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  Prepared on behalf of Sida
          July 2003

         Final draft

                                       Örjan Sjöberg
                               OPTO International AB
Albania in brief
A note on Albanian geographical names
Executive summary
1.   Introduction
2.   History: a brief sketch
3.   Politics, high and low
     Enter democracy: transition era politics
     Building the nation anew: issues of governance and civil society
     Major reforms under way
4.   Economic development: roller coaster ride
5.   Consequences of transition: poverty and well-being
     A tale of two peripheral regions
     Other aspects of well-being, or the lack thereof
Appendix: Terms of Reference

List of tables
Tab. 1       Albania in brief
Tab. 2       Basic macro-economic indicators, 1992-2001

List of figures
Fig. 1       Map of Albania

Text boxes
Box 1        Milestones of economic reform
Box 2        Korçë and Kukës regions

Abbreviations used
CARDS        Community Assistance for Reconstruction, Development and Stabilisation
EU           European Union
GDP          gross domestic product
GPRS         Growth and Poverty Reduction Strategy
GTZ          Deutsche Gesellschaft für Technische Zusammenarbeit (German Agency for
             Technical Co-operation)
HDI          UNDP‟s Human Development Index
IDA          International Development Agency
IFAD         International Fund for Agricultural Development
IMF          International Monetary Fund
INSTAT       Instituti i Statistikës, the Albanian national agency of statistics
MTEF         Medium Term Expenditure Framework
NSSED        National Strategy of Social and Economic Development
OSCE         Organisation for Security and Co-operation in Europe
SAP          Stabilisation and Accession Process
Sida         Swedish International Development Co-operation Authority
SNV          Netherlands Development Organisation
UNDP         United Nations Development Programme
UNEP         United Nations Environment Programme
UNMIK        United Nations Interim Administration Mission in Kosovo
WTO          World Trade Organisation

Map 1: Albania

Albania in brief

Official name:                     Republika e Shqipërisë (Republic of Albania)
Form of government:                Parliamentary republic
Capital city:                      Tirana, 354,300 inhabitants (2001)

Population (2001):                 3,069,275 inhabitants
Size:                              28,748 km²
Population density:                107 inh./km²

Population growth rate
(1989-2001):                       -0.3 % p.a.
Birth rate (2000):                 16.5 per 1,000 inh.
Mortality rate (2000):             5.4 per 1,000 inh.
Natural rate of growth (2000):     11.1 ‰
Life expectancy at birth (2000):   74.6 years (71.5 for men, 78.1 for women)
Infant mortality (2000):           22.8 per 1,000 live births
Child mortality
(under the age of 5, 2000):        9.1/1,000

GDP per capita (2002)              USD 1499
GDP by sector (2002)               Agriculture 33.3 %, industry 12.8 %, construction 10.8 %,
                                   transportation 10.6 %, other 32.5 %

A note on Albanian geographical names
All Albanian nouns have an indefinite and a definite form. Following established conventions for
the use of Albanian geographical names in non-Albanian text, in this report all geographical
names are given in the indefinite form of the nominative case. Hence, Durrës rather than
Durrësi, Korçë rather than Korça. The one exception is the capital, which uses the form adopted
into English, Tirana, which otherwise would be rendered Tiranë. Similarly, on the few occasion
when Albanian terms are introduced in the interest of clarity, these are given in the indefinite and
singular form of the nominative.

Executive summary
Albania entered the post-Cold war period the poorest among Europe‟s countries. Since then this
south-eastern European country have seen dramatic change, not always for the better. The
various calamities that has hit the country are likely to have helped forge an image of a crisis-
prone society, the poor citizen of which are about to leave at first opportunity.
     Although this image is created not least by media, and has a factual background, it is never
the less not the full picture. Albania is a developing country, with all that this implies in terms of
widely spread poverty, lack of properly working public sector agencies and poor infrastructure.
The fact that economic growth has been substantial throughout most of the period since the fall
of the Communist regime in 1991 has proven important to the progress that has been made, but
as growth began at very low levels following the collapse of the centrally planned economy there
is no room for complacency. Economic growth, as both the Albanian government and the
international community agrees, has been and continues to be a necessary condition for
improvements in the standard of living of the population and for successful poverty alleviation.
     It is equally clear, however, that growth is not a sufficient condition for reducing poverty and
increasing levels of well-being. The long term objectives of the National Strategy for Social and
Economic Development recognises this fact, and outlines a number of important issue areas that
need to be addressed. Health, education and rural development all figure prominently, as does
issues of good governance. Despite the fact that Albanian political life in many respects is rather
far removed from the lofty ideals embodied in the term democracy, there is a broad consensus
that the priorities identified in the NSSED and the parallel Stabilisation and Accession Process,
aimed at integrating Albania into the European mainstream, are necessary parts of any successful
push to lift the country out of its present predicament.
     It can be argued, however, that also such concerted effort falls short in several respects. The
capacity to initiate a policy process, to make priorities and see policies through to implementation
have all been identified as weak links in the chain. To this can be added that the process falls
short with respect to participation and therefore tends to assume a top-down perspective. As
such, it rarely moves beyond the national level or such basic distinctions as urban-rural, coast-
inland or lowland-mountain areas. While clearly useful and often able to capture essential
variation across the Albanian economic and social landscape, it still lacks a true sense of the
extent and effects of regional differentiation. Although other agencies, such as the UNDP and
various donors, have pointed this out, the national policy making process still has some way to go
to achieve this. In particular, it would seem to require a measure of redistribution of resources in
favour of disadvantaged groups of people or regions not yet contemplated. Put differently, also
as policies focus on growth and the creation of a more benign business environment is made an
overarching priority, provisions to support such groups that are unable to avail themselves of the
opportunities or revenues this would create would have to be made. In the end, this is also likely
to put a stronger emphasis on disadvantaged groups and regions.
     This is reinforced by the realisation that growth as has occurred – and at times it has been
quite impressive – may have helped reduce the number of poor, and in particular those suffering
under extreme poverty. Recently released data, from the Living Standards Measurement Survey,
does indeed suggest that this has happened. However, form a policy point of view the implication
is not only that economic growth helps, but that efforts to reach the poor have to be – and now
can be – better targeted than in the past.
     As matters now stand, macro-economic indicators give a mixed picture. Growth is high, but
is no longer driven by agriculture or industry but rather construction, transport and services.
Inflation is kept within bounds and the private sector today dominates the national economy.
Less auspicious are statistics on the budget deficit, the trade and current account deficits and
external debt, all of which hint at serious weaknesses in the economy. The reluctance or inability

to address these issues in a decisive fashion is not encouraging. As a consequence, the
dependence on remittances from the about 600,000 emigrants from Albania and donor support is
high. Consequences include a lack of room for manoeuvre and quite possibly an over-valued
exchange rate that makes the prospects for agriculture and industry somewhat uncertain. On the
other hand, inflation abatement and a reduction in the cost to service foreign debt are tangible
    The various sectors of the economy also suffer from deficient infrastructure, both in terms
of physical infrastructure and in the form of institutions, that is, the legal provisions, rules and
norms that guide economic activities. The erratic supply of electricity is on everyone‟s mind, but
arguable the supply of an institutional setting conducive to entrepreneurship in the formal sector,
whether domestic or foreign in origin, is as important, if not more so. Here, the SAP and
NSSED have important contributions to make, as have the assistance of bilateral donors.
      Another main concern is equity and poverty alleviation. At the latest count, one quarter of
the Albanian population are considered poor, with 5 per cent of the total population not being
able to meet its own subsistence food needs and thus considered living under conditions of
extreme poverty. The poor are found in all areas of the country, but are over-represented among
rural dwellers, inhabitants in the mountainous interior irrespective of whether they have a rural or
urban domicile, the unemployed and those with low levels of education. Single income earner
households, in particular those headed by women, are also vulnerable, as are households with no
access to remittances from abroad. Regionally speaking, northern mountain districts and some
mountain areas in south-central Albania are the worst off, with in particular the Kukës region
falling behind much of the rest of the country.
      To illustrate the situation, the present report outlines some of the salient features of the
Korçë and Kukës region, both of which fall below the national average in most respects.
However, Korçë, which currently forms the geographical focal point of Swedish support, is
decidedly better off than is Kukës, where currently few donors are active. The problems faced by
the latter, however, are in part derived from a peripheral position and less favourable conditions
for agriculture than in most other parts of the country. Yet, the dependence on agriculture for
livelihoods is greater here than in most other regions of the country. Few other options are
available, save out-migration. Both regions have seen a substantial loss of population from such
movements, but it is in particular true of Kukës. What is more, it is likely that migrants leaving
Kukës are less able to send money home to those who have stayed behind.
     Such a focus on the regional dimension of economic change and development must not be
allowed to conceal the fact that there are a few problems that, while perhaps more pronounced in
some regions than in others, are truly national in scope. This report highlights a few of them,
such as gender issues and environmental degradation. While the latter is clearly of considerable
importance to any society trying to achieve sustainable long term growth for the benefit of the
well-being of its population, gender empowerment and equality is perhaps less easily invoked for
instrumental ends in a society still strongly influenced by traditional values that put the male head
of household at the centre of things. The fact remains, however, that irrespective of whatever
other values we may attached to gender balance and the equality of men and women, women‟s
potential contribution to the development of society is clearly not taken care of, a cost that a
country like Albania can ill afford.

1. Introduction
„Albania‟, the British painter Edward Lear remarked in 1851, „is a puzzle of the highest order.‟
One might have thought that, with the passing of time, such sentiments would have long since
worn off. Not quite, it seems, as to the extent that Albania figures in the public eye at all, it is in
connection with events that to the casual observer must come across as out of the ordinary. First,
two generations of orthodox Stalinism and isolation, then, in the summer of 1990, Albania hit the
front pages of the world‟s newspapers as word got out that the few embassies in Tirana were
filled with refugees. Clearly something was afoot in this secluded corner of Europe.
      It turned out that there was. Developments were set in train that ensured that over the rest
of that decade Albania was to find itself on top of the news on several occasions. Already in the
spring of 1991, the communist government in the form it had ruled the country for almost five
decades came to an end, only to be followed by yet another highly publicised wave of refugees
making their way to Italy‟s Adriatic shore. A few years later, the country was thrown into near
civil war conditions as the infamous pyramid funds collapsed amid political chaos. This poor
people, ripped of their hard earned savings, a mere two years later rose to the formidable task of
accommodating a large influx of Kosovar refugees, and did so in a most admirable manner.
     It is perhaps not surprising, then, that books, news reports and even the combined effect of
social science research makes this republic by the Adriatic sea seem a rather exotic place.
American author P.J. O‟Rourke, of Holidays in Hell fame, in his Eat the Rich (1998) dubs Albania a
case of “bad capitalism”, while Robert Carver in his equally hilarious but often highly contentious
The Accursed Mountains (1998) speaks of Albania as Africa and identifies large parts of it as “Bandit
country”. And they are not alone in helping project an image of Albania as extraordinary. Media
tend to focus on the singular while for instance the interest of anthropologists and other social
scientists in the revival of customary law – not least aspects such as blood feuds and “the third
sex” – is a growth industry to be reckoned with.
      Yet, all of this is likely to hide important dimensions of everyday life and change in Albania.
It is true that Albania, as has been suggested also for some of its Balkan neighbours, in a sense
has moved from the Second to the Third world. A concern with development and means to
improve the livelihood of the three million inhabitants of the country therefore parallel the
efforts to make the polity more democratic and to reintroduce a market economy on the ruins
left behind by a centrally planned one-party state that collapsed under the sheer weight of its own
failure. This report, which provides background information on political, economic and social
change in Albania with a focus on the post-socialist period, sets out to identify and analyse the
main social and economic developments in Albania. Against this background the critical issues of
poverty and integration into European structures will be analysed.
     The report is divided into four substantial sections. Following an executive summary and this
brief introduction, the first main section provides a sketch of the modern history of the country
up to the end of “monism”, as the socialist period is sometimes referred to in Albania. This is
followed by two sections that detail political and economic developments, respectively, since the
fall of the one-party state. This period of “transition”, as the first decade of post-socialism is
colloquially known as in Albania, has been marked by rather dramatic changes to many if not
most aspects of ordinary peoples‟ lives. What these changes amount to, and not least their impact
with respect to poverty and livelihoods, are analysed in the fifth and final section. As a major
conclusion of the discussion on policy formulation and development efforts is the relative neglect
of regional differentiation, these aspects will be included in the final section. This is especially
relevant as the south-eastern part of Albania forms the geographical focus of much Swedish
development assistance to the country. Similarly, the north-eastern part, by general consent
considered the poorest part of the country, will be included in the analysis so as to capture the
need and potential for future Swedish support.

2. History: a brief sketch
Albania emerged as an independent political entity only in the 1910s. In November 1912, the
independence of Albania was first declared, but it would be another eight or ten years before the
country actually was in possession of the trappings of a sovereign state, such as a head of state, a
capital, a government in reasonably effective control of the country‟s territory and with at least
some capacity to formulate and implement policy. The legacy of several centuries of Ottoman
rule had not quite prepared the newly independent country for a role in the world, and during the
World War I its territory was effectively carved up between Austria, Italy and France.
     In other respects, Albanians were no less prepared for the establishing of a nation state of
the type favoured in Europe during the better part of the 19th and 20th centuries. The Albanian
Renaissance, which arose out of ideas widely spread throughout Europe in the era of
Romanticism, had set the agenda and provided several inputs to such a project. This included a
standardised script for the Albanian language, the beginnings of a modern Albanian literature
written in the vernacular and efforts to introduce elementary instruction in the mother tongue. In
this Albania paralleled the experience of its Balkan neighbours, but the severing of the political
ties with Turkey came later than elsewhere in the region.
     It was left to the inter-war years to consolidate the state, and much of this was done under
the leadership of the self-proclaimed king, Zog I. Having ousted, in late 1924, the then Prime
Minister, Bishop Fan S. Noli, Ahmed Zogu step by step turned Albania into a monarchy with
weak democratic credentials. What is more, with time he increasingly came under Italian
influence, not out of a personal preference but because of circumstances that in part stemmed
from an increasing political and economic dependence on the much larger neighbour. In 1939,
Italy occupied Albania, sending the king and his entourage into exile.
     The Italian occupation was not to last for long. Although the occupiers tried to continue the
modernisation – now in a manner consonant with the prevailing Fascist ideology in Rome – first
embarked upon by King Zog and similarly tried to endear themselves to the occupied population
in a number of ways, the occupation was a failure. This is as true militarily as politically and
socially. Soon the Italian forces had to concede the Albanian territory to the Germans, who in
turn were driven out in late 1944.
      This signalled the start of a period of orthodox Stalinism. The new leaders of the country
first relied on political and material support from Yugoslavia, but in 1948 a break with Josip Tito
took place. Instead, Albania sided with the Soviet Union, an alliance that eventually proved
equally uncomfortable to the Albanian Party of Labour. One reason for this was the campaign
initiated by Nikita Khrushchev to de-Stalinise the Soviet Union and the entire socialist bloc.
Another was the rather peripheral role in the socialist brotherhood that Khrushchev thought
appropriate for Albania, that of supplying agricultural products and as a site for tourism, the
occasional military base not to be forgotten.
      This lead, in 1961, to a break with Moscow. Instead, as the Sino-Soviet rift became a reality
Albania came down on the Chinese side. As the Soviet Union before it, China extended financial
support to Albania with a view of expanding industry, but unlike the Soviet Union it was
prepared to help Albania shift the emphasis towards heavy industry. In the end, the “Çeliku e
Partisë” (Steel of the Party) steelworks at Elbasan, the oil refinery at Ballsh and the hydropower
station “Drita e Partisë” (the Light of the Party) at Fierzë resulted, as did several other smaller
projects within industry and agriculture. This had been achieved by the late 1970s, but the
deterioration of relations in China had begun at the beginning of that decade: Enver Hoxha, the
Albanian leader of several decades‟ standing, did not approve of the rapproachement between
China and the US set in motion by President Nixon. The death of Chairman Mao and the demise
of the Gang of Four also meant that a more pragmatic stance was taken in Beijing, a fact which
in itself could prove dangerous to Hoxha.

     Instead, the Albanian Party of Labour, torn by personal and ideological conflicts, saw the
purge of several high ranking officials during the 1970s, and of the number two in command,
Mehmet Shehu, in late 1981. Whether the latter committed suicide or was simply shot we may
never know for sure, but this opened up for a still more radical turn of Albanian economic
policies. Collectivisation of agriculture, begun in the late 1940s - early 1950s and officially
completed once the mountainous areas were fully under state farms and co-operatives in 1967,
was now extended to include the last remaining animals. At the same time, the access to and use
of a private plot became much more circumscribed.
     The result was an unmitigated disaster. Food rationing, most of which was removed by the
late 1950s, now became a fact of life again, the number of items requiring ration tickets being
quite extensive. Yet, tickets did not always grant supply and the standard of living stagnated or
fell during the 1980s. Health and education standards had been improved, in many instances
quite considerably, since Liberation from the German troops in 1944, and the provision of basic
infrastructure was in most parts of the country better than at any point in the past. But such
achievements were of little consequence as the country now found itself in a precarious situation
with respect to food security.
      A first opportunity to rectify this unfortunate situation came when Hoxha died in April
1985. His successor, Ramiz Alia, conceded that mistaken agricultural policies had contributed to
the crisis and a measure of back-tracking was embarked upon. At the same time, the previously
very oppressive political atmosphere became a tinge more tolerant and towards the end of the
decade such expressions of capitalism as private entrepreneurship in services were reluctantly
allowed for the first time since the 1960s. Yet, also other sectors of the economy were in dire
straits, with unemployment figures approaching 10 per cent of the labour force. In particular,
small and medium-sized industrial towns were hard hit.
     In fact, from the break with the Soviet Union and onwards, Albania stood out among the
socialist countries by being much more orthodox than the others, save perhaps for China and
North Korea. The relations with China did not inspire it to introduce an anti-urban, pro-rural
socialism that China was generally (but wrongly) believed to promote at the time, but continued
to strictly adhere to a pro-urban, pro-industry policies with a focus on producer goods industry.
Rural dwellers, although allowed to share some of the welfare gains made during socialism, were
actively prevented from moving to town and pro-natalist policies had the greatest impact in the
countryside. Politically, there were few signs of any liberalisation and Albania was unique among
the socialist countries not having a dissident movement; there was simply no way in which it
could establish itself and reach out. The number of political prisoners was high and the repertoire
of punishments, ranging from summary death sentences to internal exile by way of isolation cells,
ordinary prisons and labour camps, was second to none. Such punishments often affected also
the family of the persecuted, banishment and thwarted careers being standard fates for those with
a tainted biografi.
     Also culture and civil society were dealt severe blows. Independent organisations were closed
down or enlisted to the cause of “building socialism”; there was no sports club small enough to
escape the attention of the authorities. The fine arts and popular culture was refashioned to serve
the interest of creating a society on the Stalinist model. After years of sharp and at times violent
confrontation, religion was abolished, and with it public and private religious practices, as Albania
proclaimed itself the first atheist state in late 1967. Similarly, the rule of law was considered a
bourgeois invention primarily there to protect the interest of capitalists and, indeed, in a move
that was not merely symbolic the Ministry of Justice was abolished already in 1966. Instead,
“Party norms” and “socialist legality”, that is the subjection of law to the immediate interest of
constructing socialism and keeping “class enemies” at bay, was systematically enforced.

     The stance taken on various aspects of international relations were equally strict. The
Constitution of 1976 did not allow foreign investments and likewise banned the acceptance of
credits and development assistance from the outside. Foreign military bases were similarly not
allowed. This does not necessarily imply that the country was entirely isolated from the outside
world, not even after the break with China. Rather, that provided the occasion to improve
relations with the neighbouring countries, the minor members of the socialist bloc and Europe‟s
non-aligned states. In particular, relations to Greece and Yugoslavia took a turn for the better.
Although the latter were not very cordial, contacts were open-minded as regards trade, correct as
regards politics – but remained at loggerheads as far as ideology was concerned. Towards the end
of the 1980s, also relations with West Germany and other major European powers improved
     These steps towards liberalisation and increased interaction with the outside world could not,
however, stop the polity and economy from falling apart. Following the first refugee crisis, in
1990, a dialogue of sorts within the ranks of the Party came into the open. Students voiced their
greviances and by December 1990 a formal opposition began to take form as Sali Berisha, Azem
Hajdari and Gramoz Pashko openly questioned the monopoly rule of the Party. By early 1991,
the Democratic Party had been formed by these and other intellectuals, many of them drawn
from the nomenklatura, and Alia had promised increased liberalisation but also cautioned that
Albania should strive to prevent that a “Romanian situation” developed. Within a couple of
weeks, the huge statue of Enver Hoxha in central Tirana was torn down and elections were
announced. There is some debate in Albania as to when, exactly, the transition from one-party
rule to democracy took place, but this serves as a convenient point to conclude this historical
sketch of Albania. In the following, subsequent developments and the current situation will be
outlined in greater detail, in turn taking a look at political and economic developments.

3. Politics, high and low
Enter democracy: transition era politics
Albanian post-socialist politics have been described as both fractious and clannish. There is a
grain of truth in such, admittedly sweeping, characterisations. The main political groupings to
emerge since the fall of the one-party state are not primarily distinguished by deep ideological
differences, nor are their respective fortunes in the various elections held since the first
democratic election in the spring of 1991 primarily an outcome of class-based voting patterns.
Thus, while conflicts between the government and opposition has often been very visible and
vocal – walk-outs and boycotts being common tactics – on a practical level agreement over goals
and means in some major areas of policy has carried the day. Economic policy, for instance, has
been surprisingly stable and differences across the major parties have in practice been rather
marginal. This is also true in foreign policy making, where the overarching ambition has become
the integration with Europe rather than more parochial, and to the international community
highly contentious, policy goals such as the establishment of a Greater Albania.
     The early steps towards democratisation and multi-party politics where reluctant and
conflict-ridden. With the first general elections called on a rather short notice, the Albanian Party
of Labour – then in the middle of a process of reinventing itself – managed to secure a majority
thanks to its support primarily in rural areas. This victory was to prove short-lived, however, as
not only the process of re-styling itself as the Socialist Party turned out to be a contorted one, but
political unrest continued as the newly elected government assumed power. General strikes and
politically motivated violence accompanied its few months in sole control. By early summer, a
new government – known as the Stability government – was formed in which also the opposition
Democratic Party was represented. This helped calm down the situation for a while and the first
attempts at a concerted effort to reform the economy were embarked upon.
     Within half a year, however, also this government fell apart and new elections where held in
March 1992. This ballot returned the Democratic Party to power and three or four months of
high levels of pre-election violence faded away surprisingly fast. From that point on, it was rather
the heated debate between government and opposition in the Peoples‟ Assembly and in the
media rather than political violence and demonstrations that can be said to characterise the
political scene. Issues such as the compensation to former political prisoners, lustration laws and
the role and power of the President were prominent, as were the difficulties experienced in the
privatisation of former state enterprises and land reform. Accusations of corruption, nepotism
and non-democratic attitudes and actions on part of leading political personalities became daily
      A referendum on a new constitution was a major setback for the Democratic Party and the
period 1993-96 saw the build-up, under the surface, of an increasingly precarious situation; the
Party‟s sweeping, but hotly contested, electoral win at the local elections in October 1996 did
little to solve the emerging problems for country and government. The situation came to a head
as the infamous pyramid schemes, marketed as investment companies or charitable foundations,
not only attracted an ever larger number of depositors but eventually collapsed as they failed to
stave off the demands of those that had invested their money in them. This drove home the
critique that the institutional side of the economic reforms had not been well attended to, but this
insight was of little comfort as the collapse of the “pyramids” as these often shady companies
became known as soon erupted in several months of high levels of violence. Army barracks and
stores where looted, both light arms and heavier weapons becoming next to common property,
weapons that were used for a variety of typically non-honourable ends.
     Criminal gangs availed themselves of the situation, a large number of people – a plausible
figure suggests about 1,800 – lost their lives and commercial activities and public services ground
to a halt. Looting and destruction hit individual Albanians, businesses and public agencies alike,

foreign investors being scared away in the process. A new wave of refugees from Albania
prompted the neighbouring countries to move in yet again to stem the tide and to put the
country back on track. Although not of as long a duration as Operation “Pellicano” in 1991-
1993, and more concerned with putting an end to the state of lawlessness that ensued rather than
the distribution of food aid, this second major intervention proved as successful as the first one.
Berisha and the Democratic Party were forced from power in the summer of 1997, the Socialists
taking over. The latter have been in charge since with the help of number of smaller coalition
      As it appears, Albania surprisingly quickly returned to a state of normal conditions, but
considerable values were lost in the process. Destruction was clearly visible, the country lost
several years of foreign direct investment and a sum the equivalent of half of Albanian‟s GDP
evaporated in the pyramid schemes alone. Arguably the most important casualty, besides the loss
of life, however, was the trust in public institutions, businesses and fellow Albanians which now
was dealt a very severe blow from which the country is still to recover in full.
      The Socialist Party has since then retained power, both nationally and in important cities
such as the capital Tirana. Local elections in October 2000 and in particular the parliamentary
elections in June-July 2001 were, as one international observer put it, „not a completely
untroubled event.‟ The irregularities identified by OSCE and others were reason enough for the
opposition to boycott parliamentary proceedings, but it is worthy of note that this marked the
first occasion where a reformist government with roots in the former one-party state won a re-
election in the western Balkans. Despite expressing concern over the hostile relations between
the two main parties, the international community looked favourably on the elected government
and thereby also opened up for Albania signing a Stabilisation and Association Agreement with
the EU. These negotiations were begun, after some delay, in January 2003.
     The significance of these elections also rests with the fact that the Peoples‟ Assembly elects
the head of state, the President. With factions within the Socialist Party severely divided, and the
opposition under the former President Sali Berisha boycotting Parliament, a stalemate was only
narrowly averted thanks to the international community bringing home to the Albanians that
their behaviour was most irresponsible. In the end, the retired general Alfred Moisiu was elected,
and remains on that position. As a former Minister of Defence both in communist and post-
communist governments, he enjoys a measure of respect both nationally and internationally,
which may serve Albania well in its ambitions to eventually joint NATO.
     It did little to solve the problems within the majority party, however. The then Prime
Minister, Ilir Meta, has been at loggerheads with the Chairman of the Socialist Party and current
Prime Minister, Fatos Nano, ever since. Nanos is a gifted politician and a survivor from the
communist era (albeit one of the leading reformists as the Albanian Party of Labour sought to
find itself a new role after the collapse of the one-party state), who cunningly has manoeuvered to
regain power. As of time of writing, Meta has just lost his position as deputy Prime Minister,
Nano thereby for the time being having the upper hand, but it would be foolish on the basis of
these developments to try to predict what may come next. As the next round of local elections
are planned for 12 October 2003, one may have thought that their conflict would be put aside in
order not to lose ground to the opposition, but such expectations have so far not been fulfilled.
Possibly, the positioning for the party congress (to be held mid-December 2003) and the next
parliamentary elections, in 2005, are considered more important.
     Leaving aside the intricacies of the conflicts in and within parties, there are at least two other
concerns that warrant mention. One is the decreasing interest on part of the electorate. Even
disregarding the very high voter turn out in the very first post-socialist election, which at 98.9 per
cent was reminiscent of the levels often reported during the reign of Enver Hoxha, subsequent
elections have seen a continuous slide in participation. Thus, in the national elections in 2001

only 53.4 per cent of the electorate cast their ballots. Although one may argue that voters‟ lists
includes a great many emigrants, and the turnout therefore can be expected to be lower than
would otherwise have been the case, this creates new opportunities for irregularities. The other
issue is the rapid decrease of women‟s representation in elected bodies. This is quite visible in the
People‟s Assembly, but as local elections have been introduced as part of the post-socialist
reforms, the pattern of low levels of representation is equally visible: typically only one in ten
politicians or less is a female. Indeed, in the current legislature only one in twenty MPs is a
woman. The observation that in this politics replicates a pattern quite visible across most walks of
life is of little comfort.

Building the nation anew: issues of governance and civil society
While party politics and elections at various levels are part and parcel of the transition to a
democratic society, and Albanian experiences on that score are somewhat mixed, there are other
aspects of the political life of formerly socialist countries to be considered. As is the case
elsewhere, much attention has been devoted in Albania to the re-emergence of a civil society.
Similarly, in common with many other transition and developing societies issues of governance,
which is of a much wider scope than policy making and proper implementation of decisions
taken in good democratic order, have assumed increased salience in Albania. In fact, the latter
can be construed as being of even wider significance, as, for want of a better term, “nation
building” in a rather practical sense of the word has arguably become the third major item on the
agenda alongside that of democratisation and the introduction of a market economy.
      This includes, critically, the organisations, institutions and procedures needed for good
governance, but also other rather mundane and diverse matters that keep a society running. This
may include municipal management, revision of school curricula and improving the public
awareness on issues such as health and environmental degradation, not to mention the multitude
of other basic public or societal functions that were left unattended to by the previous regime or
that need to be realigned to the new order. This is where we now turn. The emphasis will be on
institutional issues and on the formulation and implementation of policy as expressed by the
National Strategy on Social and Economic Development and similar initiatives.
     Right from the outset, a major focus has been the introduction of a legal system conducive
to the transition to democracy and marketisation. Constitutional provisions have of course
attracted much attention, not least issues such as electoral law and the role of the President, both
of which has generated heated debate without therefore necessarily having been solved once and
for all. Other areas of intense legislative activity have been in the field of civil law and other
provisions relating to the economy. Early large scale reforms embarked upon include land reform
(rural 1991, urban 1993) and small scale privatisation. Indeed, economic liberalisation and the re-
introduction of markets are considered among the more successful areas of legislative action,
while other issues such as reform of the judiciary, a necessity not only for the proper functioning
of the economy but indeed for most other aspects of society, has proven more difficult to
accomplish. In part this has less to do with legislation per se than the politics that surrounds these
parts of the civil service.
     Indeed, both civil service reform and the need to combat corruption rank high on the
agenda. Once the urgency of restoring security (as in 1991-1992 and again following the
calamities in 1997), the European Union and major multilateral and bilateral donors have made it
clear that unless the rule of law is fully restored, transparency increases and corrupt practices are
weeded out – and this includes nepotism, bribes, turning a blind eye to trafficking and money
laundering and a host of other issues – the process of accession to bodies such as NATO and the
European Union will suffer. The civil service will have to become more professional and the
practice of appointing friends, relatives and political associates, all of which are still rather

common, done away with. Similarly, the propensity to protect higher level civil servants and
politicians from screening with respect to involvement in illegal activities has proven difficult to
     This does not exhaust the list of problems that are, or should be, addressed as part of the
political agenda. Governments, irrespective of their political composition or ideological
convictions, have shown a lack of patience with the media and have at times gone to great
lengths to put pressure on or even close down news media. Individual journalists, including some
of the most influential writers on political and social issues, have also suffered from the strong-
arm tactics that have been applied. Penalties for various alleged transgressions and tax audits have
frequently been used to silence uncomfortable voices. Not surprisingly, media has become
increasingly more conformist so as not to lose advertisement income; also business that have
used opposition or anti-government media as outlets for their marketing efforts have at times
found themselves subject to irregular financial inspections. Similarly, there has recently been a
conflict over the use of pro-government papers as the main or only outlet for public
announcements. From the point of view of the democratic transition, however, the influence
over broadcast media is arguably as, or perhaps even more important, as while few Albanians
outside the major cities read newspapers; instead, most households follow developments by way
of TV and radio.
     Less visible today, but an important issue not least during the first years of transition, was
the role and position of the Albania‟s ethnic minorities. Conflict over Greek speakers in Albania
and the Çam in northern Greece – Albanian speaking Muslims that were forced to leave Greece
or who for other reason lost their land there – have been as important a source of conflict with
the southern neighbour as have illegal immigration from Albania. Most other ethnic groups
suffer from having little influence and leading a marginal existence, either because of small
numbers and/or peripheral location within the country – this would appear to be true of speakers
of Slav languages such Macedonians and Gorani, while Serbs and Montenegrins for the most part
have left the country – or because of being looked down upon. The latter in particular applies to
the various groups of Roma (Romany or Albanian speaking) that quite possibly form the largest
ethnic minority. Like the Greek speaking Albanians, another major group, the Vlachs, have to a
larger extent availed themselves of the opportunity to leave Albania for work abroad or have
been assimilated into the majority culture. Not least as the number of Albanians citizens
belonging to these and other still smaller minority communities remain unknown, it is difficult to
assess the full consequences of the political and economic changes of the past decade or so for
them. From the point of view of current legislation, however, the rights of minorities are now
essentially on a par with European norms. In practice, this means that Albanian is the language to
be used by the civil service – including in contacts with minority group members – but also that
schooling and radio broadcasts in Greek and Macedonian are available provided that certain
thresholds (e.g., number of eligible school children) are met.

Major reforms under way
These past, current or potential areas of political conflict must not be allowed to conceal the
existence of major issues of a political or administrative nature that are in progress but over
which differences are more low-key. This includes the twin processes of local government
reform/fiscal decentralisation, the Stabilisation and Accession Process (SAP) and the formulation
of a Growth and Poverty Reduction Strategy (GPRS), the latter of which is also to be considered
relative the Millennium Development Goals. In all these cases the international community are
strong supporters and this may explain the relative consensus over the projects, their goals and
implementation. In addition to the obvious benefits of increased transparency and local
influence, an alignment to international or European standards and a possibility to better co-

ordinate development planning, the combined effect of the reform of local government and
having an explicit strategy for the reduction of poverty are increased local influence in the
management of local affairs and a hands-on experience in strategy formulation and policy
implementation. If successful, the civil service at the national and regional level could be expected
to learn a thing or two with respect to both the policy making process and turning policy into
action. On the other hand, although a consensus of sorts support these measures, the experience
of 2002-03 shows that other things may impede the entire process, such as the repeated crises
and the concomitant uncertainties resulting from political conflicts within and between the
parties of the ruling coalition.
     The main components are as follows. Following a first reform of local government in 1992,
made necessary by the collapse of the socialist system under which much local management was
in the hands of co-operatives and state enterprises (municipal administrations were quite weak), a
second round of local government reform was set in motion in 1999 as a Strategy for
Decentralisation and Local Autonomy was adopted. In the following year, the basic law, “Law on
the Organisation and Functioning of Local Government”, was promulgated. Accompanied by a
“Law of Territorial and Administrative Division of Local Government in the Republic of
Albania”, this set the stage for increasing the competence of municipalities and communes. A not
only elaborate but also ambitious schedule of the transfer of competencies and responsibilities to
the local level was included in these provisions, and further legislation on the implementation of
the various parts of the basic law was foreseen. This includes the “Law on the Inventory of State-
owned Real Property and the Transfer of Property to the Units of Local Government”, with still
more already in the pipeline.
     In addition, while this reform did away with the district (rreth or less frequently nën-qark) as
unit of political decision making – it remains an administrative unit of operation for the ministries
and other national level authorities such as INSTAT represented at the sub-national level – a
Regional Council was formed. Members of this Council are all mayors and chairpersons of
commune councils within a qark, or region (which, geographically speaking, is co-terminous with
the jurisdiction of a prefekturë). The primary task of the Regional Council is to formulate regional
development strategies, while issues of local management and utilities are left to the first level of
local government, that is, municipalities (bashki) and communes (komunë).
     Although not yet formally completed, a number of problems have already come to the
surface. One is the lack of budgetary independence, which severely restricts the capacity of local
authorities to carry out their duties or take initiatives of their own. As the process of fiscal
decentralisation is completed, this particular problem will hopefully be solved or at least
mitigated. However, as locally raised revenue is largely a function of population size and relative
level of success of local businesses, local governments in less favoured areas will face the stark
choice of accepting low levels of earnings or raising levies to choking levels for short term gain.
      Another problem is the lack of professional competence at both the local and regional level.
Larger municipalities are better off in this regard, and have greater clout relative the central
government, but may also suffer from the consequences of cohabitation, should their political set-
up not reflect the political majority at the national level. As for the Regional Councils they
typically lack the experience in drawing up strategies and for now are in a still more precarious
budgetary position than are their constituent first level units of local government. To the extent
that the drafting of such regional strategies have at all begun, they tend to take the form of wish
lists rather than a considered discussions of goals, means and priorities to be made.
    The GPRS, or the National Strategy for Social and Economic Development (NSSED) as it
is more widely known as, is better able to achieve a measured list of priorities and to identify the
means to carry them through. As such, the Strategy is supposed to be linked to the budgetary
process through the Medium Term expenditure Framework (MTEF): The Strategy, first adopted

by the Albanian government in November 2001, similarly serves as the basis for the access to the
IMF Poverty and Growth Facility arrangements, but also identifies the means in the form of
structural and social policies to foster growth and to reduce poverty. Thus, in 2003, an IDA
Poverty Assessment exercise is to be completed. The perspective taken, however, is longer than a
mere year or two into the future. Thus, the long term objectives of the NSSED includes by the
year 2015 a doubling, or more, of GDP per capita; reducing by half the current rate of absolute
poverty and the elimination of extreme poverty (defined as not being in a position to secure
minimum food needs); achieving an enrolment rate of 100 per cent in primary education, 90 per
cent in secondary education and an average educational attainment not less than 13.5 years of
education completed; and reducing by more than half the current infant mortality rate. There are
also a host of other objective, including those that relate to other areas of health and education
and to environmental protection, but suffice it to note that the programme is an ambitious one.
The one area that does deserve special mention is rural development. The NSSED is in favour of
integrated rural development and a rural development strategy has been put together in order to
serve this particular policy area.
      For now, however, the NSSED process has had a number of problems, some of which
relate to difficulties in implementation, in part reflecting a failure on part of politicians to keep to
the agenda as political conflict (including the split between factions in the Socialist Party) has
taken the upper hand. The process has also been faulted for not being able to deepen and
institutionalise the participatory process and for not being able to elaborate a more specific vision
of the country‟s long term development. The NSSED is not yet clearly linked to the budgetary
process (i.e., through the MTEF) and the ability or willingness to make clear-cut priorities leaves
a few things to be desired. On the other hand, the Government appears to have been at least
partially successful in getting the process back on track also as momentum was lost in the
political in-fighting
     Delays have also affected the parallel process of preparing for Albania‟s future integration
into the European mainstream. Albania was due to begin formal negotiations with the EU in
early 2002, but the uncertainties surrounding Albanian politics at that point in time caused a
postponement. Instead, negotiations began in early 2003 and today the Stabilisation and
Accession Process (SAP) is a major determinant of Albanian political priorities in a number of
policy areas, in particular as relates to the improvement of standards of governance, the
strengthening of state institutions and agencies and the legal framework as a whole. As such it
may also serve a number of other ends that are nominally outside the scope of the agreement,
such as a counterweight both domestically to the logic of party politics and internationally to the
requirements and pressures of other donors. To smoothen this process, Albania and the EU in
March 2002 signed a financial agreement under the Community Assistance for Reconstruction,
Development and Stabilisation (CARDS) programme of the EU. In total, the programme is
foreseen to provide assistance to the tune of EUR 145 million for the period 2002-04 to assist
with Albania‟s integration into European structures.
     Whereas the SAP has its goal set on European integration and stability, objectives that are to
be achieved through political, legal and economic means, issues of poverty alleviation and
concrete action to improve the economic performance of the country is largely the preserve of
the NSSED. Yet, although poverty alleviation through economic growth is a major goal of the
NSSED, and despite the fact that the initial stages included extensive discussions with civil
society representatives at both the national and local level, it is probably fair to say that the
perspective that dominates the documents produced to date is one of a predominantly top-down
or perhaps better stated above all a national exercise. It is also predominantly sectoral in outlook
and in particular implementation may prove in need of greater efforts at co-ordination across
sectors than is currently foreseen. For the same reason, any issue not the prerogative of a
responsible ministry runs the risk of falling outside the scope of the NSSED.

     Thus, there is little to indicate that regional differentiation has played a prominent role,
neither as an input to the Strategy nor with respect to policy formulation and implementation.
This would seem to be a problem, in part because the regions charged with the task of
formulating regional strategies are still not quite up to the task of filling this void, in part because
this would in all likelihood require a measure of redistribution of resources other than for the
purposes of social assistance between regions. As yet, this is not happening and to the best of this
author‟s knowledge is not about to happen within foreseeable future. Rather, the process of fiscal
decentralisation relies on the twin pillars of local governments being able to raise local revenue
and of per capita transfers from the central government to carry out centrally mandated tasks.
     If good rates of economic growth are achieved, and if this is made to trickle down, a lack of
such redistributive mechanisms may matter less. It would still require, however, that institutional
reform is carried through as planned. Both the business sector and outside observers, including
donors, have repeatedly pointed out that a business climate conducive to the orderly conduct of
business and with the requisite rewards to those that contribute employment and tax income is a
necessity to maintain the desired rates of economic growth. As the entire NSSED is premised on
continued progress in this regard, any failure to improve conditions is not to be taken lightly.

4. Economic development: roller coaster ride
The focus, in the NSSED, on economic growth and poverty alleviation – not to speak of the
requirements in this regard if the SAP is to lead to the long-term goal it sets itself, that of Albania
being integrated into the European mainstream – must not be construed as a total failure in this
regard up to now. On the contrary, few countries in the Balkans, indeed among the transition
economies of Europe, have achieved such high growth rates as have Albania. In marked contrast
to some of the former Yugoslav republics, for instance, Albania stands out as dynamic and with
reasonable chances of improving the lot of its population also in the relatively short run.
     Such an optimistic view must, however, be tempered by the recognition that Albania did set
out from an appallingly low level and that severe setbacks have occurred along the road.
Similarly, the fact that GDP growth rates are high does not necessarily translate into improved
levels of income and a higher standard of living across all segments of the population or even the
majority of them. In fact, in the short run, economic growth may well serve to increase relative
depravation, among individuals, sectors and regions. Nor should the possibility of an increase of
absolute poverty be ruled out on a priori grounds.
     The initial conditions faced by Albania were exceptionally unfavourable. The centrally
planned economy did, after all, collapse by its own making. Productivity was extremely low,
unemployment high and on the rise, levels of remuneration low and the availability of investment
funds severely circumscribed. The system was premised on the availability of funds to be
transferred out of the agricultural sector, which employed more than half of the labour force, to
the benefit of secondary sector activities. Incentives, however, were not conducive to increased
productivity in agriculture and the transfer of labour resources out of the primary sector was very
slow; any such transfer would only serve to reduce agricultural output and increase the burden on
an urban sector that, comparatively speaking, offered much greater benefits for those living there
than did rural areas. It is not surprising, then, that strict administrative controls on domestic
migration were imposed. Over time, greater resources were needed to keep up production levels
in agriculture, to the detriment of an industry that was dependent on such transfers as it could
not produce the requisite returns on its own.
     As the increasingly doctrinaire policies of the early 1980s only made this deterioration worse,
the population increasingly lost their patience with and trust in the economic system they had to
endure. True, it was reasonably good at achieving income equality, but arguably other things
mattered more than monetary earnings, such as societal position, contacts and place of living. By
the same token, the access to social services, that is, in kind transfers, resulted in appreciably
improved health and levels of educational attainment also in a country characterised by very high
levels of natural population growth (the population increased by a factor of 3 in little more than
four decades). Basic utilities and infrastructure also saw noticeable improvement, but all of these
achievements obviously fell short of the population‟s expectations. As a result, state property,
nominally owned by the entire people but in effect by no-one, was made subject to a major
onslaught of looting and destruction as the 1980s approached the end. By 1991, such vandalism
had effectively made important societal functions grind to a halt and the economy suffer still
more than it did under the highly unproductive system of central planning.
      The demise of the previous order also made inflation come into the open. The removal of
subsidies and withdrawal of sizeable volumes of domestic products, previously made available (if
at all) at very low prices, made this still more visible. Together with the collapse of state budget
revenues and rapidly increasing need for support to sustain a basic livelihood implied that macro-
economic stabilisation became a pressing necessity. There was simply no way in which other
important reforms could be introduced and sustained unless structural adjustment type measures
were introduced.

Table 2: Basic macro-economic indicators, 1992-2002

Item                1992     1993    1994    1995        1996    1997    1998    1999    2000    2001    2002
real growth*          -7.2     9.6     8.3    13.3         9.1   -10.5    12.1     7.7     7.7     6.8     4.7
Private sector         10      40      50      60          75      75      75      75      75      75      …
share of GDP (%)
Inflation             226      85      23       8          13      33      21       0       0       3       5
Trade deficit (%
of GDP)                              -23.2   -19.6       -25.7   -22.7   -20.4   -18.0   -21.4   -24.1   -23.9
Current account
(% of GDP)                        -14.0    -7.3           -9.1   -12.1    -6.1    -7.2    -7.1    -6.2    -9.1
External debt
(% of GDP)                           51      32            28      39      36      31      31      28      24
State budget
(% of GDP)                                                12.8    12.9    10.4    11.8     8.9     8.2     6.9
12 month
deposit rate                                              19.1    27.8    16.5     9.1     7.7     7.7     …
Real deposit
rate                                                       1.7   -14.3     7.8    10.1     3.5     4.2     …
(USD, mls)                                               499.6   266.9   452.2   368.1   530.8   568.0     …
Exchange rate
(lekë/USD)                                 93.0          104.8   149.6   151.2   138.1   144.0   143.6   132.2
Exchange rate
(lekë/euro)                               127.0          136.1 168.6 168.4 147.4 132.8 128.9 132.2
* GDP data for 1977-2002 are based on the revised        national accounts, released in 2003; the figure for
2002 is an estimate.
Sources: Albania: Selected issues and statistical appendix (IMF Country Report, 01/118. Washington,
DC: IMF, July 2001); Bulletin statistikor 3 mujor nr. 4 2001 (Tirana: INSTAT); Second Review under the
Three-Year Arrangement under the Poverty Reduction and Growth Facility (IMF Country Report, 03/218.
Washington, DC: IMF, July 2003).

In addition to attempts to stem the tide of expenditure, made more difficult for the rapidly
deteriorating ability of the population to feed itself, early measures included the liberalisation of
foreign exchange markets, privatisation of small businesses and preparations for the distribution
of land to co-operativists. Some progress was made, but a concerted effort at full scale market
reform was launched only over the next few years, this time partly under guidance of multilateral
     There is no need to detail all measures taken – the main ones are listed chronologically in
Box 1 – suffice it to note that basic legislation with respect to liberalisation and small scale
privatisation have made considerable progress. Other areas, including the regulation of financial
markets, have been less successful. This became painfully apparent as the pyramid funds
collapsed in early 1997. One consequence was the return of inflation, another a precipitous drop
in GDP. Both domestic and foreign direct investment suffered, many foreign firms in effect
being driven away by violence and lawlessness. It goes without saying that it has taken time to re-
establish the confidence of domestic and international investors alike.

Box 1: Milestones of economic reform                       There are also other changes that have
                                                      taken place during the period under review.
1991 Small-scale privatisation begins                 One is the origin of growth of GDP as has
     Rural land privatisation begins
                                                      been recorded. Leaving methodological
1992 Two-tier banking system introduced
     Full current account convertibility              issues aside – and much can be said about
     Exchange rate unified                            the quality of data – it appears that the first
     Controls on foreign trade removed                period of relatively high levels of economic
     Most prices liberalised                          growth, 1993-96, in part was fuelled by
1993 Restitution law for non-agricultural land        improvements in the agricultural sector.
     Privatisation of housing begins                       This is not particularly surprising, as
     Privatisation agency established                 agriculture weighs heavily in the Albanian
     First foreign owned bank opened                  economy and the combined effects of land
     Enterprise restructuring agency                  privatisation and a revival of the domestic
     established                                      market helped farmers particularly in the
1994 Modernisation of tax administration
                                                      western lowlands to find a growing market.
     Treasury bills market initiated                  This market did not expand quickly enough
     Small-scale privatisation completed              to help the entire agricultural sector to get
1995 Voucher privatisation begins                     back on its feet, however, and import
     Competition law enacted                          competition has all along been a headache
     Land titles introduced                           for Albanian producers.
     Bankruptcy law enacted
1996 Law on Central bank independence                       The negative effects of EU agricultural
     Securities & Exchange Commission                 policies – including formal barriers to trade
     and stock exchange established                   and market distorting production subsidies
     VAT introduced                                   – are clearly among the culprits to blame,
     First large enterprise liquidated
                                                      but also the effects of massive transfers of
1997 Law on transparency adopted
     “Pyramids” placed under international            development assistance and remittances
     administration                                   from Albanian‟s residing abroad have
1998 State owned Rural Commercial Bank                arguably helped maintain an exchange rate
     closed                                           that is not entirely in keeping with the
     Banking law amended                              ability of Albania to find export markets for
     Comprehensive tax reforms adopted                its products. An overvalued exchange rate
1999 Capital adequacy ratio raised to 12%
                                                      has a number of positive benefits, such as
     Credit ceiling for private banks lifted
2000 Secured transaction law enacted                  reducing the cost of debt service and
     National Commercial Bank sold to                 contributing towards keeping inflation at
     foreign investor                                 bay. Its effects on other aspects of the
     Mobile telecommunications company                economy are contested, however, and the
     sold to foreign investor                         IMF has recently argued that it does little to
     Accession to WTO                                 erode the ability of local producers to
     Indirect monetary policy instruments
                                                      export. This is may well be true, as several
     Anti-Corruption Board set up                     products face various tariff and non-tariff
2001 Second mobile telephone license                  barriers that are arguably more important
     awarded to foreign investor                      than are price levels as such. However, in
2002 Deposit insurance law enacted                    the domestic market this is likely to make a
     Bankruptcy law enacted                           difference, in particular as Albanian
     Free trade agreements with Croatia,              agricultural producers currently has to
     Serbia-Montenegro and Macedonia
                                                      contend with the combined effect of the
2003 Privatisation of the oil sector to begin
     Free trade agreements with Bosnia-               recently concluded free trade agreements
     Herzegovina and Kosovo                           with several of its Balkan neighbours and
     Incipient opening up of agricultural             imports from the EU enjoying export
     trade following trade talks with EU              subsidies.

     The heavy dependence on remittances and donor support carries other costs as well.
Politically, and depending on the view taken, it may provide arguments both for those who see
benefits in the hands of local politicians being tied by commitments to or pressures issuing from
the international community and those who see this as an erosion of national independence. The
fact that a broad consensus can be found in foreign affairs and on the NSSED process can be
cited as an expression of such realities. For the fact remains that Albania is heavily dependent on
aid and concessionary finance to meet its various obligations. The budget deficit has consistently
been substantial and although the level of external debt may not seem an immediate threat, given
Albania‟s inability to expand its exports debt service may become a problem. The size of both the
trade and current account deficits relative the size of the national economy are reason for
concern, just as the difference between the two is indicative of the importance of the continued
flow of remittances and donor support to the continued health of the economy.
     The best bet for a smooth solution to problems such as these is continued growth of the real
economy and GDP growth has in fact picked up again following the calamities in 1997. An
important change, however, is that agriculture does not seem to contribute as it did prior to the
events that year. Instead, economic growth is by and large driven by construction, transport and
services. Construction has benefited from a building boom that has resulted in two-digit growth
every single year since 1993 except in 1997. As the centrally planned economy collapsed, there
was a considerable backlog in housing availability, size and comfort. Demand has also been
fuelled by the magnitude of domestic relocation of the population, both between regions and
locally. All told, in 2001 more than a quarter of the housing stock was ten years old or less.
     Industry for its part has only slowly been moving towards a revival. According to official
figures, which, it must borne in mind, are likely to exaggerate the level of output achieved at the
end of the socialist economy, registered a drop by half in 1992 alone. Only in 1995 did industry as
a whole see positive growth, then largely stemming from the expanded production of building
materials meeting the needs of construction. From 1998 and on-wards, however, growth has
continued apace, at about 4-7 per cent a year. This makes it somewhat more successful than
agriculture, but Albania is yet to see a return to the levels of employment in industry maintained
during the centrally planned economy. Indeed, it is unlikely that it ever will. On the other hand,
as far as can be ascertained, productivity has seen considerable improvement, not least because of
the introduction of much more modern production techniques and equipment.
     Within industry, food and beverages, garments and shoes have made some progress, with the
latter two becoming increasingly visible as an important part of Albanian exports. This sector
relies only marginally on the former state-owned companies and production facilities and instead
takes the form of outward processing on behalf of primarily Italian and Greek firms. Inputs and
machinery are typically provided from the country of origin of the investor, while Albania
provides little above labour. As the sector appears to predominantly employ women and quite
possibly pays above average wages – a lack of data, however, makes such inferences unreliable –
it makes a positive contribution to the economy and may be a pointer as to the future direction
also of Albanian manufacturing. As long as factor price level do not price Albania out of the
market, infrastructural needs remain unmet or security again becomes an issue, by virtue of her
location in close proximity to EU member countries such as Greece and Italy, Albania is well
placed to develop outward processing further.
      Also the rapid growth of construction has had a positive impact on industrial development,
as demand for building materials is partly met with domestic production. Meanwhile, mining and
metallurgy are but a shadow of its former self. Albania is well-endowed with natural riches that
can be exploited, including oil, iron ore, nickel, copper and chromium, but levels of depletion
from uneconomic use and old-fashioned production techniques during the socialist period have
left this potential source of income and employment at levels nowhere near early expectations.
Although it is quite clear that this situation has been made worse for the fact that the

privatisation of large scale state enterprises has been a major hurdle that is yet to be fully
overcome, it is quite unrealistic to assume a full-scale return of this sector. The environmental
degradation generated by the industry – oil wells, mines, chromium enrichment plants, copper
and oil refineries and the steel plant at Elbasan all rank among Albania‟s many environmental hot
spots – adds to the problems experienced and its not entirely rosy prospects. Even so, on the
basis of privatisation strategy prepared by the government, two concessions for chromium and
one for copper mining have been awarded foreign investors.
     The problems experienced in mining have contributed to the widening regional differences
that exist. While these differences were considerable already under the old regime, the population
in some mountain areas in particular did benefit from extractive activities as an alternative source
of income to agriculture. This is true not least of mountain districts in the north-central and
north-eastern parts of the country, where primary processing of ores also helped increase
industrial employment and with it higher levels of remuneration and access to state sector
     Something similar can be said of forestry, another activity that provided inhabitants in select
rural areas and small towns a much needed source of employment and welfare benefits. This is
again true not least of the north-central and north-eastern parts of the country. The manner in
which forestry was organised, and the incentives in operation, did little however to ensure the
long term viability of this sector. As a result, also the importance of forestry has declined and
thereby contributed to the adverse conditions experienced in many peripheral areas that lack a
good potential for agriculture or industry.
     The economy has also suffered from deficiencies in other industries. Transportation and
construction may have increased by leaps and bounds, but the basic transport and
communications infrastructure leaves much to be desired. The number of fixed telephone lines
inherited from the socialist order was by far the lowest of any European country and expansion
since has not been able to keep up with demand. This has partly been overcome by the access to
mobile telephony, which has seen a rapid expansion of the number of subscribers and,
encouragingly, of the geographical coverage of the country. The current two operators are about
to be joined by a third, and expectations are that mobile phones will compensate for many of the
shortcomings of the fixed system.
     Electricity, however, may serve to stifle also the best of intentions. The socialist regime
prided itself of having connected every single village in the country to the electricity grid or
otherwise supplied it with electricity. This does not mean, however, that all households were so
supplied. Moreover, although industry has reduced its consumption of electricity, increased
demand from households and the service sector has made the shortcomings of the existing
system of production and distribution of electricity increasingly apparent. Albania has a good
potential for generating hydropower, but conflicts over water resources, periodic droughts, lack
of investment, sub-standard distribution and bad management have all conspired to make this a
very weak link in the chain. As a result, power cuts (planned and unplanned) have for several
years now been a fact of life, adding to the hardship of ordinary citizens and have made industrial
production and services more expensive to the extent that entrepreneurs have had to rely on
various back-up systems. The seriousness of the situation can be gauged from the fact that
disruptions in the supply of electricity are estimated to have reduced GDP growth from 6 to 4.75
per cent in 2002.
     Other aspects of infrastructure are also a source of headaches for industries and households
alike. The road network is not particularly dense and often in an appallingly bad state of repairs.
The very rapid expansion of the number of cars during the past ten years has added appreciably
not only to congestion and pollution, important as these negative effects are, but also to the wear
and tear of roads. New roads of a good standard do connect Tirana with the coast and points

north almost as far as Shkodër, and parts of the east-west connection through the Shkumbin
valley is equally well provided for with more under construction (at the time of writing the latter
was completed from Librazhd to Qafë e Thanës at the Macedonian border). Encouraging as this
is, it falls seriously short of needs and perhaps above all the new road Durrës – Qafe Morinë at
the Kosovar border, although still not beyond the drawing board, will fill an important gap. In
fact, there is a tax levied specifically to provide finance for the latter.
     Harbour facilities and airports are other pieces of transport infrastructure that have attracted
attention from national policy makers and donors alike. Most efforts have been concentrated at
the main port, Durrës, and airport, Tirana Rinas, and air traffic control facilities, but one regional
airport is currently under construction, at Kukës. Although it is not entirely clear what the
combined costs and benefits of such an investment are, the fact that it is finally into the
construction stages have been greeted with relief both nationally and in the region concerned.
      Yet, for all Albania‟s shortcomings in this regard, it is not far-fetched to suggest that it is the
institutional infrastructure that leaves the Albanian economy the most vulnerable. Banking and
financial sector reforms are a necessity, but so is the need to increase transparency in government
procurements and to reduce the level of corruption in all sectors of the society. There is also a
need to improve tax collection and to make tax payments more equitable not least across firms.
As of today, also GDP calculations are premised on the assumption, conservative as it probably
is, that the hidden economy is about one-third of the size of the formal one.
      In fact, the business climate of Albania leaves a few things to be desired. Red tape and
arbitrary decisions on issues such as licensing and taxation are important hurdles to a dynamic
and thriving formal business sector. Such businesses form the backbone of government tax
revenue and employment. Without them, and the employment opportunities they create, also the
social security system will rapidly prove unsustainable also at the currently low levels of benefits
awarded. Foreign and domestic formal businesses are important also because they are one of the
main sources of investments in the economy, and there is no shortage of investment needs to

5. Consequences of transition: poverty and well-being
Growth in GDP has clearly served Albania fairly well, at least as far as league tables are
concerned. Albania, which at the beginning of the transition in the early 1990s clearly ranked as
the poorest country in Europe, no longer holds this unenviable position. However, as is well
known high rates of economic growth, while often a necessary prerequisite for reducing levels of
poverty, is not a sufficient condition for improvement on this score. It is therefore of some
interest to assess Albania‟s performance with poverty and social equity in mind. A look at the
UNDP‟s Human Development Index suggests that also here some progress has been made.
While Albania in 1993, with a HDI of 0.633, ranked 104, by the year 2001 it had achieved a score
of 0.764, placing it at rank no. 70 out of 173 countries assessed by the UNDP. The fact that there
today are a few European economies that are worse off and that Albania has improved its
standings as measured by the HDI, however, is of little comfort as the incidence of poverty is still
at high levels.
      Thus living standard surveys have concluded that about one quarter of the population, or
close to 780,000 people, live in poverty. Even so, Albania claims to have been able to maintain a
fairly equitable distribution of income; with a Gini coefficient that is said to be as low as 0.28 it is
at about the same level as or indeed lower than most of the other countries of the region. Early
surveys further indicated that a rather high proportion of these experienced extreme poverty in
the sense of not being able to meet their basic food requirements. Preliminary results from the
living standards measurement survey taken in 2002 now suggest that a figure of 5 per cent is
more likely, but as is the case with poverty generally these national figures conceal pronounced
regional differences. Thus rural areas are generally worse off than are urban areas, and in
particular the north exhibits a higher incidence and severity of poverty, relatively speaking, than
do other parts of the country. Young families are generally worse off than more established ones,
and single adult households and particularly those headed by women are also more likely to be
poor than others. Other preliminary results from the 2002 survey suggest that factors other than
income compound these difficulties. About one-third of the population lacks access to at least
some of the basic necessities such as primary education, safe water, sanitation or heating. Poverty
is also strongly associated with unemployment or, in rural and mountainous areas,
underemployment. It is also believed that non-majority ethnicity is similarly correlated with
poverty and in particular the Roma are likely to be over-represented among the poor.
     As a consequence, almost 20 per cent of all households receive some form of social
assistance. One reason for the high levels of poverty is to be found in the state of agriculture.
Although Albania‟s rural population enjoys a fairly equitable distribution of the most important
type of asset, land, there are considerable regional variations in land ownership. The fact that
access to land is nearly universal in most rural areas, and few therefore are fully excluded from
this potential source of income in cash or kind, does not imply however that it is quite enough. In
the mountainous interior of the country, and then particularly in the north and north-east, per
capita land availability is very low indeed. As land here tends to be less fertile than elsewhere, it
adds to the predicament of the inhabitants of these parts of the country.
     There are many other problems that serve to reduce the ability of agriculture to provide a
decent livelihood for those so engaged. Besides land availability, land fragmentation is a problem
in many areas, as is the access to irrigation. Furthermore, as conditions often force farmers to
emphasise production for subsistence needs and as there are typically very limited opportunities
for non-agricultural pursuits that could be exploited in parallel to farming, there are quite a
number of “involuntary farmers” the skills or aspirations (or both) of whom are not in line with
the present occupation.
    Instead, if farmers do not accept the consequences of a lack of specialisation and
underemployment, that is, a low level of income, most rural areas today only offer one option,

that of leaving. This has been made use of to a considerable extent, with villagers in peripheral
areas moving to the main regional town, to the western lowlands or simply a nearby village that
appears to offer better prospects, by however slim a margin. Alternatively, as is also a common
strategy among those living in more favoured areas and in town, permanent or seasonal migration
in particular to Greece and Italy but also further afield is often resorted to. The amount of money
remitted home speaks volumes about the livelihood strategies that many try to avail themselves
of. Indeed, the results of the census in 2001 suggest that about 600,000 people have left the
country and it is commonly asserted that access to money sent home by family members and
other relatives often the dividing line between being poor or not.
     This points to the fact that also outside agriculture problems persist. The inability to earn a
decent income at home is a common experience across wide segments of the population. The
employment rate, at 58 per cent of the relevant age groups (71 % for men and 45 % for women,
in 2001), is low and unemployment very high (overall 22.7 %, with 18.8 for men and 28.4 % for
women, in 2001). Over time, the proportion of the registered unemployed that have gone
without a job for more than twelve months have increased and today make up more than 90 per
cent. The majority of the unemployed are young, and although there are a number of lowland
districts with above average levels of unemployment (including Tirana and Durrës), inland and
mountainous districts typically register higher levels of unemployment than do others. For
instance, in the north-eastern district of Kukës, one in three remains unemployed.
     A statistic such as the one last mentioned is indicative of the substantial regional differences
that exist, indeed persist. As previous sections of the present report have also indicated that
regional differentiation is a prominent feature of the Albanian economic and social landscape,
and that few measures have been taken to rectify or mitigate this situation, any discussion on
economic development, the incidence of poverty or the strategies that people employ to secure
their livelihood need to take this into account. In fact, it can be argued that although the
individual or the household is the relevant level of discussion in this regard, a regionally
disaggregated portrayal of the current situation is better able to capture essential features of the
experiences of the population than does an analysis conducted at the national level alone.
Towards this end, in the following the report focuses on two mountainous inland areas, Korçë
and Kukës, which in part share a common experience, in part differ in this respect. The former
also has the benefit of introducing the area that constitutes the main geographical focus of Sida
activities in Albania, while the latter by common consent is considered the most disadvantaged
region of the country and therefore qualifies as a potential focus of future efforts.

A tale of two peripheral regions: Korçë and Kukës
Located in the south-eastern and north-eastern corner of the country, respectively, Korçë and
Kukës share a peripheral location relative the capital and the western lowlands. In many respects,
however, the position of Kukës is much less favourable than is the case of the south-east.
Bordering on Kosovo, and historically very close to that Albanian speaking part of the former
Yugoslavia, it has not been able to reap the benefits awarded by a location adjacent to an
economically dynamic neighbour such as that enjoyed by Korçë. The current state of existing
physical infrastructure has reinforced these differences. Thus, while the eponymous regional
capital of Korçë region has seen the time distance to Tirana decrease as a result of improved
roads, in Kukës no such improvement has as yet been registered.
     Also in other respects Korçë comes across as the more favoured. The quality and availability
of agricultural land is much better in most of the four districts that make up that region. The fact
that land distribution in Korçë was done strictly on a per capita basis, as the 1991 law required,
also led to a more equitable distribution of this asset, than was the case in Kukës where land was
predominantly distributed in accordance with pre-socialist boundaries and on a family basis.

There are sizeable tracts in both regions that are mountainous and not conducive to farming – at
the very best, animal husbandry can be engaged in to an advantage – but the highland Korçë
plain located at an altitude of about 800-900 meters above the sea level affords good conditions
for a rather wide range of agricultural products, such as grains, fruits, vegetables and potatoes. In
the Kukës region, by contrast, the main exceptions to the generally poor conditions for crops are
potatoes, chestnuts and fruits such as apples and plums. Both areas also have a potential for
forestry, but in neither case is the quality and extent of forest resources currently such that it
could form the basis for anything but rather small scale and marginal activities in this industry.
      These general conditions mattered a
little less under the socialist period, in that    Box 2: Korçë and Kukës regions
significant resources were invested in the                             Korçë      Kukës
mining sector. Although low-grade coal
and ores that could be used in the steel           Size, km²           3,711      2,374
industry were exploited in Korçë, Kukës
                                                   Population          265,200    111,400
was arguably much better off in this
regard. Its natural resource endowment             % share of
includes chromium and copper, but other            national total      8.6        3.6
minerals can also be found, the most well-         Inh./km²            71         47
known being the uranium mine at Nimçë              Pop. change
in Kukës district. As a result, several            1989-2001 (%)       -14.8      -23.7
communities in all three districts of Kukës
region were built around mines and                 Constituent         Devoll     Has
enrichment plants. All in all, more than           districts           Ersekë     Kukës
10,000 people found employment in this                                 Korçë      Tropojë
sector as recently as the 1980s.
     Today, income generating activities           division:
outside agriculture and animal husbandry           municipalities        6          3
are few. Unemployment has become                   communes             31         24
much more widespread in both regions,              comprising          345        187 villages
but whereas at the end of the 1980s was
lower than the national average in both            Regional            Korçë      Kukës
                                                   capital             (59,000)   (16,600)
regions, Kukës now stands out as one of            Other main          Pogradec   Bajram Curri
the worst hit among all regions (Korçë,            towns               (23,800)   (7,500)
for its part is close to the national                                  Ersekë     Krumë
average). The dependence on social                                     (7,500)    (3,200)
assistance is correspondingly high in                                  Bilisht
Kukës, but below the national average in                               (6,700)
Korçë. Thus, a staggering 57 per cent of
                                                   Social assistance
the population (or 48% of all families) of         recipients, % of    17.0       48.0
Kukës region receive such support. It              all families
should be noted in this context that both
regions and all seven of their constituent         2001 % share of
districts have a higher proportion of their        national public      3.9        1.4
population engaged in agriculture than             investment
does Albania as a whole, which implies
that in particular in Kukës district –             HDI (2002)          0.757      0.719
already the area with the highest level of         Rank                8          12    out of 12
unemployment in the country – the urban
unemployment rate is more severe still
relative the national average.

     Against such a background, it comes as no surprise that out-migration has become an
important means of securing a livelihood. All districts in the two regions concerned save one
(Pogradec) have seen a substantially decreased population, in large measure as a result of out-
migration. However, as far as can be established without detailed survey data, there are important
differences between these two regions with respect to migration. Korçë has seen a relocation
within the district, from outlaying mountain villages to the highland plain and the main town of
the area, Korçë. As importantly, in this region where emigration overseas has a long history,
permanent or seasonal work in Greece and, to a lesser extent, Italy and other countries figures as
an important part of household strategies to secure a living. Also the main lowland towns, and in
particular Tirana, attract migrants from the region.
     In Kukës, by contrast, relocation to the western lowlands appears to be the main option at
hand for those considering leaving their home area. What is more, northerners that have
relocated to these areas more often than other end up in rural locations or in irregular settlements
on the outskirts of major town. As the lack of land appears to be a more important inducement
to relocate from the north-east than from the south-east, entire families are more likely to leave
Kukës than Korçë; else, and as is universally the case, in both regions young people have a much
higher propensity to move than do other age groups. On the other hand, emigration, both
seasonal and permanent, is probably less common in the north-east in part for a lack of nearby
options, in part for less extensive networks of contacts (the importance of Great Britain as a
destination for those that do actually leave Kukës for work abroad is indicative of the significance
of networks). As in Korçë, however, there seems to be a measure of step-wise migration in that
rural dwellers in peripheral villages will move into more favoured rural areas locally or to the
towns of the region, filling the gaps as it were of those that have left those localities for
destinations further afield.
     Those left behind have to contend with quite different conditions in these two regions. It is
true of course that rural areas in both regions are typically worse of than are urban areas, and in
both regions a peripheral location typically implies a much lower standard of living than do non-
peripheral locations, but there are also differences that clearly set the two regions apart. The
UNDP‟s Regional Human Development Index classifies Korçë as a medium HDI region, while
Kukës squarely falls within the category of low HDI. The difference is also captured by the use
of the Gender Development Index (GDI) and Gender Empowerment Measure (GEM), which
the UNDP has calculated for the regions of Albania. In both instances Korçë falls within the
mid-range regions (rank 8 and 6, respectively, out of 12), while Kukës again finds itself at the very
bottom of this ranking. Similar results have been arrived at by other studies, including the World
Bank‟s A Qualitative Assessment of Poverty in 10 Areas of Albania (2001), which identifies the district
of Korçë as one of the two study areas least affected by poverty. Kukës district, for its part, here
found itself in the category most affected.
     Yet, it should be borne in mind that not all social indicators have deteriorated. At the
national level, the average expected life span has not fallen, as is otherwise a common experience
across transition economies. Similarly, infant and child mortality, while high by European
standards, have seen some improvement, both at the national level and, as far as can be
ascertained, in the regions under discussion here. The illiteracy rate has improved in all seven
districts of the two regions; whereas no district in 1989 had a rate of less than 5% of those above
the age of 6 that were considered illiterate, in 2001 no district found itself above the 5% level.

Other aspects of well-being, or the lack thereof
Statistics such as those presented immediately above may of course conceal considerable
variation and may also reflect that the processes that generate such outcomes have changed over
the period assessed. Thus, on a positive note, the superior access to better quality food today

compared to the 1980s, has probably had a beneficial impact on the health status of individuals
irrespective of whether the access to health services have improved or deteriorated (as appears to
be the case in particular in outlying areas). Less propitiously, the much improved illiteracy rate is
likely to hide important changes. On the one hand, as older cohorts are replaced by a younger
generation, the rate is likely to fall. On the other, given the not infrequent reports of especially
girls being withheld from school in some rural areas, the problem of illiteracy may well take on a
very different character with the passing of time. Nowhere is this more common than in the
north-eastern part of the country where primary school enrolment rates can be as low as nine-
tenths of a given age group (as is the case in Kukës district) and locally lower still. Whether this
happens as a result of old fashioned values and attitudes making a comeback, as is sometimes
claimed, or is a result of poor security – the abduction of children is not unheard of – and low
returns to education is certainly not only of an academic interest as it carries important policy
     As it happens, though the above observations point in two quite different directions, both
are relevant to an assessment of current levels of well being. The rights of children and women
have often been pushed aside in post-socialist Albania. Not least because of the precarious
situation many families have found, and many still find, themselves in, the organisers of
trafficking have had found Albania useful both as transfer point and recruiting ground. Although
figures on the number of people so affected vary tremendously over time and across
commentators, it is fair to say that this trade in humans, or the exploitation of their rightful desire
for a better future, has left deep scars in Albania. There are also few signs that trafficking is being
pushed of the map, as it where. Despite some efforts to come to grips with the problem, it will
remain a reality to contend with for some time to come.
    Trafficking may also have found fertile ground in a situation where women are denied the
same rights as men. Traditional Albanian society made men the norm and also awarded them
power over women and children alike. The socialist order, to the extent that it promoted
modernisation, contributed to the breaking down of these traditional values, which had been
under pressure for quite some time already by the time the Communist partisans assumed power.
This has neither prevented their partial survival, nor their ability to re-surface once the socialist
regime was gone. In particular, peripheral areas are generally thought to be under the spell of
customary law, and nowhere more so than in the northern mountain areas. In urban areas, and
perhaps above all in Tirana and adjacent settlements, values that are more conducive to achieving
a gender balance are present.
     This is not to suggest that urban areas or those better off are in fact successful in this regard.
As has already been remarked, the presence of women in political life is poor in all parts of the
country. Their role in the economy is also more marginal than is that of men, and their
participation in the labour force is lower by a considerable margin. This reflects differences in
opportunities in the labour market as well as attitudes with respect to women‟s role in society. It
should be noted, however, that women increasingly avail themselves of higher education and by
virtue of such educational attainment may find themselves in a better position in the future.
University graduates do after all enjoy a higher level of employment and lower levels of
unemployment than do other groups in society. Similarly, the type of foreign direct investment
that the secondary sector attracts depends to a considerable degree on female labour, and as
foreign investors often provide higher wages and better benefits, including a better working
environment, than do domestic investors this may be to the advantage of the women so
employed. On the other hand, sweatshop conditions are not unheard of.
     Thus, current developments neither guarantee equality in the labour market, nor at home.
Marriage patterns among young urbanites may change, and also set a model for youth elsewhere,
but surveys as exist indicate that a traditional division of labour prevails also at the household
level. The collapse of the socialist system of support to mothers may not have proven as dramatic

as first thought, but the chances are that more traditional ways of solving the problems arising
from dual roles are entrenched.
      It is also a question of how values and attitudes spread. While university students arriving in
town from other parts of the country may well readily adapt to the environment in which they
find themselves, other in-migrants to the coastal plains may bring their more traditional way of
life with them, as has indeed been documented in some of the squatter settlements to be found
on the outskirts of Tirana. The strain of an insecure existence at the margin of society does little
to appease tensions between newcomers and the original population, as well as between
generations. Such clashes of different sub-national cultures do occur and although self-
organisation based on time honoured models has its benefits, it may also serve to reduce the
ability of newcomers to integrate into the mainstream.
     Other difficulties these groups of in-migrants are subject to may reinforce an already
precarious existence; it does not come as a surprise that recent in-migrants from rural areas in the
interior or on the eastern borders are more likely to belong to the poor than are most other
groups in the relatively affluent western plains. Having left their home regions behind in search
of better opportunities, in-migrants to the western lowlands often find themselves reduced to
squatting on state land. Although some are taken in by relatives, or find land in villages where
they have such contacts, many live without the benefit of access to any resources that could be
used as a platform for their new existence. This is of some consequence as their chances to find
formal sector jobs are slim. In the most extreme cases, in-migrants have little option but to settle
on derelict industrial land, much of it severely contaminated by industrial waste. The grounds of
chemical plants at Laç and at Porto Romano outside Durrës are the best known examples, and
quite possibly the very worst cases as indicated by a UNEP mission a few years ago, but the list
can be extended well beyond the environmental “hot spots” identified on that occasion.
     In fact, at this particular point, two powerful legacies of the socialist past of Albania
converge. Firstly, the geographical distribution of its population to some extent still reflects the
priorities formulated and enforced during central planning; the large population movements over
the past dozen or so years is in a sense a necessary adjustment of the rather extreme situation
created by strongly pro-natalist policies and equally strong curbs needed to make people stay put.
The requirements of the centrally planned economy, not to speak of security and defence, served
to underwrite, indeed create, a population distribution that is at some remove from an optimal
deployment of resources under the conditions of a market economy.
     Secondly, these autarkic economic policies put a strong emphasis on resource mobilisation
and high levels of investments in “productive” activities, leaving an inefficient heavy industry
built around locally available resources and in many cases old-fashioned technologies. Often very
wasteful, such policies also created a structure of production that did not reflect the country‟s
comparative advantages. In turn, this has ensured that most of this industry is now gone, but it
has left behind a number of heavily polluted local environments – UNEP‟s hot spots – which
include both former mines, sites of primary processing of ores and minerals as well as a number
of chemical and manufacturing establishments that continue to produce a negative impact well
beyond the life span of any production that may have taken place. Neither the fact that there are
also a number of other negative and geographically more extensive environmental legacies left
behind – the consequences of an indiscriminate cultivation of land previously used as pastures or
not at all for agricultural purposes is widely evident – nor the equally palpable air pollution
issuing from increased traffic and large scale construction, not to speak of the difficulties in
taking care of solid waste, alters this negative assessment of the past. At most, the recently
experienced effects of an emerging consumer society only add to an already heavy environmental