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Albania
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Situation and cooperation
After the collapse of the Communist system at the end of the 1980s, Albania rapidly underwent a comprehensive transformation of its political and economic system. It had to establish the institutions required for a constitutional democracy based on the rule of law and introduce a market economy. Since 2000 there has been extensive economic development with an average annual growth rate of around five per cent.
When a crisis broke out in neighbouring Kosovo in 1999, Albania made an internationally recognised contribution to stability in the region. It engaged responsibly in the peace process and took in thousands of refugees. Albania has good relations with its neighbours and is a party to the Central European Free Trade Agreement (CEFTA).
Prospects for integration into the European Union
The people of Albania now see their future as lying in Europe. Since 1991 the European Union has been supporting wide-ranging structural reforms in Albania. In 2003 the country entered into negotiations with the EU on a Stabilisation and Association Agreement (SAA), which came into force in April 2009. The aim is to foster a progressive partnership, in which the EU supports Albania by means of the Instrument for Pre-Accession Assistance (IPA). IPA is made up of five components: assistance for transition and institution building, cross-border cooperation, regional development, development of human resources and rural development.
In 1991 the European Union's support to Albania through various partnership programmes amounted to more than 1.5 billion euros. Albania's rapprochement to the EU requires further adaptation in almost all areas and continues to present the country with major challenges.
Development potential
The Human Development Index now ranks Albania 64th out of 169 countries (HDI, 2010); its position has consistently risen over recent years. While many of the Millennium Development Goals can be regarded as largely met, in its National Strategy for Development and Integration 2007-13 (NSDI) Albania has set itself the target of reaching EU standards.
The proportion of the population living below the national poverty threshold has halved in recent years, falling from 25.4 per cent (2002) to 12.4 per cent (2008). Despite this, Albania still lags behind its European neighbours both economically and socially. In 2009 per capita gross domestic product was only just under 3,800 US dollars. Officially the jobless rate is almost 14 per cent. However, informal employment is widespread. At the same time there is a shortage of skilled workers in the Albanian workforce. Formal vocational training is being reformed to take account of social factors and the requirements of the labour market.
Almost 50 per cent of the population continues to live from agriculture, although this generates less than 20 per cent of gross domestic product. Since many farms operate on a purely subsistence basis, productivity in the Albanian agricultural sector is low. Most farms are too small to be competitive in Europe. Farmers lack access to markets and to the capital needed for investment in the agricultural sector. Rural development is therefore a high priority for the Albanian government. In addition, further investment in water supply and sanitation and in the energy sector is planned, with the aim of improving the supply of clean drinking water and energy to the Albanian population. The need to invest in infrastructure improvements remains high.
Albania has deposits of chromium, copper, nickel, iron, coal, natural gas and oil. Extraction of these natural resources in the past has resulted in major contamination of soil and water that continues to burden human health and the environment. There is as yet no system for the environmentally sound management of solid waste. Albania has considerable potential for renewable hydropower, of which only around one-third is currently harnessed. The food industry, rural development and the service sector (e.g. tourism) could make a greater contribution to economic development and employment.
Priority areas of German cooperation with Albania
For Albanian-German development cooperation in 2010 and 2011, Germany pledged Albania loans and grants totalling around 100 million euros for Financial Cooperation and around eight million euros for Technical Cooperation. For many years now, the following priority areas of cooperation have been agreed by both sides:
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Drinking water supply, sanitation and waste management
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Energy
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Sustainable economic and social development
An overarching objective of bilateral cooperation, along with poverty reduction, is to support Albania's increasing alignment with the European Union. A specific example of technical cooperation is a project that is supporting Albania's Ministry of European Integration in managing and coordinating the accession process. This project is funded by the EU and the German government.
Drinking water supply, sanitation and waste management
Germany is helping Albania to reform its water sector. With German support, a 24-hour water supply has now been established in several Albanian cities and towns by constructing new waterworks, repairing supply networks and providing advice to those responsible for management. Albania's first sewage treatment plant was commissioned in Kavaja in 2007; the second was completed in Pogradec in 2009. Further sanitation programmes are being implemented in cooperation with Switzerland and Austria.
As well as extending and modernising the water sector's infrastructure, an additional aim of Albanian-German development cooperation is to staunch the high losses of water and raise prices to cover costs. This is essential for the long-term security of water supplies and sanitation.
The infrastructure inputs are designed to create incentives for establishing industry and developing sectors that could provide employment for the Albanian population in the long term. One such sector is tourism. A secure water supply benefits everyone – in particular the poorer sections of the population, who often have to procure clean water elsewhere at higher cost.
Energy
Bilateral commitments in this priority area are aimed at improving Albania's energy sector and making it environmentally sound in line with the Albanian development strategy. This contributes to a stable, sustainable and secure energy supply in Albania and to global climate change mitigation.
Activities involve expanding and modernising transmission grids, promoting renewable energies (especially hydropower), boosting energy efficiency, improving the statutory setting, and making efficient use of the regional transmission systems. Energy efficiency measures are also to be promoted by refinancing bank loans to private households, small and medium-sized enterprises (SMEs) and local authorities.
Financial Cooperation has funded rehabilitation of the Bistrica hydropower plants and refurbishment of the Saranda transformer station, significantly improving the electricity supply in the south of Albania. Expansion of the 110kV transmission grid in southern Albania will make the energy supply more stable and more energy efficient. Construction of the cross-border 400kV transmission line between Albania and Montenegro has helped improve the electricity supply in both countries and now contributes to integration into the European electricity grid ENTSO-E. The line was commissioned in spring 2011.
Other projects that will promote the exchange of electricity within the region and greater energy efficiency are the cross-border transmission line between Albania and Kosovo and the project agreed in 2010 for a 400kV transmission line between Albania and Macedonia.
At the same time Technical Cooperation is promoting regional cooperation with the Open Regional Fund – Energy Efficiency.
Sustainable economic development
In this priority area the aim of bilateral development cooperation is to support sustainable and inclusive employment and earning opportunities. This improves living conditions for broad sections of the population and contributes to Millennium Development Goal 1 (poverty reduction).
Within Technical Cooperation the business and employment promotion programme promotes balanced economic development with a particular emphasis on rural areas and small and medium-sized enterprises (SMEs). The vocational training programme helps young people acquire the skills needed for the labour market: training schemes are being improved and reforms based on greater cooperation between the state and the private sector are being introduced.
Activities undertaken with Financial Cooperation are supporting further development of the banking sector to promote SMEs, as well as the economic integration of rural areas. Because the domestic market is small, support is needed to promote exports and regional cooperation. Development cooperation is addressing this partly through the promotion of regional cooperation in south-east Europe.
