While developed economies bent under the weight of the global financial crisis, the small Western Balkan country seems to be again isolated, this time for its benefit. The nation of 3.2 million people continues to attract foreign investors to different sectors – infrastructure, energy, construction materials, insurance and banking - boosting the standard of living by giving Albanians a variety of well paid job opportunities.
This year Albania privatised almost all of the remainder of its communist command economy. The government also made progress in its plan to exploit the mountainous nation's plentiful hydro resources and to solve once and for all a perennial energy shortage. Albania was invited to join the North Atlantic Treaty Organisation (NATO) and probably next year will officially apply for membership of the European Union.
Next year, however, remains crucial: Albania will probably hold in July general elections which could set the nation on a new political course. It will remain a market-oriented country, but after completing privatisation and taking the first steps towards NATO and EU integration, the next set of political aims currently are unknown.
Whether there will be a lack of fresh ideas to spur the country’s further development is a question which can only be answered by the next government. Voters also wonder if the promised investments will mean more job creation, or will money be diverted by corruption, an all too familiar problem in Balkan governance. There are also fears of pressure on jobs from a mass return of some of the one million expatriates, seeking work in their homeland because their host countries have been hit by the crisis and cut their jobs.
But this year Albania has made substantial progress on its way to starting to catch up with developed economies.
Here are some of the main political and economic events in Albania during the year.
* Macroeconomic indicators:
Albania has forecast economic growth this year of a real 6.1% and average annual inflation of 3.0%. In 2007 the economy grew by a real 6.0%, up from the 5.0% in 2006. The government targets a current account gap equivalent to 11% of GDP, which this year is forecast to reach 1,078 billion leks. Albania initially targeted a 2008 budget deficit equivalent to 7.9% of the projected GDP then cut the deficit target to 5.2% of GDP in July, to reflect higher-than-planned customs and tax revenue in the first half of the year. This was the third year in a row with a supplementary budget.
In 2009 Albania expects the economy to grow by a real 6.3%. The current account gap is seen narrowing to 8.3% of GDP, and inflation is again seen at an average annual level of 3.0%. The budget deficit in 2009 is forecast to be equivalent to 4.2% of GDP.
* The International Monetary Fund, whose last programme in Albania will end in January, sees economic growth at between 3.5% and 4.0%.
After almost four years of attempts to sell oil refiner and distributor ARMO, Albania choose this June a U.S.- Swiss consortium as new owner of the company. The consortium, made of up U.S.-based Refinery Associates of Texas and Swiss-based companies Anika Enterprises and Mercuria Energy Group, paid 129 million euro for an 85% stake and will invest $240 million in ARMO in the next five years.
Just weeks before year’s end, Albania sold its 61% stake in insurer INSIG to American Reserve Life Insurance for 25 million euro. American Reserve Life Insurance offered 41 million euro for 100% of INSIG, with the remaining stakes held since 2004 by International Finance Corporation and the European Bank for Reconstruction and Development. The final deal is yet to be signed.
After bidding by Italy’s Enel and Austria's EVN and Energy Steiermark, Czech power utility group CEZ was announced winning bidder for a 76% stake in power distributor OSSH. CEZ paid 102 million euro for the stake and will invest 323 million euro in OSSH, as well as paying its outstanding debts, more than the paid price for the stake - 15.6 billion leks ($178 million/126.8 million euro).
The remainder of communist era assets are the transmission arm of power utility KESH, oil explorer, developer and producer Albpetrol and motor fuel dealer Petrolimpex, which is a very small company.
* Developments in 2008 for the Energy sector:
Undoubtedly the biggest news this year in the energy sector is the more than two billion euro deal signed in December with Italy. This concerns the construction of a liquefied natural gas regasification plant near the town of Fier, worth 1.0 billion euro; and the construction of a wind farm near the town of Vlore and a power line linking Vlore with Italy, worth 1.15 billion euro.
Austrian power utility EVN, jointly with Norway’s Statkraft will build three power plants worth 950 million euro. The plants will have an installed capacity of 340 MW and will produce 1,000 GWh per year, which represents some 20% of the current country production. Austria’s Verbund will develop a 48 MW hydropower plant at Ashta, an investment worth 160 million euro.
Altogether, this year Albania approved the construction of 27 small hydropower plants with a combined installed capacity of 125 MW.
Albania has 1,670 MW total installed capacity in hydropower plants, with the main on the Drin river, where the capacity is 1,446 MW.
However, to feed a country's power needs only with hydro energy is too risky taking into account climate change and the subsequent shorter winters, with less snow in the Balkans in the last few years. So Albania is also trying to develop thermal plants to break off its dependence on hydro. Prime Minister Sali Berisha also raised the idea of a nuclear power plant, probably to be constructed with Italian money.
Next year Italian Maire Engineering will complete Albania’s second thermal power plant, an investment worth 92 million euro, which will add other 97 MW to the existing power capacity in the country. Albania’s sole thermal power plant is at Fier with an installed capacity of 159 MW, but since communism it has not worked at full capacity. Albania is to choose next year between Enel and Greece PPC jointly with German RWE for a coal-fired power plant with an average 1,000 MW installed capacity.
Next year only the Italian Maire Engineering plant will be put into operation and will contribute its daily production only during the second half of the year. But the weather forecast for this winter does not look positive – little snow and rainfall – which could mean a repeat of the 2006/2007 winter, when Albania suffered one of its worst energy crises, with blackouts of up to 20 hours a day. The country will have to resolve such problems by increasing power imports, taking into account that it still has no high voltage 400 kV links with Montenegro, Kosovo or Bulgaria, so the main route to cover the demand is only through Greece.
* Foreign Investment Other than in Power Generation
The development of Albania’s mineral resources has attracted the attention of many big players. Greek building materials manufacturer Titan, through its Albanian subsidiary started this year the construction of a 170 million euro cement plant in Albania – currently the biggest greenfield investment in the coutry. The cement production sector has attracted also the attention of Italy's biggest cement maker Colacem, which will build a 160 million euro plant.
The development of oil fields in Albania is the second biggest area catching investors' attention. Swiss-based Manas Petroleum said it will invest at least $25 million in oil and gas research in its two onshore oilfields in Albania. The fields’ structure has the potential to hold a total of more than 1.4 billion barrels of light oil and 15 trillion cubic feet of natural gas. Two Canadian-based companies are also active in drilling in Albania: Tirex Resources and Bankers Petroleum. The first company holds a 90% stake in Albania’s probably biggest mineral field. Bankers Petroleum started this year its investment programme in Albania, under which in the next three years it will invest $370 million. Since 2004 Bankers Petroleum has drilled Albania's Patos Marinze and Driza onshore oilfields, and since 2008 it started to drill the Kucova heavy oilfield.
* Road to link Albania’s Adriatic port of Durres with border of Kosovo
The cost of the Durres-Morine motorway has become a point of controversy between the centre-right coalition cabinet of Berisha and the Socialist opposition, which says the project would increase Albania's indebtedness. The IMF has repeatedly said that rising indebtedness can jeopardise the financial stability of the impoverished country.
The entire motorway will cost Tirana over 1.2 billion euro almost twice what the government had initially planned, local media reported. The Durres-Morine motorway project envisages the construction of 111 kilometres of new roads and the repair of 59 kilometres of existing roads. Lulzim Basha, who started in this cabinet as transport minister but later was appointed foreign affairs minister, has been accused of abuse of office, breaking the rules for public tenders regarding this road.
* The North Atlantic Treaty Organisation (NATO) invited on April 3 Albania to join the Alliance.
During the year Prime Minister Berisha three times carried out government reshuffles, changing his deputy minister, defence, education, justice, labour and health ministers. An army store for obsolete munitions at Gerdec blew up in a chain of massive blasts on March 15, killing at least 26, wounding 300 and leaving 300 families without homes, causing cabinet changes. Since 2005, when Sali Berisha took over governing from the socialist Fatos Nano, Berisha changed his cabinet eight times, in 10 ministries out of the 14-member government. Berisha kept only the Finance Minister – Ridvan Bode, the Economic, Trade and Energy Minister – Genc Ruli, the Environment Minister – Lufter Xhuveli and the Agricultural and Food Minister Jenim Gjana unchanged.
* The biggest political scandal of the year
Kosta Trebicka, the main figure in the Albanian arms industry, was found dead in September just a month before he was due to testify in the investigation of the Gerdec explosions, in which Trebicka had involved some top officials. Trebicka, through his firm Xhoi, was involved in repackaging of Chinese ammunition, sold by Albania to AEY Inc, a U.S. company contracted by the Pentagon to supply the army in Afghanistan. Trebicka was removed from this deal by the defence minister, after which he decided to testify.
Albania’s parliament approved a set of constitutional amendments simplifying the rules for holding presidential and parliamentary elections, with the aim to holding a free and fair vote. Under these, the general elections in Albania will be held under a regional proportional system. Under the Dushku system, applied after the fall of communism, the bigger parties' candidates have been elected directly, while candidates from the smaller parties, altogether 40 seats, have been elected according to proportional representation. The allies of the party that wins most of the votes in the direct representation get most of the votes in the proportional representation. The law also became a big political issue. Ten opposition politicians had staged an eight-day hunger strike to oppose the law saying that the regional system of proportional representation would close the door of parliament to all small parties. However the new electoral code was not signed by President Bamir Topi. He said he could not appoint a date for the general election without breaking the constitution. So, in the middle of December the assembly re-established the special electoral reform constitution to re-examine the electoral law.
(1 euro= 122.9571 Albanian leks)
