Albania’s challenges

TIRANA – The government that emerges from Albania’s general election held yesterday needs to complete the overhaul of an economy still heavily burdened by the legacy of communism, politicians and analysts say. Socialist Prime Minister Fatos Nano promised to double the speed of development if re-elected. Opposition leader Sali Berisha said he would make Albania the most attractive destination for foreign investment in the Balkans. Albania was Europe’s poorest country when communism collapsed in 1990. The economy has grown by an annual rate of 6 percent over the last two years, but statistics have not translated into higher living standards and one-quarter of its 3.5 million people remain in poverty. Agriculture, which makes up half of the economy, has been held back by antiquated equipment and the creation of a multitude of inefficient small farms, together with muddled property rights. A short drive away from the bustling capital’s smart cafes and glass high-rises, the landscape is still blighted by rusting dinosaurs of Stalinist-era heavy industry: sprawling plants producing vast amounts of pollution but no profits. Expensive or unreliable power and water monopolies, crumbling infrastructure and a lingering reputation for corruption have also kept foreign investors away. Reforms have so far been pushed only under pressure from the European Union. Both parties are strongly pro-European and say eventual accession is their top priority. Pressure from EU «Our development depends on pressure from the EU on the government rather than on the drive of politicians,» said Gjergj Erebara, editor of the Biznesi daily. Both Democrats and Socialists promise to resolve land ownership and create free industrial zones. The Democrats plan to simplify the tax system and cut taxes, especially of firms re-investing in employment schemes. They aim to tackle corruption and government-sponsored monopolies in food, energy and telecommunications that stifle competition. «We are convinced the deformities caused by these monopolies should be uprooted,» said Genc Ruli, a former finance minister of the opposition Democratic Party. The Socialists point to a good record during their tenure, with real incomes doubling and Tirana earning plaudits from the International Monetary Fund. They pledge to continue with privatizations to improve the business climate, selling off the KESH power utility and completing the sale of fixed-phone monopoly Albtelecom to a Turkish group – a sale resisted by the opposition. «Strengthening the rule of law and making the economy more open and competitive remain the main challenges of our third mandate,» said Finance Minister Arben Malaj. Analysts said that whoever comes to power will face an uphill struggle getting the economy to a level where EU accession could be feasible. The informal economy is estimated at up to 12 percent of GDP, and almost 5 percent is made up of remittances from Albanians in Italy and Greece.

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