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Albania: Weak Economy Dilutes Effect Of World Bank Loans

Over the past 10 years, the World Bank has loaned Albania some $400 million. But as Alban Bala of RFE/RL's Albanian Unit reports from Tirana, the weakness of the Albanian economy has diluted the impact of World Bank assistance.

Tirana, 29 January 2002 (RFE/RL) -- International financial institutions have played a key role in Albania during its difficult transition decade. The World Bank has granted Albania loans totaling $400 million in support of 22 priority projects. These loans constitute 18 percent of all the international assistance that Albania has received since the fall of the communist regime in 1991.

In addition, the World Bank mission in Tirana disbursed $125 million to help Albania shelter hundreds of thousands of refugees from Kosovo during the NATO air campaign against Yugoslavia.

The World Bank's mission chief in Tirana, Eugen Scanteie, praises the attitude of the Albanian government to date.

"We are generally satisfied with the implementation of the portfolio of projects which the World Bank finances in Albania. And we are satisfied with the policy measures generally, which the government is taking. Of course, we always have some problems. There is never [a time] without problems, but overall the assessment is favorable."

The governor of Albania's central bank, the Albanian State Bank, Shkelqim Cani, credits his country's economic successes to the polices of the World Bank and International Monetary Fund (IMF). He says Albania's administration is to blame for any possible failures.

"In Albania, the two institutions' policies have been successful so far. Of course, the Albanian side knows the reality better, and it is an Albanian's obligation to better serve the specific needs of the Albanian economy."

Others take a more critical view. Gafur Muka is an Albanian consultant to a German assistance project, GTZ, and a former Albanian trade attache in Germany. Muka says the World Bank and IMF have not been able to activate the inner mechanisms of the local economy in Albania.

"I guess that the problem in relations between our country and international [financial] organizations is the lack of [adequate] funds to mobilize economic domestic resources. Any action taken until now has been purely financial (rather than investment)."

Muka says these institutions have all but ignored Albanian experts. And he says the databases on which policies were formulated have not been realistic and failed to reflect actual priorities. Muka stresses that Albania's needs could best be met by establishing a Ministry of Economy. Domestic economic development is currently handled by the Ministry of Finance.

"It's easy to observe that in all fields the living standard is declining, along with voices calling for economic growth. I think that globalization policies in certain countries should be implemented in accordance with the specific developing conditions."

Muka believes Albania's willingness to heed international advice has been on the decline. In his opinion, this is a hostile reaction to the so-called "diplomacy of encouragement," a term international financial institutions use as they help a country overcome an economic crisis, such as the wave of anarchy that engulfed Albania in 1997. That crisis was sparked by the collapse of bogus pyramid schemes, which the regime of then President Sali Berisha had encouraged Albanians to invest in.

Bardhi Sejdarasi is an economic analyst and editor-in-chief of the Albanian financial magazine "Monitor."

"Generally, the policies of international institutions in Albania have been efficient. But there are exceptions, as well. Let me remind you of a recent report issued by independent experts of the European Union in Brussels, together with the European Commission office in Tirana. This report considered the international economic aid program implemented in Albania in the last 10 years a fiasco."

The IMF's resident representative in Tirana, Volker Treichel, says the IMF is not responsible for Albania's economic policies but only aims at improving their quality.

"We advise the government in the drafting process of financial economic policies. Generally speaking, the successes have been numerous, but there's still much to do."

Treichel notes that international financial institutions have not accepted any responsibility for Albania's economic collapse in 1997 as a result of the pyramid scandal.

"The attitude of the IMF regarding this case has been extremely clear. We warned the government of the pyramid crisis in proper time, but no proper reaction followed. We should admit in fact that our warning, considering the gravity of the situation, should have been stronger, tougher, faster, and, I might say, more efficient."

Sejdarasi claims the collapse of the pyramid schemes was not the unique failure of international assistance to Albania.

"I would say that international institutions lost 10 years before they realized that Albania needs a development strategy. The first steps towards a strategy for the reduction of poverty and for economic growth have just been taken. Fulfillment of this goal is not yet visible beyond the efforts of the government infrastructure to implement this strategy."

Central bank governor Cani stresses that Albania should improve many parameters, starting with statistics.

"It is nothing new to say what the Bank of Albania has declared that Albania lacks is data. The absence of statistics is misleading in any decision-making. To make decisions, one should have some data. One should know the situation and then make a decision. It is nothing new to say that Albania has not yet elaborated detailed and clear strategies. The Albanian authorities are to blame. We are just born. We came to life in 1991 and are talking in 2002. Ten years make us look relatively young. Therefore, it is natural to have shortcomings in growth. But on the other hand, 10 years are not so few."

The World Bank's chief of mission in Tirana, Eugen Scanteie, says that independently of his share of errors, the World Bank has tried to respect the priorities of the country. In the early 1990s, the World Bank supported mass privatization, which he says is not something it would support today.

Scanteie, a Romanian-Canadian, says the World Bank mission in Tirana has adopted a new approach of broad consultation with the government and civil society on the content and orientation of its programs. Nevertheless, he says the Albanian economy's weaknesses remain significant.

"If you look at the numbers, the growth of the Albanian economy is good -- 7 to 8 percent a year. But this growth is not what I would call a sustainable growth, in the sense that it is largely generated by construction and certain services which do not provide permanent jobs and incomes. We would like to see a lot more investments in agriculture, in agro-processing, in manufacturing, in export-oriented activities."

World Bank and IMF officials say they will try to help Albania, and its private sector in particular, examine these questions. The World Bank notes that 70 percent of those with jobs in Albania are in fact underemployed.