Albania has liberalized its economy and promoted private sector-led growth in recent years.
After several ups and downs in the first decade of transition, the economy has managed to achieve macro-economic stability and a relatively high annual growth rate of over 5.
5 percent since 2002.
Significant progress has been made in structural reforms, especially in privatizing the small and medium sized state owned enterprises.
As a result, the economy today has a private sector that accounts for over 90 percent of gross domestic product (GDP) and over 85 percent of employment.
At the same time, the Government has continued its effort in legislative reforms.
A large number of laws and regulations have been introduced to provide the legislative framework for the financial sector, land market, tax and customs systems, and other important components for a market-oriented economy.
However, despite the achievements in the macroeconomic reforms and relatively high rates of economic growth since its transition, Albania remains yet one poor country of Europe.
Apart from the fact that Albania had to start from a low base, weak governance and institutions, coupled by tenuous rule of law, are deterring informal enterprises from "graduating" to the formal sector.
They have discouraged entry by long-term and strategic investors and limited the ability of the broader population to share in the benefits of economic growth.
Albania is also among the lowest recipients of FDI in Eastern Europe.
In many specific procedural areas, the systems are seriously flawed and characterized by lack of clarity, discretion, and transparency and investor unfriendliness.
Bureaucratic delays, arbitrary treatment, and high costs (including frequent "un-official payments") seem to be common features that are usual also among transition economies in the region.
Apart from possible broader social and political factors, some other observed problems are present in actual socio-economical environment in Albania to a combination of the following factors: There is a serious systemic lack of implementing regulations and operational guidelines.
Newly introduced laws (but some of the old ones too) are not supported by efforts setting out necessary procedures, criteria and responsibilities.
As such, the system permits the exercise of a high degree of administrative discretion by regulatory agencies and their officials, whose interpretations of the laws are frequently inconsistent and lack transparency.
It also creates confusion among investors regarding their legitimate rights and obligations, as well as their means of compliance.
There is a systemic lack of effective institutional structures, with neither clear designation of individual agency responsibility and accountability, nor the required degree of cooperation between them.
Investors often do not know exactly where to go for what, and government authorities also seem confused about who is responsible for what.
For investors, this means a waste of time and unpredictability.
For government authorities, this allows responsibility to be avoided when things need to be done, and "turf battles" to be waged when vested interests are threatened.
Legal and regulatory enforcement is chronically lacking.
Complaints exist in almost all areas about ineffective dispute settlement mechanisms, both within public administration and the court system.
Officials with operational power are able to abuse their power without being held accountable.
Private parties can move easily from legal to illegal practices (e.
g.
, not using bank accounts, constructing without permits, smuggling, etc), and, in some cases, seem to be driven of necessity to the latter since they are in competition with firms who engage in those practices.
This is highly inequitable since those who try to comply can be penalized the most.
It creates a vicious circle, in which fewer and fewer people, in both public and private sectors, are motivated to comply with the rule of law.
Administration is further weakened by a lack of development of the appropriate mindset and skills of officials at all levels.
In general, regulatory officials seem not to trust businesses.
Many appear to see themselves as policemen, not service providers.
It is common perception that some abuse their position by seeking personal gain.
Moreover, many authorities do not keep good records of their own performance; many cannot provide statistics on applications received, rejected, appealed, etc.
Almost all authorities interviewed complained about resource constraints, and none had effective staff performance systems to reinforce good performance and dissuade poor performance.
Corruption in our everyday life.
What to do in the effective way? In the context of this pervasive dysfunction, it is hardly surprising that corruption stands out as the most serious factor impeding reform efforts.
To meet the challenge of urgently needed economic development, the Albanian government will still has to demonstrate stronger political will and ability to tackle the problem of corruption.
The Albanian government has recently reinitiated an anti-corruption program under the Prime Minister's Office.
The present and the former experience suggests that any anti-corruption program can't be effective if is not developed together with a block of measures which must contain almost the poverty reduction strategy and development of direct investments in all the strategic sectors of Albanian economy.
Experience in many countries suggests the same idea, that governments can advance the battle against corruption by simplifying the investment process and eliminating scope for discretion.
The Albanian government should also make more vigorous efforts to clarify institutional responsibilities and enhance agency accountability, enforce laws and regulations, and educate the general public and civil servants at all operational levels on their rights and responsibilities.
These initiatives will require a strong political will and long-term commitment.
The Albanian government should regard the next years as an opportunity to implement the necessary far-reaching structural reforms that are fundamental to encouraging private sector investment.
At the same time, the effectiveness and credibility of laws and regulations designed to safeguard the legitimate public interest should be increased.
Removing administrative barriers in order to support the private sector Designing the implementation program for removing administrative barriers and the necessary institutional framework is a challenge that is not new for Albania.
Some years ago, or to be precise 4 years before the former government it started reforms focused on removing administrative barriers relatively recently, and all have to learn by doing.
Moreover, countries have to design their implementation programs according to their priority needs, economic reform agenda, and institutional conditions.
Therefore, there is no one model that can be imposed on any country.
Ultimately, the success depends on the joint effort of the Government, relevant ministries and agencies, and the private sector community in each country to agree on priority goals, develop appropriate strategy, and specific designs of the action plans and institutional mechanisms for implementation.
There have been many studies, workshops, and action planning in the past addressing similar and/or other issues vital to the private sector; and there are several on-going initiatives targeting administrative reforms and anti-corruption within the Government including the Prime Minister's Office, Ministry of Finance and Ministry of Industry and Economy.
More recently, as a gesture to support the private sector development, the Government of Albania has established a number of new agencies to promote foreign direct investment, small and medium businesses, and export activities.
What is the most important issue now in Albania is that all agencies have understood that their credibility and accountability depend on their performance, not just on laws and regulations laid in paper; and that self-assessment of their performance will be the key to encouraging good performance and increasing the overall operational efficiency.
After several ups and downs in the first decade of transition, the economy has managed to achieve macro-economic stability and a relatively high annual growth rate of over 5.
5 percent since 2002.
Significant progress has been made in structural reforms, especially in privatizing the small and medium sized state owned enterprises.
As a result, the economy today has a private sector that accounts for over 90 percent of gross domestic product (GDP) and over 85 percent of employment.
At the same time, the Government has continued its effort in legislative reforms.
A large number of laws and regulations have been introduced to provide the legislative framework for the financial sector, land market, tax and customs systems, and other important components for a market-oriented economy.
However, despite the achievements in the macroeconomic reforms and relatively high rates of economic growth since its transition, Albania remains yet one poor country of Europe.
Apart from the fact that Albania had to start from a low base, weak governance and institutions, coupled by tenuous rule of law, are deterring informal enterprises from "graduating" to the formal sector.
They have discouraged entry by long-term and strategic investors and limited the ability of the broader population to share in the benefits of economic growth.
Albania is also among the lowest recipients of FDI in Eastern Europe.
In many specific procedural areas, the systems are seriously flawed and characterized by lack of clarity, discretion, and transparency and investor unfriendliness.
Bureaucratic delays, arbitrary treatment, and high costs (including frequent "un-official payments") seem to be common features that are usual also among transition economies in the region.
Apart from possible broader social and political factors, some other observed problems are present in actual socio-economical environment in Albania to a combination of the following factors: There is a serious systemic lack of implementing regulations and operational guidelines.
Newly introduced laws (but some of the old ones too) are not supported by efforts setting out necessary procedures, criteria and responsibilities.
As such, the system permits the exercise of a high degree of administrative discretion by regulatory agencies and their officials, whose interpretations of the laws are frequently inconsistent and lack transparency.
It also creates confusion among investors regarding their legitimate rights and obligations, as well as their means of compliance.
There is a systemic lack of effective institutional structures, with neither clear designation of individual agency responsibility and accountability, nor the required degree of cooperation between them.
Investors often do not know exactly where to go for what, and government authorities also seem confused about who is responsible for what.
For investors, this means a waste of time and unpredictability.
For government authorities, this allows responsibility to be avoided when things need to be done, and "turf battles" to be waged when vested interests are threatened.
Legal and regulatory enforcement is chronically lacking.
Complaints exist in almost all areas about ineffective dispute settlement mechanisms, both within public administration and the court system.
Officials with operational power are able to abuse their power without being held accountable.
Private parties can move easily from legal to illegal practices (e.
g.
, not using bank accounts, constructing without permits, smuggling, etc), and, in some cases, seem to be driven of necessity to the latter since they are in competition with firms who engage in those practices.
This is highly inequitable since those who try to comply can be penalized the most.
It creates a vicious circle, in which fewer and fewer people, in both public and private sectors, are motivated to comply with the rule of law.
Administration is further weakened by a lack of development of the appropriate mindset and skills of officials at all levels.
In general, regulatory officials seem not to trust businesses.
Many appear to see themselves as policemen, not service providers.
It is common perception that some abuse their position by seeking personal gain.
Moreover, many authorities do not keep good records of their own performance; many cannot provide statistics on applications received, rejected, appealed, etc.
Almost all authorities interviewed complained about resource constraints, and none had effective staff performance systems to reinforce good performance and dissuade poor performance.
Corruption in our everyday life.
What to do in the effective way? In the context of this pervasive dysfunction, it is hardly surprising that corruption stands out as the most serious factor impeding reform efforts.
To meet the challenge of urgently needed economic development, the Albanian government will still has to demonstrate stronger political will and ability to tackle the problem of corruption.
The Albanian government has recently reinitiated an anti-corruption program under the Prime Minister's Office.
The present and the former experience suggests that any anti-corruption program can't be effective if is not developed together with a block of measures which must contain almost the poverty reduction strategy and development of direct investments in all the strategic sectors of Albanian economy.
Experience in many countries suggests the same idea, that governments can advance the battle against corruption by simplifying the investment process and eliminating scope for discretion.
The Albanian government should also make more vigorous efforts to clarify institutional responsibilities and enhance agency accountability, enforce laws and regulations, and educate the general public and civil servants at all operational levels on their rights and responsibilities.
These initiatives will require a strong political will and long-term commitment.
The Albanian government should regard the next years as an opportunity to implement the necessary far-reaching structural reforms that are fundamental to encouraging private sector investment.
At the same time, the effectiveness and credibility of laws and regulations designed to safeguard the legitimate public interest should be increased.
Removing administrative barriers in order to support the private sector Designing the implementation program for removing administrative barriers and the necessary institutional framework is a challenge that is not new for Albania.
Some years ago, or to be precise 4 years before the former government it started reforms focused on removing administrative barriers relatively recently, and all have to learn by doing.
Moreover, countries have to design their implementation programs according to their priority needs, economic reform agenda, and institutional conditions.
Therefore, there is no one model that can be imposed on any country.
Ultimately, the success depends on the joint effort of the Government, relevant ministries and agencies, and the private sector community in each country to agree on priority goals, develop appropriate strategy, and specific designs of the action plans and institutional mechanisms for implementation.
There have been many studies, workshops, and action planning in the past addressing similar and/or other issues vital to the private sector; and there are several on-going initiatives targeting administrative reforms and anti-corruption within the Government including the Prime Minister's Office, Ministry of Finance and Ministry of Industry and Economy.
More recently, as a gesture to support the private sector development, the Government of Albania has established a number of new agencies to promote foreign direct investment, small and medium businesses, and export activities.
What is the most important issue now in Albania is that all agencies have understood that their credibility and accountability depend on their performance, not just on laws and regulations laid in paper; and that self-assessment of their performance will be the key to encouraging good performance and increasing the overall operational efficiency.
Source...