99229 ALBANIA World Bank Group Partnership Program Snapshot June 2015 ALBANIA World Bank Group Partnership Program Snapshot June 2015 Tirana, June 2015 World Bank Office Ibrahim Rugova Str., No. 34 Tirana, Albania www.worldbank.org.al Photos by Jutta Benzenberg, Blerta Kambo, Gent Shkullaku and Ana Gjokutaj Design by “Grid Cartels” Table of Content Recent Economic and Sectorial Developments………………………………….…...………6 The World Bank Program in Albania……………………………………………….……..….18 IBRD projects 19 Albania: Social Assistance Modernization Project.…………………………….....……….……….20 Albania: Health System Improvement Project................................…….……….……...22 Albania: Integrated Coastal Zone Management And Cleanup Program ..........……….….24 Albania: Energy Community Of Southeast Europe APL5 - Albania - DAM Safety Project .....26 Albania: Water Resources And Irrigation Project .......................................................28 Water Sector Investment Project ...............................………………………........………….30 Enviromental Services Project ................................................................................32 Albania: Strengthening Supervision Capacities Of The Albanian Financial Supervisory Authority...................................................................33 Albania: Extractive Industries Transparency Initiative (EITI) Post-Compliance Grant I....34 Albania: Integrated Planning System Multi Donor Trust Fund (IPS2)..……...……………..36 IFC projects 37 Albania: Kurum International..………………………………………….........………………38 Albania: Union Bank…..........……………………………………….........…………………40 Albania: Bankers Petroleum………………………………………….........…………………41 Albania: Credins Bank …………………………………….......…….........…………………42 Albania: Antea Cement …………………………………….......…….........…………………43 Albania: IFC Residential Energy Efficiency Project Albania (REEP)..........…......………44 Albania: Debt Resolution…………………………………………………………........……..45 Albania: IFC Balkan Renewable Energy Program (BREP).......………………….......……46 Albania: Southeast Europe Tax Transparency And Simplification Program.........……….48 Albania: PPP Operation And Maintenance Of Milot Morine Highway.......……....………50 Albania: Enso Hydro Energji………………………………………………………........……52 MIGA projects 53 Albania: Giorgi Alfo sh.p.k.……………………………………………………..........………54 Albania: Energji Ashta sh.p.k………….……………………………………….........………56 Albania: ProCredit Group Central Bank Mandatory Reserves Coverage……......….……..57 Albania Program Snapshot - 2015 Recent Economic and Sectoral Developments Albania’s growth indicates signs of recovery since Economic Sentiment Indicator (R) and Real GDP growth (L) the global economic crisis. The country’s growth suf- fered from the Eurozone crisis, in particular in neighboring Italy and Greece. Exports, remittances, and to some extent foreign direct investment (FDI) fell and were the main channels of the external shocks on the economy. Growth reached its lowest rate of 1.4 percent in 2013, as consump- tion shrank, investments stagnated, and fiscal and financial vulnerabilities came to the fore. Thanks to an increase in domestic demand supported by sound fiscal policies and Source: Bank of Albania, INSTAT structural reforms, growth is estimated to have picked up to 2.1 percent in 2014, due also to an increase in consumption and private investments. Growth is expected to increase GDP in 2009 to 35.0 percent in 2013 and imports changed gradually over the medium term but will remain signifi- little as a share of output. The downward trend in the CAD cantly below its precrisis levels and its potential. Growth is is expected to have reversed in 2014 and reached 14 per- projected to rise to 3 percent in 2015 and 3.5 percent in cent of GDP. Despite this expansion, financing has been 2016 supported by an increase in FDI. Domestic private in- available through debt and equity in the financial account. vestment is also expected to gradually pick up in response External debt has increased since 2009 but remained at a to an arrears clearance and credit expansion, as well as sus- manageable 36.7 percent of GDP in 2014. tained improvements in the business climate. Inflation remains low on account of a negative out- Large external imbalances gradually corrected, but put gap and low external inflationary pressures. The external vulnerabilities remain. The current account Bank of Albania (BoA) maintains an inflation-targeting deficit (CAD) declined from 15.9 percent of GDP in 2009 to monetary policy and a flexible exchange rate regime with 10.6 percent in 2013, as exports grew from 28.4 percent of relatively little intervention. Despite a long record in main- Page 6 taining an inflation rate remarkably close to the target in the fall below 60 percent by 2019, as sustained fiscal consoli- past decade, monetary policy is now facing the constraints dation combined with solid GDP growth is expected to put of declining global prices, a persistent negative output gap, public debt on a steep downward trajectory. This path is, and low labor demand, despite substantial monetary policy however, vulnerable to changes in the fiscal policy stance, easing. In January 2014, BoA’s policy rate reached a historic GDP growth, financing terms, and the exchange rate, as minimum of 2 percent. Yet, the full transmission to cred- well as the realization of unexpected contingent liabilities it markets has been weakened due to the high euroization, from the energy sector. high risk premiums, and sluggish credit demand. The lek (local currency) exchange rate against the euro has changed Fiscal Revenues Expenditures (L) and overall balance as % of GDP (R) little since 2011 and appears broadly in line with funda- mentals. Fiscal Performance The Government of Albania is currently implement- ing a number of reforms with the aim of reducing ri- gidities in public spending and freeing up resources for more efficient spending. Public debt has surged since Source: Ministry of Finance; World Bank staff calculations 2008, reaching 71 percent of GDP in 2014. The increase in public debt resulted from loose fiscal policy, the need to The energy sector poses significant fiscal risks. support the state-owned power generation company, and About 98 percent of Albania’s energy is generated from hy- external shocks. At the end of 2012, the parliament revoked dropower. Recurrent energy shortages due to fluctuations in the 60 percent of public debt-to-GDP limit, without replac- rainfall, persistently high distribution losses (about 43 per- ing it with any other fiscal or debt anchor. In 2013, public cent in 2013), and regulated tariffs below energy costs have debt increased further, reaching 70.2 percent of GDP, as resulted in sustained fiscal support from the Government government arrears to the private sector of 5.2 percent were in the form of guarantees for power imports and liquidity recognized. The fiscal consolidation program that began in injections to the energy generation company KESh. In the 2014 and is included in the medium-term fiscal framework distribution sector, low collection rates from households, contains a reduction in the public debt-to-GDP ratio start- businesses, and public institutions have contributed to the ing in 2015. The fiscal deficit reached 5.6 percent of GDP financial woes of the publicly owned distribution company in 2014, including a repayment of arrears of 2.4 percent of (OShEE), which faces an unfunded deficit of US$550 mil- GDP. The annual budget law for 2015 has introduced fiscal lion. In February 2015, the Government prepared a Pow- measures on both the revenue and expenditure sides, which er Sector Financial Recovery Plan, the implementation of suggests a further narrowing of the fiscal deficit to 4.8 per- which is supported by the World Bank–financed Energy cent of GDP in 2015. Albania’s public debt is projected to Sector Recovery Project. Albania Program Snapshot - 2015 The World Bank supported the design of the Public decline is expected in the future as the repayment of arrears Financial Management Strategy, which is also serving advances. However, progress to date in cleaning up these as the platform for European Union (EU) budget support. troubled loans has been limited. Meanwhile, during 2015, The recently approved Policy-Based Guarantee aims espe- banks are expected to write off considerable chunks of old, cially at improving macro and fiscal stability. dated NPLs to comply with BoA rules that require manda- tory write-offs of loans classified in the “lost” category for more than three years. An economic recovery, clearance of Financial Sector arrears, and reform of the bankruptcy law would help fa- The financial sector continues to face important cilitate private balance sheet restructuring and revive loan risks, especially external ones, but it has remained demand. stable and recently has shown improving trends. The outstanding credit contracted by ALL 3 billion in the first Despite the large NPLs, banks remain sound, with an quarter of 2014. Overall lending contracted by 1.7 percent overall capital adequacy ratio of 16.8 percent at the in annual terms during the second quarter of 2014. Lend- end of 2014. The banking sector remained profitable, as ing increased during the second half of 2014, reaching an the return on assets at the end of the same period recorded annual growth of 2.2 percent as of the end of the year. The a positive result of 0.89 percent, while the return on equity BoA further cut the key interest rate in January 2015 to a reached 10.5 percent. record low of 2 percent. As a consequence, during 2015, in- terest rates continued to fall. The exchange rate to the euro has remained stable. However, as monetary and financial Unemployment and Poverty conditions have improved, lending and demand for mon- Albania’s strong economic performance prior to etary assets have remained low. Widespread euroization, 2008 was accompanied by positive changes in em- weak demand, and banks’ risk aversion (due to high non- ployment and a strong reduction in poverty rates. The performing loan [NPL] levels) hamper the transmission of poverty rate, measured by national standards, decreased monetary policy. The Greek economic and debt crisis pose from 25 percent in 2002 to 12 percent in 2008, and rural significant risks to Albania as well. poverty dropped by an even more impressive rate from 40 to 15 percent over the same period. As of early 2015, the outstanding NPL portfolio was 22.8 percent, a slight improvement from the 23.5 per- However, the effects of the global and Eurozone cri- cent at end-2013 and the 24.9 percent in September ses and sluggish growth appear to have modestly re- 2014. Several legal and administrative measures supported versed the poverty trend. Labor markets and transfers— by the World Bank and the International Monetary Fund public and private—have been key channels for impacts on (IMF) have been taken up by the authorities to address the living standards. The Living Standards Measurement Study expedition of NPL resolution. The repayment of arrears so (LSMS) data for 2012 indicate that the poverty rate has far has not significantly influenced NPL reduction, but a increased to 14.3 percent since 2008. The extremely poor Page 8 population, defined as those with difficulty meeting basic There has been progress on setting up a social safety nutritional needs, increased from 1.2 percent in 2008 to 2.2 net for the poor. Further measures are planned to improve percent in 2012. Extreme poverty has increased for both ur- equity, efficiency, transparency, and effectiveness in the use ban and rural areas. This development is also supported by of resources for social protection. Ndihma Ekonomike Labor Force Survey data on employment, which show that (NE) is the main poverty-oriented cash benefit social 27 percent of Albanian households had at least one member assistance program, providing a monthly cash allowance to who had lost a job versus a Europe and Central Asia (ECA) approximately 7.3 percent of the population (about 100,000 average of 18 percent. Available data on the unemployment households) on the basis of a means test. Overall spending rate indicate that it increased from 12.5 percent in 2008 to on social assistance is comparable to other countries in the 18 percent in 2014, with the lack of jobs being more pro- region (about 1.7 percent of GDP), but the composition has nounced in vulnerable groups such as youth and women. gradually shifted away from benefits targeted to the poor. The persistent output gap and strains in the labor market The relative balance in spending on the NE and disability are also reflected in the declining trend of the labor force assistance has shifted significantly over time in favor of participation rate. The increase in poverty was partly miti- disability benefits, crowding out resources for NE. Only gated by income from pensions and social transfers. about one-quarter of total spending on social assistance in Albania Program Snapshot - 2015 Albania (1.6 percent of GDP) is devoted to NE (0.4 percent Government’s implementation of reforms to improve the of GDP). The poorest 20 percent of the beneficiaries receive equity and efficiency of cash-based social assistance as well 56 percent of all NE transfers, while in the best performing as disability programs. Under the equity objective, improv- social assistance programs in the ECA region, at least 80 ing targeting and coverage is a key component of the re- percent of benefits reach the poorest 20 percent of the forms in both programs. population. The Government, with World Bank support, has initiated reform of the program to improve its link to poverty, in terms of both transfers from the central level to Health Sector the municipalities and the selection of beneficiaries at the The access to and quality of health services have municipality level. been improving, but more needs to be done to en- sure universal access by poor households. Albania The Bank is supporting social protection in Albania spends about 2.6 percent of GDP on health care, substan- through the ongoing Social Assistance Moderniza- tially lower than that spent by other countries with compa- tion Project, which is supporting social assistance and rable income levels. As a result of low public sector spend- disability reform. The project is providing support to the ing, out-of-pocket expenditures at the point of service Page 10 account for about 60 percent of sectoral funding. The high and wide-ranging education reforms have been initiated in level of direct household spending indicates that the exist- recent years, including: curriculum reform; improved teach- ing health financing system offers limited protection to the er training; a more equitable distribution of resources across population against catastrophic illness or injury and allows regions; improved learning conditions; an increase in average for little redistribution of resources to protect the most vul- teacher salaries; and a revamping of the content and adminis- nerable groups from health shocks. The economic barrier tration of the Matura examination. Going forward, the Gov- to accessing quality services by the poor is exacerbated by ernment could consider incorporating more reforms that spe- the lack of total health insurance coverage. The Govern- cifically target the poorest and most vulnerable children. ment is working to develop a health-financing policy that will address these problems, which will be informed by an Major higher education reforms have also been initi- ongoing regional Bank study on health financing. ated. In higher education, the focus has been on the adop- tion of the Bologna process for a modular education that is The Bank is currently supporting the health sector compatible across Europe. To this end, the Bank is provid- in Albania through a recently approved project on Health ing technical assistance to review the revised legal frame- System Improvement, which is focused on improving the work, conduct a functional review and then advise on the efficiency and quality of health care. The project seeks to creation of new management structures in higher educa- strengthen the management and governance of public hos- tion, and recommend administrative procedures to imple- pital services, improve health financing arrangements, and ment the provisions of the new law on Higher Education. establish health information systems. The challenge in Albania is to enhance the quality and relevance of the education and training system to Education and Skills Development improve labor market outcomes for current workers, Albania has significantly increased access to all lev- while ensuring that learning outcomes are translated into els of education. Primary and lower secondary en- the relevant skills needed in the labor market. To improve rollment are nearly universal, and between 2009 and skills and jobs prospects, Albania may consider establishing 2013, preprimary net enrollment shot up from 47.4 to 73 reliable channels of labor market information for informed percent and upper secondary enrollment from 76 to 92 per- policy and programmatic reforms and enhancing the quali- cent. However, the poorest quintile have lower education ty of employment services for unemployed workers. attainment compared to the wealthiest quintile, limiting these groups’ access to economic opportunities and the po- The Bank’s Early Childhood Development Systems tential assets base of the country. Approach for Better Education Results report high- lights the importance of developing good cognitive and so- The importance of education and skilled labor for cio-emotional foundation skills as a basis for the lifelong ac- individuals themselves and for economic develop- quisition of technical skills. A more streamlined approach ment is well recognized in Albania. As a result, major to early childhood development (ECD) would be beneficial. Albania Program Snapshot - 2015 Going forward, it will be important for Albania’s edu- mercial, and competitive sector, while fostering alter- cation reform efforts to focus on developing “21st- native income opportunities for rural residents exiting the century skills” among its students and to do so in a sector. Competitiveness can be improved through increased way that is evidence-based and linked to labor market productivity and higher-quality products. At the same time, needs. Gaps exist in understanding the constraints that hin- agriculture policy reform should be conducted within the der a well-functioning labor market in Albania. A compre- context of current and future EU requirements, including hensive approach will be required to identify both supply harmonization with EU legislation and standards. and demand side constraints. Following the Education Ex- cellence and Equity Project, cofinanced by the World Bank, The Bank has supported agriculture in Albania future Bank engagements, whether analytical or investment through investments in irrigation, exposure to new oriented, will require a multi-sectoral approach, as well as technologies and practices, and improved access to close collaboration between key ministries, including the quality market facilities, and also through piloting a small Ministry of Education and Sport and the Ministry of Social grant program that was subsequently scaled up by the Welfare and Youth. Government. Currently, the Bank is financing the Water Resources and Irrigation Project (WRIP), which aims to es- tablish a strategic framework to manage water resources at Agriculture the national level and in the Drini-Buna and Semani river Agriculture is a main source of employment and in- basins, and to improve sustainably the performance of irri- come in the rural areas, contributing 21 percent to gation systems in the project area. GDP in the country and representing 43.3 percent of the workforce (data for 2014). Albania’s farming sector has been dominated by small private holdings since the col- Environment lapse of the communist state in 1991, when peasant farmers The Government of Albania is implementing a disbanded the quasi-state collective farms. There are cur- wide range of policies in the field of environmental rently a total of some 324,000 agriculture holdings, each protection and natural resource management, with an average of (roughly) only 1.1 hectares of field crops moving its respective laws toward a gradual approximation in four plots. In addition to field crops, about 70 percent of of EU environmental legislation. Challenges include limited farms also have livestock. Over the past 10 years, there has enforcement, due to the weak capacity of the environmental been a slight downward trend in the total area devoted to authorities at both the central and regional levels, and a lack field crops, with a major decrease in cereals, partly compen- of resources for monitoring and ensuring full compliance sated for by an increase in areas under forage and, to a more with environmental standards. limited extent, vegetables. The Bank has helped to preserve the important nat- The challenge is to transform agriculture from sub- ural and environmental assets of Albania and to fos- sistence-oriented production into a modern, com- ter local economic growth through a number of proj- Page 12 ects, in partnership with the Global Environment Facility coastal environmental infrastructure in the Saranda and (GEF) and other development partners. A new project on Himara municipalities and helped to clean up a densely Environmental Services aims to improve and promote the populated area of 280 hectares in Porto Romano from the value of ecosystem services, in partnership with the Swed- legacy of an old chemical factory south of Durrës that pro- ish Government and GEF. Through biomass regeneration, duced pesticides. forest-dependent communities successfully participated in the pilot BioCarbon Fund program, reducing greenhouse gas emissions and obtaining additional resources for local Transport needs. The expansion, improvement, safety, and manage- ment of the road network are critical to Albania’s The Integrated Coastal Zone Management Project development. With support from several development supported the improvement of critical public envi- partners, the condition of the road network has been im- ronmental infrastructure and municipal services of the proving. The road network in Albania is a key asset in sup- southern coast and also a reduction in environmental and port of growth and job creation. Currently, its management, health risks from industrial pollution. It also supported financing, and development face several key challenges. Albania Program Snapshot - 2015 Roads in Albania constitute one of the highest asset values, tion losses that require significant power imports is adding estimated at about US$6 billion, with substantial increases financial stress to the sector and the economy. The retail over the past decade. As such, the sector requires sufficient tariffs do not fully reflect the sector cost structure, which, budget to sustainably manage and operate the road assets, combined with low collection rates and high arrears, has and a program to address the highest priority maintenance meant that the power sector is not able to be financially requirements of the 3,400 kilometers of national roads self-sustaining. needs to be funded and implemented. During the past four years, 2011–14, the reliability of Within the transport sector, the primary emphasis supply has deteriorated, and the level of losses and has been on developing the national network, but debt in distribution has affected the sector signifi- these investments have not been adequately maintained. cantly. The hydrological situation improved in 2013 and Current transport sector priorities within the draft Nation- 2014, but the security of supply remains an issue, as de- al Strategy for Development and Integration (NSDI) 2014– mand increases and weather patterns vary from one year 2020 include a strong focus on the construction, rehabilita- to the next. tion, and management of the national road network. Albanian Power System 2001–14 (Supply and Generation in GWh) The World Bank will support road maintenance under the recently approved Results-Based Road Mainte- nance and Safety Project (RRMSP), which will include the development of strategies that can be used to inform future road maintenance management and sector invest- ments and to support increased transparency in public in- vestment management in the transport sector. This project will contribute to providing regional opportunities for sus- tainable sources of employment and income for the poor, Source: The World Bank. especially in rural communities, where poverty is highest. By the end of 2014, the Government had initiated a vigorous and ongoing outreach and enforcement Energy program to reduce the theft of electricity and improve The electricity sector is facing a number of systemic revenue collections. As a result, the situation improved challenges that leave the country vulnerable to sup- and in 2014, losses reached 38 percent compared to 45 per- ply disruptions and mounting contingent liabilities. cent in previous years. However, the cost of distribution The combination of total dependence on hydropower gen- losses remains the same, amounting to US$200 million. The eration and its vulnerability to weather patterns, the lack collection rate improved 90 percent in 2014, but the accu- of self-generation capacity, and the high level of distribu- mulated arrears reached US$650 million (including some Page 14 netting off). New tariffs were approved by the Energy Regu- Further efforts are needed to restore the sector’s fi- latory Authority (ERE), abolishing the two-tier tariff struc- nancial viability and to ensure that losses, arrears and bad ture for households and introducing a cost-reflective tariff debt are diminished to sustainable levels, not only to reduce for all categories of consumer starting in January 2015. pressures on the budget but also to enable a higher secu- rity of supply. The World Bank is supporting these efforts Energy sector reform will contribute positively to through a US$150 million Power Recovery Project, which poverty reduction and shared prosperity by helping will assist and support Albania’s power sector reforms, par- to sustain growth and reduce fiscal risks. Higher elec- ticularly efforts to improve the reliability of the electricity tricity tariff collection could, however, have a negative effect supply and the financial viability of the sector. on poor households, which could be mitigated by adjusting the energy subsidy to the poor. The Government has accepted A Power Sector Financial Recovery Plan was ap- its responsibility to subsidize vulnerable households against proved by Government in February 2015. The effec- any change in price for the monthly quantity of 300 kilowatt tive and consistent implementation of this plan could turn hours (kWh) and has approved subsidies in the amount of around the power system within the financing package ALL 1.7 billion for the 214,000 customers in this category. agreed with the IMF and make it self-sustaining by 2018. Albania Program Snapshot - 2015 The plan could also ensure that the fiscal risk posed by the IFC has assisted the Albanian Government on con- sector is progressively reduced. Steps are being taken by the cessioning and investing in medium-sized hydro- Government to reduce the country’s vulnerability, such as power plants and, via an ongoing Balkans Renewable En- supporting short-term complementary power imports to ergy advisory program, is helping the Government to draft maintain adequate reservoir levels in the Drin Cascade, en- a new renewable energy law to enable the private sector to hancing cross-border capacities with the construction of an develop and construct feasible plants. interconnection line to Kosovo, recommissioning the Vlora thermal power plant, etc. Private Sector Development The World Bank’s engagement in the energy sector, Improving the business climate has been an import- done in close collaboration with the International Fi- ant priority for Albania. One area of concrete progress is nance Corporation (IFC), has included support to put the the legal and regulatory framework for business, which has energy sector on a financially sustainable path, with a view been substantially overhauled and modernized. to gradually shifting to market liberalization. Ensuring an adequate supply of energy is critical to improving the busi- Despite progress in these reforms, challenges in ness environment. The World Bank Group is also leading a the regulatory environment remain. Albania’s relative program to strengthen the safety of the dams on the Drin standing in the ease of doing business in the Doing Business Cascade, together with the European Bank for Reconstruc- 2015 report has increased to 68th, representing a significant tion and Development (EBRD), the Swiss State Secretariat improvement compared to Doing Business 2014, where the for Economic Affairs (SECO), and the German Develop- back-calculated position was 108th. Albania’s 2015 distance ment Bank (KFW). to frontier score is 66.0, while its 2014 back-calculated score was 59.8. IFC is fully engaged in continuing cooperation to facilitate improvements in the Doing Business indicators. Distribution Activity Performance 2001–14 IFC activities are expanding in Albania. Priorities in- (Supply, Losses, and Billed Consumption in GWh) clude crisis response, climate change, and improvements in the investment climate and real sectors. IFC is also focusing its investment services in Albania on increasing access to finance by supporting the development of local financial institutions, especially those that concentrate on small and medium-sized enterprises (SMEs). Across all sectors, IFC prioritizes investment in Albania’s less-developed regions and in projects that contribute to greater economic diversi- fication and regional integration. IFC’s committed portfolio Source: The World Bank as of December 2014 was about US$310 million, 56 percent Page 16 of which is allocated in the general manufacturing sector, Governance and Public Sector 41 percent in infrastructure, and 3 percent financial sector. Management IFC’s advisory services in Albania aim to improve the in- Public sector performance is crucial to the country’s vestment climate, the performance of private sector com- ambition to gain EU membership. A coordinated sup- panies, and access to finance and to attract private sector port effort (IMF-World Bank-EU) has been especially fo- participation in the development of infrastructure projects. cused since the start of 2014 on improving public financial management, including the budget framework and treasury IFC is mobilizing funds, especially for private partici- system. The Government has articulated its key priorities of pation in infrastructure through its advisory services. accelerating growth and development and improving pub- It has been using its Public-Private Partnership Transaction lic services by making services more transparent and citi- Advisory to facilitate privatization/concessioning and pro- zen centric. A Delivery Unit (DU) that was established in vide financial support for public-private partnership (PPP) December 2013 at the Prime Minister’s Office is providing transactions for hydropower privatization, road operation daily monitoring support on the progress of the Govern- and maintenance, and health services. The highway Mi- ment’s top priorities. The Bank has been providing support lot-Morine is currently in the process of concessioning to to the DU, and further support for the Government pro- strategic investors with experience in this area. IFC has gram “Innovation against Corruption” is anticipated under been providing its advisory support to further improve the the proposed Citizen-Centric Service Delivery Project. The investment climate in line with the country’s overall EU project will focus on improving government-citizen inter- accession aspirations. IFC’s investment climate program in face, including front office reform and the establishment of Albania also includes tax simplification, trade logistics, debt the one-stop shop, as well as improvements in the informa- resolution projects, and trade and competitiveness. IFC has tion provided to and communications with citizens. been working toward an integrated approach to business climate reforms through activities promoting energy effi- In partnership with several development partners, ciency, renewable energy, tax simplification, the facilitation the Bank is supporting a number of programs. Cur- of trade across borders, and key Doing Business indicators. rently there are seven active Recipient-Executed Trust IFC’s residential energy-efficiency and renewable energy Funds amounting to US$12.5 million focused on natural projects are contributing to that goal. IFC is also providing resources, an integrated planning system, public sector corporate governance advice in Albania; it has supported accounting, and the extractive industries. A set of import- the establishment of the Corporate Governance Institute of ant trust funds are in the pipeline to support accounting Albania and helped in drafting the first National Corporate standards and strengthen the supervision capacities of the Governance Code. financial supervisory authority. Albania Program Snapshot - 2015 The World Bank Program in Albania Since Albania joined the World Bank in 1991, the of the semi-annual Regular Economic Report (RER) for Bank’s overall financing to Albania is estimated at US$2.1 South-Eastern Europe was launched in January 2015, and billion, including trust fund resources managed by the a Public Finance Review is being finalized. Analytical work World Bank. and technical assistance are being provided, often through regional programs, on the financial sector, public financial The Bank Group Country Partnership Strategy (CPS) management, corporate accounting, poverty monitoring, for 2011–14 focused on three strategic objectives: (i) pension reform, the energy sector, and water utilities. supporting Albania’s economic recovery and growth; (ii) broadening and sustaining Albania’s social gains; and (iii) The current portfolio consists of eight projects total- reducing vulnerability to climate change and natural disas- ing US$450 million in International Development Associa- ters. A total US$442 million of International Bank for Re- tion (IDA) credits and IBRD loans. The portfolio has been construction and Development (IBRD) commitments was consolidating significantly in the past few years, from 18 approved during this CPS period. During FY15, a Power projects at the end of FY09 to six projects by FY14, with the Sector Recovery Project (US$150 million), Health System average size of the project increasing from US$17 million Modernization Project (US$40 million), Road Safety and to US$56 million per project. In order to further improve Maintenance Project (US$80 million), and a Policy-Based performance and results, a number of steps are being tak- Guarantee (US$200 million) have been approved. en in collaboration with the Government to streamline the portfolio, restructure projects, and conduct regular portfo- The Bank Group is now finalizing the next five-year lio performance reviews. Country Partnership Framework (CPF)  for Albania covering 2015–19. It was preceded by a Systematic Coun- Engagement and partnership are cornerstones try Diagnostics (SCD) that identified the key constraints of the World Bank Group’s support to Albania. The on and opportunities for Albania’s growth and also with World Bank engaged in a very extensive consultation pro- regard to reducing poverty and boosting shared prosperity. cess during the preparation of the SCD and the new CPF. Extensive in-country consultations were conducted during Consultations took place with representatives of the Gov- the preparation of the SCD and the CPF. The new CPF an- ernment, parliament, development partners, local author- ticipates deepening World Bank Group engagement in the ities, the private sector, and civil society at the central and priority areas identified in the SCD and the Government’s local levels. The Bank office in Tirana has also been promot- draft National Strategy for Development Integration. ing the Open Data Initiative by undertaking several tours to Analytical and Advisory Program. The latest issue universities across the country. Page 18 ibrd projects Albania Program Snapshot - 2015 ibrd projects Albania: Social Assistance Modernization Project Key Dates Financing in million US Dollars: Approved: April 3, 2012 Financier Financing Effectiveness: October 31, 2012 IBRD Loan 50.00 Closing: June 30, 2017 Government of Albania 147.82 Total Project Cost 197.82 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IBRD Loan 50.00 15.00 35.00 * as of June 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The objective of the Social Assistance Modernization Pro- Results achieved ject for Albania is to support the country’s implementation XX The training of social administrators on improved NE of reforms to improve the equity and efficiency of its social eligibility criteria (i.e., Unified Scoring Formula) was assistance programs. The project, which has a results-based completed successfully and marks the achievement of design, consists of two components: the first Disbursement Linked Indicator (DLI) for the (1) Strengthening the implementation and performance project. of social assistance programs. The objective of this compo- XX To date, four more DLIs have been achieved, including: nent is to support the results from improvements in the main (i) screening of more than 80 percent of NE beneficiaries social assistance programs. The component will support in three pilot areas (Tirana, Elbasan, and Durres), based improved implementation of both the Ndihma Ekonomike on the new Scoring Formula; (ii) developing and testing (NE) program and disability assistance benefits in the main the NE management information system (MIS) in the areas identified in the broad roadmap for reforms: (a) pro- three pilot areas; (iii) using an automated system by local gram parameters (eligibility criteria and intake processes); government units in the three pilot regions to process NE (b) benefits administration (business processes, manage- applications, benefits, program enrollment, and payment ment of information, payment mechanisms, and reporting orders; and (iv) ensuring information cross-checking of and monitoring); and (c) oversight and controls. the NE MIS with at least seven government information (2) Providing technical assistance to strengthen the im- systems (i.e., tax registry, employment, civil registry, etc.), plementation capacity of social assistance programs. The which will provide lessons for further refinement. objective of this component is to strengthen the capacity for XX Activities for the design of disability assistance reforms implementing improvements in the delivery of social assis- have been initiated. A policy paper on reforming key tance benefits. This component will finance select technical pillars of the disability system has been developed and is assistance and investment activities. currently awaiting approval. Key Partners: The Bank team works closely with the Ministry of Social Welfare and Youth. Key Development: Partners: European Union (EU). Page 20 Albania Program Snapshot - 2015 ibrd projects Albania: Health System Improvement Project Key Dates Financing in million US Dollars: Approved: February 27, 2015 Financier Financing Effectiveness: Not yet effective IBRD Loan 40.00 Closing: February 28, 2021 Government of Albania 5.00 Total Project Cost 45.00 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IBRD Loan 40.00 0 40.00 * as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The proposed Project Development Objective (PDO) b. improving monitoring and management of service is to contribute to improving the efficiency of care in se- quality and efficiency through the establishment of a lected hospitals in Albania, improving the management of health management information system and a medical information in the health system, and increasing financial equipment management and maintenance system; and access to health services. c. reforming the health financing and provider payment In order to improve the access and efficiency of health care systems, improving the capacity of the Health services in Albania, the project will support: Insurance Fund (HIF) for strategic purchasing, a. reforming the hospital sector by creating a sound strengthening systems for the efficient purchasing/ legal framework and management structure for distribution of pharmaceuticals and medical supplies, efficient service provision, strengthening performance and assessing options to expand insurance coverage management and planning, overcoming operational within the available fiscal space. constraints in service delivery, supporting the rationalization of the hospital network, and Results Achieved: strengthening the referral system; Project signed, not yet effective Key Partners: The Bank team works closely with the Ministry of Health. Key Development Partners: The Swiss Agency for Development and Cooperation (SDC) and the Austrian Development Cooperation (ADC). Page 22 Albania Program Snapshot - 2015 ibrd projects Albania: Integrated Coastal Zone Management and Cleanup Program Key Dates Financing in million US Dollars: Approved: June 29, 2005 Financier Financing Effective: November 25, 2002 IDA Credit 18.05 Restructured: March 22, 2010; November 2012 Government of Albania 5.71 Closing: March 31, 2015 Other Donors (Dutch Gov’t) 3.11(closed) Other Donors (Japanese Gov’t) 2.23 Other Donors (Austrian Gov’t) 2.60 Other Donors (EC) 1.8 (closed) Other Donors (GEF) 0.95(closed) Total Project Cost 34.45 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IDA Credit 17.50 16.00 1.50 * as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. In 2002, Albania embarked on an integrated coastal zone Results achieved management initiative to protect the coastal area for XX The Southern Coast Development Plan and a current and future generations and formally adopted the regulation was approved in July 2008, following a principle recommendations of the Barcelona Convention dialogue with stakeholders from the central, regional, for Protecting the Mediterranean Sea. The project plays a and local levels. catalytic role in mobilizing development assistance and XX The cleanup of the Porto Romano hotspot was improving the environmental and sanitary conditions completed in 2013, with more than 45,000 cubic essential for long-term coastal development and tourism. meters of hazardous waste safely disposed of and The Project Development Objective is to assist the encapsulated, thus protecting the population of Porto Government of Albania in developing, on a sustainable Romano from health hazards. basis, tourism on the South Albania coast by improving XX Phase one of the Coastal Village Conservation critical public environmental infrastructure and and Development (CVCD) program, completed in municipal services, remediating and containing pollution 2010, supported village infrastructure investment in hazards from a former chemical plant in Porto Romano three coastal municipalities and 12 coastal villages, near Durrës, improving community infrastructure, and including: a new water supply system serving more enhancing architectural and cultural resources. The than 400 families in Gjilek; the rehabilitation of project was restructured in 2010 and 2012. the water supply system for 167 families in Vuno; Page 24 Key Partners: The Ministry of Urban Development and Tourism is responsible for overall project coordina- tion and management; the Ministry of Environment is responsible for cleanup of the hazardous hotspot near Durrës; the Coastal District and Municipal administration, village councils in coastal communities, and local non- governmental organizations (NGOs). Key Development Partners include the Governments of the Netherlands, Austria, and Japan, the Euro- pean Commission, and the Global Environment Facility. the provision of water supply for 315 families in improvements, such as access roads and squares Piqeras; the construction of a 1.3 kilometer access and water supply systems in 12 villages in Saranda road in Orikum for daily tourists and residents; the and Himara municipalities. A pilot roof and facade construction of a 1.2 kilometer access road serving rehabilitation program and support for small bed and 132 families and tourists in Palasa; the construction breakfast investments were implemented in selected of pedestrian paths in vernacular stone providing villages. pedestrian access to 500 residents and tourists in XX Major infrastructure works completed by the end of Dhermi; and the landscaping and upgrading of a December 2014 include: (i) the rehabilitation of the 2.6 kilometer scenic road to the Monastery of Saint Saranda Gateway-Passenger Terminal, which resulted Theodhor in the Gjipe Canyon and a 0.6 kilometer in the improved capacity of the port to receive large pedestrian access road to the Borshi castle for visitors cruise boats and port surface infrastructure.; (ii) the and pilgrims. construction of a regional sanitary landfill in Bajkaj- XX Phase two of the CVCD program was completed Palavli; and (iii) the rehabilitation of the water supply in August 2014 and included village infrastructure and sewage system in the tourist area of Saranda. Albania Program Snapshot - 2015 ibrd projects Albania: Energy Community of Southeast Europe APL 5 - Albania - Dam Safety Project Key Dates Financing in million US Dollars: Approved: June 30, 2008 Financier Financing Effective: December 16, 2008 IDA Credit 35.30 Closing: December 31, 2016 IBRD Loan 21.60 KESH 8.70 Other Donors (SECO) 7.40 Other Donor (EBRD) 16.50 Other Donor (KfW) 20.50 World Bank Disbursements, million US Dollars*: Total Project Cost 110.00 Total Disbursed Undisbursed IDA Credit 35.30 21.73 10.51 IBRD Loan 21.60 0.30 17.10 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The last Albanian hydropower dam was completed in the EU through the implementation of priority investments mid-1980s. These major infrastructure facilities have been supporting electricity market and power system operations inadequately monitored and maintained for more than 15 in electricity generation. The project will contribute to years, and there may be risk of dam failure. A “Dam Safety safeguarding the major hydroelectric dams of Albania and Survey for Hydropower Plants Located on the Drin and improve their operational efficiency, and also enhance the Mat River Cascades,” funded by the Swiss State Secretariat stability of the power supply for the regional electricity of Economic Affairs (SECO), was completed in 2006. The market. The project will help Albania to maximize its benefits report identified serious deficiencies and concluded that “the from existing hydropower by improving the operational present state of dam safety is uncertain, and a disaster could practices of existing facilities and enabling more effective be considered as possible, if matters are left to deteriorate participation in the regional electricity market. The project further.” Support for Albania’s hydropower will also improve will also promote private sector investment in hydropower the country’s overall hydropower operation. The improvement by collecting, organizing, and making available better data of dam storage capacity can provide considerable benefits for and studies on the country’s hydropower potential. the Southeast Europe electricity grid and promote economic efficiency in the regional market. Results Achieved The Project Development Objective is the development of a The project has achieved several intermediate outputs: functioning regional electricity market in Southeast Europe XX The Dam Safety Expert Panel was selected and has been and its integration into the internal electricity market of the active since 2009. Page 26 Key Partners: Ministry of Energy and Industry and the Albanian Power Corporation (KESh), the implement- ing agency of the project. Key Development Partners include the Swiss Secretariat for Economic Affairs (SECO), the European Bank for Reconstruction and Development (EBRD), and the German Development Bank (KfW). XX An assessment of rehabilitation works at Drin River EBRD, are progressing. Hydropower Cascade in light of the flooding in early and XX The Designed Flood Study of the Drin River was late 2010 has highlighted the urgent need to expand the presented. Technical assistance for the Prefeasibility scope of these efforts and provide additional investment and Feasibility Study and for the Preparation of Tender to scale up the project’s impact and achieve development Design and Technical Specifications for Providing Safe objectives. Additional Financing was provided and major Flood Management of Drin Cascade is contracted and rehabilitation work has been started. progressing. XX The Geological, Seismic, and Geodetic Monitoring are XX Technical assistance for strengthening the institutional completed in three dams in Drin River; the rockfall setup of the Dam Safety and Emergency Preparation Plan danger protection in Fierza dam is completed and it is is contracted and progressing. under implementation in Komani dam; the stochastic XX There has been some delays in the package for the rockfall modeling is completed; rehabilitation of Spillway Gates and Stop Logs in three XX Rehabilitation works on the Komani hydropower plant, Drin River dams; the package is currently undergoing a started in July 2013, is progressing as per the agreed plan. restructuring and retendering process. The refurbishment and rehabilitation of the first unit are XX The development objectives contributing to the expected to be reassembled and completed in July 2015; safeguarding of the major hydroelectric dams in Albania XX The consolidation works for Komani scour area (the are progressing well, and the facilities affected by the rehabilitation of the dam toe and scour area), financed by safeguard measures have increased by 30 percent. Albania Program Snapshot - 2015 ibrd projects Albania: Water Resources and Irrigation Project Key Dates Financing in million US Dollars: Approved: November 29, 2012 Financier Financing Effective: May 13, 2013 IBRD Loan 40.00 Closing: May 31, 2018 Swedish Government 5.00 Total Project Cost 45.00 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IBRD Loan 40.00 4.10 35.90 Swedish TF 5.00 1.30 3.70 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The objectives of the Water Resources and Irrigation of local governments, drainage boards, and Water Project for Albania are to (i) establish a strategic framework Users Associations and also piloting public-private to manage water resources at the national level and in the partnerships in I&D service delivery through the Drini-Buna and Semani river basins, and (ii) improve, in a recruitment of third-party operators to deliver irrigation sustainable manner, the performance of irrigation systems services in three I&D pilot schemes. in the project area. 3. The Integrated Water Management Component will The project has four components. establish a strategic framework to manage water 1. The Dam and Irrigation and Drainage (I&D) Systems resources at the national level and at the level of the Rehabilitation Component will rehabilitate and Drini-Buna and Semani river basins. modernize I&D systems and dam infrastructure. 4. The Implementation Support Component will manage 2. Institutional support for the I&D component will project resources in accordance with the project’s improve the performance of organizations that provide objectives and procedures. irrigation services. This includes implementing institutional reforms and strengthening the capacity Page 28 Key Partners: The Ministry of Agriculture, Rural Development and Water Administration and the Ministry of Environment are responsible for overall project coordination and management; other partners include drainage boards, local governments, and river basin agencies and councils. Key Development Partner is the Government of Sweden. Results Achieved contract awarding and negotiations for preparing feasibility The project is being implemented by the Ministry of Agriculture, studies and detailed designs for the I&D investments; Rural Development and Water Administration (MARDWA), conducted short listing and prepared terms of reference and the Ministry of Environment (MOE). Project teams in both for the supervision of the rehabilitation of dams (including ministries have completed their project management staffing supervising their safeguards management plans); (manager, procurement, financial management, safeguards) and prepared detailed specifications to procure water and have launched a number of activities, including notably: monitoring equipment for the Drainage Boards. In the MOE: Advanced the tendering process for key In the MARDWA: Issued revised tender documents for a contracts, including preparation of an Integrated Water major international competitive bidding works contract for Resources Management Strategy (technical evaluation the rehabilitation of several dams (largest contract in the stage), preparation of a water resource database/cadastre project, tender documents needed lengthy preparations, and river basin management plans (short-listing stage), including preparing specific dam safety plans and obtaining rehabilitation works for river basin agencies, and project- approvals from the dams’ “Panel of Experts”); conducted wide monitoring and evaluation. Albania Program Snapshot - 2015 ibrd projects Water Sector Investment Project Key Dates Financing in million US Dollars: Approved: December 20, 2013 Financier Financing Effective: May 14, 2014 IBRD Loan 85.30 Closing: June 30, 2019 Total Project Cost 85.30 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IBRD Loan 85.30 8.40 76.90 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The objective is to: (i) improve the quality of water and pressure-reducing valves to reduce losses. wastewater services in the Durrës Water Utility Service Area; and (ii) improve the financial performance of the ii. Wastewater Network Investments will finance prior- Durrës Water Utility. The project components are: ity wastewater investments, including rehabilitation of critical parts of the existing sewerage system in Durrës i. Priority Water Supply Investments will finance six water City; construction of the secondary and tertiary sewer- supply production wells and a bulk water supply trans- age network in the Durrës Beach area; provision of high- mission pipeline that will provide up to 6.30 liters per powered sewer cleaning equipment for Durrës Water second (l/s) additional supply capacity in the Durrës Utility; and the strengthening of Durrës Water Utility’s Utility Service Area; ancillary investments, including initial ability to operate and maintain the new Durrës elevated reservoirs, linking municipalities/communi- wastewater treatment plant. ties within the Durrës area and along the transmission pipeline route to the water supply system; and priority iii. Institutional Development Program, Utility Strengthen- investments in the water distribution network in Durrës, ing, and Water Demand Management will support the including the provision of leak detection equipment and Government’s broad-based policy and reform agenda at Page 30 Key Partners: The Ministry of Transport and Infrastructure and the Durrës Water Utility are the main partners. the national level with specific interventions at the local supporting project investment technical reviews, as well level. Investments include design and implementation of as overall project supervision, monitoring, evaluation, a Water Demand Management Program; support to the and reporting. Performance Monitoring and Benchmarking Unit; prep- aration and implementation of a Performance Improve- Results Achieved ment Plan and other support for institutional strength- The project is in its initial phase of implementation. The PIU at ening of the Durrës Water Utility; Technical Analysis the Ministry of Transport and Infrastructure has launched the and Capacity Building, in particular with regard to en- procurement process, which is resulting in some delays for the ergy efficiency; and a dedicated annual financial audit of bulk water pipeline and associated investments, and the pro- the Durrës Water Utility. curement process for the supervision of these investments, as well as complementary activities to increase sewerage iv. Project Implementation Support will help implemen- connections and support the operation of the wastewater tation of the project, including salaries for Project Im- treatment plant. The Durrës Water Utility has also approved plementation Unit (PIU) staff, PIU operating costs, a new business plan that outlines how services and the utility’s provision of needed equipment, and consultant services financial situation will be improved over the next five years. Albania Program Snapshot - 2015 ibrd projects Enviromental Services Project Key Dates Financing in million US Dollars: Approved: July 8, 2014 Financier Financing Effective: January 29, 2015 IBRD Loan 10.00 Closing: June 30, 2019 Swedish Government 10.00 Global Environment Facility 2.88 Total Project Cost 22.88 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed IBRD Loan 10.00 0.20 9.98 * as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Project Development Objective (PDO) is to support The project has the following components: sustainable land management practices and increase com- Component 1. Strengthening institutional capacity to munities’ monetary and non-monetary benefits in the tar- improve environmental services for integrated landscape geted project areas that are mainly in erosion-prone rural management upland areas. Component 2. Preparing for the planning and provision This PDO is to be achieved through the support of alterna- of Instrument for Pre-Accession Assistance for Rural De- tive livelihoods, the provision of environmental services, velopment (IPARD)–like grants to improve land manage- and the sustainable utilization of wood and pasture prod- ment ucts in the long term. The project will particularly focus Component 3. Introducing payment for environmental on enhancing the financial, economic, and institutional services sustainability of land use and natural resource manage- Component 4. Supporting project implementation ment and on helping build the capacities of Albania farm- ers, community organizations, and government institu- Results Achieved tions to efficiently use EU funding. Achieved: N/A Key Partners: Ministry of Environment, Ministry of Agriculture, Rural Development and Water Administration. Key Development Partner is the Swedish Government. Page 32 Albania: Strengthening Supervision Capacities of the Albanian Financial Supervisory Authority Key Dates Financing in million US Dollars: Approved: November 2014 Financier Financing Effective: April 2015 IDA Credit - Closing: December 2017 Other Donors 2.00 Total Project Cost 2.00 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed Grant 1.85 0.00 1.85 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The development objective of the project is to support The project is expected to achieve the following results: the Albanian Financial Supervisory Authority (AFSA) in Result 1: AFSA is equipped with a comprehensive strengthening its capacities to supervise the investment supervision methodology and practices for investment funds sector and the issuance of corporate and municipal funds as well as related operational manuals and tools. bonds. The project is expected to cover two specific areas: Result 2: AFSA is better able to support the development Area 1: Develop the capacities of AFSA to supervise and of the corporate and municipal bonds market through an regulate the investment funds sector improved regulatory framework. Area 2: Develop the capacities of AFSA to prepare for the Result 3: The professional and human resources of AFSA to issuance of corporate and municipal bonds supervise capital market activities are strengthened through AFSA is the direct beneficiary of this project, while the on-site and off-site capacity-building activities. Government, as well the Bank of Albania, have a clear stake in the sound development of the non-bank financial Results Achieved markets. NA – project starts in April 2015. Key Partners: Albanian Financial Supervisory Authority. Key Development Partners: Swiss SECO. Albania Program Snapshot - 2015 ibrd projects Albania: Extractive Industries Transparency Initiative (EITI) Post - Compliance Grant I Key Dates Financing in million US Dollars: Approved: October 2013 Financier Financing Effective: February 2014 IDA Credit - Closing: June 2015 Other Donors 0.30 Total Project Cost 0.30 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed Grant 0.30 0.20 0.10 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Extractive Industries Transparency Initiative (EITI) Secretariat (AlbEITI) that leads the work on the preparation is a global standard that promotes revenue transparency of the Annual EITI reports. Albania was declared to be EITI and accountability in the oil, gas, and mining sectors. compliant on May 3, 2013. It has a robust yet flexible methodology for disclosing The World Bank has been supporting the EITI process and reconciling company payments and government in Albania through the Multi-Donor Trust Fund for revenues in implementing countries. The Government EITI (MDTF-EITI) since 2010. The current grant is the of Albania officially endorsed EITI at the Global EITI third grant from MDTF-EITI and its main objectives are Conference in Doha in February 2009. EITI in Albania to support Albania’s EITI post-compliance goals of: (i) is being implemented through the Ministry of Energy strengthening EITI’s role of producing and disseminating and Industry. The implementation of the EITI in Albania critical information to citizens, specifically to those living is overseen by a multi-stakeholder group (MSG) headed in producer regions, including extending the scope of the by the Deputy Minister of Energy and Industry and current EITI process by enhancing the coverage of EITI comprised of representatives of the private sector, civil reports to the subnational level; and (ii) supporting the society organizations, and other government ministries country’s goals of building on EITI to improve the overall and agencies. At the technical level, there is a national EITI management and governance in extractive industries. The Page 34 Key Partners: Ministry of Energy and Industry, Ministry of Finance, private sector, CSOs and other line ministries. Key Development Partners: SIDA, Department for International Development (DFID), U.S. Agency for International Development (USAID), EU, the Organization for Security and Cooperation in Europe (OSCE), and other development partners. third EITI-MDTF grant, among other goals, has supported Results Achieved the MSG and AlbEITI in generating the annual EITI reports The project has provided support to the Ministry of Energy for 2011 and 2012. and Industry for the finalization of two annual EITI reports Going forward, AlbEITI is looking to extend the scope and crucial support for outreach and communication of the EITI reports and is currently initiating a study, activities. It is also supporting the Albanian EITI Secretariat funded by the MDTF-EITI grant, to assess the feasibility with capacity building and operational support. of including revenues from hydropower plants (HPPs) The grant is more broadly providing a platform for in future EITI reports. In 2015, further outreach and dialogue between the Government, private sector, and civil training activities on EITI are planned as part of the society organizations, with the objective of enhancing the MDTF-EITI grant. governance of natural resources in Albania. Albania Program Snapshot - 2015 ibrd projects Albania: Integrated Planning System Multi Donor Trust Fund (IPS 2) Key Dates Financing in million US Dollars: Approved: December 2012 Financier Financing Effective: March 2013 IDA Credit - Closing: March 2016 Other Donors 3.70 Total Project Cost 3.70 World Bank Disbursements, million US Dollars*: Total Disbursed Undisbursed Grant 3.70 1.60 2.10 *as of June 2015 - Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The project aims to address the weakness on the monitoring The Project Development Objective of the IPS 2 is to “Strengthen side by establishing a coherent results chain between the the implementation of the Integrated Planning System by creating budget programs’ results (outputs) and higher-level indicators the conditions for introducing a performance orientation in (e.g., impact indicators at the level of the National Strategy for the policy planning and budgetary processes and by improving Development and Integration [NSDI]), through the development institutional capacity to monitor results at the strategy and of policy/strategy-level intermediate outcomes, which have so far program levels.” The performance orientation is an essential link been a missing essential link. Component three is also expected to between strategies and policies (NSDI and supporting sectoral/ support the integration of the public financial management and cross-sectoral strategies) on the one hand, and the budget process policy processes. This will be facilitated through the integrated on the other. In this context, performance is understood in a Albanian Financial Management Information System (AFMIS) broad sense, encompassing measures of technical efficiency (cost that will link the Medium-Term Budgeting Plan to the treasury, effectiveness), as well as program outputs and outcomes. thereby enabling the regular tracking of results at the program level (outputs) and their linkage to budgetary inputs, while the Results Achieved Integrated Planning System Information System (IPSIS) will The project is providing assistance to the Ministry of Finance to design facilitate the monitoring of program-level outputs as well as and install the AFMIS. The establishment of the Human Resource policy implementation and strategy-level intermediate outcomes. Management Information System is well under way. Support for the The project will contribute to strengthening macroeconomic and External Assistance Management Information System will soon public financial management, which is one of the main priorities start to yield concrete results. The trust fund also provided important of the World Bank’s current Country Partnership Strategy. initial support for the Delivery Unit at the Prime Minister’s Office. Key Partners: Ministry of Finance of Albania; Delivery Unit (Council of Ministers), Department for Development Programming, Financing and Foreign Aid (Council of Ministers), Department of Public Administration; and Ministry of Economy, Tourism, Trade and Entrepreneurship. . Key Development Partners: SIDA; Austrian Development Agency (ADA); Swiss Agency for Development and Cooperation (SDC); EU. Page 36 ifc projects Albania Program Snapshot - 2015 ifc projects Albania: Kurum International Key Dates Financing in million US Dollars*: Approved: July 2013 Financier Financing IFC 30.00 Total Project Cost 120.00 The loan is to Kurum International SH.A. for financing: Results Achieved (a) the acquisition from privatization of four operational XX Support power sector reform by increasing the share hydroelectric power plants located in Albania with a total of the private sector in Albania’s overall electricity installed capacity of 76.5 megawatts (MW); and (b) the generation rehabilitation investment of these power plants. Total XX Help liberalize the Albanian power market and promote project cost is estimated to be €120 million, of which €109.5 private sector participation million will cover privatization and the remainder will be XX Facilitate the move toward the creation of a regional used for rehabilitation. The project is sponsored by Kurum energy market in Southeast Europe Holding AS, a third-tier Turkish company operating in the XX Increase foreign direct investment and promote South- iron and steel industry. The project can be considered a captive South investments in the region energy project, as the electricity that will be produced will be XX Mobilize parallel and B lenders mostly consumed by the company’s steel plant in Albania, XX Help Turkish banks’ entry into the Albanian market which is one of the largest industrial companies in the XX Mitigate climate change (increase clean energy country, thus securing a reliable power input for the plant, generation by improving efficiencies) the second most important input after scrap. Key Partners: Kurum International SH.A. Page 38 Albania Program Snapshot - 2015 ifc projects Albania: Union Bank Key Dates Financing in million US Dollars*: Approved: May 2013 Financier Financing IFC 4.00 Total Project Cost 4.00 The project is very well aligned with the IFC Country Results Achieved Strategy for Albania, which is to build partnerships with XX Provide guarantees to support the trade finance clients in strategic sectors that serve the country’s long- operations of the bank and allow the bank to free up term sustainable development. Due to the high liquidity capital and decrease costs; levels in the sector and the dominant presence of foreign XX Signal confidence in the bank and potentially gain players who control 90 percent of the market, IFC has fo- support from other commercial banks that are willing cused on local banks that can benefit from IFC’s expertise to work with Union Bank as the issuing bank; in specialized products such as trade finance, renewable XX Support trade finance operations of the bank at a time energy/energy efficiency, etc. The project is also in line when trade finance lines are being cut; with the World Bank Group’s objective of facilitating trade XX Support private sector enterprises dependent on trade flows post-crisis. finance for survival. Key Partners: Union Bank Page 40 Albania: Bankers Petroleum Key Dates Financing in million US Dollars*: Approved: September 2009; December 2012 Financier Financing IFC 105.00 ERBD 105.00 Total Project Cost 370.00 In September 2009, IFC and EBRD jointly financed the Results Achieved project and committed US$10.4 million in equity and XX The investment helped promote and integrate cleaner US$30 million in loans, as well as a loan of up to US$5 and more sustainable environmental practices in oil million each in the form of a special-purpose environmental production in Albania. term loan. The project involves the further redevelopment XX The project helped accelerate domestic oil production of the onshore Patos Marinza oilfield in southern Albania. and recovery rates from existing resources in the The estimated cost of the project is US$370 million, country. which includes: (i) promoting the expanded reactivation XX The project helped to further develop local skills of existing wells in the field; and (ii) drilling new vertical and transfer know-how and technology for heavy oil and horizontal wells and carrying out parallel testing extraction in Albania. and application of additional strategies, including water- XX The project contributed to an increase in fiscal revenues flood and cyclic steam stimulation, to further increase oil to the Government of Albania thanks to a significant oil recovery. In addition, in December 2012, IFC and EBRD sales increase. signed a second loan agreement of US$50 million each to XX Bankers designed and completed a remediation trial further support the company’s growth. project to clean up historical contamination. XX Further plans include the remediation of contaminated areas in the project area, the implementation of robust waste management plans, and the environmental cleanup of one of the historical ecology pits. Key Partners: Bankers Petroleum; EBRD. Albania Program Snapshot - 2015 ifc projects Albania: Credins Bank Key Dates Financing in million US Dollars*: Approved: August 2012 Financier Financing IFC 10.00 Total Project Cost 10.00 The project involves a €10 million renewable energy (RE) Results Achieved loan to Credins Bank, coupled with RE technical assistance XX Facilitate the development of energy-efficiency and corporate governance and risk management support. investments through making increased financing The main goals of the Advisory Services engagement in- available for residential and potential small and clude (i) building the operational capacity of the bank to medium-sized enterprise (SME) clients; develop and launch viable lending products and support XX Improve the competitiveness of the Albanian economy the financing of small hydropower plants (SHPPs), (ii) in- by increasing the efficiency of energy use across creasing the bank’s knowledge in RE/SHPPs and project sectors; financing, (iii) providing initial support for SHPP project XX Increase lending for RE projects in Albania with a assessment and evaluation and monitoring, and (iv) sup- specific focus on SHPPs; porting the bank in improving the risk management and XX Improve the local and global environments through internal audit systems. the decreased emissions of greenhouse gas and other conventional pollutants while reducing the country’s dependence on energy exports. Key Partners: Credins Bank Page 42 Albania: Antea Cement Key Dates Financing in million US Dollars*: Approved: May 2008, June 2012 Financier Financing IFC 30.00 ERBD 30.00 Total Project Cost 210.00 The project involves the construction and operation Results Achieved of a greenfield, integrated cement plant with a cement XX Modernization of local cement industry production capacity of 1.4 million tons per year near XX Benefits to employees Burizane village, located 45 kilometers from the port of XX Benefits to consumers Durrës and about 35 kilometers from Tirana. The project, XX Local supply linkages with a total cost of €210 million, capitalizes on the domestic XX Higher-level environment and social performance market growth prospects and substitute imports. It also XX Quantified development impacts benefits exports a portion of its output to smaller neighboring cement markets. The project stimulates competition in Albania and helps address the shortage of domestic cement supply by substituting imports at more affordable prices and supporting the housing and infrastructure sectors. The project observes international environment and social standards. In June 2012, IFC undertook another investment of €5.4 million. Key Partners: Antea Cement, EBRD. Albania Program Snapshot - 2015 ifc projects Albania: IFC Residential Energy Efficiency Project Albania (REEP) Key Dates Financing in million US Dollars*: Approved: January 2009 Financier Financing Closing: September 2016 Austrian Ministry of Finance (TATF) 0.75 Total Project Cost 0.77 The Residential Energy Efficiency Project provides support ÔÔ Five new EE products were launched, and in-depth to financial institutions to extend micro loans to promote technical assistance helped to build their internal energy efficiency (EE) and lower energy consumption. The capacities in the assessment of EE projects in the project has three components: residential sector, with the aim of facilitating the XX Advisory Services for partner financial institution relevant investments (currently ongoing technical support to local financial institutions to help develop assistance) the new energy-efficiency product and facilitate relevant ÔÔ Union Bank in-depth advisory on EE finance in investments; FY15 (November 2014–present) XX Public Awareness activities to raise public awareness on XX Technical assistance to Credins Bank led to an IFC EE and energy savings; investment in EE and renewable energy (RE) finance XX Regulatory framework support to the National Agency of with the bank (€10 million in EE/RE credit line). Natural Resources (AKBN) in reviewing the draft Energy XX The lending operations of FIs counts over 4,900 loans Efficiency Law and in developing the corresponding worth US$20 million from inception to date. Lending bylaws. operations to date have benefited more than 15,000 individuals. Results Achieved XX EE website developed and hosted by the Albanian Bank XX The project is working with five financial institutions— Association, addressing EE measures and EE products in Credins Bank, Societe Generale Albania Bank, Union the market. (http://www.aab.al/edu/ee/en/index.php) Bank, BESA Fund (a microfinance institution [mfi]), and XX Eleven country-level workshops to increase public NOA (an mfi)—to introduce micro loans targeting EE knowledge on the economic benefits of EE investment. improvements. XX Review of the Energy Efficiency Law and draft of seven ÔÔ Sixteen seminars, training, workshop events held bylaws to promote the efficient use of energy and energy with banks on EE potential and promotion and loan savings (support given to the AKBN). Adoption process of product development the EE package has been put on hold by the Government. Key Partners: National Agency of Natural Resources (AKBN), Albania Association of Banks, Credins Bank, Societe Generale Albania, Union Bank, BESA Fund, NOA. Donors: Austrian Trust Fund (TATF). Page 44 Albania: Debt Resolution Key Dates Financing in million US Dollars*: Approved: July 2012 Financier Financing Closing: December 2015 Total Project Cost (Albania) 0.80 Objectives of the project are: XX Official launching of the project on September 2014 jointly with XX Support legislative reform by improving insolvency legislation Ministry of Justice and SECO to introduce rehabilitation and more efficient procedures to XX Journalists awareness event regarding the Debt Resolution Albania Project at the end of September 2014 XX Develop provisions for the fast-track recognition of negotiated XX A detailed Action Plan on the three-year project drafted, out-of-court workouts (pre-packs) for Albania submitted, and agreed with Ministry of Justice and ABSA XX Support regulatory reform by introducing and establishing an XX Five questionnaires drafted for stakeholders such as banks, out-of-court workout mechanism judges, legal studios, bailiffs, and insolvency administrators to XX Enhance the capacities of the Albanian Bankruptcy gather feedback on the current legal bankruptcy framework Supervision Agency (ABSA) and relevant professionals, such XX A diagnostic report on the Bankruptcy Legislation Gap, analysis as judges, attorneys, insolvency administrators, and business and recommendations delivered to the Ministry of Justice in people, and raise awareness among stakeholders. December 2014 XX Provide training and awareness raising among relevant XX Support to Ministry of Justice to draft a new law on bankruptcy. stakeholders; strengthen the role of the ABSA and raise the Expected to be finalized by the end of March 2015 quality of the bankruptcy administrator profession XX 30 technical meetings/workshops on the framework of law drafting The expected result is to make the Albanian debt resolution system with Ministry of Finance, Ministry of Economy/National Registration more efficient by improving the insolvency framework and prac- Center, General Directorate of Taxation, State Advocate, Chamber tice, which will lead to a strengthened avenue for nonperforming of Commerce and Industry of Tirana, Prosecutors Task Force, seven loan (NPL) resolution, increase returns to creditors, and protect legal studios, six banks, and consultants economically viable companies. XX Six round tables with Banks Association of Albania, Court of Tirana judges, Ministry of Justice/ABSA, insolvency Results Achieved administrators, American Chamber of Commerce, and bailiffs XX Review of insolvency legislation and recommendations for XX Currently negotiating with Court of Tirana to sign a improvement memorandum of understanding and provide advisory services XX Review of internal ABSA functioning and administrative for the judges in the commercial section responsible for procedures bankruptcy cases XX Training for ABSA staff to enable transfer of knowledge, skills, and XX Six recommended regulations approved based on the advisory guidance by an insolvency expert from the United Kingdom services provided to the Ministry of Justice Key Partners: Ministry of Justice and Albanian Bankruptcy Supervision Agency. Donor: SECO Albania Program Snapshot - 2015 ifc projects Albania: IFC Balkan Renewable Energy Program (BREP) Key Dates Financing in million US Dollars*: Approved: January 2009 Financier Financing Closing: June 2017 Austrian Ministry of Finance 7.40 Total Project Cost Regional 7.91 Total Project Cost Albania 1.70 The project is part of the Regional Western Balkan Pro- Results Achieved gram (BREP), implemented in Albania, Bosnia and Her- XX Renewable energy (RE) regulatory work and support zegovina, FYR Macedonia, Kosovo, Montenegro, and to the Ministry of Energy to create a comprehensive Serbia. These countries offer the highest development im- framework for RE project development and pact potential and have made sufficient progress on im- implementation with a focus on SHPPs in Albania. plementing regulatory frameworks. The project has three ÔÔ The RE law was approved in May 2013. objectives: ÔÔ IFC team is working with the World Bank energy XX Improve the existing regulatory framework to enable team on commenting on the draft Power Law. small hydropower project (SHPP) sponsors to develop XX Work with SHPP concessionaires/sponsors in and construct feasible SHPPs Albania. XX Work with SHPP sponsors to improve their SHPP ÔÔ Eight seminars and workshop events with SHPP designs and business plans concessionaires for promoting RE investments. XX Work with selected financial institutions in Albania ÔÔ Business-to-Business workshops, bringing to improve their internal capacities and knowledge on together international and local investors in SHPP and project financing the renewable sector to promote foreign direct The expected impacts are to facilitate at least US$90 mil- investment (FDI) in this sector. lion of investment into SHPP construction; to support the ÔÔ In-depth technical assistance to ENSO GMBH, construction of 30 SHPPs with total installed capacity of an SHPP sponsor, on the approval of the 60 megawatts (MW); and to directly avoid 0.15 metric program of activities in the clean development tons of CO2 emissions per year. mechanism (CDM) registration process with Page 46 Key Partners: Ministry of Energy and Industry (MEI); Enso Hydro GmbH (SHPP); S.P.E. Gjader (SHPP); Credins Bank; Intesa Sanpaolo Bank; Albanian Association of Banks. Donor: Austrian Ministry of Finance. the United Nations Framework Convention on to build internal capacities in the assessment of Climate Change (UNFCCC). the SHPP project to support the country strategy ÔÔ In-depth technical assistance to S.P.E. Gjader, an for the RE sector (currently ongoing technical SHPP sponsor, to review the technical design of assistance). a cascade of seven SHPPs (24.3MW). ÔÔ In-depth technical assistance to Inesa Sanpaolo XX Work with selected financial institutions to improve Bank to build internal capacities in the their internal capacities on SHPP and project financing. assessment of the SHPP project. The advisory ÔÔ Nine workshops, seminars, meetings, and package includes (i) in-depth training to staff, trainings with banks in Albania. A country-level ii) RE assessment manuals and tools, and iii) workshop with banks was organized jointly with an assessment of three SHPP projects, increasing the Albanian Association of Banks to promote internal capacities of bank staff to engage in investments in the RE sector. SHPP lending (currently ongoing technical ÔÔ In-depth technical assistance to Credins Bank assistance). Albania Program Snapshot - 2015 ifc projects Albania: Southeast Europe Tax Transparency and Simplification Program Key Dates Financing in million US Dollars*: Approved: December 6, 2012 Financier Financing Closing: June 30, 2015 State Secretariat for Economic Affairs (SECO) 3.00 Total Project Cost (Region) 3.00 The project goal is to improve tax compliance by increasing XX Transfer Pricing Needs Assessment Report submitted to the transparency and simplicity of tax administration proce- the Ministry of Finance in October 2014 dures. The Southeast Europe Tax Transparency and Simplifi- XX Support to the Ministry of Finance and the General cation Program works in Albania, Bosnia and Herzegovina, Directorate of Taxation to draft Transfer Pricing primary Kosovo, FYR Macedonia, Montenegro, and Serbia to achieve and secondary legislation two objectives: XX Support to the Ministry of Finance to prepare a position XX Simplify tax administration procedures to reduce tax paper on VAT refund based on comments provided by compliance costs, especially for small and medium-sized the IMF enterprises (SMEs). XX Support to the General Directorate of Taxation (GDT) to XX Improve the legal framework and efficiency of the review and amend relevant legislation pertaining to the administration of international taxation procedures, simplification of tax procedures with a focus on Transfer Pricing (and Double Taxation XX Transfer pricing primary legislation approved by Treaties). parliament in April 2014 XX Advance Pricing Agreements drafted Results Achieved XX Several trainings and regional activities on Transfer XX Tax Compliance Survey (completed for 800 businesses) Pricing Agreements, Double Tax Treaties provided for XX Mapping of “as is” and “to be” 12 tax administration the GDT and Ministry of Finance staff procedures XX Support to the Ministry of Finance for the Global Forum XX Recommendations of the survey and mapping shared Review Phase I in relation to the exchange of information. with the Government, resulting in eight legal changes in XX Eight laws and five bylaws were drafted, amended, and the 2014 fiscal package approved during July 2014–January 2015 Key Partners: Ministry of Finance and General Directorate of Taxation. Cooperation Agreement signed in March 2013 with the Ministry of Finance (US$50,000 cash fees collected). Donor: SECO Page 48 Albania Program Snapshot - 2015 ifc projects Albania: PPP Operation and Maintenance of Milot Morine Highway Key Dates Approved: January 2011, amended in May 2014 IFC is the lead adviser for an Operation & Management Results Achieved (O&M) concession of Milot Morine Highway (114 kilom- XX Related legal framework approved by the parliament eters). This is the first toll highway in Albania. The trans- XX The bid submission is expected in late spring 2015 action structure is innovative for the Southeast Europe XX The winning bidder will be announced in late October region in that it foresees that the Government of Alba- 2015 nia will provide a minimum traffic guarantee rather than XX Final contract expected in December 2015 availability payments (typical in European road public- XX Concessionaire is expected to invest €25–€30M during private partnership [PPP] projects). the concession term in highway upgrade and slope The project has two phases. The preparation of the transac- stabilization measures tion included a complete technical, legal, environmental, social, and financial assessment; the identification of po- tential investors; an analysis of the various options avail- able for PPPs; and the identification of key decisions and the design of the transaction structure. The implementa- tion phase of the transaction will include the prequalifi- cation of potential investors, design and oversight of the bidding process, drafting of and negotiations on contrac- tual documentation, and finally, a bid award process and contractual closure. Key Partners: Ministry of Transport of Albania Page 50 Albania Program Snapshot - 2015 ifc projects Albania: Enso Hydro Energji Key Dates Financing in million US Dollars*: Approved: February 2012 Financier Financing IFC equity 8.40 Total Project Cost 105.00 IFC invested US$8.4 million for a 20 percent stake in Enso Results Achieved Hydro Energji to help it build a series of small hydropower XX The project helps reduce infrastructure bottlenecks to projects in Albania. This investment will increase the coun- enhance Albania’s economic growth. try’s electricity generation capacity and reduce energy im- XX The project supports the development of a sustainable ports. Austrian hydropower developer Enso Hydro estab- power sector that is less reliant on expensive imports lished Enso Hydro Energji to develop small and medium and therefore improves the competitiveness of the hydropower plants in Albania. During 2012–15, the com- Albanian economy. pany aims to invest around €75 million in the country to XX The project’s success will also send a strong signal of build new plants that will have the capacity to produce up support for continued power sector reform, which is to 50 megawatts of hydropower. This investment supports critical for the long-run success of the power sector. the Bank’s strategy in Albania of stimulating investment in XX The project supports the development of power sustainable renewable energy sources such as hydropower. generation projects based on renewable energy and helps support water conservation in the hydropower dams by increasing production in run-of-the-river type hydropower plants. Key Partners: Enso Hydro Energji Page 52 miga projects Albania Program Snapshot - 2015 miga projects Albania: Giorgi Alfo Sh.p.k. Project ID: 1163 Gross exposure: US$1.6 million Fiscal year: 2000 Project type: Non-SIP Status: Active Guarantee holder: Ge.Por.Tur. s.a.s. Investor country: Italy Host country: Albania Sector: Tourism In its first project in Albania, MIGA issued a guaran- numerous disruptions in trade, infrastructure, and tour- tee of US$1.6 million to Ge.Por.Tur. s.a.s. of Italy (Ge. ism in neighboring countries. Por.Tur.) for its equity investment in Giorgi Alfo Sh.p.k. The Albanian Government expects tourism to become Ge.Por.Tur will design, construct, and operate a tour- a major source of income. The first marina on the Alba- ist marina—including a lodge, restaurant, supermarket, nian coast will be a modest step toward this goal, as it is yachting club, and moorings for leisure boats—on the expected to help meet increasing demand from European southern Albanian coast. The guarantee insures against countries for leisure ports in the Southern Adriatic Sea. It the risk of expropriation. is also expected to create permanent jobs and training for The project is contributing to the World Bank and some 50 local citizens. The port is environmentally sen- European Commission–led reconstruction efforts in the sitive in design, as it minimizes the disturbance of land- Balkans in the aftermath of the Kosovo war, which caused scape to maintain the beauty of the coastline. Page 54 Albania Program Snapshot - 2015 miga projects Albania: Energji Ashta Shpk (ASHTA) Project ID: 7869 Sector: Power Fiscal year: 2012 Date SPG disclosed: November 07, 2011 Status: Active Project Board date: January 31, 2012 Guarantee holder: EVN AG Gross exposure: US$159.4 million Investor country: Austria Project type: Non-SIP Host country: Albania Strategic priority area: Complex Project Environmental category: A ESRS: Environmental and Social Review Summary for Energji Ashta Shpk in Albania On February 1, 2012, MIGA issued guarantees totaling Shkoder in northwestern Albania. The developers have also €121.4 million (US$159.4 million) to EVN AG of Austria entered into power off-take and cascade agreements with for its investments in Energji Ashta Shpk (Ashta) in Alba- the Albanian public wholesale electricity supplier, Korpo- nia. MIGA’s coverage is for a period of up to 20 years for its rate Elecktroenergjetike Shqiptare Sh.A (KESH). equity investment and up to 10 years for its loan guaran- The project is expected to have high developmental im- tee. Coverage insures against the risks of transfer restric- pact by providing clean, renewable energy while helping to tion, expropriation, war and civil disturbance, and breach alleviate the power shortage in the country in the mid and of contract. long term. The project will also reduce the country’s load The project involves the construction of a 52.9 megawatt shedding and electricity imports. (installed capacity) run-of-the-river hydropower plant on a The project also aligns well with the current World Bank build, own, operate, and transfer basis under a 35-year con- Country Partnership Strategy for Albania. One of the three cession agreement originally entered into between VER- strategic objectives of the strategy is to accelerate Albania’s BUND AG and the Ministry of Economy of Albania. In economic recovery through improved and more financially 2010, the two project sponsors, EVN AG and VERBUND sustainable infrastructure services such as roads, energy, AG, negotiated a shareholder agreement to jointly develop and irrigation. In the energy sector, the strategy focuses and operate the project. on consolidating current reforms and completing ongoing The project is the fourth plant on the Drin River but the investments while promoting new and private financing first to be built in 30 years. It is located in the district of mechanisms. Page 56 Albania: ProCredit Group Central Bank Mandatory Reserves Coverage Project ID: 9186 Sector: Banking Fiscal year: 2011 Date SPG disclosed: October 05, 2010 Status: Active Project Board date: November 23, 2010 Guarantee holder: ProCredit Holding Gross exposure: US$25.0 million Investor country: Germany Project type: Non-SIP Host country: Albania Strategic priority area: Complex Project Environmental category: FI On December 22, 2010, MIGA issued a guarantee of US$25 tal relief from the CAR requirements. By obtaining MIGA’s million to ProCredit Holding (PCH) covering its investment insurance against the risk of expropriation of funds, the risk in its subsidiary in Albania. The coverage is for a period of weighting for mandatory reserves held at the central bank up to 10 years against the risk of expropriation of funds for can be reduced. A lower risk weighting will allow PCH to free mandatory reserves held by the subsidiary in the central bank up equity currently tied up for CAR maintenance purposes, of its jurisdiction. thereby allowing these funds to be injected into its subsidiary This project is part of a master contract that MIGA has banks. This in turn will allow PCH’s emerging market subsidi- issued. PCH is headquartered in Germany and is the parent ary banks across its network to increase their lending activi- company of 21 banks (ProCredit group). The ProCredit group ties. is a provider of finance to some 750,000 micro, small, and me- MIGA’s support will help PCH optimize its capital man- dium-sized enterprises (MSMEs) in Latin America, Eastern agement across its 21 banks, allowing PCH to direct equity to and Central Europe, and Africa. Throughout the world, banks subsidiaries with the greatest need. These banks will be able are required to maintain mandatory reserves with the central to offer additional financial services to MSMEs at a time of banks of their respective jurisdictions. The ProCredit group’s macroeconomic challenges. Supporting productive small capital adequacy ratio (CAR) is calculated according to the businesses will help stimulate growth, generate employment, German Banking Act. Under this act, at a consolidated level, and reduce poverty. reserves deposited at the various central banks can attract a MIGA’s support for this project is aligned with the World risk weighting of 100 or even 150 percent, depending on the Bank Group’s microfinance strategy, which includes improv- country. This risk weighting determines the amount of equity ing the supply of microfinance in large but underserved mar- required to maintain a specified CAR in accordance with the kets; enhancing deposit capacity by assisting microfinance German Banking Act. institutions in savings mobilization; promoting capacity build- The guarantee issued by MIGA will help PCH obtain capi- ing; creating and shaping markets; and fostering innovation. Albania Program Snapshot - 2015