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U.S. Department of State - Great Seal

U.S. Department of State

Diplomacy in Action

FY 2007 SEED Act Implementation Report


Bureau of European and Eurasian Affairs
FY 2007 U.S. Government Assistance to and Cooperative Activities with Central and Eastern Europe
Report
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Country Overview

U.S. FOREIGN POLICY AND FOREIGN ASSISTANCE OBJECTIVES & PRIORITIES

Albania is a committed partner of the United States in peacekeeping and the War on Terror, sending troops to Iraq, Afghanistan, and the European Union (EU) stabilization force in Bosnia-Herzegovina. The country plays a vital role in the Balkans promoting peace and security and ethnic reconciliation, especially important as Kosovo status moves toward conclusion. Albania will be a key player in the economic prospects of the region, both as a trade partner and facilitator for transporting others’ products. No other country works so closely with Albania, has such influence, or holds so special a place with Albanians as the United States. Albania aspires to an invitation in 2008 to join the North Atlantic Treaty Organization (NATO). U.S. policy strongly supports the country's efforts to meet NATO's rigorous standards for admission beyond those for military reform, including requiring progress on democratic institution-building, a free-market economy and, especially, rule of law. While Albania has made progress toward realizing its goals of NATO and EU integration, much remains to be done, and the pace of reform must accelerate. For this to occur, sustained USG assistance remains vital.

U.S. foreign assistance supports Albania’s efforts to implement necessary reforms for integration with Euro-Atlantic institutions. USG-funded programs focus on Albania’s transition to a market economy and a democracy based on the rule of law, and on the Government of Albania’s (GOA) capacity to provide social stability. Energy sector reform, anti-corruption activities, religious harmonization and anti-trafficking in persons initiatives complement the overall assistance program in Albania. The success of the U.S. assistance program will have a substantial impact on the GOA’s capacity and ability to make crucial reforms that will determine Albania’s hoped-for accession into the North Atlantic Treaty Organization (NATO) and the European Union (EU). Albania’s integration into the European community will serve as a significant step toward a peaceful and stable Balkan region, a key U.S. foreign policy priority.

OPERATING ENVIRONMENT

Albania’s economic performance has impressed as the country’s gross domestic product (GDP) will likely maintain a growth rate between 5 and 6%. The per capita GDP in 2006 rose to $2,900 and the average annual inflation was 2.4%. Still, Albania remains one of the poorest countries in Europe. High unemployment rates, a trade deficit, poor infrastructure and the lowest FDI in the region continue to pose economic challenges. USG assistance improved competitiveness in the private sector. The GOA has also shown an increased commitment to economic reform by taking steps to improve the business environment.

In Governing Justly and Democratically, Albania faces its most daunting challenges and, according to recent surveys, Albanians still have an improving, yet still high, perception of corruption among government officials and politicians. However, anecdotal evidence shows a continuing decline in actual corrupt practices and Albania demonstrated modest progress as it moved up several rankings from last year to place 105 for corruption on Transparency International’s 2007 Corruption Perception Index. Poor governance hinders Albania’s democratization, and while the basic rules of a democratic justice system are enshrined in law, those rules are rarely enforced. USG assistance has increased accountability of national leaders and local government, improved service delivery, and promoted ethics in the judiciary. USG will focus on increasing accountability, strengthening performance, and enhancing public confidence of local government units and key national offices.

The energy situation in Albania remains critical, with the supply network unable to meet demand. Weather-dependent hydropower production, limited import capacity, deteriorating infrastructure, insufficient investment, and poor management all result in rolling blackouts and increased costs for consumers. USG plays a small but critical role, having improved the legal framework, regulatory capacity, and privatization prospects that facilitate the large infrastructure investments of the GOA, World Bank, and others.

Regarding investing in people, Albania has significant distance to cover relative to its neighbors. USG assistance has focused on primary health care (PHC), identified as the most efficient means to generate the biggest impact. With USG assistance, a PHC model designed to improve efficiency, quality and access to services has been adopted by the GOA and will be implemented nationwide. USG assistance for family planning and maternal child health is now part of the package of services available to women in many PHC centers. USG assistance is also effectively leveraging a large World Bank loan to strengthen PHC in Albania.

Finally, combating organized crime and corruption are essential for Albania to secure Peace and Security. Organized crime in particular, exacts an enormous toll on the rule of law, the economy, and the nation’s prospects for the future, including accession to Euro-Atlantic institutions. Existing law enforcement institutions in Albania have not adequately addressed this major challenge, due to persistent corruption and a lack of political will. The GOA has made solid progress in securing its borders and improving the professionalism and independence of the Albanian State Police

FY 2007 Country Program Performance

PEACE AND SECURITY

The GOA has made solid progress in securing its borders and improving its interdiction capabilities as part of its plan for combating corruption and achieving NATO and EU security standards. However, organized crime and corruption remain two of the biggest threats to Albania’s stability and the sustainability of its law enforcement institutions. Organized crime in particular exacts an enormous toll on the rule of law, the economy, and the nation’s prospects for the future. Existing law enforcement institutions in Albania have not adequately addressed this major challenge for many reasons, including lack of political will among some leaders, corruption and insufficient resources and investigative techniques. In 2007 progress was made by enacting a new State Police law and in instituting reformed approaches to police training. However, overall institutional capacity for the support, planning and conduct of law enforcement operations remains weak.

Integrated Border Management - USG assistance is designed to enable the GOA to manage and control its borders in compliance with international standards including ensuring security at its international seaports and effective response to matters of human trafficking.

The USG continued technical assistance in drafting legislation, policies and procedures and developing GOA capabilities to effectively manage and control its international borders in accordance with international standards, including assistance to secure its ports and improve Albania’s response to human trafficking. The USG continued to assist the GOA in implementing its National Action Plan to Combat Trafficking. The USG also led efforts to establish the National Referral Mechanism (NRM) and border crossing procedures for the identification and handling of suspected victims of trafficking. In the area of port security, Automatic Ship Identification Systems and custom security locks were donated to the Ministry of Public Works, Transport and Telecommunications (MOPWTT) along with the corresponding training and advisory support to ensure their effective sustainable utilization and to enhance port security and preparedness. USG assistance in the form of extensive advisor consultations and policy drafting support from the USG led to the establishment of the Office of the State Maritime Security Authority (SMSA) within MOPWTT.

In August 2007 the USG formally assessed Albania’s compliance with the International Maritime Organization (IMO)’s International Ship and Port Facility Security (ISPS) Code. The preliminary report determined that Albania’s international ports are “substantially compliant”. The GOA compliance with the ISPS code is a significant step as its guidelines, adopted following the terrorist attacks of 2001, aim to prevent shipping from becoming a vehicle or target of international terrorism. Reaching compliance represents the successful outcome of three years of USG assistance to the GOA.

Counter-Narcotics and Organized Crime - In this area the USG works to develop the capabilities of the Albanian State Police (ASP) to more effectively investigate and address the critical problems of organized crime and narcotics trafficking. In its ongoing efforts to build Albanian capabilities to fight organized crime, the USG coordinated USG and international resources to sponsor training in Advanced Surveillance Techniques and Street Survival presented to 40 members of ASP’s Special Operations, Anti-Terrorism, and RENEA, the counter terrorist and critical incident response unit. Separately, two vehicle theft investigations courses were concluded for 52 ASP investigators. The courses specifically addressed the organized crime and wider-transnational implications of Albanian vehicle theft investigations.

In FY 2007 the ASP continued to make record seizures of heroin and other illegal drugs. Compared to FY 2006, the estimated amount of heroin seized increased by more than 6% and the number of marijuana plants destroyed increased by 140%. The ASP made progress in investigating and arresting high profile persons accused of corruption. These included employees of the state oil company (AMBO), the General Secretary to the Ministry of Labor, and four senior officials of the MOPWTT. Political and procedural challenges remain in seeing arrests become successful prosecutions; nevertheless, the GOA is demonstrating an increased political will to investigate and prosecute high level government and private officials.

Police Training and Academy Development - The USG offered assistance to reform the training functions of the ASP to more effectively address educational requirements for the provision of effective law enforcement services in a democratic society utilizing internationally recognized best practices.

During FY 2007 and in line with USG-supported police restructuring efforts, the new Training Department at the ASP Deputy General Directorate level was successfully implemented. A significant milestone in the USG assistance efforts to modernize and professionalize the ASP was achieved with the commencement of the newly designed 20-week Basic Police School in September 2006. Subsequent field training, a completely new concept for the ASP, was initiated, whereby field training officers mentor and guide new recruits in on-the-job activities. With USG support and guidance, the first class, a total of 141 students, of the new Basic Police Generalist program graduated in February 2007.

Police Accountability and Human Resource Management - The USG objective of this assistance is to develop the administrative and organization structures and capabilities of the ASP to support the effective management, development, and accountability of its human resources. New efforts were undertaken to improve the capacity of the Ministry of Interior’s (MOI) Office of Internal Control (OIC). The OIC performs an internal affairs function ensuring the integrity, professionalism, and accountability of the ASP. Attention was also given to the establishment of sustainable human resource management systems in the areas of disciplinary procedures, performance evaluation, merit-based promotions, and personnel deployment.

The USG provided extensive advisory and drafting support and expert testimony to the Albanian Parliamentary National Security Committee to assist the drafting of a new state police law that adequately addresses reform needs.

In June 2007, after more than two years of USG funded assistance, the Albanian Parliament passed the new State Police Law. The new law is a significant step toward professionalizing the state police and addressing crime and corruption issues in Albania. Additionally, the law brings the GOA into compliance with international standards and moves it closer to accession to Euro-Atlantic institutions by creating a more professional and autonomous civilian police agency guided by democratic principles.

Total Information Management System (TIMS) - The USG offered assistance to implement within the ASP a sustainable, modern and integrated, information management system to enhance capabilities in criminal investigation, case management, criminal intelligence analysis, border control and overall police administration.

The USG continued deployment of TIMS law enforcement information system hardware and software components to all 12 Albanian border crossing points including land borders, seaports, and the Tirana International Airport. In March 2007, the new terminal building at Tirana International Airport was opened with USG-provided and installed TIMS equipment for the new ASP, border, and passport control points.

Three ASP regional directorates were also connected to TIMS systems. This has enabled police officials deployed throughout the country to access the integrated border, criminal records, and criminal analysis databases. The USG also developed and drafted policies and procedures for TIMS usage and data security in line with NATO and GOA National Security Authority standards. The USG continued installation of the TIMS System, which will ultimately provide national coverage and greatly enhance case management, criminal analysis, border control, investigative support, and access and reporting of data.

In 2007 system installation was completed at four additional border crossing points, raising the total number of fully integrated border stations to 15. TIMS equipment and software enable automated passport checks with automatic cross-referencing for wanted persons, suspected terrorists, etc. In 2007 TIMS systems assisted in the identification and arrest of 167 fugitives and wanted persons crossing Albania’s borders. TIMS implementation was previously extended to include Prosecutor’s offices. In 2007 connectivity was further extended to the MOPWTT, Ministry of Foreign Affairs, and Ministry of Labor and Social Affairs to facilitate access to relevant law enforcement related information like drivers and vehicle registrations, E-visas, and information on victims of trafficking. TIMS has improved communication between these offices and enhanced information sharing among police and prosecutors.

Trafficking in Persons and Migrant Smuggling - The USG anti-trafficking program aims to help the Albanian government fully comply with the minimum standards to combat trafficking in persons under the Trafficking Victims Protection Act (TVPA) with the long-term goal of helping Albania achieve Tier 1 status. The short-term objectives are to expand prevention programs for at-risk populations and better inform the general population about trafficking issues; to address the root causes of poverty, gender-based violence, and social stigmatization; to enhance social services that ensure successful reintegration for victims; and to build the capacity of the GOA and non-governmental organizations to combat trafficking in persons.

USG-supported projects aim to reduce the supply of victims, protect reintegrated victims, and deter trafficking through police, justice and border security programs. In FY 2007 the USG mitigated trafficking by enhancing the capacity of local organizations to integrate vulnerable communities; provide income generating opportunities to families and persons at risk; raise awareness with vulnerable communities and the wider population; and enhance the ability of local and state actors to identify and assist persons at risk. The USG helped reintegrate victims by supporting shelters and drop-in day centers for victims. Careful monitoring of the programs helped to identify areas where Albanian efforts to eliminate transnational crime have fallen short.

Military Assistance - In FY 2007 USG funding concentrated on bringing Albania’s military forces up to the standards necessary for eventual NATO membership. Albania aspires to receive an invitation in 2008 to join NATO.

USG foreign military funding and defense readiness assistance acted as the foundations for Albanian contributions to U.S. operations in Iraq, NATO operations in Afghanistan, and the EU mission in Bosnia. The Albanian Armed Forces (AAF), through the National Military Strategy, continued to make progress in its planned 10 year transition from a post-Communist force with extremely limited capabilities and dangerously outdated stockpiles of arms and ammunition to a modern, mobile military suitable for Albania's defense needs and NATO interoperability. USG security assistance is essential in supporting the GOA to accelerate its pace of modernization and achieving NATO standards. To meet these needs, the USG provided defense reform advisors, equipment support, supplementary deployment funds, and training to improve Albanian peacekeeping capacity.

In FY 2007 USG assistance contributed to the destruction of thousands of tons of weapons, including rifles, mortars and ammunition. This $300,000 program is ongoing and destroyed approximately 50% of the 25,000 surplus small arms/light weapons identified for destruction. An additional 2,700 tons of sea mines and torpedoes were also destroyed as a program initiative to destroy surplus, decaying munitions. Albania eliminated over 16 metric tons of chemical weapons agents with USG support and became the first party to the Chemical Weapons Convention to fully complete the destruction of its entire chemical weapons stockpile.

GOVERNING JUSTLY AND DEMOCRATICALLY

Better Governance/Participatory Governance - The objectives of USG assistance are to increase the level of civic engagement in Albania and increase the professionalism of the civil service. USG assistance to local governments focused on strengthening local government fiscal autonomy and improving local service delivery. Nine USG funded small grant projects contributed to better local governance and increased citizens’ participation in self-government. These initiatives helped in enhancing the professional Civil Service at the local level, improving transparency and local governance and promoting citizen participation in decision-making. Another grant, through participatory processes, helped the citizens of Kavaja and their municipality to draft their urban plan by using the functional zoning concept. A Community Information Office was opened in Permet to enhance dialogue between the community, civil society and the municipality; 16 community-based working groups were established in two communes of the Diber region to contribute in setting the economic and social development priorities for their communes; 220 citizens in Bathore (a suburb of Tirana) participated in community meetings, which addressed issues related to improving local governance and community life. Another project trained 150 representatives of the Korca business community and local government officials (dealing with public procurement and services) on business principles for countering bribery. Two environmental initiatives provided training to approximately 400 students and 55 teachers at elementary and high schools in Tirana discussing environmental protection.

As a result of the grants, 144 officials at the local level were trained on resolving conflicts encountered in their daily work through mediation and reconciliation. Based on the Sustainable Development Strategy of the Gjirokastra municipality three NGOs established the Forum of Artisans and Craftsmen, the first ever in southern Albania. In cooperation with the Tirana Municipality they helped in improving and increasing the green areas of the city and in raising the citizens’ awareness of this issue. Following a coordinated policy dialogue sponsored by USG, the GOA established new fiscal rules giving local governments more discretion. As a result, local capital expenditures rose as a share of total spending. USG assistance also sponsored a stakeholder dialogue that yielded draft laws on local borrowing and urban planning. Both laws will grant local governments authority to borrow money for investment projects and manage growth in their jurisdictions. Due in part to USG assistance, more than half of local government expenditures are now under full local discretion. Locally generated revenues increased measurable improvements in local services in all targeted local governments. Consistent improvements were made in accountability and were reflected by increased citizens’ satisfaction.

Religious Tolerance/Civic Education Programs - The “Understanding Civic and Faith-Based Education in Albania” project, in its fourth year of existence, continues to play an important role in fostering civic values, religious tolerance and understanding among hundreds of students in five Albanian madrassas. More than 1,500 students have now been exposed to the civic values provided by this project. More concretely the project, in close cooperation with the Department of Education in the Albanian Muslim Community, mainstreamed the “Project Citizen” format with students from grades 9, 10 and 11 in all the Albanian madrassas. Students addressed different problems from their local communities and came up with original public policies and action plans to solve them. The portfolio presentations strongly enhanced students’ civic participatory skills as well as increasing their confidence that they can make a difference in their communities.

Education Programs - The USG funded book translation program has funded the translation and publication of textbooks on political and economic theory and helped fill the void of basic textbooks and reference materials needed to help Albanian students, scholars, and even politicians and other leaders, more fully understand modern political theory. The texts have already been incorporated in the university-level teaching curriculum and ongoing instructor-training workshops and have made the translated texts more accessible to tens of thousands of undergraduate Albanian students.

The Status of Women - The status of women is becoming a more important part of the political agenda and political parties and government representatives are focusing on programs that support women’s rights. USG funded status of women projects focused on improving women’s political and social status and supported activities related to women’s participation in elections and decision-making. Thanks to these programs, 100 members of the Women’s Forum of political parties participated in meetings and other activities, and 376 women activists in seven cities from Albania, through round-tables, seminars, etc. helped to contribute to the increase in the number of women elected to local government councils during the last round of elections. Through four Democracy Commission Grants the USG informed and trained 812 women and girls from Diber, Shkoder and Tirana how to face and fight domestic violence. The results of these activities encouraged a cross-party approach to gender equality issues, based on the exchange of the best practices from various political forces and helped raise the awareness of domestic violence.

Media Development Programs - During the year, the USG funded Public Diplomacy programs focused on instilling sound business practices in the media, particularly in the areas of marketing-related human resources management and marketing/sales techniques for one national and one local television station. The support for media in Albania is also aimed at raising standards for investigative journalism through assistance to reporters and media outlets.

The Media Training Program Post focused on helping the country’s Journalism School and some of the leading print and broadcast outlets. Approximately 250 journalism students and young reporters were trained in basic journalistic principles and ethics. A USG funded speaker on crime reporting trained print reporters on covering organized crime in Albania. The speaker shared tips and expertise with reporters, journalism students, and professors through a four-day seminar and two lectures. In addition, he had various open discussions with editors, media experts, government spokespeople, as well as law enforcement. The program was useful in furthering media independence and freedom. The USG continued to support weekly production of "Hapur," a television show that reports fraud, waste and abuse (in courts, hospitals, businesses, etc.) on 20 local television stations.

With USG support, Albanian journalists improved their capacity to organize, advocate and improve public awareness of problems they encounter. The USG also supported efforts by the Albanian Media Institute and the Institute for Policy and Legal Studies to build consensus in favor of a new Ethics Code and helped form a Council for Media Ethics, the enactment body. This group hosted seminars on journalistic ethics and monthly forums on standards and practices, generally bringing greater cohesion among practitioners on the question of professional ethics.

Rule of Law & Human Rights - The Albanian judiciary is relatively weak, under-funded, and registers high in corruption surveys. While positive changes occurred in some operational aspects, the sector did not demonstrate the sustained will to reform, despite pressure from the public and other branches of government. Challenges in judicial reform include a lack of consensus among major political parties on the scope and nature of judicial reforms, and resistance within the judiciary to control and punish corruption in its ranks.

USG assistance focused on building internal audit institutions which detect and deter corruption and on assisting civic watchdogs and associations to bring the judicial reform issue to the political front-burner. The USG provided assistance to the National Chamber of Advocates (the bar association) to establish disciplinary procedures for lawyers who engage in unethical behavior. In addition, programs strengthened civic organizations such as the Transparency International affiliate Citizens’ Advocacy Office and survey research organizations to monitor corruption and keep the pressure on government and the judiciary. These organizations engage in Court Watch activities, publish surveys on judicial corruption and engage in advocacy for judicial reform.

Cooperation between judicial and executive branches on court inspection procedures (a means of investigating corruption among judges) resulted in standardized inspection procedures, a basis for more rigorous oversight.

Justice System - Assistance in the justice system area focuses on strengthening criminal justice structures, with particular emphasis on fighting corruption, organized crime, narcotics, and human trafficking. In FY 2007 the USG provided legislative reform assistance on new laws on witness protection and money laundering. In a series of regional seminars together with European counterparts, the USG provided training for judges on seizure and confiscation of criminal assets, special investigative means, public and private corruption, and handling of evidence at trial. The USG also donated videoconferencing equipment to the Serious Crimes Court, enabling testimony from witnesses with disguised identities, and sponsored training of personnel from the witness protection unit. In order to build sorely-needed capacity in the area of investigation of corruption and financial crimes, the USG sponsored three police officers and two tax investigators to attend financial investigation training in the U.S. USG assistance also facilitated the creation of a multi-agency Joint Investigative Unit to fight Economic Crime and Corruption in the Tirana District Prosecution Office, with prosecutors, police officers, tax investigators, intelligence agents, and customs officials, dedicated to the investigation and prosecution of corruption and financial crimes.

USG programs continue to provide training, technical expertise, investigative tools and computer equipment to the Serious Crimes Prosecutor’s Office, which was launched in January 2004 and has now established itself as the centerpiece of organized crime prosecution in Albania.

During FY07 USG programs trained 109 judges and magistrate school students during three regional seminars, concentrating on increasing the effectiveness and fairness of trials, and raising the awareness of many new laws affecting evidence in criminal cases. In February 2007 Parliament passed amendments to the Penal Code based on USG recommendations, which were made jointly with European partners. The highlight of these amendments was a new provision criminalizing false statements to prosecutors and police officers. A Memorandum of Understanding between the Ministry of Interior, Ministry of Finance, General Prosecutor, and Director of the National Intelligence Service creating the Joint Investigative Unit (JIU) to fight Economic Crime and Corruption was signed on May 22. On September 17, police arrested six government officials in connection with a bribery scheme related to procurement proceedings, including the Deputy Minister of Transport. These arrests are part of a recent series of corruption-related arrests related to “Operation Clean Hands,” an encouraging sign in the overall fight against corruption, as there have been no significant arrests in corruption for the past two years. In FY 2007 USG assistance forged cooperation between the Ministry of Justice and judiciary inspectorates that resulted in a set of regulations intended to streamline judicial inspection. Those rules are expected to impact judicial accountability.

Anti-Corruption Reforms - In FY 2007 USG anti-corruption reform assisted Albania with the implementation of its Freedom of Information Law and strengthened watchdog organizations. USG funded programs helped draft Ombudsman regulations and by training approximately 200 responsible officials. USG anti-corruption efforts also assisted NGO watchdog activity in FY 2007 including a series of grants made to civic monitoring organizations for discrete watchdog projects and the Annual Corruption Survey.

Corruption in Albania stems from a lack of transparency and accountability across all branches of government. In 2007 USG good governance programs included the support of the High Inspectorate for Declaration and Audit of Assets (HIDAA), which is the audit agency that enforces accountability and transparency in government. In the last three years, HIDAA played a significant official anticorruption role. The combination of its mandates, as both the conflict of interest and asset disclosure agency, turned the institution into a powerful tool of detecting corruption and abuses within public functions. In FY 2007, HIDAA was key in detecting and reporting such cases which led to the dismissal of over 100 public officials.

The 2007 Annual Corruption Survey showed slightly lower reported incidences of bribery and a slight improvement in perceptions in some categories as being less corrupt. Local surveys showed an improvement in timely replies to information requests issued by government offices.

Civil Society - In addition to GOA efforts to combat corruption, it is also imperative to engage citizens in the fight against corruption. USG assistance aims to support civil society in the reform equation with grant-making to watchdogs and investigative media, focusing on the nexus between media and civic watchdog activities.

Most media outlets in Albania are beholden to political or economic interests, and professional and ethical practices remain poor. Media legislation is viewed as adequate, but it lags in implementation. In FY 2007, USG assistance continued to promote investigative journalism with the production of a news show devoted to exposing corruption throughout the country.

In FY 2007 USG funding supported 25 civic watchdogs throughout Albania in their efforts to engage local officials in the budget process, track local spending and shine the light on specific corruption cases that affect their communities. Although small, these grants achieved remarkable results at the local level. USG support has also helped selected NGOs diversify their income sources.

Elections and Political Processes - USG assistance in this area was focused on the 2007 local elections in Albania, and aimed to encourage clean elections as well as consolidating a civic capacity for elections monitoring. Carried out by a coalition of nine collaborative organizations, the effort mobilized around 3,000 short-term independent observers in polling stations and 540 count observers, covering three-quarters of voters in the most populous cities. All major TV stations and five main newspapers were monitored for political bias and reports were issued on campaign coverage. The media outlets made visible efforts to correct bias the monitors identified during the campaign. Lastly, the USG sponsored a large-sample pre-electoral poll on issues voters thought were important. USG programs assisted political party branches in more than ten cities throughout the country on diverse topics ranging from campaign management, internal and external communication, organizational structure, development and support to young leaders, and campaign finance.

The February 2007 Albanian local elections were free and competitive. On the domestic monitoring side, the area in which USG assistance was most extensively involved, the elections were a success.

Civic Participation - In FY 2007 USG assistance aimed to strengthen civic involvement in elections monitoring by supporting a successful domestic observation effort in the local government elections led by a coalition of observer groups. Also in FY 2007 the USG-funded Transparency International Chapter (CAO) led numerous anticorruption initiatives. They included campaigns for transparent government, political party finance reform, free legal aid to citizens confronting government corruption and business malpractices, monitoring implementation of the Freedom of Information law, and promotion of corporate social responsibility.

ECONOMIC GROWTH

Trade and Investment - USG programs aim to assist Albania's public institutions and private enterprises to strengthen their capacity to participate in the global, open market through training and technical assistance. Governmental agencies and private firms worked together to promote Albanian products in international trade fairs and business-to-business events. Despite its impressive economic performance in recent years, Albania needs to increase trade and attract Foreign Direct Investment. In FY 2007 USG assisted Albania to improve the enabling environment and the capacity for trade and investment.

In FY 2007, USG assistance aimed to strengthen the government’s capacity in formulating and implementing sound trade policies, facilitate the involvement of the private sector in the discussion of trade issues and policy dialogue with the government, supported government efforts to comply with World Trade Organization (WTO) requirements, and fulfill its obligations to free trade agreements with the countries in region and with the European Union. The USG funded workshops and roundtables to enhance the government’s understanding and implementation of WTO commitments and promote a better public understanding of trade policies and agreements along with their implications on economic development. It supported the GOA in concluding Albania’s free trade agreements with its neighboring countries and the negotiation of the trade-related part of the SAA with the EU.

In part as a result of USG assistance, including the technical assistance provided by the USG-supported ACIT (Albanian Center for International Trade), the GOA took several key actions to improve the investment environment - including reducing the business tax and reforming the business registration process with the establishment of the “one-stop-shop” National Registration Center - and further liberalized trade in 2007.

Financial Sector - The central focus of USG assistance to Albania’s financial sector development has been institutional development of the Ministry of Finance (MOF) and the Bank of Albania (BOA). The USG provided the MOF with a full-time advisor on debt management, focusing on debt strategy and refinancing risk. The USG also provided a full-time advisor to assist and support the Ministry of Finance through its Fight against Money Laundering (FAML) directorate and its sub-agency, the Administration of Sequestered and Confiscated Assets (AASCA), the High Inspectorate for Declaration and Audit of Assets (HIDAA). Assistance was also provided to the BOA’s departments of Bank Supervision, Monetary Operations, Internal Audit, Payments, Research, Monetary Policy, Information Technology, and Human Resources. Through this assistance, the BOA has strengthened risk management processes, improved the quality of research and statistics, contributed to the implementation of sound monetary policy and increased the ability of bank supervisors to efficiently and effectively inspect commercial banking activities. USG assistance strengthened the capacity of the BOA as a strong independent institution, which is a key internal anchor for economic policy making and macro-economic stability, a major contributor to Albania’s impressive economic growth in past years.

With USG support, the MOF successfully introduced a new automated Reuters auction system for government securities and secured Albania’s first ever Sovereign Debt Rating from Moody’s Credit Service. Both developments will significantly improve the GOA’s ability to raise funds in international capital markets.

Financial Sector Enabling Environment - USG assistance aims to establish an enabling environment to ensure the financial sector’s soundness and transparency and specifically target improving the quality and consistency of bank regulation and supervision through strengthening the professional capacity of the BOA staff. In FY 2007 the USG program trained 109 financial sector supervisors. The BOA has improved both its on-site and off-site supervisory capacity and communications with commercial banks.

Infrastructure - Despite important investments during the transition years, Albania's power infrastructure is far from meeting the increasing demand of energy for residential and industrial consumption. Energy shortages, together with antiquated and unreliable energy infrastructure, contribute to Albania's poor business environment, making it difficult to attract foreign and domestic investment.

USG infrastructure program goals are to provide technical assistance to support the implementation of Albania's energy strategy to improve the availability, efficiency and reliability of energy supplies at a reasonable cost. USG assistance in restructuring the Albanian power sector has been instrumental in developing a legal framework, strengthening regulatory capacity, and opening a functioning energy market. Through technical assistance and training, the USG has helped build the capacity of the Energy Regulatory Entity (ERE) to function as a fully independent and transparent regulator. The ERE now establishes policies and procedures for tariff setting, licenses, monitors, and develops an energy market in compliance with EU directives, and lays the groundwork for privatizing the public utility's distribution assets.

Through technical assistance to the Ministry of Economy, Telecommunication and Energy (METE), the USG helped to expedite the privatization of the electricity distribution sector and ensure its transparency and fairness. USG assistance helped the METE revise the transitional market model and develop the Albanian Market Model (AMM), according to EU directives and the Southeast Europe Energy Community Treaty (SEEECT). The USG also assisted METE in advancing measures so that the privatization process for KESH, the Albanian electric generating utility, will be completed in 2008. The USG also assessed the financial situation and performance of KESH's distribution division to provide METE with reliable information. A financial model was developed, converting the raw accounting data available into international accounting standards. USG helped METE draft amendments to the public procurement law to address the concerns of KESH and the GOA regarding procuring electrcity. USG technical advisors worked with the ERE and TSO to prepare procedures for the allocation and capacity of interconnectivity. These procedures promise a greater level of transparency and fairness.

Agriculture - Agriculture accounts for 22.8% of Albania’s GDP and about 57% of the population lives in rural areas, where poverty is much higher than the national average. This sector’s growth is constrained by fragmented small farms, low productivity, insufficient production, poor marketing and weak competitiveness. As a result of the free trade agreements signed with other countries, Albanian farmers are facing increased competition from imports. Without proper interventions, these problems will worsen and have a major negative impact on Albania’s economic growth and poverty reduction.

To address the above problems, USG started a new agricultural program with FY 2007 funding. The Albanian Agricultural Competitiveness program aims to stimulate the growth of Albania's agricultural sector, which will contribute to achieving sustained, broad economic growth and poverty reduction in targeted rural areas. The program will provide technical assistance and training to producers and other players in the market chain to improve productivity and competitiveness.

Private Sector Competitiveness and Productivity - Albania’s impressive economic growth in recent years is based mainly on macro-economic stability and remittances. However, Albania will not achieve sustained, broad economic growth unless it overcomes several challenges, including the private sector's weak competitiveness. The USG private sector competitiveness program objectives are to improve Albanian private enterprises' competitiveness through productivity improvement and workforce development.

In FY 2007 the USG assisted the Albanian small and medium sized enterprises (SME) to become more competitive in the global market and increase their contribution to the national economy and employment. USG programs built the capacity of SMEs to increase efficiency, lower production costs, and improve product quality. In other sectors, USG programs helped small and medium enterprises adopt new technologies to improve efficiency and product quality to effectively compete in the open markets. The USG also facilitated the access of a number of firms to commercial credit. The number of firms receiving USG assistance to invest in improved technologies and management practices was 120 and 154, respectively. Fifty-three assisted firms obtained loans from commercial banks. The USG-supported micro-credit program provided loans to 5,165 micro- and small enterprises with a total value of over $8 million.

As a result of these programs, many targeted enterprises benefited from USG technical assistance and training to improve productivity and quality through technological innovations, facility renovations, and application of best management practices. The USG also facilitated access to commercial credit for those firms that need capital. Hundreds of SMEs benefited from USG assistance to increase their domestic and/or export sales. The improvement in product quality and the compliance with international standards enabled Albanian exporters to successfully penetrate new markets in the EU, the Balkan region and the Far East. Several enterprises obtained organic and ISO certifications for their products, such as herbs and spices, enabling them to penetrate new markets in the EU and the Balkans. Assisted firms were able to improve their productivity and competitiveness and obtain a significant increase in domestic and/or export sales.

Workforce Development - The lack of a workforce capable of meeting market economy challenges is a major constraint to Albania's sustained economic growth. This problem is exacerbated by the impact of 40 years of communism that suppressed private entrepreneurship and business initiatives, compounded with the weak capacity and poor governance of current public and private institutions.

In FY 2007 USG programs aimed to support programs that helped Albanian youths understand how the market economy functions and provided capacity-building experience to employed or self-employed adults. Through these programs, over 1,000 Albanian students completed training in economic education and enterprise development. Over 59% of these students were female. The learning experience helped these students develop the entrepreneurial spirit, ethical attitudes and business skills, which will enable them to become productive employees or businesspeople capable of putting into practice the concepts of the market economy after graduation from school. The programs assisted more than 200 employed adults (27% of whom were women) through short-term specialized training. In addition, other USG-funded activities provided on-the-job training to hundreds of employees of small and medium-sized enterprises to improve their productivity and competitiveness.

INVESTING IN PEOPLE

Public Health Reforms - A USG funded speaker's visit and participation in the Public Health Conference supported USG efforts to help address pressing health sector issues in Albania. The speaker was the keynote presenter in a day-long Public Health conference organized by the Albanian Fulbright Alumni Association and the USG. Conference participants included physicians, representatives of public health institutions, academics, and public health professionals from neighboring countries and formulated policy recommendations for pressing public health issues in Albania and the region.

Health - USG assistance aims to support Primary Health Care (PHC) reform to better manage scarce resources, improve health care policies and rationalize the regulatory environment to address inefficiencies and qualitative shortcomings in PHC services. As a result of USG training, the quality of PHC services increased in FY 2007. Doctors and nurses are making better medical diagnosis and treatments. More women received birthing information and neonatal and child heath care. Almost 76,000 ANC visits were registered in the health information system during the year, surpassing the target by almost 18%.

Tuberculosis (TB) - USG support focused on training health professionals, expanding Directly-Observed Therapy (DOTS) to the PHC level, improving the knowledge and skills of providers and clients, and fostered collaboration between the National Program for TB and international partners to prevent, detect, and improve treatment of TB. During FY 2007 almost 600 health professionals were trained in DOTS. The training resulted in earlier detection of TB, greater adherence to the DOTS regimen, and a reduced risk of multi-drug resistance/extreme drug resistance.

The national program also continued to provide testing and treatment in TB hospitals and dispensaries. There is a greater awareness of this infectious bacterium and because of this, TB is not only being detected sooner, it is being treated earlier at the local health centers. Greater collaboration of the national program with other TB programs around the world has led to the increased sharing of best practices and their application in Albania. Nevertheless, extra-pulmonary TB remains a serious challenge in Albania. Improved awareness and identification of its symptoms at the community and health center levels, coupled with earlier testing in TB facilities, will reduce the incidence of the extra-pulmonary TB and the exposure of this infectious agent to family members and other contacts.

Other Public Health Threats - USG assistance aims to enhance the quality and access of health care and to better manage limited resources and improve the environment for policy and regulations. By working with other donors and local partners, USG garnered greater participation for improving antenatal clinics (ANC), post-delivery neonatal, and child health care at both the community and clinical levels. During 2007, modest progress was achieved in consolidating the health information system in targeted regions and the system is ready to be implemented nationally. The system provides medical personnel with key information on performance measures and is providing needed data to supervisors to make better decisions with staff. The result is that the system is playing an important role at both the prefecture and central levels for managing the network of health care centers. In turn, there is both better tracking of patients needing chronic care and a greater adherence to patient follow-up.

Maternal and Child Health (MCH) - In FY 2007 USG assistance to MCH services contributed significantly to the well-being and productivity of the population by improving the health of both adults and children. Increased access to quality PHC services, at the health clinic and community level, supported Albania’s long-term goal to reduce infant mortality and maternal mortality by 2013 to the targets established in the GOA’s national health strategy. An increase of almost 15% in antenatal care visits resulted in better follow-up for pregnant women. These visits now include physical examinations, family planning sessions supplemented by IEC, pregnancy follow-up, and infant/child natal care, including immunizations and some nutrition education. Access to MCH services also increased due to community outreach visits to 154 Health Centers and Health Promotion activities in 116 administrative units. As a result, the demand for MCH services has doubled. The Neonatal Resuscitation program expanded from five to nine prefectures with the certification of 325 maternity professionals. The number of newborn deaths occurring within the first 48 hours of life is lower then in the non-assisted prefectures. The significance of this trend will be shown when the DHS is conducted—data collection at the end of FY 2008 and the final report in FY 2009.

FY 2007 Measures of Country Performance

The following data are based on the Monitoring Country Progress in Europe and Eurasia system developed by the United States Agency for International Development (USAID) to measure and track progress in the region. The system uses four different indices to monitor progress, drawing on readily available standardized country-level data on economic reform, economic structure and performance, democratic reform, and human capital. The primary data sources are the European Bank for Reconstruction and Development (EBRD), the World Bank, the United Nations Children’s Fund (UNICEF), and Freedom House. The data for each of the four indices are converted and standardized to a 1-to-5 scale, with a “5” representing the best performance of the Eastern Europe and Eurasia region, and a “1 the least advancement of the region.

Albania’s Democratic Reform* Scores in 2006 compared to Romania and Bulgaria in 2002

Date: 01/01/2008 Description: The graph to the left shows Albanias democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romanias and Bulgarias democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Albania’s democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2007 scores not yet available


Albania’s Democratic Reform Scores in 2006 compared to its Reform Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Albanias democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Albania’s democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Actual 2007 scores not yet available

*Democratic reforms include the electoral process (the extent to which elections are free, fair and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform) and the scope of corruption, as well as anti-corruption income.

Albania’s 1st Stage Economic Reform* 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Albanias stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Albania’s stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.


Albania’s 1st Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Albanias stage one economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Albania’s stage one economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).



Albania’s 2nd Stage Economic Reform 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Albanias stage two economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Albania’s stage two economic reform scores in 2007* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

Albania’s 2nd Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Albanias stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Albania’s stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Economic reforms include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and “second stage” reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

Albania’s Progress on the USAID Country Progress Indices between 1998 and 2007


Date: 01/01/2008 Description: Albanias Progress on the USAID Country Progress Indices between 1998 and 2007. State Dept Photo

 

(1) Economic reforms index include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and second stage reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

(2) The economic structure and performance index tracks indicators such as the size of the private sector as % of GDP, export share of GDP, and the size of the small and medium enterprise sector as % of GDP, economic growth, inflation, debt, and foreign direct investment.

(3) The Democratic reforms index include the electoral process (the extent to which elections are free, fair, and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform), and the scope of corruption, as well as anti-corruption efforts.

(4) USAID tracks progress on the Human capital index by analyzing trends in health (life expectancy, under five mortality rates, and public expenditures on health), education (secondary school enrollment rates and public expenditures on education) and per capita income.



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