 2003: 108; 2004: ... — Source: Min of Agriculture - Chemical fertiliser used (kg/ha cultivated land): 2000: 3.1; 2001: 2.8; 2002: 3.0; 2003: 3.0; 2004: 3.1 — Source: Min of Agriculture - Trade balance in agriculture (in Lek billion): 2000: -11; 2001: -12; 2002: -13; 2003: -16; 2004: -11 — Source: INSTAT - Trade balance in agro-industry (in Lek billion): 2000: -20; 2001: -21; 2002: -26; 2003: -24; 2004: -20 — Source: INSTAT ### Transport - Number of deaths in motor vehicle traffic accidents: 2000: 216; 2001: 211; 2002: 260; 2003: ... — Source: WHO HFA-MDB - Note: According to the World Bank Country Economic Memorandum, road fatalities are believed to be underreported by 15-25% because government statistics refer to death at crash site rather than death within 30 days as the international convention requires. ### Energy - Hydroelectric energy generated (GWh): 2000: 4736; 2001: 3684; 2002: 3123; 2003: 586; 2004: 5417 — Source: KESH - Hydroelectric energy imported (GWh): 2000: 1072; 2001: 1819; 2002: 2269; 2003: 937; 2004: 567 — Source: KESH *National Strategy for Socioeconomic Development – 2004 Progress Report* ### Annex 2 Mid-term plan of priority actions ### Annex 2 Mid-term plan of priority actions ### Context and process - Mid-term priority action matrices were developed in line with the medium-term budgeting process to address criticisms about clarity of costs and fit with the MTBP. - Ministry of Finance instructions: medium-term budget preparation relies on line ministries in 2 steps — Programme Policy Review and Programme Expenditure and Investment Planning (including public investment). - Only 5 ministries completed full Programme Policy Review procedures this year: Education, Health, Labour and Social Affairs, Agriculture and Food, Territorial Adjustment and Tourism. Ministry of Transport and Telecommunications submitted a review of one programme. - Eight largest-share ministries were asked to prepare sector expenditure strategies; Defence, Finance, Industry and Energy, and Local Government and Decentralisation submitted sector strategies; Culture, Youth and Sport, Environment, Justice, and Public Order did not. - Matrices do not yet indicate whether proposed activities will receive budget funding; medium-term budget programme process not completed at time of writing. - NSSED Department to assume increasing coordination responsibilities in the Integrated Planning System, linking long-term goals with medium-term policies embedded in medium-term budgeting. ### Ministry of Education and Science — key programmes and targets - Programme 1: Planning and management - Targets: (1) All communes will manage investments for new buildings and school maintenance beginning year 2010; (2) All schools of pre-university education will be inspected once in three year. - Year 1: Pilot decentralisation in Tirana Municipality will end in 2006; Amended law for decentralisation; Increase 20% number of communes involved; 20% of schools inspected using the new inspection system. - Programme 2: Basic education - Policy goals include expanding compulsory education from 8 to 9 years; increase average years of education from 9.5 to 10.5 during next 10 years. - Targets: enrolment rate in compulsory education 99%; kindergarten 47%; provide 100% of pupils with textbooks. - Year 1: reduce by 20% the students that learn under inappropriate conditions; design new curricula for 3rd and 7th classes. - Policy standards include 22 pupils/teacher; 35 pupils/classroom; assessment reaching 98% practicability; 3 laboratories per 1000 pupils. - Programme 3: General secondary education - Targets: Higher secondary enrolment 79% in 2006 and 90% in 2009; student-classroom rate 35; 3 laboratories per 500 pupils; 90% enrolment rate; 95% promotion rate. - Year 1: Equip 60% of higher secondary schools with laboratories and teaching materials. - Programme 4: Professional secondary education - Target enrolment share: about 30% of students in professional/vocational education. - Year 1: rehabilitate 10% of schools; increase number of students by 20%. - Policy standards: Number of students per teacher: 20; one place of work per two students for professional practice. - Programme 5: University education - Targets: increase entrants from high schools from 75% to 90%; each university cover 40% of academic necessities from own revenues; ratio student/lecturer 20/1; academic/administrative personnel ratio 3/1; student diploma 180 credits ECTS. - Year 1: Increase number of students by 10%; Accreditation of first 3 universities. - Programme 7: Scientific research - Targets: Implementation of national evaluation indicators of VSHT in research system until by 2015; involve private business in financing projects x% (amount unspecified). - Year 1: Platform for reformation implemented in three years; increase 15% each year in national and international programs. ### Ministry of Health — key programmes and targets - Programme 1: Planning, management and administration - By 2015 all Regional Health Authorities (RHA) to be delegated 80% of competencies. - Year 1: 1% of staff trained from centre for continuous professional formation; 20% of Ministry staff strengthened. - Programme 2: Primary health care services - Targets: cover 100% of territory with ambulatory centres until 2010; reduce under-5 mortality to 10 per 1000 live births until 2015; reduce maternal mortality by half from 2001 (22.7 deaths per 100,000 live births) to 2015; 90% of population educated on oral health care; 90% of children aged 0-6 benefit from fluorine tablets by 2015. - Annual Years 1-3: each year cover 10% of rural areas with ambulatory centres; equip 10% of health centres; equip 5% of mother-child consulting centres; expand family planning services in 10 health centres; improve 4% of public oral health infrastructure and cover 7% of population with preventive services. - Standards: At health centres 1 doctor per 2000 habitants in urban areas / 1 health centre for each commune maintaining a ratio of 1 doctor per 1700 habitants in rural areas; Family doctors: 1.3 per 1000 inhabitants; 1 mental health centre per region; 1 mental health care centre per 150,000 inhabitants; 1 dentist per 1500 people aged 0-18. - Programme 3: Secondary health care services - Year 1: Improve human resources and financial management in 20% of regional hospitals; 40% of haemodialysis needs covered each year; establish legal framework for accreditation; cover blood needs by 100%. - Year 2: improve in a further 30% of regional hospitals; 20% of hospitals supported in accreditation process; eliminate hospital waste by 20%. - Year 3: Provide hospital service at regional level for population of 200,000; cover 50% of haemodialysis needs; additional 40% of hospitals supported in accreditation process; eliminate hospital waste by 40%; establish transplant treatment service. - Programme 4: Public health services - Targets: Vaccine shots/mandatory immunisation covered (100% and over 95% respectively); no poliomyelitis and measles; decrease water-borne disease infections by 5% each year; establish and equip public health laboratories by 2015. - Annual Years 1-3: increase proportion of regions reporting illnesses on time with high quality information by 10% each year. - Year 3: Establish public health laboratories in 12 regions with developed standards. ### Ministry of Agriculture and Food — key programmes and targets - Programme 1: Planning, management and administration - Targets: Modern accounting system by 2010. - Year 1: Improve conditions 50%; train 50% of new staff and 25% of existing staff; 30% offices with internet. - Year 3: Improve conditions 100%; modernise accounting system 32%; 70% offices with internet. - Programme 2: Agricultural and food security inspections and consumer protection - Year 1: Preparation of 40 draft regulations applying the Veterinary Law; vaccination against anthrax and brucellosis of 1.000.000 animals; search for TBC in 100.000 animals. - Programme 3: Irrigation and drainage infrastructure - Years 1-3: Rehabilitate and improve 20000 ha of irrigation and drainage infrastructure; rehabilitate 10 dikes; capacity of 28 drainage pumping stations to grow by 20% (through repairs of 5 drainage pumping stations); transfer irrigation responsibilities to WUA for 20000 ha. - Standard: fulfil farmer demands for water up to optimal application of 3,500m3/ha/season; drainage performance 7 lt/sec/ha; endurance 80mm of rain for 24hrs when hidrovors are used. - Programme 4: Support the agricultural, fish, agro-industrial and plant production - Year 1: Increase credit for agro-industry by Lek 7 million to construct milk collection centres. - Year 2: Increase credit by Lek 8 million; Year 3: Increase credit by Lek 9 million. - Reference to EU Regulation 1493/99 and approximation of EU Regulation 493/99. - Programme 5: Research and extension - Years 1-3: Support and supervise 37 research projects; establish and equip 20 Agriculture Information Centres; train agricultural specialists (220 days) and farmers (600 days). - Programme 6: Management of natural resources - Years 1-3: 1500 inspections in land and sea per year; repopulation of ponds with 1.000.000 koran and 1.500.000 carps. - Programme 7: Integrated rural development - Year 1: Initiate pilot regional development projects (Lezhe, Elbasan); 6% production growth in north eastern areas (MADA project). - Year 2: Creation of Payments Agency; 30% of investments used for rural infrastructure of mountainous areas; 10% to modernise and consolidate farms. - Year 3: 10% export growth of agricultural products that match EU standards. - Additional: Increase number of trained farmers by 20% in rural policies and CAP. ### Ministry of Labour and Social Affairs — key programmes and targets - Programme 1: Labour market - Targets: Reduce number of job-seekers to 150000 in 2006, 147000 in 2007, and 144000 in 2008; reduce unemployment rate to 14% in 2006, 13.7% in 2007 and 13.4% in 2008. - Increase unemployment benefits by 10% every year. - Year 1: Establish/continue Vocational Training Centres (Elbasan, Fier, VTC4, Korca); computerise employment services. - Programme 2: Social insurance - Years 1-3 objectives include increase level of revenues faster than expenditures; align rural to urban pension scheme; increase contributors to voluntary insurance. - Numeric targets: Increase benefits by 8% in urban areas and by 15% in rural areas; revenue realisation: Lek 44502 million (2006), 49497 million (2007), and 54625 million (2008). - Transfers: (a) Transfer from social insurance funds towards individuals: Lek 53397 million (2006), 58321 million (2007), and 63942 million (2008); (b) Transfer from state budget into Social Insurance Institute's budget: Lek 16274 million (2006), 16416 million (2007) and 17173 million (2008). - Increase urban pensions respectively by 9%, 8% and 7% and rural pensions by 14% per year. - Improve dependency ratio by 5% per year; improve replacement ratio by 1% per year; improve revenue ratio of contribution to GDP by 0.1% per year. - Programme 3: Social protection - Targets: Carry out 20 projects with the community (World Bank); reduce number of families in NE scheme by 3% through annual control; annual increase of PAK payment and number of PAK recipients by 10% and 0.5% respectively; establish 60 new community-based services financed by World Bank project. - Year 1-3 includes transfers of Houses of Children and Babies and PAK Centres to local government per timelines listed (2006–2008). - Programme 4: Planning, management and administration - Year 1: set up an efficient electronic system of communication and information. - Programme 5: Labour, health and security inspectorate - Years 1-3: legislative approximation and capacity development for implementing labour legislation. - Programme 6: Internal audit - Targets: Provide a permanent license as qualified auditors to 20% of the staff (2007); 30% of the staff (2008). ### Ministry of Territorial Adjustment and Tourism — key programmes and targets - Programme 1: Planning, management and administration - Years 1-3: Technical assistance and training; set up computer network for all directories. - Programme 2: Urban infrastructure / Programme 3: Water and sanitation - Objective: decentralisation of services and private sector participation. - Year 1: Complete transfer of state-owned water supply and sanitation enterprises to local government; increase basic service indicators by 2-5%. - Year 2: improve indicators by 3-5%; Year 3: improve by 5-10% through improved management and higher tariffs. - Programme 4: Housing and urban planning - Year 1 budget allocation: Lek 722 million: training (52m), loan interest support pilot project (50m – principal paid from municipality), conditional budget for municipalities (620m). - Year 2: Lek 865 million: loan interest support pilot project (50m), conditional budget for municipalities (815m). - Programme 5: Tourism - Targets: Increase number of foreign tourists to 300,000. - Increase number of beds in hotels: Adriatic Sea 3000, Ionian Sea 1200, mountain area 100, lake area 1000 beds. - Year 1–3: implement strategy stages, attract private investment, train tourism sector workers, increase international promotion. ### Ministry of Transport and Telecommunications — key programmes and targets - Programme 1: Planning, management and administration — support system objectives and provide financial support. - Programme 2: National road system - Year 1: Continue construction on 19 km of Rrogozhina-Lushnja road; about 20km of Milot-Rrëshen and Kukës-Morina roads; works on Vlora-Orikum, Palase-Dhermi-Himara, Velipoja, Dardha, Liqenas roads; asphalting of Fier ring; slides mitigation; road signalling investments. - Programme 3: Road transport management - Years 1-3: studies of medium/long-term transport strategic planning; studies of EU standards; studies of transport information systems and PPP financing schemes. - Programme 4: Ports - Year 1: establish Albanian Sea Administration after legal framework; continue investments in four ports; continue negotiations for €12m credit with Italian cooperation. - Year 3: construct travellers terminal in Durres port; complete paving and draining of grounds in Durres port; complete east bulwark in Shengjin port; construct quays in Shengjin port; conclude phase 2 and 3 in Vlora port; rehabilitate quays in Lijmon port (Saranda). - Programme 5: Railways - Year 1: Modernise Tirana-Durres and connect with Rinas Airport (project of GE Transportation Systems) at investment value €57.5 million and $12.2 million; local cost estimated at about €10-15 million; project implemented in 2006-2007. - Construct new railway to connect with Macedonia; study cost about €5.2 million; investment concluded in 2006-2007. - Year 2: Modernise Shkozet-Rrogozhina at cost about $21.6 million. - Year 3: Modernise railway between Shkodra and border with Montenegro at cost about $17.5 million. - Programme 6: Civil aviation - Year 1: Make Vlora and Saranda airports operational through state budget contribution of about €25 million for each; provide operational expenditures for Kukes airport. ### Ministry of Finance — key programmes, reforms and numeric budget management implications - Programme 1: Macroeconomic policy and budget management - Output targets: reliable macroeconomic assessment and forecasts to be produced in February, June, and September. - Tax policy and administration recommendations for the 2006-08 MTBP and for the 2006 Budget. - MTBP timelines: Draft MTBP document at end June; Final MTBP at end December; Draft Annual Budget at end October; Final Annual Budget at end December. - New reforms: draft New Organic Budget Law (expected 2006); Manual of Procedures for Public Finance Management; New Public Investment Management System. - Roll-out of MTBP procedures: 5 ministries in 2005, likely 9 in 2006, 14 in 2007, all ministries and agencies in 2008. - Budget management implications: net costs of converting Budget Directorate into General Directorate including cost of a General Director and additional Director’s position; potential creation of more positions to support reforms. - Activity 4: Budget implementation - Output targets: monthly reports to Minister; monthly instructions on virement; monthly consolidated cash flow forecasts. - Budget transfer management software to be implemented during 2005. - Programme 2: Treasury and accounting - Activity 1: Cash management and debt servicing — need for new modern Treasury management computer system; funded under World Bank Public Administration Reform Project; additional domestic resources and recurrent IT/Treasury staffing implications anticipated. - Activity 3: Accounting and reporting — establish national accounting standards; prepare government accounts. - Programme 3: Planning, management and administration - Activities include human resource training, IT linkage of budget and treasury systems, legal drafting (Organic Budget Law, customs and tax legislation, money laundering legislation). - Programme 4: Advice on strategic policy options - NSSED Department to revise NSSED, develop standards for approval of national/sector/regional strategies to ensure they are coherent and costed. - NSSED to shift from monitoring/dissemination to strategic planning and cross-sector allocation recommendations; anticipated need to create more positions in NSSED Department (to be determined and possibly included in 2007-09 MTBP). ### Ministry of Industry and Energy — key programmes and costs - Programme 1: Planning, management and administration - Investment funds for 2006-2008: about Lek 700,000 (reconstruction completed). - Programme 3: Support for energy sector - Activity 1: KESH action plans — Payment of Lek 900 million for previous obligations in 2006 for budgetary and non budgetary consumers; payment at the level of 100% of actual bills for budgetary and non-budgetary consumers. - Activity 2: KESH restructuring — vertical division into generation, transmission, distribution; studies by international company to be completed by June 2005. - Activity 3: Establish internal electrical energy market and regional integration — open market by 2008. - Investments listed: Vlora TEC about $105 mil; new national dispatching centre €23 mil; new 400kV interconnection Elbasan-Podgorice €43.9 mil. - Activity 4: Update National Energy Strategy by 2006 — funds needed Lek 10 million (previous 2003 fund Lek 8.6 million). - Activity 5: Implementation of Energy Efficiency Law during 2006-2008 — funds needed: Lek 15 million for local Energy Offices in 2006; Lek 13 million (promotion of Energy Efficiency and renewable energy sources) in 2006, Lek 15 million in 2007, and Lek 17 million in 2008. - Activity 6: Monitoring implementation — funds: Lek 6 million in 2007 and Lek 7 million in 2008. - Programme 4: Support for mines and enterprises - Activity 1: Mine closure and privatisation — funds needed during 2006-2008 about Lek 297 million for mine closure, monitoring, and re-closure. - Activity 3: Conservation of super phosphate in Kurbin and new urea plant in Fier — increase budget from Lek 6.85 million in 2005 to Lek million in 2006 (text contains "Lek million in 2006" without numeric value); increase budget for enterprise closure from Lek 0.15 million in 2005 to Lek 1.5 million in 2006. ### Ministry of Local Government and Decentralisation — key programmes and budgets - Programme 1: Planning, management, and administration - Activity 1: Addresses — provide locality addresses for all Albanian citizens; financial effect: 5 people, Lek 1.7 million annually. - Activity 2: National Inspectorate of Civil Protection — financial effect: 4 people, Lek 1.7 million annually. - Programme 2: Civil Registry - Activity 1: increase personnel in understaffed civil registry offices; financial effect for increasing personnel by about 43 persons is Lek 10.2 million annually. ### Ministry of Defence — key programmes and budget figures - Programme 1: Planning, management, and administration - Activity 1: administrative-operational expenditures planned: Lek 1,300 million (personnel payments, operational expenditure, equipment, IT). - Activity 2: International collaboration and integration activities: planned expenditure Lek 875 million. - Programme 2: Guarantee security (defence reform and operational capacities) - Activity 1: Normal administrative-operational activities: planned budget Lek 21,500 million (personnel payments and running costs). - Activity 2: Reorganisation of Armed Forces: planned expenditures Lek 6,120 million (reorganisation, operational needs, processing excessive materials). - Activity 3: Infrastructure Development: planned expenditures (under process) (5 Billion lek). - Activity 4: Modernisation of Armed Forces: planned expenditures (7,412 billion lek) for C4I, air/naval/land surveillance systems and military technical equipment. - Activity 5: Military missions and contribution abroad: planned expenditure (1.5 billion lek). - Programme 3: Education - Activity 1: administrative-operational: Lek 1,450 million. - Activity 2: Modernisation of military education and exercise system: Lek 900 million. - Programme 4: Health - Activity 1: medical support: Lek 1,050 million. - Activity 2: Reorganisation and modernisation of Military Hospital: Lek 300 million. - Programme 5: Sport and culture - Activity 1: administrative-operational: Lek 145 million. - Activity 2: Reorganisation of the Armed Forces — payment of released soldiers: Lek 664 million (temporary payment for 2 years). - Programme 6: Technical-scientific support - Activity 1: normal administrative-operational activities: Lek 284 million. *Source: Annex 2 Mid-term plan of priority actions, National Strategy for Socioeconomic Development – 2004 Progress Report (as provided).* ### Annex 3 ### _cr0623 - Annex 3 ### Sector and crosscutting strategies - 1. Agriculture and Food - Sector: Agriculture and food - 2. Culture, Youth and Sport - 3. Defence - 4. Economy - Export — 51 – 8 Oct 2002 - Small and medium sized enterprises — 57 – 2 Feb 2001 - Privatisation, electro energy sector — 171 – 19 Apr 2002 - Telecommunication sector — 288 – 18 Jun 1999 - Water infrastructures — 571 – 8 Dec 1999 - 5. Education and Science - Pre-university education — 538 – 12 Aug 2004 - 6. Environment - National Action Plan of Environment — 34 – 28 Jan 2002 - National Action Plan of Biodiversity — 532 – 5 Oct 2000 - 7. European Integration - European Partnership - 8. Finance - NSSED — 223 – 24 May 2002 - 9. Foreign Affairs - 10. Health - Health — 382 – 19 Jun 2004 - 11. Industry and Energy - Energy — 424 – 26 Jun 2003 - 12. Justice - 13. Labour and Social Affairs - Employment and vocational training — 69 – 10 Jan 2003 - Social services — In process - Social insurance — In process - Disability — In process - 14. Local Government and Decentralisation - Decentralisation and local autonomy — 651 – 29 Dec 1999 - Training — 717 – 30 Oct 2003 - 15. Public Order - 16. Territorial Adjustment and Tourism - Water supply and sanitation — 706 – 16 Oct 2003 - Water — 273 – 7 May 2004 - Rural water supply and sanitation — 679 – 16 Oct 2003 - Tourism — 517 – 3 Jul 2003 - 17. Transport and Telecommunications - 18. Minister of State by the Prime Minister / Council of Ministers - Anti-corruption — 580 – 21 Aug 2003 ### Public expenditure management calendar - Stakeholders listed: - Assembly - Council of Ministers - Budget Department - Macroeconomic Department - NSSED Department - Line ministries - Donors - Document preparation and approval process phases: - LEGISLATIVE PHASE - Ministry of Finance - Information - Key calendar components and documents (preserved language): - MEDIUM-TERM BUDGET PROGRAMME - ANNUAL BUDGET PREPARATION - MTBP preparation forms - Draft MTBP document and MTBP expenses ceilings - Review and approve - Draft macroeconomic forecast and ceilings - MTBP Issues Paper - Finalise national strategy - Finalise sector strategy - MTBP Preparation ceilings and Budget Preparation Instructions Part A - NSSED Annual Progress Report - Programme Policy Review - Programme Expenditure and Investment Planning and Technical Notes - MTBP Technical notes - Consult as required - Revised macroeconomic forecast - Budget Preparation Instructions Part B - Draft Annual Budget request - Revised MTBP - Budget negotiations - Draft State Budget - Proposed State Budget and Budget Law - Design / Review of national and sector strategies - Policy design and review - Design / Review of sector strategies - Sectors ensure strategic plans are consistent with MTBP - Legend entry preserved: - Policy design and review *Source: _cr0623 - Annex 3 — https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr0623.pdf* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr0623.pdf_