Albania's parliament last month passed a law paving the way for privatizing the state-owned insurance company INSIG. The World Bank, which had imposed the May deadline in an effort to push the country's privatization efforts forward, welcomed the step as politically significant. But domestic analysts say they doubt that the state, which is facing growing economic troubles in the country, will properly spend whatever revenues are earned through INSIG's privatization.
Tirana, 3 June 2002 (RFE/RL) -- Albanian lawmakers last month removed one of the last remaining obstacles to privatizing the country's major state-owned insurance company INSIG. The country's parliament passed a law detailing the privatization procedure for the company, which last year earned net profits of over $4 million.
The new law was passed under a timetable imposed by the World Bank, which made a three-year, $120 million assistance package conditional on the privatization bill's passage. Eugen Scanteie, who heads the bank's permanent mission in Tirana, says the INSIG privatization is a project with long-term economic and political aims.
"The objective of [INSIG's] privatization is not to sell an enterprise, it is to create the conditions to develop a competitive industry in the country. So what we want from privatizing INSIG is to be able to attract good, solid strategic investors, to attract capital, to attract technology [and] know-how, and to provide insurance services which are competitive in the world market. So in that sense, the law will create the conditions for this to happen by allowing for the gradual privatization of INSIG."
The law grants the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) the right to purchase 40 percent of INSIG. A 51 percent controlling stake will be sold to a strategic investor, with the remaining 9 percent staying under state control.
INSIG has seen its marketability grow in recent years. In addition to last year's profits of some $4.3 million, the company -- working in partnership with the American Bank of Albania -- has successfully entered the financial market in neighboring Kosovo, where INSIG officials say they now hold a 30 percent market share.
Scanteie says the 51 percent of INSIG shares should be sold at their true market value and that the IFC and EBRD will follow suit. It is up to the government, he says, to negotiate a fair and profitable selling price: "Well, the market will decide that. The sale price and the sale of the shares which the government wishes to sell to IFC and EBRD should be decided on the basis of the market. We never intervene in the actual commercial transactions with commercial partners, so the government is fully free and sovereign in negotiating the conditions, including the prices with the commercial partners."
Once the sales are complete, the government is also free to decide how best to redirect the revenue toward development and poverty-reduction programs. But it is unclear what tangible gains Albania will reap from the INSIG privatization. Albania's first round of strategic privatization failed to produce sound prospective funding projects. And some critics say former Prime Minister Ilir Meta, during the run-up to last year's parliamentary elections, used privatization revenues to support a handful of projects with virtually no transparency or long-term political vision. They say that with the country facing a new wave of economic troubles, the same could happen again following the sale of INSIG.
Genc Ruli heads the INSIG steering committee. He says politics is to be blamed for the country's economic woes: "The crisis is not new. For the past year we have been involved in a political crisis that has altered many of the economic parameters. We have an administration that has low efficiency, that is continuously reshuffling while failing to meet many conditions and criteria. All this results in investors hesitating. So, politics underlies the economic crisis."
Zef Preci, who heads the Albanian Center for Economic Research, says other factors are to blame as well. Preci says the fight against terrorism and trafficking -- combined with a lack of foreign investment and a drop in international support -- have all contributed to the country's chronically depleted coffers. "I think the situation should be considered realistically. Albania never recovered from the crisis of 1997, except for the progress it made in re-establishing the rule of law, public order, and financial control. At the same time, we should admit that having a permanent state of crisis in the country -- for different reasons, including political ones -- might indicate that we are simply re-proportioning the crisis within the same old bed."
Scanteie of the World Bank says Albania is not moving toward a crisis. At the same time, he warns, the country should monitor carefully its fiscal and financial sectors in order to attract greater foreign investment and stimulate economic growth. The economy and the government was forced to cut this year's budget by 6 percent.