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International Monetary Fund
Published Date:
July 2004
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CHAPTER 1 Assessing economic growth


NSSED defines economic growth as the main mechanism to reduce poverty and macroeconomic stabilization as the way to create a suitable environment for sustainable growth. Apart from factors such as the past rates of growth, the real rate of interest and the level of credit to the private sector, the lack of macroeconomic stability affects negatively the level of private domestic and foreign investment. Macroeconomic instability also places a heavy burden on the poor. Inflation strikes more heavily the deprived groups of society. Hence, the government has given special care to the macroeconomic stabilization in 2003.

There was further improvement in the major macroeconomic balances in 2003. This was reflected in relatively high rates of growth and low rates of inflation, the fall in current account and budget deficits, and the increase in foreign currency reserves.

The growth rate of the gross domestic product (GDP) accelerated to 6% in real terms (compared to 4.7% in 2002) and to 9.9% in nominal terms. Real GDP in 2003 was 121.4% of its 1989 level.

Per capita GDP grew by 25.2% in 2003, reaching $1950. The fact that per capita GDP (in dollars) has fluctuated more and has grown at a higher rate the overall GDP, as shown in Graph 1.1, is the result of trends in population, the exchange rate and inflation. Total population has fallen. The substantial overvaluation of the lek against the dollar was the main reason that per capita GDP grew at such a rate in 2003. However, despite its recent growth, per capita income in Albania is still very low level compared to other countries in the region.

Graph 1.1:Growth rates of per capita GDP and real GDP

Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003

The average annual inflation rate, as measured by the consumer price index (CPI), dropped to 2.4% in 2003 as against 5.3% in the previous year (Graph 1.2). At the end of 2003, the inflation rate was 3.3%, i.e. still within the 2%-4% limit set by the Bank of Albania. The inflation pattern was characterized by periodic fluctuations throughout the year, but these were more moderate compared to previous years. Movements in food and alcoholic beverages prices mainly drove observed fluctuations. The GDP deflator for 2003 was 3.8%.

Graph 1.2:Average Annual Inflation Rate, 1990-2003

Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003

Inflationary pressures were the result of exogenous shocks, such as the increase in oil prices following the war in Iraq during the first half of the year. Unfavorable weather conditions, such as low temperatures in April and a prolonged dry weather in the summer, reduced the supply of certain agricultural products. At the same time the increase in tourism flows during the summer period spurted demand growth. Coupled with an increase in the export of agricultural food products in January and February, there were inflationary pressures that cancelled the fall in prices that is usually observed in the summer months. Finally, another factor that affected inflation in 2003 was “imported inflation” from the main trade partners of Albania, Italy and Greece, where inflation rates stood at 2.8% and 3.5%, respectively.

Maintaining low rates of inflation was the result of a series of factors on the fiscal front, such as:

  • under-spending on forecast budget expenditure;
  • more balanced allocation of budget expenditure compared to the previous year;
  • limiting budget deficit at low levels;
  • adherence to the planned schedule of domestic financing of the budget deficit and a balanced dispersion of domestic borrowing prevented the intervention of the Bank of Albania to finance budget expenditure.

The Bank of Albania has chosen a moderate monetary policy aiming to reduce the cost of investment. However, it has proceeded with great caution to lower inflationary pressures, especially during the first half of the year. The gap in interest rates between foreign currencies and the local currency has raised the demand for financial assets in lek, thus contributing to its appreciation. By leading to a fall in the price of imports, which make up a substantial share in the consumer basket, the appreciation of the lek reduced the effect of “imported inflation”. The smooth operation of the monetary policy was also reflected in money supply growth within the forecasted limits, thus stabilizing the liquidity situation.

The campaign to prevent speculative rise in prices probably also played a role in moderating some of the inflationary pressures during the end-of-year period. Experience suggests though that these campaigns merely reveal the need to take additional and more effective measures to increase the supply for essential goods.

Another indicator of macroeconomic stability is the reduction of the budget deficit from 5.6% of GDP in 2002 to 4.6% of GDP in 2003 (including grants) against a forecast of 5.8%. 70.5% of the deficit was financed from domestic sources (or 3.2% of GDP) and the remaining 29.5% (or 1.3% of GDP) from foreign sources against forecasts of 49% and 51%, respectively. Positive steps towards budget planning and execution should be credited at least in part for the low deficit. Actual expenditure was 92% of the budgeted level, whereas realized revenues were 92.7% of the forecast. Public revenues increased by 8.2% in nominal terms. This was equivalent to 22.4% of GDP, much below the forecast (24.2%) and also below the 2002 level (22.8%). Public expenditure increased by 4.5% in nominal terms. This was equivalent to 27% of GDP, much below the forecast (30%) and also below the 2002 level (28.4%).

With respect to restoring property to previous owners and compensating the politically persecuted, the Government of Albania will show the necessary attention towards fulfilling all obligations that result from approved legislation. The Government of Albania will respect the allocation shares between priority sectors stated in the NSSED.

The current account balance was also improved in 2003. The current account deficit was $406.7 million in 2003 (6.7% of GDP) as against $420 million (9% of GDP) the year before, excluding official transfers. There was an overall balance of payments surplus of $99.6 million. Foreign reserves increased by $186.6 million or nearly 22% compared to 2002 and reached $1.025 billion by the end of 2003 or nearly 4.7 months of imports.

Budget and current account balances are now on a sustainable path and contribute to macroeconomic stability. In 2003, domestic debt was 38% of GDP in real terms. The external debt has also been falling and had reached 23.3% of GDP in 2003 (Graph 1.3).

Graph 1.3:Internal Debt; External Debt

Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003

The trade deficits in goods and goods and services have increased4 by 15.7% and 22.3% respectively in 2003. The reduction of the current account deficit is largely due to a substantial increase in transfers by 37% (i.e. from $613 million in 2002 to $842 million in 20035). Remittances are 93% of these transfers and have continued to play a key role in macroeconomic stabilization and development financing in 2003. Net capital inflows in the form of foreign direct investment, long-term loans at low interest rate and grants have also financed current account deficit.


During 2003 there have been further steps to fiscal consolidation. Following European Union recommendations and with assistance from the IMF, a tax package to help finance the construction of the “Durres-Kukes-Morine” highway was scrapped. In the framework of free trade agreements with neighboring countries, custom tariffs were re-negotiated, a process that was completed in a transparent and participatory way through many meetings and discussions with trade unions and business associations.

The Law “On games, casinos and racing” has been revised and will be submitted for approval during 2004. The law has been commended as tackling an area that is very difficult to supervise and where fiscal evasion is rife. It should be emphasized that, unlike in other countries, the licensing for these activities in Albania is very open, transparent and unconstrained.

In the framework of improving business climate and eliminating administrative barriers, a matrix monitoring the action plan has been created under the coordination of the Ministry of Economy, in particular the tax and customs administrations. Also, the Ministry of Finance has revised legislation regarding the functioning of the Tax Appeal Commission after continuous requests made by business associations and trade unions.

Good fiscal administration continues to be one of the focus issues at the Ministry of Finance. It is important to emphasize that despite the fact that the average tax and tariff rates have not been increasing (in fact, tariffs have been falling), fiscal revenues have continued to rise at a faster rate than the growth rate of the nominal GDP. This implies progress towards reducing the size of the informal economy. 4000 new entities that started their activities in 2003 fulfilled their tax obligations compared to 2002 (or 9% more). The objectives of tax administration in this field remain ambitious for 2004, when it is expected that there will be 57,000 tax-paying entities in total up from 49,000 at the end of 2003.

In spite of improvements made in the budget and current account balances, a more careful look at persistent factors affecting deficit sustainability would reveal that the situation is still fragile. With respect to the budget deficit, the following two factors should be taken into account. First, the cost of domestic borrowing is high, not only in terms of the growing share of interest payments in the budget expenditure but also, and more notably, in terms of its effect on crowding out private investment. Second, the cost of foreign borrowing will increase in the context of marketization of loans and credits allowed by international financial institutions. With respect to the current account deficit, three issues are of concern. First, there level of the trade deficit in goods is high and growing. Second, remittances, which play a key role in financing imports, are expected to follow a downward trend the in medium- and long-term. Third, foreign direct investment remains at relatively low levels. To address issues on the major macroeconomic figures, radical improvements are underway in a number of directions. One may mention the reform of fiscal institutions, the enhancement of budgetary programming, monitoring and implementing capacities, the improvement of the climate for private foreign and domestic investment, the promotion of market institutionalization and other structural reforms.


The growth of real GDP by 6% in 2003, even though below the average of 6.9% for the period 1993-2003, is considered high relatively to other countries in the region. The Albanian experience of transition, as in other countries, shows that there is a positive relationship between macroeconomic stabilization and economic growth. Macroeconomic stability is one of the factors that have created favorable conditions for economic growth. It has helped among other things to create a suitable environment for carrying out economic reforms. Such an environment is closely linked with the liberalization of prices and trade, with privatization and other structural and institutional reforms that affect the institutionalization of the market, the role of state in the economy etc. It is also linked with boosting the confidence of private investors, improving the use of factors of production and raising their productivity, efficiently reallocating resources, and further technological improvements. In addition, it is linked with an increase of emigrants’ remittances, especially with their repatriation to invest not only their savings but also their professional and managerial qualifications, with established business relations etc. The Albanian experience shows that structural reforms play a decisive role in activating growth.


Employment rose slightly from 921,000 at the end of 2002 to 927,000 a year later. Public sector employment declined from 187,000 to 182,000, while private sector employment grew from 734,000 to 745,000. The growth rate was approximately equal in the private agricultural (from 526,000 to 534,000) and non-agricultural sectors (from 208,000 to 211,000)6. Meanwhile, the number of the unemployed dropped from 173,000 to 164,000 resulting in a decrease in the unemployment rate from 15.8% to 15%.

Investment grew by 24% in 2003 and was equivalent to 22.3% of GDP relative to 20.4% in 2002. Private investment increased by 40% and was equivalent to 18.2% of GDP relative to 14.7% in 2002. Public investment declined by 17% in nominal terms in 2003. As a result, its share in GDP went down from 5.6% in 2002 to 4.1% in 2003. The main reason was that only 47% of the public investment expected to be financed by foreign sources was actually realized, whereas the level of public investment realized by domestic sources was 86% of the forecast. The reasons for are related to problems with planning and implementation of the program of public investment on the part of line ministries (despite positive steps taken the year before). The level of foreign investment, estimated at $178 million, increased by nearly 32% relative to the year before.

Table 1.1:Nominal investment (in million lek), 2000-2003




Non-public Investments652440.00%7524115.32%9694928.85%13568639.96%
Percent of GDP12.10%12.75%14.73%18.21%
Public Investments350490.00%4339723.82%37296-14.06%30443-18.37%
Percent of GDP6.5%7.4%5.7%4.1%
Total Investments1002930.00%11863818.29%13424513.16%16612923.75%
Nominal GDP539210590237658062744974
Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003
Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003

Labor productivity, measured as a ratio of GDP to total employment, grew in 2003. It has continued an upward trend throughout the period of transition (except for 1997) (Graph 1.4). Higher efficiency in resource allocation resulted in productivity gains for all factors. Structural changes continued in the Albanian economy7. The share of agriculture in GDP continued to decline in 2003, while the shares of services, transport and construction grew. The GDP share of industry also fell as seen in Graph 1.5. Improvements in resource allocation have coincided with a series of technological improvements, brought about by foreign investment, imports of equipment, materials and machinery, human capital investments through emigration, training and retraining programs, and other efforts to modernize education (though faster steps are needed).

Graph 1.4:Labor Productivity Growth, 1992-2003

Source: Reports of the Bank of Albania and the Ministry of Finance for the Year 2003

Graph 1.5.A:GDP Structure, 1992

Graph 1.5.B:GDP Structure, 2002

Graph 1.5.C:GDP Structure, 2003

The construction sector recorded the highest real growth rate in 2003 (11.3%), followed by transport (10.8%). The growth rate of services was slightly faster than that of GDP (6.4%), while those of industry and agriculture were slower (at 2.7% and 3% respectively).

Agriculture is still one of the most important sectors of the economy (24.7% of GDP in 2003). It grew by 2.8% in 2003, which is higher than the growth recorded the year before (2.3%). The main drivers of growth were livestock and arboriculture (4.8% and 15.5% respectively). However, farming and livestock production still depend on investment and especially on credit, both of which would help to improve technology and raise competitiveness and product quality. A number of institutional reforms took place in irrigation and drainage in 2003, as well as in the research and extension services of the Regional Departments of Agriculture.

Some developments in the sector deserve special attention. For example, there was an increase in investment, introduction of advanced technologies, and new organizational methods for such the establishment of business associations. Supporting high growth rates in farming production and mobilizing local resources is very important because this directly affects the efforts to reduce poverty since the great majority of the poor is tied to rural areas and agriculture.

Services grew by 6.4% in 2003 (46.1% of GDP). Retail trade, hotels, and restaurants recorded the fastest growth rate (11.5%). Tourism also recorded considerable growth (7.2%), although net tourism revenue dropped even in absolute terms by $88 million (from $121 million in 2002 to $33 million in 2003), as the money spent by Albanians on tourism abroad increased. Improvements in tourist services quality and in tourism infrastructure would both increase incomes and lower expenditure in the sector.

Construction was the fastest growing sector in the economy in 2003 (11.3%). Its share in GDP grew from 8.6% in 2002 to 9.1% in 2003. The retail sales index of construction sector increased by 22%, while its cost index only increased by 2.7% according to INSTAT. The institutional steps taken in 2003 and at the beginning of 2004 are expected to integrate parts of the informal sector.

Industry recorded the lowest growth rate in 2003 compared to other sectors of economy (10.2% of GDP) continuing its decline. The hydrocarbon and electrical power industries enjoyed the highest growth rates in the sector. Owing to administrative changes and especially to weather conditions, the domestic production of electrical power grew significantly in 2003 (54.2%), thus contributing to lower energy imports. Power supply, though, has remained problematic for both consumers and business. Promising steps have been taken to support the agro-processing and fishing industries, which grew by 11.2% and 8.5% respectively in 2003. Agro-industrial product exports recorded a significant growth (65%).

Transport grew by 10.8% and raised its contribution to GDP from 9.6% in 2002 to 10% in 2003. Maritime and air transport grew fastest by 14.8% and 13.4% respectively. Rail transport declined, as a result of backward infrastructure and outdated stock, which make the service uncompetitive.

Despite satisfactory growth in 2003, many aspects suggest the need for radical changes in terms of unutilized resources and the business climate. High unemployment, failed public investments, limited foreign investment, low levels of credit as against both available resources in the banking system and the GDP, low productivity in many sectors, large areas of unfarmed land, unused natural resources are some examples.


The deepening of reforms in line with the government action plan has produced a more encouraging environment to develop private enterprise. Improvements in the investment climate have benefited the private sector. Administrative barriers were lowered, communication between the private and the public sector has improved, governance has been strengthened and market opportunities were broadened. The market was further liberalized after the completion of a series of free trade agreements in the region. A FIAS survey (March 2003) played a special role in improving the climate. The respective government authorities but also the business community, the civil society and other interest groups were broadly involved in the process.

The main directions of reform consisted of:

  • abolishing the license condition in the non-food sector (as suggested by the survey);
  • establishing a publication center for laws and regulations to offer businesses access to detailed information;
  • steps taken by the tax and custom administrations to publicize orders and instructions, especially those on the customs code and tax procedures, including an extensive use of the Internet as an information channel;
  • introducing phone lines to report complaints in public institutions;
  • implementing a $11.2 million World Bank project to facilitate trade and transport. In addition to improving custom infrastructure and standardizing custom documentation, this project contains an important element for trade facilitation. It includes setting up a regional network for regulations needed at border crossing points, training businesses in international trade and transport regulations and procedures and creating a new structure (ALBAPRO) run by the National Union of Commerce and Industry Chambers.

The adoption of the European Chart of SMEs was another important development in 2003. Overall sector competitiveness would increase if the Albanian authorities were to meet their obligations. The process will be monitored in close collaboration with the European Commission. The establishment of the SME Agency has promoted SMEs. One should also mention the ongoing programs for business training carried out by the European Fund for Training, and supportive programs for this sector designed by donors (like the Italian Government, USAID etc).

These improvements have contributed to rising business performance. The growth in the number of enterprises established in 2003 by 45% is an important indicator along with the significant growth in private sector investment. The trade and service sectors, as indicated by Graph 1.6, have the highest number of active companies.

Graph 1.6:Sectoral Spread of Enterprises

(established over years)

Source: INSTAT, Mars 2004

The dynamism of the private sector is also reflected in the volume of bank credit. The outstanding credit increased by Lek 11.9 billion in 2003. New credit was Lek 92.6 billion in 2003 (48% higher than in 2002). Graph 1.7 and Table 1.2 show the performance of private sector credit indicators in recent years.

Graph 1.7:Annual Growth of Outstanding Credit Off

(in billion lekë)

Source: Bank of Albania, March 2004

Table 1.2:Key Indicators Performance of Credit to Economy
20012002Q1 2003Q2 2003Q3 2003Q4 2003
Credit to economy (as a percentage of GDP)
Credit to economy (as a percentage of assets)8.911.511.612.512.913.7
Ratio credit/deposits (as a percentage)10.213.513.514.514.915.6
Source: Bank of Albania, March 2004
Source: Bank of Albania, March 2004

There was a shift in the direction of medium-term and long-term credit, reflecting a trend in the banking system towards financing investment projects in the private sector. By the end of 2003, the outstanding credit recorded a rate of 54% of the overall credit as regards mid-term and long-term credits, which was higher by 8.5 percentage points compared to the previous year. Table 1.3A presents figures on the distribution of credit by maturity over the period 2001-2003.

Table 1.3A:Outstanding Credit Indicators Performance(as a percentage)
20012002Q1 2003Q2 2003Q3 2003Q4 2003
Short-term credit61.353.853.253.451.445.5
Mid-term credit26.530.130.430.730.537.0
Long-term credit12.216.116.415.918.117.5
Private sector98.099.899.8100.0100.0100.0
Public sector2.
Outstanding credit (in billion lek)27.938.740.444.548.050.6
Source: Bank of Albania, March 2004
Source: Bank of Albania, March 2004
Table 1.3B:Outstanding Credit by sector(as percentage)
Economic sectors200120022003
Extractive Industry1.
Manufacturing Industry19.517.014.916.017.117
Gas, Water and Electricity Production and Distribution3.
Trade, Car and Household Appliances Repair41.340.440.538.435.934
Hotels and Restaurants4.
Transport and Telecommunication4.
Financial Activities0.1-
Real Estate6.39.15.610.212.513
Health and Social Activities1.
Collective, Social and Personal Services3.
Source: Bank of Albania, March 2004
Source: Bank of Albania, March 2004

The commercial sector continues to be the preferred sector for loans by banks. At the end of 2003, this sector accounted for the largest share of the credit portfolio in the banking system. Crediting to manufacturing industry and agriculture also increased moderately, as did credit to individuals for buying real estate.

The banking system’s support of the private sector is strongly encouraged by the development of the financial system during the year 2003. The following is a based on a fact review of the main features outlined in 2003.

  • The overall level of deposits increased by Lek 14.5 billion in the third quarter reaching Lek 322.4 billion at the end of September. Expressed as a percentage, this is a growth of 13% in 2003.
  • Overall annual growth of deposits (September 2002 – September 2003) is 45 Lek 7 billion (16.5%). Fixed deposits growth contributed to overall growth by 97%.
  • The number of banks involved in credit activity in lek increased to ten against six at the beginning of 2003.
  • Interest rates of credit in lek and euros dropped by 4.4 and 0.6 percentage points, respectively, while interest rates of credit in dollars have risen by 1 percentage point.

The inter-bank payment system, completed in early 2004, was among the major initiatives taken by the Bank of Albania to reform the internal payments system. The implementation of this project will help to expand and strengthen the financial market of the country and will help to move the Albanian banking system towards the regulations and standards of the European Union.

The Supervisory Board approved the internal regulations for running the Albanian Inter-bank Payment System (AIPS). Their approval was in the context of fully implementing the AIPS project in the banking system and specifying the tasks for various organizational units of the bank in support of operation, administration and control.

The system is in its closing stages of implementation and the approved document constitutes a regulatory support of its function, in particular provides the basis for establishing and regulating a relationship between the Bank of Albania and other banks participating in the system. The regulations and the procedures are based on the latest international standards in the field of payment system and on the principles of the Bank for International Settlement (BIS) for large-value payment systems. The Albanian banking system was thoroughly involved in the process.

The biggest event for the Albanian banking system was the completion of procedures in December for the privatization of Savings Bank. The process, which decided in favour of the Austrian Raiffeisen Zentralbank (RZB) is expected to bring about a number of changes in the financial system of Albania both directly on the Savings Bank itself but also through spillover effects to the rest of the banking and the financial system. It is also expected to affect in some ways decisions on monetary policy and bank supervision adopted by the Bank of Albania.

The improvement in investment climate has contributed to an increase of foreign direct investment (FDI). By the end of 2003, FDI reached $178 million, which was a 32% increase.

Graph 1.8:Foreign Direct Investments Performance

(in US million dollars)

Source: Bank of Albania, Statistical Report, March 2004

As of 2000, FDI have really benefited from the leading programs for privatization in the strategic sectors of economy, such as the banking system, telecommunications, mining etc.

In spite of the results achieved, the development of private enterprise requires the deepening of structural reforms and improvements in governance. The big size of the informal economy, the poor observance of legislation, the backwardness of physical and institutional infrastructure, and corruption pose serious barriers to private sector competitiveness. Convinced that the elimination of barriers to private sector will be the main source of economic growth and poverty reduction, the Government of Albania is committed to deepening the far-reaching reforms that aim at addressing the abovementioned problems and take priority in this strategic document.


Further economic opening through the reduction of trade barriers is one of the main sources of growth. An open trade regime is the only option for a small economy as Albania to climb over the obstacles created by the small dimensions of the domestic market. On the other hand, just reducing the trade barriers and liberalizing trade is not sufficient to promote economic development. Trade and trade policies ought to be seen as part of a wider development strategy, which includes macroeconomic policy, infrastructure development, investment in human resources by promoting education and health system, and the improvement of governance. These elements of investment climate are essential for ensuring sustainable growth and for enabling trade strategies to generate future benefits and be themselves a source of growth.

Albanian trade policies intend to transform foreign trade into a development factor by deepening the liberalization of the trade regime either in the context of transition reforms or in the context of integration into the world trade system. Albania was accepted as a member of the WTO in September 2000. As a result, national trade policies are now anchored to the regulatory system of global trade, which gives them more transparency and credibility. In the context of WTO membership, Albania has committed itself to a maximum tariff of 20%, while in the context of regional initiatives it has undertaken to achieve gradual trade liberalization. As of 2000, these initial engagements aim at zero tariffs on a group of products.

Reducing tariffs has been a policy throughout the 1990s, but the pace of liberalization speeded up only after 2000. The share of products with zero tariffs increased from 17.2% to 25.5%, while the share of products on which the maximum customs tariff of 15 % is applied decreased from 27.5% to 23.2%. While the average level of tariffs (6.75%) remained constant, the trade-weighted tariffs level is expected to fall from 4.36% in 2003 to 4.1% in 2004.

Table 1.4:Percentage of Tariff-Line Levels(according to Harmonized System classification)
Tariff-line percentage for the years
Tariff level20032004
Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.
Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.

In the context of EU Association, regional integration has been an important aspect of the trade policy reforms. With respect to the implementation of the Memorandum of Understanding signed by trade ministers in Brussels in 2000, Albania has already concluded the bilateral trade agreements with countries involved in this initiative. It is expected that the trade of industrial goods and several farming products groups will be fully liberalized. The bilateral agreement network will create a free trade area across the region due to start in 2008. Similarly, by negotiating with European Union in the context of Stabilization and Association Agreement, a free trade zone with EU is expected to start on January 1, 2009. Practically, almost 90% of trade volume in the country will by that time not be subject to any tariff because of the expansion of trade activities and the extent of liberalization.

After more than a decade of trade reform, Albania suffers from a large trade deficit in spite of increases in export volumes. Moreover, the indicator of economic opening, measured by the volume of merchandise trade, has not made good progress fluctuating around 40% of GDP.

Table 1.5:Foreign Trade Indicators(in million US dollars)
Trade Balance(662.8)(821)(1027)(1155.1)(1336.3)
Trade Volume12131331.81636.21815.62230.5
Gross Domestic Product*3444.63694.34,254.44,835.46,065.7
Economic Opening Index35.2%36.1%38.5%37.5%36.8%
Trade Deficit (as a percentage of GDP)19.2%22.2%24.1%23.9%22%
Export/Import Ratio29.3%23.74%22.9%22.2%25.14%
Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.
Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.

The level of economic opening is among the lowest in the region shows the need for transforming trade into a vital source of economic growth of the country. Graph 1.9 brings out vividly the important relationship between economic opening and economic growth.

Graph 1.9:Domestic Product and Foreign Trade Volumes Growth Rates

(as a percentage)

Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.

Exports and imports have a positive effect on economic growth. The trade liberalization policies help to raise the competitiveness of domestic products in both the local and foreign market. This is especially true of the Albanian economy where a considerable part of its domestic production depends on imports. Liberalization has had an important impact on the foreign trade dynamic.

Exports have increased at an average rate of 17.5% per year in the period from 1993 to 2003. Starting from $111 million in 1993, they reached $447.1 million in 2003, i.e. they quadrupled in a decade. Re-exports contribute 70% of overall exports and have been the main source of export growth. There has been high concentration of export activity in a limited number of products since the early 1990s. Exports have grown relative to domestic production, especially in recent years and in sectors such as mining and metallurgy that operate by concession and are run by foreign investors. Similarly, investments in agriculture and agro-business have begun to show results in the exports sector, even though at a modest level. Agricultural exports have moved into new products such as vegetables (e.g. tomatoes) and foodstuffs (e.g. eggs, fizzy drinks, juices, mineral water, beer) and complement traditional exports like medicinal herbs and fish.

Along with the concentration in a limited number of products, exports have low value added. Processing remains limited. As a result, the value added comprises for the most part manual labor and local services. Therefore, one of the ways to increase exports lies in increasing both the extent of product processing at home and the number of processing operations. This would produce higher value for the existing exports and would lead to growth in export volume.

Imports have grown at an average annual rate of 13.2% for the period 1993-2003 (4.3 percentage points less than exports). As for their volume, they have increased from $490 million in 1993 to $1783 million in 2003 or by nearly 3.6 times. Imports are affected by changes in domestic demand and supply and in demand of the export sector. Various studies have emphasized the high interdependence of imports and exports (as shown in Graph 1.10) calling attention to the importance of tariffs to export competitiveness.

Graph 1.10:Growth Rates of Imports and Exports

(as a percentage)

Source: Albanian Center for International Trade, Annual Report of Foreign Trade, 2003.

Imports have played a big role in improving technology and raising industrial competitiveness. While there is no survey of the technologies applied in specific sectors, statistics on import structure suggest significant technological upgrading, as the weight of machinery and equipment has been constantly around 20-22% of total imports. According to studies of the distribution of imported machinery and equipment across sectors, the sectors with the largest investments are communication, information technology, construction and textiles. Investment in agriculture is low (see Table 1.6).

Table 1.6:Imports in Machinery and Equipment(as a percentage)
Agricultural Machinery and Equipment2.5
Agro industry5.9
Construction Machinery and Equipment33.4
Mechanical Industry5.3
Furniture & Accessories2.7
Paper and Typing Industries2.6
Textile Industry9.7
Leather & Shoes3.1
Source: Mançellari, Xhepa, Trade and Economic Development, Albanian Center for International Trade, 2002
Source: Mançellari, Xhepa, Trade and Economic Development, Albanian Center for International Trade, 2002

An important relationship is observed even between the performance of restructuring sectors and the performance of imports. As the Albanian industry consolidates itself and meets domestic demand for various products or manufactures, imports of these products decline. This is reflected for instance in the weight of imports in agro-food products that fell from 35% of total imports in 1996 to 20% in 2003.

On the other hand, the liberalization process has exposed some problems facing the country:

  • In the course of implementing and meeting the abovementioned engagements, some of the sectoral liberalization reforms are observed to be incompatible with the very process of restructuring. Therefore, due to high competitive pressures on these sectors and under the pressure of the business community, the authorities intend to enter a process of renegotiation with the WTO to adjust the liberalization terms.
  • The implementation of free trade agreements with neighboring countries has revealed problems related to the administration of quotas (in terms of concessions exchanged between countries) and with the observance of regulations for the origin of goods. These problems require close cooperation between customs authorities, the main institutions assigned to implement the policies. The development of a network of institutions supervising the market and the supportive infrastructures on aspects of non-tariff trade barriers comes out as an important priority in raising the efficiency of trade policies.

Taking into account the fact that tariff revenues are an important source of budget income, there is an increasingly intense search for alternative income sources. In this context, fiscal reform assumes even greater importance. While the reforms launched through the 1990s have helped to cope with unemployment and stressed the need of labor market reforms, the integration process will continue to cause problems in this respect. Hence, it is necessary to introduce reforms that will reallocate the work force of the sectors that are threatened by the possibility of bankruptcy due to foreign competitiveness.


Economic growth has an impact on poverty reduction not only through its rate but also through its distribution and its relationship with inequality. Modern economics suggests that growth has a limited impact on inequality and that few changes take place in income distribution over time. The economies in transition, however, had a different experience from both the developed and even the developing countries as regards this relationship. Given that the initial stage of transition is characterized by “equality on a poverty basis”, it is only natural that economic growth would be associated with rising inequality. Inequality indicators in transition economies however are still much lower to those in developed or developing economies. Empirical studies on transition economies report a substantially high elasticity of poverty reduction relative to growth8.

It is difficult to estimate the poverty reduction elasticity of growth in the case of Albania for lack of necessary data9. Nevertheless, taking into account the available evidence on economic development and the standard of living, one might conclude that the elasticity is somewhere between -1.07 and -4. By assuming an average annual growth of 6%, the goal of halving the level of poverty could be reached in a period ranging between 4.3 years to 8.9 years, depending on the selected elasticity rate. The estimated period is between 5.2 and 10.6 years respectively if one assumes an average annual growth rate of 5%.

Table 1.7:Percentage of growth and number of years required for halving the poverty rate
A 6% yearly growth rate scenarioA 5% yearly growth rate scenario
Assumed poverty

elasticity to growth
Required cumulative

Required number of

Required cumulative

Required number of

Source: Institute for Contemporary Studies- Macroeconomic Policy Choices for Growth and Poverty Reduction, the Case of Albania, based on 2002 LSMS data; Mancellari, Hida.
Source: Institute for Contemporary Studies- Macroeconomic Policy Choices for Growth and Poverty Reduction, the Case of Albania, based on 2002 LSMS data; Mancellari, Hida.

The poverty indicators reveal high levels of inequality across various social strata and geographic areas. According to the 2002 LSMS, the poverty level in rural zones is 66% higher than in Tirana and 50% higher than in other urban areas. From the geographic point of view, the remote areas in the north and northeastern region are most affected by poverty, as 44.5% of the population is poor and more than a fifth is considered extremely poor. Average consumption in these areas is no more than two thirds of average consumption in Tirana and 20%-30% lower than in the rest of the country. The NSSED lays emphasis on the need for a more comprehensive growth aiming to mobilize productive resources even in areas with high poverty. Annual surveys on the standard of living would enable better monitoring of the impact of growth on poverty and inequality indicators. Otherwise, one can use indirect and rough indicators, such as the variance of employment level in different geographic areas, the number of newly established enterprises, the level of investments and credit from banks or other credit institutions etc.

According to the 2002 LSMS, the poorest areas of Albania are Dibra, Elbasan and Kukës. INSTAT statistics show that the level of employment in these areas increased respectively by 1%, 0.6% and -1.7% in 2003 as against the national average of 0.7%. The worst indicators are found in Kukës, which is one of the remotest districts in the northeastern region. The other two areas however have better indicators than the national average.

Preliminary data from INSTAT on newly established enterprises by prefecture in 2003 show that while the total number of enterprises has increased in the long-term, the annual growth rate has suffered fluctuations. By 2003, the total number of active enterprises at a national level had increased by 60% compared to the stock of enterprises at the end of 2000. Meanwhile, the increase in the number of active enterprises for the areas of Dibra, Elbasan and Kukës at the same period was respectively 41%, 59% and 26%. Despite being below average, these figures reveal good prospects for economic regeneration.

The expansion of activities of non-bank credit institutions has been noteworthy. These organizations have succeeded to establish their presence in rural areas, especially in the mountain regions. Figures in Table 1.8 highlight the increasing role of these institutions.

Table 1.8:Growth of Micro-Credit Schemes Activity
Credit Outstanding, $1.400.0001.800.0004.100.0007.536.060184%538.29%
Average Credit4475761.1001.772161%396.42%
Active Clients3200310037004253115%132.91%
Credit Outstanding2673.7603.685.1865.427.9177.715.590142%288.57%
Average Credit76793911761.310111%170.80%
Active Clients4423527763807.621119%172.30%
Outstanding Credit4.973.4826.936.59810.417.63712.118.869116%243.67%
Average Credit1.8862.0302.3212.25597%119.57%
Active Clients2637341744885375120%203.83%
* MAFF: Mountain Area Financing Fund**RFF: Rural Finance Fund*** BF: Besa Foundation
* MAFF: Mountain Area Financing Fund**RFF: Rural Finance Fund*** BF: Besa Foundation

Another positive indicator is the expansion of micro-credit activities over a larger number of areas. Thus, the Mountain Area Financing Fund (MAFF) covered 16 districts in 2003 as against 4 in 2000. The Besa Foundation indicators increased its coverage from 4 to 16 districts, whereas the Rural Finance Fund (RFF) covered 248 villages in 2002 relative to 157 in 2000.


Albania has a young population with an average age of 29. In contrast to the 60+ population which constitutes only 11%, the 0-19 age group represents 42% of the total population. This youthful population is one of the factors that have contributed to the dynamic demographic indicators evident in the transition years. Other contributing factors include town-planning processes, migratory movements and other economic factors. Albania’s population is also gender-balanced, with females comprising approximately 51% of the total population.

The constitution of the rural and urban populations has changed over a short period of time. The urban population currently stands at 46% having grown from 36% in the early 1990s. This urban population growth can be attributed to the uncontrolled movement of the rural population both towards bigger towns and cities, and also within the same district.

Chart 2.1:Change in the Relationship between the Urban and Rural Population, in Years

Source: INSTAT, Mars 2004

Demographic Changes and the Impact

INSTAT estimates that approximately 600,000 Albanians, or 18 % of Albania’s population, have migrated to foreign countries. Detailed analysis of population age-group demographics indicates that the process of transition has had, and continues to have, an impact on the Albanian population structure. A comparison between the 15-24 age group, registered in 2001, and that identified in the 1989 population census, leads to the conclusion that one fifth of Albania’s population has left the country.

Changes in the Family Structure

Transition has brought about fundamental changes in the family structure. In search of a better standard of living the typical Albanian family has changed both its residential location and also its lifestyle. Over the past decade, the average age at which females marry has increased from 22.6 to 24.1 years, and for males from 27.2 to 29.3 years. The number of divorces has risen from 8.7 to 9.6 per 100 marriages. The average number of families tending to branch off into two generations (parents and children) has also changed.


The Living Standards Measurement Survey (LSMS 2002) conducted by INSTAT and the World Bank has made possible an in-depth and comparable analysis of poverty in Albania. In addition to studies and evaluations of social groups at risk, the LSMS has been developed a deep understanding of social issues, and an awareness of the need for better social policy adjustment. In 2003, INSTAT carried out several studies underpinning specific aspects related to social issues and poverty, in particular. The data are not yet available. INSTAT will repeat the LSMS in 2005. This will also allow an evaluation of the extent to which changes to poverty have occurred over the medium term period 2002-2005.

Economic Poverty and Income Inequality

Although poverty is defined as inequality in the allocation of material goods, income inequity remains the most important and representative indicator of inequality and poverty in Albania. According to this indicator, the level of poverty is calculated according to an assessment of the extent to which basic needs are met. Two poverty lines are applied for this end:

  • The food poverty line (or extreme poverty or extreme poor) is related to the level of food consumption below which the basic need for calories is met (2,288 calories, which is equivalent to a consumption level of Lek 3,047 per capita each month). According to the present definition, those in extreme poverty constitute 4.7% of the population.
  • The full poverty line is related to a consumption level that also incorporates some other non-food items. This is equivalent to a consumption level of Lek 4,891 per capita each month. According to this definition, 25.4% of the population fell below the full poverty line.
Table 2.1:Poverty and Inequality in Albania
TiranaOther urbanRuralTotal




Poverty headcount17.82.320.14.829.
Poverty gap3.
Severity of poverty1.
Average/per capita9,0438,4687,2127,801
consumption (in lekë)
Source: INSTAT- 2002 LSMS
Source: INSTAT- 2002 LSMS

The LSMS study also assessed poverty using other definitions, thus producing more comprehensive estimates of poverty, and creating the possibility for comparisons with other countries, using international standards in poverty assessment.

Table 2.2:Poverty Line on the Basis of Definition
Poverty line on the basis of:ValueLevel
(in lekë)(%)
Food poverty line3,0474.7
50% median per capita consumption method3,3497.0
$2 PPP method3,77510.8
60% median per capita consumption method4,01913.5
Total poverty4,89125.4
$4 PPP method7,55059.3
Source: INSTAT- 2002 LSMS
Source: INSTAT- 2002 LSMS

According to administrative data, about 130,039 households benefit from social assistance12 or 3,400 fewer than in 2002. The reduction in the number of beneficiaries is not explained by an improvement in their living conditions, but by the reduction in cases of system abuse.


When asked to rate their own living standards, people generally perceive that their living conditions have not changed over the last twelve months13. When asked how they perceive their economic situation, nine out of ten household heads reply that they are not satisfied with their current financial situation. Half of them are not at all satisfied. 20% of the respondents share the opinion that their overall life is deteriorating. 40% claim that they are mainly concerned with their health, and one third maintain that their financial situation has slightly improved.

Chart 2.2:Level of Satisfaction with the Current Financial Situation

Source: INSTAT- 2003 LSMS


An analysis of the non-income dimension of poverty shows a positive situation, whereby both the poor and the non-poor have access to basic services and enjoy good living conditions.

An analysis of the 2003 indexes indicates that the poor have access to fewer public services:

  • The poor are twice as likely to lack access to appropriate medical services;
  • It is obvious that the poor have less access to running water supply;
  • The poor occupy less living space than the non-poor section of the population;
  • Eight out of ten among the poor do not have a private telephone.
Table 2.2:Poverty, Living Conditions, and Availability of Basic Services (in %)
Lack of running water30.443.1
Toilets outside the dwelling, lack of access to a piped toilet22.145.2
Telephonic service
Lack of access to telephone service39.778.6
Energy supply (number of hours/day when power is off)
More than 12 hours12.516.1
Crowding (persons per room)
3 and more20.348.6
Distance from the health centre
One or more hours7.414.7
Source: INSTAT- 2003 LSMS
Source: INSTAT- 2003 LSMS

Other Dimensions of Poverty

All indices point to evidence of a regional dimension of poverty, in terms of divisions between the urban and rural areas, the north and south and the mountainous and non-mountainous areas.

Poverty is more pronounced in the northern and northeastern parts of Albania. This is attributable to the limited job opportunities and low incomes typical of these areas, particularly in the agricultural sector. Data on farmland ownership indicate that about 70% of households located in these areas possess less than 1,000 m2 of land per capita. Likewise, the limited access to public services on account of the poor infrastructure is another factor that contributes to the high level of poverty in these areas. In the districts of Kukës and Dibra, approximately 45% of the population falls below the official poverty line. 80% of family income in these districts is covered by social protection schemes, economic assistance and disability payments.

Table 2.3:Level of Poverty by Residential Location
TiranaCoastal areaCentral areaMountainous







Source: INSTAT- 2003 LSMS
Source: INSTAT- 2003 LSMS

The LSMS reports that 18.3% of the “very poor” whose three or more basic needs are not accommodated live in the countryside, while 3.2% dwell in town. The data on economic assistance corroborate this finding. An analysis of the fourth poverty group14, classified as the group of the poorest communities, demonstrates that 93% of these communities live in the countryside and are distributed in 66 communes, while 7% live in towns, located in two municipalities (see the Poverty Mapping).

Demographic features, especially household size, are closely related to poverty. The number of children in a family also correlates strongly to its economic situation. Around 24 % of families with three children or more are poor. 74 % of the poor households have four members or more. Households with a female parent are likely to be worse off than households with a male breadwinner, standing at a ratio of 35 to 1.

Poverty is a serious threat in the new settlements, which have emerged as a result of internal migration towards areas with higher economic potential. This phenomenon has given rise to large illegal settlements with poor social conditions. Studies in these areas show that 80 % of migrant families live in poverty. However, due to the fact that these families are residents of informal settlements, they do not enjoy entitlement to social protection schemes and, as a result, are short of income. Secondly, spontaneous construction activity has led to the degradation of the urban environment. And thirdly, as these households are not registered with the registrar’s offices, they do not have access to schooling, health care or social services.


Unemployment has fallen over the last three years. However, we cannot talk of improvement in employment rates since, as shown in the chart, the decline in unemployment rate is also associated with the reduction in the total workforce.

Chart 2.3:Workforce Progress and Unemployment Rates in the Last Three Years

Source: INSTAT- 2004

In 2003 the long-term unemployed made up 68% of the total15. Unemployment is more frequent among women and the young. Unemployment is 19.1% among women and 13.6% among men. Whereas unemployment is a rather urban phenomenon and is reflected in the unemployment indexes, under-employment is a rural phenomenon. This is reflected in the high number of farming households (71,887) that receives partial economic assistance from the State.

Social Categories at Risk

Those who are ‘at risk’ find themselves in this situation as a result of a combination of social, cultural, economic, health and education inequalities. Their situation also comes partly as a result of the failure of institutions to provide for their basic social needs. Individuals from ‘at risk’ groups have both shared and specific needs which are either not addressed, or are poorly addressed, by institutions, thus leading to a wide gaps between these groups and the rest of society.

Poor families are the main social category at risk. Indeed, the policy designed to provide them with economic assistance, which is quite low (Lek 2,170-3,188 per family each month), does not help these families handle the income dimensions of poverty.

Individuals within these families are further marginalised by other factors, including ignorance, problems inherent in the education system and the health system, housing, and society’s overall indifference to their situation.

Table 2.4:Economic Assistance
Year 2003TotalBeneficiaries of partial

economic assistance
Beneficiaries of full

economic assistance
In % to

Families receiving economic assistance130,03980,20449,83519,06%
Municipalities55,4248,31747,10717,9 %
Source: INSTAT- 2004
Source: INSTAT- 2004

Ethnicity is not a profoundly distinctive feature of Albanian society. However, among the minorities (estimated to amount to 2 % of the population), the Roma and gypsy groups are most likely to be found in marginalised social categories. This minority, similarly to the majority of the population, suffers from a shortage of several services. Their low education level accounts for their high unemployment rates. They are faced with housing problems, and are disproportionate carriers of infectious diseases.

Children at risk make up a category that is affected by numerous social problems, which arose during the Albania’s transitory period. Amongst conditions characterised by a lack of public order and security, children have fallen prey to trafficking and crime; it is estimated that about 5,000 children have been trafficked to, and are being exploited in, Italy and Greece.

The regional structures of the Social State Service16 have produced data series which estimate that there are 6,700 working and street children across the country.

Drop-out patterns. The present phenomenon reflects the social and economic changes that have affected the family structure, as well as the problems with which the education system is attempting to cope. About 2% of enrolled children dropped out of school in 2002-03. As surveys and official data indicate, dropping out of school is primarily a phenomenon that prevails in rural and peri-urban areas inhabited by migrants. About 35% of children drop out for economic reasons. A fifth of them also cite the low quality of schooling as another reason for dropping out.

The children restricted in their homes on the grounds of ongoing vendettas also contribute to dropout. According to local government data, 1450 children fall under this category. This phenomenon is encountered in the districts of Shkodra, Lezha, Kukës and Dibra. Fear, psychological violence and lack of confidence are also closely associated with this phenomenon.

Children unaccompanied by their parents have immigrated, this being part and parcel of the migration phenomenon. According to partial data available to the non-governmental organisations and the Social State Service, about 4,000 children unaccompanied by their parents have immigrated to Greece (3,000) and Italy (1,000). Once in other countries and away from their families and their care, this category of children is faced with numerous risks, including ill treatment, physical and sexual abuse, and engagement in bad forms of labour, trafficking, drug distribution and other illicit activities.

Table 2.5:Category of Children at Risk Nation-wide

children in

Orphans in

Children who

have dropped out

of school





Source: INSTAT- 2004
Source: INSTAT- 2004

Young people at risk. Despite the fact that Albania has a young population and a high growth rate, the number of young people has dropped by 20 per cent compared to what is used to be 12 years ago because of migration.

Against the backdrop of Albania’s opening and the new social phenomena accompanying this transition, young people at risk fall into the following categories: (i) drug users, (ii) working youth, and (iii) young people with criminal behavior.

A survey conducted with 400 young people17 indicated that 12% of them have been in contact with narcotic substances, and 3% of them have grown addicted.

Table 2.6:Unemployment Rate by Age Groups and Gender in 2003

Source: INSTAT- 2004

As compared to other European countries, the number of crimes committed by young people (14-26 year olds) is relatively low in Albania.

The elderly are another vulnerable group, with low income deriving from pensions and insufficient access to basic health services. Insufficient income, health problems, and the threat of abandonment and loneliness contribute to the marginalization of this social stratum.

Disabled persons, born as such or affected by disability before the age of 21 years, form another category at risk. In 2003, their number increased to 46,000, and the largest part of them live in the countryside having no access to special services.

Level of education of the Albanian population

The number of pupils who have dropped out of obligatory education increased considerably during the 1990’s, with the average number amounting to 3.9 per cent, with one point at 6.3 %, in 1991, versus 1 per cent, with one point at 1.4 %, in 1980’s. The rise in the rates of dropout was attributable to national and international migration, the increased direct and opportune costs of schooling, the public insecurity, and the weakening of governmental institutions responsible for the obligatory education.

In recent years, the rates of dropout amounted to 2 per cent, chiefly due to the decline in national and international migration, and the elevated public security, as well as better education system’s coverage

School Dropout


Source: Directorate for Statistics and Information, Ministry of Education and Science, 2002

Whereas the indexes for NER (net enrolment ratios) and GER (gross enrolment ratios) regarding obligatory schooling remain high, 93.3 per cent and 99.8 per cent respectively, the quality of schooling has deteriorated. Memorisation of facts is overwhelmingly underlined, and a part of children feel overburdened while they have to cope with unmanageable difficulties.

In comparison with 1990, the number of students attending secondary general schools following completion of obligatory education has doubled (from 28.6 per cent to 57 per cent). However, secondary general education retains an elite character. Many students have poor progression and have less knowledge than what they are supposed to, while many parents are forced to provide for their children’s academic formation by having them enrolled in costly private courses.

Nonetheless, following the drastic decline in the number of secondary vocational schools, vocational education is marking a slow upward bias. Secondary vocational schools, which are enlarging the range of vocations, are taking in a constantly growing number of students. In 2003, the best academic year, 16 per cent of secondary school students only attended secondary vocational schools, social-cultural schools inclusive. This is a very low figure if compared with the average rate of attendance for the OECD countries (50 per cent). Seven point three per cent of the age group 14-18 years attend long-term schooling at the end of which they master officially recognised vocational skills. With the number of higher school students added on top of it, this figure amounts to 10 per cent. The said figure proves to be much lower than across developed countries, and even in the countries whose development is not a long way ahead that of Albania.

Despite the recent improvement in school attendance, the risk of having new illiterates is present, whereas overall education level of the population is still low with regard to secondary and higher education.

Table 2.7:Structure of Education of the Population
Education levelHeadcount %
Literacy 15-24 years98%
1-4 grades18,9%
Secondary general13,6%
Secondary vocational5,23%
Two-year secondary2,2%
Higher education4,8%
Source: INSTAT 2004
Source: INSTAT 2004

Disabled children are not encompassed in basic education, and an extremely small number of them are attending pre-school education. There are 12,000 disabled children in Albania. State institutions offer services to 9.5 per cent of them.

The Roma or gypsy children are more exposed to risks. Roma children would have on average 4.02 years of schooling, whereas the gypsy children would have on average 5.05 years of schooling. This figure is extremely low.

There exist no considerable differences in obligatory education attendance in the rural and urban areas. However, the quality of schooling in the rural areas is considerably lower (schools in the rural areas have less educational materials than schools in the urban areas, a poor infrastructure, and an insufficient number of graduated teachers). The gap between the rural and urban areas is more obvious in secondary education, which follows obligatory education. Less than 3 out of 10 eight-year school graduates in the rural areas would attend secondary school, versus 7 in Tirana and 6 in other urban areas. Only 1 out of 40 persons in the rural areas possesses a university diploma, as opposed to the ratio 1 to 5 in Tirana and 1 to 10 in other urban areas.

Education is strongly correlated to poverty. The rates of obligatory education attendance are low among the poor, and very low among the extreme poor. Secondary school attendance reveals bigger discrepancies. Only 2 out of 10 poor eight-year school graduates enrol in secondary education, versus 5 out of 10 children among the non-poor. Over 80 per cent of the poor do not finish a secondary school.

Table 2.8:Enrolment by socioeconomic status
Extreme poorPoorNon-poorTotal
Net Enrolment Ratios
Obligatory education88.691.694.193.3
Secondary education19.819.446.738.7
Gross Enrolment Ratios
Obligatory education90.997.1101.199.8
Secondary education21.021.653.143.9
Source: INSTAT- 2004
Source: INSTAT- 2004

The current education system is not yet able to accommodate the right to access to different preuniversity levels. Costs of schooling are one of the omnipresent reasons. Recent years have seen a constant increase in public expenditures in education. However, they cannot ensure provision of an education service of European standards for as long as they amount to nearly 3 per cent of the GDP, with the world average, including the average for some countries in transition, standing at 5 per cent.

Table 2.9:Percentage of GDP for Education
Source: INSTAT- 2004
Source: INSTAT- 2004

In the course of the transition years, education has undergone profound changes in terms of its content. A number of laws governing the education system have also been promulgated. However, during these years education in Albania lacked a kick-off strategy, which consequently led to unnecessary zigzagging and slower rates than those recorded across other countries in the region, being subject to similar development conditions.

The present education system does not yet offer a democratic civic formation, comparable to European standards. Overall, the Albanian economy is not designed around issues ensuring the use of and remuneration for the high human capital levels. In face of the systematically growing demand for enrolment in secondary and higher education, the education system still offers limited premises of training human resources with high level performing skills and knowledge, required by a modernised market economy. On the other hand, the bias towards academic formation and the insufficient focus on the life-called-for skills are the reasons why eight-year school graduates or secondary school students are short on a satisfactory background for personal success on the labour market.

Decentralisation in education is progressing at a slower rate than in other areas, and is fraught with more ambiguities. School autonomy is almost non-existent as decisions relating to the financial aspect, the staff and the curriculum, lie with a (deconcentrated) central level. The governance system in education, which provides limited access to all the interested stakeholders and allows for extremely sparing flexibility, highly reduces the effectiveness and efficiency of human and financial resources. Likewise, it exercises very little influence on improving the education service extended to deprived areas and strata.

The strategic reform in the education system, which has been under way for the past years, is impacting education governance, the curricula at all the levels and the human resources development system, thus laying solid foundations for the alleviation and prevention of current acute phenomena of equity. (See chapter “Development of Human Resources: Education”)

Health status of the Albanian population

Basic indexes, some of which have improved considerably, determine the health condition of the local population. Infant and maternal mortality rate is worth mentioning here. Whereas other indexes continue to indicate a declining tendency as they relate primarily to the influence a number of transition negative factors exercise. Reference could be made here to mortality (which is largely affected by the increase in the number of accidents, traumas, suicides), infectious diseases, and basically HIV-AIDS, cardiovascular diseases, and tumours. The following is a brief outline of some of these indexes.

Expected average life expectancy is relatively high: 69 years for men, and 75 years for women. This index has marked an upward bias during the second half of the last century, and at present, it is only slightly lower than the average recorded in Western Europe, and higher than the average for Central and Eastern Europe. However, recent years have seen a slightly declining tendency.

Infant mortality is still very high if compared with that across the countries in the region. Nonetheless, the tendency shows a decline in the infant mortality rate, which in 2002 was 17.4 deaths per 1,000 live births (source: Ministry of Health and INSTAT), and in 2003 was 16.8 deaths per 1,000 live births (source: Ministry of Health).

Maternal mortality, with 21 deaths per 100,000 live births in 2003, is relatively high (source: Ministry of Health). In certain areas in the country, however, it is several times higher than the average. The chapter on the gender analysis depicts a broader picture.

Mortality and cause-related mortality

The mortality rate is 5.1 per 1,000, and this index has not changed considerably during the past ten years. However, changes have occurred with regard to the structure of the causes of mortality. Blood circulation diseases, cancers, and accidents and injuries are the three groups accounting for three fourth of all deaths. Treatment of the diseases under these three groups has proved very costly both for the State and the families, thus affecting the latter’s living standards.

Incidence of infectious diseases

Respiratory diseases top the list, followed by gastrointestinal diseases. A cholera epidemic and a polio epidemic plagued Albania in 1994 and in 1996, respectively. Since the early 1990’s, the number of affected areas across the country has increased. HIV-infected patients have started to be hospitalised. Syphilis has resurfaced and the number of people carrying the virus is increasing. Although the disease has been reported to be decreasing, hepatitis A and B has a high prevalence in Albania. The same is true for the gastrointestinal diseases, too. In 2002, the World Health Organisation reported no cases of poliomyelitis in the country. Other diseases prevented by vaccines, including measles and diphtheria, are not reported either.

Table 2.10:Pre-natal Care
SkilledNot skilledCare unavailable
Urban areas95.92.02.1
Other urban area96.70.32.9
Rural area87.82.89.4
Coastal area92.107.9
Central area92.62.84.7
Mountainous area78.44.017.6

Chart 2.4:Infant Mortality

(per 1,000 births)

Source: INSTAT- 2004

HIV infection

The first HIV-infected case was confirmed in May 1993. Ever since, 5-10 persons carrying the HIV-virus were reported in 2000, whereas 1-4 cases infected with AIDS have been reported on a yearly basis. By late November 2003, 117 persons infected with HIV/AIDS were reported. Nearly 90 per cent of all the cases have contracted HIV/AIDS sexually, with sexual transmission being the main way of getting the virus. Seventy per cent of the HIV/AIDS cases are thought to have come into contact with the virus abroad.

It should be pointed out that a number of factors the majority of which do not concern the health system, take their toll deteriorating the health status of the population. Economic, social-cultural and environmental factors could be mentioned here. Whereas the health system, despite the major role it plays to promote health and health education, is centred on fighting the consequences rather than on eliminating the causes.

Chart 2.5:HIV/AIDS Cases Reported


The NSSED addresses the gender-specific problems and the gender perspective on the basis of the concept underlying the 1995 United Nations Report on Human Resources, stating that, “If human development is not viewed from the gender perspective, then it is in serious danger.” Three of the principles suggested to incorporate the gender perspective into human development, are as follows: (i) equality of rights between men and women; (ii) females should be considered as agents and beneficiaries of the changes; and (iii) a broader range of choices for men and women, and equal choice opportunity for men and women.

The process of evaluating the involvement of men and women, including legislation, development policies and programmes in all areas, and at all levels, entails the gender-specific analysis and perspective of the issue in the framework of the entire spectrum of the Albanian society. This is a way to make the concerns and experiences of men and women a component part of the drafting, implementation, monitoring and evaluation of policies and programmes in all the spheres – political, economic and social – so as to ensure that men and women benefit in equal terms, and inequalities are not promoted.


Education is a vital aspect of every strategy in the framework of efforts to encompass gender concepts. In a nutshell, gender equality in education should study and reflect, from the gender perspective, the gender balance at all the phases of education. Considering the education sector as the entry gateway in order to challenge the gender stereotypes contributing significantly to maintaining gender inequality in the society, is equally important. Enrolment of females in primary, eight-year and secondary education has decreased from 98.3 per cent in 1991 to 87.3 per cent in 2001 for the primary and eight-year schools, and from 58.9 per cent in 1991 to 47.3 per cent in 2001 for the secondary schools. Whereas enrolment of females in higher schools has increased from 9.7 per cent in 1991 to 19.7 percent in 2001.

Chart 2.6:Bias in Education by Gender

Source: INSTAT- 2003

As seen from the chart, the number of females enrolled in secondary education is lower. This phenomenon is rather present in the rural areas, where in terms of education the female is discriminated against on account of the prevailing mentality and insecurity. The period 2002-2003, in particular, has seen a greater effort to get rid of certain gender stereotypes in connection with the curriculum in health education, civic education and legal education, by virtue of improving the textbooks and all the other educational materials. There is still much to be done particularly with regard to the reviewing of secondary vocational education curriculum so as to ensure that it meets the labour market requirements, and in particular, the requirements for jobs that are attractive to females.


In recent years, health programmes and policies have been designed around better coherence of the gender perspective. Hence, as one of the priorities for the health sector the woman’s health status is addressed through specific programmes and projects with funding obtained from both foreign donors and the State budget.

The tendency indicates that maternal mortality, which measures the obstetric risk inherent in a pregnancy, is reduced considerably. However, the figure of 21.3 deaths per 100,000 live births in 2003 (source: Ministry of Health) is still high as compared to the average across European countries.

Chart 2.7:Maternal Mortality Rate per 100,000 Live Births

Source: INSTAT- 2003

Several of the factors contributing to reduction in maternal mortality rate are as follows: (i), The number of births dropped by over 40 per cent in 2003, as opposed to 1990. In 2002, the fertility rate was 2.1, versus 3.9 reported in 1990 (source: INSTAT). The drop in fertility rate is largely due to increased family planning, which is easily accessible for about 60 per cent of women, and the condom use. (ii) Legalisation of abortion, with the ratio between abortions and births being 1 to 3. (iii) Improvement in mothers and households’ education on the progress of pregnancy, children’s feeding and the need for family planning.

However, recent years have seen lower access to pre-natal services in Albania. And a downward bias is marking assisted births, thus adversely impacting maternal mortality. About 93 per cent of births take place in health institutions, and 7 per cent of births at home. Of the latter group, 6.2 per cent have the attendance of skilled health personnel at delivery, and 0.8 per cent have no medical assistance. Births at home may be accounted for by low access to health services and their low quality; shortage of skilled health personnel, especially midwives in villages (this being the result of uncontrolled internal migration); the mothers’ desire to deliver their children at home; the uncontrolled shifting of the population, which keeps changing addresses, making medical follow-up by the midwife responsible for the area impossible; and poor infrastructure conditions in maternity hospitals in town and maternity homes in the countryside, which more often than not go short of water, heating and electricity.

In an effort to improve the health status of mother and child, the health sector is aiming to reduce maternal and infant mortality, which are two of the MDG. Diseases and maternal, pre-natal and infant mortality have been followed up as part of services the KSHP offers to mother and child. The goal is to bring the mortality rate down to 15 deaths per 100,000 live births in 2006, and to 11 deaths in 2015, as well as to reduce infant mortality rate to 15 deaths per 1,000 live births in 2006, and to 10 deaths in 2015.

Family planning, which has an impact on reduction in maternal mortality, has had the following important achievements:

  • Family planning services are extended to the rural areas;
  • This undertaking was launched the previous year. A total of 295 family planning centres have been set up in town and countryside across the country. In 2003, the number of the said centres increased significantly in the countryside, and at present, at commune level the family planning service is offered to 20 districts. Now every district has its own team of local trainees in place; and,
  • In 2003, a system providing information on the management of condoms was established both centrally and locally. At a central level, the Department for Reproductive Health at the Directorate of KSHP is responsible for collecting the said information. This has enabled the assessment of needs and a better-controlled distribution of condoms, barring the way to their misuse

The Adoption of the Strategy for the Procurement of Condoms in July 2003 aimed at ensuring the long-term guaranteed supply of quality condoms, and self-sufficiency in condoms, thus enabling the country to be financially self-sufficient in order to meet the needs for condoms or logistics, and for technical assistance concerning purchasing, and storing of condoms.

Gender-based Violence

Another phenomenon encountered quite frequently in the Albanian society is also the gender-based violence, including rape, insult, threat to use violence, abuse, degeneration, forceful social isolation, and other forms. Domestic violence is likewise a widespread form of gender-based violence.


In Albania, the number of highly educated women is high. However, their involvement in the political and economic life is very low, with the tendency showing that their number is constantly decreasing. Although two thirds of women are recognised of being highly educated, their representation in decision-making at the level of the Parliament, a ministry, a municipality and commune is very low. The following reveals the women’s representation level in 2003:

Table 2.11:Gender-specific Employment
Women in the Parliament5.7%
Women Ministers5%
Women Mayors0%
Women Mayors of Small Municipalities37.5%
Chairwomen of communes1.6%
Women Prefects25%
Women managers in the private sector17%
Highly educated women registered2/3

Horizontal gender-specific inequalities making way in the discrepancies regarding preference for different professions between males and females are also present in Albania. The woman’s presence in certain professions – women judges, women surgeons, and women company managers – seems to be still a luxury for the Albanian society. There also many cases of vertical gender-specific inequalities, indicating differences concerning posts and positions within the same profession, and being reflected in the women’s low participation in the leadership, both at the level of central government and local government.

Some of the targets that should specifically guide employment policies in Albania encompass the creation of many possibilities, urging to do better, promotion on duty, remuneration and equal pay with male counterparts.

Agriculture and Rural Areas

In the agricultural sector, men and women perform different roles and responsibilities, which vary from one region to the next. In Albania, there exist major gender-specific inequalities both in terms of access to the production resources and control of resources within the family, though in the majority of cases the woman is a major contributor. Women contribute to the well-being of the family and the community and have no equal access to and control of the most essential resources, time inclusive. The roles and responsibilities women perform in the family affect their engagement in different activities at the community level. These facts highlight the importance of concrete projects focused on reinforcing the woman’s role and her involvement in the various areas of the community development, and in rural areas, in particular.


Finally, the following could be mentioned:

  • Right to equal access to education and employment. The basic rights, devoid of any gender-specific differentiation, represent a fundamental human right.
  • Efforts successfully addressing the gender equality have a direct impact on reducing poverty in all its dimensions, and on the economic growth. Women in the rural areas, in particular, represent the group most exposed to poverty.
  • As part of the agenda for the European integration, policies and programmes concentrated on ensuring gender equality are crucial.

The financial effect of gender policies is very small in comparison with the significant impact the female section of the society has on the country’s social and economic development.


Early childhood is described as the period of a child’s life from its conception to the age of eight years. It entails the combination of the health, nutrition and intellectual stimulation. This period of life concerns the inculcation of study and active learning skills. It also involves the emotional and social care and the feeding a child is in need of so as to realise its human potential, and play an active role in the family, and at a later stage, in the community. In Albania, the complex interventions in early childhood are still at an embrionic stage. However, it should be highlighted that an Intersectoral Task Force for Early Childhood was established for the first time during 2003, and a number of concrete targets were set with regard to this age group.

The Ministry of Education and Science, for instance, which contributes significantly to the early childhood development and care with regard to children aged 3-6, has set the target of including 100 per cent of children aged 5-6 and 50-70 per cent of children aged 3-4 and 4-5 in the preschool institutions in 2015.

This Ministry is also aiming to ensure:

dissemination of contemporary methodologies placing the child at the centre of the educative activity, the reforming of the university curriculum for the faculties training teachers for the preschool education in favour of the students’ contemporary professional formation, the introduction of the teacher’s training system, and the improvement in the legal framework, which would contribute to the decentralisation of the preschool education system and its implementation in practice.

Health. The constant improvement in the child’s health status has been one of the health sector priorities, thus contributing to reduction in the incidence of infant disease and mortality. The tendency in Albania saw a reduction in infant mortality rate from 41.5 per 1,000 live births in 1990, to 16.8 per 1,000 in 2003. These figures are still a far cry from figures across European countries.

Iin the northeastern part of Albania, such as Dibra, Kukës, Tropoja, and Puka infant mortality rate is twice as high. However, it should be pointed out that several other big cities, including Tirana, Durrës, and Elbasan, have high infant mortality rates. This correlates to people’s free and uncontrolled movement from northeastern areas, and their settlement in the peri-urban areas, characterised by a low soial economic level and not a high level of health education. The health sector is running specific programmes to follow up the infant mortality rate, with a focus on the following targets: Unification of the treatment protocols and the updating of knowledge by physicians who have worked for five years following internship, training of the personnel working in the child’s consultation centres, continuous monitoring of the law “For Protection of Breastfeeding”, reduction in various forms of malnutrition among under-five children, and irradication of the disease of iodic defficiency among children aged 0-6.

One of the challenges of the health sector in the framework of the Millennium Development Goals is reduction in infant mortality rate to 10 per 1,000 live births in 2015. During 2003, the implementation of the ambulatory integrated management of child disease in order to provide assessmnet, treatment and combined consultation on the main child disease, has been an important process. This will be an on-going process in the future, too.

The Ministry of Local Government and Decentralisation could make an especially important contribution to early childhood, assuming full powers regarding the preschool infrastructure for children aged 0-3 (crèches). In its efforts to ensure the normal functioning of the preschool institutions in the framework of decentralisation with a focus on the poor and marginalised areas, this Ministry has set major objectives with regard to this age-group. Some of these targets center on the increased investments in the preschool infrastructure (crèches), and the coordination of efforts with the Ministry of Education and Science, and the other line ministries so as to ensure a division of powers and the regulation of the legal framework governing the decentralisation process, and the training of the local government officials with a focus on social policies and services.

The Ministry of Labour and Social Affairs could play an important role in connection with early childhood by virtue of developing social policies, targeted to children aged 0-6, as well. This Ministry has elaborated some of the following objectives concerning early childhood:

The families in need, especially those with children under the age of 6, should receive the necessary incomes;

Either of the two or more children born to a family at the same time, should receive a special remuneration.

By 2004, this Ministry aims to revise the legislation for social protection and care, while specifically addressing the support designed for the orphaned children or the children with one parent, the children with disabilities, and the trafficked children. Focusing also on the important role the mother has to play with regard to early childhood development and care, this Ministry plans to provide for the professional training of women who are heads of families, while granting assistance to them, too. Data collection with a view to drawing a clear picture of the children’s situation according to the age-groups and regions, is of special importance to early childhood development and care. For that end, the Ministry of Labour and Social Affairs is intent on working out a statistics registration system in order to identify children’s problems and needs, in accordance with the provisions contained in the new law “For the Social Assistance and Care”. It is also planning to review the law for the traffic in children, while taking due preventive measures.

The Committee for Equal Opportunity, being involved in the drafting and at the same time implementation of the National Strategy for Children, is duty-bound to see to the application of the present strategy at all the central and local government institutions, and by all the civil society actors concerned with protection of the children’s rights. In terms of the implementation of the action plan relating to the strategy for children, this Committee undertakes to report on the 0-6 age-group.

What should be changed in the legislation affecting the 0-6 age-group?

Reviewing of the laws addressing the problems of orphaned children;

Reviewing of the laws addressing the health problems of mother and child;

Improving the criminal legislation, taking into account children’s special protection from all the phenomena posing a threat to their life;

Concluding agreements with other States on the execution of court decisions to ensure that one of the parents pays maintenance to the child/children;

improving the civil legislation, and specifically the Law “For the Adoption of Minors by Foreign Nationals, and Several Amendments to the Family Code”;

Setting up a functional Court for Minors.

What are we aiming at through early childhood development and care?

By having early childhood development and care in place, we aim to:

•Work out a national plan for the early childhood, ensuring that the line ministries should undertake to carry out integrated work with this age-group;

•Support the establishment of a specific structure for children, incorporating a department for the early childhood;

•Provide for increased financing from the budgets of the relevant ministries, targeted to this age-group;

•Develop policies and strategies for the introduction of alternatives in terms of possibilities for primary education for all the children aged 0-6, especially those aged 5-6, in a shorter period of time, seeing to it that efforts are integrated with successful community models applied by nongovernmental organisations;

•Promulgate the necessary legislation allowing for the normal functioning and the division of duties with regard to the decentralisation process;

•Introduce a statistics registration system covering children aged 0-6, according to the regions, gender and age-group.

CHAPTER 3 Implementation of Policies and Public Priority Measures the Objectives and the MTEF for 2004-2007

Achieving the NSSED objectives depends on the implementation of public priority short- to medium-term measures. The NSSED process deepened during 2003 in all the ministries, and some central and other state institutions, such as the Parliament and local government.

Each institution has tried to implement its own priority measures consistent with the relevant sector matrices. The results appear in the progress reports of each institution and contain: (i) an analysis of the policies and the most substantial measures, their impact as well as a medium-term perspective; (ii) a matrix with qualitative indicators of the priority measures for 2003; (iii) data on the progress of output and outcome indicators; and (iv) a matrix of mediumterm priority measures for 2004-2007.

Being a fundamental and complex strategy, the NSSED calls for an effective and efficient coordination of the implementation process. During 2003 the goal was to ensure better coordination of the main government agenda, namely the NSSED, with the process of SAA and the adoption of the MDGs.

This chapter of the Progress Report is a synthesis of progress on the implementation of measures by area and sector, the most important short-term implications of these measures, as well as the objectives of medium-term priority measures for 2004-2007.


One of the main NSSED implementation areas in 2003 was the deepening and expansion of institutional and legal reforms. These were designed on the basis of an analytical process, but with a high degree of consultation and participation of all stakeholders and of the public in general.

Governance institutional reforms aim at:

  • Strengthening implementation and respect of law as well as the regulatory and warrantor role of the state (stability, public order, security, effectiveness and efficiency)
  • Enhancing democratic standards of governance (justice, accountability, transparency, inclusion)

Experience has indicated that these two areas are very important and inter-related. Weak enforcement of public order could seriously compromise the democratic nature of institutions and vice-versa, leading to a vicious circle.

Assessments by specialized international institutions indicate that weaknesses in guaranteeing public order constitute a major problem for the countries in the West Balkans, and in particular for Albania. Although there have been improvements in governance, it still is a far cry from the minimal standards of the EU.

Reforms in governance are the foundations for NSSED implementation. They also represent the main focus for the process of negotiation of the SAA with EU and for NATO membership.

Progress in governance reforms needs to be measured. To this end, the government has adopted the main indicators and objectives that determine the quality of governance.

Table 3.1:Indicators of governance
IndicatorsEvaluation (0-100)
Base level 2002Objective 2010 *Objective 2015*
1. Participation and accountability49.565.081
2. Political stability30.360.571
3. Governance effectiveness38.157.776
4. Regulatory quality41.263.283
5. State of law17.556.574
6. Control of corruption23.254.773

Objective 2010 represents the indicators of governance for Eastern Europe – regional average (2002), while Objective 2015 the minimum indicators of governance for the EU countries – average (2002).

Objective 2010 represents the indicators of governance for Eastern Europe – regional average (2002), while Objective 2015 the minimum indicators of governance for the EU countries – average (2002).

Achieving the twin objectives of governance reform relies on a combined approach of measures, which includes all state structures: (i) legal regulation of the system of rights; (ii) establishment of new institutions and/or restructuring of the existing ones; (iii) strengthening capacities and improvement of the available technology; and (iv) adoption of the most advanced rules and standards of democratic governance.

1. Justice

During 2003 the work on legal process consisted of: (i) formulation and follow-up of approval procedures for 59 legal initiatives, of which 36 were draft-laws and 23 by-laws of normative nature, including 16 conventions and international agreements; and (ii) provision of specialized legal opinion and assistance to other institutions, which involved drafting approximately 900 legal peer reviews for draft-acts during 2003, of which 190 were draft-laws.

In the context of the ongoing attempt to achieve a clearer division and an appropriate balance between the legislative, executive and judicial authorities the following activities took place: (i) creation of supportive infrastructure to facilitate the setting up of courts and Public Prosecutor offices for extreme offences; (ii) training; (iii) strengthening of the legal framework and improvement of legal services; (iv) improvement of the legal system control by the Inspection Department of the Ministry of Justice; (v) revision of the prosecution procedures in cases that have passed the preliminary phase and have not yet begun the respective procedures; and (vi) needs assessment for improvements in the judicial infrastructure.

A wide range of important reforms in the legal system are planned for 2004 in the following areas:

(i) prevention, detection, investigation and effective trial against terrorism offences and its financial sources, organized crime, trafficking, money laundering, corruption and financial crime;

(ii) incorporation of international statutes, especially in the penal code;

(iii) reform of juvenile justice to attain international standards in material, procedural and institutional provisions for prevention, penal training and rehabilitation of young offenders;

(iv) reforms in Public, Administrative and Commercial Law, in order to improve the services to business and the public, to simplify procedures, to reduce delays and to develop modern procedures for dealing with citizen complaints;

(v) setting up of the Legal Reform Commission, as a consultative entity under the Ministry of Justice, consisting of eminent professionals with outstanding judicial experience, supported by a group of specialized legal experts.

Civil judicial decrees will concentrate on raising professional standards, determining indicators that measure individual output, realizing an effective, accurate and quick service, strengthening the control of the executive structure, providing training, and disciplining employees that do not abide by the law during the exercise of their duties.

Considerable work will be carried out during 2004 to expand and modernize the physical infrastructure of jails. Not only the security of these institutions will be improved but also the conditions and treatment of detainees.

With respect to the judicial authorities and the Public Prosecutor’s Office, the Ministry of Justice will aim at:

(i) increasing the speed and the quality of judicial control;

(ii) introducing information technology into the judicial system to improve the management of judicial cases;

(iii) improving the administrative services of courts, in particular the maintenance of the judicial archives;

(iv) determining performance evaluation criteria and procedures for courts based on the number of cases coming from higher level court houses;

(v) establishing qualification standards for judges and prosecutors, as well as meritocratic appointment and transfer rules;

(vi) rehabilitating the judicial infrastructure and creating a computer-based infrastructure in courts;

(vii) improving procedures, increasing the budget and implementing training for judges and prosecutors; and

(viii) preparing legal provisions for cases where there are delays in the judicial process.

Public Order

The main priorities for 2003 were to ensure public order, strengthen personal and community security, and fight organized crime and terrorism.

Further work was done to increase policemen’s qualifications, to organize activities related to organized crime prevention, to prevent conflict and resolve differences and generally to curb illegal activity. Feelings of security have increased among citizens during the exercise of their rights.

Security measures have been increased all over the country through the improvement of the operational structures. Special services have been planned for the coming summer season in all tourist areas, beaches and main roads.

A new system entitled “About the grades of the state police” which was put in force during 2003 converted military into police grades for all police employees. The new grades have created possibilities for a secure and guaranteed career for police employees, based on five criteria: police education, work experience, training, qualifications and periodic evaluations at the workplace. The objective is to raise barriers against subjective decisions based on political activism and personal connections that have been previously mentioned and criticized. From now on, all appointments in the state police are done with respect to the grade of the police employee.

Table 3.2:Indicators of crime and violence




Crimes against persons1586149995%1726161994%
of which: assassinations17914782%14411278%
Crimes against property132292970%1766110162%
of which: violent or with guns21416577%20813967%
Financial crimes75374799%77176399%
Drug trafficking25023092%22720189%
Human traficking54452997%70468197%
Source; Ministry of Public Order, 2004
Source; Ministry of Public Order, 2004

There was a slight decline in crime against the person in 2003, but crime against property and financial crime have increased.

There has been some success in the fight against drug and human trafficking, such as the elimination of emigrants trafficking, publicly acknowledged by the Italian Government and other international institutions.

Drugs are now a greater challenge that demands a more effective approach. Some recent positive developments are very modest compared to the large volume of trafficking.

The war against organized crime and terrorism is one of the greatest challenges. Albania has taken up all its international obligations and has strengthened its specialized mechanisms but is seeking stronger support from its international partners and a better coordination of joint ventures.

The evaluation of the implementation of the priority public measures and their impact highlights the weaknesses of the forces fighting crime, but also shows that the reforms already initiated will eventually play a big role in successfully addressing the complex challenges in this field.

The middle-term objectives for 2004-2007 are:

  • With respect to the war against trafficking and organized crime:
    • Block any moves to resume illegal human trafficking for emigration purposes;
    • Achieve more obvious results in the war against drug trafficking and eliminate incountry production of drugs, such as cannabis sativa;
    • Detect and eliminate organized crime structures and reduce the risk of their involvement with the international terrorism network; and
    • Detect money laundering activities.
  • With respect to general security and public order:
    • Strengthen public order and public security (personal and community security) in the entire country, according to regional needs, whether urban or rural;
    • Reduce the number of extreme offences committed not only through crime detection but also through preventive measures;
    • Reduce the number of financial crimes and crimes against property; and
    • Increase security in roads.

The above-mentioned objectives will be met by continuing the reforms in public order institutions and the Office of the Attorney. In particular, the following activities are planned:

  • Capacity building through training and expansion of the role of the Police Academy;
  • Improvement of structures, especially in the intelligence services;
  • Investments to upgrade technology;
  • Expansion of collaboration with international partners against organized crime;
  • Legal and procedural changes to the Penal Code and incorporation of international agreements and treaties in the penal field; and
  • Improvement of crime statistics and dissemination of information to the public.

Medium-term objectives and measures for 2004-2007 in the area of public order are presented in greater detail in the annexes of this document, and in the MTEF of the Ministry of Public Order.

Public Administration

The main objective behind public administration reform is the establishment of a professional and sustainable civil service, mainly in two directions:

  • Stability and job security for civil servants; and
  • Staff professionalism to meet the challenges of reforms.

The implementation of the Law “On the status of the civil servant” has been one of the prerequisites for the success of public administration reform. Currently there are 1296 civil servants in the institutions of central administration, and 705 employees have been confirmed in their positions.

After three years of implementing the civil service legislation, competitive hiring procedures are now routinely used in public administration institutions. Recruitment by competitive means is being extended to include other so-called independent institutions of public administration. During 2003, there have been 277 new appointments in central public administration institutions.

Compared to previous years there is an increasing number of competitions and improvements in implementation procedures. There are fewer complaints on procedures, fewer cancellations by the Civil Service Commission and growing applications for posts. The number of candidates per post has increased from 5.4 in 2001, to 7 in 2002 and 8 in 2003.

However, there are still problems with civil service recruitment, and these need to be given priority. Voluntary turnover is still high, despite the fact that public sector employment is competitive vis-à-vis private sector employment. 76 employees resigned from the civil service in 2003. This accounts for 4.5% of the total number of civil servants in the institutions of central administration.

The number of transfers increased by 56% compared to 2002. This increase corroborates the fact that there is now a fully-fledged career system for civil servants, and increased awareness of the rights established in the law on career development. As regards promotion, the procedures are still hardly being used largely because the necessary number of candidates is lacking.

During 2003, 441 civil servants were confirmed. This fact is related to the successful implementation of the law on the civil service. However, there are still several employees that should pass through the confirmation process and this is one of the priorities for 2004.

Improving the system of performance evaluation has been the focus of attention in 2003. To this end, direct supervisors have been trained, in addition to the employees of the human resources departments, in civil servants evaluation processes. As a result of this work, there is a fall by 17% of 1-evaluation points (maximal rating) and an increase by 17% of 2-evaluation points compared to 2002. There have been no major changes for the remaining two evaluation ratings.

Increasing professional skills in public administration is yet another important direction for the implementation of reform. The Institute of Training of Public Administration (ITAP) is functioning regularly and is organizing and providing training for public administration employees. In the course of 2003, ITAP has provided training to 1167 civil servants on 14 subject courses, and has organized 72 training courses.

The extension and enhancement of pay reforms in public institutions during 2003 has contributed significantly to the stability of the administration, increasing opportunities for improving the quality of staff hired, and ensuring increased motivation. Introducing some promotional salary elements was also a positive measure.

Another important improvement directly related to the implementation of the status of the civil servants was the clearer definition of the role of the Secretary General. This legislative intervention approved by the Government was introduced to further strengthen the position of the SG in the line ministries, as the connecting position between the political level and the civil service, and to unify and clarify the duties entailed in this position.

The new Law “On the rules of ethics in public administration” was approved in 2003 and helped bridge the gap in this area. The Law was drafted in compliance with the standard code of conduct for civil servants approved upon the recommendation of the Committee of Ministers of the Council of Europe. Work began to familiarize civil servants with the new rules and norms, and to establish special oversight structures for the implementation of the law.

A series of other measures were taken in 2003 to expand the scope of civil service principles to other parts of the public administration. Three laws extended the new civil service legislation to employees of the Public Procurement Agency, the Official Publications Center and the Tax Administration, thus meeting one of the conditions of the World Bank, the European Union and the International Monetary Fund.

Continuing with the reform in the public administration will be a priority among the institutional reforms, and a crosscutting issue for all Albanian state institutions. The main directions of the Department of Public Administration for enhancing the public administration reform for the medium-term from 2004-2007 include:

  • Expanding the scope of civil service legislation, which is related to improvements in the Law “On the status of the civil servant”;
  • Finalizing the classification for specialists and heads of sectors for two categories of institutions: the independent ones and those reporting to the Council of Ministers. This is expected to ensure fair remuneration based on merit and achievements to increase staff motivation;
  • Operationalizing the National Registry of Public Administration. This will institutionalize the obligation of all institutions involved to improve the management of administrative data;
  • Training of civil servants. This measure will strengthen the capacities of civil servants.The Institute of Training of Public Administration (ITAP) is directly responsible and organizes regularly training courses in cooperation with line ministries;
  • Implementing the functional and structural reform. This is related to the functional review of ministries and their reporting institutions in order to re-formulate their missions and their structural organization; and
  • Establishing a central computerized unit in public administration, which would create a network for the fast exchange of information and improve the management of documentation for government meetings.

2. Decentralization

The implementation of the decentralization reform and the empowering of local governments has been one of the key priorities, directly linked with the objectives of the NSSED. The implementation of this reform in the course of 2003 has included clear and determined steps, while necessary adjustments were made along the way.

Concrete actions were taken in 2003 to transfer functions to municipalities and communes. A program was initiated for water companies to transfer water supply and sewage functions. The program envisages the gradual transfer of ownership according to the degree of difficulty, subject to the settlement of pending financial arrears and the financial support for key investments. The process is carried out in cooperation with local government.

During 2003 there has been ongoing analytical work and dialogue with all the stakeholders on the decentralization of the education, social care and social assistance functions in order to ensure the harmonization of reforms in these sectors, with a potential role for local government units. A pilot project with the Tirana municipality for the transfer of investment and other functions began to be implemented in 2004. In the area of social assistance (ndihme ekonomike) and social care, some pilot municipalities and communes are engaging in a program for the enhancement of local government competencies with regard to the use of social assistance funds for the poor households. These funds are going to be used by the municipalities and communes for the same purpose, but mainly through community works. The experience thus far will help scale-up the decentralization effort.

With regard to delegated functions, priority was accorded to the legal regulation, restructuring and modernization of the civil status registry office. As for the emergency service function, 2003 saw the establishment and strengthening of the system in all its aspects. The Department of Planning and Coordination of Civil Emergencies focused on keeping the situation of emergencies under control in the entire country, establishing and strengthening structures, putting the process of planning on the right track to deal with civil emergencies and ensuring close cooperation with national and international agencies.

The fiscal allocations in 2003 together with adjustments in the formula of unconditional transfers were important steps for the decentralization process. The results of the local government units during 2003 are very encouraging. At the national level, local government expenditure is financed by more than 58% from taxes, fees and other local government financial sources, compared to the original target of 56%. In the big and medium-size municipalities of the country this ratio ranges between 70% and 90%. There has been satisfactory progress in the collection of two taxes on small business. Despite the fact that this was an election year, the agricultural land tax was introduced in more than 70 communes, while a lot more are preparing to apply this tax during 2004. Also, positive results were noted in the enforcement of the tax on buildings, which is now applied in almost all municipalities of the country.

The gradual transfer of some immovable properties directly related to the local government units’ own functions has been initiated and is expected to expand further during 2004.

Local government units are increasingly responding to the need to enhance their governance and administrative capacities, while they have been offered increasing opportunities for training and assistance. An institute for training has been recently launched jointly with the local authorities under the joint ownership of the government and local government associations.

The positive effects of the decentralization reform are notable in a large number of municipalities and communes in the country. Based on this progress, the decentralization reform will continue in line with the program of measures with cautious but determined steps.

A comprehensive study of the economic, geographical and historical territorial division of the communes was completed in 2003 and some objective criteria were proposed for possible mergers. The study contributed to the preparation of a preliminary draft-law, which enables the launch of a constructive dialogue leading to a voluntary process of mergers between communes. This process will be finalized in 2005 following an analytical, participatory and consensual process, which will optimize this division and will create the conditions for a more efficient local government in response to economic and demographic trends.

During 2003 four regional councils prepared their regional development strategies and eight additional regions embarked in the process. Studies have been conducted and legal documents are being developed to clarify the functions of regional councils as a secondary tier of local government.

By the end of the medium-term period in 2007 it is envisaged that local autonomy should be as close as possible to the vision established in the Constitution, the Decentralization Strategy and the European Charter of Local Government Autonomy. The complete transfer of asset ownership will have been finalized, as will the transfer of all fiscal and financial functions. There will be a clear definition of the shared functions in education, social care and civil protection and the role of local government. The fiscal decentralization reform will have been enhanced in the direction of increasing the weight of local government revenues and adjusting the package of local taxes and fees. There will be a formula for the amount of unconditional transfers relative to the revenues of the state budget, and increased transparency and equity in the territorial distribution of investments and development expenditures of the state budget in close cooperation with the local government.

3. Anti-Corruption

Preventing and fighting corruption is one of the priorities of the Government of Albania, as it attempts to curb its undermining effects on public trust in the political and judicial system, in the state of economic and social development, in foreign investment and in the process of European integration. To this end, a series of measures were launched in 2003 and priorities were set for 2004.

Until today, the anti-corruption strategy has focused in improving the legal structures, amending gaps in the necessary legal framework, and defining roles and responsibilities. In the future, the strategy will focus more on enforcing structures and principles, and particularly in ensuring a broad participation of the civil society.

In order to have an effective strategy, with a clear, comprehensive and coherent vision, aiming at offering sustainable approaches, it will need to encompass: effective strengthening of legislation, cutting down on systemic opportunities for corruption, raising awareness and educating the public on corruption and convincing the public to participate actively in this fight.

For the above mentioned reasons the structure of the action plan for preventing and fighting corruption for 2003-2004 has been revised to include specific anti-corruption measures in three areas: (i) strengthening the rule of law; (ii) prevention; and (iii) public education and participation.

On each of these pillars of the anti-corruption strategy priority areas and relevant measures are also envisaged in detail. The responsible institutions and their partners have also been determined in order to ensure timely implementation. Potential measures and risks have been identified and concrete indicators are used for monitoring implementation and reporting.

The plan but also the Decision of the Council of Ministers no. 580 of 08/21/2003 places the Office of the Minister of State in the Prime Minister’s Office and the Anti-Corruption Monitoring Group in charge of monitoring, coordinating and reporting on the implementation of the action plan.

Among the key measures and results achieved in 2003, we can single out:

Strengthening the structures: In the course of 2003 a series of measures were taken to strengthen the executive structures of the anti-corruption drive, such as the establishment of the Anti-Corruption Monitoring Group and the functioning of the Anti-Corruption Unit. To enhance transparency and to strengthen inter-institutional cooperation on information exchange and dissemination to the public, a Tri-Partite Commission was established. This structure was established with the proposal of the Minister of State in the Prime Minister’s Office based on the Memorandum of Understanding signed on July 15, 2003 by the Albanian Coalition Against Corruption, which is now fully functioning.

Institutional relations between the Anti-Corruption Unit and ministries, other special units of internal control, the general department of financial control in the Ministry of Finance and the Supreme State Audit have been strengthened and improved. The anti-corruption structures will be further strengthened in 2004 with the participation of new important partners.

Legal reform: The improvement of the legal framework continued in 2003 with the approval of laws in different areas. Some measures were carried out in the context of the Action Plan for Preventing and Fighting Corruption, 2002-2003. Among them, we could single out the law on “Internal auditing in the public sector”; the amendment to the criminal code on issues related to corruption; the declaration and control of assets of senior public officials; the rules of ethics in public administration; some changes and amendments to the law on prevention of money laundering; some improvements to the law and rules on public procurement etc.

Studies and activities: In addition to its routine activities in monitoring the Anti-Corruption Action Plan, the Anti-Corruption Unit has undertaken studies aimed at increasing the preventive effect in public administration institutions. Among the most important studies and activities for 2003 were:

(i) a comprehensive study of micro-systems “For the simplification of public services in central administration”. Based on the recommendations of this study, the Order of the Prime Minister no. 73 of 03/15/2004 “On the establishment of an Inter-Ministerial Working Group for the simplification and standardization of procedures and criteria for public services offered by central administration institutions” was approved. Legal and regulatory improvements of the institutions involved in the process will be evaluated and finalized by the working group during the second semester of 2004;

(ii) a study on the revision of legislation from the view point of the conflict of interests. The process of establishing a work group with the order of the Prime Minister for drafting the provisions for institutional improvements will start in 2004; and

(iii) a study on the financing of political parties and the electoral campaigns. The recommendations of the study will serve as reference for the working group that will come up with proposals for interventions in the legal framework that will take place in 2004.

Directions for 2004: The Anti-corruption Monitoring Group has planned several projects and activities for 2004. Among the most important are: (i) strengthening the specialized anticorruption structures and improving their coordination and cooperation; (ii) completing the legal framework and strengthening its monitoring to prevent conflicts of interest; (iii) completing the legal framework for transparency in the financing of political parties before the elections of 2005; (iv) expanding the application of the anti-corruption plan to local government; and (v) simplifying procedures and criteria for public services delivered by the central administration.

4. Negotiations with the EU

There was a clear improvement in the relations between Albania and the EU in 2003, which was reflected in the official opening of negotiations for the Stabilization and Association Agreement (SAA). There were seven rounds of negotiations in 2003, of which three rounds were political and four were technical. Already 71 out of 135 Articles included in the draft SAA are being negotiated (9 will be negotiated in the coming rounds), as are 6 annexes and 4 protocols. According to the agenda of the negotiations it is expected that all SAA Articles will be finalized in 2004.

The decision to open negotiations with the EU was accompanied by a decision to monitor the process of reforms in Albania through the establishment of a joint consultative working group.

The Albanian side accepted this decision. This was in place prior to and after the opening of the negotiations, which is particular for the case of Albania.

The key financial instrument in support of the SAA is the CARDS program. Two financial agreements were signed within this framework in 2003 totaling €78 million. The development of the €58.5 million 2004 CARDS program is underway.

In the context of refining legislation in 2003, the role, functions and competencies of the bodies and institutions that are part of this process were determined. Also, the necessary amendments to Law no. 9000, 01/30/2003 “On the organization and functioning of the Council of Ministers” and the Council of Ministers Decision no. 584, 08/28/2003 “On the approval of the regulation of the Council of Ministers” were made. The White Book of the EU (the strategic instrument for countries aspiring for EU membership) has been translated into Albanian and has been made available to all the institutions involved in this process.


The progress made with regard to key objectives and public priority measures in the context of the NSSED in 2003 is specified in what follows.

5. Market Institutionalization and Formalization

Key measures in the course of the implementation of the above mentioned objective included:

  • Further improvement of the legislation in the area of competition. In this context, the Law “On protection of economic competition” (“Anti-Monopoly”) was drafted and has been approved. This envisages the establishment of an agency for the protection of economic competition, as the institution in charge of the enforcement of legislation, and a commission of competition, as the decision-making body;
  • Institutionalization of the relations between the competition authority and the regulatory entities. This will put the relation on a legal basis and will improve the work of competition advocacy;
  • Formulation and approval of the law for consumer protection, which provides for public structures of market supervision that will be strengthened in the course of the coming year;
  • Beginning of the work for the computerization of the customs system, starting with the GDC and then moving on to the customs offices in the districts; and
  • Expanding the composition of the Independent Tax Appeals Commission to include two representatives of the business community, in line with the implementation of the law on tax procedures.

6. Promoting Enterprise

Actions to this end for 2003 included:

  • Preparation of the study “On removal of administrative barriers to business - an integral part of the development strategy” by FIAS, IFC, and the World Bank group;
  • Facilitation of procedures for business entry, including: strengthening and enhancing the efficiency of the Business Consultative Council on the re-organization and improvement of its operations; finding mechanisms and developing projects in line with fine-tuning the government-business community dialogue; and removal of the requirement for licensing in the non-agricultural sector;
  • Continuation of the evaluation of the Trade and Transports Facilitation project with the World Bank ($11.2 million);
  • Improved access to information for businesses via announcements in the media, the Internet pages of the tax authorities and the establishment of the Official Publications Center. The tax and customs administrations published instructions with regard to procedures;
  • Installation of special telephone lines (poll lines) for the registration of complaints in some institutions; and
  • Implementation of the new bankruptcy law

7. SME Development

In line with creating a positive climate for the development of business and in order to open the way for SMEs, the following measures were taken in 2003:

  • Establishment and strengthening of the Department of Policies and Business Development in the Ministry of Economy;
  • Establishment and initial operations of the SME Development Agency;
  • Development of a scheme for credit guarantees for SMEs and approval of a concept document for the establishment of the SME Credit Guarantee Fund in the context of a grant by the Italian Government;
  • Implementation of a project with the European Training Foundation (ETF) to improve the regulatory framework for SME development, improve the credit system for SMEs, introduce an operational information system, study the impact of SMEs on economic growth, publish a “Guide to Investments” and improve the operational management and institutional strengthening of SMEs;
  • Implementation of a USAID “Program for assistance and credits for the small business” worth $6 million; and
  • Adoption of the European Charter for SMEs in the context of the SAA and publication of the national report on SMEs in Albania (in cooperation with the EU).

The implementation of the law on SMEs led to their classification from the statistical viewpoint. An important objective would be the implementation of this classification from the fiscal perspective as well. During 2003 important progress has been made to improve the links of the banking system with business. Credit to business has continued to grow.

8. Foreign Direct Investment

The foreign investment climate has kept improving in two directions:

  • There is increased security of investors countrywide as a result of strengthening the security and public order measures;
  • Investments in infrastructure projects, especially roads.

Main areas of the government’s work for promoting FDI in 2003 included:

  • Establishment of a legal and regulatory framework for promotion of foreign investments;
  • Launching of the FDI Promotion Agency;
  • Reduction of foreign investment risk;
  • Improvement of the image of Albania as a country with potential for investments;
  • Establishment of a credible independent appeals institution for taxpayers;
  • Launching of the national entity of free zones;
  • Improvement of physical (energy, transports, telecommunications) and social infrastructure (education, training and management) related to investment;
  • Publication of the “Guide to Foreign Investments in Albania”; and
  • Study by the government in cooperation with FIAS on administrative barriers to investment, which will serve as a base for reducing these barriers.

The amount of foreign direct investment was approximately $178 million in 2003.

9. Trade Liberalization and Export Promotion

The development of exports is considered as a key factor for the improvement of the macroeconomic indicators. In this context, the government has established several public priority measures as follows:

  • Approval of the law for the establishment of the Export Promotion Agency, which was followed by the approval of the full legal package for its operation. The executive director was selected by competition, and the same method was used for the selection of the staff of the agency, which is now fully operational;
  • Establishment of the network of public and private agents involved in the operation of the agency (regional development agencies, business associations, training and research centers, consultative firms etc.);
  • Introduction of appropriate schemes for exports guarantees;
  • Establishment of an efficient system of marketing information;
  • Improving the basic legal and administrative conditions;
  • Promoting the potential of Albanian exports in the regional and international markets;

In the course of 2002 technical negotiations were completed for six Free Trade Agreements (FTA). In 2003, the agreements were ratified by Parliament and the implementation of four of these agreements began. The positive effects of the FTA with the FYR of Macedonia are visible, as new products have been added to the traditional list of exports, such as fruit juices, sparkling water etc.

Exports in the first 9 months of 2003 increased by 38.2% vis-à-vis the same period of 2002. The export structure is dominated by façon exports (78.3%), while local exported products included medicinal plants, tobacco, leather, timber and different minerals and metals. The ratio of the façon exports relative to local product exports has changed during 2003.

10. Financial Sector Development

In the context of banking system restructuring, the following important developments took place in the course of 2003:

  • Entry of a new bank, preliminary approval of another one (both operate with local capital) and the privatization of the Savings Bank. After a couple of unsuccessful efforts last December, 100% of the Savings Bank was sold to the strategic investor, Raiffeisen Bank. During 2003, the banking system expanded further in terms of the volume of transactions and geographical coverage. There are currently fifteen banks. However, given that the Savings Bank has a dominant position in the market with 60% of the bank deposits and 80% of the treasury bills market, competition is still limited;
  • Banks continue to expand their activities through new branches or agencies in different cities. Several banks are investing in electronic means of payment. During 2003, 12 new ATM facilities were installed in Tirana and other cities. However, the main payment instruments continue to be the traditional ones: payment orders and cheques.

Other developments in the financial market in 2003 included the following:

  • The Tirana Stock Exchange, which is no longer part of the Bank of Albania, received the final license to operate in the local capital market.
  • The insurance market has expanded further both in terms of new services and in terms of regional expansion. Meanwhile, progress is being made with regard to the privatization of the state-owned insurance company, INSIG, which after successfully operating in Kosovo now has a license to conduct activities in the FYR of Macedonia.
  • Progress has been made in strengthening the Deposits Insurance Agency. The periodic publication of data on the banking system has extended to the financial nonbank subjects of the Bank of Albania;
  • Further work was carried out to transfer and consolidate the pensions function from the Savings Bank to Albaposta. Also, efforts have been made to transfer the bank’s fiscal functions towards other institutions, reduce the number of staff combined with improved quality of the staff, and further consolidate its offices in rural areas to ensure access to basic banking services;
  • The Bank of Albania has simplified its requirements for approving the expansion of branch networks within Albania. In all cases, expansion is now approved solely on the grounds of sound financial situation.

By the end of 2003, credit accounted for 13.5% of all assets, thus reflecting an increase of 2.1 percentage points compared to a year ago. The fall in the investment share of treasury bills and in inter-banking transactions in addition to the expansion of lending activity reflects the improvement in the structure of the system. Except for the Savings Bank, lending is calculated at 27.9% of the assets of the remaining part of the system. The indicator of credit quality has improved, reaching 4.6% down from 5.6%, which was the figure one year ago.

The financial situation of the banking system in the end of 2003 is satisfactory. Public trust has increased along with the increase in the domestic and international deposits. As a result of the expansion of the network of bank branches, the upgrading of technology and the increased flows of information, there is an increase in the administrative expenditures. Expenditures on provisions fell by Lek 155 million; this reflects improvements in loan quality.

2004-2007 MTEF for the development of the financial sector

In the medium-term period up to 2007, the support for the development of the financial sector will continue on the basis of the adopted priority directions and instruments. These are: strengthening market institutions, increasing the leverage of financial support through financial sector development, increasing the degree of information and modernization, improving public services to businesses, and pursuing the policy of economic opening. The policies and measures will continue to be implemented with increasing engagement of the business community.

To meet this objective, in the medium-term, the banking sector has to further strengthen its structures, including banking oversight, and play a more central role in the economic development of the country. The recent privatization of the Savings Bank is expected to have a positive impact. There have been several efforts to reduce cash transactions and promote the use of the banking system. Meanwhile, the Tirana Stock Exchange should strengthen its role as a secondary market for treasury bills, government bonds, and the registration and trading of stocks and bonds of local companies.


11. Energy and industry


With the support of the Government of Albania, the power sector has established, developed and consolidated the necessary structures to support its development in compliance with the organization of the internal and regional energy market. In this context, short- to long-term policies were prepared for the development and restructuring of this sector until 2015, in line with the EU standards and an open competitive market.

2003 was a successful year with regard to the formulation and implementation of these policies, as well as in relation to the implementation of the action plan for 2002-2003. Among the main achievements for 2003 are the formulation and approval of the National Energy Strategy, which defines the concrete steps for the sector until 2015, and the approval of Law no. 9072 of 05/22/2003 “On the power sector”.

Power generation for 2003 witnessed an increase from 3100GWh to 4700GWh, and consequently imports of energy were reduced from the planned 2500GWh to 1000GWh. Loss and collection indicators in the network in general have improved substantially over the years, as summarized in the table below.

Table 3.3:Power sector indicators
Source: INSTAT- 2004
Source: INSTAT- 2004

In line with meeting the objectives foreseen for this sector, priority measures taken in the course of 2003 were as follows:

Establishment of a financially and technically powerful energy industry

In line with the functioning of the necessary structures for an open and competitive energy market a comprehensive study on all related issues for the country until 2015 was conducted together with the expansion plan for the electrical power system (LCEP). In this context, KESH was divided according to sectors, and the Transmission Systems Operator was established, which will be fully operational by June 2004. In the mean time, preparations for a detailed plan of actions for full cost recovery and rationalization of distribution fees until mid 2005 have been finalized.

Strengthening the importing, transmission and distribution capacities

In the course of 2003, several agreements for the interconnection of the Albanian with the regional power system were signed. The agreements to finance the National Dispatch Center, the construction of the 400 kV lines for Elbasan – Tirana and Elbasan – Podgorice, and the study for the construction of the 400 kV line Tirana – Prizen may be mentioned as examples.

Establishment of effective and transparent legal and regulatory framework

In the context of the legal framework reform and its adjustment to the EU requirements, a series of legal and acts were concluded, such as: the law on the energy sector, which defines the activities of the Energy Regulatory Entity, which replaces the role the Government played over the energy sector; the Decision “On prices and fees for retail selling of electricity for 2004”; the Decision “On protection of vulnerable population from increases in the price of electricity”, etc. Also, the Law “On creating facilitating conditions for the construction of new facilities for the generation of electricity” is finalized and has been approved.

Increasing generation capacities and strengthening existing ones

Among the main investments carried out in 2003 was the finalization of the “March 2000” project, which strengthened five and constructed one new sub-station. Work is ongoing for the rehabilitation of hydropower stations in the Drin and the Mat. The installation of meters was initiated in 2003 and financing was secured to generalize their use and to finalize the contracts for their procurement. There is a project underway for the construction of a new thermal power station in Vlora, and all the necessary permits have been obtained. Negotiations have begun with different international financial organizations. The decision was taken to launch the construction of the Sasaj hydropower station with BOO concession and negotiate the signing of the concession agreement with Wonder Company.

Reforms for the medium-term 2004-2007

The objectives consist of: (i) establishment of a technically and financially sound sector through improved management of the system and resources, and improved service for clients; (ii) improvement of the legal and regulatory framework (including the Transmission and Distribution Codes) and support to the energy regulatory entity; (iii) strengthening the TSO and restructuring of KESH; (iv) preparation of the process of privatization of generation and distribution and attraction of private investments in the sector; (v) participation in the regional and European energy markets. A number of public programs for redressing the situation in this sector have already been prepared and some of them are being implemented. According to the program, it is envisaged that the reduction of losses in the network could reach up to 30% by 2006, while as a result of improvements in collection their level will reach 96% out of 92.2%, which was the figure for 2003. Priority will be given to the installation of meters within 2004 because this is perceived as an important factor for reducing the excessive consumption of energy and establishing a fair relationship with the consumers.


Currently, the hydrocarbons market is fully liberalized, from the point of research to the point selling oil and LPG by-products.

As a result of the restructuring of the oil companies and the implementation of the hydrocarbons agreement for the Patos-Marinza area the production of oil and gas increased by approximately 10% in 2003. The production is further expected to increase from 398 to 430 thousand tons in 2004.

In recent years, 19 hydrocarbons agreements have been signed, as a priority action to attract foreign investment. Foreign companies have so far invested approximately $350 million in oil research.

Another important achievement for the hydrocarbons market was the legislation on licensing for the processing, transporting and trading of oil, gas and their by-products, thus creating a very diverse and at the same time competitive environment.


In the course of 2003, the mining sector supplied utilization and research permits to 379 companies in accordance with the law on mining.

Chromium: Approximately 30 mines have been closed down and their assets are in the process of being privatized. 7 mine facilities have been given on concession (3 mines, 2 ferrochromium factories, 1 enrichment factory and 1 selection facility). 110 mine utilization permits have been issued to 44 applicants. Approximately 70 mine galleries together with their assets have been leased.

Copper: 48 facilities have been closed down and are in the process of privatization, while 2 mines were privatized. 3 facilities have been given on concession: a copper factory in Rubik, a mine, and an enrichment factory (BER-ALB);

Iron and nickel: 13 mine facilities have been closed down and are undergoing the process of privatization of assets.

Coal: 35 mine facilities have been closed down and are in the process of privatization, 6 utilization permits have been issued and their assets have been rented.

Since 1995, 140 mines and sectors have been closed down and are in the process of privatization.


A study was carried out in 2003 to look into the possibility of establishing industrial parks. The study looked into the possibilities for the former industrial regions in the country to define ways for their development. A study was carried out in the Elbasan metallurgical plant in order to determine the free spaces to set up the industrial park. In cooperation with other institutions, the existing infrastructure was assessed and a preliminary design was done for the establishment of this park.

In the framework of eliminating administrative barriers, Decision no.398 of 06/13/2003 of the Council of Ministers abolished the process of licensing for subjects that invest and operate in the non-food industry area.

The industrial sectors that performed best in 2003 were metallurgy, leather and shoes, and timber. Industrial production grew by 9% compared to 2002, accompanied by a 4% increase of the labor force.

12. Transport and Telecommunications

Expanding and enhancing the transport infrastructure has been a priority objective. To this end, the following measures were taken in 2003:

  • Important public investments with support from the budget and international partners have been carried out to improve road infrastructure, including: (i) rehabilitation and expansion of the east-west (166 km) and north-south (105 km) corridors and of sections that connect them with regional networks and other nationally important roads; and (ii) rehabilitation of tourism, cross-border and regional, urban and rural roads in agreement with economic and demographic trends, as well as the objective of increasing road access to the poorest areas of the country.
  • Spending on maintaining the roads network and improving the traffic lights system has increased. The first stage for the implementation of a project to gradually transfer the maintenance of road networks to contractors (privatization) has already began and the first ten contracts were signed. The transfer rural and urban road maintenance responsibility to the local government and the award of maintenance contracts are expected to yield positive effects to this end.
  • Investments have been carried out to increase the processing capacities in the ports of Durres, Vlora, Shengjin and Saranda. Rinas airport now has a higher processing capacity and the tender for the management contract was completed. In the context of a World Bank project, work began on the commercialization of the Durres Port Authority via the establishment of an autonomous port authority, the privatization of operations, improvements of customs procedures, and safety operations. An Albanian Maritime Authority is now in place. The first phase of a project to modernize air traffic is also completed.

Rapid progress has been witnessed in telecommunications, including fixed line telephony, mobile communication, internet access providers etc. In addition to Albtelecom, licenses have been issued to 45 telephony operators in rural areas, with a growing number of users. The market expanded in 2003, especially in the area of mobile communication. There were 996,288 mobile phone users in June 2003 up from about 800,000 at the end of 2002. In the context of the privatization process, Albtelecom was restructured in two stages and as a result no longer has exclusive rights for fixed telephone services for urban and international calls. There were 222,000 Albtelecom clients in June 2003. There are already approximately 30 telephone operators in rural areas with approximately 20,000 users. The total number of fixed telephone lines is therefore 242,000. Access to a fixed telephone is therefore 7.8% of the total population. The postal service is also undergoing reforms.

The main medium-term objective for 2004-2007 in the development of transport and telecommunications is the establishment of a modern infrastructure network that will lower the cost of economic transactions and alleviate poverty, especially in rural areas. To this end, some of the measures are: (i) preparation of a transport master plan by sub-sector; (ii) rehabilitation of the road network and improvement of the system of maintenance; (iii) commercialization of services in all infrastructure sectors (roads, maritime, railways, and air) and improvements in the regulatory and institutional framework. Air transport projects will continue and private investors will be sought for these projects. Further liberalizing the telecommunications sector, privatizing Albtelecom, and expanding the network to rural areas will be important directions for the development of the private sector, along with supportive and promoting government actions.

13. Water Supply

The water supply sector has gone through major problems of capacity, coverage, access, quality, as well as financial and management problems in recent years. To this end, priority measures have focused on: (i) improving water infrastructure through public and foreign investment; (ii) improving management and the financial situation of water companies; (iii) implementing reforms in the water infrastructure through different methods of involving private operators, such as through concessions, management contracts etc.; and (iv) implementing the decentralization reform, which transferred the water and sewage companies under the administration of local governments.

As a result of considerable investments, there was an increase in the water supply of the population by 4-5 hours per day on average during 2003. On average this means a water supply of approximately 11 hours per day. Meanwhile, the number of clients reached 11,000 in 2003. There has been an increase in the number of concession contracts (Durres, Lezha, Fier, Saranda, Kavaja, Elbasan, Berat, Kucova and Vlora). In the context of the decentralization of the water supply service, the inventory of assets for all water and sewage companies has been completed and the first group of 12 joint stock companies has been prepared for transfer to local government authorities in 2004.

Public measures in recent years demonstrate the positive impact of increased efficiency in water supply. The reform will continue the medium-term to strengthen discipline, privatization and decentralization, and carry out major public investments. Similarly, the decentralization reform, the concessions and other forms of private sector participation, the refinement of price policies reflecting the costs of interventions in the networks, and the improvement of the quality of service to the population will also continue. Work is underway to raise community awareness and foster the participation of the private sector. Completing the projects currently under implementation, together with a range of proposed measures is expected to have positive effects on improving the quality of service provision.


14. Education

The provision of education services has taken center-stage in the context of national social and economic development, not only because of education’s special role in increasing opportunities for the poor and inducing growth, but also because of the deterioration of education indicators during the last ten years and the slow progress of reform. In order to redress the situation, several interventions led to the following main achievements in 2003: (i) the Ministry of Education and Sciences (MoES) is now operating according to a new charter, and reporting institutions have been restructured to increase administrative effectiveness; (ii) strategic objectives until 2013 were formulated; (iii) the system was directed in the road to a deep and substantial reform based on strategic objectives; (iv) new curriculum frameworks for pre-university education were prepared; (v) the new structure of the Budget Division was finalized according to analyses of demand and potential; (vi) a new scheme for the distribution and sale of pre-university education textbooks was implemented; (vii) financial autonomy was promoted at different levels.

Graph 3.1:Education sector expenditure

Source: Ministry of Finance *2004 – projections

In the context of increasing the effectiveness of public management: (i) the reform of MoES and of reporting institutions with respect to content, structure and organization was finalized and a Council of MoES was established as a consultative body; (ii) the transfer of responsibilities of the ISP to two quasi independent institutions, namely the Institute of Curricula and Standards, and the Center for Education Training and Qualification, was finalized; (iii) district education departments were replaced by Regional Education Departments, and the process for the establishment of Education Offices in the districts is underway; (iv) work is underway for the establishment of a national preparatory system, training and qualification of education system experts.

In the context of reforming the system and the content of education:

  • The draft of the Strategy for the Development of the Pre-University Education System 2003-2013 was completed. This strategy envisages changes in the education structure and attempts to harmonize this strategy with the objectives of the “Education for All” initiative. The revised document of the Strategy for the Development of the Pre-University Education System will be forwarded to the Council of Ministers within the first half of 2004;
  • Training programs for the senior staff at the central, local and school levels were drafted in order to strengthen their qualifications. Staff at the central and regional levels have started their training;
  • The new curriculum framework of pre-university education, which aims to develop the necessary skills to face the challenges brought about by the gradual integration of the Albanian with the regional and European education systems, has been introduced;
  • The main lines of the new curriculum framework as well as the implementation platform that would enable its launch by the academic year 2004-05 were drafted;

In the context of policies to extend compulsory education to eight years and expand vocational training and its adjustment to market needs, the following steps were taken:

  • Universal enrolment of the school-age population in compulsory education was achieved. The overall participation during academic year 2002-03 was approximately 98%, while the dropout rate fell to 2% (compared to 3.2% in 1996–97, 2.8% in 1999– 2000 and 2.4% in 2000– 01);
  • 170 new laboratories have been established and 20 new specializations have been introduced in vocational schools in 19 districts;
  • The transfer rate from compulsory to secondary education increased to 71% up from 66% last year and 63% in 2000. This represents an absolute increase of 7700 students of which 1734 went to vocational schools;
  • For the first time, free textbooks were supplied to students in compulsory education;
  • Nationwide support was achieved for the “Education for All” project and an implementation draft was completed;

Education expenditure has been increasing. Education expenditure was 2.85% of the GDP in 2003 and is expected to increase to 3.14% in 2004. This level is still low compared to other countries in the region at similar levels of development, where this level is on average about 4.8% of the GDP. In 2003, 42 new schools were constructed and 176 schools were reconstructed with public budget funds. Another 272 schools were furnished and equipped. Besides, 7 new schools were constructed and 56 schools were reconstructed with donor funds in 28 districts. In the context of improving working conditions, the Decision of the Council of Ministers to increase the salaries of employees by 8% was put in force during the previous academic year.

The priority action plan will intensify the reforms throughout the system in order to achieve the set targets. The reorganization of the education system will proceed towards decentralization. This step intends to establish a distinct role for local government and promote the autonomy of schools, while the MoES will strengthen its leadership, coordinating and monitoring role. Ongoing programs to increase access of poor children to education, to improve teaching conditions, to increase the skills and motivation of staff, and to increase participation in secondary education will continue as will projects to increase the number of vocational schools. There will be moves to rationalize the expansion of the education system. Reforms will be introduced in the university system to increase autonomy and the quality of teaching in order to comply with the long-term national developments targets. The Bologna process and its directions constitute the basis of university education reforms.

For the mid-term period 2004-2007 the objectives of the MoES are the following:

  • Extend compulsory education from 8 to 9 years;
  • Further decentralize the compulsory education system;
  • Optimize the size of existing vocational schools;
  • Complete the legal framework of the education sector;
  • Set education standards to increase effectiveness and develop sound curricula;
  • Establish a nationwide compulsory and inclusive education system;
  • Introduce interactive teaching methods;
  • Establish professional capacities aiming to increase of the education quality.

15. Health

One of the health sector priorities is to reduce infant illnesses and mortality. Infant mortality in Albania has decreased from 41.5 per 1000 live births in 1990 to 16.8 per 1000 live births in 2003, but this is still far from European levels.

In the northeastern districts of Albania, such as Diber, Kukes, Tropoje, and Puke this mortality figure is twice as high as the national average. The Ministry of Health has drafted specific programs for the continuous monitoring of infant mortality levels. These programs include: the unification of treatment protocols; training for all physicians who have been working for five years after completing their specialization; training for staff that works in children advisory centers (known as Well Visit Clinics); continuous monitoring of the Law “On the promotion and protection of breast feeding”; the reduction of different kinds of malnutrition among children up to 5 years old; the fight against iodine deficiency disorders in children up to 6 years old, etc.

Reducing infant mortality to 10 per 1000 live births by 2015 is one of the challenges for the health sector in the framework of the Millennium Development Goals. The introduction of integrated management for infantile diseases in 2003, including evaluation, treatment and combined advice, has been very important and will be continued in the next year.

Graph 3.2:Health sector expenditure

Source: Ministry of Finance *2004 – projections

The health sector, as one of the most important sectors for human development, is defined as one of the priorities of the Government of Albania for the years 2004-2007. But despite all interventions, many problems still exist. Financing by the public budget is still very low despite annual increases. Only 2.9 % of the GDP is allocated to the health sector, which is lower not only to developed but also to developing countries. Nevertheless, this figure is projected to increase to 3.2% by 2006. Problems are encountered in regulation and service provision. Solving these issues will take time and requires continuous emphasis in health sector reform.

The strategic objective of the Government of Albania has always been the continuous improvement of public health indicators. This objective will be achieved through: (i) increased effectiveness in the use of material, human and financial resources; (ii) improved regulation; (iii) increased access and equal rights for health services for all citizens; and (iv) specific interventions in particular areas. In order to meet all these objectives, several interventions in were carried out in 2003.

In the framework of improving efficiency and effectiveness of the use of human resources, efforts have been made in the following directions:

  • Improvement of the planning process in order to move into a planning process based on detailed analyses of problems in each district and each institution. For this purpose, DFID has prepared a program, which will encourage institutions to start drafting three-years plans.
  • Improvement of resource allocation and monitoring of their use at the central and local levels as well as of corruption;
  • Improvement of monitoring and financial control by experimenting with different forms of public involvement and evaluation of health services;
  • Improvement of public health financing methods. Apart from increases in the size of the resources, it is also very important to allocate these resources effectively and use them efficiently. Efforts are made to expand the health insurance scheme. The NIHC has worked intensively to draft the overall policy on health insurance and to strengthen its institutional and professional capacities. In this framework, it has drafted and prepared a new project to include NIHC (ISKSH) in the total financing of health services in the district of Berat. In addition, efforts have been made to computerize the health services in Tirana. The master plan for the primary health sector in Tirana has been completed.
  • Important steps have been made to improve the regulatory system. There were improvements in the legal framework (seven bills were prepared in 2003) and the structure of the Ministry of Health. Support was provided to the Physicians Order, the establishment of the Pharmacists Order, and the development and monitoring of the private sector.

In relation to increasing access to health services and improving the quality of services, it is intended to cover the entire country with health centers and half of the national territory with ambulatory services. For this purpose, 190 health centers were constructed or reconstructed during 2003. The hospital law, which will be the base for establishing regional hospitals, was completed. Attempts were made to re-balance the geographical distribution of staff. For this purpose a new map was drafted to help distribute staff in accordance with needs. Efforts are made to increase the motivation of those working in rural and remote areas of the country, in order to prevent them from moving out of these areas and into the cities. Several Decisions of the Council of Ministers have been issued in relation to this issue, such as “Creating the financial motivations for mid-level staff who work in rural areas”, “Adjustment of the salaries of employees with seniority scientific grades” and “Adjusting and establishing a correspondence between titles, working posts and payment levels in the sector”.

Particular attention is paid to tackling corruption, which is by now a worrying phenomenon. A number of normative acts, which should limit corruption, were drafted and improved. Illegal fees realized by health staff have been exposed. This will hopefully reduce leakage and abuses of public office. The establishment of public relations offices is being considered, as is the introduction of boxes where people can lodge their complaints and concerns related to corrupt behavior. Awareness posters urging patients not to pay and health staff not to accept bribes have been put up.

With respect to increasing the quality of service, it is intended to strengthen the role of nurses in public health services by organizing training courses and establishing the National Coordinating Committee for Nurses. With respect to ensuring the provision of safe, effective and affordable medicine, the legal framework has been improved through the laws “On medicine” and “On narcotic and psycho-therapeutic substances”.

Public health indicators will be improved through specific interventions to promote health, limit and prevent contagious diseases, tuberculosis and STD, improve mother and childcare etc. Full vaccination coverage has been achieved under the EPI program. Moreover, the chain refrigerating equipment is now functioning properly and the quality control system has been improved through the establishment of the National Authority for Vaccination Control. The National Program for Tuberculosis Control in the framework of the WHO Directly Observed Treatment Strategy (DOTS), which is being carried out in all districts, has increased the laboratory diagnosing level of tuberculosis cases. In order to reduce diarrheal diseases, careful attention has been paid to the quality of potable water and food. The spread of the SARS disease was prevented thanks to strong measures applied at border crossing points.

Finally, a strategic policy paper for mental health services was approved and staff in these facilities was trained.

16. Social Policy

The policy followed by the Ministry of Labor and Social Affairs in 2003 was based on two foundations: (i) providing opportunities for social groups in need; (ii) increasing their participation in the decision-making process and guaranteeing the provision of basic services. The policy also aimed to improve the financial situation of these groups and to expand the range of benefits made available to them. The need to guarantee a minimal standard of living and services for the poor and others in need requires increased effectiveness in policy implementation.

Active Employment Policies

The increase in employment levels has been one of the main objectives of social policy, in particular through: (i) institutionalizing and formalizing the labor market; (ii) improving the employment services; (iii) qualitatively improving and expanding professional training in accordance to market needs; and (iv) introducing measures to stimulate employment. The implementation of public priority measures in 2003 has contributed to significant progress.

The presence of a large informal labor market stresses the need for integration and institutionalization. In this context, the priority measures implemented in 2003 moved in the following directions: (i) improvement of the legislation to limit informal labor and promotion formal employment; (ii) preparation of short and medium-term study on demand and supply in the labor market; and (iii) building up the qualifications of staff in the employment services in Tirana, Durres, Shkoder and Korca through training and establishing modern working conditions in some Regional Employment Offices (Fier, Durres, Gjirokaster and Shkoder).

Expanding the employment services and increasing their effectiveness has been another important direction of policy. The efforts in this direction headed in the following directions: (i) establishment of quantitative and qualitative monitoring indicators on the performance of employment services; (ii) improvement of the quality of employment services; (iii) computerization of employment services for which an agreement with the Swedish National Employment Agency has been concluded. In addition, a pilot project transferring the European experience on employment services with the support of the ANPE-France was extended to Regional Employment Offices (Vlore, Elbasan, Fier and Berat). Among the activities carried out was the upgrading of the qualifications of managers, the introduction of experts in Regional Employment Offices and the approval of action plans for twelve Regional Employment Offices. All the above-mentioned measures have increased the effectiveness and quality of employment services. Regional Employment Offices were involved in 7400 cases, which exceeded the target of 7000 set for 2003. Increased levels of intermediation have resulted in 11% more placements in 2003 relative to the year before. This has also had a positive effect on national employment levels.

Particular attention has been paid to the quantitative and qualitative development of vocational training in accordance with labor market needs. This has raised the effectiveness of training center activities and the number of people trained in response to labor market needs. One of the measures undertaken in 2003 was the expansion of vocational training centers and their spread throughout the country. The vocational training center in Shkoder started its activities, while similar centers in Elbasan and Fier will start their activities once the buildings where they are based are reconstructed.

In the context of modernizing the vocational training curricula and improving the quality of these schools, the legal framework has been drafted and the curricula for eight different occupations are being reviewed to comply with market needs. The number of graduates increased to 8500 in 2003, well above the target of 8000 persons for this period. This has had a positive impact on unemployment since only 30% of those trained persons were seeking a job. 94 private entities and non-profitable organizations carrying out vocational training courses were granted a license in 2003.

In the framework of measures to stimulate employment, 147 employment promotion projects were being implemented in 2003. The Government of Albania has paid particular attention to the employment of the poorest groups of the population and other social groups in need by including these categories in the employment promotion programs.

The long-term objective to increase employment levels is primarily based on policies to promote economic growth and develop the private sector. Given labor market trends in the medium- and long-run, the development objectives are the following:

  • Reduce unemployment to its natural rate by adopting the labor market objectives of other European countries;
  • Integrate the Albanian labor market into the regional one through legal and institutional measures included in the Vocational Training and Employment Strategy. This will be monitored through the number of trained persons according to regional labor markets standards;
  • Adapt the vocational training in Albania to the requirements of a developing and restructuring economy and those of globalization. This will be monitored through the number of occupations whose certificates are recognized in the EU countries;
  • Change the balance in favor of active instead of passive policies. This will be manifested through declining public expenditure on unemployment benefits and social assistance and increased spending on active labor market programs.

Employment promotion programs will continue focusing on vocational training and the improvement of employment services. For this purpose, public centers for training and jobs are being strengthened and private services for employment and social business will be promoted and extended. In addition, subsidies to the private sector will be continued with the aim to employ initially 5,000 unemployed people every year.

Social Assistance

The high levels of poverty call for financial assistance, which was about Lek 4 billion in 2003, to also remain at a considerable level.

In the framework of the priority strategic objectives for social protection and other active preventive policies, which gradually reduce poverty, social exclusion and inequality, progress has been recorded in the following areas during 2003:

  • Extent of coverage of the socio-economic needs of the poor and disabled through social assistance;
  • Establishment of the legal framework for the implementation of effective and integrating programs for the poor groups of the population that place priority to services over financial aid in cash;
  • Decentralization and award to the community of social services in collaboration with the civil society and the business community;
  • Introduction of innovative kinds of social services in response to the new social problems facing the country. The role of local government has increased significantly in this respect, as has the collaboration with non-profit organizations and donors for bringing services closer to the community throughout the country.

With regard to achieving these objectives, the following steps have been undertaken: (i) improvement of the methodology for allocating social assistance funds, based on socioeconomic indicators defined by local government in order to target funds to the poorest families; (ii) improvement of the information system to collect more detailed data on the groups in need; (iii) structural improvements to strengthen control mechanisms; (iv) improvement of the managing structures of the social assistance at the central, regional and local level; (v) training of social administrators; (vi) drafting of the integral law on social services; (vii) preparation of social service standards; (viii) institutionalization of structures for planning community services at the regional level, and (ix) improvement of the quality of residential centers in order to create room for day care centers.

The social assistance scheme is a passive policy with regard to the poverty reduction and as such needs to be continuously updated during the poverty reduction process. To improve coverage, the level of assistance and the overall impact, the main dimensions should be the following: (i) improvement of the method to calculate social assistance; (ii) decentralization of the social assistance scheme starting with pilot projects; (iii) bring social assistance in line with the social protection and social care mechanisms and with the employment promotion schemes. A study on the “Assessment of the criteria and indicators for the distribution of social assistance” was carried out in 2003, in line with this reforming process. This study will be a tool for the improvement of the distribution of the block grant of financial aid. Quantitative poverty indicators improved in 2003 and qualitative poverty indicators were first introduced. The social assistance program supported 129,600 families throughout the country in 2003, down from 133,000 families in 2002. The funds used for this purpose were Leke 4 billion. 55,000 families living in urban areas benefited from social assistance (42% of the total), compared to 75,000 families in the rural areas (58% of the total).

In the medium-term reforms 2004-2007, the implementation of the poverty mitigating social policies is one of the main directions. The financial support program for families in need through social assistance is also included. In order to increase the efficiency of the scheme, this will be reformed to combine it with employment policies, the social business model, and active social services, which take the multi-dimensional profile of poverty into consideration. Emphasis will be put to the provision of special services offered to vulnerable population categories (children, youth, women, elderly people) in response to their needs. This will address not just traditional problems but “new” ones as well, such as drugs and abuse.

Housing problems are very critical and have been inherited and accumulating for years. The measures undertaken in 2003 to mitigate the crisis have consisted mainly of mending gaps in the legal framework and implementing long-term policies housing. Despite all the efforts, the improvements in this direction have been modest due to budget constrains and the high demand and cost to cover this issue. It is necessary to look for alternative strategies, which are still being discussed. Two hundred families were offered accommodation in 2003. Devising relief measures for homeless families is one of the main objectives for 2004.

Social Insurance

With regard to further developing the social insurance system, the priority activities consisted of the following: (i) continue with system reforms in order to increase its sustainability; (ii) increase the real level of benefits; (iii) increase the involvement of the rural population in the contribution scheme; (iv) extend social insurance to people employed abroad; and (v) tackle the evasion issue and carry out legislative improvements in order to resolve outstanding issues. Steps to strengthen the SII and its capacities, to adopt new initiatives and introduce computerization accompanied these activities.

These measures have had a positive impact on the balance of the insurance scheme and resulted in a decline of subsidies. In addition, control rules have been improved, as has inter-institutional collaboration, which has insured an increase of the number of contributors to 114,700 compared to the previous year.

There have been some notable achievements in the effort to minimize evasion in contributions and decrease the burden on businesses. Evasion dropped by 2.6 %, while the share of businesses in total contributions fell from 42.5 % in 2002 to 38.5%. The collected contributions were 13.7% (or Lek 2.5 billion) higher than the previous year, while the expenses were increased only by 12%.

In the mean time, the process to merge the urban and rural pensions schemes in a unified scheme has continued. Urban pensions increased by 10% in 2003, while rural pensions increased by 20%, with an annual benefit of Lek 1.7 billion. These increases were recorded not only for retirement pensions but also for family and disability pensions as well as for groups of population in need. The fourth phase of the implementation of a program to reduce differences in pensions accorded in the period 1993-1996 started in December 2003. Some 110,000 urban retired persons benefit from this scheme with an added financial effect for the social insurance budget of Lek 760 million per year (or 5 % of the increase in pensions).

The system of social insurance is now approaching a crossroads in the long-term reforming process. In the framework of this reform, social insurance will continue to face a number of challenges in the medium-term period 2004-2007. In this context, in order to achieve these targets, besides the annual planned measures, the following ones will also be considered: (i) align the rural with the urban pensions scheme and increase the magnitude of the contributions of the self-employed in rural areas; and (ii) increase the number of contributors in the mandatory insurance scheme through voluntary contributors. In the long run, the above-mentioned changes aim to: (i) increase the replacement level from 35.8% in 2002 to 38.2 % in 2020; (ii) increase the level of coverage from 38.3% in 2002 to 57.6% in 2020; (iii) increase the dependency ratio of the scheme from 1.04 beneficiaries per contributor in 2000 to 0.82 beneficiaries in 2020.


In recent years, policies focusing on sustainable development have become an area of priority in medium to long-term policy development in both the social and economic arenas of policy making. Given the guidelines provided by the Millennium Development Goals, these policies will focus on deriving natural resources with regard to environmental protection and sustainable production.

During the period of transition there was much environmental degradation and over exploitation of natural resources and as a result the policies will concentrate on the areas that have suffered the greatest environmental degradation. These include environmental areas where high levels of the population have been assessed to be at risk, areas where environmental assets are at risk and where the poorer cohorts of the population specifically are considered to be at risk. Subsequently to address these issues the mid-term public measures adopted include controlling the extent of the degradation areas had suffered, rehabilitation of polluted landscapes and their compliance with basic safety standards, sustainability of the natural resources through greater awareness and education and creating the necessary framework for consolidating the public and private sector roles in this area.

The role of law enforcement is pivotal in consolidating the institutional framework and increasing effectiveness of the environmental sector. Throughout 2003 most efforts were concentrated on the effective regulation of the environmental sector. The role of the Ministry of Environment is crucial in successful policy implementation and projects financed by DFID therefore sought to increase capacity building in the Ministry of Environment and the Environmental Inspectorate. A number of collaboration agreements and papers have been ratified in order to facilitate the Environmental Inspectorate’s work in regulation and enforcement. Continued efforts are being made to consolidate relationships between international environmental agencies and institutions. In 2003 the Environmental Ministry produced policy papers on legal acts (on the environmental impact assessment), environmental management of solid waste, water pollution management, protection of the inter-borders lakes, bio-diversities assessment. They have participated in the Albania Prevention Convention for International Trade of the Species under Risk, in the Kyoto Protocol and the Environmental Strategic Estimation Protocol. A number of agreements between the Ministry of Environment and NGOs were signed during this year, which led to the preparation and approval of the Environmental Assessment Report for the period of 2001-2002.

In 2003 the following projects and initiatives were undertaken in order to address the environmental pollution in Albania:

  • Preparation for the tendering of the project “Elimination of the arsenic mixture in the Azoth Factory in Fier”, financed by PHARE.
  • A World Bank financed feasibility study on the environmental, health, economic and social risks in the area of Porto Romano – Durres has commenced. The study is to be concluded by early 2004.
  • Completion of the procurement procedures for the project “Pre-investing study for the hot area of Vlora” supported by the UNEP MAP. Implementation of this project is expected to be completed by 2004.
  • The “Ozone Project” which aims to consolidate the institutional framework for the implementation of the National Plan to prevent Ozone damage has commenced.
  • Finalization of project proposals for the CARDS 2002 project; construction of a plant for the processing (treatment) of the polluted waters in the Oil Refinery in Ballsh and a feasibility study on for the establishment of a landfill for hazardous waste disposal. The tendering procedures for the above projects have also commenced.
  • Two draft papers have been prepared titled “Estimation of the Costs for reduction of greenhouse gases” and “Estimating the Costs of Technology required for Adaptation of the Coast Areas”.

Policy measures for the sustainable development and exploitation of natural resources have been another area of focus for the Ministry of Environment in 2003. These include:

  • A report prepared on the status of the water collection zone for Lake Oher 2000-2003 for the project “Protection of the lake of Oher.” This is incorporated into the common program for the monitoring of the lake of Oher. A collaboration agreement between Albania and Macedonia for the protection and the sustainable development of the water collection zone (water collection place) of Lake Oher had been previously agreed.
  • Public awareness programs have been implemented for the protection of the lake of Oher.
  • Re-starting the work for the project “Protection of the coastal and lagoon eco-systems in the Mediterranean” after the project’s previous interruption due to oil research in mid 2003.

Adoption of these measures and the increased efficiency of the public structures have resulted in a decrease in the damages and misuse of forests, land, coast, water basins and river beds. Furthermore pilot projects are being developed for more sustainable systems for resource exploitation based on these initiatives and their success. Over the period of 2004-2007 the initiatives will focus on the effective rehabilitation of polluted zones in compliance with the minimal safety standards; effective management of environmental resources and capacity building of the public and private structures in this sector.

The long-term goal of achieving the environmental standards in compliance with EU regulations is integral to the Albanian road map for EU access. This will require further consolidation of the environmental structure in all levels as well as increasing human resources. There will be continued need for environmental performance reviewing, law enforcement, monitoring structures, maintaining of environmental databases and statistics in the contemporary levels, rehabilitation frameworks and increasing public awareness for effective participation in decision-making processes.


Integrated rural development is a main priority for the NSSED. Greater harmonization of activities in rural areas in order to mitigate rural poverty levels can be achieved through: (i) enhancing the employment and the increasing the revenues from non-agricultural products (ii) creating equal possibilities with regard to quality of services; (iii) improvement of the rural infrastructure such as roads, rural markets, potable water supply etc.; (iv) increasing the access of the rural population to the financial resources and credits as well as enlargement of non-banking services; (v) increasing the capacities of the rural community, etc.; and (vi) decrease of the rural migration and establishing closer relations of the rural community.

Agriculture and food is considered the most important sector of the national economy given the numbers of the population living in rural areas that are self-employed in agriculture. The NSSED framework aims to consolidate the progress made so far and set objectives for midterm and long-term strategies focusing on public investments as well as economic, social and financial resources harmonization in order to stimulate further investments. The increase of the private and public investments in the areas of marketing, agro-processing, food control and sustainable use of natural resources are key areas for reform. Even though Albania is an agrarian economy, the trade balance remains negative with regard to agricultural products. Production and commercialization of agricultural productions is still conditioned by the underdeveloped rural infrastructure, missing markets and information uncertainty.

17. Meeting the Objectives and the Priority Measures during 2003

In 2003 the total production from the Food and Agriculture sector reached a level of 4.1%, in which the agricultural products have recorded an increase of 2.8%, while the products from the agro-processing industry have recorded an increase of 11.2%.

The main achievements to the agricultural and food sector which have had an impact on the levels of production include:

Agricultural land management and protection

In 2003 efforts to improve and strengthen Land Management and Protection were continued and furthermore extended into 12 regions of the country. The draft law “On Land Protection” is under approval procedures and the unified documentation has been submitted to the villages in the touristic areas in Vlora, Saranda, Delvina and Diber (Lura). The law was drafted in collaboration with PMU/SRPP (a contractor of USAID) and there were five phases in the technical-financial action plan for the registration of assets. The work is ongoing and implemented in 74 new registries of which 18 are up dating and reconciling data, a process which when completed shows 17,927 assets. A further 35 registries are completing this updating process.

Irrigation water and draining management

In 2003 irrigation projects were continued in 21 districts of the country, including the rehabilitation project for Korca and the rehabilitation of the hidrovoreve in Vlora and Lushnja. 11 Regional Water Directorates, 2 Draining Boards and 211 Association of water users (SHPU), covering a surface of 110 604 ha have been established. Water structures, which irrigate 61,293 ha involving 87,644 farmers, are managed by the Water Directorates SHPU, which currently are responsible for a total of 180,000 ha.

Agricultural mechanization and inputs

Technology in the agricultural sector has increased significantly in 2003. The Japanese Government with their fourth project grant contribution of 448 millions has done much to boost agrarian technology. In 2003 agro-fertilizers amounts used were significantly higher to the previous year. Seeds: availability has improved combined with the necessary legal framework to support and develop the production quality control, importing sectors and research into new methods.


During 2003 there has been the targeting of specific projects for the successful breeding of cattle, pigs, poultry, etc. Artificial insemination amongst cattle was at over 40% of the cows’ population and 485 insemination centers are functioning in the country. 1200 animals of pure-breed, with full data or their predecessors including the production of their individuals have been registered. Two functioning breeding centers for cows and pigs have also been established. New technology for artificial insemination in pigs and sheep has also been established. Implementation of over 337 controls in 36 districts of Albania have been carried out for safer and more effective factory production for animal feed, this has been in both the commercialization as well as the importing sectors. 16 farms, which were responsible for 70 water buffaloes, received financial support from the state in the districts of Lushnje, Elbasan, Kavaje and Fier.

Scientific research

In 2003, 49 projects were implemented that reformed and restructured the research institutions. Activities carried out included the hosting of national conferences including “Land Degradation and Protection”, and a scientific symposium titled “Recent Studies in the Parasitological area”.

Advisory services

54 new centers for Agricultural Information were set up over the 2003 period. These centers helped in the information dissemination for greater public awareness and successfully distributed some 37,807 leaflets, 2,333 brochures and had 34 articles printed in the national magazines and newspapers. Furthermore they have played a role in information dissemination through the media with the broadcasting of 8 central electronic media programs, 72 other programs and advertisements. 112,729 farmers were contacted of which 7,619 farmers actively participated in some 835 demonstrations; this included 252 days of trainings with the participation of 2873 specialists. In collaboration with other agriculture research institutions, research programs in several farms have been carried out. Interviews were carried out to determine the levels to which the recommendations were helpful to farmers and it was concluded that 60% of farmers found the information of relevance to them.

Agro-processing industry

Significant growth in the agro-processing industries is evident through the marked increases in its related sectors such as increases evident in the processing and canning of fish (+87%), increases in meat processing (+43%), fruits and vegetables processing (+15%), production of vegetable fats (vegetable oil and olive oil with +51%) and the production of milk based products (+41%). Bread played a key role in determining the overall value of food industry production in 2002 taking a 38% of the overall production. The milling industry held 15% of this share. The number employed in the food industry also showed significant increases with an addition of 550 employees in 2003 (6% increase from 2002). The successes evident have been largely due to the heavy investment made within the sector. Investments totaling two billion have contributed to improvements in the sub-sectors of agro-processing industries.

Food safety and quality

Plant protection and the phytosanitary control

A working legal framework for plants protection and agriculture planting materials has been established in conjunction with the removal of technical and trade barriers between Albania and EU. These efforts will address problems related to the phyto-sanitary purification of products and prevention from diseases and parasites. Legal and technical initiatives have been undertaken for increased exports of new potatoes into EU markets. The Plant Protection Institute (PPI) has focused on the development of intensive cultures of greenhouse vegetables, fruit farming and viniculture. The role of the Directorate of Agriculture has helped in reducing the expenses related to crop damage by grasshoppers by half in comparison to 2002 figures. The funds saved as a result are now contributing to research related to saving other crops from parasites e.g. olive trees in districts of Sarande, Vlore, Delvine, Berat.

Protection of animal health

Regulations have been enforced for the control of diseases of pseudo-pox in poultry, brucellosis control in animals; mad cow disease (BSE); eggs export; import and commercializing of the medicaments; bivalves mollusks and for residues in the products of animal origin. All reforms have been carried out in compliance with EU regulations. In addition several programs have been implemented including the monitoring of animals residues (wastes); monitoring mollusks; monitoring the residues in animals and their eggs. Correct veterinary care and the use of veterinary prophylaxis have been carried out for the improvement of the epizootic situation of countries with regard to imports-exports and veterinary law. This veterinary draft law has been an area of priority for the Veterinary Directorate and is seeking approval. Strict controls over foods of animal origin have been implemented and tracked at every level from the border crossing control points up to the domestic veterinary inspectorate. Some 1500 licenses have been issued in 2003, contributing to revenues of 1,7 millions leke. Implementation of a new common information system on the zoo-zones has been put into practice along with a new strategy for animals’ brucellosis, which includes vaccination to take place between the small animals.

Food quality and control

Draft reports produced include “Sweeteners in food products”, an Agreement-Act between the Ministry of Food and Agriculture and Ministry of Finance on imported food products. Numerous orders have been passed including “The approval of the technical regulations of the Coca-Cola mark”; “Technical Regulation of all the approved pre-standards”; “The assignment of the inspectors of the Food Inspectorate in the border crossing points”; “The approval of the technical regulation of the Schweppes Holdings Limited mark”; completion of some parts of the Albanian Food Codex in relation to milk and it’s under-products, food oil and cans; the Regulation for the implementation of the Law no. 8944, dated 19.9.2002 “The production, nomination and commercialization of the olive oil”. The completion of regional laboratories for food control is underway at Durres and Vlora. To date 18,000 controls have been carried out with 4,060,000 leke taken in revenues for fines and penalties.

Improvement of marketing of agricultural food products

In 2003 the construction of the wholesale market in Lushnje was completed resulting in significant improvements in the marketing of agricultural products. Construction of the market of Korca had commenced and the design stages for a further market for Vlora was completed. The study for the construction of the market for Shkoder was under review. In Korca, there were completed construction works for rural markets in Pirg, Bilisht and Pojan. Some 34 villages have benefited by the construction of these markets including 3 communes and 1 municipality in Korca and an additional 43,000 beneficiaries in the surrounding regions. This has enabled the identification of potential products for export as well as creating an up to date product list. Market construction has identified key members and their potential roles including agricultural producers, stock-farming producers, fishing and agro-industry entities. Price reviews and analysis have been carried out on the competitiveness of milk, eggs and wine.

Sustainable management of the natural resources

Fishing and aquacultures

In addition to the increases in the number of the licenses entities from 388 to 600, a monitoring program was also started to guard over the illegal or non-licensed fishing, especially in small and artisan fishing. Collaboration programs have been prepared involving the General Police Directorate, General Tax Directorate, the Ministry of Environment, the Ministry of Defense for effective management solutions and regulation of sector activity in order to prevent illegal and non-licensed fishing. The program will also help in the rehabilitation of misused natural resources and as a result many interventions have taken place to make lake Oher, Saranda, Butrinti, Divjaka, Vain, Kune, Patok, Vilun environmentally sound. Progress for the establishment of the Fishing Management continued with the first construction phase in Vlora e Saransa completed. Following the approval of law no. 9041, dated 27th March 2003 making some additions to law no. 8976, dated 12th December 2002 on tax and excise and the subsequent approval of the DCM no. 495, dated 18th July.2003 on the definition of the conditions, persons and necessary quantities of fuel for fishing boats, the excise tax for fishing boats was removed hence decreasing productions costs and increasing investment in the sector. The fishing industry has seen increases especially in trout culture, which has recorded increases of 157 tons, together with shrimps (70 tons) and mussel production in the Butrinti lagoon (820 tons).

Forests and pastures

The Strategy and the Action Plan for the Development of the Pastures and Forests Sector outlining institutional reform has been completed and the new forest draft law prepared. Decisions have been made regarding the administration and procedures of protected and buffer zones, on tariffs for pasture and forest areas, as well as the approval the protected species list in Albania. Regulations for cave exploitation procedures have been issued. Five completed management plans for the state forests have been established in conjunction with 23 other management plans for communal forests. 68 thousands hectares of forestland has been divided amongst 21 communal forest areas. 265 hectares of forestation as well as improvement of forests over some 1285 hectares has been implemented. Measures for pastures improvement and construction and repairing of dams for 5100 cubic meters have taken place. The efforts for the National Forests Inventory has continued with the volumes of the illegal woodcuts down to 15 thousand in 2003 and volumes of the sequestered wood has increased. A draft decision by the CM is seeking approval for a coherent fire strategy.

Institutional reforms

In order to implement institutional support and reform to further integrate rural development in 2003, the following initiatives were executed: (i) establishment and consolidation of the land administration and protection structures in 12 regions of the country; (ii) restructuring of the Agricultural Directorate in the districts and regions; (iii) restructuring of Agricultural Research Institutes to encourage capacity building (project funded by the World Bank), for restructuring forest structures, and (iv) establishment of land protection strategies on a regional level.

Decentralization and rural capacity strengthening

The decentralization program, which has only commenced in the last few years, has further consolidated its progress in 2003. Some initiatives adopted include: (i) transfer of management and co-management of natural resources and water resources to the local governments (ii) continued support to the communes for the improvement of pastures and forests management and preparation of effective management-exploitation plans; (iii) approval of laws and decisions with regard to the improvement of the regulatory framework for the rural sector; (iv) transfer of the draining/irrigating schemes under the management of SHPU has continued and subsequent support for the rehabilitation of systems and trainings for these associations have been organized.

Financial services and credit

The FFZM has expanded to 16 regions at a cost of $7.1 million, which represents an increase of 31% of the total loans portfolio. Loans were extended to 119% more villages or 477 out of the 400 originally planned. On June 3rd 2003 the Agreement on the Transfer of Acts was signed in conjunction with the responsibilities and functions of the Rural Financing Fund in the Savings-Loans Albanian Union. The ASL Union implemented the “Savings-Loans Associations” as part of the micro-credit project financed by the World Bank. The activity of the Union stems from Law no. 8782 “Associations savings credits and their unions”, dated 5th May 2001, which is registered by the Courts and is licensed by the Bank of Albania. The Albanian Saving-Loaning Union in its last quarter of 2003 had extended its activity in 8 districts, 328 villages and had 8,161 members with a loan portfolio of $7.7 million. The loans portfolio recorded an increase of 249% compared to 2000, while the number of members increased 40% compared to figures in 2002. The SLA in 2003 had a capital of Lek 110 million. The Savings-Loans Associations, members of the SLA Union, had commenced deposits collection activities, therefore increasing the credibility of the institution and contributing in the increased availability of money in rural areas.

18. The Mid-Term Program for Integrated Rural Development (2004-2007)

Giving priority to the sustained increase of agricultural products, stock-farming products, agro-food and fishing as well as the sustainable management of the forests will continue as major objectives in the development of the mid-term strategy for 2004-2007 within the integrated development framework of the rural sector.

Given the need for a coherent strategy for Albania in 2004-2207 the following 14 areas are of importance: (i) sustaining increased levels of agricultural production – farming products, agrofood and fishing; (ii) development of land market and land consolidation; (iii) rehabilitation and administration of the irrigation, drainage systems, protection against inundations; (iv) enhance the mechanization and introducing the new technologies, improvement of the inputs quality; (v) increasing plants production; (vi) consolidation of the zoo-technical services; (vii) strengthening and increasing research and further development; (vii) consolidation and increase of agricultural extension effectiveness; (viii) increasing the processing level of the agricultural and stock-farming products; (ix) improvement of supporting policies for the specific and important products with regard to exports; (x) consumer protection and insuring foods’ quality; (xi) strengthening the phyto-sanitary services and plants protection; (xi) continuing to extend projects for the improvement of the veterinary prophylaxis and protection of the animals; (xii) improvement of the legal framework and control on the foods quality; (xii) strengthening of the foods’ quality; (xiii) improvement of the conditions and level of the marketing of the agricultural products, and; (xiv) sustainable management of the natural resources.


The Territorial Planning Sector in 2003 continued its efforts in the management and development of urban areas. Examination and approval of the projects in TACRA and implementation of the decisions issued with regard to TACRA on the development of the tourist zones and the studies for the centers of the main cities has been carried out.

Taking into consideration the economic development of the country as well as the capacity of the state institutions, it was considered necessary to develop a national strategy in the territory-planning sector. Terms of reference for this strategy have been prepared at TACRA at the end of 2003. The approval of this strategy and the full completion of urban law will help establish aims and objectives for a mid-term and long-term sustainable development of the territory-planning sector.

Continued efforts for further improvement of urbanization of the peri-urban areas is evident through the pilot municipality projects at Tirana and Kamez in order to solve basic problems in these areas. The project success and experiences hopes to be extended in other cities. The process will also give direction to future measures adopted and take into consideration efficient solutions to problems experienced over time, including high public costs.

In 2003 a total of 73 studies were reviewed of which 60 were approved, 38 of which were urban studies, 9 involving construction sites and 13 regarding constructions permits. In the Technical Secretariat of TACRA 84 studies have been reviewed. 11 urban studies have been partially approved mainly with regard to tourist complex development. Approval of construction sites and permits for the new TEC in Vlore, the Industrial-Energy Park of Vlora, for the funicular Tiranë-Mali i Dajtit, and the project for the AMBO area have taken place including projects attracting private investments in industrial areas in the Region of Tirana.

One of the main priorities with regard to effective public measures was controlling the growth of urban areas and exerting guidelines for the construction sector. The area cleaning action for the community started with the demolition of 300 buildings across the country. This included schools and was therefore done in collaboration with the Ministry of Education and Science. Demolishing illegal constructions was part of a major public action taken, which was designed and implemented mainly in the tourist areas. This has contributed significantly to the improvement of Albanian towns and had a strong psychological effect within the towns themselves.

The implementation of the earlier decision for the development of the tourist areas in Albania led to the rejuvenation of tourist areas in the coastal regions of Vulpine, Shingling (Kune), Girl i Lazio, Plash i Direst, Sheba i Navajos, Golem, Spille, Vlore, Sarande, involving approvals of 191 decisions with the combined costs of Lek 35 million.

In line with the implementation of measures on construction in touristic and urban areas, particular attention was paid to the effect of these measures had on regular construction activity in Albania.

Measures were taken to prevent harmful construction in tourist and urban areas. However, the implementation of these measures has led to a number of difficulties for the Ministry of Territorial Adjustment and Tourism such as: (i) shortage of demolition equipment; (ii) overall shortage of necessary logistics and infrastructure; (iii) limited number of specialists; (iv) conflict about decisions taken resulting in breakdown of communication with local institutions (Regions, municipalities and communes).

19. The Mid-Term Program for Urban Development (2004-2007)

The socio-economic developments and reforms, which the country has been experiencing in the last few years, have resulted in shifts in demographic movements. Albania will require the adoption of a long-term vision for sustainable urban development. The long-term objective would be the development of urban areas, which would then act as centers for economic development. The policies and measures adopted must create an enabling environment for sustainable urban development by drawing together three basic requirements of urban space:

(i) effective use of urban land; (ii) modernization of infrastructure, services and technology; (iii) development of the urban culture and harmonization of public and private interests.

The mid-term strategy period between 2004-2007 will aim to stop the urban degradation process and create an enabling environment for sustainable urban development. The specific mid-term objectives with regard to urban area rejuvenation are as follows:

  • Drafting of the national strategy of the urban development;
  • Full revision of the law on urban planning and a follow-up of the “Urban Regulation” improvements by the Institute of Urban Studies (ISPU). Follow-up the final approval of the Law “On legalization of additional construction”
  • Making progress with the process of legalization of non-formal areas (completion of the legal and sub-legal acts, coordination of the process amongst the local government units);
  • Drafting of a national survey with full technical analysis for mapping informal zones;
  • Drafting in collaboration with the ISPU and local government units a priority study on the tourist areas and centers of the main towns of Albania;
  • Developing a framework for the CARDS Project for the “National Project of the areas of Tirana-Durres” (first phase of application and positive effects);
  • Consolidation of control over the national territory;
  • The transition process and demographic movements have worsened the social urban pathologies of the future thus requiring adoption of specific measures which will improve the social protection of areas considered to be under risk and their integration into urban society.

The achievement of the above urban development objectives requires a number of coherent institutional and legal reforms to be designed and implemented, which include the following initiatives: (i) strengthening of the municipal governance in accordance with the decentralization reform; (ii) strengthening of the regulatory entities (territory adjustment councils, construction police, etc.); (iii) creation of suitable areas for the communitarian activities; (iv) adequate regulation of private ownership’s rights, common properties and areas in the buildings and public properties as well as the adoption of implementation instruments including adequate compensation forms; (v) completing the regulations on the rights and obligations for access to infrastructure, public urban services and construction rights; (vi) capacity building for monitoring urban development. Urban governance will be a more transparent process and will involve both institutional actors as well as the stakeholders.


Six principal objectives underlie the drafting and implementation of the NSSED: (i) the acceleration of medium-term and long-term development goals; (ii) the harmonization of these goals, and integration of all Government agendas into a single dynamic reference document; (iii) prioritization of measures to attain the goals; (iv) calculation of the real costs of the priority measures; (v) the strengthening of Albanian ownership of the NSSED; and (vi) intensifying the national and inclusive dimension of the NSSED. These long-term objectives need to be constantly appraised.

Albania has in place a large framework of policies, which address the economic, social, security and institutional priorities for the country’s development. The MDGs, the Stabilisation-Association Process, the NATO membership agenda, and the advancement towards market liberalization and regional integration in general, provide an important framework for the NSSED.

One of the key strategic goals of the Government of Albania is European integration. This enjoys the consensus of all the local political forces, which share long-term targets towards the achievement of European standards. Incorporation of the EU integration objectives and phases into the NSSED will bring about a change in emphasis of the Strategy, and will enable it to be considered increasingly as a truly comprehensive national strategy. The dimensions of poverty reduction and social and economic development must be maintained, but the focus should be shifted onto efforts to fulfil three essential criteria that bring us closer to EU membership: political stability and efficiency, economic development, and the mastering of the acquis communautaires.

It is very important to establish strong links between all these development agendas and their institutionalisation in the NSSED framework. The agendas should complement one another, avoiding overlap or duplication, throughout the processes of planning, implementation, and monitoring and evaluation. Maximum complementarity may be achieved among them if the identified indexes and indicators are the same or similar, leading to reliable single databases, matrixes and responsible joint institutions. This vision and harmonization process may have a positive impact on the setting of concrete targets, the division of activities and the promotion of the participation of civil society and the community at all the prioritisation levels.

A series of measures with positive results have been undertaken in this framework. The MDGs are now incorporated into the NSSED, providing this Strategy with a long-term vision. The first steps have been taken in order to ensure that the SAA becomes a part of the NSSED. A comprehensive system to support the monitoring process and a corresponding database system (MIS) to monitor the implementation of the Government’s 35-month long programme have been established.

Within this framework, there is a need for greater attention to be paid to accelerating the transition reforms and the reform process in general. The reason for this is that Albania is already involved in the second phase of reforms, which concern overall structural, fiscal and governance reforms, such as: (i) the reform and institutionalisation of the market; (ii) governance and institutional improvement; and (iii) the creation of a climate favoring investments while increasing possibilities for private undertakings, and improving the relations between the private business and the central and local government. In greater detail, these reforms for the sectors in general would break down under the following groupings:

  • Improvement in the legal base: property rights; facilitation of administrative procedures; intensification of combat against corruption, evasion and smuggling in support of the private sector;
  • Acceleration of the process of privatisation of the strategic and potential sectors of the economy, as well as better promotion of public services;
  • Radical improvement in infrastructure, especially in the energy sector;
  • Continuation of reforms in the financial sector: implementation of the RTGS payment system; establishment of a secondary market for treasury bonds; establishment of the credit support scheme;
  • Intensification of reforms in the tax and customs administration: increase in number of taxpayers; improved service towards taxpayers; enhanced fiscal transparency; reduced administrative hurdles; computerisation of the tax and customs system.

According to the macroeconomic framework, a real economic growth of 6 % in 2004 is associated with an inflation rate of 2-4 %, a budgetary deficit of 5 % of GDP, fiscal revenues of about 20-21 % of GDP, and currency reserves equal to four to five months of import of goods and commodities and services.

The NSSED objectives have been expressed and measured through current indicators and their future targeted values. These have been broken down into final and intermediate indicators (input, process, and output). In determining the final indicators and their targeted values account has been taken of the country’s long-term development objectives, which are supported by the structural, fiscal and governance reforms. The targets include the following:

  • GDP will grow by over 18% during a 3-year period (2004-2006), and will double during a 15-year period;
  • During the period 2004-2006, GDP per capita will grow from $1,950 in 2003 to $2,660 in 2006;
  • Over the period 2004-2006, inflation should fall in the range of 2-4%;
  • Enhanced effectiveness of employment policies is aimed to be ensured through promoting the development of the productive sectors, and the service sectors in particular, with the chief objective being to reduce unemployment rates from 15% in 2003 to 12% in 2006;
  • Further liberalization of trade will ensure a major trade opening in terms of reducing tariff barriers and increasing trade coverage achieved. The target is to ensure that the respective indicators amount to 90% over a medium-term period;
  • The percentage of the population living in poverty18 will decrease from 25.4% in 2002 (base year) (according to estimates from the 2002 LSMS) to below 20% in 2006, and below 10% in 2015. The number of people living in extreme poverty will drop from 4.7% in 2002, to 3% by 2006, aiming at total elimination by 2015;
  • Infant mortality is aimed to be reduced from 17.4 deaths per 1,000 live births in 2001 (base year) to 15 deaths per 1,000 live births during a medium-term period (2006), and to 10 deaths per 1,000 live births in 2015;
  • Maternal mortality is aimed to be reduced from 22.7 deaths per 100,000 live births in 2001 (base year) to 15 deaths per 100,000 live births over a medium-term period (2006), and to 11 deaths per 100,000 live births in 2015;
  • The incidence of diarrheas diseases is envisaged to decline from 1,200 cases per 100,000 inhabitants in 2001 (base year) to 600 cases per 100,000 inhabitants during a medium-term and long-term period;
  • The percentage of people aged 15-24 who know how to read and write will rise from 98.4% in the base period (2001) to 98.8% over a medium-term period (2006), and to 100% in 2015;
  • The ratio between females and males who know how to read and write will improve from 0.9 and 0.87 of the same age-group in urban and rural areas in 2001 (base year) to 1 by 2015;
  • Compulsory 8-year schooling completion rate will grow from 97% in 2001 (base year) to 98% during 2003 and to 99% medium-term period (2006) and to 100% in 2015, at national level;
  • Secondary education enrolment rate will rise from 42% in 2002 (base year) to 43% in 2003 and to 50% during a medium-term period (2006);
  • The average of years of schooling will increase from 9.5 years in the base year 2001 to 10.5 2003 and to 10.8 years over a medium-term period 2006, and to 13.5 in 2015;
  • Internet access. The number of Internet users will grow from 0.18 visitors per 100 inhabitants in 2001 (base year) to 1 visitor per 100 inhabitants in 2007, and to 10 visitors per 100 inhabitants in 2015.Improvement in governance:
  • Control of corruption19 will grow from 23.2% in 2002 (base year) to 73 % in 2015;
  • Voice and credibility20 will grow from 49.5% in 2002 (base year) to 81 % in 2015;
  • Effectiveness of governance21 will grow from 38.1% in 2002 (base year) to 76% in 2015.


Table 4.1:Main NSSED Objectives
AREA AND INDEXES20012002200320062015
GDP per capita (in $)1386155719502660At least two

Annual growth7.64.766N.A
Budgetary deficit in % of the GDP6.65.64.45
Inflation rate (CPI)
Absolute poverty (food and non-food) in %25.4N.A20Below 10
Extreme poverty (food poverty line) in %4.7N.A30
Infant mortality per 1,000 live births17.417.5N.A1510
Maternal mortality per 100 thousand live births22.721.31511
Incidence of diarrhea diseases per 100 thousand inhabitants1200600
Percentage of age group 15-25 years who know to read and write98.498.8100
Ratio between females and males who know to read and0.91.00
write (15-25 years) in urban and rural areas0.871.00
Eight-year schooling completion rate97989899100
Secondary education enrolment rate3842505090
Weight of vocational education in secondary education16161630NA
Average number of years of schooling9.5NA10.510.813.5
Voice and credibility49.581
Political stability30.371
Effectiveness of governance38.176
Rule of quality41.283
Rule of law17.574
Control of corruption23.273


At present, Albania pursues a large number of policies addressing social and economic priorities, institutional improvement and the improvement in security. The essential part of these policies is focused on the NSSED, the SAA and the MDGs. The NSSED and the MDGs capture the Government agenda for social and economic development, while the SAA provides a strategic guide towards European integration.

There exists a topical correlation among the three agendas. They are complementary in the areas they cover, the methodologies they use and the timetables they establish. However, they are also different because they center on specific priority areas. Moreover, the MDG represents a mainly political agenda, the NSSED represents a broad medium-term strategy, and the SAA represents a specific instrument operating within the general framework of the NSSED.

Table 5.1:Linkages among the SAA, the NSSED and the MDG
PrioritiesJusticeEconomic growthElimination of extreme
Public order and securityMacroeconomic stabilitypoverty and hunger
Administrative capacitiesHealthObligatory education
Social and economicEducationGender-specific problems
developmentInfrastructurePublic health
Environment and naturalPublic servicesSustained development
resourcesGovernanceGlobal development and
Democratic stabilitySocial carepartnership
Rural and urban developmentGovernance
TimetablesPresented in 2001Presented in 2001Presented in 2002
Covers 2002-2006Renewable four-year implementation planCovers 2002-2015
ReviewingLimited flexibilityReviewed and updated annuallyReviewed and updated continuously
High flexibility
ParticipationNot inclusive of non-governmental stakeholdersPreparing and reviewing with large participation of and consultation with non-governmental stakeholdersPreparing and reviewing with large participation of and consultation with all stakeholders

It is very important that the correlation between the NSSED, the MDGs and the SAA is taken further ahead, and is institutionalised with a view to producing a single integrating document and process in the NSSED framework. As discussed in Chapter 4, this process has already started and has produced some tangible results.


The national consensus-creating process was another important initiative undertaken in 2003. This process was designed to pave the way for the availability of national feedback and the process for enhanced incorporation of the MDGs into the NSSED. It started with a meeting of representatives from the line ministries, civil society and the United Nations agencies held at the Ministry of Foreign Affairs. This activity was launched on 17 June 2003, with a press conference held by the representative from the Ministry of Finances (Directorate for the NSSED), the representative from the United Nations agencies and the representative from the Ministry of Foreign Affairs. The Conference was a milestone, which brought together all the interest groups with a view to networking and defining work procedures in the process of reaching consensus on the NSSED and the MDGs.

The main objective of the consensus-creating process is to propose the consensus baseline data. All six of the working groups which were set up, each focusing on specific targets, worked openly with the interest groups so as to guarantee maximum involvement. Later, a seventh working group was set up to concentrate on governance issues. The MDG does not directly address governance issues, but governance is part of the Millennium Declaration and highly relevant to the Albanian society. After nine months of intensive consultations, the objectives, indicators and baseline data were prepared and they are now operational in several regions in the country. To help make the regional validation process as practical and relevant as possible, a two-day conference was organised in Tirana. Representatives from the entire spectrum of civil society took part in the conference, and participants shared the experiences of different regions in the validation process.

Further to the regional validation process, in March 2004 a National Conference was held under the title, “European Integration and Achieving the MDGs through the NSSED”. The purpose of the Conference was to contribute to the institutionalisation of the consensus process, to present the NSSED and the MDG consensus tables, and to highlight the achievements of the working groups. Through a number of contributions, the discussions in the working groups, and the supporting materials, the Conference assisted the development of structured and sustained links between the NSSED, the MDGs and the SAA. At the same time, it set up a mechanism that will ensure the continuity of the participatory process and the transparency of national policies. The Conference was an opportunity to introduce and further publicise the NSSED objectives, and debate at greater length the main challenges and the long-term steps ahead.

The following summary outlines some of the important issues arising in the framework of these agendas.

The monitoring system: the NSSED, the MDGs and the SAA (including the CARDS programme and other foreign assistance and financing) require monitoring and evaluation to be carried out more regularly than at present. The qualitative and quantitative analyses of each agenda could easily translate into complementary tools, especially if their identified indicators are the same. These intertwined monitoring processes could ensure a database, matrixes and joint responsible institutions. The joint monitoring systems will also support the participation of all stakeholders from civil society and state and legislative structures, including the Parliament, local government, non-profit organisations, the media, and academic circles.

Planning: The feedback provided by the monitoring system with the contribution of civil society, and the dialogue on the MDGs, the NSSED and the SAA should be used so as to have an impact on new policies and to plan decisions. This specifically concerns the Medium Term Expenditure Framework, the CARDS Programme, and all the other programmes contributing to the success of the objectives and policies designed for the country’s social and economic development.


  • Identification of the NSSED long-term vision in the Albanian context. The MDGs and the SAA are significant aspects of this vision as they focus on long-term development objectives and policies.
  • Introduction of an integrated strategic planning framework guiding Albania’s medium-and long-term development.
  • Concentration on better links between the three agendas while reinforcing the harmonization, prioritization, financing, monitoring and evaluation process of the key development strategies.
  • Optimal connection between the individual policy framework and the provision of local, regional and national planning correlation.
  • Better integration between the strategic planning and budgeting cycle.
  • Institutionalization of the evidence-based policy process and optional costed policies supported by their qualitative analyses.
  • Establishment of a partnership between the Government and the donor community to ensure support for the national development priorities both strategically and financially


  • It is necessary to improve the consistency between the NSSED, the MDGs and the SAA, and the policy framework, as well as the Medium Term Expenditure Framework and foreign assistance and funding.
  • Full integration of the MDGs and the SAA into the NSSED in compliance with the terms of priority, planning and the monitoring and evaluation system.
  • Improvement in prioritization and costing of the priority public measures contained in the NSSED, the MDGs and the SAA.
  • Integration of indicators so as to avoid overlapping.
  • Further explanations of management on the basis of the results, transparency and responsible mechanisms at government institutions.


Progress of the process. The year 2003 saw considerable progress in the efforts to give the NSSED a local dimension through incorporating the national priorities into the Regional Strategies for Social and Economic Development in a more efficient way. These strategies are being drafted and implemented by local government structures at a regional level. With the support of the UNDP, regional development strategies have been drawn up in several regions of the country, including Fier, Kukës, Elbasan and Berat, ensuring large participation in priority sectors and areas as articulated through the NSSED (including health, education, infrastructure and social protection). These documents have ensured the harmonisation of the principal measures and policies aiming at poverty reduction and social and economic development in general, with the specific measures and policies towards the purpose of achieving the Millennium goals scheduled for 2015. In the course of formulating their regional objectives, the interest groups and the regional councils made efforts to integrate the priorities contained in the NSSED, the MDGs and the SAA as systematically as possible.

Hence, for instance, the following table drawn from the Strategy for the Region of Kukës indicates the correlation between the NSSED and regional priorities, in the area of education.

Table 5.2:Correlation among Strategic Priorities
NSSED – National frameworkRegional strategies for social and economic developmentSAARegion of Kukës
1) Ensuring full enrolment (100%) in 8-year education1) Ensuring 100% completion rate of 8-year education by girls and boys1) Enhancing the level of secondary general education, higher education, professional training, and promoting youth cooperation1) Ensuring the basic 8-year education completion by girls and boys in the Region to the extent of 100%
2) Ensuring 90% enrolment in secondary education2) Establishing the necessary infrastructure for the application of reliable standards at all the levels of education2) Improving school infrastructure in the Region with a view to bringing them closer to national standards
3) Increasing obligatory education and 8-year education enrolment rates
4) Balancing the offer and demand through consolidating education in rural areas, improving human and technical resources
Reorganizing vocational training in accordance with the labour market requirement

Different interest groups and main stakeholders at a local level took part in the drafting of the Regional Strategies for Social and Economic Development. In numerous workshops and round tables debate was focused on the NSSED, the MDG and the SAA, thus increasing the awareness of the NSSED among interest groups and the public. In 2004, this process is foreseen to take in eight other regions so that they can draw up their own Regional Strategies for Social and Economic Development.

Areas in need of support in the future. While the process of incorporating regional priorities into those of the NSSED has started, there are still several other areas that need further support so as to ensure that these priorities are applied in concrete terms. The 23-24 March 2004 Conference “Towards European Integration and Achievement of MDG through the NSSED” sponsored by the Ministry of Finance, produced many recommendations with regard to the NSSED and the strengthening of its bearing on local development priorities and trends.

Generally speaking, the following areas require further support:

Full enforcement of the law for the decentralisation of the local government. The regional councils have started to take on their legally recognised roles in terms of formulating the regional development strategies, but it is necessary to improve and explain their role in the budgeting process, and in the implementation and monitoring of the regional strategy. It is not sufficient merely to incorporate the priorities of the NSSED into the Regional Strategies for Social and Economic Development. Their implementation should be followed up. Under the current legislation, the regional councils are responsible for the coordination and harmonisation of policies pursued towards municipalities/communes with national policies. The NSSED Department should employ the institutional mechanisms available to the regional council so as to coordinate the monitoring and drafting of the NSSED Progress Report, while further developing the capacities of the regional council. Potentially, the Ministry of Finance and the NSSED Department should provide technical support to local government structures to ensure the enforcement of the NSSED at a local level. Moreover, the local government functions and responsibilities provided for by law should be reviewed and enlarged, while seeing to it that the role of the regional council in terms of local planning and implementation and its function as the direct NSSED coordinator is duly incorporated.

Improvement in the local budgeting cycle and fiscal decentralisation. Having drafted the Regional Strategies for Social and Economic Development and identified the needs to be addressed, the regions should develop an inclusive mechanism to ensure that budgeting (financial and human resources) complies with established priorities. Budgeting should not only be limited to looking for and allocating funds to municipalities and communes by virtue of the annual revenues. Budgeting should also allow for the contribution of the interest groups (for instance, cooperation with the private sector and with the community itself) and donor funds. The process of better harmonising coordination among donors, and achievement of local mapping of donors so as to avoid overlapping of donations, is important to make sure that the Government allocates funds on the basis of the regional development strategies. Besides, looking into the specific needs of each and every region, these strategies should generally stick to the same line as the NSSED priorities.

Finally, given that the local government budget is prepared, endorsed and administered by the local government itself, at the beginning of the year, technical support should be provided to local government in its effort to prepare the local budget, while it follows up the process of budget planning with a view to ensuring financing for projects or programmes that have a direct impact on the attainment of the NSSED objectives. Besides, local taxes are a very important instrument conducive to local government revenues, and at the same time, comprise the basis for local government autonomy. Local revenues could be better used to achieve the NSSED targets if they are concentrated on funding the development projects supporting the NSSED. For that reason, local government authorities should be involved in all stages of the NSSED (planning, prioritisation, implementation and monitoring). It is essential for local government to improve its capacities to increase local taxes – local taxes bring in more revenues, which have a direct impact on the achievement of the NSSED objectives.

Local government may play a very important role in the areas of education, health and social assistance, while sharing its responsibilities with the central government through the NSSED contribution. Local government handles administrative matters, services, and investments and plays a partly regulatory role pursuing the established policies and national standards. Local government may allocate resources with a view to achieving high standards that benefit the local community. A system focusing on fund compliance, which falls into line with the implementation of projects supporting the NSSED priorities, is more likely to be successful. Such fund compliance should not be based on ad hoc decisions. It should be an inherent part of the national and local budget adopted by the Parliament and the regional council.

Monitoring and evaluation: Monitoring of progress towards the goal of achieving the NSSED priorities contained at a local level should be improved. This process is synonymous with the implementation of local strategies, and should not be considered as a specific task. Supplementary indicators should be produced at a central and local level. Besides, the INSTAT regional offices should be strengthened so as to enhance their performance in the monitoring of these indicators and dissemination of data that are important to interest groups and local government structures for the formulation of Regional Strategies and the monitoring process. Moreover, civil society stakeholders may be included both in the drafting of the development strategy and in the monitoring of its progress. Data collection through a pilot project for the instalment of database systems, in cooperation with INSTAT, will be a fruitful experience so as to move towards a better methodology to monitor the progress of the NSSED priorities.

Developing the capacities: Developing the capacities of local government and interest groups at a local level will help attach a local character to the NSSED, and should make a crucial contribution to the process of the formulation, implementation and monitoring of the Regional Strategies for Social and Economic Development. Given the numerous differences in the capacities of the regions, a system for developing these capacities should be established on the basis of the requirements of each region. This system will be put to test in Kukës, Fier and Gjirokastra during 2004.


The monitoring and evaluation of the progress of the NSSED in 2003 was a process, which involved civil society, Parliament, local government and interest groups. The NSSED Department at the Ministry of Finance took several measures to stimulate its formalisation so that it becomes part of the monitoring and evaluation system. Under the auspices of the Government of Albania, which views the NSSED increasingly as a reference document for its daily work, and on the basis of Decision no. 87 of the Council of Ministers, dated 19 June 2003 “For the establishment of leading structures for the implementation, evaluation and monitoring of the NSSED”, all the ministries were involved in the system of implementing, monitoring and evaluating the NSSED.

To give the interest groups the necessary space and time to contribute to the evaluation and monitoring in the 2003 Progress Report, the NSSED Department was itself involved in coordinating the participatory process, which the previous year was handled by the Carter Centre. Building on last year’s experience, the NSSED Department at the Ministry of Finances drew up a detailed agenda of activities, which ensured a successful drafting process of the progress report, providing for the necessary spaces at all its stages. Hence, the consultation process with civil society and interest groups and the attainment of a consensus did not suffer from a lack of time, as was the case one year ago.


The Directorate for NSSED coordinated the participatory process building through two main channels: (i) the inter-ministerial channel, and (ii) the channel of partners facilitating the participatory process.

22. Inter-ministerial Channel

This channel encompasses all the ministries involved in the implementation of the NSSED, and in the evaluation and monitoring of its progress from a sectoral perspective. The progress regarding institutionalisation of this channel varies from one ministry to the next. The ministries which have long been involved in the process of institutionalisation - since as early as last year - have fared well. They have cautiously identified the interest groups and the stakeholders making their contribution to the relevant sectors, and have set up a database to support dialogue among them. Drawing also on their experience from last year, these ministries have improved the consultation cycle, expanding it over a greater length of time and enhancing its quality.

Scheme 6.1:Functioning of Participatory and Consultation Process under the NSSED Framework

An important step forward has been taken to improve the participation of civil society in the policy development process. In the course of a long process of learning and implementation, many of the ministries have succeeded in amending their progress reports on the basis of comments and suggestions coming from civil society. The Ministry of Environment, the Ministry of Labor and Social Affairs, the Ministry of Education and Science, the Ministry of Local Government and Decentralization, the Ministry of Economy, and the Ministry of Health have revisited their prioritization of public measures on the basis of the consensus reached in the course of consultations.

The ministries, which worked on the drafting of the NSSED’s 2003 Progress Report, encountered difficulties in their efforts to manage participation and reflect comments so as to come up with a better policy formulation. With assistance from the NSSED Department, all the ministries focused on enhancing the monitoring and evaluation unit capacities. In the 2003 process, the ministries involved their regional offices and institutions in the drafting, monitoring and evaluation of the sectoral strategy. In their consultations with the Ministry of Labor and Social Affairs and the Ministry of Education and Science, the regional office employees put forward very useful suggestions and comments, thus providing sectoral strategies with a local character arising from the reality at the grassroots. The regional offices addressed the strategic vision of their relevant sector, and added their local perspective, becoming part of the dialogue on policy development.

23. Channel of Partners Facilitating the Participatory Process

This channel encompassed all the national and international partners who facilitated the process while focusing on upgrading civil society’s capacities to organize and develop national development policies. The NSSED Department was in charge of coordinating and managing this channel. All the partners – Carter Center, CESEDA, OSCE, OXFAM, SIDA, SNV, Soros Foundation and the UNDP – contributed in a very effective way to ensure coverage of the whole territory of Albania. The line ministries, grouped under the first channel, limit the participatory process to Tirana alone, and involve solely civil society in the process (except for the pilot ministries, which made it a regional process). For this reason, the partners facilitating the participatory process centered on enhancing the civil society’s capacities to draft development policies, and on improving their ability to be organized (the case of UNDP, CSO groups).

CESEDA organized consultations in Tirana, mainly in its rural and suburban areas. OXFAM held consultations in Shkodra, Lushnja, Përmet and Vlora, involving rural forums, local civil society and local government structures. Consultations focused on increasing civil society capacity to develop and monitor policies relating to the agricultural sector and rural development, and on recommendations on how to tackle the different problems of the fight against poverty and of social and economic development. On 10 February 2004 and 12 February 2004, the Carter Center organized pilot consultations with the Ministry of Education and Science and the Ministry of Labor and Social Affairs in Tirana, at which representatives from civil society and academia and employees from the regional directorates of the respective ministries were present. In the consultation held in Durrës on 30 March 2004, the debate focused on the Ministry of Health Progress Report, and highlighted two issues that the working group considered as sensitive issues for the District of Durrës. The consultation in Vlora took place on 11 March 2004. It concentrated on private tourism development in the city of Vlora. In Kukës, a consultation was organized on 6 April 2004, which underpinned forestation as a necessity. The consultation that took place in Elbasan on 13 April 2004, focused on the urban development of the city of Elbasan, the town of Peqin and at large. SIDA, SNV and SOROS coordinated their assistance in consultation with the UNDP and OSCE. The UNDP is supporting regional strategy development all over Albania. To that end, a national CSO consultation group has been set up, along with sectoral CSO consultation groups (health, education, agriculture, rural development, and social affairs), and groups in local government, the private sector and business. Joining efforts with the UNDP, the Directorate for the NSSED involved these institutions in a large consultation on the 2003 Progress Report concerning the twelve regions in Albania. The OSCE focused its activity and assistance on the regional dimension of the strategy, and on the involvement of the Parliament in the NSSED implementation process. The OSCE mediated to set up three meetings in Vlora, Korça and Shkodra, with an impact on the Southern, Northern and Central Albania respectively. The meetings aimed to bring together local government representatives at the prefecture, region, commune and municipality level, parliamentarians, civil society, donor community representatives and members of the local government leadership.

Local Government Involvement

The NSSED Department, which considers the regionalization of the Strategy to be a valuable process, drew on support from the OSCE to host regional meetings in Vlora, Korça and Shkodra. The meetings were an attempt to create as much space as possible for the local government to find a way of implementing the National Strategy in compliance with local specificities and priorities. Despite the support provided by the hosts, the meetings in Vlora and Shkodra failed to come out of the traditional frame of consultations that had preceded the meetings in both these cities. The lack of capacity to identify local priorities or to develop policies aimed at supporting local community development, and especially the tendency to perceive the meetings as forums in which only complaints could be tabled, limited the opportunity for these regions to identify their own objectives in the National Strategy. The experience gained in Korça set a good example, which will serve to improve the process in the other regions of Albania.

Parliament Involvement

In the context of efforts to prepare the 2003 Progress Report, a number of consultations were held with Parliament, in cooperation with the OSCE, with a view to enlarging the scope of the Strategy. Parliamentarians from the whole political spectrum attended the three major meetings organised in Vlora, Korça and Shkodra. The Parliamentary Committee on Economy, Finances and Privatisation has become part of the NSSED monitoring and evaluation process. The present Committee has made a significant contribution to the identification of the best solutions for improving the process. At the 2nd Balkan Forum held in Thessaloniki, Greece, in March 2004, the Chairman of the Parliamentary Committee on Economy, Finances and Privatisation supported and highlighted the importance of organising, coordinating and harmonising foreign assistance in complying with the NSSED priorities.

Coordinating and Harmonising Foreign Assistance

As part of its efforts to merge the three agendas (the NSSED, the MDG and the SAA) into a single agenda, which will guide Albania towards sustainable development, the Government of Albania established a technical secretariat to take charge of coordinating and harmonising foreign assistance in accordance with the NSSED priorities.

Challenges Ahead

  • Enhancing the capacities of the line ministries to better identify sectoral objectives in support of Albania’s NSSED and its indicators, and to develop sectoral policies which specifically address issues at a regional level as well as promoting the development of the country as a whole.
  • Improving approaches to consultation. Different regions have differing approaches to consultation, resulting in varying degrees of success in achieving a participatory process.
  • Better identifying and balancing the interest groups. There is a risk that the personal agendas of participants and interest groups will divert attention from the principal focus of a consultation. The balancing of interest groups and the adoption of a well-defined approach would therefore improve the performance of consultations.
  • Strengthening the capacity of the media to ensure that they can more effectively debate and contribute to the NSSED process.
  • Ensuring that the whole Albanian political spectrum agrees to the document.
  • Improving the quality of the identified indicators that will measure the progress of the NSSED at a national and local level.


Monitoring and Evaluation Units

As part of the Government of Albania’s efforts to make the NSSED a key reference document guiding its performance towards social and economic development, in 2003 the Council of Ministers issued Decision no. 87, dated 19 June 2003, entitled “For the establishment of leading structures for the implementation, evaluation and monitoring of the NSSED”. This established monitoring and evaluation functions at all the ministries. Drawing on the experience in 2002, the Directorate for the NSSED introduced a standard methodology for all the ministries to pursue, which could facilitate the drafting of the progress report.

In drawing up their 2003 Progress Reports, the line ministries employed the methodology of prioritisation for the first time, and established the costs of their priority measures jointly with civil society. Although prioritization is not an entirely satisfactory process – given that the budgeting system in Albania continues to rely on mechanical methods and not on programmes and projects (which was the biggest difficulty for the monitoring and evaluation units, and the budget directorates at the line ministries) - it should nonetheless be emphasised that this process provided a very good experience for the drafting of the Medium Term Expenditure Framework.

International partners (the World Bank through the Trust Fund, DFID) are making an important contribution to better identify the objectives and the performance indicators on the basis of the results so as to render the NSSED progress more measurable.

Monitoring Indicators

Determining and maintaining indicators is one of the problems with the NSSED, although improvements have been made in this respect. It is essential to define a complete set of indicators both at a national level and sectoral and local level. The Directorate for the NSSED, in cooperation with IDEA International (the company offering assistance to one of the Trust Fund components), organised training for all the line ministries with a focus on indicator identification on the basis of the results attained. This helped identify the initial basket of indicators for measuring the progress of the NSSED at a national level. Irrespective of the work done for the completion of the 2003 Progress Report, it still continues to be a priority for the Directorate for the NSSED for the following reasons:

  • The number of the indicators proposed by the line ministries is very high, and more often than not they are not realistic;
  • Few of these indicators offer a real measure of the effectiveness of the sectoral policy;
  • All indicators are measured by means of rather unreliable administrative data. They often lack a baseline, or the latter is not properly evaluated;
  • Standardisation of indicator measurement methodologies is non-existent, with different institutions often coming up with different data;
  • The indicators generally refer to a national level, with those referring to a local level missing.


A series of national events have been organised to revitalise the participatory process in the monitoring and evaluation of the 2003 Progress Report.

Under the auspices of the Greek Government, the World Bank, the International Monetary Fund and DFID, the 2nd Balkan Forum was held in Thessaloniki, Greece, on 29-31 March 2004, in which Albania, Bosnia and Herzegovina, Serbia and Montenegro, and the Former Yugoslav Republic of Macedonia took part. The Forum facilitated the exchange of experiences among the countries in the region. In advance of the Thessaloniki debate, with support from ISB, two round tables were organised: “Participation in and Monitoring and Evaluation of the NSSED Process” and “Correlation between the NSSED and the SAA”. They were attended by representatives from civil society, academia, Parliament, the Ministry of Foreign Affairs, the Ministry for Integration, and the donor community. Both debates suggested ways of improving the monitoring and evaluation system and achieving a better coherence among the three governing agendas.

The national conference “Towards European Integration and Achievement of MDGs through the NSSED” was organised with support from the UNDP. At the conference, the Albanian Prime Minister and members of his cabinet, and representatives from civil society, the line ministries, the donor community, interest groups and local government reinforced the Government of Albania’s approach of making the NSSED a fundamental document that determines and guides the performance of both the Government, and also non-public institutions and local structures.



The structure, organization and sectorial management.

Ministry of Education and Science founded the Council of the MES composed of sector experts. The delegation of ISP responsibility to the Curriculum and Standard Insitute and the Qualification and Training Center for Education were approved. The District Educational Directorates were substituted with 13 Regional Educational Directorates (RED). The National Educational Center started functioning. Which assesses the rate and quality of mastering the teaching programs, of the final exams and admission tests.

Decentralization: the decentralizing policy in the field of pre-university education was drafted.

Competencies and responsibilities of the capital investments were delegated to the Tirana Municipality only.

Investments: the construction of 218 school buildings was completed, 42 of which were newly built and 176 were reconstructed. 272 schools were supplied with teaching equipment. 63 schools were refurbished in 28 districts of the country 7 of which are new.

Post-university education. The Strategy of the pre-university education was drafted. There was a shift from the system 4+4+4 into the system 5+4+3. The Project “Teaching for all” was drafted.

The basic education:

98% of the registered pupils attended school during the school-year 2000–2003 and 2% of them left school. The school-books were given in use free of charge. The standards of achievement for many curricula were drafted and a new syllabus was compiled based on the new curriculum.

Secondary education

71 % of the pupils who graduated from the compulsory education continued to attend school. The absolute addition was 7700 pupils, 1734 of whom attended the vocational schools. Schools were supplied with 170 new laboratories.

The secondary vocational education. New classes were opened for 20 specialities in 19 districts of the country, 10 classes for teaching in Burrel, Puke, Fier, Vlore, Permet, Tepelene and in Tirana district. ; 2 foreign language classes (English and French) in Berati, 7 classes on the electricity subject in Berat, Lushnje, Kucove, Ulez, Polican; 5 classes for mechanics in Korce, Elbasan, Berat, Kamez; 3 classes on construction in Gjirokaster, and Berat, 3 classes on Agrobusiness and economics in Lezha and 2 classes on sports in Durres. The main lines of the curriculum framework were drafted.

Higher education:

Albania became member of the Bolonja process. 11897 new students were admitted as full time sudents. The part time system was opened with 5 506 students. New departments were founded in the Universities of Tirana, Vlora, Gjirokastra and Korca. The University financial decentralizing standards were drafted.

Scientific research:

The Cycle for Research and Development National Program started for 6 main areas.

Support for vulnerable groups. The Projects “Global Innitiative for Food and Education” were implemented.

Matrix 2003-Annual Review
Prior actions for 200323-Implementation measures

-Reasons for implementation shortfalls

Drafting of the strategy for the pre-university education and its approval by the CM. Drafting and discussion of the draft-strategy among all the target groups. Approval of the document at the Council of Ministers.3-It is being harmonized with the goals of the document of “EFA” project. The consultation for compiling the draft is realized. It will be presented at the CM on the first 6 months of. 04.

-Consultancy with the donnor experts should have been ensured.
Administrative and financial sector reform: Realization of the sector functions at central level, regional level, local level and institutional level, and subordinate institutions. (IKS, QATK, QKAVP) Realization of the financial reform at central level, local level, but via the escalation of the administrative and finacial reform starting with the pilot projects.3-Duties and responsibilities, the functions of the sector at central and regional level were defined. The competition for the functions of the local sector and the institutional sector started and the status, duties, responsibility and relations with MES were defined

-The relevant financial reform at central and local level was prepared through the gradual piloting which ran parallel to the capacity growth.

-Deficiency in the mutual cooperation with the other institutions and lack of funds. Insufficient knowledge on the relevant procedures.
Training of the specialists at all levels both central and regional as well as the training of the teachers without the required education. Drafting of the training programs for the managing staff at central and local and educational level aiming at the enhancement of the staff proficiency for countering the new functional responsibilities. Publication of teaching materials and students’ materials supporting the new curriculum.2Programs, cooperation with the specialized institutions, DAP and other specialized structures such as QATK, IKS, Universities and donnors, the involvement of the vocational education specialists. The modula on training of the general and vocational education specialists are in the process of preparation.

-Deficiency of funds, insufficient interest. Reorganization of QATK, IKS, DAR, ZA.
Reforms in the structure and contents of the pre-university education.:the new curriculum framework, was drafted, the standards of achievement for many curricula fields and the syllabus based on the new curriculum was prepared. The operation of giving the schoolbooks in use free of charge to the pupils of the compulsory education throughout the country was realized.4-Cooperation with specilalists, relevant structures and target groups. School-attendance at the basic education: 98% of the registered pupils with a reduction of school-leave at 2%. It was managed to attract 71% of the pupils who have graduated from the compulsory education (7700 pupils more, 1734 of whom in the vocational education.) Schools were supplied with 170 new laboratories for the natural sciences, informatics and new classes were opened for 20 specialities in vocational education, in 19 districts of the country.
The Reform in higher education/Membership into Bolonja process. The formulation of standards and criteria for opening of accounts at the Faculties and avoiding interference into the manner of the budget distribution within one university.3-Cooperation with Universtities(ours and foreign), EU, etc. During the school-year 2003-04, 11. 897 new full time students were admitted. For the first time the part time system was opened where the admission number was 5 506 students. A series of new branches were approved to be opened at the Universities of Tirana, Vlora, Gjirokastra and Korça.

-Insufficient coordination among the actors, insufficient coordinating capacities with SHL
Reforms at scientific research/Setting up the “ad-hoc” Committee upon the decision of the KPSHZHT3-Setting up of the working group with the relevant capacities.

-the KPSHZHT has not yet organized the meeting for approval.
Increase of school attendance for the basic education by marginalized groups, identificaion of causes that lead to school leaving, drafting of local and national pilot projects for the attraction of the marginalized groups with the school and realization of the MDG.2-Increase of cooperation of the Local Government and Educational Institutions, with DA, ZA, for drafting the diagnostic questionary, extension of the pilot projects and drafting of new projects.

-Ensurance of donnor support. The study not completed in by some DA,ZA, and local government. Lack of supportive donation ensurance.
Improvement of the infrastructure and the teaching conditions at the Educational Institutions. The piloting of the project for bus utilization in 5 zones where access for this kind of service is available. Continuation of new school refurbishment in the peri-urban zones. A 12% pay rise and pay restructuring per year for the educational staff. Restructuring or construction of five schools of the vocational education with dormitories for the benifit of the rural and peri-urban zones.2-Cooperation with the Local government, DA, ZA and Educational Institutions. Implementation of the project with financial support from the relevant Educational Directorates. Continuation of school concentration according to the study by every ED. Implementation of an 8% pay rise from the salary fund. Cooperation with the EU, CARDS program. Financing is required

-Insufficient commitment of actors, lack of financing. Retreat of the local government from commitment. The study on school concentration-not finalized. Approval of the Cooperation agreement.

Level of completion per criteria

Level of completion per criteria

Matrix 2004-Annual Plan
Objectives/Public Priority Actions24Responsible institutionBudget25Cards26Others27
Organization, Structuring, System Management/Efficiency in administration and sector management. / Efficiency in fund use.
Definition of duties, competencies, and responsibilities at all levels and subordinate institutions.1MES, ED
Reforms in financing and financial management on project basis.1MES,5740436
Institutionalization of cooperation with the target groups, civil society and NPO’s for solving the sector issues.3MES,LG,ED, ZA
Extension of the project for bus utilization in areas of service access.3LG, ED, ZA250
Decentralization and gradual competence delegation to the Local Government and Educational Institutions.2MES, LG, ZA300
Ongoing improvement of the school infrastructure.2MES, LG, ED, ZA1500
Restructuring or setting up of five schools of vocational education and formation with dormitories, for the benifit of the rural and the peri-urban zones.2MES, CARDS PROJECT406
Basic education. Enhancement of participation into the basic education. Realization of the MDG.
Drafting and approval of the strategy of pre-university education.1MES
Preparation for implementation of the “EFA” at the relevant international structures.1MES, WB
Identification of the factors that affect school-attendance to basic education by the marginalized groups with tendency to school-leaving.2MES, ED,ZA
Curricula improvement to support the reform and attraction of the children to school.1MES, IKS
Drafting and piloting of programs which aim at school participation growth of the marginalized groups.2MES, ED,ZA
Secondary education/Reformation in structure and contents
Reforms in structure and curricula.1MES, IKS
Drafting and publication of the new textbooks.1MES, IKS250
Publication of the teaching materials and learning materials that support the new curriculum of the vocational education2MES, IKS
Definition of evaluation standards2MES, ED
Higher Education/the Reform in AL, as a step for gradual integration into the EU.
Reforms in structure in compliance with the Bolonja declaration.2MES, Universities443
Scientific Research (SR))/The Reform at the SR, a step forward for the gradual integration into the EU.
Reformation of the scientific research in structure1MES, KPSHZHT90
Legislation improvement of the SR.2MES, KPSHZHT
Capacity building/training of specialists through training and qualification
Implementation of the training project for the managing staff at central levels as offered by the DAP and international organizations.2MES, DAP
Program preparation and realization of training by the QATK and the ED for the educational specialists.2MES, ED, QATK
Ongoing training of the vocational education specialists before hiring them to work and during work.2MES, ED, QATK
Enhancement of the qualifying activities at institution level, muncipality/commune (school).2MES,QATK, ED, ZA

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Matrix 2004-2007-Mid-Term Plan
Objectives/Public Priority Actions28Responsible InstitutionsDeadlineBudget29Cards30Others3132
Organization, Structuring, System management/Efficiency in administration, sector management and fund use.
Restructuring and conceptual, virtual reformation of the sector at all levels and sub-ordinate institutions1MASH, DA2004
-Definition of duties, competencies and responsibilities at all levels and sub-ordinate institutions.1MASH, DA2004
Reforms in financing and financial management on project basis.1MASH2004229601746
Institutionalization of cooperation with the target groups, civil society, and NPO, for solving the sector problems.3MASH, P. Vendor DA, ZA2004
Extension of the project for bus utilization in service access zones.3P. Vendor DA, ZA20041200
Preparation and implementation of the financial support legal packet for the poor family children2MASH, Min. Fin20053000
Decentralization and gradual competence delegation to the local government and Educational Institutions.2MES, Local government, ED, ZA20041200
Increase of financial compensation for the teachers and disadvantage zones.2MES, Min. Fin.20052590
Ongoing improvement of the school infrastructure2MES, local government,ED, ZA20048000
Restructuring or construction of five schools of vocational education and formation with dormitories for the benifit of the rural or peri-urban zones.2MES, CARDS project200410001000
Basic education/Participation growth in basic education. Realization of the MDG
Drafting of the strategy on the pre-university education1MES2004
Preparation for the implementation of the “EFA” project in international structures.1MES, WB2004
Identification of the factors that affect the attendance to the basic education by the marginalized groups with tendency to school-leaving.2MES, ED, ZA2004
Curriculum improvement supporting the reform and attraction of the children to school.1MES, IKS2004
Drafting and piloting of the programs aiming at participation growth into school of the marginalized groups.2MES, ED, ZA2004
Secondary education/Reformation in structure and contents
Reforms in structure and syllabus.1MES, IKS2004
Reforms in curriculum1MES, IKS2004
Drafting and publication of new schoolbooks1MES, IKS20041000800
Publication of the teaching materials and learning materials which support the new curriculum of the vocational education.2MES, IKS,2004
Definition of the evaluation standards.2MES,ED2004
Higher education/The Reform at AL, as a step forward for gradual integration into the EU.
Reformation of higher education. Raproachemennt with the higher education of the EU countries, in structure and in contents.2MES, The University20071700
Reforms in structure in compliance with the Bolonja declaration2MES, the University2004
Reforms in curriculum2The University2005
Definition of evaluation standards3MES, Universitetet2007
Scientific research (SR)/Reforms in SR, as a step forward for gradual integration into the EU.
Reformation of the scientific research in structure.1MES, KPSHZHT2004650150
Improvement of the SR legislation2MES, KPSHZHT2004
Definition of the SR evaluation standards3MES, KPSHZHT2007
Capacity growth/competence growth for specialists through training and qualification
Implementation of the training program for the managing staff at central level offered by DAP and international organizations.2MES DAP20041600
Program preparation and training organization by the QATK and ED for the educational specialists.2MES, ED, QATK2004
Continuous training of the vocational education specialists before hiring them to work and during work.2MES, ED, QATK2004
Enhancement of the qualification activities at institutional level, municipality, commune, (school).2MES,QATK, ED, ZA2004

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Monitoring Indicators
GDP Percentage spent for education3. 2%2. 92%2. 81%3. 02%3. 14%3. 4%3. 7%
Subsidy by the government for the school-books as % of the MES budget2. 06%1. 55%1. 31%1. 18%0. 68%0. 65%0. 65%
% Of teachers with the relevant qualification for the 8th grade.74. 3%74%75,1%76,2%76,5%77,4%78,6%80%
% Of the teachers that complies with the standards required by the MES.74. 3%78,9%81,6%83,1%84,4%85,2%86,3%87%
Percentage of pupils at the obligatory education without school-books20%20%18%0%0%0%0%
School attendance at the low cycle of the elementary school98%97%98%99%
School attendance at the high cycle of the elementary school97%97%98%98%
School attendance at the secondary education93%94%96%96%
Ratio pupil/teacher at the low cycle.22. 422. 422. 12223
The ratio pupil/teacher at the high cycle16. 216. 316. 31616. 5
The ratio pupil/teacher at the secondary education1718191920
Size of class pupil/classroom in the low cycle22. 522. 722. 522. 322. 1
Size of class pupil/classroom in the high cycle2626. 8262624
Approximate % of girls who finish the 8 year education97%96%96%98%
Approximate % of boys who finish the 8 year education95%95%97%97%
Net % registration in the low cycle76%93%96%97%95%
Net % registration in the high cycle86%89%93%92%91%
Net % registration in 8 year education81%91%94%94%93%
Net % registration in secondary education38%38%42%43%21%


Agricultural land protection and management. The chart organization of the administrative sections was changed for all the 12 districts of the Republic. The updating process of 17927 properties register was completed in 18 cadaster zones and work in 35 cadastre zones is still going on. The Law on Land Protection was drafted. Irrigation and drainage system management. The irrigation and drainage system of Korca plain was rehabilitated. In the districts of Lushnja and Vlora the artificial irrigation system was rehabilitated. 211 SHPU have been set up covering a service surface of 110 604 ha. 180 000 ha land surface was transferred to the SHPU. Agricultural mechanization. New equipment was provided with the 448 millions of lek grant. Agricultural inputs. Chemical fertilizers. The variety and quantity of fertilizers used were increased. Seeds: Ongoing improvement of the legal framework for seeds and seedlings, and that of the private sector industry for the seed production. Farming production. The artificial insemination was completed in 40 % of the cow population and 485 centers of cattle artificial insemination are functioning. 313.126 farms of milk production were created. 16 buffalo’s farms are state-subsidized.

Scientific research. 38 projects financed by the Ministry of Agriculture and Food are being implemented and 11 projects are financed by the national program “Agriculture and Food”

Counselling Service 54 new Agricultural Information Centers are being used. 3025 activities in total have been realized; 263 new titles and prospects and 2333 brochures have been published, etc. Agro-Processing Industry. The total production value is 33.914 millions lek with an increase of +10%. The legal framework for the Plant and Plant Sowing Materials Protection was drafted. The expenditure for fight against grasshoppers was reduced by 50 %. Animals Health protection. Regulations were approved on: the pseudo-pest disease among fowls, brucelose check up among the sheep and the mad cow disease (BSE); on eggs exports and medicine trade, on bi-valvular moluscs, on residues in products of animal origine., 1500 veterinary licenses were issued and 1,7 millions lek were obtained. Food control and quality. The legislative framework on food was completed. The status of regional laboratories and the technical and methodological support were defined, etc. The regional laboratories of Durres and Vlora for food control were provided with equipment and electronical devices. 18.000 controls were undertaken and there were 172 administrative violations found. Fines value reached the amount of 4.060.000 and destroyed goods were 3890 kv. The number of analyses made was 36.570; the number of new licenses issued was 370; the number of renewed licenses was 1702. Controls have been undertaken on raw materials and auxiliery material of the food industry during the food processing as well as for the instant products.

Improvement of Agro-food Products Marketing.

The agricultural, farming, fishery and agro-industry producers which meet the criteria for their products to be exported were identified. The construction of wholesale market of the food products was completed in Lushnja. In Korca District nr 3 rural markets were completed. Fishing and Aqua-culture. There are ongoing activities in Ohrid Lake, in Saranda, Butrint Lagoon, Divjaka, Vain, Kune, Patok, and Vilun. The first phase for the establishment of Fishing Management Organizations in Vlora and Saranda was finalized. Approximately 1.4 million fish-beds were distributed. The excise tax for the fishing ships was abolished. The trout and shrimps cultivation were raised and the production in 2003 reached the amount of 70 ton compared to the 15 ton in 2002. Forests and pastures. 5 management strategies of public forests and 23 management strategies of communal forests were drafted. 68 thousand ha have been inspected in 21 municipalities. 265 ha of land have been forested, 1285 ha forests were rehabilitated, 220 ha pastures were rehabilitated, 28 pieces of arable land were constructed and repaired and 5100 m3 of mountain dams were constructed.

Matrix 2003-Annual Review
Prior actions for 200333-Implementation measures

-Reasons for implementation shortfalls

Consolidation of the Land Management Offices (LMO) in all districts.
Compilation and obtaining of the documentation for the land management structures4
Aproval of the Project/Council of Ministers Decision for the number of employees.4
Completion of agricultural land registration and other stock property in rural areas.
Registration of the agricultural land in 445 ZK2-Fund for debt paying to the contractors for 156 Cadaster Zones was obtained.

-Delays in giving the financial support by the USAID/ARD due to the failure to pay the contractors.
Providing property documentation for the Northern region, conflict resolution, land market development in pilot municipalities, publication of brochures on transaction procedure treatment, preparation of documentation on the efficiency of land consolidation, registration and transfer register the state stock property.4Completion and submittance of formularies. Aproval of public property documentation. Organization of counselling services for the unified documentation and its approval.
P/Council of Ministers Decision on the change of the registration fee for the agricultural land transactions, set up of the land information system.4
Drafting of the Law on Land Protection
Draft law on land protection, set up of the working groups, comparison with other countries legislation.4
Civil Code Amendments on the agricultural family
Draft law4
Continuation of investment for Water rehabilitation and Drainage
Monitoring of the irrigation investment implementation funded by the state budget for the rehabilitation of 4000 ha. Cooperation with the MADA Project for irrigation rehabilitation of 1500 ha. Monitoring of the drainage investment implementation funded by the state budget for drainage rehabilitation of 6000 ha.4-Irrigation and drainage project for 1500 ha. Irrigation and drainage project for 10000ha.
Restructuring of irrigation companies and creation of seven other Drainage Boards.
Draft, aproval, and implementation of the P/CMD on drainage activity. Initaial procedures for the creation of the drainage board in Lushnja.4
Identification of the assets that will undergo the privatization process for 35 Water Directorates.3-The study will be completed within the year 2004

-It is included in the study process on the irrigation and drainage infrastructure.
Support to the foundation and consolidation of the Associations/Federations of Water Consumers for the improvement and enhancement of the managing capacities.
Budget Preparation. Phisical control of maintenance of transferred schemes during the irrigation session of the real irrigated surface. Financial control of the WUA4
Improvement of the water source management via transfer of the irrigation works rehabilitated for WUA.
Transfer of the irrigation schemes rehabilitated in 16 500 ha to the WUA.4
Study on the technical situation of the irrigation and drainage system and flood protection in all the country’s territory.
Draft of terms of reference for the study4
Incentive schemes for investments in new technologies and in the mechanization of agriculture, supported by projects such as the Project on Agricultural Production Growth (2KR), the Project of Agricultural Service (Competitive Grants Scheme), etc and legislation improvement.
Increase of the mechanization rate and of green houses production by cost reduction of the inputs (price differentiation for the fuel). Restructuring and strengthening of the institutions and of Controlling Laboratories and certification of the chemical fertilizers, seeds and seedlings, fodder, products for plant production (PPP)4Equipment and new processing technology for agricultural products, aproval of 30 grants for technology improvement
Financial support for the high quality seed production sector by international donors and different associations
Ongoing activities of the two projects from WB and IFAD4
Creation of centers for racial improvement in cattle and sheep.
Creation of race herds for production of race material in farming and opening of 20 new IA centers for cattle and sheeps.4
Enhancement of the research and agricultural counselling network
Consolidation of public counselling structures within the regional directories of agriculture and food.4
Providing of contracted service to farmers (45 contracts up to the year 2006)1-Negotiations with donors are in process2007
Support for the development of an effective counselling service in areas with the highest productive potential in the country.4
Restructuring of the agricultural research
The consolidation of the ARI which is the product of the first restructuring phase of the four Agricultural Research Institutes; study and programing of the further restructuring phases of the ARI-s; increase of research contribution to the rectructuring of the ARI-s, draft of the research policies supported by foreign consultancy.4
Enhancement of fito-sanitary service and plant protection
Keeping the plant diseases and plant predators under control2-The tendering process is completed but not on time

-Delays in the tendering process
Product control for the plant and fito-pharmacy protection4
Enhancement of inter-institutional cooperation for epidemy prevention4
Raising the producers awareness in order to apply integrated protection for the plants and providing support for the initiatives on the organic chemistry.4
Continuation and extension of projects for the improvement of the veterinary and animal health protection.
Keeping under control the zoo-notic diseases through cooperation with the Ministry of Health and reduction of infection among animals and people.4
Taking measures for the signalling and prevention of the List A and other diseases4
Better use of the human and financial resources in the veterinary service of all the levels.3-The verterinary directorate has requested better staff structures organization

-the law and EU directive implementation requires staff completion.
Consolidation of the zoo-technique service
Restructuring of the zootechnic service within the framework of the establishment of Regional Agricultural Directorates.3-Regional Directorates are planned to be functioning before 2004

-The Regional Directorates are in the configuration process
Encouragement and support for the creation of permanent units for livestock production in specialized farms of the organic production (it began in 2004) and in industrial complexes for the egg and meat production.4
Extension of the industrial breeding in cattle with specialized races for meat at a rate of 50% of the cattle population artificially inseminated.4
Incentives for the private operators to product and partly to import the animals with high racial values.4
Improvement of the feeding technology of animals.4
Financial support on race programs.4
Better access to the financial resources and credit
More access to financial recources and credit for investment in the priority sectors (mechanization, green houses, fruit-culture vineyards, livestock complexes, processing lines, etc) mainly through the extension of schemes as FKK/FKK of the (FFR) and those of MAFF and extension of the other financial undertakings in competitive grants or the 2KR project in the rural zones.4
Development of credit unions through the creation of the Save and Credit Associations (with the support of FFR, MAFF, and other actors);4
Improvement of the processing technologies
Creation of new agro-processing lines through the implementation of the Competitive Grant Program (the Project PSHB) and ongoing activity of the Project of Food Production Growth (2KR);4
Analysis of the vineyard and wines production situation and the drafting of supportive policies for their trading
Evaluation on mid-term and long-term development of the sector of the wine production4
Analysis of the situation of milk production and drafting of supportive policies for production improvement, specifically the milk marketing.
Completion and approval of parts of the Albanian Food Code regarding milk and its by-products, nutritive oil and the canned food.4
Completion of the legal framework “On milk collection, processing and trading and of the byproducts” in accordance with the sector developmen policies, according to the Food Code and EU Directives.3-A working group is set up and is cooperating with foreign experts from Land O’Lakes.2004
-The implementation scope of the law has been extended by introducing the milk production
Evaluation of mid-term and long-term development of some sectors
Drafting of the fiscal incentive shemes for supporting domestic food production and evaluation of mid-term and long-term development tendencies of the canned fruit and vegetables.4
Creation of wholesale markets in Shkoder, Lushnje, Vlore and Korce (Project of Agricultural Services)
Completion of works in the wholesale market of agricultural products in Lushnja district.4
Ongoing construction of the wholesale market in Korca District4
Creation of pilot centers for collection, storage and marketing of products in some rural zones
Completion of two rural markets in Korca District (Pojan, Devoll)4
Better functioning and mangement of product markets
Strengthening of collection and information dissemination process. Training and technical assistance in quality improvement, labelling, packaging and marketing of the agro-food products. The marketing strategy of the fresh and processed fruit and vegetables.4Recruitment of qualified staff for the management of wholesale market in Lushnja. Draft of act-agreements
Incentive to agro-food exports in the framework of implementation of the FTA-in the region and wider
Information on markets and prices of member countries FTA. Publication through the written and electronic media of the periodic results for FTA implementation. Free Trade Agreement signing with countries of the region4
Completion of the legislation on products market conditions
Completion of legislation on food control4
Harmonization of legislation on food products with the EU legislation
CMD on “Use of additives in food products”4
Approving legislation on milk and its byproducts, nutritive oil and canned food4
Improvement of control standards on product quality
Approval of the technical rules for food production4
Strengthening of inspectoriates activity in the framework of the DRBU
Creation of the Department on Faked Products Analysis at the IKU, SHIU control strengthening on producers and on quality of imported food. Providing equipment. Draft policies regarding the falsification of food products and their labelling4
Enhancement of the laboratory network for food products analysis
Technical assistance for regional laboratories for food control in Shkoder, Vlore, Durres, Gjirokaster.

Standardization of food control laboratories. Training of different levels staff engaged in food control laboratories. Enhancement of check-points of veterinary, fito-sanitary and food quality control. Better cooperation with counterpart institutions and the Consumers’ Associations.
Drafting and implementation of specific supporting policies for fishing
Incentives for using sea space by the private sector increasing the number of licenced companies4
Implementation of law on fuel differentiation. Draft of CMD on the quantities for each port.4
Efforts on the creation of Fisherman Associations in order to undertake fish resources management.4
Rehabilitation of fishing ports
Completion of fishing port rehabilitation in Vlore and Sarande4
Review of the legal framework in accordance with the actual conditions of the fishing sector.4
Efforts for re-starting fish production activities in the existing reservoirs ;
Implementation of strategies aimed at use of water-collectors for fishing, repopulation and fish-beds.4
Setting up the pilot schemes of aqua-culture in fresh waters until 2003
Efforts onexporting bi-valve moluscs and living fish4
Restructuring of Forest Service
Restructuring of the DPPK, Forest Police Sections in the districts. Setting up of Regional Directorates of Forests and Pastures and Pilot Regional Directories of Elbasan. Decentralization of competencies and division of functions into managing functions and regulating functions. Capacity growth of the interministerial Task Force for the prevention and control of the informal cuttting.4
Amendment to the laws on forests and pasture
Review and improvement of law “On Forests and Forest Service Police”, No 7623, date 13. 10. 19923-The institutional reform has been already finalized and the strategy of forests and pasture has been reviewed.

-The draft law is being prepared for amendment and it will be presented at the Parliament in June 2004. Due to the entire process of the Institutional Reform and the review of the Forest and Pasture Strategy this Draft law was postponed for review after the finalization of the above.
Amendment of laws “On fauna and hunting”, “On the income account of the DPPK”, “On administrative sanctions” Forest and pasture protection4
Bringing forests to municipality jurisdiction. Rehabilitation of the downgraded forests and their protection. Drafting of programs for forest, pasture and protected area enlargement, specifically for the PK Dajt. New processes of protected area administration, mainly at national parks.4Completing transfer of 50 thousand ha forests to the municipality juridisction. Study ECONET on the enlargement of the surface of the protected areas in 15 territories of the country.
Land protection from erosion and flood prevention
Activity of re-foresting4Construction of mountain barriers. Enhancement of the interinstitutional cooperation with the MD,MLGD,MO etc.

Level of completion per criteria

Level of completion per criteria

Matrix 2004-Annual Plan
Objectives/Public Priority Actions34Responsible institutionBudget35Cards36Others37
Sustain agricultural, livestock, agro-food and fishing production./Land marketing development and property consolidation
Land administration consolidation in all districts1MAF, PSHB,SRPP8
Ongoing agricultural land registration and other stock property in rural areas.1MAF, SRPP42.581
Creation of the land information system1IT
Rehabilitation and management of irrigation and draining systems and flood protection
Investments for water and drainage rehabilitation1MAF, BB, BIZH,20221216
Investments by state budget for the improvement of the irrigation surface of 5500 ha1MAF182450
Irrigation and drainage project for the improvement of the irrigation surface of 14500 ha.1, MAF Irrigation Project228216
MADA Program. Beginning of rehabilitation of the small irrigation schemes of approximately 1000 ha1AZHZM40
Investment by state budget for the improvement of the irrigation surface of 13500 ha.1115
Allocation of state budget for the year 2004 for Water Directorates and Drainage Boards.1
The irrigation and drainage project, beginning of irrigation plant rehabilitation with 2 million Euro of Italian credit1, MAF Project40250
Study on the physical situation of the irrigation and drainage system including the assets of the former 35 Directorates included.1, MAF Land Institute10
Establishment of two Drainage Boards120
Incentives for mechanization and introduction of new technologies. Improvement of input qualities.
Ongoing investments for technology improvement in agricultural mechanization and the seed sector2MAF PSHB, 2KR, ESHFF, IKB, different associations290800
Greater mechanization in green houses through production cost reduction (differentiation of fuel price)2MAF PSHB, 2KR, ESHFF, IKB, different associations28.5
Increase of production, improvement of early or late vegetable cultivation index
Study of suitable zones and microzones for the enlargement of the green house surface.1MAF IP Tirane, PSHB,6
Introduction of new technologies for vegetable cultivation in green houses1MAF PSHB, IP Tirane51
Enlargement of fruit trees planted surface
Study and definition of the potential regions and micro-regions for fruit-trees planting1MAF, IP Vlore, PSHB10
Support for new technology introduction for fruit trees planting and cultivation1MAF, IP Vlore, PSHB16
Organization of Vineyard and Wine Cadaster.
Definition of the administrative structures at the regional DBU1MAF50
Pilot project for the office of cadaster for vineyards and wine in Tirana1MAF
Establishment and organization of the central and regional offices.1MAF
Further steps for the implementation of racial programs in the livestock
Creation oft hree race herds for livestock race material production.2MAF, IKZ, NGO, Private operators
Creation of 20 new centers IA with cattle, sheeps and pigs.2MAF510
Creation of the database for about 1000 jersey cows identified as pure-race cows, as for Hostein.2MAF, IKZ35
Creation of the Genealogy Book on Jersey Cows2MAF, IKZ
The Law “On Livestock Reproduction”2MAF, IKZ
Staff training at race centers and of 30 specialists at IA2MAF, IKZ
Mixed food production growth for livestock and qualitative control
Extension and improvement of livestock food processing industry2MAF, IKZ, Private operators, NGO,
Organization of food trading network2NGO MAF, IKZ, Private operators,
Completion of the regional laboratory network of animal food analysis.2MAF, IKZ, Private operators, NGO,8
Incentives for creating food producers associations.2NGO MAF, IKZ, Private operators,
Raising farmers’ associations awareness for industrial food quality and safety2MAF, IKZ, Private operators, NGO
Unification of the food evaluation system2
Development of farms and industrial centers for livestock production
Support for the creation of stable units on livestock production with specialized farms and industrial complexes for egg and meat production2MAF, IKZ,4
Distribution of over 100 thousands dozes of biological material of meat races2MAF, IKZ
Conservation of the autochthon genetic resources in livestock
Keeping under control farms that reproduce animals of autocton races2MAF, IKZ,
Restructuring of the research institutes
Implementation program of institute restructuring process, with technical assistance of the World Bank2MAF, Res. Inst.194
Identification, testing and introduction of new methods and materials for safe agricultural production from the environmental point of view.
Aproval of research projects by the Project Review and Aproval Commission2MAF, Commission on project review and approval4
Research Project Monitoring and their impact on the country agricultural development
Reporting of the institutions by their analyses departments and scientific councils2MAF, Res. Inst., MES
Implementation of procedures on drafting, evaluation, acceptance, project monitoring in the framework of the National Program “Agriculture and Food”2MAF, researsh institutes, MES
Drafting of brochures, organization of seminars, publications and other activities to increase scentific research impact on farmers’ community.2MAF, researsh institutes, MES
Integration in a regional network of agricultural research of the different projects developed in our country
Monitoring of the cooperation projects developed by Research Institutes and the Science Directorates2MAF
Further involvement of the research institutes in projects financed by donors.2MAF
Membership in international organizations2, MAF
Supporting the big private farms extension
Providing ongoing financial support for the agricultural counselling regional centers in Durres and Fier2MAF24
Efforts for creation of two new regional Centers in Korca and Shkodra2MAF
Information Centers throughout the country
Creation of about 100 Information Centers up to the end of 20042MAF, Projects
Providing specific services on contractual basis for the middle farmers
Tendering process 10 service contracts a year.2MAF
Providing Services on a contractual basis to farmers in the mountainous areas through the Development Agencies of the Mountainous Areas.
Support for the development of mountainous areas2MAF, AZhZM
Research activities for new technologies
Realization of 20 research projects in the farms.2MAF, Res. Inst., UB, PSHB, AZhZM,4
Training for agriculture specialists and farmers
Organization of 150 training days per year for all specialists.2MAF, UB, MES2.5
Involvement of the agricultural high schools in the farmers’ training program (40 days of training per school/per year)2MAF, UB MES
Increase of the livestock and agricultural product processing rate
Support for processing technology improvement2MAF, PShB, 2KR
Improvement of important product supporting policies
Creation of a working group for the implementation of the vineyards and wine strategy3MAF
Analysis of the milk situation and its by-products and drafting of supporting policies for the product quality improvement3MAF
Implementation of priority measures for fresh and processed fruit and vegetable production and marketing strategy3MAF
Consumer protection and food quality guarantee. / Strengthening controls on the seed and seedling quality.
Legislation improvement and amendment1MAF
Creation of authorized regional laboratories for official analyses.1MAF, PSHB e ESHFF117100
Introduction of ELISA test at the ESHFF Central Laboratory1MAF, PSHB e ESHFF
Support for the production of certified seedlings.
Creation of genetically and fitosanitary free material through cloning selection for the seedling supply.1MAF, IP Vlore, ESHFF,
Conservation of the fruit-tree germoplasm collection.1MAF, IP Vlore, ESHFF28
Extension of projects for the improvement of the veterinary protection and animal health protection.
Drafting of joint projects for the zoo-zones with M. SH2MAF, MSH, IKV
Enhancement of the Epidemiology and Informacion Office2MAF, IKV
Improvement of the human and financial resources policies in the veterinary service2MAF
Improvement of the legislation on food control and food quality
Improvement of legislation on food quality, deadlines and product marketing conditions2MAF
Imrovement of control standards2MAF, IKU, IKV, Ministry of Health6
Enhancement of food quality control
Strengthening of inspectoriats activity in the framework of DRBU1MAF, IKV, Food Institute, M. SH
Enhancement of activity against falsification1MAF Food Institute
Creation of food products analyses department at IKU1MAF, Food Institute
Strengthening of control over SHIU1MAF Food Institute
Strengthening of control over producers1MAF, Food Institute
Strengthening of imported food quality control1MAF, Food Institute
Enhancement of food control infrastructure
Providing the necessary infrastructure to SHIU in the districts1MAF, Food Institute
Structuring of the Food Inspectoriates1MAF, Food Institute
Strengthening of analysis laboratory network on food products
Standartiziation of food control analyses1MAF
Methodology standartization1MAF
Specification of food control laboratories1MAF
Strengthening of the veterinary, fitosanitary, and food control check points1MAF, Ministry of Health
Better cooperation with the interested institutions and the Consumers’ Associations1MAF Institutes, Associations
Improvement of agro-food products marketing / Improvement of trade conditions
Creation of wholesale markets in Shkoder, Lushnje, Vlore dhe Korce2MAF, PSHB
Structures for information dissemination on markets2MAF, GTZ
Training on agro-products quality improvement, labelling and packaging2MAF
Support for agro-food exporting in the framework of FTA implementation in the region and wider2MAF
Sustainable management of the natural resources/Improvement of fishing management
Implementation of specific policies regarding input access for supporting fishing activities2MAF P. Fishing2.626.6
Supporting the creation of Fishermen Associations for the management of fishing resources and rehabilitation of the fishing ports in Shengjin and Durres2MAF,76436
Strengthening activities in aqua-culture
Supporting the restart of the acticity of fish production in the existing reservoires2MAF P. Fishing37
Higher rate growth of repopulation with mullet fish-beds by making efficient Lini economy2MAF, P. Fishing
Forest Service Restructuring
Separation of the managing functions from those of regulating and controlling2MAF, GDFP, MLGD
Competences Decentralization2MAF, GDFP, MLGD
Legislation improvement on forests and pastures
Approval of the new law on forests2MAF, MLGD GDFP, ME, M. D
Amendments to the law on pasture and meadows2MAF, MLGD GDFP ME, M. D
Amendments to the law on fauna and hunting2MAF, MLGD GDFP, ME, M. D
Amendmenst to the law on income administration in forests and pasturew2MAF, MLGD GDFP, ME, M.D,
Rehabilitation and protection of forests and pastures
Reabilitiation and protection. of downgraded forests and pastures and their2MAF GDFP, ME
Transer of competencies on forests to municipalities2MAF GDFP, ME
Protection of land from erosion and flood prevention
Afforestation of damaged areas and bare surfaces2MAF GDFP, ME
Construction of mountain dams2MAF GDFP, ME

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Matrix 2004-2007-Mid-Term Plan
Objectives/Public Priority Actions38Responsible InstitutionsDeadlineBudget39Cards40Others4142
Sustainable growth level for agricultural, livestock, agro-food and fishing production/Development of land market and property rights consolidation
Consolidation of the land administration offices in all districts1MAF200432
Completion of the agricultural land registration and other stock properties in rural areas.1The Project on the Stock Property Registration20058014935
Creation of the Land Information System1The Land Institution20073
Rehabilitation and management of the irrigation and drainage system and flood protection
Ongoing investments on Irrigation and Drainage Rehabilitation1MAF,WB, AZHZM, BIZH2007661912162640
Creation of the Drainage Boards1MAF20071486
Drainage systems management by the Drainage Boards1MAF200720
Supporting mechanization and introduction of new technologies, improvement of input qualities
Ongoing investments for technology improvement and agricultural sector mechanization in the framework of different projects (2 KR, ASP)2MAF, PSHB, 2KR, ESHFF,IKB, Different associations2007290800420
Higher green house mechanization and production through production cost reduction (fuel price differentiation)2MAF, PSHB, 2KR, ESHFF, IKB, Different associations2004121
Plant production growth
Production growth, improvement of the index of early and late vegetable production through increase of green houses surface, improvement of the cultivation technology.1MAF, IP Tirane, PSHB,200749
Surface extension with fruit trees, to fulfill domestic market demand and decrease imports1MAF, IP Vlore, PSHB200753
Organization and management of the Cadaster on Vineyards and Wine1MAF2007150
Consolidation of the zoo-technique service
New steps for the implementation of race programs in livestock2MAF, IKZ, Associations, Private operators.200751010
Mixed food production growth for livestock and quality control.2MAF, IKZ, Operatore private, OJQ20076
Development of farms and industrial centers for livestock production2MAF, IKZ200745
Preservation of the autocton genetic resources in livestock2MBU IKZ200713
Draft projects in livestock2MBUIKZ200727
Enhancement of research efficiency
Restructuring of the research institutions2MAF, Research Institutions2007650
Identification, testing and introduction of new methods for agricultural production, environmentally safe. Market needs oriented research2MAF, Commission of project review and aproval.20075
Monitoring of research projects and their impact on the agricultural development in our country2MAF, Research Institutions, MES2007244
Integration in the regional network of agricultural research of projects developed by donors2MAF200712
Enhancement and extension of agricultural efficiency
Support for private extension to big farmers2MAF200795
Information Centers development throughout the country2MAF, Projects20076
Providing services to middle farmers on contractual basis2MAF200713
Providing services to farmers in mountainous areas on contracual basis through the Agency on the Mountainous Area Development2MAF AZhZM20073
Research activities in farming on cotractual basis for the development of the new technologies2MAF, Res. Inst., UB, PSHB, AZhZM,20074
Training for agriculture specialists and farmers2MAF, UB, MES20072
Growth of agricultural and livestock production rate
Support the processing technology improvements1MAF, PShB, 2KR200726
Supporting policies on specific and important products
Implementiation of the vineyard and wine strategy3MAF2004
Analysis of milk and by-products market situation. Draft of supporting policies for production and marketing improvement3MAF200420
Measures for implementation of the strategy on fresh and processed fruit and vegetable marketing3MAF20045
Consumer protection and food quality provisions/Enhancement of the fito-sanitary service and plant protection
Strengthening of control on seed and seedling quality1MAF, PSHB e ESHFF20078
Incentives to product certified seedlings1MAF, IP Vlore, ESHFF20071020
Continuation and extension of projects for the improvement of veterinary and animal health protection
Keeping under control zoonotic diseases in cooperation with the Ministry of Health; reduction of infection among animals and people2MAF, MSH, IKV2007846
Measures taken for the prevention of the List A diseases and other diseases.2MAF, IKV200753
Better use of human and finacial resources in the veterinary activities at all levels2MAF2007140
Improvement of the control legislation on food quality
Improvement of the legislation on quality, deadlines and trading conditions of all food group-products2MAF20078
Improvement of standards and control on product quality2MAF, IKU, IKV, Ministry of Health20077
Strengthening food quality control
Strengthening of inspectoriats control activity in the framework of the DRBU1MAF200734
Enhancement of analysis laboratory network1MAF200737
Strengthening of food control infrastructures1MAF, Institute of Food20079
Strengthening of veterinary, fitosanitary and food quality control check-1MAF, Ministry of Health200725
Improvement of the cooperation with interested Institutions and the Consumers’ Associations1MAF, Institutes, Associations20074
Improvement of the agro-food products marketing / Improvement of trade conditions of agricultural products
Opening of wholesale markets in Shkoder, Vlore and Korce2MAF, PSHB2007130432
Enhancement of structures for information collection and dissemination about market situation2MAF, GTZ200712
Training and technical assistance on quality improvement, labelling, packaging and marketing of agro-food products2MAF20078
Incentives schemes for agro-food exports in the framework of the regional FTA and wider2MAF20075
Sustainable management of natural resources / Improvement of the fishing management
Implementation of specific policies of input access for supporting fishing activities2MAF200614
Supporting the creation of Fisherman Associations for the management of fish resources2MAF P. Fishing200735
Rehabilitation of fishing ports in order to obtain minimal hygenic conditions and standards of fishing and navigation2MAF, P. Fishing200740
Activity growth in aqua-culture
Supporting the re-start of fish production activity in the existing reservoires2MAF P. Fishing2007144
Higher growth rate population with mullet fish-beds by putting into efficiency the Lini economy2MAF, P. Fishing20077
Amendments to fishing regulations2MAF2007
Improvement of control and management structures for pasture and forest
Restructuring of the Forest Service2MAF, GDFP MLGD20071000
Improvement of the forest and pasture legislation2MAF, MLGD GDFP, ME, Min. Of Justice2007136
Forest and pasture rehabilitation and protection2MAF, GDFP, ME20071500
Land protection from erosion and flood prevention2MAF, ME2007630

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Monitoring Indicators
indicatorsViti baze 20002001200220032004200520062007
Total agricultural production (Annual growth in %)
Agricultural production1.
Plant Production-
Livestock Production3.
Agro-industry Production7.813.111.210101010
Fishing Production418.81.94445
Irrigation Surface(ha)203590196282198011216011236000256000276000296000
Mechanization level (Nr. of tractors & automatic agricultural machinery)8510840484068481850090001000010100
Quantity of chemical fertilizer used as inputs (in tons)117900113400184126185000200000220000250000250000
Quantity of pesticide used as inputs (in tons)1109810695100110130130
Quantity of guarantee certificates seedlings300330420500520550600650
Green houses (in ha)462478524553590620660700
Fruit trees and citrus Trees (in ha)2900029900313503200032400326003280033300
Vineyards (ha)58246275670070007300760080008400
Olives (ha)3600036700375003800038800395004000040500
Number of livestock farms (>5 cows)584722850901955101210721136
Number of inseminated cows (%)2027384045505055
Number of cows examinated for tuberculosis23260322000017458566000200000200000200000100000
Number of cows examinated for Anthrax148800096450010206081281000500000500000300000100000
Number of cows vaccinated against Anthrax1785085158400016505298700001000000100000010000001000000
Number of cows vaccinated against Brucelosis-158400016500001000001000000100000010000001000000
Investment in agroindustry (in lek)8979621020532101244420926001500000170000019000002100000
Number of analyses in the Food Control Analyses3211733237350943657038070395504075042100
Number of the functional information centers-325080100100100100
Number of licenses for reservoir utilization6880106117120170190200
Foresting (in ha)220342123265270300300300


Improvement of the legal and institutional framework: Infrastructure of Heavy Crime Court was founded to rehabilitate the juridical infrastructure and to set up and maintain of the informatics infrastructure in both levels of courts. Ministry of Justice and both levels of the courts are connected through informatics network. The institutional management capacities were strengthened and court issues were automated. Statistical information exchange was computerized. An assessment on judicial infrastructure, current staff skills and needs was made. An assessment for the implementation of the projects in the pilot courts was made

During 2003 was took a legal initiative, on electronic management court issues, which defines clear rules for the managing functions in the courts. An assessment of the current manual system and identification of further steps that would enable transfer into electronic system was made. Controls in courts of Kukes Shkoder Korce Pogradec Sarande, Gjirokaster districts and in the Court of Appeal Durres were strengthened. Controls took place in Courts of Durres, Vlore and Fier specifically on penal issues as: illicit trafficking. The Directorate of Inspection from the Ministry of Justice has also controlled the legality of the prosecutors’ activity in Durres, Vlore, Kurbin, Gjirokaster, and Sarande, specilay for cases to which was completed investigations and procedures was not started. While it is concluded that the judiciary independence has marked progress, although not yet in the required level, it is assessed that this independence, has not been associated proportionally with the performance growth and system fairness.

Improvements in legislation and rules implementation including their publication: Institutional Enhancement for every level and for every court (specifically in the high levels such as the Supreme Court, Supreme Council of Justice, and its inspectoriat, the courts of appeal. Increase capacity building through traininig and increased role of the magistrate school. Improvement on the conditions and means at the judiciary disposal were made. A slight reduction of the appeal level is noticed as viewed at the court statistics as compared to the previous years. Whereas the most evident effect is the rate reduction of the refusal and/or cancellation of the verdicts from the courts of appeal by the Supreme Court meanwhile, the rate of District Court case refusal by the Courts of appeal has not reduced.

Notary and Advocacy Service: Reorganization of the executive system. Three training activities have been undertaken and new and more qualitative staff recruitment is on the way. There is control enhancement, procedures have being clarified and uniformed and a more efficient cooperation with the state structures is ensured. As a consequence, the rate of the execution of the judiciary decisions by the executive offices, has reached 50% of cases compared to the 15-20% cases of the year 2001, before starting the reform.

Matrix 2003-Annual Review
Prior actions for 200343-Implementation measures

-Reasons for implementation shortfalls

4th Program of the cooperation EU-Albania2-Anticipation of contract2004
Matesterplan of the infrastructure at the Judiciary System2-Anticipation of contract2004
Project Implementation for the Korca prison2-Provision of construction plot2004
-Lack of funds
Construction of the Prison in Fush-Kruje3-Provision of construction plot2006
-Finalization of the project implementation
Master-plan for detentions3-Contract anticipation2004
Supervision of the Prison Fushe-Kruje1-Provision of the construction plot2006
-Finalization of the project implementation
Technical Assistance on Jurisprudence3-{Providing of foreign financing2007
-Drafitng of Terms of Reference by CE
Training CoE3Providing of foreign financing2007
-Centalized at KE
Construction and supervision of the Korca Prison1-Provision of the construction Plot.-Drafting of the project implementation2006
Control enhancement in Courts upon judgement of the penal cases in general and in particular of the penal cases dealing with illegal trafficking and control of sentence policy against the authors of these penalties4- Control has been undertaken in the Courts of Districts of Sarande, Gjirokaster, Elbasan, Vlore, Shkoder, Korce, Pogradec, Kukes
Prosecutors’ avtivity control on the activity of the Prosecutors on investigation of the cases that have concluded the preliminary investigation and the non-start of the procedures in order to fight against bureaucracy and violation of the subjects’rights in the penal process.4-Control has been undertaken in the Prosecution Offices of the districts Sarande, Gjirokaster, Vlore, Kurbin, Durres.
Enhancement and further improvement of the judicial inspection structures by restructuring the Inspection Directorate with the necessary framework in order to avoid legal violations in judging penal cases as well as elimination of bureacracy while handling them.4
Transfer of the stock property registration system onto the dependence of the Ministry of Justice, improvement of this system, analysis of the development and fields for further reform in this activity, undertaking of relevant legal and institutional initiatives.3-Under process2004
Establishment and functioning of Heavy Crimes Court4
Reorganization of the advocacy service in compliance with the constitutional and international standards, professional reorganization of the advocates and reports within the Ministry of Justice.4
Adaptation of the legal provisions with the Constitution requirements and anticipation of the provisions in order to reflect identified oversights while exercising the notary public profession.4
Improvement and consolidation of the activity fields, organization and functioning of the Minstry of Justice.4
Increase the efficiency the Magistrate School in order to organize training of judges and prosecutors.4
Measure’s enhancement for preventing and fighting against criminality phenomena (Code and area of the relevant Legislation)3- The system for protection of witnesses endangered by the criminal structures started to operate.2004
Improvement and consolidation of the penal, material and procedure legal provisions as well as functioning and organizational mechanisms of the relevant structures in the field of prevention and fight against money laundering.4
Further reformation of the judicial system especially in regard to the real stabilization of the career, judges’ professional level growth and improvement of the organizational and functioning manner of this system.1-Lack of funds2004
Further improvement of the organization and functioning of all links of the Prosecution system, of the managing post status and competencies etc.4
Preparation of the first legal package which foresees the improvement of the system on rules for the trade associations in particular and for exercising trade activity, considering even the reproachment of the legislation with European Union one.2It is foreseen in the legislative plan of the Ministry of Justice for the year 20042004
Achievements in the field of legislation aproach with the Constitution and the International Standards, etc. Concrete normatives which will enable the conversion of the unjust emprisonment time with money rembursement.2-It is foreseen in the legislative plan of the Ministry of Justice for the year 2004

-Lack of organization
Improvement of the activity, organization and functioning efficiency of the Official Publication Center2-Cooperation has taken place with the Ministry of Economy on new milieu.

-Lack of milieu
Provision of qualified ideas on the compliance of the normative draft-acts of the Ministries and Central Institutions with the legislation in force4
Signing of bilateral agreements in the penal, civil and administrative field aiming at procedure facilitation.4
Extension of prison system capacities through operation of the new reformatories or improvement of the existing ones.3- the capacities of the Peqini, Rrogozhine, Lezhe prisons have been extended. The draft decision for the increase of the staff number has been prepared.

-Shortage of staff and funds.
Preparation, approval, and implementation of the normative acts for completing the transfer of pre-detention system under the dependence of the Ministry of Justice.3-Transfer is continuing, funds have been obtained

-Problems dealing with the transfer of the logistics base.
Measures on the enhancement of the executive organs.2-Tendering is under process.2005
-The project is continuing (Project Implementation Unit-PIU)

Level of completion per criteria

Level of completion per criteria

Matrix 2004-Annual Plan
Objectives/Public Priority Actions44Responsible institutionBudget45Cards46Others47
Prison system/Improvement of prisoners’ conditions
Masterplan of Pre-detention1Ministry of Justice400,000
Judiciary System/Improvement of the judiciary system
Training at the Judiciary. COE1Magistrate School1,000,000
Masterplan of the Judicial Infrastructure2Ministry of Justice700,000
Legislation/Improvement of the penal legislation
Draftlaw against terrorism financing2MoJ
Draftlaw on the ract of the additional protocol of the Convention on combatting terorism2MoJ
Draft-law on annexes and amendments in the Penal Code Corruption, witnesses protection, article 134 etc2MoJ
Draft-law on additions and amendments in the Penal Procedure Code: Corruption, Heavy Crimes Court’s competence area (article 75/a), special investigation means, etc2MoJ
Draft-law on some amendments in the law on the ratification of the Penal European Convention on Corruption (release of some reserves, declaration of the central authority of the convention)2MoJ
Draft-law on the ratification of the additional protocol of the Penal Convention on Corruption2MoJ
Draft-law on the (penal etc) responsibility of the juridical persons involved in corruptive acts.2MoJ
Draft-law on additions and amendments in the Penal Code: organized crime, trafficking (especially human trafficking), extension of sanctions with prison and fine, financial crime, cyber-crime, offence-rumour, terrorism area, EU financial interests, the genetic manipulations etc.2MoJ
Draft-law on additions and amendments in the Penal Procedure Code: organized crime, special investigation means, completion and improvement of procedures etc.2MoJ
Draft-laws regarding the use of cameras in public and private places aiming at public security and penal attendance.3MoJ, MoPO
Draft-law on judicial and legal international cooperation2MoJ
Legal package on the return of the evidence barrier and sequestering in the administrative area, to confiscation specialized agency.2MoJ MoF, MoPO
Legal package on children’s justice with amendments and changes in:MoJ
Penal Code, Penal Procedures Code, Law on judicial power organization and functioning; Law on the Prosecution organization and functioning; Law on Ministry of Justice’s organization and functioning; Law on Judicial Police organization and functioning
Draft-law on unjust emprisonment compensation3MoJ
Draft-law against bureaucracy in the judicial and investigation process3MoJ
Draft-law on pardoning and amnesty3MoJ
Draft-law on the ratification n of the UNO Convention. On corruption2MoJ
Draft-law on the ratification of data protection Convention2MoJ
Draft-law on the ratification of the Convention for Compensation of the violent crimes victims3MoJ
Draft-law on the ratification of the 12th Protocol of the European Convention on Human Rights3MoJ
Draft-law on the ratification of the 13th Protocol of the European Convention on Human Rights3MoJ
Draft-law on ratification of the additional protocol in the Convention on the ciber-crime3MoJ
Amending draft-law on the trade associations2MoJ
Amending draft-law on the trade registration2MoJ
Draft-law on the abrogation of the first part of Trade Code2MoJ
Draft-law on the international private rights.3MoJ
Draft-law on Advisory Commission creation and functioning2MoJ
Draft-law on additions and amendments to the law on the judicial organization2MoJ, Supreme Court of Justice (SCJ).
Draft-law on Judges’ professional evaluation2MoJ, SCJ.
Draft-law on amendments of Magistrate School’s Law3MoJ, SCJ.
Draft-law on additions and amendments to the law on the Prison Police3MoJ
Draft-law on Sh K B Prisons3MoJ
Draft-Instruction on the official translation service’ procedures and tariffs2MoJ
Sub-legal draft-acts on Official Publication Center’ functioning3MoJ
Sub-legal draft-acts on the transfer of the state property competency (MoDefence, M of Public Order)3MoJ
Draft-law on arbitrage.3MoJ
Sub-legal draft-acts on the functioning of the Judicial Executive Service3MoJ
Ministry of Justice’ Internal Regulation2MoJ
Draft-law on the ratification of the Convention for Contacts with children3MoJ
Draft-manual of the Legislative Technique3MoJ

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Matrix 2004-2007-Mid-Term Plan
Objectives/Public Priority Actions48Responsible InstitutionsDeadlineBudget49Cards50Others5152
Prison system/Improvement of the prisoners’ conditions
Masterplan of pre-detention1Ministry of Justice2004400,000
The prison Lezhe, the prison Fush-Kruje, the prison Korce1Ministry of Justice20061,700,0008,100,0002,500,000
Pre-detention center construction on prefecture basis1Ministry of Justice20071,000,0001,000,000
The Judicial System, The Improvement of the Judicial System
Training at the Judiciary, COE1Magistrate school20041,000,0001,000,000
Masterplan of the Judicial Infrastructure2Ministry of Justice2004700,000
The Heavy Crime Court1MoJ2006500,0005,000,000
Training at the Judiciary1Magistrate school20051,000,000
Appeal Court in Vlora, Korca2MoJ20063,500,000
Establishment of the Children’s Institute2MoJ20071,000,000
Establishment of the Trade Court2MoJ20071,500,000
Enhancement of investigating skills2Gen. Pros.20071,500,000
Enhancement of SCJ2SCJ2007900,000
QPZ/Increasing the QPZ efficiency
Support to QPZ1QPZ2007900,000
Rehabilitation of the district courts2Ministry of Justice20078,000,000
Legislation/Improvement of the penal legislation
Draft-law against financing of terrorism2MoJ2004
Draft-law on ratification of the additional protocol of the Terrorism2MoJ2004
Suppression’ Convention
Draft-law on amendments and changes to the Penal Code: Corruption, witnesses protection, article 134 etc2MoJ2004
Draft-law on additions and amendments to the Peal Procedures Code: Corruption, Heavy Crime Court’ competence area (article 75/a), special investigation means, etc.2MoJ2004
Draft-law on some amendments to the law on the ratification of the Penal European Convention on Corruption (release of some reserves, declaration of the central authority of the convention)2MoJ2004
Draft-law on the ratification of the additional protocol of the Penal Convention on Corruption2MoJ2004
Draft-law on responsibility (penal etc.) of the juridical persons involved in corruptive activity.2MoJ2004
Draft-law on additions and amendments to the Penal Code on: organized crime, trafficking, (especially human trafficking), extension of sanctions with prison and fine, financial crime, cyber-crime, offence/rumor, terrorism field, EU financial interests, genetical manipulations, etc.2MoJ2004
Draft-law on additions and amendments to the Code of Penal Procedure: organized crime, special investigation means, completion and improvement of procedures etc.2MoJ2004
Draft-law on the use of cameras in public and private places for public security and penal attendance aim.3MoJ, in coordination with the Minstry of the Public Order2004
Draft-law on legal and judicial international cooperation.2MoJ2004
Legal package on return of the evidence barrier and sequestering in the2MoJ in coordination with the Minstry of2004
administrative area, to specialized confiscations agency etcFinance and Ministry of Public Order.
Legal Package on Children’ Justice with additions and changes in:
Penal Code; Penal Procedures Code; Law on judicial power’ organization and functioning; Law on the Prosecution’ organization and functioning; Law on Ministry of Justice’s organization and functioning; Law on Judicial Police’ organization and functioningMoJ2004
Draft-law on injust imprisonment’ compensation3MoJ2004
Draft-law against bureaucracy in the investigation and court process3MoJ2004
Draft-law on pardoning and amnesty3MoJ2004
Draft-law on the ratification of the Corruption UNO Convention2MoJ2004
Draft-law on the ratification of the Data Protection Convention2MoJ2004
Draft-law on the ratification of the Convention on compensation of heavy crimes’ victims3MoJ2004
Draft-law on ratification of the 12th Protocol of the European Convention on Human Rights3MoJ2004
Draft-law on ratification of the 13th Protocol of the European Convention on Human Rights.3MoJ2004
Draft-law on ratification of the additional protocol in the cibernetic crime’ Convention3MoJ2004
Amending draft-law on trade associations’ law2MoJ2004
Amending draft-law on trade registration’law2MoJ2004
Draft-law on the abrogation of the first part of Commerce Code.2MoJ2004
Draft-law on the privete international right3MoJ2004
Draft-acts on establishment and functioning of the Advisory Commission2MoJ2004
Draft-law on some annexes and amendments to the law on the judicial organization2MoJ, coordination with the Supreme Court of Justice is required.2004
Draft-law on Judges’professional evaluation2MoJ, in coordination with SCJ2004
Draft-law on the amendment of the Magistrate School’ law3MoJ, in coordination with SCJ2004
Draft-law on some annexes and amendments to the Prison Police’ law3MoJ2004
D/law on the Sh K B Prisons3MoJ2004
Draft-Instruction on official translation service’s procedures and tariffs.2MoJ2004
Sub-legal draft-acts on the functioning of the Official Publication Center.3MoJ2004
Sub-legal draft-acts on competency transfer of the state land administration (Mof Defence,M. Public Order)3MoJ2004
Draft-law on the arbitrage3MoJ2004
Sub-legal draft-acts on the Judicial Executive Service’ functioning3MoJ2004
Ministry of Justice’ Internal Regulation2MoJ2004
Draft-law on the ratification of the Convention on Contacts with Children3MoJ2004
Draft-manual of the Legislative Technique3MoJ2004

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Monitoring Indicators
IndicatorsBase line 20002001200220032004200520062007
Juridical infrastructure Staff assessment.80%
Reinforce of the legal framework, improvement of juridical public services50%
Supervision of prosecutor regional office.100%90%90%30%
Verification and respond of citizens claims90%
Design and approval of 59 legal frameworks.90%
Notary Assistant registration67%
Lower Assistant registration.88%
Registration of the mediators for misunderstanding solution.79%
Notary test92%


The current expenditure for the end of the 2003 year was 169.7 billion lek or 22.8% of the GDP. Expenditure has increased by 15 billion lek from 2002; though as a percentage of GDP it remains at a similar level. Interest expenditure has increased by 3 billion lek (4% of the GDP) against planned. Expenditure for the social institutions for social and health protection was on target at 44.8 billion lek. Local government spending was 1% under spent as a result of a 5% shortfall in revenue collection. Payments for unemployment checks and economic aid were 8.8 billion lek (91% of planned expenditure) in comparison to expenditures of 8.7 billion lek in 2002.

Capital spending in 2003 was 62% of planned expenditure and 4.1% of GDP. Capital spending on internal investments by the end of the year was 18.3 billion lek (2.5% of GDP) against planned expenditures of 21.2 billion lek. The shortfall was due to the late submission of investment projects The Ministry of Finance has taken precautions to ensure this does not happen again, by requesting that the Line Ministries present their investment projects along with their budget requests. Foreign financial investments for 2003 were 12.1 billion lek (1.6% of GDP), less than 50% of initial planned expenditure (by around 16 billion lek). There are two reasons for this, firstly poor initial projections, and secondly the lack of absorptive capacity by the appropriate ministries.

Department of Education expenditure for 2003 was 21 billion lek (2.82% of GDP), an increase of 2 billion lek from 2002. The government budget for the Department of Education has increased in 2003 from 8.9% of the 2002 budget to 10.5%.

Health Department expenditure for 2003 was 13.2 billion lek (1.77% of GDP), an increase of 1.3 billion lek from 2002. General public expenditure has increased from 6.2% to 6.6%. Increase in Health Department spending in 2003 was a result of an increase in current expenditure. Capital expenditure remained constant.

Transport and Communication Department expenditures in 2003 were 12.3 billion lek (1.7% of GDP) down from the planned 13.6 billion. This was mainly caused by a reduction in planned expenditure in foreign financial investments.

The Department of Agriculture expenditures for 2003 were 5 billion lek (0.7% of GDP) against the planned 7 billion. This failure to accomplish the plan can be attributed to spending only 1.2 billion lek of the 2 billion allocate from foreign financial investments along with reduced expenditure against governmental budget.

Matrix 2003-Annual Review
Prior actions for 200353-Implementation measures

-Reasons for implementation shortfalls
New Deadline
Amelioration of the legislative acts and subparts for the money laundering prevention and the synchronization with Standard International Conventions
Creating Law no. 9084 (19.06.2003) “Addendums and Revisions in Law no. 8610 for the Prevention of Money Laundering.” (17.05.2000)4
Creating Law no. 9085, (19.06.2003) “Addendums and Revisions in the Penal Procedures Code of the Republic of Albania”4
Creating Law no. 9086, (19.06.2003) “Addendums and Revisions in the Penal Code of the Republic of Albania”4
Drafting of Directive no.1163, (18.2.2003) for Gambling Games4
Drafting of Directive no. 2051, (24.03.2003) for Travel Agencies Investigation4
Drafting of Directive no. 3038, (6.5.2003) for Notary Actions4
Coordination with other internal structures for the work against money laundering and economic/financial crime
Cooperation with the office of the District Attorney General, Bank of Albania, Ministry of Public Order, State Information Services, Police (Tariff, Customs Judicial)etc.4
Adherence of the Memorandum of Understanding “Inter-institutioanal Cooperation for the Prevention of Money Laundering”4
International cooperation with homologous structures and with international organs
Signing of contracts for the cooperation and sharing of financial information in relation to money laundering with the institutions in Bulgaria, Macedonia and Slovenia.42004
Obtain membership in the Egmond Group “International Organization for the Cooperation of Financial Information Units Against Money Laundering”4
Analysis, improvement and distribution of financial information to other Agencies
Timely analysis and appropriate distribution of information to in-charge legal police institutions, and District Attorney’s office for suspicions and implications of money laundering and financing terrorism.4
Improvement Of public expenditure management
Improvement of coordination and political relationships to secure improved relationships between organs of the state and allocation of funds, and to secure a higher transparency in the budget process.4-Preparation of Midterm Budgetary Program for 2005-2007. Preparation of project-law of the state budget for the year 2005 based on budget indicators and sectional priorities which were approved on main governmental documents such as NSSED, PBA etc. Creation of directives for the 2005 budget. Preparation of revisions in the Organic Budget Law in accordance with the new conditions and the progress of reforms in other sections. Improvement of the process of drawing up the yearly budget through revisions in procedures, directions, standards, etc, by planning to increase the transparency of the process. Training of MOF staff and the other Ministries with a contact line for foreign and internal technical assistance.2004
Increase of efficiency of public expenditures and fiscal discipline in budget implementation.3-Preparation of directives for implementation of the 2005 budget. Creation of Project Actions for employees working on the budget for the year 2004. Creation of directives for the evaluation of investment procedures. Preparation of priority draft of central instructions in accordance with the new Organic Budget Law in order to simplify, and make more transparent the process of budget implementation. Continuation of the fiscal decentralization reform. Preparation of common directives in accordance with the approved legislature.
-Approval of the new Organic Budget law was not achieved during the year 2003
Improvements in the budget system and the budgetary procedures.4-Improvements in the classification of the existing budget. Publication of the ‘Management of Public Finances Manual’June 2004
Strengthening Of Institutional Capacity4-Training of MOF staff. Reevaluate branch functions.
Modernization of the budgetary system3-Improvements and successful maintenance of the system where information is stored. Implementation of the automatic registering of budgetary transfers program.2004
- Design of the program was not achieved on time, due to the fact that the process was lengthier than initially projected.
Monitoring, evaluation and drafting of progress report for 2002
Drafting and distributing the methodology for drafting of the progress report.4
Inclusion of all interested actors throughout all phases of drafting the progress report.32004
Organize consultations with representatives of Line Ministry working groups with local experts etc.4
Organize trainings in components of the Progress Report4
Organize meetings with the Inter ministry NSSED working group.4
Organize a national conference for launching the report4
Preparation of all documents for the transfer of the report to the Inter-ministry Committee of Economic Politics for its approval4
Translation and distribution of the report4
Send the report to the Executive Board of Directors for the World Bank and IMF4
Strengthening capacity of line ministries and the NSSED office
Constructing of Terms of Reference for the four components of the Trust Fund.4
Constructing of a training program with the Monitoring and Evaluation Units in Line Ministries along with the Units of the European Integration and the Units of Programming and Growth in the regions, municipalities, and communes.4
Finalizate negotiations with DFID concerning the three-year assistance programme including the Terms of Reference and expert inputs.4
Achieving full-complement of staffing.4
Institutionalization of the participation process.
Organization of regional and sector consultations on NSSED.4-It is a process which will get strengthened gradually and that is why it needs timeOngoing
Organization of the national conference with citizen representation and local and national authorities.4
Organization of business meetings with the parliament representatives.4
Improve donor coordination by orienting them towards the priorities of NSSED
Organization of joint meetings on the orientation of foreign aid based on NSSED priorities.2Ongoing
Raise people’s awareness of NSSED.
The publication of the Progress Report 2002, of the Midterm Plan of the Public Priority Measures 2003-2006 including CD-Rom.4
Continuous renovation of NSSED web page.4Ongoing
Production and distribution of the NSSED newsletter to the public4
Strengthen the ties between NSSED and MTBP
Expansion of the prioritizing process and costing of the public priority measures at a sector and national level.3- The execution for the first time of this process has created difficulties in the exact understanding of this concept. The lack of coordination between NjMV and DoB2004
Drafting of the methodology on the priority process.4
Inclusion of the Budget Office representatives in the Technical sector.4
Training Budget Office, Loan and Treasury Office staff and other related sections within MOF. Strengthening and reviewing of the functions of the regional branches-The consolidation and strengthening of the operations in the treasury system.
The management of the resources and public spending with the help of Treasury.-Income and expenditure projections for a five –year period. The prediction of the necessary amount for treasury bonds.
Securing internal loans with the lowest cost.-The construction of a calendar on treasury bonds. Approval of the agreement between MoF and BoA.
Management of external debt and of foreign finances.-Updating of the databases on external debt. The opening of special accounts in BoA and in the second level banks. Account settlement of the external fund.
Steady economic growth with real growth of the preliminary gross internal production at 6% and the decline of the general budget deficit from 5.8% opf GDP to 4.4 % of GDP
Growth in all economic sectors but with more emphasis in the service and construction area Industry 2.7%, Agriculture 3.0%; Construction 11.3%, Transportation 10.8%.4Government
Improvement of the economic structure-lowering specific weight of the agricultural sector on Agriculture GDP4Government
Increase of GDP per person in 2003 by 2.4 times the GDP of 19984Government
Synchronizing of fiscal and monetary policy4Government
Continued institutional and structural reforms in the public administration.4Government
Improve revenue collection and management of expenditures4Government
Responsible fiscal policy4Government
Attract investments particularly foreign investments.4Government
Abide by a responsible monetary policy (maintain inflation at the 2-4% level) reaching by a 3-4% level by end Of 2003
Maintain quantitative objectives from the Bank of Albania4Government and Bank of Albania
Maintain the exchange rate in stable levels4Government and Bank of Albania
Better management of public expenditures4Government and Bank of Albania
Maintain control of the budget deficit4Government and Bank of Albania
Synchronization of monetary and fiscal policy4Government and Bank of Albania
Prepare a draft with the amendments for the gambling law (01.12.2000) and include inter ministry comments.3-Legislative acts of some states were utilized

-Did not obtain approval at the parliament
Training for the gambling and casino specialists1-No training was provided2004
License gambling organizations4-Licenses were given to 11 new organizations
Control the activities of all licensed organizations throughout the country3-Control appropriate documents

-Due to lack of personnel, only a yearly check was implemented throughout the country and in all organizations
Creating Directive no. 15 (16.07.2003 “Over opening and closing procedures for math, electronic and locations of sports games of chance”4-Preparation of materials for the Directive in order to create procedural ease
Creating directive no.10 (12.03.2003 “For the definition of necessary procedures for concentrated printing of tickets, distribution and control over their use”4

Level of completion per criteria

Level of completion per criteria

General Tax Department

Prior actions for 200354-Implementation measures

-Reasons for implementation shortfalls
New Deadline
Creation of new structures based on functions4-Implement organization and strengthen institutions
Complete procedures manual with responsibilities for each sector, and office ex: registration manual, evaluation for collections, appeal, finance, evasion and investigation,3-Foreign investments. Obtain and evaluate information and internal experience.-This is a continuous process. From the implementation of the new reform components necessary priorities have arisen which need to be applied2006
Complete implementation of the control function4-Foreign funding. Strengthening of internal procedural systems.
Design objective for each tariff branch for county4-Perfect administrative, detailed program of objectives in the yearly operational plan
Create appropriate directions4-Foreign Investment. Internal line functions
Implement registration system for the contributors to the social security and health insurance2-Foreign Investment. Internal organization.

-It is a continuous process. Problems in connection to transfer of information via ISSH.
Begin archiving the security contributors in the ‘Branch of Big Tariff Payers’, Tirana4-Foreign Investment. Internal organization.
Implementation of the media program for the education of the taxpayers4-Implementation of functional responsibilities
Organize the old loans system for tariffs, acknowledging and signing the memorandum of understanding4-Improvement of internal procedures in relation to debt collection.
Prepare legislative acts for the implementation of the new fiscal package4-Implementation of functional responsibilities. Cooperation of all responsible groups.
Prepare legislative acts for the archive transfer of the security contributions from Security to Tariffs.4-Foreign investment. Internal Line Functions
Fiscal packet to accompany budgetary law for the year of 2004.4-Implementation of functional responsibilities. Cooperation of all responsible groups.

Level of completion per criteria

Level of completion per criteria

General Customs Department

Prior actions for 200355-Implementation measures

-Reasons for implementation shortfalls
New Deadline
Improvement of Customs administration
Increase of archiving and lowering fiscal evasion
Improvement of administrative plans for the achievement of the monthly plans4- Strengthening of transit goods control. Improvement of work and quality in customs checkpoints. Improvement and strengthening of the customs administrative structures and also improvement in professionalism. Improvement and augmentation of the level of internal control.
Strengthening cooperation with the General Tax Department, law and legal enforcement offices.3- Lack of adherence of NIPT subjects and the provision of new NIPT by DPT has created difficulties in recuperating the customs debt.2004
Preparation of a strategy for the war against smugglers and corruption
Creation of the checking system after customs process is complete4- Improvement and augmentation of the level of internal/domestic check up. Increase the role of the D.O.H in the war against smuggling and fiscal evasion
Complete implementation of the informative system ASYCUDA in Tirana and Durres.3- Dramatic reduction in subjectivity during the review of customs evasions due to the use of information system ASYCUDA by the Customs Service in Tirana.2004
- Not having been able to take over the object of the customs branch offices due to unsatisfactory construction work.
Preparation of the 4 monthly report on corrective actions taken as a result of the internal control reports4
Protection and well being of the customs data.
Reevaluation and improvement of the information system on dues from customs declarations and strengthening functions in regard to their archival-We have now begun the technology update of the Custom Service with the ASYCUDA system which has considerable minimized Customs employees subjectivity in the reviewing of evasions. Implementation of the customs amendments aimed at ensuring customs legislation has reached the level of professionalism and responsibility needed during work. The implementation of the project for the technology update of the ASYCUDA +++ customs information in the customs office of Tirana which will soon begin to be used in the Customs office of Durres initially and then in order all other customs centers.
Improvement of the information system of the ASYCUDA
Increase professionalism and quality of actions taken against evasions
Creation of the accountability plan for the customs and its technology update.
Definition of stronger staff disciplinary actions, and increase the ability for timely identification of the mistakes committed by staff through the use of an adequate process (within the legal, organizational and structural boundaries)
Implementation of the Customs Ethics Code through an ongoing staff training
Circulation of staff every 2-3 years
Enhance staff motivation for the prevention of wrongful/abusive cases by personnel
Creation of a system which rewards good motivation
Reevaluate the operating and investigating structures within the Office. Use competent internal staff to increase work quality and decrease problem cases. Improve the implementation of the bonus system
Trained customs employees
IN 2003 training will be provide for about 70% of customs employees. The Mission of Cam will also play a special role in the training of anti-smuggling, information and investigation personnel.-Continue training of the employees of the Customs administration, primarily done by the CAM-A specialists. In the focus of implementing the free trade contract, with the countries of the area, priority has been given to training the customs staff on “Over the Regulations of Origin” and at the same time training of the Operational-Investigative Department continues. 18 different topics have been presented and 228 employees have participated. Topics include internal audit; risk analysis; terrorist attack threat nuclear weapons threat; customs regulations; checking of passenger’s luggage, etc.
Better coordination of the customs offices and other institutions
Continue to strengthen established cooperative relationships with domestic and foreign institutions.-Cooperation with other departments specialized in the war against economic crime including SHISH, Internal Ministry, and General Directory of Tariff Office. The operation of “Contact Group” continues. We have strengthened and increased cooperation with the Law Enforcement structures and SHISH and we have also strengthened and increased cooperation with homologous international structures through the operation of the Contact points with neighboring countries via the help of CAM-A in the reciprocal exchange of information with PAIS or with the SEMS system and the exchange of information according to the Nairobi convention for the verification of suspicious receipts. From the cooperation with the border customs offices in 24 cases sanctions in the sum of 178 million lek and are in the process of evaluation 15 more cases.

Level of completion per criteria

Level of completion per criteria

Matrix 2004-Annual Plan
Objectives/Public Priority Actions56Responsible institutionBudget57Cards58Others59
Macro-Economic focus/Stable economic increase. Real increase of the gross internal production 6%. Decrease of the general budget deficit by about 5.1% Of GDP
Growth rates in the priority economic sectors: Industry 3.1%, Agriculture 3.0%, Construction 10.6%, Transport 10.1%, Services 6.4%,1Government
Improvement of economic structure1Government
Synchronization of macro fiscal and monetary politics1Government
Ongoing structural reforms in accordance with the national strategy for the economic and social improvement1Government
Improve method of income collection and better management of expenditures1Government
Responsible fiscal policy1Government
Sufficient monetary reserves to handle months of imported goods and services1Government
Boost direct foreign investments1Government
Increase economic credit1Government
Improve the trade deficit; Improve the ratio of covering imports with exports.1Government
Improve the unemployment indicators1Government
Adhere to a responsible monetary policy which will keep inflation at 2.4% per annum1
Based on a flexible regimen of the exchange rate the monetary policy will focus on maintaining inflation under the predicted limits1Government and Bank of Albania
Maintain quantitative objectives from the Bank of Albania1Government and Bank of Albania
Appropriate level for interest rates1Government and Bank of Albania
Improved management of public expenses1Government and Bank of Albania
Keep the budget deficit under control1Government and Bank of Albania
Improve management of public expenses
Preparation of the New Organic State Budget Law1Ministry of Finance
Preparation of the Management of the Public Finances in accordance with the New Organic Budget LawMinistry of Finance, Budget Office
Improve coordination and formulation of the budgetary policy in order to establish a stronger strategic relationship with Government programs. Increase transparency and responsibility in the process of drafting and implementing the federal budget.1Ministry of Finance, Budget Office
Preparation of the Intermediary Budgetary Program each year including all budgetary institutions1Ministry of Finance, Budget Office
Improvement of project law “For accountability and financial transparency” in Parliament and commencement of efforts to prepare legislative subparts, standards and accountable manuals1Ministry of FinanceFSAC
Preparation of budget legislature each year depending on the Government program
Release of directives and standards for the implementation of the federal government aiming for an increase of transparency and inclusion of everyone in this process.2Ministry of Finance, Budget Office
Training of staff of MoF and Line Ministries.1
Increase control of implementing the national budget via creation of standards and their implementation1
Formalize relationship between central and local government, management of public finances, via preparation of the necessary legislative acts.1MOF,
Improve budgetary classifications in accordance with international standards.1Ministry of Finance, Budget Office
Technological update of the planning methods and methods of implementing state budget.1Ministry of Finance
Strengthening of capacity of Budget Office staff, Loan and Treasury Office and also other structures of M0F. Strengthening via a reevaluation of function of the branches throughout the districts.World Bank B, DoPA, DFID, Budget Office, Office of Loans and Treasures
Management of public income and public spending via treasury structures. Consolidation and strengthening of functions in the treasury systemMoF, Office of. Loans and Treasures
Secure borrowing internal loans with the lowest costMacroeconomic Office, Office of Budget, Office of Customs and Tariff Office, and Office of Customs
Management of the international loans and foreign investments.Office of Loans and Treasures Office of Loans & Treasures,
Forecast income and expenditures for a period of 5 years. Forecast essential sum for treasury bonds.. Creation of a calendar for treasury bonds. Approval of the contract between MoF and BoAMoF. Update of the information basis for foreign loans. Service implementation for foreign loans. Opening of special accounts in BoA and banks of the second level. Final account settlement of the foreign loans.MoF, Office of Loans and Treasures.

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

General Customs Department

Objectives/Public Priority Actions60Responsible institutionBudget61Cards62Others63
Modernize Customs Service/Strengthen the administering of human resources, as a prerequisite per for success in the fulfillment of responsibilities and the fight against corruption
Strengthen the administration of human resources through the adequate implementation of the new structure and the improved Acting Provisions (AP).1Ministry of Finance,BudgetInvestment CAM-A
Improve the incentives system for the personnel as an anticorruption measure and as a positive influence for performance improvement1Judiciary Administrative Dept. CAM-ABudget
Improve the evaluation system of the individual achievements of the customs personnel, through job evaluation (analysis of the job positions)2Administrative Department, Technical Department, Personnel CAM-ABudget
Creation of the indicator system for performance evaluation of the different structures, and for the whole customs system to achieve the Customs Mission (not only measuring the level of the income gathered but also other mission elements) and also for achievements in the modernization field in order to become members of the EUMinistry of Finance, Administrative Department, Technical and Operational – Investigative CAM-ABudget
Modernization of the Customs Service
Facilitate trade and passenger travel3Technical Department IRU/Analtir CAM-ABudgetInvestment CAM-A
Execute for the international TIR Carnet transit1Technical Dept. IRU/Analtir CAM-ABudget
Function of the Durres Harbor Customs as a “one-stop-shop”1Administrative Dept, TechnicalBudget
Implementation of the Red/Green channels in the Rinas Airport1Technical Department, Director of the Rinas Customs Branch, CAM-ABudget
Run a pilot program of the simplified procedures in the Customs Branch of Tirana, using the functions of the appropriate module in the ASYCUDA system.1Technical Department Director of the Tirana Customs Branch, Manager of ASYCUDA, CAM-ABudget
Simplify procedures of customs clearance for the postal traffic and express mail3Technical Department, CAM-ABudget
Decentralize and delegate responsibilities in the regional level l level3Technical Department, Regional OfficesBudget
Modernize the Customs Service/Maximize the customs income via the improvement of the technical customs procedures
Improve management and implementation of the regulations about origin1Technical Department CAM-ABudgetInvestment CAM-A
Draft a system of information for a customs evaluation1Technical Department CAM-ABudget
Maximize income via strengthening of administrative fees, control of the economic regimen and administration of the customs loan1Technical Department CAM-ABudget
Synchronization and simplification of the procedures for the suspension regimen.3Technical Department CAM-ABudget
Modernization of the Customs Service
Improvement of the statistics3Technical DepartmentBudget
Modernization of the Customs Service/Increase of the anticrime capacity and anticorruption
Improve the system of information management2All Departments, ASYCUDA GroupBudgetInvestment CAM-A
Increase law imposing capacity2Operational-Investigational Dept. and CAM-ABudget
Improve intelligence quality1Operational-Investigational Dept. and CAM-ABudget
Assistance for customs and police in order to increase operational action against organized crime, corruption and trafficking2DPD Operational-Investigational Dept. CAM-A–Group, OCI/CAM GroupBudget
Preparation of a detailed and relevant program for the coordination with other agencies, which will have as a goal, the reduction of the chances for organized crime, corruption and illegal traffic to occur.2DPD, Operational/Investigational Department CAM-A Group and OCI/CAM GroupBudget
Improve the effectiveness of the customs and law enforcement actions taken via work support2DPD, Operational/Investigational Department and CAM-A Group OCI/CAMBudget
Encouragement for the increase of successful penal investigations2DPD, Operational/Investigational Department and CAM-A Group OCI/CAMBudget
Consolidation of the External Control Unit and improvement of the performance level by technical staff2DPD, Operational/Investigational Department and CAM-A Group OCI/CAM, A Posterior UnitBudget

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

General Tax Department

Objectives/Public Priority Actions64Responsible institutionBudget65Cards66Others67
Administrative problems
Complete implementation of the function of internal control. In this regard re-evaluate and draft regulations on the organization and function of the office of Internal Control and Investigation1DPT
Collection of the social security and health insurance contributions in the categories below.1DPT, ISSH, ISKSH
Taxpayers registered based on law no. 7928, (27.4.1995) “For Taxes in Regard to Increased Value” starting from 1.5.2004.1DPT, ISSH, ISKSH
Budgetary institutions starting from 1.8.2004.1DPT, ISSH, ISKSH
Creation of the procedures and regulations manual in accordance with the contributions collected in the two categories of the aforementioned taxpayers2DPT, Cooperation with the PWC consulate
Improvement of procedures
Finish the procedures manuals with the job responsibilities for each function, such as manual of the Human Resources of Evaluate/Collections Access of Finance and Appeal2DPT, Cooperation with the PWC consulate
Reevaluation of the procedures manual for tax control and for loan collection and disciplinary actions2DPT
Improve in the legislative focus
Creation of the legal subparts in execution of the revision of the 2003 end year fiscal packet1DPT
Draft tax laws in line with the respective legal dispositions of the European Union1DPT, Cooperation with the PWC consulate
Preparation of the legal draft of the tax procedures1DPT, Cooperation with the PWC consulate
Preparation of the draft of the direct taxes law.1DPT, Cooperation with the PWC consulate
Preparation of the draft of the law in connection to VAT.1DPT, Cooperation with the PWC consulate
Drafting of legal subparts for all the revised laws1DPT, Cooperation with the PWC consulate
Preparation of the fiscal package for the end year 20041
Problems that arise from the technology update.
Implementation of the informed declaration of taxes over earnings1DPT
Implementation of the declaration and the payment of the social security contributions and health contributions in the Integrated Tax System, implemented by the priority tax branches1DPT
Implementation of the Collections System of the Social Security for the other tax branches2DPT
Assign a special identification number for the budgetary institutions for the coding of social security, health, personnel employment income contributions2DPT

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Matrix 2004-2007-Mid-Term Plan
Objectives/Public Priority Actions68Responsible InstitutionsDeadlineBudget69Cards70Others7172
Preparation of the New Organic State Budget Law1Ministry Of Finance2004
Preparation of the Management of the Public Finance Manual in accordance with the New Organic Budget LawMinistry Of Finance Budget Office2004
Improve budget coordination and policy formulation to secure a stronger relationship with the strategies and the programs of the government. Increase transparency and responsibility in the process of creating and implementing the State Budget1Ministry Of Finance, Budget Office2005-
Preparation of the Mid-Term Budgetary Program each year including all budgetary institutions1Ministry Of Finance, Budget Office2004-2007
Preparation of the Budget law each year based on the Government program
Publishing of directives and standards for the implementation of the state budget, aiming to increase transparency and inclusion of all in this process.2Ministry Of Finance, Budget Office2004-2007
Training of the MOF Staff and Line Ministries.12004-2007
Increase the control over the implementation of the state budget, via the creation of standards for its implementation.12004-2007
Formalize the agreements between the central and local government over the management of the public finances via the preparation of the other necessary legal acts.1MOF, MPVD2004-2007
Improve budgetary classification in accordance with international standards1Ministry Of Finance, Budget Office
Modernize the planning and implementation methods of the state budget1Ministry Of Finance2004-2007
Economic stability and the maintenance of the growth rate (true increase of the economy 6 per cent per year)1Government2004-2007
Maintain growth rates in the primary sectors of the economy, Industry, Agriculture, Construction, Transport, and Services.1Government2004-2007
Better synchronization of the fiscal policy with the monetary one1Government2004-2007
Continue expanding the institutional and structural reforms including here the reforms in the public administration1Government2004-2007
Reorientation of the budgetary expenditures towards the most influenced by poverty sectors (education, health)1Government2004-2007
Improvements in infrastructure, particularly in the energy sector and potable water1Government2004-2007
Boost investment particularly foreign investments.1Government2004-2007
Adhere to a responsible monetary policy (maintain inflation at 2-4% per annum)1
Maintain quantitative objectives for the Bank of Albania1Government and Bank of Albania2004-2007
Maintain the exchange rate in constant levels1Government and Bank of Albania2004-2007
Better management of the public expenditures1Government and Bank of Albania2004-2007
Keep the budget deficit under control1Government and Bank of Albania2004-2007
Synchronization of monetary and fiscal policy1Government and Bank of Albania2004-2007
Continue policies of fiscal consolidation1
Better use of the reserves for the increase of income in the war against fiscal evasion, smugglings, corruption, and informal economy1Government and Ministry of Finance2004-2007
Effective use of the budgetary expenses1Government and Ministry of Finance2004-2007
Continuous strengthening of the financial control and budgetary discipline.1Government and Ministry of Finance2004-2007
Approval of the Law “For Accountability and Financial Transparency”, in the Parliament. Preparation and approval of the legal subparts, standards and accountability manuals1Government, Office of Accountability, MF,2004-2007
Improve the Legal Framework
Proposal of project law “For a change in the law no. 8977, (12.2.2002)” “For the System of Taxes in the Republic of Albania”(Payments for casino licenses)1Ministry of FinanceYear 2004
Reevaluation and presentation of the draft with revisions about the gambling law no.8701 (1.12.2000) and gaining approval by the Government and the House1Ministry of FinanceYear 2004
Improvement of adequate policies
Creation of policies for the best control of the gambling games, in the increase of income during the war against fiscal evasion, smuggling, corruption and informal economy.1Ministry of Finance2004-2007
Creation of policies for the protection of gambling customers.2Ministry of Finance2004-2007
Creation of the policies in connection with the advanced gambling technology.2Ministry of Finance2004-2007
Strengthening of capacity with the goal for Increase of control
Training of office staff1Ministry of Finance2004-2007
Increase control for the implementation of the law in regard to gambling legislature and the legal subparts1Ministry of Finance2004-2007
Continue the licensing processMinistry of Finance2004-2007
Cooperation with the Office of War to prevent Money Laundering1Office for Gambling Laws, Office for the Prevention of Money Laundering2004-2007
Preparation of detailed bulletins in connection to the gambling activities2Ministry of Finance2004-2007
Continuous control over the activities of the licensed organizations and implementation of the law versus the unlicensed activities1Ministry of Finance2004-2007
Concentrated printing of tickets for games of chance1Ministry of Finance2004
Continuous improvement of the legal basis and in particular of the enforcement of the directives.
Continuous synchronization of the Albanian customs legislation with that of the region3Offices close to the General Customs OfficeOn goingForeign Assistance + 10 million leke
Simplify customs legislation and hence procedures3Judicial Office J, Procedures Office2004
Preparation of explanatory notes for the Goods Nomenclature3Office of Value, of Origin and of Taxes2004
Preparation of regulation and practical manuals for the central, regional and local level.2Judiciary Office in Cooperation with the Office close to D. P.D.Ongoing2
Implement modern techniques for risk analysis and selective control
Ensure implementation of the risk manual2Office of Information2004
Improve the system of information in collecting and evaluating information in order to create risk profiles which closest resemble risk reality and objective focus of the chosen controls2Office of Information in Cooperation with other customs offices2004
Continuous evaluation of the risk analysis and the adaptation of the risk indicators in accordance with the problems.2Office of Information in cooperation with other customs officesOngoing
Increase the professionalism of investigators by their applying new technical investigative methods.2Office of Investigations Office of Administration and Personnel TrainingOngoing2
Put into practice an integrated information system and intelligence system based on the standards of the EU and as a weapon increase the effectiveness of control and minimization of the fiscal evasion, and also fighting illegal trafficking.
Creation and implementation of an internal information systemOperational-Investigational Department2004
Creation of regulations and norms which guarantee a well functioning information system, ensuring maintenance of secrecy, and specification of the procedures for the reward for the informers2Operational-Investigational Department2004
Training of staff of Technical OperationsOngoing10
Effective use of the information network, CEN of the World CustomsOffice of Information20
organization, and of other agency networks such as “ZEKA” and “RILO”, as well as the SEMS system. Implement procedures in order to be effective in the INFOMARIN network.
Active participation in the SECI movement with its center in Bucharest (The center of the War against Interborder Crime in South-Eastern Europe)3General Customs OfficeOngoing20
Implementation of the information processing systems of customs declarations and information management.
Implementation of the system in all relevant offices1Office of Technology, UNCTAD2005700
Publishing the system of the business community and the training ofOffice of Ongoing Technology, Office of Print2004 and15
customs staff and other users.and Relationships with the Public, Office of Administration and Personnel Training Z.Ongoing
Most efficient use of system capacity2Office of TechnologyOngoing
Improve the system of preparing customs statistics in such a way that they best serve the creation of Governmental fiscal policies.2Office of Statistics.Ongoing5
Improve work effectiveness by improving structure, organizational techniques and work method in central government, regional and branches
Continuous improvement of the structures to promote efficiency and flexibility in order to respond to job responsibilities, specific situations and also given job assignments.3Offices close to D.P.D, Regional Offices, Customs BranchesOngoing
Decentralization and delegation of responsibilities by consolidating the managerial, controlling and decision taking role of the Regional Offices of the Customs Branches2Offices close to D.P.D2004 and Ongoing
Strengthening of the structure for internal control and external control particularly after de-customization of the goods.2Offices close to D.P.D Office of Internal Control2004 and Ongoing
Creation of specific regulations of the functions of the Customs branches and also continuous improvement of the minor organization of work in them as a basic factor to guarantee well-being.2Offices close to D.P.D. Regional Offices, Customs BranchesOngoing
Progress of the Human Resources
Rigorous implementation of the Customs administration training strategy by increasing the quality, confirming the empty spots and identifying the need for training.2Office of Administering and Training PersonnelOngoing
Preparation of efficient training programs for training needs, as well as organization of training classes with a high professional level.3Office of Administering and Training Personnel.Ongoing
Continuous training to increase professional and didactic capabilities.3Office of Administering and Training Personnel.Ongoing5
Improve evaluation of training programs. Analyse earnings by the training programs3Office of Administering and Training Personnel.Ongoing
More effective use of the external training funds particularly the multi-bilateral programs.3Office of Administering and Training Personnel. Office of Foreign AffairsOngoing
Effective cooperation with the World Organization of Tariffs as well as implementing the recommendations of this organization.2Office of Foreign Affairs Offices next to D.P.DOngoing50
Coordination of training programs with internal funds from the Customs Administrative and those with external funds.3Office of Administering and Training Personnel.Ongoing
Increase inclusion of customs personnel in the process of revising, incensement of the level of consciousness and persuading them over the effect and advantages of the revisions.
Increase the support for and recognition of the need to change by including personnel in discussions and evaluating their suggestions during the preparation of yearly plans3Offices close to D.P.D, Office of Administering and training personnel.Ongoing
Discuss the advantages of the revisions in such a way that resistance is reduced.3Offices close to D.P.DOngoing
Organize thematic workshops and common working groups with the base specialists so personnel can contribute to the solutions rather than just having the solutions imposed on them.3Offices close to D.P.D Regional Offices, Customs BranchesOn Going2
Continuous improvement of cooperation interdepartmentally-Custom System and Perfection of Interdecasterial Cooperation.
Increase Custom Department cooperation through the creation of common working groups for the achievement of given responsibilities. Increase Cooperation between the Departments involved in customs services via the creation of common working groups for achievement of the given responsibilities.2D.P.D DepartmentsOngoing
Improve the cooperation of the Customs Administration with the Ministry of Public Order, Districts Attorney’s Office, National Information Service and particularly with the Tariff Administrations.2Department of D.P.D.Ongoing
Increase effectiveness of the activity of the Common Contact Group3Operational/Investigative DepartmentOngoing
Continuous progress of the bilateral relationships and the cooperation with the Foreign Customs Administration and International Organizations through the creation and strengthening of mutual Administrative assistance as well as being inducted in a maximum number of Customs Conventions.
Negotiate and implement a bilateral standard agreements of reciprocal administrative assistance with other E.U. countries for the prevention,2Office of Foreign Affairs,Ongoing35
investigation, discovering and punishment of custom violationsOperational/Investigative Department
Get inducted in the Kyoto Convention for the Customs Procedures, in the Convention of the synchronized system as well as in other conventions for which the customs administration meets the membership criteriaOffice of Foreign Affairs, Office of Procedures, Office of Origin, Value and Tariffs200415
Increase level of Informative Service over Customs Fiscal Legislation and for the economic operators. Increase transparency with the media and the public
Institutionalise and develop relationships with the public; publish and periodically propagate periodicals about Customs legislation; publish and distribute practical guides to aid passengers and the economic operators2Office of Press and Public Relations, Offices close to D.P.D.2004 and On Going
Focus on business-customs cooperation by organizing round tables and participating in reciprocal activities3Office of Press and Public Relations, Offices close to D.P.D.On Going
Keep the Mass Media and the general public updated over the activities of the Customs Administration. Organize regular press conferences and publish press releases.3Office of Press and Public Relations, Offices close to D.P.D.On Going
Set up near each customs check point information booths with brochures and posters to aid the passengers and the economic operators3Office of Press and Public Relations, Offices close to D.P.D., Customs BranchesOn Going5
Boost completion of projects improving Customs Infrastructure, with the goal of simplifying the movements of passengers and goods.
Maintain existing structures of the custom system by guaranteeing their reliability.1Office of Investments and LogisticsOn Going
Adapt existing structures with the aim to facilitate the movements of goods, instruments and passengers.2Office of Investments and LogisticsOn Going
Create Red and Green channels at border customs and separate where possible traffic of goods from traffic of people.2Office of Investments and LogisticsOn Going5
Create structures in the new customs points in accordance with contemporary standards and criteria.2Office of Investments and LogisticsOn Going1000
Preparation of the NSSED progress report document for 2004, 2005, 2006
Draft and distribute the methodology for the drafting of progress reports for 2004, 2005, 20061Office of NSSED, MF2004-2007
Inclusion of all interested actors in all steps of drafting the progress report.1Office e NSSED, Line Ministries2004-2007
Organize consultations, round tables with representatives of working groups from the Ministries of the line, with local experts etc.1Office of NSSED, MF2004-2007
Organize meetings with the Interministerial working groups for NSSED2Office of NSSED, MF2004-2007
Organize National Conferences for report launching1Office of NSSED, MF2004-2007
Facilitate the process of passing the report to the interministerial committee of economic policy and its approval by the government2Office of NSSED, MF, Council of Ministers2004-2007
Publish progress reports22004-2007
Send the report to the World Bank Executive Board of Directions, and IMF2Office of NSSED, IMF, World Bank2004-2007
Strengthen capacity in the Line Ministries and in the NSSED Office
Continuous qualification of staff in monitoring and evaluation in the Line Ministries and within the NSSED Office1Office of NSSED, MF2005
Technical consultation and support within these groups for the increase and improvement of effectiveness.1Office of NSSED, MF, DFID2005
Organize training seminars on the NSSED2
Preparation of Directional Guides for the standardization and unification of the monitoring indicators1Office of NSSED, MF, DFID2005
Define national monitoring indicators1Office of NSSED, MF, IDEA2005
Institutionalize the process of participation of all interested actors in this process
Organize general meetings with representatives of civil society at local, national and regional level1Office of NSSED, MF2004-2005
Organize meetings and consultations with parliamentary representatives1Office of NSSED, MF2004-2005
Increase capacity of the Civil society in the monitoring process and evaluation.1Office of NSSED, MF2004-2005
Integrate Regional Strategies into the NSSED
Organize round-table type meetings at the central level2Office of NSSED, MF, MPVD, Council of Qarqeve2004-2005
Organize meetings with representatives for follow up and planning for the central level.2Office of NSSED, MF, MPVD, Council of Qarqeve2004-2005
Support the Process of Drafting Regional Strategies for all regions2Office of NSSED, MF, MPVD, Council of Qarqeve2004-2005
Establish structures for monitoring and evaluating at a central level.2Office of NSSED, MF, MPVD, Council of Qarqeve2007
Better synchronization of integrating agendas in NSSED
Improve long-term vision in NSSED including here OZHM and SAA1Office of NSSED, MF, MPJ, MI2005
Unification and better standardization of methodology and structures1Office of NSSED, MF, MPJ, MI2005
Synchronization and coordination of foreign aid
Organize on-going meetings with the donor community1MF, ME, Council of MinistersOn Going
Draft project proposals for winning grants for specified needs by the Office of NSSED for quality improvement in the NSSED1MFOn Going
Focus the projects of different investors on the identified priorities in NSSED1MFOn Going
Create map of administrative information in NSSED
Broaden the national level the pilot-project of Lushnja2Office of NSSED, MF2004-2007
Review the quality and the value of the administrative information2Office of NSSED, MF2004-2007
Creation of a plan of action for the improvement and implementation of this information in the creation of maps and political drafts.2Office of NSSED, MF2004-2007
Preparation of an information inventory which includes not only public institutions but also private ones2Office of NSSED, MF2004-2007
Selection of information to be included in the map2Office of NSSED, MF2004-2007
Preparation of the maps2Office of NSSED, MF2004-2007
Organization of a national conference2Office of NSSED, MF2004-2007
Increase public awareness of the NSSED
Refresh daily the NSSED website2Office of NSSED, MF2004-2007
Publication of quarterly newspaper on the activities and issues of the NSSED1Office of NSSED, MF2004-2007
Preparation of TV ads for the on-going public awareness3Office of NSSED, MF2004-2007
Implementation of specific programs on radio, national and local television2Office of NSSED, MF2004-2007
Preparation of posters NSSED posters2Office of NSSED, MF2004-2007
Preparation of brochures concerning important issues of implementation and monitoring of NSSED2Office of NSSED, MF2004-2007
Reevaluation of the legislation based on the advancements and the new international standards, and the actual conditions of our country
Drafting and reviewing of legal and legal subparts in view of the new1Office of Coordination of the War Against2004-2007
revisions based on conventions, international agreements and improved national agreementsMoney Laundering
Increase of capacity and of independence of FIU. Finish acquisition of office goods, training and contemporary qualifications
Construction of a contemporary and stable information base.1Office of Coordination of the War Against Money Laundering2004-2007
Consolidate and broaden cooperation va the FIU, legal subjects and law enforcement in particular the District Attorneys Office, the Police, etc1Office of Coordination of the War Against Money Laundering2004-2007
Strengthening of cooperation and regional and international coordination not only with the countries of the region but also on a broader basis, such as the Egmont group1Office of Coordination of the War Against Money Laundering2004-2007
Adhere to contemporary developments on the war against money launderingOffice of Coordination of the War Against Money Laundering2004-2007
Strengthening implementation of laws for the prevention of money laundering even from nonbank subjects.
Drafting and adherence of programs to control of law implementation.2Office of Coordination of the War Against Money Laundering2004-2007
Define procedures for the implementation of administrative sanctions in case of violations, which do not constitute penal acts, complaints and execution of decisions for anti-administrative acts.2Office of Coordination of the War Against Money Laundering2004-2007

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

General Tax Department

Objectives/Public Priority Actions73Responsible InstitutionsDeadlineBudget74Cards75Others7677
Modernisation of organizational structures.
Continuous monitoring of the function of the national administrative structure.1Offices in DPT, per function2004-2007
Study for the improvement of administration in the zone covered by the branch of Tariff and Taxes of Tirana.DPT, Tariff Branch in Tirana2004-2007
Continuous scrutiny and revision with the purpose improving the impact of the organizational structure of the General Tax Department (Central Offices)..1Office of Reforms, Office of Human Resources2004 and on going
Drafting and implementating necessary administrative structures for collecting social security and health contributions.Office of Reform, Other Offices in DPT per function, Regional Tariff branches2004-2005
Periodically evaluating the report of work measurement with the purpose of determining the personnel numbers so as to have sufficient staff and proper distribution of human resources.2Office of Reforms, Office of Human Resources2004 and on going
To review the responsibilities of each unit with the goal of good work flow. Amend directives as needed.2Office of Reforms, Office of Human Resources2004 and on goingSupport from DFID
Secure support in the area for the reorganization of the district tariff branches. The goal is a correct implementation of the administration and the procedures.2Office of Overseeing, Office of Reforms, Office of Tariff Control2004-2007
Analyze and study the role of the Judicial Police in connection to the DPT and its district branches.3Office of Human Resources, interconnected function Offices,2004 and on going
Review and implement an appropriate structure for the Tariffs Police.1Office of Tariffs Police, Office of Human Resources2004-2005
Evaluate workload of the Tariffs Police. Reports on the number of personnel needed.2Office of Tariffs Police, Office of Human Resources2004 and on going
Reviewing of the legislation
Review and redraft the legal tariffs framework, with the goal of creating a cohesive legal tariffs system in line with that of the UN.1Office of Reform and functionally interconnected offices2004-2005
Begin the process with the tariff procedures law, later with the direct tariffs, and lastly the tariff law on added value.1Office of Reform and functionally interconnected offices2004-2005
Form a working group to look at overlapping, incorrect addressing, internal contradictions, and conflicts with other laws.2Office of Reforms, Technical and functionally interconnected offices2004 and on going
Review requests for legislation for the tariffs police and the drafting of a legal system including the legal subparts.2Office of the Tariff Police2004-2005
The strengthening and documentation of the internal systems and procedures.
The internal control staff and the directory of reforms staff will continuously review processes and procedures as part of their responsibilities.2Office of Reforms2004-2007
Completion and implementation of all procedure manuals.1Office of Reforms, and functionally interconnected offices and the regional tariffs branches2004 and on going
Completion and implementation of the procedures for administering the documentation.2Office of Human Resources and Administration and functionally interconnected offices.2004-2007
Standardization of the evidence and statistical data of DPT in accordance with the government’s requests.2Office of Statistics and Information2004-2005
Draft and implement the procedures for the collection of the social security and health insurance contributions.1DPT,ISSH,ISKSH2004-2005
Ongoing training courses including practical training for the following groups: the Internal Control Staff, the Investigation Staff, the Tariffs Control Staff.1Office of Human Resources and Administration and functionally interconnected offices.2004 and on going
Implementation in all tariff branches of the reviewing system which oversees with guarding the taxpayers information2Office of the Operational Supervision2004-2007
The implementation of the review system in all the tariff branches.2Office of Human Resources and Administration2004-2007
Define consultants for technical long-term assistance, who will act as co directors in the selected larger tariffs branches.1All the offices in DPT and the regional tariff branches in the districts.2004-2005Support from DFID
Specify consultants for technical long-term assistance, who will act as coordinators in the selected larger tariff branches.2DPT, the responsible offices.2004-2005
Trainings of the Tariffs Police on the methods and procedures but not according to the model of Guardia di Finanzia.2Office of Human Resources and the office of Tariffs Police.2004 and on going
Secure equipment for a training school.2DPT, Office of Human Resources and the Office of Foreign Affairs and Education.2004 and on going
Secure funds for the accommodation of General Tax Department in the new offices.1DPT2004
The development and reinforcement of the abilities of the inspectors.
Provide training courses for the inspectors as a continuation of the current courses; selected staff will continue the selected training according to the method of training the trainers.1Office of Human Resources and the Office of Foreign Affairs2004 and on going
Provide training courses by trained trainers for all the investigation trainers.1Office of Human Resources and the Office of Foreign Affairs2004 and on going
Completion of the control manual with the procedures for unique industries.1Office of the Tariffs Control2004-2007Support by DFID
Completion and installation of the selection program of the tariff payers on the basis of risk analysis.2Office of the Tariffs Control2004Support by DFID
Trainings of the Tariff Police on the methods and procedures but not on the models of Guardia di Finanzia.2Office of Human Resources and the office of Tariffs Police.2004 and on going
Secure equipment for a training school.2DPT, Office of Human Resources and the Office of Foreign Affairs and Education2004 and on going
Secure funds for the accommodation of the General Tax Department in new offices.1DPT2004
Implementation of an Integrated Tariffs System.
Implementation of computerized information for income taxes1Office of Technology2004
Implementation of the collection of contributions and the tariffs on personal savings.1Office of Technology2004
Implementation of the collection of the akcizes and the national taxes.1Office of Technology2004-2005
Equip budgetary institutions with NIPT.2Office of Technology and Operational Office2004

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Monitoring Indicators
Expenditure of education sector as percentage of GDP3.24%3.19%2.81%2.85%3.23%3.5%3.1%3.65%
Expenditure of Health sector as percentage of GDP2.32%2.25%2.02%2.11%2.46%2.8%2.9%2.95%
Expenditure of agriculture sector as percentage of GDP0.9%0.89%1.06%0.66%0.85%1%1%1%
Expenditure of infrastructure sector as percentage of GDP3.03%3.12%2.19%1.76%1.92%2.3%2.3%2.2%
Expenditure of social sector as percentage of GDP7.26%7.05%6.81%6.71%6.76%6.8%6.85%6.9%
GDP in Million lek530906610426677684744974822677
Real GDP Growth in %
GDP/capita in USD10861386155719502166
Inflation in %
- annual average0.
- end of period4.
Total of revenue
Million Lek12609:130643145639154595167224198052
As % of GDP24.6123.8622.8122.4424.07
Public expenditure
Million leke170621186049192517201152240360
-as % of GDP32.1430.4828.4127.029.22
Budget deficit
-Million Lek-39978-40410-37921-33928-42308
-as % of GDP7.536.625.604.605.14
Trade balance in milion lek-821.0-1027-1155-1336-1602
Exports in million $255.4304.6330.2447.1567
Imports in million $1076.41331.61485.41783.42168
Average exchange rate
-leke Euro132.6128.5132.4137.5135.0
Nominal GDP, in milliard leke902.5989.31084.11187.71289.01398.8
Monetary Sector
Growth of monetar offer in %
Growth of private credits in %
Interest rate (T-Bills, 3muj)
Trade balance
In US$-1027-1155-1336-1602-1746-1870-2018
As % of GDP24.223.921.820.420.219.719.4
Current account balance (without public transfers)
In US$-263-435-467-593-635-672-685
As % of GDP-6.2-9.0-7.6-7.5-7.3-7.1-6.6


Establishment of the Credit Guaranty FUND of SME: In the framework of the Italian government’s project grant, which is being executed by the European Training Foundation, has been worked on drafting the guarantee credit-scheme for SME, which will be finalized in the year 2004 with the establishment of the Credit Guaranty FUND of SME.

Establishment and enforcement of Business institutions. In this framework Albanian government has been drafted and approved three legal packages on establishment and functioning of three business supporting agencies accordingly: Foreign Investment Promotion Agency (FIPA); SME-s Promotion Agency, and Exports Promotion Agency. These agencies have been made totally functional during the year 2003.

Elimination of business bureaucratic barriers: Ministry of Economy with FIAS’ Technical Assistance has been realized the study on defining the business bureaucratic barriers, as well as measures to be undertaken for their elimination. In this framework, the Government has approved Business Bureaucratic Barriers’ Action Plan, which is now under process and will continue to be implemented.

Reduction of the Informal economy: The government of Albania in partnership with Organization for Economic Cooperation and Development (OECD), has taken the initiative to develop a study which will be made concrete in 2004, through a concrete measures program for further minimization of this indicator.

Increase and strengthen the efficiency of Business Advisory Council. Reorganization and improvement of its functions. Based on the Albanian community business demands on enforcement and further cooperation improvement between business community and the council with iniciative of Prime Minister on 23. 01. 2003, a new order, “Council reorganization and the new functioning Statute” has been approved

The adoption of the European SME Card. This is one of the main elements of the EU Stabilization and Association Process. In this framework, the priority objectives for 2004 have been set. Which are being monitored and followed by the European Commission

Establishment of the Independent Competition Authority: Albanian Parliament has drafted and approved “Competition Law”, according to which the Independent Competition Authority will be created. The Competition Policy contributes positively in the process of transition and structural revisions, by increasing chances for a healthy and progressive economy.

Finalization of the Free Trade Agreement with region’s countries. All agreements have been finalized within the appointed deadline and first positive effects are being experienced.

Matrix 2003-Annual Review
Prior actions for 200378-Implementation measures

-Reasons for implementation shortfalls

Implementation of the Action plan for the reduction of administrative barriers3- Ministry of Economy by a special Council of Ministers Decision (CoMD) is responsible for monitoring program achievement2004
-Administrative Problems
Establishment of the public information offices3-Cooperation with donors, CARDS program2004
-Organization problems and legislation improvement
Strengthening and consolidating of the foreign Investments promotion agency3- Ministry of Economy and Supervisory Council’ s Contribution2004
Strengthening and consolidating of the Development Agencies of SME3- Approval of the sub-legal acts, agency status and their budget by the Government
-Cooperation problems with other institutions
Establishment of the Credit Guaranty Fund2-Financial Support by the Italian Government. Achievement of fundraising study2004
Establishment of the Competition Authority3-With the assistance of GTZ.2004
Strengthening and consolidating of the Export Promotion Agency (EPA)3-Achieved with governmental support2004

Level of completion per criteria

Level of completion per criteria

Matrix 2004-Annual Plan
Objectives/Public Priority Actions79Responsible institutionBudget80Cards81Others82
Drafting of legal package for the establishment of the Credit Guaranty Fund
Signing of the Financial Agreement between the Albanian Government and the Italian Government.1MoE, Agency of SME’s30milionEuro
Drafting of the Leasing draft-law / Discussion in round tables with financial institutions and business community/Discussion in Business Advisory Council (BAC)2MoE, Agency of SME’s
Track engagements in the framework of implementing the European Card of SME
Implementation of the engagements/defined objectives for 2004/Following up of the bilateral agreements with KE1MoE, Agency of SME’s
Establishment and strengthening of FDI indicators’ database.
Establishment of the working group: MoE, MoF, Bank of Albania (BoA)/Undertaking of the national survey on foreign and joint enterprises2MoE, FIPA
Accomplishing of a country economic situation’ study, in order to identify the level of the informal economy in Albania / Drafting of a completed program with the appropriate recommendations based on this study2MoE, FIPA
Self-evaluation of plan’s impact / Institutions Surveys1MoE, FIAS4
Establishment of the public information offices nearby each Ministry/Establishment of the working group for setting up this offices2MoE11
Incentive’s study and proposal for exports promotion3ME, EPA
Improvement of BAC’ functioning. Preparation of the SEED study’s recommendations regarding to the BAC effectiveness’s increase/Preparation of the Action Plan3MoE
Drafting the Council of Ministers’ draft-decision on fairs and exhibits’ organization in a national level.3MoE

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Prioritization coefficient.

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Matrix 2004-2007-Mid-Term Plan
Objectives/Public Priority Actions83Responsible InstitutionsDeadlineBudget84Cards85Others8687
Increase the entrepreneur’s qualification level and improvement of the professional standards for the institutions that offer business services/Increase the trainers and business consultants’ professional standards through accreditation; increase the quality of SME training programs
Increase the efficiency of Accreditation Department.2Accreditation Department200515100 mije Euro
Supporting of Small and Medium Enterprises/Following up the engagements in the framework of European Card of SME’ implementation
Implementation of defined engagements/objectives for 2004 and adherence of bilateral meetings with KE1MoE, the Agency of SME2004100 mije Euro
Drafting of the legal package for the establishment of Guaranty Credit Fund
Signing of the Financial agreement between the Albanian government and the Italian Government1MoE, Agency of SME-s200430milionEuro
Reduction of business administrative barriers/Application of monitoring and self-evaluation system for implementation on removal of the administrative barriers policy
Establishment of the Public Information Office1MoE, Line Ministries20055100 mije Euro
Elimination of Business Barriers
Self-evaluation of plan’s impact / Institutions Surveys1MoE, FIAS2004470 mije EURO
Facilitation of the information and complaints’
Establishment of the public information offices nearby each2MoE200411
Ministry/Establishment of the working group for setting up this offices
Financing Services for Business/Extension of guaranty-credit schemes as well as application of leasing schemes based on theexecution of leasing law
Drafting and approval of the leasing law1MoE, Line Ministries200550,000 Euro
Inducing of IHD’s/Establishment and strengthening of FDI indicators’ database
Establishment of the working group: MoE, MoF, Bank of Albania (BoA)/Undertaking of the national survey on foreign and joint enterprises2MoE, FIPA200450 mije Euro
Accomplishing of a country economic situation’ study, in order to identify the level of the informal economy in Albania
Drafting of a completed program with the appropriate recommendations based on this study2MoE, FIPA2004150000 Euro
Infrastructure and business technology/Extension of business incubators and industrial parks.
Increase the number of incubators and industrial parks all over the country2ME, Ministry of Labour and Social Affairs200750,000 Euro
Regional and sectorial Development of Small and Medium Enterprises(SME) / Development of regional/sectorial studies and analysis as well as extension of the projects to the faraway areas of the country.
Extension of Business Agencies Network2MoE2007100,000 Euro
Strengthening of the State-Business Partnership/Improvement of BAC’ functioning.
Preparation of the SEED study’s recommendations regarding to the BAC effectiveness’s increase/Preparation of the Action Plan3MoE200410,000 Euro

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Prioritization coefficient

Funds of the Gocernment’s budget in millions of Lek

Funds of the projec CARDS in EURO

Other approved investments

Financing required

Monitoring Indicators
Contribution of the private sector in the employment rate62%
The contribution of the private sector in GDP75%75%
Number of new established business703167206121
Employment in the private sector (No)201.365
Export increase in %-6.2%17.1%4.5%14.5%
Exports in mIn$259.6303.9338.1441.6
Direct foreign investments/mln$143.0207.0150.0178.2


Electrical Energy Sector: short, medium and long term development and restructuring policies were drafted for this sector until the year 2015 to meet the European Union standards and those of the open competitive market. The National Strategy for the Energy was drafted and approved. This identifies concrete steps, which will be taken in this sector until the 2015. The law No.. 9072, (22.05.2003) “For the Electric Sector” was passed.

Hydrocarbons Sector: Around a 10% increase in the production of crude oil and gasoline was achieved for the year. In 2004 an increase of 430 thousand tons is predicted, up from the 398 thousand tons which were produced in 2003. Nineteen Hydrocarbon Agreements were signed for crude oil research with foreign companies and US$350 million was invested. The legal framework for licensing for processing, transportation and the exporting of crude oil, gas, and their sub products was agreed.

Mining Sector: 379 permits for mineral use and research were granted. The process of closing fully utilised mines along with the privatization of their assets continued. Concessions have been granted for30 mines and 7 Mineral Companies, (3 mines, 2 chromium plants, 1 enrichment factory, 1 selection impl.). 110 Mineral Use Permits have been issued for 44 subjects, 70 Mineral Galleries along with their assets (about 278 buildings machinery etc.), capital transfer for 10 construction buildings of the local government and KESH. For the Copper branch: have been closed and transferred to the privatization process 48 mining assets and two of them have been privatized. Under concession three Copper Plant (in Rubik) one mine, one enrichment plant (soc. BER-ALB) one demolition company (Copper Plant Laç) and under capital transfer 13 construction buildings of the local government and KESH. In the branch of Iron-Nickel have been closed and undergone the asset privatization process 13 mineral companies. In the branch of Coals: have been closed and gone through the privatization process 35 mineral assets (mines, enrichment factories etc) six usage permits have been given and also their assets have been leased.

Industry Sector: A study was conducted on the possibility of constructing industrial parks. V.K.M No. 398, (13.06.2003) removed the process of licensing agencies, which invest and operated in the non-food industry. Economic analysis concluded that the industrial sector will improve in the metallurgical field, shoe-leather, confection, and wood, where for the 2003 the volume of product sold has been increased with 9% more than the year 2002. This production increase was accompanied by an increase of the work force by 4% as compared to 2002

Matrix 2003-Annual Review
Prior actions for 200388-Implementation measures

-Reasons for implementation shortfalls

Creation of a financially and technically powerful electric industry
Implementation of the action plan for 2003-20044Approved with VKM No. 27, (16.01.03)
Predict electrical energy needs in the light of the National Electrical Strategy4Achieved
Preparation of a broader plan for the Albanian Electro-Energetic System (LCEP) in the light of the National Electrical Strategy4Achieved
Preparation of a detailed action plan till mid 2005 with costs for the rationalization of the Distribution Tariff.4Achieved
Refresh the action plan for the Electro-Energetic Sector for 2004-20054Achieved
Continue the tariff rationalization4Achieved
Creation of an effective and transparent legal and regulative framework
Presentation and approval of the Electro-energy Sector Law4The Working Group was established with foreign assistance. Law No. 7092, (22.5.03) was approved.
Preparation and approval of the legislation which authorizes the Ministry of Social Work and Social Cases in cooperation with the Ministry of Industry and Energy and the Finance Ministry to set up a mechanism which will facilitate the impact that the electrical energy tariff increase will cause to the low-income consumer group and to stabilize a minimum service level.4The Working Group with members from four Ministries: PFSC, ME, MF, MIE, was set up; after coming up with several variations, an action plan was approved with the Decision No. 797, (4.12.03)
Approve and adopt the Building Energy Code4Achieved
Prepare a National Strategy for the Electrical Energy-Phase 14Achieved by AKE with foreign assistance
Prepare a Energy Conservation Plan as a part of the National Energy Strategy4Achieved
Preparation of methodology for the creation of Regional and National Energy database.4Achieved
Preparation and approval by government of an implementation program for the National Strategy.4Achieved and approved with VKM No 647, (11.9.2003).
Select and gain government approval for an Electrical Energy Transmission market model.4The proposed model has been drafted based on the law for the electrical energy sector. It will be approved in May 2004
Separation of KESH Sh.a into separate legal entities
Complete a study in cooperation with KESH to identify the necessary number of distributive offices for the separation of KESH4Achieved
Withdraw private capital and foreign investments4Achieved
Preparation of privatization and investment policies in the distribution and generation sector2-Partly

-Delay in the drafting of policies
Creation of a competitive electrical energy market in accordance with the European Union requirements for the electrical energy sector reform (Directive 96/92 EU) and with the commitments of Albania under the Thessalonica Agreement for the support of the integration of Albania into the Electrical Energy Regional Market of Southeastern Europe (REM) and the connections with the UCTE system.4-Decision No. 797 has been approved, (4.12.2003) “For the creation of the Operator of the Transiting System Society Sh.a. Tirana (OTS Sh.a Tirana)” The Athens Memorandum was signed in December 2003 in connection to engaging the countries of the region in the creation of the electrical energy market

-It is a complex on-going process which cannot be achieved within a year. The responsibilities for 2003 have been achieved.
Partake in the Electrical Energy Management Committee (REM) meetings4We have participated
Complete restructuring of the hydrocarbon sector societies with public properties
Execute VKM No. 28 (16.01.2003) for the liquidation of APC. The decisions of the Overseeing Councils for the Sector Societies for the administrative restructuring will be overseen.4All administrative measurements have been taken to achieve objective
Privatization of the crude oil societies with public property
Bring to point of sale the “SERVCOM SH.A” society3-Creation of legal subparts. Preparation for wealth registration for privatization folder2004
-Difficulties in the achievement of wealth registration
Bring to point of sale the “TRANSNAFTA” LTD Patos in implementation of VKM 30 (16.1.2003)2-Wealth registration, document preparation

-Difficulties in the achievement of wealth registration
Bring to point of sale the “Mechanic Plant” LTD Patos in implementation of VKM 29 (16.1.2003)2-Wealth registration, document preparation

-Difficulties in the achievement of wealth registration
Bring to point of sale 51% of the state shares of the “Petrolimpex” sh.a. Tirana society4Auction was completed
Prepare for privatization the “ARMO” SH.A. Fier society. Adhere to the procedures from the project-law and other judicial acts to arrive at point of sale.2-Law No. 9117 (24. 07. 2003) for the privatization of the society has been passed. The sublegal acts are under process.

Wealth is being registered

-Communication among decision-making structures has slowed down the process. Difficulty in the achievement of wealth registeration
Strengthening of the production, processing and importing capacity for crude oil and it sub products
Increase crude oil and gas production on the part of “Alb petrol sh.a.” and in the framework of implementing the Hydrocarbon Agreement in the zone of the Patos-Marinze contract.3-Alb petrol achieved the program. The project MH for Patos-Marinz was achieved

-The prediction for crude oil production from MH in the Patos-Marinz zone was not achieved
Preparation of project decision for privatization.3-The prediction was achieved but difficulty in meeting deadlines.
Diversification of the resources supplied by crude oil and its sub products via the coastal installations (terminal) of transport and their deposits4- Difficulties in meeting deadlines.
Finish the draft for the project-decision in regard to the crude oil and gas sub products, market control and administration4The common Directive of the three Ministers has emerged for this issue on the 2nd of September
Mineral sector/Adherence and implementation to the Chromium Concession Agreement
Track the investment of US$6.0 million, for the third furnace and the gas clearance implant of UFK Elbasan, Law No 8590 (23.03.2000), and the accomplishment of producing 40000 tons or FeCr per year.4-The plant for gas refinement and the investment for the third furnace continue according to schedule.

-This program needs time as it contains many steps
Track adherence of the agreement by OSHA to achieve the work in the Mines, the enrichment factory, and UFK Elbasan and Burrel.3-US$8.82 million have been invested for the concession of (UFK Elbasan and the Katjel and Pojske mines) exceeding the responsibilities of the first and second stage. The production is increasing.2004
Implement penalties per contract for failure to achieve milestones.3-The penalties have been set, and the concessionary has been requested to pay compensation
-Has not been completely finalized between the Ministry of Finance, the Ministry of Economy and MIE
Accomplishment of the investments as per the years mlnimum.3-2000/1.23 2001/4.4 2002/2.77 2003/0.122005
-Non implementation on the part of the concessionary for the second concession
Achievement of the production of the Konc mine and Ferrochromium 00/t3- 2000/Min 7.2/FeCr 8.8, 2001/min 13.2/FeCr 19.8, 2002/Min 18.9/FeCr24.5, 2003/Min 9.1/FeCr 15.32004
Track the OSHA agreement for work in the Mines, the Enrichment Factory and the UFK Elbasan and Burrel.2-Concession agreement for the mine and the Bulqize enrichment factory. The plant of selection Klos and UFK Burrel, has proceeded very slowly with investment delays even though production has been relatively okay.2007
Accomplish investments for the assets, which will be handed over (total value is US$20.6 million).2-Until now for the concession objects has been invested about 2.0 mIN USD.

-Delayed investment commencement
Draft the study and agreement along with preparing and having the technological test in UBRubik for the definition of the technical economic parameters for the production of blister copper2-The study from ITNPM-has been concluded and the implementation of the technological examination will be decided within the conservation period.2004
Execution of the protocol agreements for the definition of the assetsand their handover4-Achieved
Definition of the new status of Sh.A. Albcromium and Sh.a. Alb copper after the approval of the concession and privatization objectives4-The study has been completed and has been sent for assessment to the Ministry of Economy.
Accomplishment of the identified responsibilities in this study4
Deregistration of societies4
Closure of the chromium, copper, coal and iron –nickel mines (which are closed in implementation of the approved DCMs, which are not taken under concession asset privatization or their liquidation. 894
The preparation of needed documents for privatization and liquidation.4-Has been prepared as per closure of mines
Drafting of DCMs for the closure of mines, which will not be taken under concession.4-VKM No. 555 (01.08.2003). “For the Complete Closure of the Iron Nickel Mines, Copper, Phosphor and Chromium” for closure during 2004.
Track continuously the closure of mines regulations with adherence and implementation of the appropriate DCMs.4-The work done for the closures done during the 2002 year has been checked and a summary prepared. The planned closure of the chromium, copper, coal, and iron nickel mines continues as per the projects drafted during the year of 2003
Engage the Albanian Geological Service in important studies for the national economy4Council of Ministers’ decision No.555, date 01.08.2003. “For full closure of some iron-nickel, copper, chromium” that will be closed during the year 2004
Evaluation and management of subterranean waters in the primary water keeping basins, priority given to urban and tourist zones. Study the basins in Elbasan, Korce and Vlore.3-Finished in some zones with continuing study of other zones.2004
Conduct complex studies of the territory administration and natural springs on a local and national scale. Complete the studies in the areas Tirana—Durres-Kavaje and districts Shkoder-Vlore-Korçe-Gjirakoster-Kukes-Diber-Lezhe3-Finished in some zones with continuing study of other zones.2004
Study of civil geology charateristics connected to infrastructure problems in our country. Monitor disintegrations and skids in the Boville and Dallaka Dams.4-The study has finished and the monitoring continues
Studies for the designation of appropriate areas for urban waste primarily for the urban zones for the regions Laç-Kruje-Rreshen-Rrogozhine-Cerrik-Peqin.4-Concluded
Review the principal laws upon which the Mineral Industry and SHGJSH is based4-The study has finished and the monitoring continues.
Creation of the Draft, for the Amendment of the Albanian Mineral Law No.7796 (17.02.1994)4-Finished draft which is awaiting approval in KM.
Creation of the draft, for the Amendment of the Law for SHGJSH4-Finished draft which is awaiting approval in KM.
Study the possibility of industrial parks and means for their development4-Investment by IS.P. Metallurgy
Set objectives and identify open spaces of ex-Metallurgical Plant in Elbasan with consideration for developing an industrial park4-I.S.P. Metallurgy, Elbasan
Study the infrastructure in the ex-Metallurgical Plant of Elbasan and identify measures to allow for the development of an industrial park.4-I.S.P. Metallurgy Elbasan
Draft the park project in the ex-Metallurgical Plant of Elbasan.4-I.S.P. Metallurgy, Elbasan
Study the possibility of industrial park developments and means for their development4-Investment by I.S.P., Metallurgy

Level of completion per criteria

Preliminary evidence has been gathered on the mines or on their sections which will be privatized or liquidated. Consequently the mines will be closed according to the Council of Ministers’Decision as a part of the shutting down project, prepared by ITNPM ensuring savings that need to be made.

Level of completion per criteria

Preliminary evidence has been gathered on the mines or on their sections which will be privatized or liquidated. Consequently the mines will be closed according to the Council of Ministers’Decision as a part of the shutting down project, prepared by ITNPM ensuring savings that need to be made.

Matrix 2004-Annual Plan
Objectives/Public Priority Actions90Responsible institutionBudget91Cards92Others93
Electro energy Sector/Creation of a financially and technically powerful electrical energy
Implementation of the 2004-2005 action plan1KESH
Continue structural reform1KESH
Refreshment of the action plan for the Electrical energy sector for 2005-20061KESH
Continue rationalization of tariffs1ERE
Improve the organization and management of KESH2243800
Improve consumer services2KESH
Creation of an effective and transparent legal and regulatory framework
Drafting and approval of the Law for Energy Audits and Identification2MIE, ERE, AKE
Adopt a network code which foresees a continuous and steady operation of the transmission and distribution network as well as the dispersion of the electro energetic system2ERE
Approval of regulations to license independent producers of the Electrical Energy (IPP) and approval of the buying agreements for the electrical energy2ERE
Approval of regulations for the payment of accounts which define the regulations for the limitations and the regulations which need to be adhered by the system operator for the limitation and balancing of the system.2ERE
Removal of the private and foreign investments
I and MIE need to bring the distribution offices to the privatization point.2MIE
I and MIE need to bring to the privatization point the generation sector.2MIE
Synchronization of the regulations with the market regulations and the network code with the Regional Market for Electrical Energy members3ERE MIE,
Creation of a competitive electrical energy market in accordance with the requirements of the European Union for the Electrical Energy Sector Reform.2ERE, KESH, MIE
Hydrocarbon Sector/Preparation of the Strategy for the Development of the Hydrocarbon Sector
In support with the National Electrical Strategy approved with VKM No. 424 (26.06.2003) the Strategy for the Development of the Hydrocarbon Sector will be drafted1MIE, (DPH, D.P.ZH. D.J., QKSHH, AKH, AKE, Alb petrol Sh.A.)
Privatization of the crude oil societies with public properties/Preparation for privatization of the anonymous society “SERVCOM” Fier
Bringing the organization to point of sale.2MIE, ME, SERVCOM SH.A.
Preparation for privatization of LTD. “Mechanic Plant of Crude Oil” Kuçove
Bringing the organization to point of sale.2MIE, ME, UMN Kuçove.
Preparation for privatization of LTD. “Mechanical Plan” Patos/Bring the organsation to point of sale.3MIE, ME, U.M.P.
Preparation for privatization of LTD. “Transnafta” Patos/Bring the organsation to point of sale.3MIE, ME
Preparation for privatization of anonymous society “ARMO” Sh.A. Fier/Bring the organsation to point of sale. ARMO Sh.A. Fier. Release of legal subparts for privatization (VKM).1ME, MIE, ARMO
Preparation for privatization of the anonymous society “Alb petrol” Patos. Designate the method and the continuation of the privatization process of the society. Prepare the draft for the society privatization law. Legal subparts for privatization.1ME, MIE, ME, IMI, MIE
Implementation of the strategy for securing stability in furnishing fuel and burning parts
Accomplish investments for the construction of the coastal fuel and liquid gas deposits in Porto Romano and Vlore1321000
Finish the project for the construction of the port in Porto Romano Durres. (From I.ST. and Q.K.SH.H.)1374500
Handling and adherence of procedures with the interested societies for the construction of the coastal deposits and ports in Porto-Romano and in the zone of ex Soda Plant PVC Vlore, and the criteria for the establishment of the concession agreement.2
Adherence of procedures for he finalization of the approval of the P/Law “For some amendments and revisions of the Law No. 8450 (24.02.1999)” For the Treatment, Transport and Trade of Crude Oil, Gas and their Sub Products”2
Preparation of legal subparts acts3
Integration of Alb Petrol/For the improvement of the contract zone Patos-Marinze after the conclusion of the Hydrocarbon Agreement for the development of this place.
The taking over of the contract zone and simultaneously the restructuring for the developments of this zone.3MIE, Alb petrol.