Albania: One step forward, two steps back

The International Institute for Middle-East and Balkan Studies (IFIMES) from Ljubljana, Slovenia, regularly analyses events in the Middle East and the Balkans. One year after the new government led by Prime Minister Edi Rama was elected in Albania, IFIMES has prepared an analysis of the current political situation in that country. The most relevant and interesting sections from the comprehensive analysis entitled “Albania: One step forward, two steps back are published below.




One step forward, two steps back


In mid-September 2014 Albania marked the first anniversary since the new government led by Prime Minister Edi Rama (PS) was formed. The election held on 23 June 2013 was won by the large coalition known as “Alliance for a European Albania” led by the Socialist Party (PS) and the Socialist Movement for Integration (LSI) of former Prime Minister Ilir Meta. LSI is a renegade political party formed by Ilir Meta who left the Socialist Party which was the coalition partner of the previous government led by Sali Berisha (PD), which has devastated Albania.


Edi Rama and his Socialist Party represent Albania of the next generation. During its first year in office Edi Rama's government has launched several reform processes, declared war against the urban mafia, and for the first time sent the police force to the village of Lazarat which was known for growing marijuana. In less than a week the police managed to conquer this “drug castle” that represented a true anti-state symbol. Subsequently, Albania was granted the candidate status for EU membership.


Although the analysts have pointed to some mistakes made during the past year, Edi Rama's government has shown that it is possible to work better and in the interest of all citizens of Albania. 


With dynamite against urban mafia


Before taking over the office, Prime Minister Edi Rama organised a conference in end-August 2013 entitled “Next Generation Albania” where he invited renowned architects from all over the world to help create a vision of Albania's urban development. The campaign launched against illegal construction throughout Albanian territory and notably along the coast has already brought some results. The government has literally attacked the urban mafia with dynamite. Blowing up houses, palaces and grandiose hotels built without building permits is perhaps not the right solution for a country hoping to become an EU member state, but in a society where violation of law represents a way of life this seems to be the only possible way to bring an end to abuses of public areas.


Today, one year after the campaign, no one dares even think about building illegal constructions and usurping a public area before submitting the necessary documents to the competent institutions and obtaining the building permits.  The dynamite has obviously achieved its purpose.


Closure of “diploma factories


The second major reform initiated by Edi Rama's government has been the education reform, which included the closure of private and public faculties and universities that started to grow like weeds in Albania and turned into “diploma factories” and nests of corruption.


Altogether 17 private universities and faculties have been put on the closure list because they have abandoned their mission and no longer pursue their primary goal of providing quality education to young people.


Despite fierce public reaction, the latest public opinion poll has shown that about 90% of Albanian citizens support this decision made by the government. Edi Rama's government has thus marked another victory in carrying out the painful but badly needed reforms of Albanian society.


One step forward, two steps back towards the EU


Albania submitted request for EU membership on 28 April 2009 and was granted the candidate status on 24 June 2014. The EU at first avoided granting the candidate status to Albania due to insufficient fight against corruption, growth of criminal activities, lack of reforms and political dialogue and non-functioning of the rule of law. But Edi Rama succeeded where Sali Berisha had failed.


The first High-Level Dialogue (HLD) between Albania and the EU after granting the candidate status to this country was held on 29 September 2014, where Albania was given concrete priorities which it has to fulfil in order to continue its accession process for full EU membership. EU's outgoing Commissioner for Enlargement ŠtefanFüle has presented a list of tasks which Edi Rama's government should realise in the forthcoming period.


These include the judicial reform, fight against corruption, reinforcing de-politisation and efficiency of independent institutions as well as restoring political dialogue between the government and the opposition in order to speed up the reforms.


Discrimination against foreign companies


Privatisation of large state-owned companies in Albania has turned out to be a failure. This was evident in the privatisation of the energy sector. The Czech energy company ČEZ has withdrawn its 160 million EUR worth investments due to a dispute with Albanian government, i.e. its Energy Regulatory Entity, over the price of electricity and state institutions' unpaid electricity bills. Numerous irregularities were identified in the tenders carried out in the Albanian power corporation KESh which gave advantage to certain companies, especially in the field of electric power supply. During the privatisation process ČEZ enjoyed a privileged status on the Albanian market for a long time until it entered into a dispute over the division of profit and unsettled invoices with the state. Those are obvious elements of corruption that have not been properly investigated. However, any attempt to investigate crime and corruption in the energy sector was very soon prevented by the political elites. An Albanian television channel TV News 24 started to broadcast three thematic programmes on crime and corruption, particularly within OSHEE, prepared by the journalist Artur Çani, but the programme was stopped very soon.  LSI staff are still the key actors in carrying out public tenders. Analysts have calculated that Albanian taxpayers lose several million EUR on each tender due to corruption. Obviously that money ends in private pockets.


Moreover, Albanian Tax Administration has rejected the reimbursement of VAT to numerous foreign companies, thus reducing their working capital and bringing them to an unfavourable position in comparison with companies that enjoyed sponsorship from their political godfathers. Unfortunately Edi Rama's government has not managed to stop theses practices.


The energy sector – Albania's cancer


With the winter period approaching Albania is expecting a difficult period in the energy sector which already suffers from major defects and significant theft of electricity while electricity prices are expected to grow. The gravity of the situation is also evident from the fact that on 28 September 2014 the World Bank granted USD 150 million for a project to support Albania's energy sector which is facing serious financial and operational problems.


According to information from the World Bank Albanian government should intensify its efforts to reform the energy sector in line with EU energy directives, which is obviously not the case at the moment. However, instead of making progress in this field towards EU accession, the Albanian energy sector is currently characterised by overgrowing (and obviously systemic) corruption where certain electricity companies are favoured by certain government officials and top politicians. 


Action to be taken by Edi Rama?


The present situation triggers questions as to who controls Albania's energy sector and the public tenders for the import of electricity? Who receives the proceeds of corruption while so many Albanian citizens live in poverty? Is this acceptable for a future European country? As a reformist Edi Rama should find answers to all these questions and show the way forward.


According to reliable information from Tirana and Brussels, trade in electricity in Albania involves also other elements besides corruption and organised crime. Tailoring results seems to be regular practice in the provision of electricity with the aim to give advantage to certain companies and cover systemic losses by OSHEE. Giving advantage to EFT and GSA enables prohibited procurement practices and agreements concluded with individuals from OSHEE which represents the central point and source of such illegal practices.


This is not only a form of competition distortion but also a criminal offence of plundering the state of Albania and its taxpayers, i.e. final users who eventually have to pay higher electricity bills.  


The energy sector therefore currently represents the major challenge for Prime Minister Edi Rama who has to initiate investigations not only against OSHEE but also against the Energy Regulatory Entity (ERE) which should control the operations of OSHEE instead of tolerating and supporting the illegal practices described above. As a rule OSHEE and ERE have rejected all complaints submitted by the injured companies, which represents the violation of Albanian laws and their respective legislative powers and responsibilities. Other supervisory bodies in the energy sector also act in a similar way and follow the instructions of their political mentors and lobbies.


The above practices within OSHEE pointed out by analysts should also have been subject to investigation by the competent state institutions, but it seems that the Albanian Competition Authority and the Court of Audit still do not act in line with their legislative powers. The question is whether they do not have the courage to intervene in systemic corruption or whether they have even become a part of it. The General Prosecutor Office should also carry out its role in this process.


Besides the urgent role of competent Albanian institutions it seems inevitable that EU institutions become involved in this case. They should warn the highest representatives of Albania that the situation in the energy sector may jeopardise or even stop Albania's accession to the EU.


In addition to other relatively successful reforms Prime Minister Edi Rama should also start to introduce changes in the energy sector which represents the symbol of corruption in the Albanian society. The first step would be to eliminate the LSI and PD staff who are still the pillars of corruption in this sector. Albania and Edi Rama should not allow a situation in which they make one step forward and two steps back in their efforts to join the European Union.


Ljubljana, October 6, 2014