RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/ALB/28
30 March 1999
(99-1295)
Working Party on the
Accession of AlbaniaOriginal:  English
ACCESSION OF ALBANIA
Information Concerning Progress in the Privatisation Process
The Ministry of Economic Co-operation and Trade of the Republic of Albania has submitted
the following information concerning progress in the privatisation process, with the request that it be
circulated to members of the Working Party.
_______________
Memorandum on the Up-dated Situation
On the Privatisation Process in Albania
The main objectives of privatization process in Albania are as follows:
1. Providing of a constant long-term economic development and the increase of the economic
efficiency.
2. Increase of market efficiency through promotion of competition and further deregulation of
this market.
3. Attraction of foreign private capital in the important sectors of Albanian economy.
It is important to mention that in the Law “On Privatization Strategy of Primary Important
Sectors”, Article 7 it is stated “The privatisation of  the strategic sectors will be accomplished with the
participation of strategic investors, to whom will be offered not less than 30 per cent of the shares”.
This means that privatization process of all strategic sectors is opened to the foreign capital
participation.
Privatisation methods and formulas of strategic sectors
The idea is that all strategic sectors of economy can be privatized that means that State-owned
enterprises of these sectors will be transformed into  commercial companies.  In the implementation of
the privatization, to the private sector, three kind of rights should be transferred:  right of ownership,right of exploitation and the right of development.
(a) Partial or total transfer of the ownership right
Through this method will be realized wholly or partially sale of shares according to a
determined formula of privatization.  This formula will be approved case by case by the Council of
Ministers. In the formula will be determined the parts of shares to be hold by the State, by theWT/ACC/ALB/28
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strategic investor or by the investors and the possible limit for the participation of the vouchers.  The
parts of shares to be held by the State will be specific for different sectors, mainly concern rights for
the transfer of ownership to third parties for accomplishment of the business plan, for social
obligations, etc.  The State will maintain certain  control over the company only regarding to issues
related to public and strategic interest and not for daily operation.
(b) Partial or total transfer of the right for exploitation and development
In this method, Albania will apply management contract, leasing, etc., considering as a pre
condition transformation of State-owned enterprise s into commercial companies.  The State will
transfer the development right for exploitation of natural resources such as: oil, gas, solid, minerals,
hydro sources, etc.  In this method will be applied the mineral permission and concession contracts,
subject to resources that would offer will have specific forms and procedures.
(c) The main stages of the privatization process
First stage - preparatory stage.  This stage will be followed by:
- improvements and amendments in the legal framework;
- inventory of the entire economic units of State-owned capital and evaluation of the assets;
- transformation of State-owned enterprises into trade companies;
- institutionalisation and setting to efficiency the regulatory bodies in the telecommunications,
electric systems and water sectors;
- review the unbalanced issuance of privatization Leks and privatisation vouchers.
Second stage - promotional stage.  This stage will be followed by:
- publication of the economic units to be privatised;
- accomplishment of negotiations;- selection and pre-qualification of strategic investors through legal procedures drafted by
Council of Ministers.
Third stage - decision making period.  In this stage are involved these levels:
- People’s Assembly will take the decisions at the strategic level;
- The Council of Ministers will approve the decisions resulting by the approved laws and will
take final decision on the privatisation;
- The Ministry of Public Economy and Privatisation is responsible institution for the economic
policy of privatization and will decide on inclusion of objects or companies in privatisation
programmes;
- The National Privatisation Agency is responsible body for implementation from the technical
point of view of the process of privatisation.
SECTOR POLICIES OF PRIVATIZATION AND ONGOING OF PROCESS
The strategic sectors are:  banking, telecommunications, electro-energetic sector, oil and gas,
mining sector, transport and water supply for population.
1. Banking System
Privatisation of the banking system has two main targets:  Firstly, privatisation of second
level banks will enable the State to renounce from the non effective part of this system and to protectWT/ACC/ALB/28
Page 3
the interest of depositors;  Secondly, privatisation of the banks will enable the introduction of foreign
private capital in these banks.
The actual level of process:  the State part of the Albanian banking sector is composed of
three main banks, Rural Commercial Bank (RCB ), National Commercial Bank (NCB) and Saving
Bank (SB).
Rural Commercial Bank
According to the agreement for “absorption” of th is bank, is done the transfer of one part of
the activity of this bank in the Saving Bank and the certification of the transfer is done by an
accounting expert.  The other part of the activity of this bank is transferred to the Credits TreatmentAgency and the certification of the transfer is done by an accounting expert.  Based on these reports
and the final report of KPMG, will be stricken of from the court.
National Commercial Bank (NCB)
It is applied new accountancy plan and it is nominated foreign administrator (IDI company)
which has prepared the draft for restructuring, re-capitalization and the privatization of the NCB.
KPMG has performed the auditing and is issued the final report of this auditing.  NCB is promoted to
the other banks that are interested to be involved in the privatization of NCB.  It is approved the law
on form and structure of the privatization formula of NCB and the Decision of the Council ofMinisters regarding the privatization procedures of NCB.  The Bank of Albania has to issue the
permission for the beginning of privatization procedure.  In the meantime, will be established the
Commission for the evaluation of the offers.  According the privatisation formula not less than
50 per cent of the shares will be sold to the strategic investor (strategic investor is a bank with active
trade activity).  The selection of the strategic investor will be through an international bid, divided intwo phases:  (i) pre-qualification;  and (ii) final selection. The other part of the shares may will be sold
to State institutions.
Saving Bank (SB)
It is applied new accountancy plan and it is signed the governing contract of the Saving Bank,
through the assistance of a foreign bank (Bank of Ireland).  The target of this governing contract iscreating the conditions for privatization procedure of the SB.  This procedure is foreseen to start in the
end of 1999.
2. Telecommunications Sector
The sector of telecommunication includes activities of TELECOM State-owned enterprise, as
well as of AMC Joint Stock Company.  The laws for this sector include:  the Law “On
Telecommunication in the Republic of Albani a” and the Law on “Regulatory Entity of
Telecommunications”.
Up to now it is achieved the restructuring of telecommunications sector and transformation of
TELECOM enterprise into a joint stock company.  We can mention here also the establishment of
Regulatory Entity of Telecommunications that it is acting as a independent body.
The accomplishment of privatization of the telecommunication sector will undergo these
future stages:
- evaluation of the TELECOM and AMC property;
- drafting of tariff policy;WT/ACC/ALB/28
Page 4
- implementation of the programs according to the Master Plan of Telecommunications;
- negotiations with partners;
- preparation and publication of the documentation for the selection of the strategic investor;
- decision on privatisation.
The privatisation form will be through sale of shares.
3. Electronics sector
Electro-energetic system is a unique system in Albania, which is composed of three main
elements (production, transmission, distribution) and is represented by the Albanian Energy Corporate
- AEC (KESH), a joint stock company.
KESH privatization process will pass through these stages:
- First stage will aim at the increasing the values and preparation the KESH for privatisation
through application of management contracts for a three-year period.  During this stage willfocus on:
- implementation of rehabilitation projects in HPS-s in Drini cascade,
- final solution regarding the collection of bills from clients and minimizing of loses,
- necessary legislation improvement in order to realize privatization of local HPS-s,- possibilities to start investments, at least one new generation source through possible
financing schemes and concession contracts,
- evaluation of KESH assets from reliable companies,
- completion of the financial improvements;
- second stage will accomplish KESH privatisation based on the results and experience gained
during administration through the Management Contracts.
4. Oil and Gas Sector
“AlbPetrol” joint-stock company runs the oil and gas activity.  It includes the research-
extraction, processing-marketing and special service branches.  Up to now is performed therestructuring  of  AlbPetrol and it is reorganized in four companies, each of them with special status,
optimizing the number of the employees.
The privatization of this sector will undergo these future stages:
The first stage will be accomplished up to the year 2000.  During this stage Albania will aim
at normalizing the production and increase AlbPetrol value.  During this stage following objectives
will be accomplished:
- providing of development credits at convenient interest rates from the Albanian banks and
foreign ones;
- maximum exploitation of the current production, depositing and marketing capacities of
AlbPetrol  in order to provide some million dollars;
- trimming of AlbPetrol from unproductive units such as the processing plant in Cerrik,
processing plant in Kucova and other plants which do not function, as well as privatisation ofsome auxiliary sectors of AlbPetrol;
- evaluation of AlbPetrol assets;
- approval of Law on Privatizat ion of Fuel and Gas Sector;WT/ACC/ALB/28
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- evaluation of opportunities for rehabilitation, technological improvement and exploitation of
production capacities in the fuel processing sector.
The second stage will aim at privatising AlbPetrol.  This stage will probably begin at the end
of 1999.
The following criteria will be considered:
- giving priority to strategic investors;
- the Government will take the final decision on privatisation;
- the Government will keep the golden share and a percentage of the shares which will be
established through negotiations with partners;
- participation with vouchers will be in exchange of shares.
5. Mining Sector
Two main entities exercise their activity in this sector: Albkrom and Albaker corporate and
some other mines such as coal, iron-nickel, nickel-silicate, bauxite, etc.  Their activity is in
conformity with the Law on Mining.  In order to develop this sector, it is of a special interest to apply
the form of transferring right of exploitation and of development right, by using all possible forms to
attract foreign capitals, such as self-financing proj ects as well as other concessionaire forms.  Both,
Albkrom and Albbaker companies are passing the process of restructuring.
Chromium industry
This industry is being presented by Albkrom.  It is composed of mines, enrichment plants,
ferro-chromium facilities and marketing.  There exists the legal framework for privatisation of thissector.  So far negotiations have been held with foreign partners.  The stages of privatisation are as
follows:
- clean up of Albkrom from some non-profitable units;
- study for the evaluation of Albkrom property.
Copper industry
Includes copper extraction, processing, melting and marketing.  AlbBaker is the most
important company.  The stages of privatization are as follows:
- accomplishing of agreements with foreign companies to exploit the new mines and to
improve the technology of the existing industry;
- transformation of AlbBaker into a joint stock company has occurred;
- clean - up of AlbBaker from non-profitable sect ors, by open privatisation through all possible
ways or by liquidating them;
- evaluation of AlbBaker property;- provision of financial sources, as development credits to open and exploit the efficient mines
- privatisation will start in 1999;
- for both mining companies after privatization of some sectors, an international tender will
take place to sell them.
6. Transport Sector
Only air transport, ports and railways will be considered as strategic sectors within the
transport sector.WT/ACC/ALB/28
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Albtransport and Air Traffic National Agency (ATNA) are the main players.  These
enterprises are involved in the reconstruction pr oject of Rinas Airport with the German company
Siemens.  The privatisation process most probably will include the transfer of exploitation rights or
development rights and will follow these stages:
- transformation into a joint stock company.  Albtransport company is transformed and is under
the process of registration as a commercial company;
- completion of legal framework and property evaluation;
- negotiations to identify the strategic investor.
In the port sector are included the ports of Durres, Vlora, Shengjin and Saranda.  Up to now
the process of privatisation is extended to auxiliary and services activities.  Except for loading -
unloading service, all auxiliary services in Durres Port are privatized.  This Port is transformed into a
joint stock company.  The privatisation method probably will be that of a management or concession
contract.
In the railway sector the privatization will follow these stage:
- transformation into a joint stock company;
- privatisation of secondary non-core sectors;
- restructuring of D.P.M. and the preparation of the study for railway privatization.
7. Water Supply of the Population
There are 50 water enterprises exerting their activity in this sector.  For the privatisation these
measures will be taken:
- a Master plan will be drafted for the supply of drinkable water as well as for the deposition,
processing and avoiding of filthy water;
- completion of the legal framework;
- restructuring of all water and drainage enterprises through their transformation into trade
companies is under way.
Privatisation of water enterprises will be carried out case-by-case for a single enterprise or a
group of enterprises using these methods:
- transfer of the utilisation right, through service, leasing and management contract;
- transfer of the development right, through concession contracts;- sale of shares to the public, local governments where the participation of vouchers will be up
to 20 per cent.
Actually, the legislative framework and the procedure for realizing the management contract
for the aqueduct of Tirana and Durresi has been compiled in co-operation with the World Bank.
According to the Strategy of Privatisation, th e programme has been compiled for preparing
the privatisation of strategic sectors, in agreement with the World Bank and European Bank for
Development and Reconstruction.  This agreement is supported financially by these institutions and it
is foreseen as a legal and financial advisory by prestigious companies for all privatisation procedures.WT/ACC/ALB/28
Page 7
PRIVATISATION OF FOREIGN TRADE ENTERPRISES
There are five foreign trade State-owned enterpri ses involved in the process of privatisation
and transformation into commercial companies:
1. Enterprise of Agroeksport Tirane
2. Enterprise of Industrialimpeks Tirane
3. Enterprise of Arteksportimport Tirane
4. Enterprise of Makinaipmpeks Tirane
5. Enterprise of Albkoopi Tirane
They are divided into two groups, acco rding to the form of privatisation:
- enterprises in the direct privatization:
- Makinaimpeks Tirane
- Albkoop Tirane
- enterprises that will be transformed into commercial societies:
- Agroexport Tirane
- Industrialimpeks Tirane- Artexport Tirane
For all State-owned enterprises of foreign trade the evaluation of State property is performed
and related documents are sent to the branches of Tirana and Durresi and to the Ministry of Public
Economy and Privatisation, to follow further the procedures of privatisation and of the transformationinto shareholding companies.
The privatisation procedure of a commercial society that will be created after transformation
of foreign trade
PRIVATIZATION OF STATE AGRICULTURE ENTERPRISES AND AGRI-BUSINESS
In the framework of economic reform for transformation of a centralised economy into a free
market economy, the privatisation procedure of State-owned enterprises in the agriculture field has
been as described below:
Privatization of agriculture enterprises and dairy enterprises has pass over three stages:
- the first stage (November - December 1992) began the privatisation of agriculture land of
79 agriculture enterprises;
- the second stage (April 1993 and ongoing period).  All agriculture enterprises are passed in
the process of privatisation
- the third stage (October 1993 and ongoing period).  The overall privatisation procedure of all
dairy complexes is begun.
The total number of State enterprises covered by the Central Agency for Restructuring and
Privatization has been 341 included about 70,000 objects to a total value of Leks 5 billion.  Only
300 objects have remained non privatised and it is foreseen that all of them will be privatised within
the first 6 months of 1999.WT/ACC/ALB/28
Page 8
The privatisation of the food enterprises will undergo these stages:
- the first stage (1992 - April 1993).  During this period bake-house, dairy points, factory lines
for producing of alcoholic drinks, refreshments and other assets, in total 1,000 objects were
privatised;
- the second stage (May 1993 - February 1994).  During this period 1,300 small and medium
enterprises were privatised;
- the third stage (March 1994 and continuously).  During this period about 6,000 objects have
been privatised.
Actually there are 80 enterprises and objects currently in the procedure of privatisation.
After the year 1997, the legal framework of privatisation has been improved by Amendment
No. 8237 of the Law “On Transformation of th e State Owned Enterprises into Commercial
Companies” and the Decision of the Government No. 192 dated 20 March 1998 “On Estimation of the
State Owned Property to be Privatised and the Procedures of Selling”.  In the meantime is compiled
the platform of privatization and transformation of State owned enterprises of agriculture system intocommercial companies.
Some strategic enterprises of this sector have remained unprivatised, i.e. some of the
enterprises of the water supply system, the enterprise of the seeds and agriculture inputs, the scientific
development institutions of the agriculture system.
PRIVATISATION OF THE OTHER SECTORS
According to the Law “On Privatisation of Commercial Enterprises Which Function in Non-
Strategic Sectors” the privatisation of these enterprises will be made by auctions which will be
organized by the National Agency of Privatisation or by tender.  The privatisation is open to
foreigners.
The total number of the subjects with State-owned capitals is 469.  They are divided
according to the type of entity as follows:
- State enterprise for sales of assets 255
- State enterprises under the procedure of transformation 67
- Companies with 100 per cent State capitals 29
- Companies with State capital less than 100 per cent 15
- Joint venture companies 103
Last year, the procedure of transformation and privatisation started of 332 objects with
different status of their activity and up to now are privatised 194 objects.
The documents of 91 objects are sent to National Agency of Privatisation.  These objects will
be sold by auction.
During the year 1999 will continue the procedures of selling, privatization of State
enterprises, that represent 297 objects.
Privatisation is an ongoing process.  So Albania will provide new data in the future months.WT/ACC/ALB/28
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ANNEX
Data on the Progress of the Privatisation Process
Sector No. of enterprises for
privatisationDeadline
I. Strategic
Albpetrol
Energetic body
Telecom
AMC
Alb chromiumAlb cooper
Railways
Airports
Harbours4
1
1
1
11
1
1
1End of year 2000 and on
Partly 1999 - 2000
End of year 1999 and on
Second quarter of 1999
First half of 1999First half of 1999
After year 2000
Only services, year 2000
Only services, year 2000
II. Non-strategic 469 300 within the first and second quarter
of 1999.  The rest, which still have
legal issues, etc. will be on going
__________