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Albania: Economy Struggles Against Influence Of Monopolies

The World Bank's mission in Tirana says Albania has made some progress in selling off its state-owned industries. But as Alban Bala of RFE/RL's Albanian Unit reports, monopolies are strengthening their control on Albania's fragile free market. He looks at some of the reasons why.

Tirana, 25 October 2001 (RFE/RL) -- Ten years ago, Albanians perceived the free market as a new religion to be embraced. Today, many feel disappointed.

The state still controls a broad range of services, while some private companies are believed to be colluding with the state in order to ensure high prices.

The largest monopolies include the fixed-line telecommunications company AlbTelecom and the Albanian Electric Energy Corporation. The government also controls the Savings Bank, which holds up to 80 percent of the country's deposits.

Three independent regulatory committees have been created to better coordinate public and private interests in the communications, water supply, and energy sectors. But analysts say these committees are not as effective as they could be since they operate under strong pressure from the government.

Several weeks ago, the head of the Communications Regulatory Committee, Fredi Kote, resigned after rejecting the request of a senior government official to place Internet providers in Albania under his control.

Tirana commentator Prec Zogaj has been raising these questions in parliament since he was elected a deputy for the Democratic Alliance Party earlier this year.

"These situations are a product of the absence of strategic thinking in the leadership. But there is no doubt, they are [also] caused by the close links the Albanian administration and government people have developed between state and private, partial interests."

Zogaj says the monopolistic climate is created mostly through the licensing process.

Gjergj Buxhuku is director of the Institute for Efficient Policies and served from 1995 to 1999 as economic adviser to Albania's prime minister. He explains how the licensing system enforces the vested interests of well-connected groups.

"It is an irrefutable fact that in Albania, through some legal acts, obtaining a license to trade oil and gas is very difficult. This license in Albania is awarded to a very small group of companies, which are pretty well connected to each other and are just a prolonged arm of the main industrial and financial groups, which operate as being unique in the field."

But Buxhuku says it is not so important for the public whether monopolies rule the state or vice versa. And, he says, the results have been poor so far.

"When the import-export ratio has shifted to five- or six-to-one in favor of imports, it means the government's economic policies have been failing continuously. To have different policies on track, as a first step, the authors and executors of the actual policies should accept full responsibility and step down."

The head of the parliament's Commission on the Economy, Ylli Bufi, finds fault more with the attitude of the government toward creating a climate of competitiveness.

Bufi, who served as prime minister during the collapse of communist rule in 1991 and 1992, says Albania has never had a policy of promoting competitiveness nor has the state actively enforced antitrust legislation.

The World Bank mission representative in Tirana disagrees. Eugen Scanteie says the political will for competition exists but the lack of foreign investment has limited the chances for success.

"The legislation to allow competition is, by and large, there. So I don't think there is a lack of political will to encourage competition. This is what the Americans call 'It takes two to tango.' It's not enough for the government to say we want competition. The private sector must invest. Or investments have been very slow to materialize in Albania for other reasons. So you have basically 1 percent of GDP [gross domestic product] only in new green field investment. [It] should be four to five times higher normally to see the competition you are talking about. So there is not enough private investment, therefore not enough competition."

Scanteie says he is confident about the future in Albania but stresses the current administration in Tirana should focus more on fighting corruption. He says the World Bank has conducted a survey of the private sector indicating that "much of the licensing is colored by corruption."