Albania and World Bank - 20 Years of Working Together 74174 1 Albania – World Bank 20 Years of Working Together Tirana, 2012 Albania – World Bank 20 Years of Working Together Tirana, 2012 Abbreviations and Acronyms CAS Country Assistance Strategy for Albania IDA International Development Association CEDB Council of Europe Development Bank IDF Institutional Development Fund CPS Country Partnership Strategy IFC International Finance Corporation CRIF Catastrophe Risk Insurance Facility IFIs International Financial Institutions DPL Development Policy Lending IPRO Immovable Property Registration Offices EIB European Investment Bank IPS Integrated Planning System EU European Union JSDF Japan Social Development Fund FIAS Foreign Investment Advisory Service KESH Albanian Power Corporation FSAC Financial Sector Adjustment Credit MIGA Multilateral Investment Guarantee Agency GDP Gross Domestic Production NSSED National Strategy for Social and Economic GEF Global Environment Facility Development GFDRR Global Facility for Disaster Reduction and Recovery PEFA Public Expenditure and Financial Accountability GPF Governance Partnership Facility PRG Partial Risk Guarantee GPRS Growth and Poverty Reduction Strategy PRSC Poverty Reduction Strategy Credit IBRD International Bank for Reconstruction RER Regular Economic Report and Development SME Small Medium Enterprises ICSID International Centre for Settlement TF Trust Fund of Investment Disputes WRIP Water Resources and Irrigation Project This booklet was produced for 20 year anniversary of the World Bank in Albania based on compilation of information from various World Bank Group reports and staff, and does not represent the views of World Bank executive directors, nor member countries. Photos are from the Photo Library of the World Bank Office in Tirana and Alket Islami Contents Albania: Two Decades of Progress 12 Albania-World Bank Group Partnership 18 Results by Sectors 34 Education 36 Health 37 Poverty Reduction and Social Protection 38 Agriculture 40 Environment 42 Urban Infrastructure 44 Water Supply and Sanitation 46 Transport 47 Energy 49 Private and Financial Sector Development 51 Governance and Public Sector Management 53 Working in Partnership 55 Knowledge Bank 55 Learning Together 56 6 Albania and World Bank - 20 Years of Working Together Sali Berisha Prime Minister of Albania O n November 28th 2012, Albanians will cel- in Europe, and into one of the most attractive places for ebrate the 100th anniversary of our nation’s foreign investment. Albania is rapidly changing with independence. Throughout these hundred each passing day. As ever, we remain committed to re- years, our nation has suffered from major partitions, gional integration in the Western Balkans and to the brutal occupation, ethnic cleansing, and Orwellian further advancement of its EU prospective. Through- dictatorships. But today, my country’s difficult yet suc- out the past two decades Albania’s international cred- cessful journey toward building freedom, democracy, ibility certainly has grown. respect for the rule of law, and an open society that respects human and minority rights has managed to Throughout the last 20 years on the road to build- accomplish two fundamental objectives: NATO mem- ing a democratic system and a free market economy, bership and solid progress in the process of integration Albania and its people have had the precious help and into the EU. solidarity of many friendly countries around the world. Albania has been privileged to have the support of a Two decades ago Albania was considered one of the good number of donors and international financial in- three poorest countries in the world. Today Albania stitutions. The World Bank has always been an excel- is ranked among the high-middle-income countries. lent partner for Albania. It has played a major role in Albania has made a quantum leap forward. Compre- supporting reforms, strengthening institutions, and hensive reforms carried out in the country in the fields financing investments across a wide range of sectors, of economy, healthcare, education, social policies, and, such as infrastructure, healthcare, agriculture, educa- particularly, our zero-tolerance fight against corrup- tion, finance, environment, and governance. tion, have transformed Albania into a secure country Albania and World Bank - 20 Years of Working Together 7 The World Bank has always been an excellent partner for Albania. It has played a major role in supporting reforms, strengthening institutions, and financing investments across a wide range of sectors, such as infrastructure, healthcare, agriculture, education, finance, environment, and governance It is without doubt that the economic crisis has cre- well as the nurturing of good governance. ated a setback for our efforts – not only for Albania, not only for the EU, but also for the whole world. The The government of Albania is determined to imple- Albanian economy has survived the crisis without fall- ment complete and properly timed reforms that are ing into recession primarily because of its model. This imperative for growth, competiveness, and European model is based on low taxes, the most liberal stand- integration in the short and long terms. Let us all work ards of the market, small public administrations, and a together so that our children can always find hope of a favorable business climate. Albania has the lowest tax better future. levels in all of Europe. It has one of the 10 smallest gov- ernments and least interfering administrations in the world. Over the past five years the Albanian economy has grown 22 percent, a figure four times higher than the regional average. Albania is building one of the most modern infrastructures in the region; Albania’s exports doubled between 2009 and 2011. Furthermore, Foreign Direct Investment increased by 316 percent in four years. The World Bank has been and remains an important source of expertise for Albania for the modernization of the budget sector and the public administration, as 8 Albania and World Bank - 20 Years of Working Together Philippe H. Le Houerou World Bank Vice President of Europe T and Central Asia he past 20 years have been among the most have made it a blooming tourist destination. dynamic and transformational in the history of humankind. After communism fell in East- The World Bank is proud and privileged to have ern European countries, they rapidly built modern been one of Albania’s key partners along this amaz- economies and democratic societies, linking their fu- ing 20-year journey, and to have contributed to Al- ture with the European Union (EU). Across the world, bania’s economic, human, and institutional progress. developing countries have become engines for global Throughout the past 20 years, the World Bank Group growth. They have driven innovation and fostered cut- has been able to assist Albania technically, financially, ting-edge knowledge in a multitude of disciplines, all and through policy advice on virtually every aspect while moderating the woes of the 2008 global financial of its development needs. Our common successes are crisis. The global marketplace has changed profoundly many. Our joint policy work has been critical to the with respect to economic governance and the role of successful transformation of the country in terms of development institutions such as the World Bank. financial sector development, business environment, and economic management. From the investment per- Albania’s economic and social transformation has spective, we have obtained countless visible results. Just been particularly exceptional. In record time, Albania to name a few, we have helped to repair or construct has transformed itself from one of the poorest countries 1,700 km of national and rural roads; rehabilitated and in Europe into a dynamic, middle-income economy with upgraded 270,000 hectares of Albania’s irrigation and a thriving private sector; from one of the most isolated drainage system (which represents two-thirds of Al- countries in modern history into an aspiring EU member, bania’s irrigated land); enhanced productivity and in- whose citizens can travel freely to Europe; and a country comes by improving natural resource management in whose natural beauty, hospitality, and entrepreneurship about 210 communes in mountainous areas prone to Albania and World Bank - 20 Years of Working Together 9 Widely referred to as “a development success story� and “one of the fastest growing countries in Europe� in World Bank reports, Albania is an excellent example of an effective and fruitful partnership between a country and our institution. As in every partnership, both parties have been learning, changing, and adapting to new realities erosion; built or reconstructed more than 300 schools in priority areas; and equipped over 2,000 elementary and secondary schools with computers. Widely referred to as “a development success story� and “one of the fastest growing countries in Europe� in World Bank reports, Albania is an excellent example of an effective and fruitful partnership between a country and our institution. As in every partnership, both parties have been learning, changing, and adapting to new realities. Certainly much remains to be done. Just as the standards of living had started to improve visibly in Al- bania, the difficult European recovery in the aftermath of the global financial crisis slowed the pace of progress painfully, as elsewhere in Europe. Maintaining macro- economic stability is critical for Albania even as the unstable external environment complicates this task. Broadening the sources of productivity growth and creating a business climate that will result in the crea- tion of new jobs are also key challenges for Albania’s economic development in the coming years. 10 Albania and World Bank - 20 Years of Working Together World Bank brought in Albania not only much needed financial resources for the country’s recovery, but also introduced and supported the development of human resources and social sectors as the engines for growth and reducing poverty Ridvan BODE Minister of Finance I t is my great pleasure to express the gratitude and bania not only much needed financial resources for the appreciation for this long and successful partner- country’s recovery, but also introduced and supported ship between World Bank Group and the gov- the development of human resources and social sectors ernment of Albania. In celebrating 20 years of coop- as the engines for growth and reducing poverty. It has eration, our government greatly appreciates the World been playing a major role in supporting financial reforms, Bank’s contribution in ensuring sustainable economic strengthening institutions, and financing investments and social development and the development of ad- across a full range of sectors. The financial portfolio of the ministrative capacity. World Bank has been a vital support to the main indus- tries of the economy. The World Bank has had a unique We can all testify that in the past two decades, progress role in introducing Albania to the best practices for busi- and development have been remarkable. Albania has ness environment improvements, social sector develop- been a development success story in many respects. The ment, regulatory framework, and human development, country has taken enormous steps in establishing a cred- especially the education and healthcare sectors, providing ible multi-party democracy and market economy; and advisory services to the government concerning develop- Albania is rapidly being re-integrated into the interna- ment challenges throughout the past years. tional and European communities. Over the past dec- ade, Albania has been one of the fastest-growing coun- Let the 20th anniversary of the presence of World tries in Europe, enjoying average annual real growth rates Bank in Albania not only be celebrated for the achieve- of 6 percent, accompanied by rapid reductions in poverty. ments, but let it also mark the mutual commitment for further partnership in fulfilling the objectives of foster- The World Bank Group has provided a valuable ing economic growth and policies in accordance with contribution to this success. World Bank brought in Al- European integration agenda. Albania and World Bank - 20 Years of Working Together 11 12 Albania and World Bank - 20 Years of Working Together Albania and World Bank - 20 Years of Working Together 13 Albania: Two Decades of Progress 14 Albania and World Bank - 20 Years of Working Together A lbania’s development over the past 20 years is qualifying for receipt of much-needed international an excellent source of inspiration and opti- assistance. The World Bank played an important role mism for moving forward. in easing people’s hardships through immediate inter- Albania remained unknown to the broader com- ventions and structural reform programs. Albania was munity of nations for many decades. The tiny Bal- not only in immediate need of goods and resources; it kan country started appearing in international media also lacked the necessary institutions and experience headlines only after the beginning of the 1990s, fol- to build the foundations of a market economy. lowing a half century of virtual anonymity. There was Albania’s progress during the early transition years a good reason for that. In 1991, Albania had finally was rapid. From 1993 to 1995, GDP growth was an emerged from 50 years of harsh communist rule with impressive 10 percent per year, while inflation fell back widespread poverty and a nearly devastated economy. to single digits. The economy was doing well and im- A combination of strict central planning, isolationism, provements were clearly visible. and totalitarian control over every aspect of life had However, the capacity of the state to regulate was devastated economic and social development. Moreo- still in its infancy, allowing unfettered actions by pri- ver, Albania was the most isolated country in Europe vate individuals and businesses. A stark example of with virtually no ties or cooperation with any other na- this lack of experience and institutional weakness were tion, and dependent solely on its own crippled indus- the notorious pyramid schemes of the 1994–1996 pe- try and agriculture. riod which robbed the society of many of its achieve- The fall of the totalitarian regime brought Albania’s ments. Emergency international aid and tailored as- already weak economy to the brink of collapse. The sistance poured in to address the situation and rebuild abrupt transition from a centrally planned economy institutions and respect for the rule of law. to a market-oriented economy caused an initial shock. In 1999, Albania faced a different kind of emergen- Albania’s GDP per capita of US $2630 in 1990 dropped cy. More than half a million Kosovar refugees poured by 39 percent (cumulatively) by 1992. Inflation soared into Albania because of the war. Once again, Albania into the double digits and prices skyrocketed to in- had to rely upon international assistance to cope with conceivable levels. That same year, the country’s for- this new and unexpected challenge. It was not easy for eign currency reserve could cover just 10 days worth a low-income country, as Albania was then, to cope of imports. Everyday life, as well as public institutions, with the needs of the displaced Kosovars. Yet Albania switched to survival mode. showed remarkable resilience by recommitting to its During the first half of the 1990s, abundant inter- long-term goals of achieving sustainable growth and a national direct aid, coupled with strategic assistance, higher standard of living for its people. helped Albania to begin to stand on its feet. In 1991, At the start of the new millennium, Albania began Albania became a member of the World Bank and the to place major emphasis on addressing the issues of International Monetary Fund at its own request, thus poverty in a more comprehensive way. Poverty mani- Albania and World Bank - 20 Years of Working Together 15 fested itself not only through low household incomes, between 1998 and 2010 -- rehabilitating key transport but also in limited access to and poor quality of basic arteries, building new secondary roads and connecting services such as education, healthcare, water, and sew- many remote rural areas to the road network. erage. Many Albanians left the country to seek better Dramatic shifts occurred in the labor market, con- lives abroad. To improve living conditions for the vast tributing to productivity growth. Formal non-agri- majority who remained, high priority was given not cultural employment in the private sector more than only to income growth but also ensuring access to ba- doubled in the period between 1999 and 2011, fuelled sic social services. The massive emigration of Albanian largely by foreign investment. Emigration and urbani- citizens to surrounding countries, while leading to zation brought a structural shift away from agricul- brain drain and a decrease in population, also helped ture and towards industry and services – between the improve people’s lives by providing much needed hard early 1990s and the present the share of agriculture in currency that financed both household consumption GDP has been falling rapidly, from over 50 percent to and private investment. only around 19 percent today. Initially, the unskilled Development of Albania’s private sector desperately or semi-skilled workforce was absorbed principally by needed improved transport infrastructure connecting emerging manufacturing enterprises. Gradually, as less accessible areas in Albania with its larger cities and skill levels increased, the economy began to produce the country itself to neighboring countries. As a result a variety of services as well, ranging from banking to the country made huge investments in infrastructure telecommunications and tourism. 16 Albania and World Bank - 20 Years of Working Together Throughout the decade preceding 2009, Albania fold in just one decade and real growth was even maintained steady growth and achieved broad-based stronger, averaging 6 percent per annum in real terms development in many areas. Partnering closely with between 1998 and 2008. This growth produced tan- international agencies, Albania overcame previous gible gains in living standards. The poverty rate in limitations to open fresh paths to progress through Albania more than halved from 25.4 percent in 2002 broad structural reforms and improved standards of to 12.4 percent in 2008 – implying that the number of governance. Reform didn’t stop at improvements in people struggling with poverty was reduced by more macroeconomic management. Indeed, several pro- than 200,000. grams and strategic interventions were implement- Spurred by the prospect of joining the EU, attract- ed to create tools and incentives for private sector ing more investment to Albania and responding to growth, improve management of public enterprises, citizens’ demands for accountability, fundamental im- improve the quality and coverage of social services provements have been made in public institutions and and establish a more effective safety net for the most governance – though much more effort is still needed. vulnerable households. In a ranking of the business climate, Albania improved As a result of these efforts, impressive gains were from 136th place out of 183 countries in 2007 to 82nd made with respect to both economic performance and in 2011. In 2008, on account of its strong achievements poverty reduction. Per capita GDP increased  three- in economic growth and social welfare, Albania joined Albania and World Bank - 20 Years of Working Together 17 the ranks of Middle Income Countries, graduating 200.000 people were lifted out of poverty from International Development Association (IDA) to International Bank for Reconstruction and Devel- opment (IBRD) lending, thereby sending a positive signal to investors and the financial markets about the between 2002-2008 economic prospects of the country. Since the global financial and economic crisis hit the region in 2009, followed by the economic turmoil in 12.4 percent the Eurozone, these positive trends have slowed down. Albania has, so far, avoided recession, maintaining low but positive growth. The challenge going forward is to decreased poverty rate from 25.4 percent find ways of picking up the pace of growth, despite a tougher external environment, growing international to 12.4 percent between 2002-2008 competition and a constrained budget. In parallel, it will be crucial to continue to protect the poor and the vulnerable by building human capital and providing an efficient safety net. 18 Albania and World Bank - 20 Years of Working Together Albania and World Bank - 20 Years of Working Together 19 Albania - World Bank Group Partnership 20 Albania and World Bank - 20 Years of Working Together A lbania became a member of the World Bank one third of the country’s 750,000 plus dwellings had in October 15, 1991, soon after the coun- no piped water. About 400 villages, with a combined try emerged from isolation. The local office population of approximately 1 million people – nearly opened in Tirana in August of 1992. Albania became one third of the total population at the time – were in- a member of the International Development Associa- accessible to motor vehicles for at least part of the year. tion (IDA), the International Bank for Reconstruc- There were only 46,000 telephone connections in the tion and Development (IBRD), the International country – an average of 1.4 connections per 100 in- Finance Corporation (IFC), and the Multilateral habitants – with most calls being manually connected. Investment Guarantee Agency (MIGA), all of which These were issues that needed to be addressed. There- form parts of the World Bank Group (WBG). The fore, the World Bank’s assistance that initially reflected WBG became one of the country’s main sources of immediate needs was later upgraded to full-fledged development support. Since then, the Bank has fi- strategic support. The first World Bank Country As- nanced 71 projects in different sectors totaling over sistance Strategy for Albania (CAS) in 1993 responded US$ 1.2 billion. If other trust fund resources financed to Albania’s emergency situation during its early tran- or managed by the World Bank are included, the sition years. With the assistance of the World Bank, the WBG’s overall support to Albania is estimated at US Albanian government developed a three-year Public $1.4 billion. The assistance ranges from contributing Investment Program. A group of senior economists to macro-level development strategies formulation from the World Bank prepared a comprehensive stra- and execution to addressing people’s immediate basic tegic document (Albania - Building a new economy, 71 projects financed in different sectors needs. The World Bank also provides technical assis- tance and policy advice. On June 25, 1992, only eight weeks after the newly- elected democratic government took office, the World 1994) that drafted the main orientations of building a new functional economy on the remains of the newly collapsed centrally-planned economy. totaling over US$ 1.2 billion Bank provided a first (emergency) loan (US $41.1 mil- After 1992, the World Bank started to develop an- lion) to Albania, to provide Albanians with basic in- other set of projects that sought to bring about im- frastructure and other necessities. The project financed provements of a more systemic nature. The first of 1.2 billion parts and equipment to restore roads, ports, and other these projects helped build a social safety net in order infrastructure, mend local irrigation systems, repair to deal with widespread poverty, and offered assistance US$ energy transmission and distribution systems, and to those who ended up jobless after the collapse of the financing between 1992-2012 promote agriculture production. socialist economy (Social Safety Net Project, 1994). The Albania was so underdeveloped that any kind of as- breakdown of Albanian industry caused widespread sistance at the time was welcomed. Food and other vi- and unexpected unemployment; therefore, these in- tal supplies for the country were provided accordingly, terventions in the labor market and the creation of a yet problems persisted in many aspects. An estimated social safety net were indispensable and urgent. Albania and World Bank - 20 Years of Working Together 21 The population that was forcibly displaced on polit- ical grounds during the time of the communist regime World Bank Group benefited from the housing project (Housing Project, The International Development Association (IDA) 1993). Provides interest-free credits to the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by Basic infrastructure, from roads to ports, water and providing loans and grants for programs that boost economic growth, reduce inequalities, and improve people’s electricity, were developed through World Bank fi- living conditions. IDA has financed 69 projects in Albania during 1992-2008 totaling US $950 million. nancing, while extensive technical assistance was pro- vided to build government capacities in legislative re- The International Bank for Reconstruction and Development form, staff training, tax collection and macroeconomic IBRD was established in 1944 and lends to governments of middle-income and creditworthy low-income analysis (Technical Assistance Project, 1993, Agriculture countries aiming to reduce poverty by promoting sustainable development. Since Albania graduated from IDA, Sector Adjustment Credit, 1993, Transport & Infrastruc- IBRD has financed 8 projects totaling US $228 million. ture Project, 1993, Enterprise & Financial Sector Adjust- ment Credit, 1994, Labor Market Development Project, The International Finance Corporation Tax Administration Modernization Project, 1994). IFC was established in 1956 and provides loans, equity, and technical assistance to stimulate private sector investment in developing countries. IFC in Albania operates in investment and advisory services. IFC has The World Bank has supported a number of pro- committed US $255 million in the country for 14 projects in the renewable energy, financial, information, and jects that were aimed not just at delivering an imme- manufacturing sectors and 35 projects in advisory services. diate alleviation of poverty, but most significantly, at providing sustainable tools and long-lasting develop- Multilateral Investment Guarantee Agency ment to foster further growth. From 1992 until 1996, MIGA was established in 1988 and provides guarantees against losses caused by non-commercial risks to Albania received US$1.53 billion in foreign assistance, investors in developing countries. So far, MIGA has issued guarantees for three projects in Albania. MIGA’s total of which IDA provided US $272.5 million, or 18 per- expenditure for projects in Albania is US $186 million. cent of the total assistance. International Centre for Settlement of Investment Disputes Major achievements in the first half of 1990s in- ICSID established in 1966, provides international facilities for conciliation and arbitration of investment disputes. cluded extensive support for agriculture production through irrigation development and inputs (Irrigation Rehabilitation Project, 1994). By that time, more than prices between 1991 and 1995. Poverty was allevi- 90 percent of Small Medium Enterprises (SME) in ag- ated through the creation of the social safety net, from riculture production and distribution was privatized. which roughly 1 in every 5 Albanian families benefit- Among the most successful projects of this period was ted. In tandem with such developments, between 1993 the program of rural credit (Poverty Alleviation Pro- and 1995 IDA helped with the rehabilitation of public ject, 1993, Rural Development Project, 1995). Agricul- schools (School Rehabilitation Project, 1994) and health tural production increased by 57 percent in constant centers (Health Services Rehabilitation Project, 1994). 22 Albania and World Bank - 20 Years of Working Together Albania’s progress during the early transition years tor growth. Even simple transactions could routinely was impressive. Between 1993 and 1995 GDP growth take one to two weeks to be completed. Lending was was close to 10 percent per year, while inflation fell inadequate, and the volume of nonperforming loans sharply to single digits. The economy was doing well amounted to almost 30 percent by 1995. Such limita- and improvements were evident in many respects. The tions led to a thriving informal credit market. The lack notable macroeconomic performance reflected the of experience and institutional weaknesses steered this progress achieved quickly in private sector develop- informal market toward the fast development of fraud- ment and improved financial discipline in the public ulent savings schemes, known as pyramid schemes, sector. between 1994 and 1996. While the term “market economy� became an over- In 1997, World Bank assisted Albania in yet anoth- arching slogan, state regulation in many areas was yet er emergency situation. The collapse of the pyramid to be established. Many problems had been left unad- schemes resulted in a serious macroeconomic shock dressed. Structural reform fell short in many sectors, and widespread civil unrest. especially in the critical area of banking. The three Albanian state-owned banks accounted for over 90 percent of deposits. Banks could not be relied upon to provide even the most basic services for private sec- Albania and World Bank - 20 Years of Working Together 23 “…We were trying to assist Albania in so many areas: roads, schools, building job centers, water supply, irrigation, agriculture, micro-credit….the list goes on. It was all perhaps more than they or we could handle all at once. As I familiarized myself with this extensive portfolio, I discovered, unsurprisingly, that some of the projects were success stories, some not so much, and there was more than one failure. We had suspended budgetary support, I recall, because of certain fiscal issues. These were soon to be exacerbated, dramatically, by the financial pyramids that resulted in civil conflict and a total breakdown of law and order. Albania had opened up its economy some years before and the public sector was institutionally very weak. Those projects that found a strong (Albanian) leader and had strong constituency, did well. Absent those elements, projects were less than successful. It did not take me long to confirm in practice what I already knew in principle: the best thing we could do for Albania was to accompany the efforts of Albanians themselves. Beyond this, our presence there was not really that important! I left my assignment as Country Manager near the end of 1999. In a period of something over three years, I had witnessed political crises and the resulting failure of law and order. The war in Kosovo had a powerful impact on Albania; more than half a million Kosovars took refuge in the country and were there for several months. In tandem with other donors, we resumed support for Albania’s budget, particularly when the Kosovo War resulted in unforeseen expenditures. With this help the government was able to keep functioning in very trying conditions. In a notable achievement, the pyramids schemes were investigated, closed down, and some of the operators were prosecuted. The financial sector stabilized again; a state bank was privatized with the assistance of the World Bank and IFC. All the time I was in Albania, the private sector never lost its dynamism. As a more peaceful environment prevailed, life started to get better. Construction picked up, new schools opened. Public institutions, however, were still weak so the Bank decided to offer targeted assistance there also, particularly on matters pertaining to public sector management. Gradually, the institutional framework started to show signs of improvement, albeit tentative at first. As Albania’s economic growth subsequently accelerated, we again did our modest part. That is to say, we accompanied the country’s own efforts…� Carlos Elbirt World Bank Country Manager in Albania, 1996-1999 24 Albania and World Bank - 20 Years of Working Together “…In 1997, I was just appointed country director. Albania then was a small country in Southeast Europe, but a center of attention of the international community. The collapse of the financial pyramid scheme in early 1997 created massive internal civil unrest. With continued regional instabilities as a result of the Balkan wars, there was much concern about Albania’s internal stability. As events after the pyramid scheme collapse cooled down and internal order began to be restored, Albania was taken into the grip of events in Kosovo and Serbia. Would there be another Balkan war, this time involving Albania? Would Albania erupt in flames in light of regional and internal instabilities? But when the Kosovo war erupted in 1999, Albania was well prepared. Huge numbers of refugees from Kosovo entered the country. They were received and supported with great hospitality. It was touching to witness this act of solidarity and generosity of the Albanian people. But fortunately the war was very short. We returned to the Albania we knew – with pride and satisfaction about how well the Albanian people managed these highly unusual times. And these were unusual times for the World Bank and Albania as well. The World Bank was an exceptionally active partner at that time. Albania received large amounts of support for many different operations, such as health, education, micro financing systems, agricultural development, and infrastructure. Budget support measures were important so that fiscal resources were sufficient for the administration to continue functioning. Given political and regional fragilities, timing mattered and we managed to get loans approved and disbursed with very few delays. The often-bureaucratic, cumbersome World Bank showed that it could act quickly and be responsive in exceptional circumstances. The task was to support Albania quickly, as the danger of system collapse was serious. I was a regular visitor at the World Bank Executive Board explaining the unusual development challenges of Albania and to ask for support for this little and formerly rather unknown country. And collaboration with Albanian authorities was excellent during these tumultuous times. There was much mutual appreciation and collaboration based on partnership and trust. And Albanian authorities were excellent in putting us to work. There was a large World Bank team working on Albania in a very large number of sectors, virtually always, on any day, during any hour. I was officially stationed then in Washington, DC, but together with my youngest children lived many weeks during the year in an apartment in Tirana, so I could be closer to the team. We were asked to work hard, and we enjoyed it. Working on Albania during these difficult times was adventurous, exciting but also very rewarding. There was much passion, commitment and drive to get things done in the joint Albanian World Bank team. Rarely have I experienced such trusting and collaborative cooperation between country authorities and a financial institution...� Arntraud Hartmann Director for Southeast European countries, 1997-2000 Albania and World Bank - 20 Years of Working Together 25 After the events of the late 1990s, efforts were con- term expenditure planning that helped to better pri- centrated on strengthening feeble institutions and oritize expenditure in the most important and highest improving governance. Learning from past mistakes, yielding sectors. The World Bank also provided a wide the banking sector was placed at the focus of struc- range of immediate and much-needed financial sup- tural reforms. One of the key achievements was sup- port to relieve budgetary pressures. Within a record port provided for the creation of the modern Central time of 30 days a Public Expenditure Support Credit Bank of Albania by the World Bank and International (1999) in the amount of US $30 million was disbursed. Monetary Fund (Recovery Program Technical Assis- The World Bank increased the amount of the Struc- tance, 1997 and Rehabilitation Project, 1997). Starting tural Adjustment Credit (1999) from US $20 million to in 1998, the Bank of Albania operated independently of the government in accordance with international standards. The basic concept of the Central Bank as monetary authority and supervisor for the financial US $45 million. The Bank also assisted the government in providing aid and services to Kosovar refugees and to the local population in the affected areas through a Post-Conflict Grant, and a Supplemental Credit (1999) US$125million financial support sector was new for the country. to the Community Works Project. Two additional pro- for six projects in 1999, jects, Emergency Road Repair (1999) and Emergency some for immediate needs During this period, Albania developed tax collec- Water Supply (2000) were designed to address further tion capacity and laid the groundwork for medium- post-conflict needs. 26 Albania and World Bank - 20 Years of Working Together “Banking Sector Reform represents one of the most successful collaborations between Albania and the World Bank. It envisaged a long term vision and immediate action. Dissolution of pyramid schemes (Ponzi schemes), the establishment of non-performing loans agency, restructuring and privatization of state owned banks, growth of domestic and foreign banks and the establishment of Deposit Insurance Scheme, set the premises for the development and modernization of our banking system. This complex reform encouraged and supported the development of the private business in the real reactors of our economy, impacting positively our long term development agenda.� Arben Malaj Minister of Finance 1997-1998, 2003-2005 The second Country Assistance Strategy (CAS) fol- poverty) mainly due to limited job opportunities and lowed Albania’s civil crisis of 1997 and covered the period low income, particularly in agriculture. Poverty mani- from 1999 until 2001. This strategy was introduced at a fested itself not only in income deficits, but also in time when Albania had an opportunity to move from limited access to and poor quality of basic services like short-term crisis management toward a long-term vision education, healthcare, water, and sewerage. The revised of sustainable development. It supported government ef- Strategy in early 2000 tackled poverty in a cross-secto- forts to improve governance and strengthen institutions ral way, with due attention paid to social cohesion and by building efficient and inclusive public institutions. inclusive institutions. Several projects supported this Despite important improvements, the country’s institu- comprehensive approach (Microcredit Project, 1999, tions were far from meeting the desired standards. The Poverty Reduction Strategy Credit, 2000, Education Bank’s strategy also targeted improvements in private sec- Project, 1999, Agriculture Services Project, 2001, Social tor growth and business environment, while emphasizing Services Delivery Project, 2001). social progress in terms of human development, social insurance, education, and healthcare. In 2000, the World Bank assisted the government in the preparation of the Growth and Poverty Reduc- With the macroeconomic situation more stable by tion Strategy (GPRS), a multi-sectoral approach to the 2000, Albania began to place a major emphasis on ad- reduction of poverty. The GPRS presented a long-term dressing the issues of poverty and growth in a struc- vision of Albania’s EU integration, and a medium-term tured way. World Bank studies identified poverty in strategy for 2002 to 2004. The strategy was based on Albania as a multidimensional phenomenon. Poverty, two pillars: improved governance and strong economic defined in terms of low income and/or consumption in growth. The strategy also identified healthcare, educa- Albania, was relatively high (a quarter of the popula- tion, and infrastructure as priorities. During this peri- tion lived in poverty and about 5 percent in extreme od several results were achieved. Albania succeeded in 140   8   Historical    Commitments  (1991-­�2012)   Albania and World Bank - 20 Years of Working Together 7   27 120   Historical Commitments (1991 - 2012) Investments Development Policy Lending 6   6   100   Investment   Development  Policy  Lending   5   80   4   60   3   40   2   7   5   6   6   3   5   3   3   4   3   3   1   2   1   4   5   1   1   20   1   0   0   FY92   FY93     FY94     FY95     FY96     FY98     FY99     FY00     FY01     FY02     FY03     FY04     FY05     FY06     FY07     FY08     FY09     FY11     FY12     sustaining high rates of economic growth and pursuing be implemented adequately without competent and structural reforms. After a slowdown in 2002 caused by responsible public institutions. Albania’s fourth CAS electricity shortages and floods, the economy was once was aimed at supporting government’s efforts in the again on the road to growth. improvement of governance and the strengthening of institutions by building efficient and inclusive public This was a time when Albania had a real oppor- institutions, while simultaneously providing increased tunity to move from short-term crisis management transparency and accountability. It also sought to pro- toward a long-term vision of sustainability. The 2003- mote sustainable private sector growth and to foster 2005 World Bank Country Assistance Strategy was human development by improving access to and qua­ formulated in this context. It underlined the fact that lity of education and healthcare, strengthening the so- Albania needed to move aggressively toward establish- cial insurance system, and improving social assistance. ing creditworthiness and eventually gain access to in- The CAS supported Albania’s National Strategy for So- ternational financial markets. To achieve this, Albania cial and Economic Development (NSSED) as well as had to address macroeconomic imbalances, speed up the goal of EU integration. essential reforms in the business environment, and improve debt management. The poor state of Albania’s Since the beginning of the transition period Alba- electricity sector also required intervention. nia has articulated its long-term vision of joining the However, none of the aforementioned steps could EU. Successive Albanian governments have placed Eu- 28 Albania and World Bank - 20 Years of Working Together “…In 2003 when I started working in the region, and particularly in Albania, the challenges of poverty, social exclusion, fiscal management, governance, and environmental management were enormous.  There were no easy solutions and the politics—local and regional—complicated things even more. Yet, the people and the governments were determined to succeed.  They listened to the Bank, they listened to the advice we provided, they mastered the analysis we carried out, and together we tried to find solutions and to implement them.  Year after year, as I came back to Tirana for my quarterly visit I would see the difference: the Lana River in Tirana will be a beautiful green oasis, the city will be full of life and economic activity, people will be smiling, new buildings, shops and restaurants will change the city skyline.   By 2008, when I was about to transfer to Central Europe, it would take me and Julian—our driver—half the time to go from Tirana to Podgorica, or to arrive in Macedonia for a meeting, or even to visit Saranda and Korça!...�   Orsalia Kalanzopoulos Country Director and Regional Coordinator for Southeast Europe, 2003-2008 ropean accession at the top of their agendas. The vision achieved thus far, priorities had also been upgraded to for European integration and NATO membership has more demanding heights. The World Bank’s assistance helped motivate institutional reforms. was tailored to build on previous achievements and to address the challenges ahead. The 2006-2009 CAS To achieve these goals, the World Bank made avail- program sought to support Albania’s efforts in improv- able approximately US $130 million for the period ing governance while increasing selectivity. The CAS US$ 130million financing for the period 2003-2005. The implementation of this three-year pro- gram brought major progress, especially in privatiza- tion, trade liberalization, and the building of a sound financial sector (Poverty Reduction Support Credit, placed an emphasis on more coherent efforts in ad- dressing the challenge of poor governance in Albania and introduced a ‘Governance Filter’. This new CAS program focused on two pillars: continued economic 2003-2005 2004, Financial Sector Adjustment Credit, 2002, Munic- growth through support to private sector development ipal Water and Waste Water Project, 2003, Trade and and improving the delivery of public services, particu- Transport Facilitation in South East Europe, 2000). larly in the social sectors. Things had already gained speed by the mid-2000s. By the end of 2008, ten projects totalling more than Growth continued at a steady pace and the institutional US $170 million were delivered under this CAS from basis was consolidated as Albania was showing sound IDA, while IFC committed US $55.2 million. Pro- macroeconomic performance. With so much progress gress was notable in several areas, including policy, Albania and World Bank - 20 Years of Working Together 29 “IFC worked hand in hand with the relevant government agencies, mobilized top local and international experts, and committed itself to timely and quality delivery of assistance. We focused on cutting red tape, the downsizing of licenses and permits, and improving regulations and processes. The challenges were many and it took time to diagnose, review, compare, advise, and to coordinate, but most of all, to maintain the momentum for all actors involved. To our satisfaction these efforts paid off: The Doing Business 2009 report ranked Albania second among top ten reformers. As the runner-up in reforming regulations, Albania rose from 135th place to 86th in the global ranking. Furthermore, the Doing Business 2010 report once again ranked Albania among the best reformers, rising from 86th place to 82nd in the global ranking. And as the saying goes, there is no need to reinvent the wheel; it is sufficient to continue to introduce business reforms that have been implemented successfully in other places. IFC is there to offer support to reformers to follow a long-term agenda and introduce business reforms every year. IFC involves all relevant actors and helps institutionalize the reform effort. We believe that reform-minded governments are interested in improving their regulatory environment to enhance the chances for success. IFC is there to accompany them.� Elira Sakiqi IFC country representative for Albania institutional and legal reform for strengthening public assisted entrepreneurs in vital sectors to become more expenditure management, land management and busi- competitive in the market by introducing international ness regulations, improvements in transport, commu- standards, corporate governance, alternative dispute nity and agricultural infrastructure, delivery of social resolution instruments, recycling linkages, and waste care, and municipal water supply services. management. A strong signal was sent to private in- vestors in Albania and the region when the IFC gave During this period Albania’s economy maintained support to Antea Cement, (among the largest Foreign high growth rates of up to 7 percent of GDP, which re- Direct Investment (FDI) in the country) in 2008. In sulted not only in middle-income status in 2008 and 2009 IFC supported the project to rehabilitate the Pa- Albania’s full graduation from IDA to IBRD in 2009, tos-Marinza oil field and helped to address significant but also a significant reduction in poverty between environmental remediation needs. 2002 and 2008. The private sector also had a strong impetus all IFC has used the Doing Business Report to inspire along, and the IFC played a key role in introducing the governments to initiate reform and to help policy best practices for public-private partnerships. The IFC makers identify and adopt good practices. Albania has 30 Albania and World Bank - 20 Years of Working Together much to gain from the best regulations and practices The current CPS aims to further advance the im- that are working elsewhere in the region and beyond plementation of the National Strategy for Development to make the country attractive for the private sector as and Integration through three strategic pillars: i) sup- an engine of growth. porting economic recovery and growth in a difficult external environment; ii) broadening and sustaining In the second decade of this century, the World Albania’s social gains; and iii) reducing vulnerability to Bank has concentrated on supporting the National climate change, particularly through improved water Strategy for Development and Integration through resource management. The CPS program also con- 82 place nd strategic priorities for better governance through in- tinues to support governance improvements in Alba- stitutional development, transparency and efficiency, nia. Mid-term review of the CPS, while affirming the private sector development for growth and poverty priorities that had been agreed upon, recognized the reduction, and human development. These priorities need for an increased emphasis on the first pillar. As albania improved from 136th set the framework for the current World Bank Group part of its initiative to help several countries in Cen- place in 2007 to 82nd in 2o11. Country Partnership Strategy (CPS) for Albania, which tral and South-Eastern Europe mitigate the impacts of The Doing Business 2009 covers the period from 2011 until 2014 and will be the the on-going Eurozone crisis, the World Bank has also report ranked Albania first CPS to be presented following Albania’s gradua- increased the financing envelope available to Albania, second among top ten tion from IDA in mid-2008. primarily for strengthening financial stability, growth, reformers and macro-economic management. Albania and World Bank - 20 Years of Working Together 31 “...I learned a lot about leadership during my time in Albania. I learned it from my staff, my management, and Albania’s leaders. I also learned about leadership from a very, young village headman who walked two hours down the side of the mountain to take a ferry on the Drini and then a bus into town… all to reach a meeting with some World Bank officials who only asked him to repeat, again, the seemingly perpetual travails of his tiny remote hillside village. The meeting, of course, started late and he had missed the return ferry. Don’t worry, he would enjoy the night with his city cousin and return tomorrow, he assured us. I also learned some things about leadership from reading Kadare. In Albania, I learned that leadership is about passion, it’s about people, and it’s about proof. To be a leader, you have to have the passion to create a vision and to believe in it. Maybe the vision is a simple one: a vision of a small rural road, long promised but never delivered, that will connect a tiny hamlet – one that is often lost in the winter snow – to a main road whose keepers dust and sweep it year round, like the red carpet for a prince. In Albania, I learned that to be a leader you have to reach people -- to listen to them and to talk to them (in that order, by the way). I learned about listening to your neighbors, to your constituents, to your staff, to your audience. They may challenge you, “Do something!� but it is they who usually have all the answers about what to do or how to do it. You may be the leader, but really you are simply the pivot that makes the vision come true. When we gave him the chance, he talked to us, our young headman, about his village, his people, his life, and about their dreams of a tiny road. He was neither shy nor aggressive, just firm with the weight of his listening to them and to us. And he touched us in a way that no campaign speech, no crusade, no development pitch really can or should. So we acted, carefully and credibly… I think, by now, that the community of that young man has their road. It’s the proof of his good leadership, for me anyway.� Camille Nuamah Country Manager in Albania, 2007-2010 The CPS highlights the importance of resuming fis- strengthening of public expenditure management. The cal consolidation after the strong fiscal stimuli pursued return to strong growth rates needs further regulatory by the government between 2008 and 2010.This is even and institutional reforms in order to improve com- more important today given the continued volatility in petitiveness and increase investment flows. Since the European economies. The CPS also emphasizes the growth induced by structural shifts in the economy is 32 Albania and World Bank - 20 Years of Working Together “At the end of 2012 after almost five incredibly exciting years I shall pass the responsibility for the World Bank’s program in Albania to a new Country Director.    I have taken advantage of the breadth and diversity of our portfolio in Albania to travel to almost every corner of the country - visiting schools, hospitals, laboratories, irrigation systems, power plants, sewage plants, markets, roads, bridges, lakes, dams and forests.  I shall leave with a heavy heart, taking with me so many unforgettable memories -the breathtaking coast and spectacular mountains, the ancient fortresses and castles that recall Albania’s heroic struggles against invaders, the unique charm of the old stone cities of Berat and Gjirokaster, not to mention the best sea-food I have ever eaten. And more importantly, the memories of the hard working, creative, entrepreneurial Albanians I have met through our projects and the friendships I have developed with the many talented and committed people I have had the privilege to work with…�   Jane Armitage Country Director and Regional Coordinator for Southeast Europe almost exhausted, improvements in education levels investment and fostering public-private partnerships. and adaption of skills to meet the demand of the la- Improving the effectiveness of social protection sys- bor market are imperative. The World Bank and IFC tems and key health services in order to make econom- continue to help to reduce the infrastructure deficit in ic growth inclusive to everyone has further growth in a fiscally sustainable way, namely by increasing private priority at the time of weaker economic outlook. Albania and World Bank - 20 Years of Working Together 33 looking ahead I have gone back to Albania several times since my assignment there as Country Manager. Each time I find myself quite lost in the new Tirana. Happily lost. It is now a lively city, most would agree. I have revisited some of the other major centers as well, Durres for example, and have witnessed the same dynamism and progress at work. Going from place to place by road is the way to see this. There is activity everywhere. Albania still faces problems and challenges, but it is going forward… and we continue to do what we can do best: we accompany! Carlos Elbirt Last year I have returned to Albania, as a private visitor. I travelled along the new roads to the North, I travelled along the sea shore to the South. I remembered our long and cumbersome travels from Tirana to Kukes in 1998 and 1999. The country I visited last year was a different Albania. It was a different country – much more developed, with much higher standards of living. Development can happen and it happens fast in Albania… I hope that some of my Albanian students will assume leadership for country’s further economic and social development. Arntraud Hartmann On every occasion, this remarkable country and its people will continue to amaze me with their ability to engage, speak languages with no accent and to learn, learn really fast. Our country office is an example of this evolution as their good practices and innovations are shared across the Bank and international institutions seek their views and expertise! Orsalia Kalanzopoulos I shall continue to follow Albania’s progress closely, and plan to come back regularly as a tourist, to share with my family the special places I have discovered and to reconnect with old friends. One of my personal goals is to read every one of Kadare’s books - I think I am about half way through so far. Thank-you to the wonderful staff in our Tirana Office, I shall miss you all immensely and please make sure to invite me back for the 25th Year celebration! Jane Armitage 34 Albania and World Bank - 20 Years of Working Together Albania and World Bank - 20 Years of Working Together 35 Results by Sectors 36 Albania and World Bank - 20 Years of Working Together T hroughout the past 20 years World Bank sup- improve public sector management, strengthen the port for Albania has extended to a large variety financial sector and encourage private sector develop- of programs and initiatives, providing assis- ment. World Bank engagement has been often used tance to virtually each and every economic sector. It to mobilize financing from the community of devel- is difficult, if not impossible, to mention an area linked opment partners. At the same time, the World Bank to sustainable development, growth, and poverty alle- has provided knowledge and advice at an institutional viation to which the World Bank Group has not made level, contributing to improvements in governance, ac- a contribution. Collaboration between Albania and the countability and institution building, legal framework World Bank Group has also contributed to the social, en- development, structural reform, and EU integration. vironmental, and cultural advancement of the country. During these 20 years World Bank funds have helped to build new roads, bridges, ports, water and sanitation Education infrastructure, energy capacities, schools, hospitals; Education is universally recognized as key to foster- ing economic growth and alleviating poverty at both local and national levels. Sustaining growth in the Albania e-schools Albanian economy needs a more sophisticated labor As Albania improves and modernizes primary and secondary education, the government is providing force equipped with competencies, knowledge, and students—including those in remote and rural schools—with computers, internet connections and workplace skills that cannot be developed through lessons on how to use them. basic education alone. The Bank has supported three In the farming community of Fushas, Baldushk kids walk to class in a school that draws water from a projects in the education sector (School Rehabilita- well, and heat from a woodstove. Remote, yes. Cut off, no longer. Since the beginning of the school year, tion and Capacity building, 1994, Education Reform students have been learning to use computers and have been navigating the internet on eleven new Project, 2000, Education Excellence and Equity Project, computers. It’s the most popular class of the week. 2006). These projects have helped to build or recon- Albania is working to educate a more sophisticated workforce, and to give kids in rural areas the same struct more than 300 schools in priority areas, in which chances as those in cities. The Ministry of Education—with 15 million dollars of support from several 100,000 children have benefited from new schools. donors, including the World Bank-- is providing 17,000 computers to all of its fifth to twelfth graders— Major, wide-ranging education reforms were initiated more than half a million students. It is training teachers and updating its curriculum to include computer in 2006. These reforms included curriculum reform, im- classes. proved teacher training, a more equitable distribution of “For several years, teaching classes were routine, everything was limited and tied to the same book. resources across regions, improvement of learning con- But now the geography classes, can be associated with a variety of information downloaded from the ditions, less-crowded classrooms, an increase in teachers’ informatics lab. It is the students who ask for it�, says Klementina Ferhati, geography and computer average salaries and the renewal of the content and ad- teacher. ministration of the Matura examination (the secondary Computers have brought the outside world to this community and dozens like it. And the kids want more. school-leaving examination) to ensure objective results. Education Excellence and Equity Project, 2006 Reforms continue to be implemented successfully. Albania and World Bank - 20 Years of Working Together 37 Throughout the last four years, the Excellence and Health Equity Project, jointly financed by the Government, the Healthcare services have been improving, but World Bank, the European Investment Bank (EIB) and more must be done to ensure that poor households the Council of Europe Development Bank (CEDB),has have access to good healthcare. Albania spends about helped to improve the quality of learning conditions for students and to increase enrollment in general secondary education, especially for the poor. All primary schools are reported to be using the new curriculum and textbooks. An 6 percent on healthcare, in line with the average for countries at similar income levels. The public sector contribution is relatively low and well below the SEE average. As a result of low public sector spending, out- 300 schools built or reconstructed information technology curriculum has been introduced. of-pocket expenditures at the point of service account 100.000 Computers have been purchased for over 2,000 basic and for about 60 percent of sectoral funding. The high level secondary-level schools and Internet access is widely avail- of direct household spending indicates that the exist- able. The student-per-computer ratio in general second- ing healthcare financing system offers Albania’s popu- ary schools decreased from 61 to 16 students per comput- lation limited protection against catastrophic illness or children benefited er. 250 chemistry labs and 250 biology labs were provided injury, and allows for little redistribution of resources to basic education schools, and 100 chemistry labs and to protect the most vulnerable groups from health 100 biology labs were provided to general secondary edu- emergencies. The poor population faces an economic cation schools. The project has also supported a compre- barrier when it comes to accessing quality healthcare hensive range of reforms in the education sector. services, a problem that is exacerbated by the lack of 38 Albania and World Bank - 20 Years of Working Together total health insurance coverage. The government is to enhance the efficiency and equity of health spend- An alternative to poverty or immigration committed to making improvements and is currently ing. It also aimed to better protect the poor in times A project launched experimentally in 1992 offered working to develop a heath-financing policy that will of health emergencies, including health insurance re- a welcome alternative to dire poverty or hard- address these problems. forms in a fiscally sustainable environment. knock immigration. The idea was simple: offer The Bank has supported the healthcare sector in small loans to trustworthy villagers and wait for Albania through three projects (Health Service Reha- their investments to bear fruit. This micro-credit scheme, supported with additional World Bank bilitation Project, 1994, Health Recovery Project, 1998, Poverty Reduction and Social Protection Health System Modernization Project, 2008). By financ- Albania’s strong economic performance over the funds in 1999, has grown into a successful network ing the construction, reconstruction, and equipping decade preceding the 2008-2009 global financial crisis of rural micro-credit associations serving over of 115 centers in the poorest areas of the country, the was accompanied by positive changes in unemploy- 10,000 members. Bank funds have contributed to improving the quality ment and a sharp reduction in the poverty rate. The Zana Konini, now head of the Albanian Savings of basic preventive and curative health services. With World Bank has provided continuous strategic support and Credit Federation, was there at the project’s the assistance of the Bank and other donors, the gov- to alleviate poverty in the country through budget sup- beginning when $50 and $100 loans were ernment has established new hospital services in three port credits (Poverty Reduction Strategy Credit (PRSC) dispensed to villagers in cash “under the shade major cities, and has completed the general master plan (2002-2004) Social Sector Reform Development Policy of a tree.� “We helped thousands of farmers buy for the future of development of the single tertiary hospi- Loan (2011), Rural Poverty Alleviation Project, (1993)) their first cow, sheep or farming equipment. People tal in the capital. The government has also supported the and community based projects (Microcredit, Commu- would use the cow’s milk to feed their children and complete renovation of healthcare equipment. Consid- nity Works, Transport Projects) as well as continuous sell the calf to pay back their loan once a year,� she erable support has been given to advance reforms in assistance to the government (Capacity building and says. key policy areas such as decentralization, health insur- sustainability of Agricultural Statistics Service, 2005). Explaining the advantages of borrowing and ance, and transparency in sector expenditures. The preparation of Albania’s Poverty Reduction investing capital was a challenge. People didn’t The recently closed Health System Modernization Strategy Paper, known in Albania as the National Strat- understand why the World Bank - such a rich Project assisted the government in improving physi- egy for Social and Economic Development (NSSED), institution - was coming to poor villages offering cal and financial access to high quality primary health was the first national development strategy that explic- loans rather than flour, sugar, or grants. “Our care services, as well as strengthening institutions. The itly addressed poverty. It emphasized policy interven- program not only helped start a profitable rural national plan for development  of hospital sector, at tions to improve education, healthcare, and infrastruc- economy but also introduced the basic concepts of national level, has been developed and currently un- ture, while calling for stronger public accountability a market economy,� she says. der implementation. All regional hospitals as well as and increased public participation in decision making Micro-credit institutions, based on individual primary health care centers have been supported with to empower the poor. The NSSED created a better en- trust and solidarity between villagers, filled main medical equipment.  The Health Insurance Insti- vironment for advancing reforms and reducing pov- an important gap in the financial fabric of the tute has been supplied with required IT equipment for erty by strengthening country ownership of the reform country. Together with remittances sent by workers the central and regional offices.  In addition, a compre- program, reinforcing a long-term vision, focusing on overseas, small loans helped Albanians emerge hensive range of reforms have been supported through results, and encouraging partnerships. from the deep crisis of the 1990s. the project. The Social Sector DPL supported reforms The NSSED was followed by a quick disbursing Albania and World Bank - 20 Years of Working Together 39 Poverty Reduction Support Credit (PRSC) aimed at supporting its implementation. The three phases of the Lending  by  sectors  (1991-­�2012)   Lending by sectors PRSC helped to develop and implement fiscally sus- Water  supply     3%   Agriculture     tainable policies within the framework of the govern- Urban  infrastructure     13%   ment’s strategy. It supported more effective and efficient 9%   Educa1on     policy formulation and implementation, improved ac- 3%   cess to social services, better targeting of scarce fiscal Transport     resources to those most in need and policies conducive 14%   to sustained growth. The PRSC also helped consolidate reforms in public administration, public expenditure Energy     management and accountability, and social sector ser- 21%   vice delivery as a means of increasing government ac- Social  protec1on     countability, responsiveness, and effectiveness. 9%   Between 2002 and 2008, the unemployment rate de- creased from approximately 17 percent to 12.8 percent, Private  Sector  Development     and the poverty headcount rate decreased from 25.4 per- 2%   Health     Environment     4%   2%   cent to 12.4 percent, implying that about 200,000 people Governance  and  public   sector  management     Financial  sector     were lifted out of poverty. Poverty reduction has been 13%   7%   particularly dramatic in rural areas, where the poverty headcount fell from 39.6 percent in 2002 to 14.6 percent in 2008. Growth accounted for most of the reduction in of what has happened to the poverty rate since 2008. the poverty rate between 2002 and 2005. The extremely Meanwhile, there has been progress in setting up poor population, defined as people facing difficulty in a social safety net for the poor. Further measures are meeting basic nutritional needs, decreased from about 5 planned to improve equity, efficiency, transparency, percent in 2002 to 3.5 percent in 2005 to 1.2 percent in and effectiveness of the use of resources for social 2008. The next challenges include reducing the incidence protection. The Bank has supported social protec- of poverty in the mountain areas and speeding up the re- duction of pockets of poverty in urban areas. There are also concerns that poverty reduction may have stagnated in the past few years, due to the slow-down in growth. tion in Albania through the Social Services Deliv- ery Project (2000), which is helping to increase the access of vulnerable population groups to effective social care services; and improve the efficiency and 12.8percent Between 2002 and 2008, the A new Living Standard Measurement Survey effectiveness of the pension system in the country. unemployment rate in the (LSMS) is planned to take place in the next months The Social Sector Development Policy Loan (DPL, country decreased from with support from the World Bank and other donors. 2011) supported policy and institutional changes to approximately 17 percent to The survey is expected to provide an accurate measure improve the effectiveness of social safety nets. The 12.8 percent 40 Albania and World Bank - 20 Years of Working Together recently approved Social Assistance Modernization Agriculture Project (2012) is assisting with social-assistance and Agriculture is still one of the largest and most im- disability reform. In addition, the Japanese Social portant sectors of the Albanian economy. According Development Facility grant, administered by the to the most recent census (2011), the rural population World Bank, supports Youth empowerment and em- amounted to 46 percent of the total. Agriculture is a ployment programs in two major Albanian cities, Ti- main source of employment and income in the rural rana and Durrës. areas, contributing around 20 percent of Gross Do- mestic Product (GDP) and accounting for about half of total employment. Albania’s agricultural sector con- tinues to face a number of challenges, including small A reliable outlet for produce triggers a rise in productivity farm size and land fragmentation, poor infrastructure, The Agricultural Services Project, the World Bank helped fund four professionally-organized fruit market limitations, limited access to credit and grants and vegetable markets. The first market was established in Lushnje. There, farmers have found and inadequate rural institutions. a reliable outlet for their produce, eliminating the need to drive for hours looking for buyers The Bank has supported agriculture in Albania scattered in different towns. Since the market opened, production in the area has doubled both in through investments in irrigation, exposure to new open fields and in the hundreds of new greenhouses. technologies and practices, and through the piloting of “As the quantities have increased, so have the diversity and quality of the produce on sale. a small grant program that was subsequently scaled-up Production in the area has doubled�, says Enkes Shundi, a market specialist. by the government (Irrigation Rehabilitation Project, Trifon Stambolliu, president of a farmer’s association in the Lushnje region says that before 1994, Rural Development Project, 1995, Agroprocessing the creation of a central market, he grew only cucumbers and only in 6% of his small plot of Development Project, 1995, Community Works Projects, land while now a third of his land is covered by them. He grows cucumbers but also tomatoes, 1999, 2003, Irrigation and Drainage 2 Project, 1999, Ag- melons, cauliflower and salad. riculture Services Project, 2001, Water Resources Man- “My production has increased tenfold,� says Stambolliu, 54, “partly because I use better agement Project, 2004, Natural Resources Development technology but mostly because I now have a place to sell. Before, we would sell our produce Project, 2005). straight out of a van. It was muddy in the winter and dusty in the summer,� he recalls. The new The agriculture sector has benefited from both market is paved and divided in clear sections. A light roof provides shade that helps produce physical intervention and from capacity building ini- stay fresh longer. tiatives. One of the main achievements in this sector Seminars are hold to inform farmers of the demand and orient their production in sensible has been the implementation of a demand-driven, ways. Other efforts are being made to better package and label produce for export. In time, community-based approach, which has empowered a market like Lushnje could assemble the volume and quality of produce necessary for mass rural communities. Small loans and grants were pro- export to neighboring countries like Italy. Traders from Kosovo, Macedonia and Montenegro vided to local organizations in rural areas that helped show up regularly at the market. to regulate water usage on market basis, thus provid- Agriculture Services Project (2001-2007) ing cohesive management of water resources and in- Albania and World Bank - 20 Years of Working Together 41 frastructure maintenance. Competitive grants were have benefited from the irrigation schemes. awarded to farmers that had feasible ideas but lacked The Rural Development Project, and later, the Micro- startup capital. credit Project, promoted small on-farm and off-farm Three successive irrigation projects focused on in- activities to help accelerate rural economic growth. creasing agricultural production by raising farm pro- The microfinance program provided over 47,000 loans ductivity through the rapid rehabilitation of the exist- for income-generation activities in 380 villages and ing irrigation and drainage infrastructure. They also had a positive impact in poverty reduction by increas- ing the income of small private farmers and creating employment opportunities for dependent farm labor in 8 districts. About 150,000 individuals have benefited from the program. The Agriculture Services Project helped to create an environment conducive to rural income growth by ad- 335.000 hectares of irrigation and rural areas. These projects also contributed to sustain- dressing key constraints faced by Albania’s emerging drainage system ability of irrigation and drainage investments through small-holder farmers in agricultural production, trade, rehabilitated or upgraded farmer participation in operation and maintenance, ef- and the functioning of land markets. The project ori- ficient system management and greater cost recovery. entation was of an all-inclusive nature; it addressed 100.000 More than 335,000 hectares of Albania’s irrigation and comprehensive seed market development, land mar- drainage system was rehabilitated or upgraded. This ket development, agriculture market development, represents two-thirds of irrigated land. Thirty-three community-based rural productivity, and marketing dams were rehabilitated. More than 100,000 families improvement. Support to farmers in production and families benefited 42 Albania and World Bank - 20 Years of Working Together trade contributed to rural income growth. Through this through increased productivity and higher quality project the availability of high quality seeds improved. products. At the same time, agriculture policy re- Four wholesale markets built in Korca, Lushnja, Vlora form should be conducted within the context of cur- and Shkodra facilitated the marketing of local agricul- rent and future EU requirements, including harmoni- ture products. A total of 145 grants were awarded to zation with EU legislation and standards, and taking farmers with an impact on more than 20,000 farmers account of the need for an integrated approach to wa- who were exposed to new technologies. ter resource management and adaptation to climate Now the challenge is to transform agriculture from change. subsistence-oriented production into a modern, com- In this context, a new Water Resources and Irriga- mercial, and competitive sector, while fostering al- tion Project (WRIP) has been prepared and will be ternative income opportunities for rural residents approved and launched in the coming months. The exiting the sector. Competitiveness can be improved project aims to strengthen the Government’s capacity to manage water resources at the both national, river basin and local levels, to improve the performance and sustainability of irrigation systems in the Drin-Buna Helping communities take charge of their natural resources and Semani river basins, and to pilot public-private Decades of logging and overgrazing devastated many of Albania’s forests, leading to poor soils and partnerships for operating and maintaining the irriga- erosion. The Albanian government is working with communities to plant new trees and to let forests grow tion systems in the tree areas. undisturbed so they can one day become a sustainable source of income and jobs. Three years ago the acacia forest above Rubik city was clear cut —a result of years of acid rain from a nearby copper plant and overuse by citizens. Now the plant is closed, and the forest is coming back to life, thanks to the same citizens who once stripped the land bare. Environment In partnership with the Global Environment Fa- A government program supported by the World Bank and the Swedish government is helping Rubik and 251 cility (GEF) and several donors, the Bank has helped other communities plant trees and to better manage forests and pasturelands—resources used by almost to preserve important natural and environmental as- a million people. The project has helped transfer hundreds of thousands hectares forest more to other local sets of Albania and to foster local economic growth governments across Albania. The main aim was to stop the further degradation of the forests. Villagers receive through a number of projects (Forestry Project, a little cash to tend their orchard but also to thin the forest to grow better. There has been 8% increase in income 1996, Integrated Water and Ecosystems Management earned from forest activities in communal forest and pasture lands and 28% increase from forest and agriculture Project, 2004, Natural Resources Development Pro- activities in micro-catchments. Erosion has been reduced by approximately 220,000 ton. ject, 2005, Integrated Coastal Zone Management and We have a lot of needs and a lot of challenges especially to know better the huge possibilities of the forest to Clean-up Project, 2006, Afforestation & Reforestation generate employment, to reduce erosion and flooding� says Haki Kola, forest engineer. of Refused Lands in Albania BioCarbon Fund Project, Sixty percent of Albania’s forests are now being managed by local governments. As the forest cover grows 2007, Butrint Global Biodiversity and Heritage Con- along with new attitudes, this sustainable resource can offer benefits for this generation and the next. servation 2007). Forestry, Natural Resources Development Projects (1996, 2006) The government of Albania is implementing a Albania and World Bank - 20 Years of Working Together 43 wide range of policies in the field of environment tation of the plans has involved the employment protection and natural resources management. Al- of some 6000 workers, including 1900 women and bania is moving toward gradual approximation of its 1900 beneficiary families. A follow-up project is laws with the environmental legislation of the EU. being prepared to improve and promote the value Challenges include limited enforcement (due to the of ecosystem services, in partnership with SIDA. weak capacity of the environment authorities both Through biomass regeneration, forest-dependent 220.000 at central and regional levels) and a lack of resources communities successfully participated in the global for monitoring and ensuring full compliance with BioCarbon Fund program, which supports, on a pi- environmental standards. lot basis, reducing GHG emissions though improved The recently completed Natural Resources and biodiversity and natural resource management im- Development Project helped reduce upstream risks provements and provides additional resources to lo- tons of erosion by improving the management of Alba- cal communities. land erosion reduced by nia’s wetlands, forest, and pasture resources, as well The on-going Integrated Coastal Zone Manage- 220,000 tons as creating water catchments. This project enhanced ment Project supports the improvement of critical productivity and incomes by improving communi- public environmental infrastructure and municipal ty-based natural resource management in 251 com- services of the southern coast. The component that munes in mountainous areas prone to erosion. Land supported, with the help of the grant from the Gov- erosion has fallen by 220,000 tons. The implemen- ernment of Netherlands, the reduction of environ- 44 Albania and World Bank - 20 Years of Working Together Urban Infrastructure Cleaning Up and Revitalizing Porto Romano in Albania Albania is endowed with a variety of fascinating Hundreds of tons of chemicals and pesticides from an abandoned lindane factory were left and distinctive places to visit, including a range of unattended, and contaminated the surrounding land, water and air in Porto Romano area. A seacoast towns along the Adriatic, historic cities, and project, supported by the World Bank and the Government of the Netherlands, invested in the cultural heritage destinations featured on UNESCO’s cleanup of Porto Romano, close to Durres. What once was a highly contaminated area of about World Heritage List. Years of under-financing of city 24.6 hectares, by the end of May, 2011 was clean and will soon be green. and town infrastructure, however, has left a backlog After the plant closed in early 90s, 5,000 people who emigrated from remote and poor areas of of critical investment needs in water and sanitation North East Albania settled here and built houses around the empty buildings. Their livelihoods systems, solid-waste management, inner-city road re- depends on fishing, farming and cattle breeding, which were precisely endangered by the habilitation, and urban amenities. Such problems can contamination on site. undermine the prospects for tourism, as well as the liv- “The smell in the area was horrible and my second son was getting sick very often. But we were ing standards for Albanian citizens. lucky to get assistance and move from the area, thanks to this project,� says Thellenxa Dalipi. Now, The World Bank’s Urban Infrastructure Portfolio her family and the four others have been moved from the contaminated site to apartments in is helping to address these deficiencies. The Urban Shkozet. Land Development Project (1996) has provided es- Almost 750 tons of incinerated chemicals were repackaged in the storage site and transported sential urban infrastructure to informal settlements to a specialized German disposal site in 2006. A local NGO informed the inhabitants and school on the outskirts of Tirana. About 3,000 families have children about the risks of the contaminated area and how to avoid them. Frequent free tests of benefited from this project. milk, water, and meat were offered to inhabitants. The Land Administration and Management Project Results of the cleanup are visible and landscaping is taking shape. Trees are planted and a (LAMP) is assisting to survey and register an estimated playground will be constructed so that over 400 children of the Met Hasa Elementary School can 400,000 properties in urban areas, providing residents play safely. and businesses with secure property rights. So far, it “I like Porto Romano better now, the trees and the fresh air,� says Xhesi Hodo, student. Their parents is completed the registration of over 28,900 titles and are also confident that their kids will not suffer from respiratory or skin diseases anymore. They the digitization of property records at some Immov- hope that a revitalized area will bring more jobs and prosperity for their families. able Property Registration Offices (IPRO), has reduced Integrated Coastal Zone Management and Clean-up Project, 2006 property registration time from 47 days to less than 10 days. Full automated property registration system is operational in Tirana, with an on-line connection to mental and health risks from industrial pollution notaries. Eight cities and towns in Albania will now be in Porto Romano, was completed in 2011. The Lake guided by Comprehensive Territorial Plans that were Shkodër Integrated Ecosystem Management Project completed under the Project, based on extensive com- is helping to maintain and enhance the long-term munity consultations. value and environmental services of Lake Shkodra Municipal investment programs to upgrade and and its natural resources. rehabilitate essential urban infrastructure services are Albania and World Bank - 20 Years of Working Together 45 supporting four cities. The investments helped provide and business of the area. The construction and pro- retail market space for small-scale businesses previ- tection works have been completed for the after-the- ously operating under make-shift structures on side- flood restorations of Dobrac and Bahcallek Water walks on the main street of the town of Berat; paved Supply Pumping Stations, and 1 km storm-water streets to improve commuter and pedestrian mobility collector in the main boulevard of Shkoder. and access in the city of Shkodra and Kamza; and im- Albania is vulnerable to a number of natural disas- 10days proved and restored building facades and downtown ter risks such as earthquakes, floods, and drought. The amenities in the town of Elbasan. A comprehensive Albanian economy is especially sensitive to weather street addressing system was installed in 13 towns, im- conditions, given the importance of agriculture, hy- less than proving the ability to provide municipal serves and to dropower, and tourism. property registration time enhance tax collection. The World Bank supports the Disaster Risk Miti- reduced from 47 days to less In response to the emergent needs of flooded ar- gation and Adaptation Project (2008) which aims to than 10 days eas of Shkoder and Lezhe, the Bank has been helping strengthen institutional capacity, reduce Albania’s to restore damaged facilities and services, such as vulnerability to natural and man-made hazards, and construction of storm-water collectors and rehabili- limit human, economic, and financial losses due to tation/protection of Water Supply Pumping Stations catastrophic events. Albania was the first member and and Drainage Pumping Stations, serving to more contributor to the regional Catastrophe Risk Insur- than 150,000 residents, as well as numerous homes ance Facility (CRIF). With project support, a national 46 Albania and World Bank - 20 Years of Working Together Emergency Command and Control Center was es- physical infrastructure, the ongoing deterioration will tablished in Tirana, and the disaster response capac- lead to crisis situations in many urban and rural areas. ity of the government is being gradually strengthened The World Bank has been involved in the Albani- through the provision of specialized equipment for the an water and sanitation sector since 1994. Alongside emergency response units. In parallel, with grant re- other donors, the Bank has provided a steady stream of sources from the Global Facility for Disaster Reduc- investments to help improve water and sanitation ser- tion and Recovery (GFDRR) assist the government in vices, while contributing to institution building meas- the development of the medium- and long-term flood ures. The Durrës Water Supply Rehabilitation Project, risk mitigation options for Drini-Buna river basin. followed by Water Supply Urgent Rehabilitation Project (2000) supported the government in its effort to im- prove the water supply services of four municipalities Water Supply and Sanitation (Durrës, Fier, Lezha, and Saranda). Both projects fo- Albania is endowed with water resources of 8,600 cused primarily on the rehabilitation of the existing m3 per capita, of which only 6% is withdrawn annually. water supply facilities to eliminate water shortages This generous allowance helps the country to provide and associated health risks. The Urgent Rehabilitation high coverage of water supply and sewerage services. project was more of a stop-gap operation linked to the But the relatively high coverage is negated by the poor Kosovo refugee crisis, thus addressing immediate and quality of service. The country has been suffering limi- urgent constraints in water supply in these cities. tations in water supply with the demand constantly in- In close cooperation with other donors, the Bank creasing due to rapid economic development, urbani- is taking the lead in helping the government carry out zation, and increased levels of water losses (estimated policy reforms, focus on cost recovery, and to foster 3 plants to be greater than 50 percent in all cities). private sector and community involvement.   At the The water sector is plagued  by problems similar to beginning of 2000, with the assistance of the World those being faced by the power sector, including: high Bank the Albanian government has prepared a Water for wastewater treatment consumption, wastage and misuse, illegal connections, Supply Action Plan and a comprehensive Water Supply plants built in the coastal below-cost tariffs, inadequate revenue collection,  un- and Sanitation Strategy. cities of Durrës, Lezha and Saranda controlled extraction of underground waters, and in- The Municipal Water and Wastewater Project sufficient investment in physical infrastructure. Con- (2003) supported investments in improving water sup- sequently, despite Albania›s abundant water resources, ply and sanitation services in four participating cities water supply in urban areas is intermittent,  and less (Durres, Fier, Lezha and Saranda),  and tried to as- than half of the rural population has access to piped sist water utilities to introduce a new incentive-based water. The lack of reliable water supply hampers pri- multi-city management contract approach, with the vate investment and endangers public health, especial- objective  of increasing their financial viability. In par- ly that of the poor. Without reform and investment in allel,  The Integrated Water & Ecosystems Management Albania and World Bank - 20 Years of Working Together 47 Project (2004) built wastewater treatment plants in the ter utility performance and services, for both local resi- coastal cities of Durrës, Lezha and Saranda. The waste- dents and prospective tourists in the Durres region, as water treatment plants, complemented by EU and well as key institutional reform and activities orienting Government of Albania projects in sewerage collectors utility towards operational cost recovery, improvement and secondary networks,  will improve  the municipal of sector governance and regulation, etc.  wastewater services and the quality of wastewaters dis- charged in Adriatic and Ionian Sea. Following the sector decentralization initiative and Transport adoption of the National Strategy for Development The country’s swift transition to a market-oriented and European Integration, the Bank provided  fur- economy made necessary a functional transport sys- ther assistance to the Government of Albania in pre- tem in order to cope with the ever-increasing demand paring the new National Water and Sanitation Strategy, for the circulation of goods, services, and people. The which articulates the reform agenda and, at the same World Bank concentrated significant financing and ex- time, supports a more programmatic approach among pertise on assisting Albania’s transport system by estab- donors and IFIs, financing the majority of investment in lishing a modern infrastructure network. This support the sector, today.  The Water Sector Investment Project helped facilitate growth, increase efficiency of cost recov- (WSIP) is currently being prepared  and will  support ery, increase road safety, increase environmental protec- priority WSS investments to improve the quality of wa- tion, and promote cooperation with the private sector. 48 Albania and World Bank - 20 Years of Working Together new roads were built through various projects that Connecting Rural Roads in Albania targeted national and rural networks. The National The on-going Secondary and Rural Roads Project (2008) is revitalizing remote areas by connecting Road Project (1996) helped rehabilitate and construct rural population with markets and essential services. The road has made life a lot easier for small of national roads, including the improvement of stra- businessmen like Arben Muca—a cheese monger who was born in a village of Dumre and still lives tegic connections between Albania and its neighbor- there. He knows about long days. Every morning after milking his own cows, Arben hops in his van ing countries. The project also included investment in to collect buckets of still-warm milk from small farmers. His truck has no refrigeration--the milk needs road maintenance and safety. About 90 km of national to reach the small processing farm before it spoils. With the new road, the trip is five times faster roads in the East-West and Northern corridors were than before. “The new road shortens the work day, it takes less travel time and less fuel. All these are rebuilt in order to connect the major urban centers to expenses—and work gets done faster,� says Arben. the international market through port of Durrës and Secondary and Local Roads Project (2008) neighboring countries such as Macedonia and Greece. The Emergency Road Repair Project (1999) helped Albania to overcome the difficulties created during the Since the beginning of the Bank’s intervention in the Kosovo crisis when heavy refugee convoys damaged sector, nine projects have been implemented and brought roads, humanitarian aid was transported, and NATO positive changes in access to education, healthcare, postal vehicles passed frequently. The project aimed at restor- and banking services, and in connecting the major urban ing the serviceability of the main route connecting the centers with the international market. Adriatic Sea (Port of Durrës) to Kosovo, and other key Old roads were paved, extended, or upgraded; and Albanian cities. “In 2007 the government requested World Bank’s assistance for the establishment of a program for the modernization of the rural road network in the country. Until that time, about 80% of rural roads in the country were in a bad or a very bad condition and frequently even impassable. Such a depreciated road network was converted into higher costs for the transportation of agricultural products, lack of conditions for development of tourist areas, and a poor quality of education and healthcare services, including the emergency ones. Five years later, one of the largest programs for the improvement of rural networks was set up with the support of the World Bank. This program has managed to mobilize about US $380 million from several international donors and is being implemented by the Albanian Development Fund. It has helped to establish a detailed database for rural road networks, prepared detailed studies of about 1,300 km of roads, funded the construction of about 1,100 km of roads, with the aim of reconstructing an additional 400 km by 2015. The roads are reconstructed based on modern standards and this has provided a tremendous impetus to the development of rural areas in Albania.� Benet Beci Director of Albanian Development Fund Albania and World Bank - 20 Years of Working Together 49 The Rural Roads Project (1995) improved around million) leveraged about US$350 million from other do- 975 km of rural roads, while The Road Maintenance nors and International Financial Institutions (IFIs). The 1700 km Project (2007) contributed to the repair and main- project is providing an all-weather connection to many tenance of 500 km of roads. These projects also ad- communities and improving access to essential services dressed poverty and the need for increased employ- and economic markets for the resident population in the ment by creating temporary or permanent jobs. hinterland of the project roads. national and rural roads, The Albania Transport Project (2007) supported im- repaired, constructed provement of access for hinterland population and con- Energy or maintained struction of 26 kilometers of Durres - Morine Corridor. In Whereas the country was a net electricity exporter addition, it introduced innovation in road maintenance in 1992, electricity demand grew rapidly from then un- 26 communities on pilot basis (about 10% of the national road network), til 2000. Since 1998 Albania has become increasingly and contributed to the development of the institutional dependent on electricity imports. In 1992, the coun- framework and implementation of road safety activities try’s yearly consumption per capita was around 700 The Secondary and Local Roads Project (2008) is cur- kWh, whereas in 2011 it had already bounced to more have access to all-weather rently close to completing about 110 km of secondary and than 2,000 kWh. roads for the first time local roads. Through this project, the Bank prepared an This increase was due mainly to a sustained surge overall program for the entire secondary and local roads in consumption, much of which was not paid for, by network, which in addition to its own financing (US$20 households and small commercial establishments. 50 Albania and World Bank - 20 Years of Working Together Emergency repairs financed by donors and IFIs, in- 2002). That helped reduce electricity losses through cluding IDA, temporarily improved the quality of elec- investments in the grid, and improve transmission and tricity supply. However, the country was unable to get distribution capacities. These projects played a key all the imported electricity it needed because of trans- role in improving the overall standard, reliability, and mission and financial constraints. The result was large efficiency of the electric power supply, and enhancing load shedding, which had adverse effects on national the efficiency of electricity interchanges with neigh- economic output, businesses and families, who were boring countries. This led to the reduction of unbilled left without electricity for many hours of each day. electricity consumption and the establishment of a The World Bank Group took a leading role in sup- regulatory framework for the power sector, and laid porting power sector development through several the ground for unbundling the Albanian Power Cor- projects that helped increase energy supply and secu- poration (KESH) in an efficient and non-disruptive rity, while also reforming and restructuring the sector way with subsequent privatization of the distribution as to operate in a market-based environment. segment. Support from the World Bank began with a power Following the 2001 electricity crisis, it was impera- component of the Critical Imports Project (1992) that tive to build new power generation capacities and di- financed urgent system repairs. It continued through versify energy supply which is almost entirely based three successive projects (Power Loss Reduction Project, on hydropower generation (Power Sector Generation 1995, Power Transmission & Distribution Project 1996, &Restructuring Project, 2004). The Transmission Pro- Power Sector Rehabilitation and Restructuring Project, ject (2005) was a major regional initiative that helped to build the missing links in the electricity links in Energy Demand, Supply and Generation (1991-2011) South East Europe by creating an integrated regional 8,000.0   market that would bring improvements to energy ef- ficiency and cost savings. 7,000.0   The World Bank’s current support for the energy 6,000.0   sector includes the Energy Community of South East Europe Dam Safety Project (2008) that is helping Alba- 5,000.0   Net  Demand  (GWh)   nia to rehabilitate and improve operations of its main Net  Supply  (GWh)   hydropower plants in the Drin River, thus increasing Net  GeneraAon  (GWh)   4,000.0   the efficiency of water resources and production. The World Bank Group, including its private sector arm, the 3,000.0   International Finance Corporation, supported distribu- tion privatization, through advice from IFC and Partial 2,000.0   Risk Guarantee (PRG) from IBRD. The IFC program 1991   1992   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   also supports private sector engagement in small hy- Albania and World Bank - 20 Years of Working Together 51 dro-development projects, new renewable energy pro- litical stability and commitment to reforms after 2000 jects, and residential energy efficiency initiatives. have led to robust growth in private sector activity. The While major progress has been made, the remain- Bank supported the government’s efforts to improve ing challenges are plentiful: to complete the reform the institutional and legal framework by assessing ad- agenda, further improve security of supply to meet ministrative barriers to investment (FIAS) and subse- growing demand while strengthening demand-side quently streamlining administrative procedures (PRSC management, clarify and better enforce market rules, II, 2003); improving the legal framework for bank- maintain the network, and continue strengthening the ruptcy, resolution of debt, and commercial disputes institutions in the sector. through the Financial Sector Adjustment Credit, FSAC, 2002 and PRSC I and II, 2002-2003; and through the Private and Financial Sector Development Private Industry Recovery Project (1998) establishing As measured by “Doing Business� indicators, Alba- an investment guarantee agency with the help of the nia moved from the 136th ranking in 2007 to 82nd in Multilateral Investment Guarantee Agency (MIGA). 2011 as a result of completing business regulatory re- Micro, small, and medium enterprises dominate Al- forms in various areas. bania’s economy. The need for a good business climate The World Bank has provided extensive support to extends to rural areas, where infrastructure is also es- private sector development, considering such develop- sential for enabling business environment. Many do- ment as the driving force behind growth. Relative po- nors and IFIs, including the World Bank Group, pro- 52 Albania and World Bank - 20 Years of Working Together vided assistance to these clients. supplemented by the ongoing Balkan Renewable En- IFC and the Bank collaborated closely in the pri- ergy advisory program that helped the GoA to draft vatization of the electricity distributor – with IFC fi- a new Renewable Energy Law will enable the private nancing in the private electricity distributor linked to sector to develop and construct feasible plants. IFC is the conditions of IBRD’s indemnity agreement under also supporting financial sector in the country by pro- 5 days to register a business in 2011 its Partial Risk Guarantee. IFC played an important role in introducing the best practices for Public Pri- vate Partnerships. They helped entrepreneurs in dif- ferent sectors to become competitive by introducing viding guarantee facility for enhancing trade finance capacities of the banks as well as providing long term financing targeting investments in the field of renew- able energy and energy efficiency. IFC is also providing from 36 days in 2008 international standards and thus increasing sales and advisory services to the government in three main ar- exports. The IFC support in 2008 to Antea Cement, eas: Tax Simplification and Transparency, Debt Resolu- among the largest FDIs in the country, was a strong tion and Trade Logistics. signal to other private investors in Albania and the re- Most recently, the Bank supported private sector gion. In 2009 IFC supported the project to rehabilitate development in Albania through the Business Envi- the Patos-Marinza oil field and addressed significant ronment Reform and Institutional Strengthening Pro- environmental remediation needs. Currently, IFC is ject (BERIS, 2008). The project has contributed to an assisting the Albanian Government on the privatiza- improved legal framework for the regulatory impact tion of medium size existing hydro power plants which assessment and inspection regime, and financed the construction of a modern Metrology Laboratory that meets the EU standards. Investing in Albania’s future In parallel, tangible progress has continued in the fi- Flamur, 36, the younger Biduli brother from Pinet village, was among the first villagers to take the leap when nancial sector. The Bank has placed an important focus he borrowed $600 in 1994 from the World Bank funds. Over the years, the two brothers borrowed repeatedly on developing Albania’s financial sector, from address- to plant new saplings and to build the structures on which the grapevines now grow. ing poverty in the country through microcredit pro- Success did not come at once. Vineyards mature slowly so the investment had to be paid off with other grams (Microcredit, 1999) to major interventions such as crops, melon by melon, peach by peach. Now they had to work from dawn to dusk. There were hard years restructuring the banking sector (Financial Sector Institu- when the brothers went separately to Greece and Italy to work as waiters. “It was a waste of time and tion Building Technical Assistance Project, 2000, Financial spiritual torture,� remembers Dashnor, 41. Like other unhappy immigrants, they came home determined to Sector Adjustment Credit, 2002). Since 1997, with support succeed. “My family is here and so are the investment opportunities,� says Dashnor. from the World Bank, the government has liquidated The brothers’ dream is to move from bottling unlabelled wine, which they now sell to friends and acquaintances the insolvent state-owned Rural Commercial Bank, in the capital, to full-fledged wine production. Commercial banks are ready to do business in small towns privatized the National Commercial Bank (BKT) to an now. Flamur is sure that his dream will come true, “this is our family’s future,� he says raising a glass of wine. investor consortium that included the IFC and EBRD, Microcredit Project, 1999 prepared the privatization of the Savings Bank - the last remaining state-owned and Albania’s largest – now Albania and World Bank - 20 Years of Working Together 53 known as Raiffesen Bank. Close IDA-IFC cooperation and legal and judicial institutions (Public Administra- has been instrumental in helping Albania move for- tion Reform Project, 2000, Legal and Judicial Reform ward with financial sector privatization. Project, 2000, Tirana Transparency Project, 2001). In the following years, the Bank extended institution- building efforts to selected priority sectors - educa- Governance and Public Sector tion, healthcare, power, water, and transport - through Management sector-specific operations. Several projects were also Institution building has been one of the key priori- designed to support Albania’s decentralization process, ties for Albania, especially urgent during the first years and to build capacity at local levels. of transition, with a number of issues in need to be ad- Since 1998, as part of a broad governance and anti- dressed to the present day. Improving governance and corruption agenda, the Bank has helped the govern- strengthening institutions has been a permanent ob- ment develop and implement its Anti-Corruption jective in all Country Assistance Strategies (CAS) for Plan, which includes numerous actions affecting eco- Albania in and the current CPS. nomic policy, rule of law, public administration, public The World Bank, in close coordination with other finance, customs administration, procurement, audit, development partners, has focused on building criti- and public awareness. Its support continued through cal central capacities, including public administration a number of operations (PRSC II and III) and several and the civil service, public expenditure management, studies. Building on the National Strategy for Integra- 54 Albania and World Bank - 20 Years of Working Together An empowering experience - Tirana Information Center Years ago when a resident of Tirana needed an official answer from the municipality’s information center, he would have to join a line outside a corrugated iron shipping container and wait for one of its small windows to open. As the city grows, getting information was a pitched battle of nerves. When the new mayor of Tirana, Edi Rama took office in 2000, he took members of a World Bank team to observe the scene. “If you want to help us,� Rama said, “let us work on building a modern information center.� A World Bank project funded by the governments of the Netherlands (US $ 614,000) and Norway (US $25,000) were used to build a new online information center, a new city council meeting hall, three pilot information centers in the suburbs, and to conduct a citizen survey. A spacious and bright hall has come up and serves as a new information center, making things easier for residents. “I asked about a water pipe that is causing problems in my building and they directed me to the appropriate office. They were very quick,� says a resident. “I do not care what party governs here; they really helped me.� Citizens can use the report card to monitor improvements in municipal services and influence the process by providing feedback. All in all, it is an empowering experience. Tirana Transparency Project, (2001-2003) tion and Development the Bank has introduced a gov- the Government of Albania’s to make core policy and ernance filter in all programs, including policy advice financial processes function in a coherent, efficient, and dialogue to contribute to Albania’s goal of improv- and integrated manner. The national REPARIS pro- ing governance and reducing corruption. gram, also financed by donor funding, was recently Albania’s efforts on the road to EU integration re- launched with the aim of bringing financial reporting quire a sound public sector performance. The Bank into line with EU requirements. has supported better public expenditure management, Further support to selected issues and sectors was which is essential to poverty reduction. The Bank has provided through the Governance Partnership Facility also supported better budget execution and financial (GPF, 2009-2012), including the successful piloting of accountability by improving the treasury, accounting, the country e-procurement system in one of the World and internal auditing. In partnership with several do- Bank projects and a development marketplace on good nors, it is supporting the Integrated Planning System governance that promoted innovative ideas among Project (IPS, 2000). The multi-donor trust fund, which civil society for the improvement of governance and has recently moved to the second phase, serves to help accountability. Albania and World Bank - 20 Years of Working Together 55 Working in Partnership Reflecting strong donor coordination and partner- ship, with government leadership in promoting such coordination, the World Bank program in Albania is enhanced by several trust funds (TF) co-financing pro- jects. They make a valuable contribution to strengthen- ing the dialogue and results in priority areas. Several trust funds support self-standing projects adminis- tered by the Bank such as the Integrated Planning Sys- tem (IPS-2), the REPARIS program to improve finan- cial reporting, the Japan Social Development Fund (JSDF) grant for youth empowerment, a grant from the GFDRR for flood risk mitigation, and a Swedish grant for Improved Natural Resource Management. Knowledge Bank In addition to providing financing for fostering de- velopment of Albania through investment and other projects, the World Bank plays an important role in providing policy advice and technical assistance to the Government. This advice relies upon the Bank’s long- term experience in working on economies of countries in the region and in economies that have successfully car- ried out structural reforms in and outside the region. and education. Two issues of the semi-annual Regular The most recent Bank studies on Albania focus on strengthening future sources of growth and competi- tiveness (The New Growth Agenda, 2010), improving the efficiency and effectiveness of public spending Debt Economic Report (RER) for South-Eastern Europe were launched in November 2011 and June 2012. Jointly with UNDP, the Bank has prepared a study on public utility governanve in water and electricity sectors. PIC Public Information Center Management Assessment, and Public Expenditure and Analytical work and technical assistance is carried of the WB Office in Tirana Financial Accountability (PEFA), and improving gov- out, through regional programs, such as on the finan- Faculty of Economics, ernance. With support from the GPF, the Bank pre- cial sector, corporate accounting, poverty monitoring, University of Tirana pared and disseminated several reports in 2011: an pension reform, health sector, energy sector, water overall governance profile, property rights, water sector, utilities, urban management, and environment. 56 Albania and World Bank - 20 Years of Working Together Learning Together Kseniya Lvovsky Country Manager in Albania C oming to work in Albania was one of the best different set of challenges – that of mobilizing busi- decisions I made. I will always remember ness-friendly policies, good governance, innovation, my first day on duty which coincided with human talent, and regional cooperation to propel the opening of a new school in Kamza, financed Albania from the middle-income to the advanced through the on-going education project. A modern, economy status. It was also the time when the World wonderful building, full of light and opportunities Bank began re-assessing its role and comparative for young Albanians to build the life their grandpar- advantage on the global stage by increasing atten- ents could not even dream of… tion to the needs of middle-income countries - a fast growing group by numbers and influence - in lever- A breathtakingly beautiful and welcoming coun- aging financing and accessing cutting-edge knowl- try with vast yet-to achieve potential, Albania has edge. Over the past 20 years, both Albania and the forged one of the most rewarding partnerships World Bank have expanded partnerships with other with the World Bank, one through which both have multilateral and bi-lateral development institutions learned and improved. When the country joined the and non-government players as the key for keeping World Bank 20 years ago as one of its poorest mem- abreast of new ideas and experience, and both have bers, the Bank’s overarching focus was on fighting placed trust into the EU integration process as the poverty and lifting low-income countries to the next best facilitator of Albania’s continued economic and league. In the global effort to eradicate poverty, Al- social progress. bania performed spectacularly, moving up the de- velopment ladder at a record pace. When I settled Having travelled extensively across the country to in Tirana about two years ago, the country faced a follow the projects we finance, I find great inspira- Albania and World Bank - 20 Years of Working Together 57 After 20 years full of achievements and lessons, we are better prepared to work together on the next phase of Albania’s development and EU integration agenda - and I look forward to celebrating the country’s future successes tion in the commitment and perseverance of the Al- phase of Albania’s development and EU integration banian people to build a better country for the next agenda - and I look forward to celebrating the coun- generations. It is most impressive to listen to com- try’s future successes. mune leaders, health practitioners, teachers, farm- ers, engineers and small businessmen learning from their strength and vision. It is most encouraging to talk to students and see enthusiasm and expectations of a brighter future in their eyes. As recovery from the 2008 global financial crisis has taken longer than initially hoped for across Europe, including Albania, it has not changed, rather amplified, the priorities and challenges going forward, including nurturing human capital for the 21st century world. It has also amplified the importance and value of our collabo- ration. I feel very privileged to be with an excellent team of World Bank staff at the Tirana office, at the forefront of our evolving partnership at this unprec- edented time. After 20 years full of achievements and lessons, we are better prepared to work together on the next World Bank Tirana Office Ibrahim Rugova Str., No. 34 Tirana, Albania www.worldbank.org.al