DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B POLICY DEPARTMENT BRIEFING

DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B POLICY DEPARTMENT BRIEFING ANALYSIS OF THE 2009 ANNUAL PROGRAMME FOR ALBANIA UNDER THE INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA) IN THE CONTEXT OF THE 2009 ENLARGEMENT PACKAGE Abstract This Briefing Paper analyses the coherence of the IPA Annual Action Programme 2009 for Albania (AAP) with the European Union's (EU) pre-accession objectives. It evaluates the relevance of the elements of analysis put forward in the AAP and their adequacy to the situation in that country. The AAP s allocation of funding and composition of projects will be projected against Albania s specific needs as identified by the European Commission s (EC) Progress Report (Commission 2009a) and the Enlargement Strategy (Commission 2009b). This paper is divided into a political section, an economic section, a section on Albania s ability to assume the obligations of membership. Each section provides an analysis of the current situation, of the AAP priorities and projects, as well as an assessment of the latter. The briefing closes with conclusions and recommendations. EXPO/B/AFET/FWC/2009-01/Lot1/08 February 2010 PE 433.671 EN

DG EXPO Policy Department This study was requested by the European Parliament's Committee on Foreign Affairs. AUTHOR(S): Dr. Jens Bastian is a Senior Economic Research Fellow for South East Europe at ELIAMEP (Hellenic Foundation for Foreign & European Policy) in Athens, Greece. Between 2005 and 2008 he held the position of Economist/Institution Building at the European Agency for Reconstruction (EAR) in Thessaloniki, Greece. E-mail: jbastian@eliamep.gr ADMINISTRATOR RESPONSIBLE: Georgios Ghiatis Directorate-General for External Policies of the Union Policy Department WIB 06 M 045 rue Wiertz 60 B-1047 Brussels LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR Manuscript completed on 20 January 2010. European Parliament, 2010 Printed in Belgium The study is available on the Internet at http://www.europarl.europa.eu/activities/committees/studies.do?language=en If you are unable to download the information you require, please request a paper copy by e-mail: xp-poldep@europarl.europa.eu DISCLAIMER Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation, except for commercial purposes, are authorised, provided the source is acknowledged and provided the publisher is given prior notice and supplied with a copy of the publication. ii

2009 AP for Albania under the IPA EXECUTIVE SUMMARY Scope of the briefing: This Briefing Paper analyses the coherence of the IPA Annual Action Programme 2009 for Albania (AAP) with the European Union's (EU) pre-accession objectives. It evaluates the relevance of the elements of analysis put forward in the AAP and their adequacy to the country's situation. The AAP s allocation of funding and composition of projects will be projected against Albania s specific needs as identified by the European Commission s (EC) Progress Report (Commission 2009a) and the Enlargement Strategy (Commission 2009b). This paper is divided into a political section, an economic section, a section on Albania s ability to assume the obligations of membership. Each section provides an analysis of the current situation, of the AAP priorities and projects, as well as an assessment of the latter. The briefing closes with conclusions and recommendations. Main findings: The objectives stipulated in the IPA Annual Action Programme 2009 for Albania (AAP) are in accordance with the tasks identified in the European Commission s (EC) Progress Report and the Enlargement Strategy. Political requirements and the ability to assume the obligations of membership figure prominently on the three priority axis of the AAP. Together they account for 76.4 percent of the overall budget. Political Criteria: The eight projects within the IPA programme reflect Albania s priority needs in view of EU approximation. They build on results of current projects and seek to emphasize continuity. The projects aim at consolidating the legislative and institutional justice system, capacity building in maritime security as well as support to the population and Housing Census planned for 2011 (single-largest component). Economic Criteria: The three projects assigned to the Socio-Economic priority axis are only partly in line with the needs in this area. Only one project (improvement of secondary and local roads) specifically addresses weaknesses such as infrastructure, human capital and security of electricity supply that are identified in the Commission s Communication to the Council and the European Parliament (Commission 2009b). European Standards: The four projects proposed for funding correspond to various challenges identified in the Progress Report. The focus on water supply, property rights, food safety and data protection is in accordance with Albania s needs and EU compliance standards. However, this concentration is unbalanced in terms of funding (one project alone receives 73 percent of total resources). Other priority areas such as money laundering, drug trafficking and organized crime are not being addressed. iii

DG EXPO Policy Department Main conclusions: The 16 projects in the 2009 IPA National Programme for Albania cover several priority areas identified in the Commission s recommendations of the 2008 Enlargement Strategy and Progress Report as well as the MIPD 2009-2011. However, the projects proposed under priority axis 2 Socio economic criteria are only partly convincing regarding their economic potential. Furthermore, organized crime as specified within the Commission s Progress Report is not sufficiently addressed in priority axis 3 of the IPA Programme for Albania. Recommendations: Strengthen administrative capacity in the judiciary and civil society in order to better address informal structures of policy making (election fraud, property rights, organized crime). Devote more attention to the social implications of high unemployment and informal economy. iv

2009 AP for Albania under the IPA CONTENTS EXECUTIVE SUMMARY SCOPE OF THE BRIEFING: MAIN FINDINGS: MAIN CONCLUSIONS: RECOMMENDATIONS: III III III IV IV 1 INTRODUCTION 2 2 POLITICAL CRITERIA 3 2.1 POLITICAL SITUATION 3 2.2 THE ACTION PLAN 3 2.3 ASSESSMENT 4 3 SOCIO-ECONOMIC CRITERIA 4 3.1 SOCIO-ECONOMIC SITUATION 4 3.2 SOCIO-ECONOMIC ACTION PLAN 5 3.3 ASSESSMENT 5 4 ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 6 4.1 SITUATION WITH REFERENCE TO THE ABILITY TO ASSUME THE OBLIGATIONS OF EU MEMBERSHIP 6 4.2 ACTION PLAN 6 4.3 ASSESSMENT 7 5 CONCLUSIONS 7 BIBLIOGRAPHY 9 1

DG EXPO Policy Department 1 INTRODUCTION The request for this Policy Brief specifies that the briefing should analyze: the coherence of the annual programme with the Union's overall policy objectives as set for the preaccession process in general and for Albania in particular; the pertinence of the elements of analysis put forward in the action programme and their adequacy to the conditions observed/identified on the ground in Albania, considering the recent developments in the area; the way in which results or lack of them (achievements and/or weaknesses) in implementing previous annual programme(s) and analysis of situation could be taken on board with a view to adjusting the Multi-annual Indicative Programme for Albania. The Policy Brief will evaluate the consistency of the IPA 2009 National Programme for Albania with this EU policy framework. More specifically, the analysis will discuss the adequacy of the IPA Programme to meet the needs identified by the beneficiary country and the conditions established by the EU policy framework. In responding to this task, we analyze the IPA 2009 National Programme for Albania and its allocation of funding and composition of projects against the country s specific needs as identified by the European Commission s (EC) Progress Report (Commission 2009a) and the Enlargement Strategy (Commission 2009b). We divide this paper into a political, an economic and a European standards section thereby following the structure of the Progress Report and the priority axes within the IPA Programme as well as the MIPD. Each section provides an assessment of the proposed projects in the context of existing political, economic and European standards criteria. The briefing closes with conclusions and recommendations. The 2009 IPA National Programme for Albania represents the third such engagement by the Albanian authorities and the EC Delegation. The maximum amount of Community contribution shall be 69.86 million. This financial contribution is broken down into 21.8 million allocated in priority axis 1 (political criteria), 14.46 million in priority axis 2 (socio-economic criteria) and 31.5 million in priority axis 3 (ability to assume the obligations of membership). In addition to the assistance identified in these three priority axes, financial support ( 2.0 million) is also provided to participation in community programmes, in particular Competition and Innovation Framework Programme (CIP) and Europe for Citizens as well as the 7th Research Framework Programme. 2

2009 AP for Albania under the IPA 2 POLITICAL CRITERIA 2.1 Political Situation Albania continued to make progress towards meeting the Copenhagen political criteria during 2009. The past year was a watershed for Albania s road towards Europe. It submitted its application to join the European Union in April 2009. The Parliament had unanimously approved a resolution calling on the Government to apply for EU membership in January 2009. The parliamentary elections of 28 th June 2009 brought a confirmation of the coalition government headed by Prime Minister Sali Berisha. The OSCE Office for Democratic Institutions and Human Rights (ODIHR) assessed the elections as meeting most OSCE commitments. But it also emphasized that Albania has yet to realize the full potential to adhere to the highest standards for democratic elections, e.g. with regard to voter identification, and vote counting. The new coalition government includes four parties, the Democratic Party (DP) of Prime Minister Berisha, the Socialist Movement for Integration (SMI), the Republican Party (RP) and the Party for Justice and Integration. The new government programme gives priority to European integration and confronting the fight against organized crime. As the Commission s 2009 Progress Report underlines, Albania has continued to make some progress in strengthening its government structures with a view to addressing SAA commitments, a key European Partnership priority. However, in areas such as strengthening of capacity, coordination and strategic planning for EU integration further sustained efforts remain necessary. The Albanian authorities are currently dealing with the EC s extensive pre-accession questionnaire. The answers provided will form the basis of the EC s assessment of the country s readiness to be granted candidate status. Replying to the questionnaire is a demanding task which will require strong commitment from the entire public administration and political authorities in Tirana. It constitutes an unprecedented reality check for Albania. Forging consensus on a wide range of issues will prove challenging if the opposition does not end a boycott of Parliament since the June 28, 2009 general elections. The Albanian Parliament needs to function normally for the country to continue making progress on its European accession process. 2.2 The Action Plan The first priority axis in the AAP political criteria comprises a total of eight projects with an EC funding contribution of 21.8 million. The projects grouped in this priority axis convincingly address the diversity of needs as articulated by various political authorities and civil society representatives in Albania. For instance, improved border management capacity has repeatedly been advocated by the Albanian Border Police, in particular vis-à-vis human trafficking and drug smuggling. Equally, strengthening Civil Society Organisations (CSOs) in areas such as their fight against corruption, environmental education and support for vulnerable people has been requested on a number of occasions. Moreover, the project mix responds to and is in line with Albania s EU approximation process. The projects range from consolidating the legislative and institutional justice system (with a well-timed twinning contract), capacity building in maritime security as well as support for the population and Housing Census planned for 2011 (single-largest component) and further strengthening of civil society organizations in Albania. 3

DG EXPO Policy Department The emphasis is on project continuity, strengthening donor coordination and providing results-oriented impact. This approach within the third IPA National Programme for Albania is all the more necessary since the projects seek to integrate lessons learned from earlier IPA assistance. These lessons include the importance of local ownership, project maturity, the mobilization of civil society on key reform activities and timely planning capacity between EC assistance priorities and multi-level governance authorities. 2.3 Assessment The projects proposed in priority axis 1 of IPA 2009 focus on areas such as good governance and institution building, rule of law and civil society development. IPA assistance for 2009 is formulated in reaction to lessons learned. These apply mainly to impact and sustainability of projects due to the uneven capacity of the various Albanian administrations. The priorities and projects presented in the 2009 AAP mirror the objective of further assisting Albania in implementing its Stabilisation and Association Agreement (SAA) and they keep on supporting sustainable reforms needed to comply with EU requirements. Against the background of Albania having applied for EU membership in April 2009 and the EC currently preparing its opinion on Albania s application, the effectiveness and efficiency of the 2009 IPA Programme will be timely and critical. However, the European Commission has pinpointed the persistence of weaknesses in areas insufficiently covered by the 2009 AAP in priority axis I. Two observations are made for future programming cycles: Visibility of EU approximation efforts: Albania's first EU Info Centre was opened on 24 November 2009 in Tirana. This creation should be mentioned in all future project proposals of AAP. Informed citizens are instrumental in ensuring a successful EU integration from both Albania's and the European Union's perspective. Administration of elections: The parliamentary elections of June 2009 met most international standards. But further efforts are needed to address the shortcomings identified by the EC, the OSCE and the Council of Europe. AAP for 2010 and beyond should seek to identify projects focused on strengthening procedural aspects of administrating elections, in particular voter registration, transparency requirements and vote counting monitoring. 3 SOCIO-ECONOMIC CRITERIA 3.1 Socio-economic situation The impact of the economic crisis affected Albania during 2009. The 2009 growth estimate was revised downwards. In the first half of 2009 exports fell by 21% year-on-year. Remittances were down by around 16% in 2008 compared to 2007, amounting to 9.2% of GDP, partly reflecting the impact of the global financial crisis, partly the declining trend observed over the past years. According to latest data the second quarter 2009 saw a further decrease of remittances by 4% compared to the same period in 2008. The reliance on remittances continues to be a challenge for private households. However, it should be noted that the Albanian authorities have not (yet) had to revert to external assistance from IFIs such as the IMF. Contrary to their peers in the region, such as Serbia and Bosnia & Herzegovina, the Albanian government continues to claim not to need external funding assistance. The unemployment rate decreased slightly to 12.7% by the end of 2008, down from 13.2% by the end of 2007. In the public sector, the average wage increase was of 8.8% in 2008, whereas the average increase in the private sector was of 15.1%. A further increase in public sector wages and pensions took place in May 4

2009 AP for Albania under the IPA 2009. Overall, there were some improvements in labour market outcomes. However, unemployment remained high and labour market data continued to be poor. The large informal economy remains a major challenge to economic development and the business environment. The current AAP refers once to measures to help Albania to soften the effects of the financial crisis (AAP 2009, Annex, p.2). 3.2 Socio-economic Action Plan The AAP proposes to allocate 20.7 percent of the overall budget ( 14.46 million) to priority axis 2 socioeconomic criteria. In practice this includes three projects, namely (i) The improvement of secondary and local roads which targets infrastructure weaknesses, (ii) The protection of cultural heritage which responds to the EC s engagement in the so-called Ljubljana process 1 and demands from the European Parliament (EP), (iii) Financing the rehabilitation of the border crossing infrastructure in Morine (Kukes Region) bordering Kosovo. However, as the conditions for IPA Component II to support joint cross-border programmes with Kosovo are currently not met, the project proposal can only focus on financing a unilateral activity in Albania. This threefold focus on road and transport infrastructure, the physical restoration of urban areas in and around selected historical heritage sites as well as the rehabilitation of border crossing infrastructure reflects the beneficiary needs, while taking into account external institutional demands and prevailing limitations. Put otherwise, the funding proposals in this priority area highlight current constraints and future opportunities. More specifically, support for regional infrastructure development in Albania seeks to contribute to the country's social and economic cohesion. The protection of cultural heritage combines the EC s engagement in the said Ljubljana process with requirements articulated by the EP. Hence, good project visibility of EU engagement should be attained at all stages of the funding period for these two activities. The unilateral border development programme for the Kukes region illustrates that conditions for IPA Component II to support joint cross-border programmes with neighbouring Kosovo are currently not met. In light of institutional and administrative limitations DG Enlargement transferred IPA funds from Component II to Component I. 3.3 Assessment The volume of funding reserved to the Socio-economic criteria under IPA 2009 totals 14.46 million, or 20.7 % of the total budget. This amount requires focus on a limited number of priorities and is reflected in the proposition of only three projects. In light of the impact of the global economic crisis in Albania, one would have expected that funding priorities and volume also address issues such as social policy making and unemployment, education and vocational training for those (re-)joining the labour force. The three projects assigned to the socio-economic priority axis of the 2009 AAP are only partly in line with the needs identified in this key area. The project to improve secondary and local roads specifically addresses weaknesses in transport infrastructure. The economic potential of this project is convincing and the project's identification is timely. 1 The Ljubljana process aims to ensure public and private funding for so called consolidated projects among 186 monuments on the Priority Intervention list. 5

DG EXPO Policy Department The proposed activities in the area of cultural heritage and border infrastructure can generate high EU visibility on the ground. However, the degree to which the criterion of economic potential applies to these two projects is not sufficiently clear. Qualitative benchmarks such as economic gap assessments and economic impact evaluation in the project fiches should specify this criterion. Moreover, two of the three socio-economic support projects lack a clearly identifiable link to cross-cutting issues. Infrastructure projects will be subject to environmental impact assessments. The incorporation of cross-cutting issues (e.g. equal opportunities, non-discrimination and minority groups concerns) in the projects on cultural heritage sites and unilateral border infrastructure should be more evident in the funding proposals. Finally, future AAP cycles should seek to broaden the range of projects in this key priority axis. They should reflect more adequately intervention areas identified in the Commission s Communication to the Council and the European Parliament (Commission 2009b) such as human capital development, security of electricity supply and enforcement of bankruptcy procedures. 4 ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 4.1 Situation with reference to the ability to assume the obligations of EU membership As noted in the EC Progress Report, Albania continued during 2008/09 to make good progress with regard to its ability to assume the obligations of EU membership, in particular in areas such as standardisation, accreditation, metrology, and consumer protection. Less progress has been achieved in movement of persons, capital, customs and tax administration. Administrative capacity for the implementation, enforcement and monitoring of legislation needs to be enhanced (European Commission, 2009a). The most critical deficits reside in areas of social policy making; social dialogue is still at a developing stage while administrative capacity in the field of public health remains weak. Overall, as the Commission s Progress Report 2009 argues, preparations in the field of social policies, employment and public health policy are advancing moderately. Efforts are required to promote social cohesion (European Commission, 2009a, p.33). 4.2 Action Plan The AAP proposes to allocate 45.2 percent of the overall budget ( 31.6 million) to priority axis 3 Ability to assume the obligation of membership. In practice this includes four projects, namely: (i) Improvement of water supply and sewerage systems. A major part of the project rests on the implementation of joint management between the EC with the Council of Europe Development Bank (CEB) in co-operation with Kreditanstalt für Wiederaufbau (KfW). Thus, donor coordination with IFIs and the Government of Albania in the delivery of different assistance programmes will be critical in this single largest project in the overall 2009 AAP ( 23.1 million). (ii) Improvement of industrial property rights. The key target of this administrative capacity building activity is the Directorate of Patent and Trademark. (iii) The project on the consolidation of the food safety system seeks to enhance administrative enforcement capacity in the Ministry of Agriculture. The project is focused on the adoption and implementation of EU-compliant measures (iv) Building an e-government infrastructure in line with EU personal data protection standards. This project aims to create an interoperability framework for activities that will be developed in the future. 6

2009 AP for Albania under the IPA The four projects proposed for funding correspond to various issues identified in the EC s 2009 Progress Report. The focus on water supply, property rights, food safety and data protection is in accordance with Albania s needs, EU approximation process and compliance standards. 4.3 Assessment In line with the EC Progress Report and the MIPD, the focus of the 2009 AAP is on administrative capacity building and infrastructure investment in selected issue areas aimed at enabling Albania to transpose, implement and enforce the acquis. The emphasis lies on enhancing the rehabilitation of water supply, strengthen administrative capacity in the field of industrial property rights, consolidation of the country s food safety system and building an e-government infrastructure in line with EU personal data protection standards. However, the project mix is somewhat unbalanced in terms of funding priorities. One project alone - improvement of water supply and sewerage systems - receives 73 percent of total resources in this priority axis in the 2009 AAP. Furthermore, while the political will to make further progress on European standards exists and is recognized by the EC, the necessary administrative steps towards implementation remain challenging in practice. There is a strong track record in the production of legislation. Still, administrative follow-up, implementation capacity and impact evaluation will require considerable resource commitment over time by the Albanian authorities. Shortcomings on this priority axis relate primarily to areas of multi-level governance capacity, administrative enforcement and financial control. Intervention areas which the EC s Progress Reports during the past years have consistently highlighted for Albania, such as money laundering, drug trafficking and organized crime are not being addressed in the project envelope for 2009. In terms of decentralized management preparations for IPA Component I EU project assistance, coherence and continuity will be critical in the coming years. The existing institutional structure in the Ministry of Finance and its proposed national roadmap are not fully in line with the operational requirements of decentralized management for IPA Component I projects. 5 CONCLUSIONS The 16 projects in the 2009 IPA National Programme for Albania cover several priority areas identified in the Commission s recommendations of the 2008 Enlargement Strategy and Progress Report as well as the MIPD 2009-2011. Consistency with the overall policy framework is evident, albeit unevenly. For next year s preparation of the AAP, the following issues should specifically be addressed in project and funding proposals: The effects of the global crisis on the economic conditions in Albania have resulted in rising unemployment and further social dislocations. Assistance within the framework of the socioeconomic criteria therefore needs to focus more on social issues, especially unemployment, social cohesion and social dialogue. A stronger orientation towards tackling social issues more visibly to Albanian citizens would contribute to matching the ambitions of the MIPD s requirements while simultaneously enhancing legitimacy for the EU integration process. Organized crime as specified within the Commission s Progress Reports during the past years should be addressed directly in priority axis 3 of the IPA Programme for Albania. The EC s 2009 Communication to the Council and the EP pointedly notes that internal trafficking of women and children is on the increase in Albania. Potential initiatives could include resources for inter-agency 7

DG EXPO Policy Department coordination, providing adequate training for personnel in border management and strengthening enforcement capacity in preventing trafficking in human beings. Support to administrative capacity building in the judiciary and civil society environment should be increased in order to better address informal structures of policy making (election fraud, property rights, contract enforcement). In particular, Albania s recent parliamentary elections highlighted continuing deficits in the administration of elections, vote counting, voter registration etc. Given Albania s electoral calendar for 2010 and beyond project attention and funding should be directed towards these aspects. The inclusion of civil society organizations in the formulation and implementation of such projects would further enhance the EU s visibility and recognition on the ground. Dr. Jens Bastian is Senior Economic Research Fellow for South East Europe at ELIAMEP (Hellenic Foundation for Foreign & European Policy) in Athens, Greece. Between 2005 and 2008 he held the position of Economist/Institution Building at the European Agency for Reconstruction (EAR) in Thessaloniki, Greece. E-mail: jbastian@eliamep.gr 8

2009 AP for Albania under the IPA Bibliography BLOCKMANS, Steven (2007): Tough Love. The European Union s Relations with the Western Balkans, I.M.C. Asser Press: The Hague. COMMISSION (OF THE EUROPEAN COMMUNITIES) 2009a: Albania 2009 Progress Report (SEC(2009) 1337), Brussels. COMMISSION (OF THE EUROPEAN COMMUNITIES) 2009b: Enlargement Strategy and Main Challenges 2009-2010 (COM(2009) 533 final), Brussels. COMMISSION (OF THE EUROPEAN COMMUNITIES) 2009c: National Programme for Albania under the IPA Transition Assistance and Institution Building Component for the Year 2009 C(2009)9754 final, Brussels. MULTI-ANNUAL INDICATIVE PLANNING DOCUMENT (MIPD) 2009-2011 FOR ALBANIA, Commission decision: C(2009)5911 SCHIMMELFENNIG, F. and U. SEDELMEIER (eds., 2005): The Europeanization of Central and Eastern Europe, Cornell University Press: Ithaca. 9