# EUR-Lex - 52014SC0304 - EN

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# 52014SC0304

**COMMISSION STAFF WORKING DOCUMENT ALBANIA 2014 PROGRESS REPORT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Enlargement Strategy and Main Challenges 2014-2015 /* SWD/2014/0304 final */**

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TABLE OF CONTENTS

1............ Introduction. 3

1.1......... Preface. 3

1.1......... Context 3

1.2......... Relations between the EU
and Albania. 4

2............ Political criteria. 5

2.1......... Democracy and the rule
of law.. 5

2.2......... Human rights and the
protection of minorities. 12

2.3......... Regional issues and
international obligations. 13

3............ Economic criteria. 14

3.1......... The existence of a
functioning market economy. 15

3.2......... The capacity to cope
with competitive pressure and market forces within the Union. 19

4............ Ability to take on
the obligations of membership. 21

4.1......... Chapter 1: Free movement
of goods. 21

4.2......... Chapter 2: Freedom of
movement for workers. 22

4.3......... Chapter 3: Right of
establishment and freedom to provide services. 22

4.4......... Chapter 4: Free movement
of capital 23

4.5......... Chapter 5: Public
procurement 23

4.6......... Chapter 6: Company law.. 24

4.7......... Chapter 7: Intellectual
property law.. 25

4.8......... Chapter 8: Competition
policy. 26

4.9......... Chapter 9: Financial
services. 26

4.10....... Chapter 10: Information
society and media. 27

4.11....... Chapter 11: Agriculture
and rural development 28

4.12....... Chapter 12: Food safety,
veterinary and phytosanitary policy. 29

4.13....... Chapter 13: Fisheries. 30

4.14....... Chapter 14: Transport
policy. 31

4.15....... Chapter 15: Energy. 32

4.16....... Chapter 16: Taxation. 33

4.17....... Chapter 17: Economic and
monetary policy. 34

4.18....... Chapter 18: Statistics. 34

4.19....... Chapter 19: Social policy
and employment 35

4.20....... Chapter 20: Enterprise and
industrial policy. 37

4.21....... Chapter 21: Trans-European
networks. 37

4.22....... Chapter 22: Regional
policy and coordination of structural instruments. 38

4.23....... Chapter 23: Judiciary and
fundamental rights. 39

4.24....... Chapter 24: Justice,
freedom and security. 50

4.25....... Chapter 25: Science and
research. 54

4.26....... Chapter 26: Education and
culture. 54

4.27....... Chapter 27: Environment
and climate change. 55

4.28....... Chapter 28: Consumer and
health protection. 57

4.29....... Chapter 29: Customs union. 58

4.30....... Chapter 30: External
relations. 58

4.31....... Chapter 31: Foreign,
security and defence policy. 59

4.32....... Chapter 32: Financial
control 60

4.33....... Chapter 33: Financial and
budgetary provisions. 60

Statistical Annex. 62

1. 
Introduction
1.1. 
Preface

The
Commission reports regularly to the Council and Parliament on the progress made
by the countries of the Western Balkans region towards European integration,
assessing their efforts to comply with the Copenhagen criteria and the
conditionality of the Stabilisation and Association Process.

This
progress report, which largely follows the same structure as in previous years:

–   briefly
describes the relations between Albania and the European Union;

–   analyses
the situation in Albania in terms of the political criteria for membership;

–   analyses
the situation in Albania on the basis of the economic criteria for membership;

–   reviews
Albania’s capacity to take on the obligations of membership, i.e. the acquis
expressed in the Treaties, the secondary legislation, and the policies of
the European Union.

This
report covers the period from October 2013 to September 2014. Progress is
measured on the basis of decisions taken, legislation adopted and measures
implemented. As a rule, legislation or measures which are under preparation or
awaiting parliamentary approval have not been taken into account. This approach
ensures equal treatment across all reports and enables an objective assessment.

The
report is based on information gathered and analysed by the Commission. Many
sources have been used, including contributions from the government of Albania,
the EU Member States, European Parliament reports[1] and
information from various international and non-governmental organisations.

The
Commission draws detailed conclusions regarding Albania in its separate
communication on enlargement,[2]
based on the technical analysis contained in this report.

1.1. 
Context

The
Stabilisation and Association Agreement between Albania and the EU came into
force in April 2009. Albania presented its application for membership of the
European Union on 28 April 2009. Following a request by the Council, the
Commission submitted its Opinion on Albania’s application in November 2010. In
December 2010, the Council noted that the opening of accession negotiations
would be considered once the Commission has assessed that the country has
achieved the necessary degree of compliance with the membership criteria and,
in particular, has met the key priorities set out in the Commission’s Opinion.

In view of the
progress made by Albania, the Commission recommended in October 2013 that
Albania be granted candidate status, on the understanding that it continues to
take action in the fight against organised crime and corruption. In December,
the Council stated that it would decide on whether to grant candidate status in
June 2014, in the light of a report by the Commission focusing on Albania’s
implementation of its judicial reform strategy and on the fight against
organised crime and corruption. The Council stressed that sustained
implementation of reforms and fulfilment of all key priorities would be
necessary for the opening of negotiations. In its June report,[3] the
Commission confirmed its recommendation that the Council should grant Albania
candidate status. The European Council of June 2014 endorsed the decision of
the General Affairs Council granting Albania candidate status.

1.2. 
Relations between the EU and Albania

Albania
participates in the Stabilisation and Association Process.

Overall, Albania
has implemented its obligations under the Stabilisation and Association
Agreement (SAA) well. The protocol on the adaptation of the SAA, to take
account of Croatia’s accession to the EU, was signed in February 2014; pending
its ratification, the protocol is applied on a provisional basis with effect
from 1 July 2013.

Regular
political and economic dialogue between the EU and Albania has continued
through the SAA structures. The Stabilisation and Association Committee and
Council met in March and May 2014, respectively. Meetings of six subcommittees
and of the special group on public administration reform were held. Albania
participated in the multilateral economic dialogue with the Commission and the
EU Member States to prepare the country for participation in multilateral
surveillance and economic policy coordination under the EU’s Economic and
Monetary Union. A High Level Dialogue on the key priorities for opening
accession negotiations[4]
was launched in November 2013, with subsequent meetings in March, June and
September 2014. Joint working groups to structure work on the required reforms
were established in September 2014.

Visa
liberalisation for Albanian citizens travelling to the Schengen
area has been in force since December 2010. As part of the
monitoring mechanism in place since visa liberalisation, the Commission has
been regularly assessing the progress made by the country in implementing
reforms introduced under the visa roadmap. The monitoring mechanism also
includes an alert mechanism to prevent abuses, coordinated by Frontex. The
Commission has regularly submitted its post-visa liberalisation monitoring
reports to the European Parliament and the Council. The next report will be
presented by the end of 2014. A visa-waiver suspension mechanism
entered into force in January 2014. On this basis, EU Member States can request
the Commission, in an emergency situation and as a measure of last resort, to
examine the possibility of temporarily suspending the visa waiver for
third-country nationals. A readmission agreement between the European
Union and Albania has been in force since 2006.

Between 2007 and
2013, the EU provided financial assistance to Albania under the
Instrument for Pre-accession Assistance (IPA). Albania has benefited from IPA
components I — transition assistance and institution building — and II —
cross-border cooperation — receiving a total allocation of approximately € 594
million, which includes approximately € 82 million in 2013 for the
national programme under IPA component I. The assistance is
managed either by the EU Delegation in Tirana or by the Albanian government under
indirect management.

The
implementation of EU assistance was, in some cases, affected by missing or
delayed construction permits, non-budgeting of funds for operating and
maintaining EU-funded investments, missing or delayed utility connections,
missing or delayed re-imbursement of value added tax to contractors and civil
society organisations and a lack of coordination with other institutions,
including local governments. Similarly, some staff replacements following the
change of government affected people who had been trained with EU support.
Strengthening national ownership and addressing the shortcomings above is
essential to maximise the impact of future EU support.

Under IPA II,
Albania will benefit from EU assistance for 2014-20, with a total indicative
allocation of € 640 million. A 2014-20 country strategy, drafted in
partnership with the Albanian government and in consultation with relevant
stakeholders, was adopted by the Commission in August. Over this period, IPA II
will address fundamental issues in the areas of rule of law, democracy,
economic governance and public finances to support the successful reforms and
investments needed for the integration process.

Albania will
also receive support under the IPA multi-country programmes and will participate
in cross-border cooperation programmes with neighbouring Western Balkan
countries and Member States and in trans-national cooperation programmes under
the European Regional Development Fund.

Albania
participates in the following EU programmes: the Seventh Research
Framework Programme, the Competitiveness and Innovation Framework Programme,
Lifelong Learning, Europe for Citizens, Culture and Customs. Albania has also
recently concluded or is in the process of concluding new agreements for a number
of programmes, including: Horizon 2020, Competitiveness of Enterprises and
Small and Medium-sized Enterprises, Fiscalis 2020, Erasmus+, Creative Europe
and Employment and Social Innovation. Albania has applied for observer status
in the EU Fundamental Rights Agency.

2. 
Political criteria

This
section examines the progress made by Albania towards meeting the Copenhagen
political criteria, which require stability of institutions guaranteeing
democracy, the rule of law, human rights and respect for and protection of
minorities. It also monitors regional cooperation, good neighbourly relations
with enlargement countries and Member States and compliance with international
obligations.

2.1. 
Democracy and the rule of law

The government
has shown
concrete action and sustained political will in the area of EU-related reforms,
covering a broad range of issues. In November, the government and the
opposition joined forces to adopt a resolution on EU integration and have
continued to support the process since then. However, further consensus
building has been affected by an increasing confrontational climate between the
government and the opposition, which often abstained from parliamentary work and,
in July, launched a parliament boycott.

Constitution

Overall, the
implementation of the Constitution has been upheld. Since the new government
took office, the Constitutional Court has examined seven lawsuits filed
by opposition, one filed by local government units and one filed by the
President. Four cases relate to the functioning of state institutions. Swift
implementation of Constitutional Court decisions is essential.

Elections

Building on
progress in the 2013 parliamentary elections, Albania needs to implement the
recommendations of the OSCE’s Office for Democratic Institutions and Human
Rights (OSCE/ODIHR) election observation mission, notably strengthening the
independence of the election administration bodies, well ahead of the 2015
local elections.

Parliament

In November,
parliament consensually adopted a resolution on Albania’s European integration,
endorsing a number of measures relevant to EU integration, mainly on the rule
of law. The government secured a 3/5 qualified majority in parliament when two
Members of Parliament (MPs) from the opposition decided to join one of the
majority coalition’s parliamentary groups. EU integration remained a high
priority for parliament. The opposition generally participated in the political
discussions during parliamentary proceedings, although it often abstained from
parliamentary work including on the administrative and territorial reform, and
withdrew from key votes on legislative initiatives. Since July, the main
opposition party has boycotted all parliamentary work. This followed a violent
incident within parliament. Further action is needed from both the government
and the opposition to ensure a constructive and sustainable political dialogue
in parliament.

Parliament voted
on appointments to judicial institutions and endorsed one nomination to the
High Council of Justice and the re-appointment of the Chairman of the
Constitutional Court for a new term. It rejected three presidential nominations
to the High Court.

Parliament
overruled the presidential veto on nine laws, including amendments to the Law
on the High Council of Justice and the law on administrative territorial
reform. The overruling of the veto on a normative act postponing the entry into
force of the Civil Service Law (consensually adopted in the previous
legislature) led to an opposition complaint to the Constitutional Court, which
decided to annul the normative act, inter alia, on the grounds that a normative
act cannot replace a law requiring a 3/5 majority.

Regarding
parliament’s oversight role, the jurisprudence of the Constitutional Court on
the scope and limits of parliamentary control through ad hoc inquiry committees
needs to be fully applied by parliament. Relevant Constitutional Court
decisions need to be implemented without undue delay.

The
Parliamentary Committee on European Integration monitored and held a public
hearing on the government’s road map on the five key priorities for opening
accession negotiations. It also exercised its oversight role through hearings
with the Minister for European Integration.

Parliament
continued to monitor the work of independent institutions and discussed their
reports more frequently. However, further action is needed to ensure
appropriate follow-up to their findings and recommendations. There have been
controversies over the set-up, appointment procedures and performance of a number
of independent institutions which are accountable to parliament. The applicable
legislation needs to be fully implemented and the professionalism, functioning
and independence of these institutions ensured. The procedures of electing and
dismissing the heads and boards of these institutions by a simple majority in
parliament remain a matter of concern, as this seriously affects their
independence. Steps to reinforce the independence and performance of these
institutions need to be taken in an inclusive reform process.

Transparency and
inclusiveness in the legislative process have improved. In December, an action
plan was adopted to address the recommendations in the European Commission’s
2013 progress report relating to parliament. Draft laws, work programmes and
agendas for plenary and committee meetings are generally
published on the parliament’s website. Further work is
needed on ensuring the timely publication of the minutes of committee meetings.
Public access to the work of parliamentary bodies has improved overall with the
simplification of accreditation procedures. Parliamentary committees have
generally been proactive in holding consultations with civil society and
interest groups. However, the short notice and the lack of clear rules on
public consultations need to be addressed. In May, parliament decided to
set up offices for MPs in 12 regions, with one MP from the majority and one
from the opposition in each office. However, outreach by MPs to their
constituencies remains limited. Work has been done to improve administrative
and expert capacity in parliament, mainly through assigning new staff to key
positions. Sufficient means need to be allocated for training parliamentary
staff.

Overall,
progress has been made on the functioning of parliament. Transparency and
inclusiveness in the legislative process have improved. Further action is
needed to ensure a more institutionalised consultation process and further
strengthen parliament’s oversight role, including through implementation of the
relevant jurisprudence and rulings of the Constitutional Court. Government and
opposition should take steps to restore political dialogue in parliament. The
government needs to ensure that the opposition has the possibility to fully
perform its democratic control function. At the same time, the opposition also
needs to engage constructively in the democratic processes. Increasing cross-party
cooperation remains essential for a sustainable reform process.

Government

The new
government carried out a broad redistribution of responsibilities and changed
the structure and names of the ministries. It has 16
ministries, one more than the previous government, and three Ministers of
State.

European
integration is the first priority for the government’s programme, which pays particular
attention to related challenges in the rule of law, public administration and
fundamental rights areas. The government
has actively engaged with the European Commission in the High Level Dialogue
process on the key priorities. In May, the government adopted a
comprehensive roadmap to structure Albania’s efforts in addressing the key
priorities. In July, it adopted the 2014-20 National Plan for European
Integration.

The government
set up a delivery unit network to identify its policy priority
objectives and
monitor progress in meeting them. Delivery units were established in all line
ministries, under the coordination of the Prime Minister’s Office. Six
priorities have been identified (good governance, water, energy, land, foreign
direct investments, structural reform) and a matrix of the expected results has
been drafted. Its implementation is regularly monitored through performance
indicators. Effective links between the delivery unit structures and EU
integration reform planning will need to be ensured.

A Department for
Development Programming, Financing and Foreign Aid has been set up in the
office of the Deputy Prime Minister to ensure that budget allocation, donor
funding and strategic business investment are consistent with government
priority objectives.

The Ministry of
European Integration has further consolidated its role as coordinator for EU
affairs, including as regards the implementation of the 2014-20 National Plan
for European Integration, and is working on the 2014-20 National Strategy for
Development and Integration. To manage the challenges of upcoming reforms, the
ministry’s institutional capacity needs to be further strengthened and its
coordinating role systematically enforced.

Some
steps have been taken towards improving the functioning of the
interinstitutional working groups, but the majority remain ad hoc fora.
Relations between state institutions continued to be difficult at times and
interinstitutional cooperation needs to be improved.

Regarding local
self-government, a Minister of State responsible for local affairs was
appointed in September 2013. The Law on Territorial and Administrative Reform
was adopted in July, reducing the number of local government units from 373 to
61, abolishing also the communes and keeping the 12 existing regions. The main
opposition party abstained from voting and expressed its strong disagreement
over the reform. The law aims to increase the units’ efficiency, financial
sustainability and capacity to provide services. Local government units experienced
difficulties in exercising their competences in the period leading up to the
adoption of the law and the national strategy on territorial planning. In
August, the National Territorial Council decided that the implementation of the
already adopted local planning instruments should be suspended and that new
development permits should be issued. The implementation of the new Civil
Service Law by the newly established local government units has not been fully
launched.

Decentralisation
reforms progressed and work has started on clarifying the functions of local
government units under the new territorial administrative division in the
preparation of amendments to the Law on the Organisation and Functioning of
Local Government.

Amendments to
the Law on Territorial Planning were enacted in July with the aim of further
clarifying the scope of national territorial planning instruments and
strengthening the role of relevant institutions. The central government was
more involved in managing urban development issues and has taken measures to
strengthen the competence of central institutions such as the National Urban
Construction Inspectorate and the National Territorial Agency. In March, the
Constitutional Court ruled that the inspectorate could not interfere with local
government’s authority to demolish illegal constructions. The transparency of
the decision-making process in the National Territorial Agency and Council and
in local government bodies needs to be improved.

Total local
government expenditure in 2013 was estimated at 2.2 % of GDP, while
revenues remained at 0.8 % of GDP. Local taxes continued to dominate
revenues for local government.

Local government
human resources management and financial control remain weak. Transparency and
strategic planning in central funding to local authorities remain a challenge.
Strong politicisation still hinders relations between central and local
governments and limits local authorities associations’ role. Local authorities
still need to develop an inclusive dialogue with civil society and local
communities.

Overall, the
new government undertook a number of reforms to bring the country closer to
meeting the key priorities for progress towards the EU and deliver further
tangible results, notably in the area of rule of law. Steps have been taken to
strengthen and streamline government structures and improve interinstitutional
cooperation. Further strengthening of capacity, coordination and strategic
planning for EU integration is needed.

Regarding
local self-government, substantial efforts have been made to advance
territorial-administrative reform. Further action is needed to strengthen the
administrative capacity of local government units, allowing them to exercise
their authority and implement legislation in a financially sustainable way,
enforcing transparency, effectiveness and inclusiveness.

Public
administration

The drafting of
the new public administration reform strategy resumed in January, with the aim
of broadening the strategic framework for public administration reform.
The new strategy is foreseen to cover public administration organisation,
policymaking, e-government and ensure also a link to public financial
management and programming.

Regarding policy
development and coordination, after the reshuffling of functions and staff
under the new government, the administration is still trying to achieve its
full capacity. The Prime Minister’s Office was significantly strengthened,
enforcing inter-ministerial coordination and creating new units for delivery,
research and policy development, legislation and programme monitoring, and
support for strategic business investments, but there is not yet a fully
operational annual and mid-term planning system. Coordination was
further strengthened through the appointment of a Minister of State for
Innovation and Public Administration, whose human and financial resources need
to be increased to fulfil the Minister’s policy coordination role. The
public administration reform special group in the framework of the SAA remains
the main forum of dialogue on these issues between Albania and the EU.

With regard to public
service and human resources management, following the elections and an
extensive reorganisation affecting the structures of the 16 ministries, around
13 % of staff in the central government institutions were dismissed. In
parallel, staff numbers were increased in key ministries such as the Ministry
of European Integration. The restructuring of the public sector raised heated
debate on the legality of the process that was followed and the number of
personnel downgraded, dismissed and put on waiting lists, and on the results in
relation to cutting expenditure. Albania needs to increase its efforts to
ensure that the high staff turnover does not compromise capacity or business continuity.

The Department
of Public Administration, which has demonstrated increasing transparency,
estimated that since September 2013, around 380 civil servants in central
institutions were dismissed, resigned or put on waiting lists and around 100
were downgraded out of a total of 1 392 current civil servants. The
department also estimated around 5 200 dismissals and resignations in
subordinate institutions and agencies. Further efforts are needed to ensure
transparency and accuracy of data. Recruitment of civil servants was frozen
from March to July to ensure proper implementation of the new legislation. It
was also estimated that there were 137 appeals by employees in central
institutions with 85 % of them still pending, while the same percentage in
subordinate institutions and agencies is also high, reaching 75 % of 1 758
appeals. Two thirds of all concluded cases at first instance were won by the
employees. Final court rulings should be fully respected and implemented.

The new Civil
Service Law became effective in February. By March, the government adopted 10
by-laws, covering significant issues such as recruitment, transfer, promotion,
dismissal, the description and classification of job positions and the new
senior management staff. From April to September, the Department for Public
Administration produced five sets of guidelines on job descriptions,
disciplinary measures, the competencies of the Restructuring Committee, lateral
transfers and executive positions through open competitions. It introduced an
electronic system for applications for recruitments and for data collection of
personnel in public institutions. It has organised intensive training for the
proper implementation of the law, which remains a challenge.

Building a
comprehensive monitoring mechanism is essential. In this respect, the Civil
Service Commission has been replaced by the Civil Service Commissioner, whose
appointment by the parliament is still pending. The functioning and
independence of the new institution must be ensured, something essential for
proper monitoring of public institutions.

The approval of
the necessary implementing legislation for the Law on the Organisation and
Functioning of the Public Administration is still pending. The government needs
to assess all existing legislation on the organisation and functioning of all
subordinate institutions and align it to the principles and provisions of this
law.

The Department
of Public Administration has started to play a more prominent role. It
facilitated training regarding the new legislation, including at local level.
Departmental capacity has been increased from 22 to 35 with a view to reach 43,
according to the Prime Minister’s order adopted in February. The implementation
and extension of the human resources management information system has been
subject to delay. Implementation was resumed in August and work advanced on
data entry of personnel files from central government institutions, relating
just to the human resources module of the system. The roll-out of the system to
all public institutions and linking it to the Ministry of Finance’s treasury
system have been delayed. The School of Public Administration is operating with
its full annual budget and new premises, implementing its annual work plan and ad
hoc extra activities in cooperation with the Department of Public
Administration.

With regard to accountability
and service delivery, a new Code of Administrative Procedures was adopted
by the government in June and is currently in parliamentary procedure. The law
aims to strengthen the principles and standards of good administration and
transparent administrative decision-making, including e-administration.
Implementation of the Law on Administrative Courts progressed when the courts
started to operate in November 2013. They work regularly, providing rulings in
reasonable timeframes despite the heavy workload. Vacancies for judges and
assistant judges have not yet been fully filled and the case management system
needs to become operational.

Public financial
management
was identified as one of the key priorities in the government programme and as
an integral part of good governance reforms. A comprehensive reform programme,
including a public financial management strategy for the period 2014-20 is
planned to be finalised by the end of the year. The Ministry of Finance needs
to enhance its human resources to this end. Albania has taken short-term
measures for improved public financial management through the adoption of the
arrears prevention and clearance strategy and the partial payment of arrears
through IMF and World Bank loans. Temporary measures improving monitoring by
the Ministry of Finance were gradually introduced to address the urgent need
for commitment controls aiming to prevent new arrears. Systemic actions will be
implemented as part of the 2014-20 public financial management strategy.

Overall,
some progress has been made on public administration reform with the coming
into effect of the Civil Service Law and its implementing legislation and some
first steps for its implementation. The new legislation provides an opportunity
to build a professional, effective, depoliticised and accountable public
administration. Proper implementation and monitoring are now essential. The
appointment and independence of the Civil Service Commissioner and transparent
and merit-based practises, especially in future recruitment, need to be
ensured. Applicable legislation and court rulings must be fully respected. The
Department of Public Administration was reinforced to meet its increasing
responsibilities. The new Minister of State for Innovation and Public
Administration should have the necessary means and human resources to fulfil
policy coordination tasks. Albania has also committed to substantial reforms in
public financial management over the period 2014-20. A comprehensive reform
programme will address and sequence reform actions in the relevant parts of the
public financial management system.

Ombudsman

The
Ombudsman has continued to actively promote human rights. He has recommended legislative
changes
to improve respect for the rights of vulnerable groups, including lesbian, gay,
bisexual, transgender and intersex people, the Roma, former political prisoners
and persecuted people. His cooperation with civil society organisations improved
further with the establishment of a civil society advisory board on human
rights in December. The Ombudsman submitted his annual report to parliament in
April. His special reports have started to be published on the parliament’s
website, but their follow-up remains limited. In 2013, the Ombudsman conducted
180 inspections and on-site visits in prisons and other institutions, handled
220 complaints and issued 55 recommendations. Follow-up on his
recommendations has improved but needs to be further strengthened. Further
action is needed to ensure that the Ombudsman is properly informed and
consulted by the government on draft legislation and reforms, notably those
directly affecting his areas of competence. The budget allocated to the
Ombudsman’s Office was reduced and remains insufficient. The
institution needs stronger political and financial support from both parliament
and the government to continue to carry out its duties in a fully effective
manner.

Civil society

An empowered
civil society is a crucial component of any democratic system and should be
recognised and treated as such by the state institutions. Cooperation between
state institutions and civil society organisations (CSOs) has improved. Civil
society was regularly consulted on policy and legal initiatives, although with
limited follow-up. The National Council for European Integration, which
has the potential to play a key role in institutionally reflecting the broad
national consensus on European integration, has not yet been established. A new
Supervisory Board of the Agency for Support to Civil Society was nominated. The
Ministry of European Integration set up a unit for civil society coordination
to cooperate with CSOs on European integration. The new law on access to
information has been adopted in September. Access to
information and the transparency of policymaking and legislation need to be
further improved. Consultations with CSOs need to become more
systematic and transparent, including follow-up on their recommendations.
Preparations to set up the National Council for Civil Society, a consultative
body to
enable regular dialogue between the government and CSOs on key issues related
to civil society development in Albania, are at an early stage. No
steps have been taken towards revising the tax framework for CSOs and removing
provisions that undermine their financial viability, particularly on VAT
reimbursement for received grants. Cooperation between CSOs and
local government units remains very weak due to the lack of adequate
capacity to ensure proper cooperation and funding for CSOs. The
civil society sector remains fragmented and overly dependent on donor funding.

Judicial
system

Albania has
demonstrated commitment to judicial reform, notably by interacting with the
Venice Commission to improve the independence, accountability and
professionalism of the system. Measures were taken to increase the
accountability of judges, prosecutors, MPs and other senior officials through
the adoption of legislation regulating their immunity. Disciplinary proceedings
against magistrates have led to a number of sanctions. Rules on the suspension
and removal from office of members of the High Council of Justice were
introduced, although concerns have been expressed on their expeditious adoption
without including and consulting all relevant actors. The administrative courts
started to function, but they still need to be made fully operational. A school
for lawyers has been set up and new criteria for the selection of the
magistrates’ school management and staff were introduced.

Albania needs to
vigorously pursue judicial reform with the constructive cooperation of all
stakeholders and through continued engagement with the Venice Commission,
including on the new judicial reform strategy for 2014-20 which is being
prepared, and a comprehensive review of the applicable legislative framework.
Appropriate implementation of adopted measures is essential and the legal gap
resulting from the Constitutional Court’s repeal of the Law on Judicial
Administration needs to be addressed. Training for judges and judicial staff
needs to be improved. The role of the Council of Prosecutors should be
reinforced. Full public access to all court decisions needs to be ensured
without delay. The regulatory framework for the private bailiff enforcement
system should be improved. Measures need to be taken to streamline and reduce
the backlog in the High Court. Further measures are required to ensure that the
appointment, promotion and transfer of judges are clearly based on merit and
other objective criteria. Expeditious and transparent court proceedings should
be ensured.

The functioning
of the judicial system continues to be affected by politicisation, limited
accountability, poor interinstitutional cooperation, insufficient resources and
backlogs. The
status of the High Court and the process of appointing its members remain of
concern in terms of possible politicisation, as long as the relevant
constitutional provisions are not amended. The disciplinary
system for magistrates needs to be substantially improved, including through a
more transparent and efficient inspection system. Corruption in the judiciary
remains a serious concern.

For a
detailed analysis of the developments in the judicial system, see Chapter 23
— Judiciary and fundamental rights.

Fight
against corruption

Albania
has taken further steps and has demonstrated continued political will to
prevent and combat corruption. Reporting, policy coordination and monitoring at
central level have improved through the appointment of a National
Anti-Corruption Coordinator and the establishment of a network of
anti-corruption focal points in all line ministries. Legal amendments to
address corruption offences by high-level state officials have been adopted.
Albania should now focus on their enforcement. The 2014-20 anti-corruption
strategy and action plans remain to be adopted. The structural reforms that
have been introduced illustrate an all-encompassing approach aiming to develop
a more robust anti-corruption framework and to include a wide range of
institutions. As a positive step towards increased transparency, the 2012-13
asset declarations by senior officials have been published by the High
Inspectorate for Declaration and Audit of Assets and Prevention of Conflict of
Interest (HIDAACI). Sufficient resources, training and specialised staff need
to be ensured to improve the efficiency of investigations and to develop a
convincing track record of investigations, prosecutions and convictions at all
levels. Proactive investigations, systematic risk assessments and
interinstitutional cooperation need to be improved. Corruption remains
prevalent in many areas and remains a particularly serious problem.

For a
detailed analysis of the developments in the area of anti-corruption policy,
see Chapter 23 — Judiciary and fundamental rights.

Fight
against organised crime

A number of
legislative initiatives reforming the police and establishing a National Bureau
of Investigation were adopted. International police and judicial cooperation
has increased through the implementation of extradition agreements. An
operational agreement with Europol was ratified and work began on its
implementation. Financial investigations, and seizures and confiscations of
assets have increased. The national referral mechanism against trafficking in
human beings has been improved and coordination of the relevant authorities and
actors, including at local level, has increased. Seizures of drugs have
increased, and the national plan for fighting the cultivation of cannabis has
been implemented with positive results. The authorities have taken serious
steps to fight against the cultivation and trafficking of cannabis, most
notably through a major successful police operation in the village of Lazarat.
Cooperation and joint training between prosecution officials, police and the
judiciary on trafficking has been stepped up in key areas. Organised crime
remains a considerable challenge and Albania needs to increase its efforts to
build up a consistent track record of investigations, prosecutions and
convictions in all areas and at all levels. Albania still lacks a comprehensive
overall strategic approach towards organised crime on its territory. The number
of confiscations of criminal assets and convictions for money laundering need
to be increased through the systematic use of financial investigations.
Trafficking in human beings, both international and internal, remains a serious
challenge, calling for more emphasis on a holistic approach of prevention,
protection and prosecution, and improved international cooperation. Cannabis
eradication campaigns and the fight against drug trafficking, which remains a
serious concern, should be further developed through international cooperation
and the proactive use of special investigative means and risk assessment.

For a
detailed analysis of the developments in the fight against organised crime,
see Chapter 24 — Justice, freedom and security.

2.2. 
Human rights and the protection of minorities

In the area of
freedom of expression, implementation of the Law on Audiovisual Media has been
slow, mainly due to a lack of political agreement on filling the vacancies in
the media regulator, the Audiovisual Media Authority. As a result, the
authority has not been able to fully perform its statutory tasks, such as
licensing, audience measurement, and implementation of the digitisation
strategy. The lack of transparency of media financing and the interference in
the media by political and economic interests remain major challenges. This
includes the non-transparent allocation of funds for advertising by state-owned
companies and the government.

As
regards women’s rights, the National Council on Gender Equality began its work
and coordinators on gender issues were appointed in all line ministries. The
number of reported serious offences and cases of domestic violence against
women increased. An online system to report cases of gender violence has been
launched, but is operational in only 29 municipalities. Other measures have not
yet been implemented, such as an extension of the referral mechanism for
domestic violence and mainstreaming women’s employment in the strategies of all
municipalities. As regards children’s rights, Albania remains a source country
for forced child labour.

Regarding the
area of anti-discrimination policies, the number of cases examined and
inspections initiated by the Commissioner for Protection against Discrimination
has increased. The Law on Protection from Discrimination is largely in
line with the EU acquis; however, its implementation is insufficient and
a solid anti-discrimination case-law needs to be built. The legal
framework for persons with disabilities was revised; its implementation needs
to be ensured.

Albania presents
a mixed picture on the protection of minorities.
While inter-ethnic relations have remained good overall, comprehensive
legislation on minorities has not been adopted and the legal framework for the
protection of minorities remains fragmented. Living conditions, access to
education, employment, health and social care for the Roma population need to
be improved, following up on the seminar on Roma and Egyptians in February.
Better coordination between central and local government and improved
inter-ministerial cooperation are essential.

For a
detailed analysis of the developments in the area of human rights and the
protection of minorities, see Chapter 23 — Judiciary and fundamental rights.
For developments in the areas of trade union rights, anti-discrimination
and equal opportunities, see also Chapter 19 — Social policy and employment.

2.3. 
Regional issues and international obligations

Albania still
maintains a 2003 bilateral immunity agreement with the United States, granting
exemptions for US citizens from the jurisdiction of the International
Criminal Court. In doing so, it is not complying with the EU Common
Positions on the integrity of the Rome Statute or with the related EU guiding
principles on bilateral immunity agreements. Albania needs to align with the EU
position.

Regional
cooperation and good neighbourly relations form an
essential part of Albania’s process of moving towards the EU. Albania has
continued to actively participate in regional
initiatives, including the South-East European Cooperation Process (whose
Chairmanship Albania took over in June), the Central European Initiative, the
Regional Cooperation Council, the Energy Community Treaty and the Central
European Free Trade Agreement. During its one-year presidency of the Adriatic
and Ionian Initiative, Albania organised the Conference of Parliament Speakers
and the meeting of the Council of Foreign Affairs Ministers. Albania continued
to actively participate in all events related to the implementation of the
Trans-Adriatic Pipeline and Ionian Adriatic Pipeline projects. The country is
continuing to contribute to the EUFOR ALTHEA mission in Bosnia and Herzegovina.

Overall,
Albania has continued to act as a constructive partner in the region, further
developing bilateral relations with other enlargement countries and
neighbouring EU Member States. A bilateral
convention on regional cooperation, under Article 13 of the SAA, has not yet
been concluded with either Montenegro or Serbia.

Relations
with Bosnia and Herzegovina remained good. Bilateral
consultations were held in February aiming to strengthen cooperation in all
areas of mutual interest. A bilateral agreement on mutual protection of
classified information was signed in May.

Good relations
with the former Yugoslav Republic of Macedonia continued, with frequent
high-level visits and despite some short-lived tensions following
demonstrations and statements in July over the verdict in the ‘Monster’ case. In
March, both countries signed a memorandum of cooperation on tourism.

Relations with Montenegro
continued to be good. An agreement on cooperation in the field of tourism was
signed in April.

Albania and Serbia
demonstrated their willingness to improve bilateral relations by taking steps
towards improving the rights of their respective national minorities. A regular
air link between Belgrade and Tirana was established in September.

Albania
continued to have very good relations with Kosovo,* with which it signed a new declaration
on cooperation and strategic partnership aiming to boost economic growth.
Bilateral agreements were concluded in the areas of health, tourism, culture,
taxation, use of joint border customs points, energy, unification of the
employment market, the opening of joint consular offices, and on collaboration
on the use of the EU acquis translated into Albanian. Albania continued
to support the ongoing dialogue between Kosovo and Serbia, facilitated by the
EU, and Kosovo’s participation in regional and international initiatives.

Albania
continued to have good relations with Turkey, with several high-level
visits in both capitals. An Albania-Turkey economic and trade forum was held in
February. In April, the two countries agreed to establish a strategic
partnership and high-level cooperation council to structure their cooperation
in the fields of foreign policy and international cooperation, justice and home
affairs, defence and security issues, the economy, energy, environment
protection, culture, education and science. A memorandum of understanding on
bilateral cooperation on information technologies was also signed in April.

Relations with Greece
intensified. Several bilateral agreements, including on the delimitation of the
Greek-Albanian continental shelf and maritime zones, are under discussion. A
joint declaration was signed in May, paving the way for a solution on the use
of place names in official documents.

Italy
remains Albania’s main trade partner. The two countries maintained very good
diplomatic relations and intensified their bilateral cooperation in the area of
rule of law.

Overall,
Albania continued to play a constructive role in contributing to the stability
of the region, and continued to implement the Stabilisation and Association
Process commitments in this regard. Albania needs to
align with the EU position on the integrity of the Rome Statute and with the
related EU guiding principles on bilateral immunity agreements.

3. 
Economic criteria

In examining
economic developments in Albania, the Commission’s approach was guided by the
conclusions of the European Council in Copenhagen in June 1993, which stated
that membership of the Union requires the existence of a functioning market
economy and the capacity to cope with competitive pressure and market forces
within the Union.

Monitoring of
the economic criteria needs to be seen in the context of the increased role of
economic governance in the enlargement process, as welcomed by the General
Affairs Council of 17 December 2013.

Economic and
structural reforms are at the forefront of the government’s agenda to
re-launch growth and increase competitiveness. The European
Council in June 2014 encouraged Albania to pursue its policy of improving
economic governance and investment climate.

3.1. 
The existence of a functioning market economy

Albania
maintained macroeconomic stability but still faces significant challenges.
Persistent fiscal imbalances have caused public debt to reach high levels and
fiscal buffers are largely exhausted. Large accumulated government arrears have
sapped liquidity and confidence in the economy, despite the government
beginning to clear these in March. The high current account deficit reflects
weak competitiveness and a narrow production base. The private sector is held
back by weaknesses in the regulatory environment and the rule of law.
Substantial efforts are required to improve the labour market.

Economic
policy

Macroeconomic
stability was broadly preserved, but vulnerabilities remain elevated mainly as
a result of fiscal and, to a lesser extent, external imbalances. In January, Albania
submitted its eighth Economic and Fiscal Programme, covering 2014-16. The
programme’s medium-term macroeconomic scenario assumes a reacceleration of
growth coupled with fiscal consolidation; such an outlook faces challenges and
requires sustained effort to be achieved. The conclusion in February and May
2014 of loan agreements with the IMF and the World Bank respectively is
expected to provide an anchor for increasing macroeconomic stability and
implementing growth-boosting reforms. A National Economic Council,
chaired by the Prime Minister and involving the business community, was set up
in the last quarter of 2013 to provide guidance and consistency in economic
reforms.
Overall, the consensus on the main fundamentals of economic policies has
been maintained.

Macroeconomic
stability

GDP
growth decelerated further to an estimated 1.4 % in
2013 from 1.6 % a
year earlier. The main driver of the slowdown remained sluggish domestic
demand, as both private consumption and especially investment were adversely
affected by weak confidence and anaemic lending.
Uncertainty, partly related to the high level of unpaid government obligations
towards businesses, was slow to dissipate, even if the repayment of arrears
started in March. Net exports maintained their positive contribution in 2013 as
a result of stagnating imports and good export performance. In the first
quarter of 2014, GDP growth was still low at 1.7 %,
but survey indicators point to a broader-based recovery of private domestic
demand in the second quarter. Per capita GDP in purchasing power
standards remained at 30 % of the EU-28 average in 2013. Overall,
the timely execution of the plan to clear accumulated government arrears and
the removal of obstacles to bank lending are key to further improving
confidence, bolstering investment and reviving growth in the short run.

External
imbalances remained large, reflecting a narrow production base, the overall low
competitiveness of the economy and a large fiscal deficit. The
current account deficit increased slightly to 10.6 % of
GDP in 2013. Strong growth in exports of goods, driven by crude oil sales and
electricity exports thanks to favourable hydrological conditions, and a slight
decrease in goods imports helped the substantial trade deficit to narrow, but
the traditional surplus on the services account practically disappeared due to
weak tourism sector performance. The current transfer surplus also declined
substantially due to a 26 % drop in remittances from migrant workers in
2013. In the first quarter of 2014, the current account deficit widened by 31 %
year-on-year as strong growth of goods exports was offset by a pick-up in
imports, reflecting stronger consumption and private investment. The services
account deficit also widened despite inbound tourism showing signs of
improvement, as tourism outflows also increased. In the same period, the
decline in remittances slowed down but did not reverse.

Risks
resulting from a large current account deficit continued to be mitigated on the
financing side by a healthy reliance on foreign
direct investments (FDI) as opposed to debt-generating flows. Net FDI inflows,
driven by investments in extraction and privatisations in the hydropower
sector, surged by 38 % in 2013 to 9.2 % of GDP and covered the bulk
of the current account shortfall. Official reserves increased in 2013 and at
year-end covered 4.7 months of imports; the import coverage was at around the
same level at end-June 2014, providing an adequate level of safeguard against
adverse shocks. Net FDI inflows increased by 11.7 %
year-on-year and continued to be substantial in the first quarter of 2014. Overall,
continued strong emphasis on attracting foreign direct investment is crucial
both for mitigating vulnerabilities linked to high external imbalances and for
transferring knowledge, boosting productivity and broadening the production
base.

Labour force
survey data suffer from shortcomings but indicate continued deterioration in
labour market conditions. The average rate of unemployment increased in 2013 by
2.2 percentage points to 15.6 % and remained on an upward trend
throughout the year, reaching 18.3 % in the first quarter of 2014. While
some aspects of the labour market, such as the ease of hiring and firing or the
link between pay setting and productivity, display sufficient flexibility, the
high prevalence of long-term unemployment and large gender differences in
labour force participation indicate significant structural impediments. The
activity rate of the population aged 20-64 is comparably low at 68 %, as
is the employment rate, which stood at 57.2 % in 2013.
Informal employment remains widespread, hindering company development and
fiscal revenues, reducing job security and affecting social security
entitlements. Overall, Albania needs to continue its work to address the
high unemployment rate and the high prevalence of informal employment.

Macroeconomic
stability continued to be supported by a sound monetary policy operating under
an inflation-targeting regime. Weak aggregate demand and low imported inflation
led the average inflation rate to decelerate to 1.9 % in 2013, slightly
below the lower band of the Bank of Albania’s target range of 2-4 %, and
it continued to hover around this level in the first half of 2014. Low
inflationary pressures created room for further monetary policy easing, and the
Bank of Albania cut the key interest rate several times, bringing it down to a
new historic low of 2.5 %. However, the stimulus has only partly been
passed on to the economy in the form of lower lending rates, due to banks’ high
risk aversion amid a large proportion of non-performing loans on their balance
sheets. The free-floating exchange rate of the lek remained broadly stable
against the euro in 2013 and the first eight months of 2014, helping to keep
imported inflation low. The degree of euroisation of the financial system
decreased somewhat but remains high, constraining monetary policy. Alleged
theft at the Bank of Albania led to the prosecution and dismissal of a number
of officials, including the governor who is accused of abuse of office. When
addressing this issue, central bank independence should be safeguarded and the
proper functioning of the institution should be ensured. Overall, low
inflation allowed the monetary policy easing cycle to continue, but its impact
on aggregate demand remained constrained by banks’ high risk aversion.

The budget
deficit was at 4.8 % of GDP in 2013, exceeding the initial target of 3.5 %.
Disappointing revenue from direct taxes and election-related spending increases
in the first half of the year necessitated a substantial revision of the budget
in October. In 2013 as a whole, total revenues were 8.9 % lower than
initially planned. In terms of expenditure, efforts to contain the budget
shortfall focused again on cutting capital spending, which ended up 7.8 %
lower than planned, although it did increase marginally as a share of GDP (to
4.8 %).

The need to
finance the budget deficit and the recognition of accumulated arrears,
estimated at 5.3 % of GDP, pushed up the level of public debt to 70.5 %
at the end of 2013, from 62.3 % a year earlier.
Even though efforts to lengthen the maturity profile of the debt stock achieved
some results in 2013 (notably with the first successful issuing of a 10-year
bond), its short-term component remains high, exposing the country to
refinancing risks. The narrow investor base, which comprises mainly domestic
banks, adds to these vulnerabilities and also exposes local banks to sovereign
risk.

The government
adopted an arrears clearance and prevention strategy in February. It aims, with
the support of loans from the IMF and the World Bank, to
clear arrears within three years and implement substantial improvement in
public finance management to avoid their re-emergence. Unpaid bills and
outstanding tax refunds were not previously captured by official debt
statistics; recognising and settling them therefore constitutes a major step
forward in terms of increasing transparency and re-establishing trust in the
government as a contract partner. In March, the government began the process of
clearing outstanding arrears, clearing roughly 35 % of total arrears by
end-July. An independent external auditor has been contracted to enhance the
reporting framework and ensure proper oversight of the process.

The
stated objective of fiscal policy in 2014 is to consolidate public finances
while clearing a large part of government arrears. This translates into a
deficit target of 6.5 % of GDP, which includes repayment of arrears worth
2.5 % of GDP. Increases in excise, fuel and building taxes, as well as an
increase in corporate income tax from 10 % to 15 % are expected to
underpin the forecast 11 % rise in overall revenue, while the introduction
of progressivity in personal income tax is projected to have a slightly
negative budgetary impact. Changes implemented by the new government to the tax
and customs administrations caused disruption, but measures were taken to
address fiscal evasion, uncovering several VAT and excise fraud schemes, and to
improve tax collection. As a clear sign of progress, revenues in the first
seven months of 2014 were up by 11 % in annual terms, driven by a 16.5 %
surge in VAT receipts (See also Chapter 16 — Taxation). Due
to an underspend on investment caused by a reassessment of existing projects
and procedures, total expenditure was at the same level as a year earlier, despite
beginning arrears repayments. The overall deficit in the first seven months was
38 % lower than a year earlier and amounted to around 2.2 % of the
full-year GDP.

Fiscal
consolidation is expected to continue after 2014, although this could require
additional policy measures in the next two years. Significant fiscal risks stem
from an unreformed energy sector where the government acts as financer of last
resort and from the obligation for the state, confirmed by recent judgments of
the European Court of Human Rights, to
pay compensation to former property owners, unless the modalities for
compensation are adjusted. The public debt to GDP ratio is forecast to decrease
from 2015. With
basic legislation amended in July, progress was made on reforming
the pension system with a view to improving its sustainability in the long run
and decreasing the long-term implicit liabilities of the state.

Overall,
macroeconomic stability should be further increased by lowering the public
debt-to-GDP ratio, while preserving fiscal space for growth-enhancing public
investment. Fiscal consolidation, focusing on revenues, started with the 2014
budget, but continued work is needed to put public finances on a sustainable
footing. The ongoing clearance of arrears and the improvements in public
finance management constitute major steps forward and should be carried out as
planned.

Interplay
of market forces

The private
sector remains dominant, accounting for about 80 % of
GDP and 82 % of
the workforce. Privatisation is advanced but there was no progress on the sale
of the remaining stakes in energy, oil, telecommunications and insurance
companies. The dispute following the earlier revocation of the privatised
electricity distributor CEZ Shpërndarje’s licence was resolved in June, with a
deal in which CEZ receives € 95 million as
payment of receivables and for the transfer of shares. Efforts to
increase private sector involvement in the energy sector resulted in the
signature of 14 new concessions for electricity generation during 2013. The
proportion of total electricity generation provided by private hydro power
plants increased to 11 % in 2013, from
an estimated 7 % in
2012. However, high distribution losses, accumulated arrears, regulated tariffs
below cost-recovery level and a lack of market-based mechanisms are detrimental
to investor interest in the sector and should be resolutely addressed, also in
order to lower fiscal risks. (See also Chapter 15 — Energy). Overall,
state involvement in the economy remains limited and is mainly concentrated in
some sectors, such as energy which needs wide-ranging reform.

Market
entry and exit

Market entry is
adversely affected by bureaucratic procedures and
weaknesses in the regulatory environment. Although the time it takes to start a
new business is relatively short, the associated costs can be high. In 2013,
the number of registered new businesses declined slightly by 1 %,
following strong growth the year before. Bankruptcy procedures remain slow,
while the recovery rate for debtors in most cases turns out to be low. As a result,
the bankruptcy regime does not appropriately support efficient debt resolution.
Under the bankruptcy regime, eight applications for restructuring were
registered in the first half of 2014, compared with just four in the whole
period 2008-2012 and one in 2013. The number of new liquidation cases also
increased in the first half of 2014. Preparations for the revision of the
bankruptcy law have started. Overall, both market entry and exit
procedures should be further improved to facilitate an efficient allocation of
resources.

Legal
system

The pace of
property legalisation, restitution and compensation remains slow. The first
registration of properties has yet to be completed in 470 land registry zones,
of which 399 are rural. Parliament decided in December to postpone the deadline
for processing the verification of titles concerning agricultural land until
the end of 2015.

There was some
progress on setting up administrative courts, which became operational in
November. In March, the Ministry of Justice adopted guidelines on the fees to
be paid to private bailiffs, allowing negotiation of payments upon successful
completion of the collateral execution process, instead of a full upfront
payment. This is expected to align incentives with creditors for a prompt
execution of collateral. The Economy Ministry is conducting a survey of wrong
and harmful procedures with a view to addressing regulatory weaknesses, while a
cross-institutional working group has been set up to consider any necessary
legal and procedural changes to improve the business environment. Overall,
progress is needed on reforms to deal with uncertainties over property
ownership, deficiencies in the regulatory framework and weaknesses in contract
enforcement and the rule of law, which continue to be detrimental to the
business environment.

Financial
sector development

The
predominantly foreign-owned banking sector continued to dominate the financial
system, accounting for 90.8 % of all financial system assets. Sluggish
credit demand and banks’ increased risk aversion
caused the stock of outstanding loans to decrease by 2.1 % in 2013, with
business loans contracting the most. Despite continued monetary policy
stimulus, the downward trend in lending continued in the first half of 2014,
but in July the stock of loans increased in annual terms for the first time in
twelve months, albeit at a slow pace (0.5 %). Overall credit to the
economy fell to 40.6 % of GDP at end-March from 42.8 % a year
earlier, suggesting that there is significant scope for deeper financial
intermediation.

The share of
non-performing loans has begun to level off after
almost five years of steady increase, but it remains high (24.1 % in June
2014) and is the main source of concern in the banking sector. In February, the
Bank of Albania’s Supervisory Council adopted a requirement for banks to write
off, from January 2015, non-performing loans no later than three years after
they had been classified in the ‘loss’ category. It also strengthened credit
underwriting practices and non-performing loan recovery and resolution for
large borrowers. Banks are also exposed to credit risk stemming from the
currency mismatch of borrowers with foreign currency loans but with domestic
currency income. Such loans make up more than 30 % of the total stock and
are particularly sensitive to large exchange rate depreciations.

Despite very
high NPLs, lingering credit risks and exposure to sovereign risk through
significant holdings of government securities, the banking sector appears
stable. Capital and liquidity ratios largely exceed requirements and deposits
continued to be the main source of funding for banks, which have very limited
reliance on external sources and parent bank credit lines. Loan losses are well
provisioned, which has weighed on banks’ earnings. However, profitability
indicators remain positive and have been improving since the fourth quarter of
2013.

The size of the
non-banking financial sector has increased but remains small; its assets amount
to 5.4 % of
GDP, up from 2.8 % in 2012. It comprises the insurance
and private pension segments, as well as investment funds. Their regulatory and
supervisory framework requires further strengthening. Overall, the
banking system is well capitalised and liquid. However, further measures are
needed to address the issue of non-performing loans which hamper financial
intermediation.

3.2. 
The capacity to cope with competitive pressure
and market forces within the Union

Human
and physical capital

Despite
significant improvements over the last decade, Albania still has considerable
gaps to close in terms of years of schooling, secondary enrolment rates,
education quality and the market relevance of qualifications. Public spending
on education is low at around 3 % of GDP, and is
expected to stay at this level in 2014 as more spending allocations for primary
and secondary education will be offset by cuts in higher education funding
(mainly as regards capital expenditure). A draft national employment and skills
strategy was unveiled in February; it will run until 2020 and aims to overhaul
active labour market policies, improve vocational education and training,
reform social safety nets and strengthen labour market governance.

Gross fixed
capital formation as a share of GDP dropped again to
around 26 % in 2012; the downward trend was expected to
continue in 2013. Public capital expenditure, at 4.8 % of
GDP in 2013, is often targeted by spending cuts when budget adjustments are
needed. Public spending on research and development is set to increase by 4 %
in 2014, but it continues to represent only 0.01 % of
GDP. The foreign direct investment stock has reached € 4.5 billion,
representing 46.5 % of Albania’s GDP in 2013.

The need for
investment is evident in many areas, including the energy sector. An almost
exclusive reliance on hydropower exposes Albania to large fluctuations in power
generation, resulting in large electricity imports in low-rainfall years. Work
to increase the capacity of transmission and interconnection networks achieved
some results, notably a financial agreement for the construction of the
Albania-Kosovo interconnection line. The imminent start of construction of the
Trans-Adriatic Pipeline through Albanian territory may introduce gas to the
energy mix in the longer term. Nevertheless, significant weaknesses in the
electricity sector remain and need to be addressed. (See also Chapter 15-
Energy). Overall, given the substantial need for investment
in human and physical capital, it is necessary to rebuild
fiscal space for growth-enhancing public expenditure, to improve education
outcomes to meet labour market needs and to attract private investment, in
particular foreign direct investment, by improving the overall investment
environment.

Sectoral
and enterprise structure

The Albanian
economy continues to be dominated by the services sector, which accounted for around 50 %
of gross value added (GVA) in 2013, followed by agriculture, providing more
than a fifth of GVA, and industry (15 %), comprising both manufacturing
and the booming extractive industries (crude oil production increased by 18 %
in 2013). Manufacturing relies to a large extent on the low value-added textile
and footwear industries. Following a deep contraction a year earlier, the
construction sector recorded modest growth. Agriculture continues to provide a
very large proportion of employment (around 45 %), although this fell by
almost 3 percentage points in 2013. The sectoral composition of merchandise
exports remained highly concentrated, with 83 % of total exports in 2013
accounted for by mineral products (40 %), textiles and footwear (28 %)
and construction materials and metals (15 %). This lack of diversification
exposes the economy to industry-specific shocks.

Small and
medium-sized enterprises (SMEs) play a very significant role in the economy,
providing 80 % of employment and 68 % of value
added. Micro-businesses in particular make up a high proportion of the number
of companies and account for more than 50 % of all people employed by
SMEs. Various state and donor-funded schemes exist to increase SMEs’
competitiveness and help them access finance. Overall, agriculture
continues to have a large role in the economy, suggesting that there is
significant scope for productivity gains from sectoral shifts in employment.
The sectoral composition of exports remains highly concentrated.

State
influence on competitiveness

Total state aid
granted declined by 6 % in 2013 and amounted to 1.5 % of GDP. The
share of less distortive horizontal (i.e. non-sector-specific) aid increased
further to 89 %. Similarly to previous years, the government provided
loan guarantees worth € 83 million or 0.8 % of GDP to the state-owned
power company KESH to help it survive financial difficulties and enable it to
import electricity in late 2013 and early 2014. The unresolved problems of the
electricity sector are an enduring drain on public resources.

Economic
integration with the EU

Albania’s
openness to trade, defined as the ratio of total imports and exports to GDP,
increased slightly to 88 % in 2013.
Imports exceeded exports by a margin of 18 % of
GDP, but the trade deficit has shrunk for the last two years, despite a more
than 2 %
appreciation of the lek’s real effective exchange rate since September 2013.
Exports constituted 40.2 % of GDP in 2013, up from 33.3 % in 2012.

The EU remains
by far Albania’s largest trading partner. Exports of goods to the EU increased
by 18 % in 2013 and accounted for some 84 % of total merchandise
exports, while imports of goods from the EU made up
64 % of the total. Although in recent years Albania has managed to
diversify somewhat its client base away from Italy (notably to Spain, Turkey
and Kosovo), Italy remains its single largest trading partner, purchasing more
than half of Albanian merchandise exports and providing a third of its goods
imports. The EU also remains the main source of inward investment in Albania.
Trade links with fellow Central European Free Trade Agreement (CEFTA) countries
loosened in 2013 on account of a 16 % fall in merchandise imports from the
bloc, partly reflecting weaker demand in Albania. CEFTA countries accounted for
some 12 % of Albanian merchandise exports and 7 % of its imports of
goods. Overall, Albania’s openness to trade slightly increased. The EU
remains its dominant trading partner, while trade links with CEFTA countries
weakened.

4. 
Ability to take on the obligations of membership

This section
examines Albania’s ability to take on the obligations of
membership — that is, the acquis as expressed in the Treaties, the
secondary legislation and the policies of the Union. It also analyses the
country’s
administrative capacity to implement the acquis. The analysis is
structured according to the list of 33 acquis chapters. In each sector,
the Commission’s
assessment covers the progress achieved during the reporting period, and
summarises the country’s overall level
of preparation.

4.1. 
Chapter 1: Free movement of goods

Some steps have
been taken in the area of horizontal measures, mainly in the field of
standardisation and conformity assessment.

As regards standardisation,
Albania adopted an additional 1 413 European standards, mostly via the
‘cover page’ method, without translation. It also adopted 565 standards from
the European Telecommunications Standards Institute, 248 ISO standards and 158
International Electro Technical Commission standards. The draft national
strategy on consumer protection and market surveillance, covering also
accreditation and metrology has not yet been adopted.

On conformity
assessment, work is in progress towards signing the European Cooperation
for Accreditation multilateral agreement on testing areas by the end
of 2014. Five new conformity assessment bodies were accredited, bringing the
total number to 30. The testing laboratory for fuel dispensers discontinued the
accreditation process and one testing laboratory for water and two medical
laboratories have applied for accreditation.

The Law on Accreditation
was amended aiming at further approximation with the acquis. The General
Directorate for Accreditation has started to implement the new standard ISO/IEC
17020:2012 for inspection bodies. The General Directorate continued its
awareness-raising activities through public events and the publication of its
decisions and activities on its website. Albania continued its efforts towards
becoming a full member of the European Cooperation for Accreditation.

In the area of metrology,
the General Directorate of Metrology has completed its calibration of
etalons in four regional metrology centres and in the Metrological Inspection
Department. The General Directorate conducted inspections in the hydrocarbon
and trade sectors and issued fines for infringements of legislation. There
has been an increase in verification activities by the General Directorate and
in its collected revenue. The Law on Metrology, aiming at further
approximation with the acquis, is yet to be adopted. Alignment with the
Measuring Instruments Directive has yet to be achieved.

The legislation
in the area of market surveillance needs to be better enforced. In
December, an order on methods of risk classification and assessment of serious
risk was adopted, aiming to align legislation with the acquis. An order
on standard mandatory operating procedures for market surveillance was adopted
in May. The market surveillance inspectorate has not been established.

Preparatory work
for further alignment with the ‘New and Global Approach’ product legislation
has continued, mainly through the revision of existing technical regulations.

In the area of
procedural measures, the draft Law on Cultural Heritage, aiming to align
legislation on the return of cultural objects, is still awaiting adoption.

Conclusion

There
has been some progress in the area of free movement of goods, notably on
standardisation. Overall, legislative approximation with the acquis
requires further action. The national strategy on consumer protection and
market surveillance, covering also accreditation, standardisation and metrology
has not yet been adopted. A market surveillance inspectorate needs to be
established. Overall, preparations are moderately advanced.

4.2. 
Chapter 2: Freedom of movement for workers

As regards access
to the labour market, 17 pieces of implementing legislation for the Law on
Foreigners were adopted in February, specifying procedures related to working
conditions for foreign workers and aiming to guarantee equal treatment for EU
workers in the Albanian labour market.

As regards coordination
of social security systems, negotiations on bilateral agreements
with Romania, Hungary and Luxembourg have been completed, but the agreements
have yet to be adopted. Negotiations with the Czech Republic, Canada and the
former Yugoslav Republic of Macedonia are ongoing.

Conclusion

There
has been some progress in the area of freedom of movement for workers, notably
in establishing the legal basis for improving EU workers’ access to the
Albanian labour market. Overall, preparations in this area are still being
initiated.

4.3. 
Chapter 3: Right of establishment and freedom to
provide services

As
regards the freedom to provide cross-border services, the pilot
screening of the legislation in the area of mining has been finalised with a
view to preparing for alignment with the Services Directive. Manuals on
proportionality tests, which will be used by line institutions during further
screening, have been prepared for the gambling, pharmaceuticals and taxation
sectors. The institutional capacity for preparing for legislative alignment
with the Services Directive needs to be further strengthened.

In the field of postal
services, the new organisational structure of the Electronic and Postal
Communications Authority has been put in place and a department for postal
market regulation has been set up and staffed. The draft postal law has not
been finalised yet. A working group has been set up for that purpose.

In the area of
the mutual recognition of professional qualifications, legislative
measures have been adopted to include the professions of social worker and
psychologist to the list of regulated professions, whilst provisions on
architects and engineers remain to be approved.

Conclusion

There
has been some progress in the areas of right of establishment and freedom to
provide services, mainly in the increased capacity of the Electronic and Postal
Communications Authority. The capacity of other relevant institutions needs to
be further strengthened. The legislation in the area of right of establishment
and postal services has yet to be aligned with the acquis. Overall, preparations
in this area are moderately advanced.

4.4. 
Chapter 4: Free movement of capital

In
the area of capital movement and payments, preparations are at an early
stage.

As regards the payment
systems following the adoption of the Law on Payment Systems, the Bank of
Albania issued a licence in October 2013 to the national card payment operator
Paylink and adopted in June a regulation on the organisation and functioning of
the National Committee of Payment Systems. During 2013, the number of
transactions processed through the Albanian Inter-Banking Payment System
increased to 86 350 or 12 % in comparison to 2012, while maintaining
its upward trend in terms of volume/value. The number of transactions processed
through the Albanian electronic clearing house marginally increased by 0.5 %
in 2013, while the value of transactions rose by 8.6 %. The Ministry of
Finance dominates the clearing house system, representing 73 % of total
transactions, as well as some 25 % of total payments system transactions.

Regarding
the fight against money laundering, Albania continued to implement
recommendations by the Committee of Experts on the Evaluation of Anti-Money
Laundering Measures and the Financing of Terrorism (Moneyval). In October 2013,
a law on measures against the financing of terrorism was endorsed by parliament
and the list of people declared to be involved in the financing of terrorism was
updated in July. The number of fines imposed by the General Directorate for the
Prevention of Money Laundering decreased, as did the total number of
inspections conducted during 2013, while around 66 % of the volume of
imposed fines was collected in 2013, as compared to 30 % in 2012. The
total number of suspicious transaction reports showed an increasing trend
especially in the first half of 2014, when 546 reports were registered. In
2013, the banks and the General Directorate of Customs submitted an increased
number of suspicious transactions reports, while there was a decrease in the
number of these reports that were submitted by exchange offices, notaries,
money transfer offices and the Central Office for the Registration of Immovable
Property. The number of reports referred to police and the prosecutor’s office
in 2013 increased by 38 % to 283. This upward trend continued during the
first semester of 2014 with a total of 229 cases reported. The number of
administrative sanctions increased from 13 in 2013 to 33 in the first half of
2014.

Conclusion

There
has been some progress on the free movement of capital thanks to steps towards
the implementation of the Law on Payment Systems, the licensing of the national
card payment operator and the adoption of legislative measures to fight money
laundering. Further work is needed on the enforcement of legislation. Overall,
preparations are moderately advanced.

4.5. 
Chapter 5: Public procurement

In
the area of award of public contracts, guidelines on public procurement
procedures for social care services were adopted in September 2013. A Council
of Ministers decision on conducting the bidding procedures for concessions and
public/private partnerships electronically and additional clarifications to the
guidelines on small-value procurement procedures were adopted in March. The Law
on Concessions and Public-Private Partnerships was amended in July to exclude
from its scope public works concessions on construction and maintenance of road
infrastructure of particular importance, taking it farther away from the acquis.
In July, a working group was established to promote public-private
partnerships. The budget, public finance management system and public
procurement system are not sufficiently integrated and the award of multi-year
contracts has only taken place in specific sectors, such as infrastructure.

Public
procurement activities dropped in 2013 by almost 23 % to 5 120
contracts signed, compared with 2012. The number of unpublished negotiated
procedures continued to increase in 2013, accounting for 33.6 % of all
procedures and 19 % of the total value of tenders. In the first half of
2014, they increased by 12.9 % comparing to the same period last year. The
number of disciplinary measures for public procurement infringements taken by
the Public Procurement Agency against contracting authorities fell from 55 in
2012 to 40 in 2013; the number of fines fell from 29 to 12, while reprimands
rose from 15 to 26. In the first half of 2014, the administrative penalties
increased by 27 % as compared to the same period last year. The
e-procurement system continued to function well and the number of users
increased five times in 2013, reaching 13 248.

Financial loss
from the state budget from public procurement and concessions decreased by 20 %
from 2012 to 2013, falling to € 2.5 million according to the Supreme State
Audit Institution. Substantial work is needed to increase transparency in
public procurement procedures, including those for small-value purchases, in
order to reduce corruption risks and improve competition. The new government
cancelled 13 concessions in the energy sector in 2013 (see Chapter 15 —
Energy). The legislative framework adopted in the first half of 2013 needs
to be properly implemented.

The Public
Procurement Agency has begun monitoring the selection process for unpublished
negotiated procedures, but it has to enhance its policy coordination and
regulatory role. Substantially more staff needs to be assigned to public
procurement in the contracting authorities at both central and local government
level. The effectiveness of the Concession Treatment Agency remains limited and
coordination between procurement and concessions systems should be improved.
Expertise and monitoring has to be ensured.

In the field of
remedies, the Public Procurement Commission received 561 complaints
in 2013, of which 93 % related to public procurement, 3 % to
concessions and mining permissions, and the rest to auction procedures, with an
upward trend in the first half of 2014. The complaints constitute 13.5 %
of total procedures. Further action is needed to improve the transparency,
quality and scope of its review decisions, inconsistencies, the high number of
appeals and lengthy procedures. To that end the undertaking in 2013 of the
second instance review by the administrative courts is encouraging. The
commission’s independence has to be ensured and its role as the main review
body to be fulfilled.

Conclusion

There
has been little progress in the area of public procurement, in extending the
e-procurement system to concession contracts and public private partnerships.
Substantial work is needed to develop qualified human resources, better
integrate procurement and concessions systems, further decrease financial
losses to the state and increase transparency in this area. The increasing use
of unpublished and opaque procurement procedures and exceptions from the law on
concessions and public private partnerships are issues of concern. Overall,
preparations in the field of public procurement are moderately advanced.

4.6. 
Chapter 6: Company law

In
the area of company law, amendments to the 2008 Law on Entrepreneurs and
Companies, including provisions governing reporting and documentation
requirements for mergers and divisions, remain to be adopted. A private
e-certification service provider for e-signatures was licensed and started
testing the issuance of certificates to businesses. Authentication certificates
that can be used via the chip on the national ID card are not yet operational.

In the area of
corporate accounting, new national accounting standards, to be implemented
as from January 2015, were adopted in July. The National Accounting Council
continued efforts to increase its capacity and adopted a manual of operating
procedures and methodologies for transposing international accounting standards
at national level, as well as its medium-term strategy. The Council continued
to publish translated updates of international accounting standards on its
website. However, its inspection role remains limited and its cooperation with the
other state reporting institutions, in particular the National Registration
Centre, should be strengthened. Further efforts are needed regarding public
access to companies’ annual financial statements.

In the field of auditing,
the Public Audit Oversight Body conducted reviews and inspections to check
the quality of the Institute of Authorised Chartered Auditors’ audits of banks,
insurance companies, state-owned companies, utility companies and
telecommunications companies. Further effort is needed to increase the Public
Audit Oversight Body’s own capacity to allow it become a truly independent
body. A working group has been set up for revising the Law on Audit and further
aligning it with the acquis.

Conclusion

Some
progress was made in the field of company law, through the adoption of new
national accounting standards. Substantial work is needed to increase capacity
in the National Accounting Council and the Public Audit Oversight Body. The
latter’s independence must be ensured. Albania will need to focus on enforcing
accounting and auditing standards, and further increasing its inspection
capacity as part of its work on building sound economic governance. Legislation
must be further aligned with the acquis, in particular on auditing.
Overall, preparations in this area are moderately advanced.

4.7. 
Chapter 7: Intellectual property law

Regarding
copyright and neighbouring rights, the new copyright law has still not
been adopted.

In the field of industrial
property rights, the amendments to the Law on Industrial Property were
approved in May, and legislation on protecting topographies of integrated
circuits was adopted in June.

In the area of enforcement,
the Copyright Office has continued its inspections and issued fines for
infringements of the Copyright Law. The rate of collection of fines remains
low. A legal amnesty that was promulgated by the President in March, allowed
for the pardon of those sentenced to pay fines before the end of December 2013.
The human and financial resources of the Albanian Copyright Office remained
insufficient and its overall capacity needs to be increased. As a result of
awareness-raising activities, the number of companies registering their
trademarks with the General Directorate of Patents and Trademarks increased
(697 since October as opposed to 617 in the previous year). The administrative
capacity of the General Directorate of Patents and Trademarks needs to be
reinforced.

The General
Directorate of Customs continued its work on identifying and seizing
counterfeit products at customs posts. The clear upward trend seen in 2013 of
requests for action to protect trademarks continued during the first quarter of
2014. The General Directorate continued to face difficulties in getting
reactions from right holders in relation to seized counterfeit products. The
State Police made 47 arrests for offences related to intellectual property in
2013, which represents a 21.5 % increase compared to the previous year. It
also conducted, during December 2013 — January 2014, inspections on 36 broadcasting
entities. As a result, 21 entities were prosecuted for infringements.
Amendments to the Code of Criminal Procedure were made to allow for greater
State Police involvement in investigating cases relating to intellectual
property rights infringements. The market surveillance inspectorate has yet to
be established and counterfeit products are still widespread in the market.
Further action is needed to increase the capacity of the courts and to raise
awareness, including among judges. The implementation of the national strategy
on intellectual and industrial property rights, which has been assessed in
June, remains a priority issue, and institutional coordination and cooperation
need to be improved.

Conclusion

There
was little progress regarding intellectual property rights. Albania has not met
its commitments under Article 73 of the Stabilisation and Association
Agreement. Urgent and determined action is required to adopt the new copyright
law, strengthen inspection capabilities by, inter alia, establishing the
market surveillance inspectorate, improve the collective management system and
apply effective sanctions for infringements. On industrial property, the
legislative framework was improved but administrative capacity should be
increased. Further awareness-raising of intellectual property rights is key.
Overall, preparations are not very advanced in this area.

4.8. 
Chapter 8: Competition policy

In
the area of anti-trust and mergers, in November, the Albanian
Competition Authority adopted a decision providing guidance on the assessment
of horizontal agreements. The authority received 34 complaints, compared with
19 in the same period last year, which led to the opening of investigations in
the areas of insurance, public transport services, the hydrocarbon sector and
the maritime transport market. It also initiated and concluded investigations
in the telephony, tobacco markets and the private security services. It issued
five decisions on anti-competitive agreements, one decision on abuses of
dominant market positions, and four decisions authorising mergers. The
authority also issued three decisions on assessment of complaints and exempted
one restrictive agreement. It adopted three legal acts, issued five
recommendations and initiated nine administrative procedures. No fines were
imposed in 2013, compared with seven in 2012. In June, the authority imposed a
fine to a company for procedural delays. It also issued recommendations to the
regulator for telecommunications, the Authority for Electronic and Mail Services,
the Financial Supervisory Authority and to the government for two concessions.
As regards court cases, the Competition Authority lost one case before a first
instance court, on which it submitted an appeal. It won two out of three appeal
cases. Most of the fines imposed by the authority in the past have not yet been
collected, as many court appeal decisions are pending. Its new structure has
yet to be approved by parliament. Training for judges in competition policy
needs to be further improved.

In the area of state
aid, the government approved the new composition of the State Aid
Commission in February. In April, the government adopted four state aid schemes
aimed at promoting employment. The government continued to issue guarantees to
second tier banks on behalf of the state-owned power generation company KESH,
due to the latter’s ongoing financial difficulties. State aid reached € 143.8
million in 2013, 6 % less than in 2012, mainly comprised of subsidies,
grants and tax relief. The number of state aid notifications by the government
remains low and there were none by local authorities. The staff of the State
Aid Sector was reduced to two officials.

Conclusion

Some
progress was made in the area of competition policy, mainly in anti-trust and
mergers, where the Competition Authority continued to build its enforcement
record. Overall, preparations in the area of anti-trust and mergers are
satisfactory. Further action is needed to strengthen the
administrative capacity and operational independence of the state aid
institutions. State aid rules have to be effectively implemented and
legislation must be further aligned with the EU acquis. Overall,
preparations in the area of state aid remain at an early stage.

4.9. 
Chapter 9: Financial services

In
the field of banks and financial conglomerates, in February, the Bank of
Albania adopted in a new supervisory policy, aiming to align this with the EU
risk assessment system and a new risk assessment manual. It also adopted
amendments to the regulation on credit risk administration that provides for
some requirements for banks relating to the write-off process for
non-performing loans, a new regulation on risk management of banks’ large
exposures to risk and a mandatory guideline on recovery plans, as well as
regulations on the functioning of an analytical tool to improve the
administration of foreign currency reserves and on the minimum compulsory reserves
for the second tier banks. Albania continued to implement the Basel II
principles in accordance with the relevant action plan. Preparations for Basel
III are at an early stage. The bank has taken some initial steps to strengthen
security and cash management systems after € 5.1 million were lost from
the stock reserves of the bank. Eight of the fifty posts in the bank’s
supervisory department are currently vacant.

With regard to
the non-banking area, amendments to the Law on the Albanian Financial Supervisory
Authority, aimed at increasing its financial and operational independence, were
adopted in May. These included the exclusion of the authority’s employees from
the Civil Service Law. The number of non-banking institutions and the number of
staff at the authority remained the same.

In the field of insurances
and occupational pensions, the Law on Insurance and Reinsurance was adopted
in May, with a view to further alignment with the EU acquis. The
non-banking sector is dominated by 11 insurance companies, while the insurance
market remains small, accounting for 1.6 % of GDP. Non-life insurance
continued to dominate the insurance market. The bonus-malus system for motor
insurance became operational in August. The ratio of paid claims to written
premiums remained almost at the same level (31.7 %) in 2013. About 81.5 %
of the total paid claims (€ 15.7 million) were on motor insurance. The
Financial Supervisory Authority issued regulations on tariffs for the
prospectus’ approval and on determining the rules for the monetary reserve of
claims covered by compulsory insurance premiums in the transport sector.
Following price fluctuations in the non-life insurance market observed in
February, the Albanian Competition Authority issued in July recommendations on
the regulation of competition in the non-life insurance market.

In the area of financial
market infrastructure, implementation of the Law on Payment Systems is
ongoing.

As regards the securities
markets and investment services, Albania’s securities market is
concentrated in the transaction of treasury bills. The investment fund continues
to be operational and about 93 % of total assets are in government
securities. The number of licenced operators in the securities market remained
the same. In the first quarter of 2014, the Financial Supervisory Authority
approved prospects for four issues of bonds with private placement by two
companies. It continued to closely monitor the financing of the Compensation
Fund by insurance companies.

Conclusion

There
has been some progress in the field of financial services, mainly regarding the
legislative framework on the supervision of the banking and non-banking
sectors. Preparations in the fields of securities markets and insurances remain
at an early stage. Further work is needed to secure money stock reserves and to
align legislation with the acquis. Overall, preparations in this area
are moderately advanced.

4.10. 
Chapter 10: Information society and media

In
the area of electronic communications and information and communications
technologies, some steps have been taken towards legislative alignment with
the acquis through the adoption of competitive safeguards that reduce
mobile termination rates along a ‘glide path’ from April
onwards. The award-procedure for the granting of
the fourth UMTS/3G
licence was re-launched following a legal action initiated by one of the
current mobile operators. The frequency use plan, approved by the Agency for
Electronic and Postal Communications (AKEP) in February, has only been
partially implemented due to the pending completion of the digital switchover
process. The administrative capacity and resources of AKEP have
improved, but remain limited. Concerns remain about its operational
independence. The new law on territorial planning, comprising certain
provisions on the granting of rights-of-way under the public easement framework,
was adopted in July. Albania should ensure that any measure
requiring the storage of traffic data, such as International Mobile Equipment
Identity numbers, is in accordance with the principles of EU law. The
emergency number 112 is still not operational.

Mobile usage
remains high with subscription penetration at 130 % in 2013 and 3G and
mobile broadband usage is growing strongly, while fixed broadband penetration
remains low at 5.7 %.

In the field of information
society services, the number of services for citizens and businesses
increased and
now includes
e-services for certificates, enrolment in higher education, job searches and
administrative requests company registration and income tax. The implementation
of the national plan on broadband for the period of 2013-20 is advancing slowly.
This is planned to be an integral part of the new cross-sectoral strategy for
information society 2014-20, which remains to be adopted.

As regards audiovisual
policy, implementing legislation for the Audiovisual Media Law
was adopted, including a broadcasting code, criteria on broadcasting
authorisations and inspection procedures. Significant work is needed on Albania’s
international commitments on implementing the digital switchover strategy, due
to be completed by June 2015. As a concession to the wish of operators to go
beyond the internationally coordinated and agreed ‘Geneva 2006’ frequency
distribution plan, a task force was set up. As a result of its work, all
existing operators and their territorial reach were mapped, occupied
frequencies were identified and antenna strength was measured. The need to
coordinate with neighbouring countries on harmonising frequencies was also
identified. Initial steps were taken to elect new members to the steering
committee for the public service broadcaster (RTSH). However, the process was
halted due to a lack of political agreement on the selection procedure. The
public service broadcaster’s editorial independence and fee collection system
need to be improved. RTSH digitalisation has not progressed. The
unauthorised use of frequencies by several broadcasters remains a problem. The
licensing of existing multiplexes could not progress, due to an ongoing court
case launched by broadcasting operators against the Audiovisual Media Authority.
The vacancies on the authority’s steering board remain unfilled and its ability
to perform the assigned functions undermined. The delay in appointing steering
committees for the Audiovisual Media Authority and the RTSH is
hindering public broadcaster’s reform and the timely implementation of the
digital switchover strategy.

Conclusion

There
has been some progress in the field of information society and media,
particularly by increasing competition in the electronic communications market.
Legal uncertainty on the rights-of-way regime persists and should be
eliminated. Over the next year, Albania urgently needs to address identified
priorities, particularly as regards strengthening the independence of the media
regulatory authority and the public service broadcaster, and allowing for their
proper functioning by filling vacant positions. The digital switchover strategy
and the Audiovisual Media Law need to be swiftly and effectively implemented.
Overall, preparations in this area need to be accelerated.

4.11. 
Chapter 11: Agriculture and rural development

As regards horizontal
issues, the government in 2014 increased allocated funds for direct support
and national investment schemes in agriculture and agri-processing from € 6.8
to € 12 million. According to the completed census of agricultural
holdings, 98.2 % of the 303 802 agricultural holdings in Albania are
family farms. Census data should form the basis for the creation of a farm
register. There were no further developments on putting in place an integrated
administration and control system. A new structure and organisational chart in
the Ministry of Agriculture has resulted in a reduction of staff in its central
services. A rebalancing of resources is needed in order to ensure efficient
policy implementation, ownership and absorption capacity in view of the
significant sectoral assistance provided for under IPA II.

In
the area of common market organisation, the implementing legislation for
the new law on olive oil has not yet been adopted.

The
adoption of the 2014-20 strategy for agriculture and rural development is
still pending. Preparations to manage and control rural development funds under
the rural development component of the Instrument for Pre-accession Assistance for
Rural Development (IPARD) have continued. The capacity of the IPARD
operating structures (paying agency and managing authority in the Ministry of
Agriculture, Rural Development and Water Administration) has been strengthened.
The draft 2014-20 IPARD programme, which includes additional measures and
sub-sectors, has been submitted to the Commission for comments. The Agency for
Rural Development and Agriculture (the paying agency) moved to new and suitably
equipped premises. Implementation of the IPARD-like scheme is progressing
regularly. The capacity for decentralised IPARD management by other relevant
structures, such as the National Authorising Officer and the National Fund at
the Ministry of Finance, has not increased. Further action is needed to
increase administrative and technical capacity and prepare them for the
accreditation process.

In the field of quality
policy, amendments to the law on industrial property rights referring also
to geographical indications were enacted in May.

As
regards organic farming, the provision of subsidies through direct
schemes and training on organic production continued. The law on organic
farming remains to be adopted.

Conclusion

There
has been some progress in increasing the capacity of the operating structure
(paying agency and managing authority) of the Ministry of Agriculture, Rural
Development and Water Administration to manage IPARD funds. Further work is
needed to build capacity in other structures relevant for the implementation of
IPARD programmes, such as the NAO or NF, and to establish a sustainable and
effective agriculture information system. Overall, preparations in this area
are at an early stage.

4.12. 
Chapter 12: Food safety, veterinary and
phytosanitary policy

In the area of general
food safety, Albania’s risk assessment capacity has still not been
established, as the regulatory framework relating to the
activities of the Scientific Committee has not yet been completed. Although the
number of inspections of food establishments has increased, they continue to be
carried out mostly on an ad hoc basis rather than on the basis of
approved annual inspection plans. The internal procedures of the
National Food Authority have not yet been endorsed. Food legislation is not fully compliant with the EU acquis
and contains ambiguous and inconsistent provisions as regards the balance of
responsibilities between implementing bodies.

As
regards veterinary policy, mass vaccination campaigns have been carried
out against brucellosis in small ruminants, anthrax in cattle and small
ruminants, and rabies in foxes. Constraints persist as a result of the
fragmentation of the veterinary service, unclear responsibilities and
procedures, staff shortages at central level, scarce budgetary resources and
low mobility of field veterinarians. Animal databases are not updated regularly,
due to a lack of reporting. No measures have been taken with regard to animal
waste management or improving animal market infrastructure.

With
regard to the
placing on the market of food, feed and animal by-products, the food
establishments’ database (AKUnet) is almost consolidated and validated. Data
need to be used for the preparation of official inspection plans. The
central veterinary and the nine regional food and veterinary laboratories were
built with IPA support. Residue monitoring programmes for
undesired substances such as veterinary medicines, mycotoxins and heavy
metals/dioxin need to be consistently implemented. Lack
of financial support for the official food safety
laboratory network has resulted in fewer collected and analysed samples.

As
regards food safety rules, regulations regarding food labelling, food
contact material and contaminants need to be updated in line with relevant EU
legislation. Microbiological monitoring of raw milk was conducted in June, but
compliance with the procedures on sampling and assessment of microbiological
safety should be improved. Regarding specific rules for feed, the 2011
regulation on hygiene conditions for feed and feed establishments has yet to be
approved.

In
line with the new organisational structure of the Ministry of Agriculture,
Rural Development and Water Administration, phytosanitary policy is
carried out by the Directorate of Food Safety and Phytosanitary, which has a
limited administrative and technical capacity in the field. The law for plant
protection needs to be revised in line with relevant EU regulations.

Conclusion

There
has been little progress in the area of food safety, veterinary and
phytosanitary policy. Risk assessment capacity has not yet been established and
systematic inspection plans have not yet been adopted. The proper functioning
of relevant services is hampered by overlapping responsibilities and by the
lack of communication, properly qualified staff and financial resources. A
comprehensive strategy clarifying the legal, institutional and administrative
framework needs to be adopted. Overall, preparations remain at an early stage.

4.13. 
Chapter 13: Fisheries

In the field of resource
and fleet management, the fisheries sector, including the inspection
service, was transferred from the Ministry of Environment to the Ministry of
Agriculture, Rural Development and Water Administration. However, the sector
continues to suffer from a lack of institutional coordination and capacity. The
law on aquaculture remains to be adopted. Monitoring of fish stock is still not
taking place.

In
the area of inspection and control, positive steps were taken to deter
illegal fishing in Shkodra lake, through good inter-service cooperation. In
accordance with the law on fisheries, the ban on the sale of date mussels
(Lithophaga lithophaga) was enforced. No steps have been taken to prevent the
catch and sale of fish smaller than the minimum size allowed for in law. The
new Directorate for Fisheries Services and Aquaculture lacks the appropriate
technical and administrative capacity to ensure effective deterrence of illegal
fishing practices. The Vessel Monitoring System established in 2011, became
operational only recently after a long interruption period. Viable and
long-term solutions for its maintenance and operation are needed.

As
regards state aid, direct government support for aquaculture was
introduced in 2014, aiming to subsidise up to 25 % of the amount paid for
fingerlings and feed.

As regards international
agreements, Albania is cooperating with the International Commission for
the Conservation of Atlantic Tunas (ICCAT) and has provided information; the country
has participated regularly in the meetings of the General Fisheries Commission
for the Mediterranean (GFCM).

Conclusion

Little
progress has been made on fisheries. The sector needs to be further
consolidated under a single structure within the Ministry of Agriculture, Rural
Development and Water Administration. A sound sector strategy in line with EU
fisheries policy needs to be developed. The institutional and legal framework
needs to be strengthened, ensuring regular monitoring of fish stocks and
preparing implementing regulations on management plans for fish species and
types of fishing. The necessary financial resources need to be allocated to
ensure adequate monitoring and control of fishing activity. This is essential
to ensure sustainable development of the sector. Overall, preparations are at a
very early stage.

4.14. 
Chapter 14: Transport policy

In the area of road
transport, Albania adopted a package of road safety
measures in March. Albania should focus on its enforcement, as road safety
remains a serious concern. Further efforts are needed in the areas of vehicle
inspection and education and training of road users, including professional drivers.
The administrative capacity in the General Directorate of Road Transport
Services needs to be further increased. Implementing
legislation regarding dangerous goods has not yet been adopted.
Alignment with the acquis on admission to the occupation of road
transport operator and access to the road haulage market remains insufficient.

In
the field of rail transport, the Railway Law has not yet been adopted
and independent railway institutions, infrastructure managers and rail
operators have not yet been established. The resources allocated for developing
and maintaining the railway infrastructure are insufficient, resulting in
further deterioration and reduction of passenger transport services.

As regards air
transport, implementing rules on the airworthiness and environmental
certification of aircraft and related products, parts and appliances, and on
the certification of design and production organisations were adopted in April.
Albania made progress as regards the Safety Assessment of Foreign Aircraft
(SAFA) programme and on qualification of inspectors. Yet, there is a lack of
expertise on oversight duties for any future Albanian airline. The
administrative and technical capacity in the air transport sector requires
further strengthening. More work is needed to meet the requirements under the
first transitional period of the European Common Aviation Area Agreement.

In
the area of maritime transport, the Law on Security of Ships and Ports, regulating
the legal framework for maritime security, was adopted in December. A
regulation on registration of ships and seafarers was approved aiming at
aligning with the acquis. Further action is needed in legislative
alignment on reporting formalities for ships. The detention rate of vessels
flying the Albanian flag was improved and Albania moved from the black list to
the grey list of the Paris Memorandum of Understanding on Port State Control.
Albania has not yet applied for membership in that organisation.

Regarding
intermodal transport, further efforts are required to develop a balanced
intermodal environmentally friendly and competitive transport and mobility
system.

Conclusion

Very
little progress has been made on transport policy. Alignment with the acquis
is slow and was at a standstill as regards road and rail transport. Over the
next year, Albania will need to make substantial efforts to improve the railway
sector, in particular adopting the Railway Law, working on the road safety,
progressing in implementation of the European Common Aviation Area Agreement, joining
the Paris Memorandum of Understanding on Port State Control and strengthening
administrative capacity for all modes of transport. Overall, preparations are
at an early stage.

4.15. 
Chapter 15: Energy

The new energy
strategy is still under preparation.

In the
area of security of supply, the 400 KV interconnection line project
between Albania and Kosovo was launched. The construction of a 110 KV
South-Ring transmission line in the south of the country started. Electricity
generation capacity increased by 19 MW with 9 small hydro-electric plants
coming online. New allocation rules were adopted by the Energy Regulatory
Entity to improve electricity import procedures. In April, a decision by
ENTSO-E allowed for the permanent synchronous functioning of Albanian electricity
transmission with the continental European system. Preparations for the
development of the Trans-Adriatic Pipeline project continued: in April, the
National Territorial Planning Council issued a compound development permit for
the project. The new government investigated the lawfulness of the concession
procedures in the energy sector during 2013 and cancelled some of the
concessions. Institutional capacity for dealing with the hydrocarbon sector was
increased and a policies and development directorate was set up. Amendments to
hydrocarbon legislation were adopted, aiming at strengthening quality control
in the fuel sector. Preparations for the development of the gas master plan are
at an early stage. Albania remains highly dependent on hydropower and
vulnerable to hydrological conditions. The Vlora thermal power plant is still
not operational. Albania has contributed
to the energy security stress test carried out by the European Commission in
the framework of the European Energy Security Strategy.

As
regards the internal energy market, the Power Sector Law has not
yet been amended. The dispute between the government and the power
distribution company CEZ was resolved in June. The Ministry of Energy and
Industry increased its administrative capacity and an inter-ministerial task
force on improving bill collection rates and reducing losses in the power
distribution network was set up in December. Amendments to the Criminal Code
classifying electricity theft as a criminal offence were adopted. The level of
losses and bill collection rates continues to be unsustainable. The generation
company KESH experienced serious financial difficulty and continued to depend
on government guarantees for electricity imports, accumulating arrears to third
party operators. Like the Power Sector Law, the Law on the Natural Gas Sector
also needs to be aligned with the EU Third Energy Package by 1 January 2015.
The gas transmission and distribution licences issued to Albpetrol by ERE in
2012 infringe upon the EU Second Energy Package. Albpetrol still does not meet
the requirements on legal and functional unbundling.

Regarding
renewable energy, the national renewable energy action plan, aiming to
meet the 38 % target for share of energy from renewable sources in
2020, has yet to be finalised. A law on renewable energy was adopted in May,
with partial entry into force planned in January 2015. Legal measures to
address barriers to the licensing and authorisation of renewable energy
investments, and the connection of renewable energy producers to the grid, are
awaiting the adoption of the Power Sector Law and its implementing legislation.

In
the field of the energy efficiency the draft Law on Energy Efficiency is
still being prepared. The lack of financial resources and a lack of clarity on
the roles of the different institutions involved in energy efficiency hamper
implementation of the national energy efficiency action plan. The second NEEAP
is still being prepared.

In
the area of nuclear energy, nuclear safety and radiation protection,
Albania’s National Nuclear Agency completed the 2013 programme on nuclear
safety and a feasibility study was prepared on future long-term energy
(including electricity) scenarios. In the field of radiation protection, in
March, the government adopted a decision on the establishment, composition and
form of the organisation, operation, and remuneration of the Radiation
Protection Commission. This was restructured, keeping the same number of staff.

Conclusion

There
has been little progress in the field of energy. The power sector remains
fragile and dependent on hydro sources with a high level of losses,
unsustainable bill collection rates and serious financial debt. Settling the
dispute between the government and CEZ contributed to pave the way for further
sector reforms. Over the next year, Albania should focus on aligning its
legislation with the EU Third Energy Package, attracting new investments,
establishing its energy market model in line with EU standards and laying the
foundations to ensure the economic viability of the electricity sector.
Overall, preparations are not very advanced in this area.

4.16. 
Chapter 16: Taxation

In
the area of indirect taxation, the value added tax (VAT) Law was
amended in December to exempt the supply of medical services and medicines, set
out the procedures to process refund claims and centralise claims payments
through the treasury system. A new, more acquis compliant VAT Law was
approved in July. This law, which will enter into force in 2015, retains some
exemptions which are not in line with the acquis. The backlog of VAT
refund arrears has been reduced. More efforts in this respect are needed as
delays still persist.

The law on excise
was amended in December, bringing the rates on alcoholic beverages closer to
the acquis. A plan for excise increases on tobacco products over
the next three years was adopted. The General Directorate of Customs
increased its monitoring and seizure of illegal excise products on the market.
Further work is needed to align legislation and monitor the implementation of
excise, particularly on fuels.

As regards direct
taxation, the Personal Income Tax Law was amended, replacing the 10 %
flat rate with progressive tax rates. Corporate income tax was amended to
provide for a two-tier tax based on the company’s turnover. New legislation on
transfer pricing has been adopted, aiming to bring this in line with EU and
international standards. The draft Law on Mergers and Savings has not been
adopted. Further work is needed to align tax legislation with the acquis
on direct taxation.

The Law on Tax
Procedures was amended, halving the limit for cash transactions and allowing
taxpayers to provide a bank guarantee in lieu of payment when appealing against
fines. The business community increased its involvement in the legislative
process through its participation in the National Economic Council and the
National Taxation Council.

As regards
administrative cooperation and mutual assistance, Albania has revised its
Double Taxation Convention with Kosovo and has expressed interest in
participating in the Fiscalis EU programme.

As regards operational
capacity and computerisation, the General Directorate of Taxation increased
the number of investigations into VAT evasion and fraud schemes and referred
some cases to the prosecutor’s office. The General Directorate must continue to
improve its administrative capacity. The Tax and Customs Academy provided
training on tax procedures and the code of ethics for new tax officials. Yet,
concerns continue regarding instances of corruption and misapplication of tax
legislation. The new IT system is not yet operational and the electronic filing
of personal income tax returns is not integrated in the tax information system.

Conclusion

There
has been some progress, notably in the field of tax legislation. Direct and
indirect taxes were raised, with a view to increasing revenue and a more acquis-compliant
VAT law was adopted. The capacity of the tax administration to fight
corruption, tax evasion and informal economy needs to be strengthened. Albania
should adopt robust administrative procedures to check and carry out VAT
refunds. Further action is required to upgrade the tax administration’s IT
system and improve exchange of information. Overall,
preparations are moderately advanced.

4.17. 
Chapter 17: Economic and monetary policy

In the field of
monetary policy, the Bank of Albania maintained the policy of targeting
price stability by keeping inflation within the target range of 2-4 %
under a free-floating exchange rate. The average inflation rate in 2013 was 1.9 %,
slightly below the bank’s target range. The Bank of
Albania cut the key interest rate several times, bringing it down to a new
historic low of 2.5 %. Monetary policy remains constrained by
the relatively high degree of euroisation of the financial system. The Law on
the Bank of Albania still needs to be aligned with the EU acquis with
regard to the personal independence of council members and the bank’s
accountability.

As
regards economic policy, Albania adopted in January its 2015-17
macroeconomic fiscal framework and the 2014-16 economic and fiscal programme. The
programme’s macroeconomic framework, albeit optimistic, is sufficiently
comprehensive and complements baseline assumptions with alternative scenarios.
Links between the macroeconomic scenario and the structural reform measures are
not sufficiently clear. The fiscal framework is detailed and well integrated
with the policy objectives. The National Economic Council and a
government delivery unit were established during the last quarter of 2013,
improving inclusiveness and effectiveness. The budget was finalised with a
delay due to negotiations with the IMF, which limited parliamentary
discussions. Full compliance with European System of Accounts (ESA) 95,
respectively ESA 2010, standards remains to be ensured. Further action is
needed to improve the analysis of external sustainability and increase the
capacity for economic policy planning, coordination and implementation.
Significant work is needed to align with Directive 85/2011 on requirements for
budgetary frameworks including the introduction of a fiscal rule.

Conclusion

There
has been some progress on defining and implementing monetary and economic
policy. Further action is needed to strengthen economic policy planning and
implementation, including budgetary planning and public finance management.
Overall, preparations are moderately advanced.

4.18. 
Chapter 18: Statistics

In
the area of statistical infrastructure, the independence of the National
Institute for Statistics (INSTAT) should be strengthened and expertise in
statistics, its methods and concepts should be ensured through specific
recruitments of staff, based on professional competence criteria for
statistical issues. Following the disbandment of the Statistical Council in
September 2013, a new council was appointed in February in accordance with the
current statistical law. Its new head was appointed by the Council of Ministers
in March. In November 2013, the General Director of the National Institute for
Statistics was dismissed and replaced before the end of her mandate.
Interinstitutional cooperation in many statistical sectors needs to be
improved.

As
regards classifications and registers, the statistical farm register was
finalised. It needs to be updated to include data from the census of
agriculture holdings. The quality of administrative data and national registers
such as the Albanian civil registration system needs to be improved to increase
their use for statistical purposes. Quality reports on the business register
need to be improved.

In the area of sectoral
statistics, in May, INSTAT published a data analysis of the population and
housing census, in preparation for thematic publications in several areas. The
results for analyses for the population census have been disseminated. A census
atlas and a report on census data quality assurance were also produced. In
November and December 2013, INSTAT conducted a full-scale labour cost survey
for the first time. The methodology used for the labour force survey needs to
be improved and INSTAT staff’s technical capacity for data analysis and
dissemination needs to be increased. The revision of all annual labour market
indicators was published in May. Data on employment and unemployment have been
published on a quarterly basis and data on occupation were published annually,
for 2012 and 2013. Quarterly national accounts have been published regularly.

Conclusion

There
has been progress towards alignment with EU standards in the field of
statistics. Further substantial efforts are needed, in particular in the field
of national accounts. The Albanian civil registration system and the
methodology used for the labour force survey need to be improved. INSTAT’s
independence and professional expertise need to be ensured. Overall, preparations
in this area are moderately advanced.

4.19. 
Chapter 19: Social policy and employment

The
ministry in charge of social policy and employment changed its name to Ministry
of Social Welfare and Youth. New management was appointed at the State Labour
Inspectorate, the National Employment Service, the National Agency for
Vocational Education and Training Qualification, and the Department of
Occupational Safety and Health, including at regional level.

In the field of labour
law, amendments to the labour code to align it with the acquis have
not been adopted yet.

As
regards health and safety at work, the International Labour Organisation
Conventions on safety and health in construction, and on the promotional
framework for occupational safety and health, were ratified in January and
February respectively. Seven new regulations on occupational safety and health
(OSH), aiming at alignment with the EU acquis, have been approved. The
2014-20 national strategy on OSH and its 2014-15 action plan are under
preparation. 30 labour inspectors were trained, particularly focusing on
procedures and inspection methods, the code of ethics and the new EU health and
safety legislation. The State Labour Inspectorate is improving its collection
of statistics and its monitoring of inspections. Four cooperation agreements
have been signed in this area, with the former Yugoslav Republic of Macedonia,
Kosovo, Romania and Bulgaria. The number of reported accidents at work
decreased to 86 in 2013 from 94 in 2012. The number of accidents resulting in
death still raises concerns. Monitoring and reporting of work accidents needs
to be improved. Overall, health and safety conditions at work remain poor.
Labour inspections need to be further improved. At present, the number of
inspectors in Albania is 155, of which 118 are local inspectors.

In the field of
social dialogue, the new National Labour Council held meetings in December,
April and June. However, work is still needed to make collective bargaining
possible at all levels and to increase social partners’ autonomy and capacity
to negotiate collective agreements.

As
regards employment policy, the 2014-20 national jobs and skills strategy
and action plan have been prepared and are awaiting adoption. The strategy aims
at overhauling active labour market policies, improving vocational education
and training, reforming social safety nets and strengthening the governance of
the labour market. A monitoring mechanism for the implementation of the
strategy has yet to be prepared. A new 2014-20 strategy for youth,
covering education, employment, social inclusion and health, is under
preparation. Unemployment
remains high, especially among young people and people with disabilities. The
unemployment rate estimated by the labour force survey (LSF) rose to 17 %
in the fourth quarter of 2013 from 14.4 % in the same period the year
before. Administrative data recorded an unemployment rate of 13.4 % in
2013, compared to 13 % in 2012. Labour market participation is declining,
as is the employment rate and substantial gender gaps remain. According to the
LSF, the employment rate decreased to 48.5 % in the fourth quarter of
2013, in comparison to 54.5 % in the same period 2012. The proportion of
youth who are not in employment, education or training exceeds 30 %, and
has increased by 2.3 % in 2013 compared to 2012. In 2013, the long-term
unemployment represented 72.8 % of total unemployment.

Eight
new employment offices have been established at regional and local level. In
May 2014, a set of youth employment offices opened in Tirana and
other cities. Labour market statistics need to
be further improved. The informal economy remained a significant source of
jobs, accounting for around 40 % of employment in the non-agriculture
sector. A comprehensive approach to inspection of informal employment activity
is not in place.

As regards social
inclusion, the 2014-20 strategy on social inclusion and social protection
is under preparation. There has
been no recent data on poverty levels, since the living standards measurement
survey of 2012. Basic services are provided by the Ministry of Social Welfare
and Youth to all Albanian residents.

As regards
people with disabilities, the framework law on inclusion of and accessibility
for people with disabilities was adopted in July. The new law covers all groups
of people with disabilities and provides for the establishment of a
multidisciplinary commission responsible for examining and evaluating the
disability of each applicant. It also foresees the set-up of a State Committee
for Persons with Disabilities to be composed of representatives of different
ministries and civil society organisations. Implementation of the new framework
law will require significant improvements in infrastructure and access to
services. Training was provided to school and kindergarten teachers to promote
the inclusion of children with disabilities. However, people with disabilities
continue to face difficulties in accessing education, employment, healthcare
and social services.

In the area of social
protection, delays in disability and pension payments were addressed.
Preparations for pension reform have advanced, with basic legislation amended
accordingly in July. The ongoing social reform needs to be closely coordinated
with the territorial and administrative reform already underway. The state
social service launched a pilot project to provide financial benefits for
vulnerable groups and poor families electronically, to reduce abuse of these
funds. Its country-wide deployment would require significant improvements to
existing infrastructure and cooperation between central and local authorities.

In the area of anti-discrimination,
the number of cases
handled by the Commissioner for Protection against Discrimination
rose from 107 cases in 2012 to 256 cases in 2013, while the number of
inspections initiated ex officio by the commissioner increased from 16
in 2012 to 31 in 2013. Of the 131 decisions issued by the commissioner in 2013,
21 concern cases of discrimination on grounds of ethnicity and disability. The commissioner’s
recommendations to amend the labour code have not yet been followed up. Training
and awareness campaigns have taken place, including at local level. Public
awareness of the law on protection against discrimination and of the complaint
mechanism remains low. (See also Chapter 23 — Judiciary and
fundamental rights).

In
the area of equal opportunities, the National Council on Gender Equality
held its first meeting in March. No measures were taken to address the gender
pay gap or access to entrepreneurship and credit. The representation of women
in the labour market needs to be increased, including through mainstreaming
women’s employment in the strategies of all municipalities. (See also
Chapter 23 — Judiciary and fundamental rights)

Conclusion

There
has been some progress in the field of social policy and employment. Efforts
were made towards alignment with the EU acquis on health and safety at
work, but further action is needed to ensure effective implementation. New
legislation on people with disabilities was adopted. The amended labour code
remains to be adopted. The employment rate and labour market participation
remain low and the informal economy is still a significant job provider.
Several new strategies remain to be implemented and a monitoring mechanism
needs to be put in place. Key reforms in the area of social protection have not
started yet. Labour market statistics need to be further improved. Overall,
preparations in this area are starting.

4.20. 
Chapter 20: Enterprise and industrial policy

In
the area of enterprise and industrial policy principles, Albania
continued to implement the principles of the Small Business Act. In April, the
law on late payment was adopted, aiming at further alignment with the acquis.
Cooperation between the national registration centre for business and the
National Accounting Council needs to be strengthened. The Central Inspectorate
has put in place an ‘e-inspection’ portal and has equipped its inspectors with
portable inspection equipment. However, the inspection system remains to be
strengthened. The draft 2014–20 Strategies on Industrial Policy and Enterprises
and on Business Development and Investment have not been adopted.

As regards enterprise
and industrial policy instruments, financing and support for SMEs was
provided through the Western Balkans Enterprise Development
and Innovation Facility and the European Fund for Southeast Europe.
An additional credit line of € 15 million was agreed for the SME loan
scheme concluded with the Italian government. However, access to credit for
SMEs remains an issue. The Albanian guarantee fund of € 2.5 million has
not been used, due to the insufficient quality of the applications and their
high potential risk. The Albanian Investment Development Agency continued to
support business promotion and coordinate participation in the European
enterprise network. However, the agency’s capacity requires further
strengthening. In 2014, the Creative Entrepreneurship Fund became operational,
providing support to the handicraft sector.

With regard to sector
policies, the government launched reforms in the fields of tourism, energy
and agriculture. A new agency for the coastal area was established in January.
Legislation regulating ownership of State property land in tourism-oriented
areas was adopted in July. The new draft law on tourism and the 2014-20 draft
strategy on tourism development have not yet been adopted.

Conclusion

There
has been some progress in the area of enterprise and industrial policy,
particularly with regard to legislation on late payment and on financing
instruments for businesses. Further action is needed to improve the business
environment and stimulate access to financing. Overall, preparations are
moderately advanced.

4.21. 
Chapter 21: Trans-European networks

In the area of transport
networks, Albania continued to participate in the South-East Europe
Transport Observatory and to implement the memorandum of understanding on the
development of the South-East Europe Core Regional Transport Network. Albania
should focus on developing the routes defined in the indicative extension of
the TEN-T to the Western Balkans region. There have been some improvements to
the road network. As regards road corridor VIII, construction of the
Tirana-Elbasan road is progressing, while construction of the Fier by-pass is
still at
an early stage and work on the Rrogozhna by-pass has been delayed. On the
north-south corridor, works on the Damës-Tepelenë segment and the Shkodra ring
road are almost completed. The railway network has further deteriorated and the
section from Librazhd to Pogradec is no longer operational due to a lack of
maintenance. The detailed design for the Tirana-Durres railway and the economic
appraisal study for the rest of the national rail network have yet to be
completed. As regards port infrastructure, the Durres ferry passengers’
terminal is now operational and the contract for the construction of
the infrastructure and superstructure at Vlora port was signed in April. Full
resources for
dredging the port’s access in Shengjin need to be secured.

As
regards energy networks, Albania completed a feasibility study on the
development of the Ionian Adriatic Pipeline and continued preparations for the
development of the Trans-Adriatic Pipeline project.

Conclusion

Some
progress was made in the area of trans-European networks, where the development
of road infrastructure and interconnecting energy networks continues. Transport
infrastructure maintenance and expropriation issues remain a challenge.
Overall, preparations in this area are not very advanced.

4.22. 
Chapter 22: Regional policy and coordination of
structural instruments

As
regards the legislative framework, further steps need to be taken to
secure multi-annual sector programming, budget flexibility and co-financing
capacity for EU projects at national and local level.

As
regards the institutional framework, in March the Commission conferred
management powers for indirect management under the 2007-13 IPA
component I to the competent national authorities, who
are implementing projects in the framework of the IPA 2013 national programme. The
preparatory works to manage IPA funds in the area of agriculture and rural
development have not yet been completed (see also Chapter 11 — Agriculture).

In
the field of administrative capacity, further action is needed to ensure
appropriate and competent staff for all IPA structures in view of the workload
stemming from indirect management responsibilities.

As
regards programming, institutional capacity in line ministries and
coordination with the Ministry of Finance need to be improved in order to
create and implement realistic sector policies, meeting the needs stemming from
the sector approach envisaged in the 2014-20 IPA programme. The national
strategy for development and integration for 2014-20 has not yet been adopted.
A mature project pipeline of investments for regional development has yet to be
developed. Local governments should significantly increase their capacity to
generate mature projects in order to benefit from national and IPA support.

As
regards monitoring and evaluation, the existing set-up of sector working
groups needs to become an effective system to monitor policy developments and
provide strategic advice.

In
the area of financial management, control and audit, the audit authority’s
technical and administrative capacity needs to be further strengthened and its
Director still needs to be re-appointed.

Conclusion

Some
progress was made on regional policy, notably the conferral of management
powers for IPA indirect management. Nevertheless, this management system needs
to be further strengthened to minimise risks of delays and funding
decommitments. Programming capacity has to improve with the preparation of a
mature projects pipeline at national level and the design of mature projects at
local level. Overall, preparations in this area are moderately advanced.

4.23. 
Chapter 23: Judiciary and fundamental rights

Judicial system

In January, Albania
sought the support of the Venice Commission for a comprehensive and inclusive
structural reform of the judicial system. Engagement with the Venice Commission
must continue in order to comprehensively address concerns relating to the
independence, accountability and professionalism of the judiciary. This should
be fully reflected in the new judicial strategy for 2014-20 which is being
prepared. The functioning of the judicial system continues to be affected by
politicisation, limited accountability, poor interinstitutional cooperation,
insufficient resources, lengthy proceedings and backlogs. Corruption in the
judiciary also remains a concern.

In March,
amendments to the Code of Criminal Procedure implementing the 2012
constitutional changes on restrictions to the immunities enjoyed by judges, MPs
and other senior officials were approved. A broad review of the code is still
underway. In March, the Law on Judicial Administration was repealed following a
decision by the Constitutional Court which found, inter alia, that a
qualified majority, as opposed to a simple majority, would have been required
for parliament to approve the law in 2013. In July, amendments to the Law on
the High Council of Justice, the Law on Administrative Courts and the Law on
the School of Magistrates were adopted in an expeditious manner, outside a
comprehensive and inclusive reform process based on wide consultations and
under the guidance of the Venice Commission. Key legislation on reforming the
Constitutional Court, the High Court, the High Council of Justice, and the
Prosecution Office still needs to be adopted.

Regarding
the independence and impartiality of the judiciary, no measures
were taken towards integrating the High Court into the judicial system. The
status of the High Court and the process of appointing its members remain of
concern in terms of possible politicisation, as long as the relevant
constitutional provisions are not amended. The independence and impartiality of
the High Court is still not fully guaranteed. Since January,
parliament has rejected presidential decrees appointing three members of the
High Court and the seats concerned have yet to be filled. In July, the
Constitutional Court repealed some of last year’s amendments to the Law on the
High Court providing for stricter criteria for the selection of judges and
aimed at increasing the court’s professionalism.

The
amendments to the Law on the High Council of Justice provide for only a limited
and fragmented reform of this judicial body. They address inter alia the
mandate of members of the Council, who will now be suspended upon being
indicted in criminal proceedings and dismissed if found to have violated the
law or the Constitution, and who are not allowed to be promoted or transferred
during their term in office nor to exercise a range of activities considered
incompatible on conflict of interest grounds. They also provide for mandatory
quarterly evaluations of the High Council of Justice, as well as for strict
timelines for some of its procedures.

With regard to
the evaluation of judges, the process of assessing judges’ performance during
the period 2005-06 was completed in January and the evaluation for 2007-09 has
begun. The evaluation criteria need to take better account of the workload of
judges at all levels. Some steps were taken towards increasing transparency in
the appointment, promotion and transfer of judges. Additional measures are
nevertheless required to ensure that these procedures are clearly based on
applicants’ merits and other objective criteria. In January, a working group
was set up to review these procedures.

The amendments
to the Law on the School of Magistrates define more closely the selection
criteria for the appointment of the School’s director, governing board and
academic staff and curtail the powers of the High Council in the appointment
process. Under transitional provisions, the present incumbents should lose
their positions at the end of the current academic year if their respective
profiles are not considered to be in compliance with the new criteria. The
students’ admission process has been suspended until the 2015-16 academic year.

The unified
electronic case management system ICMIS, ensuring a random and transparent
allocation of cases to judges, is not yet used by the Tirana district and
appeal courts, the Serious Crimes Court, the Serious Crimes Court of Appeal and
the newly established administrative courts. As a result, the overwhelming
majority of cases are still allocated by a lottery system under the control of
the respective court presidents. This system should be phased out. Moreover,
audio recording, currently used in a significant number of courts, should be
further extended.

Some measures
have been taken regarding the High Court’s role in unifying jurisprudence, including
two decisions clarifying the competences of civil and administrative courts.
Full harmonisation and unification of jurisprudence still need to be ensured.
Court rulings are not systematically published; when they are published, the
relevant reasoning is not always provided and deadlines are not always
respected. Court rulings should be made available to all practitioners and the
general public through a searchable database, with their reasoning and within a
reasonable deadline. They should also comply with the recommendations of the
Commissioner for Data Protection. The electronic database at the Judicial
Documentation Centre needs to be updated.

In
relation to accountability in the judiciary, the memorandum of
understanding between the Ministry of Justice and the High Council of Justice
continued to be implemented smoothly. However, the risk of
overlapping inspections remains. The Minister of Justice remains solely
responsible for opening disciplinary proceedings, which runs contrary to EU
standards. Since October 2013, the minister initiated proceedings against 20
judges. As a result, to date, the High Council of Justice has dismissed 2
judges, transferred another judge to a court of a lower level for 2 years, and
issued a warning to 8 judges, as well as a reprimand to 2 others. The
disciplinary system for magistrates needs to be substantially improved,
including through a more transparent and efficient inspection system. The
Minister of Justice’s role in this process also needs to be reviewed and a track
record of sanctions established.

The
General Prosecutor has issued warnings to 4 prosecutors and assigned another
prosecutor to less import duties; disciplinary proceedings are ongoing against
one prosecutor. The lack of accountability of the General Prosecutor’s Office
remains of concern. Procedures for the appointment and dismissal of key
personnel in this office should be transparent and impartial, and the role of
the Council of Prosecutors reinforced.

Allegations of
corruption within the justice system remain a serious concern.
Recommendations of the GRECO June evaluation report on corruption prevention in
respect of judges and prosecutors should be implemented. The High Council of
Justice dismissed one judge in July and suspended another judge pending a final
ruling on corruption-related charges. The new amendments to the Code of
Criminal Procedure introduce procedures regulating the lifting of immunity. The
High Council of Justice can authorise the deprivation of liberty of judges and
personal or house searches at the request of the prosecution, while for the
judges of the High and Constitutional Courts it is the General Prosecutor who
must request that the High Court authorise the lifting of immunity. Under the
amendments to the Law on the High Council of Justice, members of the Council
have to convene within 24 hours to decide on the prosecution’s request for
arrest and search. Corruption cases for ordinary judges and prosecutors are to
be handled by the Serious Crimes Court, while such cases for members of the
High and Constitutional Courts remain under the jurisdiction of the High Court.
These procedures must ensure in practice the full accountability of judges and
prosecutors under criminal law.

Magistrates
still do not have adequate working and security conditions. Protection for
judges against threats and pressure remains inadequate. Hearings continue to be
held on occasion in judge’s offices, which allows for the exercise of undue
influence.

As regards the efficiency
of the judiciary, the 2012 territorial reorganisation of courts has not yet
been fully implemented. In particular, the process of adjusting the number of
judges assigned to each court remains to be completed. To cope with the growing
workload in prosecution offices and the courts and to address disruptions
caused by lack of judges in some courts, the resources available need to be
reviewed and increased.

Following the
March decision of the Constitutional Court declaring unconstitutional the 2013
Law on Judicial Administration, provisions to regulate the work of courts and
their staff are needed. Under current legislation, chief court clerks have only
limited managerial responsibilities, while court presidents carry out a
significant number of administrative tasks; this undermines the efficiency of
the court system. There is still no accurate address registry guaranteeing that
parties and witnesses are duly informed of court proceedings, although
e-notification is increasing.

The IT
centralised database, which has been installed in prosecutors’ offices in
Tirana, needs to be extended across the country so as to improve the
transparency and efficiency of the prosecution’s case-handling system.

The budget for
the overall justice sector was higher (+7.2 %) than in 2013 and amounted
to € 82.5 million, which represents 0.83 % of GDP and 2.48 % of
the state budget. It covers the Ministry of Justice (+1.5 %), the General
Prosecution Office (+22 %), the Office for the Administration of the Judicial
Budget (+19 %), the School of Magistrates (+6 %), the High Council of
Justice (+17.8 %) and the Constitutional Court (+12.4 %).

Implementation
of the 2012 Law on Administrative Courts began in November. Six administrative
courts, the Administrative Court of Appeal and the Administrative College of
the High Court were set up. Nevertheless, with the exception of Tirana, these
courts operate with only 50 % of their allocated staff numbers, and judges
are seconded from other courts to meet panel requirements. A number of premises
need to be allocated or improved and legal assistants have yet to be appointed
in line with the procedures laid down in the July amendments to the law. Nine
vacancies for judges have not yet been filled. In this respect, an
incentive-oriented recruitment process should be put in place to counter the
lack of participation to date in the admission test. Most of the courts’
current workload is made up of cases on the dismissal of public servants and
property disputes; the impact of establishing administrative courts on ensuring
better and specialised legal protection in all cases involving state action and
responsibility needs to be evaluated.

Draft amendments
to the Codes of Civil and Criminal Procedure that have been assessed by the
Venice Commission are expected, once adopted, to reduce the workload of courts
and thereby increase their efficiency. These include allowing judges to impose
fines on lawyers who are repeatedly absent in civil and criminal judicial
hearings, and limiting the types of cases that can be filed to the High Court.
Further measures are necessary to rationalise the High Court’s procedures and
reduce its significant current backlog, including through modifying the
composition of panels reviewing criminal cases; the High Court needs to be
transformed into a cassation court. The impact of the 2012 provisions enabling
the disciplinary committee of the Chamber of Lawyers to penalise lawyers for
contempt of court and misconduct is still to be assessed. The backlog of cases
has increased by 7 % (32 972 cases pending before district and appeal
courts in January 2013, as compared to 30 972 cases in January 2012) and
remains an issue of concern. A school for lawyers, providing for one-year
compulsory education following university level law studies, was set up in
September 2013 by the Chamber of Lawyers. The School of Magistrates continues
to face problems due to limited budgetary resources, despite a 6 %
increase in its annual budget compared to 2013. The School of Magistrates has
taken steps to introduce good quality curricula; the overall level of training
provided still needs to be assessed.

In May, the
government submitted an action plan to the Council of Europe’s Committee of
Ministers. This aims to create, by June 2015, an effective mechanism to enforce
decisions on restitution of, or compensation for, property nationalised during
the communist regime. The government has also approved decisions implementing
European Court of Human Rights judgments in property cases, providing for
financial compensation to four out of six remaining individual applicants.
Enforcement of national courts’ decisions, in particular those involving state
institutions, remains slow and continues to undermine legal certainty.

Since March, the
functioning of the private bailiff system has been adversely affected by
changes in the regulatory framework governing working practices, tariffs, fees
and fiscal obligations. Regional offices have been closed down and there has
been a considerable reduction in the demand for private bailiff enforcement.
Moreover, an effective system for monitoring both private and public bailiffs
is still not in place. Data gathering capacity needs to be strengthened. The ‘ALBIS’
bailiff case management system is not yet linked to the system used by the
courts.

Regarding the
implementation of the Law on Mediation, there are 285 individuals (as well as 2
legal entities) with mediator licences, as opposed to 141 in 2013. A code of
ethics for mediators was approved in December. Further work is still needed on
promoting alternative dispute-resolution methods. A draft law on arbitration
remains under consideration.

National courts
have completed their examination of the ‘Gërdec’ case but the complainants have
lodged an application at the European Court of Human Rights. The case related to
the events of 21 January 2011 is pending at the High Court.

As regards access
to justice, the functioning of the State Commission for Legal Aid should be
improved and recent provisions on Legal Aid providing for the establishment of
regional legal aid offices implemented. Judicial fees deter many citizens and
application procedures are too cumbersome. Free legal aid continues to be
provided mainly by non-governmental organisations with donor funding.

Anti-corruption policy

In November, the
Minister of State for Local Government was appointed as the National
Anti-Corruption Coordinator and a network of anti-corruption focal points was
established in all line ministries. The administrative and budgetary capacity
of the coordinator’s office needs to be increased, and the new structures have
yet to show their effectiveness. The assessment of the overall set-up of the
institutions involved in the prevention of and fight against corruption is yet
to be finalised. The 2014-20 anti-corruption strategy remains to be adopted,
together with related action plans, impact indicators, budget allocation and a
coordination and oversight mechanism. Reporting, policy coordination and
monitoring at central level need to be improved.

As regards the
legal anti-corruption framework, in March, amendments to the Criminal Procedure
Code transferred the jurisdiction of cases involving active and
passive corruption by judges, prosecutors, justice officials, high-level state
officials and locally elected representatives to the
Serious Crimes Prosecution Office and the Serious Crimes Court. The Anti-Mafia
Law was amended in March, extending the seizure or confiscation of illicit
assets deriving from corruption offences to all crimes that fall under the new
competences of the Serious Crimes Court. The Law on the
State Police was amended in September, to provide for the creation of a
National Bureau of Investigation, tasked with investigating corruption-related
offences. Appropriate
training for Serious Crimes Court judges and prosecutors needs to be provided. In
March, the Criminal Procedure Code was also amended to clarify the procedure
for lifting the immunity for high level public officials and judges from
searches of their house and person, and from arrest. Amendments to the laws on
asset declaration and conflict of interest were adopted in May. The revised law
extends the number and frequency of checks by the High Inspectorate for
Declaration and Audit of Assets and Prevention of Conflict of Interest
(HIDAACI) and requires public officials to deposit assets exceeding € 10 700
in a bank. The submission of false information was made a criminal offence,
although sanctions have so far not been a deterrent. New legislation on
protection for whistle-blowers is yet to be adopted. The new law on access to
information has been adopted in September. Unified rules and procedures for
handling public complaints are being finalised.

The number of
investigations of cases of active and passive corruption, including corruption
by public officials, has increased. The number of corruption cases referred to
the prosecution by the State Police increased by 33 % in the period from
October 2013 to June 2014, compared to the same period in the previous year.
Convictions by District Courts decreased by 5 % in the same period, while
convictions by appeal courts increased by 23 %. Six corruption
investigations within the judicial system are ongoing. Regarding high state and
locally elected officials, five cases involving 25 defendants are pending
before the court and four cases are being investigated for abuse of office and
other related allegations. However, investigations continue to be reactive,
rather than proactive, and the number of final convictions remains low at all
levels.

In July, the
General Prosecutor launched the pilot phase of a new case management system.
More work is needed to increase the efficiency of investigations and make these
more proactive, including for financial and high-level corruption
investigations, corruption in the judicial system, conflicts of interest and
asset declaration fraud. A number of legal obstacles to efficient
investigations remain, such as provisions related to interceptions and
surveillance, time limits for investigations, lack of registers for bank
accounts and telephone subscribers, and issues of admissibility of evidence
before a court. The current legal framework should include provisions that
allow the State Police to obtain information for investigative purposes from
public institutions and private bodies delivering public services, and allowing
for deterrent sanctions in case of non-compliance. In line with Article 20 of
the United Nations’ Convention Against Corruption, Albania should consider
criminalising inexplicable wealth. The capacity for investigation in law enforcement
agencies needs to be increased, and risk assessments should be carried out
systematically. Sufficient resources, training and specialised staff need to be
provided to improve efficiency of investigations and to develop a convincing
track record of investigations, prosecutions and convictions at all levels. The
quality of corruption statistics needs to be improved.

Regarding
internal control mechanisms, inspections carried out by the Internal Control
and Anti-Corruption Unit have continued. However, there is a need to
substantially increase capacity in this area. Cases involving abuse of office
or public tenders referred by the High State Audit have led to very few
investigations and no convictions. Internal control by the Ministry of Interior
needs to be strengthened. It should be ensured that the external audit
performed by the High State Audit applies to all state institutions equally.
Internal audit processes in the public administration need to be strengthened.

Regarding
interinstitutional cooperation, monthly meetings began in May, chaired by the
General Prosecutor and the director general of the police, to improve proactive
investigations. An assessment of the implementation of existing
interinstitutional memoranda of understanding (MoUs) was completed. The MoU
between the HIDAACI and the High Council of Justice is still pending.
Interinstitutional communication, cooperation and coordination need to be
improved and further work is needed on sanctioning processes if MoUs are not
complied with. The digitalisation of information provided by the Immovable
Property Registration Office has not yet been completed.

The HIDAACI
detected an increasing number of cases of suspicious asset declarations.
However, the overall number of investigations and cases referred for
prosecution remains low. The HIDAACI’s audit capacity needs to be significantly
improved and the number of inspectors increased. It would be advisable for the
HIDAACI to do both full audits of assets disclosure and checks based on
suspicion of unjustified enrichment. Deterrent sanctions should be applied,
including confiscation of unjustified enrichment and criminal or disciplinary
sanctions. In a step towards increased transparency, the HIDAACI published the
asset declarations for senior officials for 2012-13.

In February, the
Inspector General of the HIDAACI was replaced and in May the procedure for the
nomination of the Inspector General was modified. The institution remains at
high risk of political and other undue influence, and its independence and
accountability need to be strengthened in view of its significant potential
contribution to strengthening the prevention of and fight against corruption.
Regarding conflicts of interest and asset declarations, the Council of Europe’s
Group of States against corruption stated in its fourth evaluation round report
that regulations remain highly complex, and that legal certainty has been
undermined by frequent amendments, which are often subject to contradictory
interpretation.

The use of
proactive investigations and risk assessment in the tax and customs services
needs to be increased. Reports of corruption in the tax administration,
especially in Tirana, remain an issue of concern. The administrative capacity
in the tax office’s internal audit service needs to be increased.

Regarding
political party funding, the audit processes provided for in the legislation
have yet to be effectively implemented. The Central Election Commission needs
to launch substantial inspections, going beyond a purely formal approach
towards checking the statements of political parties, and establish internally
clear responsibilities for oversight of party finances. The vacancies on the
commission’s board should be filled to allow the institution to exercise its
normal supervisory and monitoring functions.

Inspections
of higher education establishments continued. The 2014-20 anti-corruption
strategy foresees the development and pilot implementation of an
anti-corruption module in high school curricula. An anti-corruption monitoring
unit was established in the Ministry of Health as a focal point for corruption
complaints in the health sector. However, corruption in educational
establishments and the health sector remains of great concern. The lack of
transparency in the way property rights agencies work remains a problem. The
National General Inspectorate does not function properly. The participation of
civil society organisations and their monitoring role in the fight against
corruption need to be strengthened. The planned National Consultative Forum to
coordinate anti-corruption policies, with participation by civil society
organisation, has not yet been established. Overall, institutions involved in
the fight against corruption remain vulnerable to political pressure and other
undue influence. Corruption remains prevalent in many areas, including the
judiciary, and remains a particularly serious problem.

Fundamental rights

Regarding international
human rights instruments, Albania adopted the Sixteenth Protocol to the
Council of Europe Convention for the Protection of Fundamental Human Rights and
Freedoms. Although Albania has ratified most international human rights
conventions, further action is needed to ensure their
implementation.

Delays continued
in the application of judgments of the European Court of Human Rights,
with particular regard to property rights, judicial proceedings, the right to a
fair trial and inadequate medical care in custody. In 2013, the court delivered
eight judgments on nine applications, four of which found at least one
violation by Albania of the European Convention on Human Rights. A total of 70
applications have been submitted to the Court since September 2013. The total
number of pending applications decreased to 359.

In the area of prevention
of torture and ill-treatment, the national mechanism for the prevention of
torture at the Ombudsman’s Office has been fully staffed. It conducted 27
inspections and received 29 complaints, of which 15 were resolved in favour of
the plaintiff. In 2013, prosecution requests were filed against 13 police
officers; of these, the prosecution considered two cases to be torture. This
represents a 60 % decrease in torture cases compared to 2012 and an
increase of more than 60 % of legal actions against police officials. Out
of 79 Ombudsman’s recommendations relating to the prevention of torture and
ill-treatment, and detention standards, 36 recommendations were addressed by
prisons and the State Police.

Preparations
have begun for the establishment of a medical institute for the treatment of
detainees with mental illnesses. Concerns remain over the lack of appropriate
health care services for people with mental illnesses. Community-based mental
health services need to be further developed.

As regards the right
to life, the blood feud phenomenon is still prevalent in the north of
Albania. Certain cases have been reported also in the Tirana region, mainly due
to rural migration. Figures on the number of victims of blood feuds as well as
of families affected vary widely. Numbers seem to be stabilising, though,
rather than increasing. While it is key to develop a homogenous and reliable
database to keep track of the cases and families concerned, it is even more
important that the rule of law is strengthened to ensure this phenomenon is
eradicated. This would also put a stop to the fraudulent use of blood feud as
an argument for unfounded asylum claims in member states.

As regards the prison
system, the total number of offenders in the probation service rose from
700 in 2009, when the service was established, to about 11300 in March 2014.
The number of staff increased from 104 to 134 employees. Since February, there
have been local probation offices in all 22 judicial districts. An electronic
monitoring system, as an alternative to custody, is not yet operational.

Most
of the recommendations issued by the Ombudsman and civil society organisations
on prisons were addressed. The new pre-detention centres and prisons in Berat
and Fier have not been opened yet; construction works at the prison in Shkodra
are progressing. The full functioning of the new facilities is essential, as
overcrowding remains a major problem. Poor infrastructure and problems with
maintenance of recently built infrastructure persist. Issues of privacy and
lack of confidentiality for sentenced inmates’ conversations need to be
addressed. Inmates continue to depend on food, equipment and medicines from
their families. The legal framework for employment scheme payments needs to be
improved. Anti-corruption measures and the internal audit system need to be
strengthened. The high turnover of prison staff and prison police staff limited
the effectiveness of training.

In the area of freedom
of expression, the implementation of the Law on Audiovisual Media has been
slow, mainly due to the lack of political agreement on filling the vacancies in
the media regulatory authority, the Audiovisual Media Authority. There have
been no reported cases of defamation lawsuits by politicians against
journalists and media outlets. Further action is needed to ensure the proper
implementation of amendments on defamation and guidelines on setting damages at
a reasonable level, in particular through training for the judiciary. The
subscription fee collection system and editorial independence of the public
service broadcaster need to be improved. The broadcaster’s steering committee
has not yet been elected and the preparations for drafting its statute have
been slow.

Two cases of
violence against journalists have been reported since October 2013, which
remains a concern. The lack of transparency of media financing remains a major
challenge. The media continued to be used as a tool to promote
political and private economic interests. Further action
is needed to ensure the proper enforcement of labour rights, especially media
staff’s right to be covered by a formal employment contract. Protection from
arbitrary dismissal needs to be provided for journalists to prevent
self-censorship. The journalists’ trade union has
intensified its efforts to protect their labour rights, but its capacity
remains weak. Professional and ethical standards in journalism need to be
strengthened. New rules on public complaints against the media have been set by
the Law on Audiovisual Media, but further action is needed to ensure their
implementation and to establish bodies and initiatives that address
reader/viewer complaints effectively.

Freedom of
assembly and association has generally been respected. In
November, peaceful protests were held across the country against the potential
destruction of the Syrian regime’s chemical weapons on Albanian
soil.

Freedom of
thought, conscience and religion was generally respected and
religious tolerance prevailed.

As regards women’s
rights and gender equality, an online system to report and monitor cases of
gender violence was launched in July and made operational in 29 out of 61
municipalities. The number of reported serious offences and cases of domestic
violence against women increased. The national shelter for victims of domestic
violence has treated 132 cases of domestic violence since September. It
improved its cooperation with the employment office and provided training to
victims. However, the shelter continues to apply unnecessarily restrictive
criteria for admission. A free 24-hour national helpline for victims of
domestic violence is yet to be established. The referral mechanism for domestic
violence has been established in just 24 municipalities and is operational in
very few of those. Coordination between local and central government needs to
be significantly improved and structures that are lacking need to be set up.
Further work is needed to remove the remaining gender-discriminatory provisions
in legislative acts, and to tackle gender bias in court decisions and law
enforcement institutions.

Coordinators on
gender issues were appointed in all line ministries. Female representation in
the new government increased, with six female ministers out of 19. With the
change of government in 2013, the number of female MPs increased slightly to 17 %.
However, political parties failed to respect the 30 % gender quota
requirement in candidate lists. Overall, women remain underrepresented in
public office. Gender provisions in the Electoral Code need to be strengthened
further and a more enabling environment created for women to advance in
political and public positions.

In
the area of children’s rights, the parliamentary committee on minors,
domestic violence and gender equality, in cooperation with civil society
organisations, adopted a children’s rights resolution with general principles
and objectives, and a one-year action plan. Regular hearings on children’s
rights were held with civil society organisations. Civil society organisations
provided training for child protection units (CPUs). The number of CPUs rose to
189; however, many children in rural areas still lack access to CPUs. Of the
189 CPU specialists, only 31 worked full-time in child protection, while the
others were primarily social services workers covering a wider range of issues.
There is no framework for monitoring CPUs and coordination at local level
remains poor. In April, a new director of the state agency for children’s
rights was appointed. However, the child protection system continues to lack
sufficient budgetary means, staff continuity and minimum standards of
operation. Further action is needed to ensure its effective functioning, make
it more accessible to children and raise public awareness. The national child
helpline is still run by a non-governmental organisation with donor funding.
Further work is needed on deinstitutionalisation, expanding foster care and
ensuring special
protection for children in residential institutions. The emigration
of unaccompanied minors from Albania to the EU remains a matter of concern. An
in-depth analysis of the push factors for emigration by unaccompanied minors
towards the EU is needed. Cases of children confined to their homes for fear of
retribution in blood feud conflicts persist. No measures have been
taken to provide specialised services to sexually abused children and protect
them from violations of personal data protection by the media.

As
regards juvenile justice, education programmes were put in place for
detainees in the juvenile correctional institution in Kavaja. The strategy and
action plan on juvenile justice have yet to be adopted. There are still no
specific chambers in police stations for children under 14 and the assistance
of a psychologist is not provided during interrogations that take place in the
evenings, at weekends and on public holidays. Juveniles are still being
detained longer than provided for in the Criminal Procedure Code’s provisions
on detention and pre-trial detention for minor offences. Cases of ill-treatment
of juveniles in detention were frequently reported, and one investigation was
launched against a prison police official for torture. A lack of coordination
persists between the justice and protection systems for juveniles coming out of
the justice system, who need support to reintegrate into society.

Regarding
child labour, the number of children, mainly Roma and
Egyptians, who were working or begging in the streets and who were subjected to
the worst forms of exploitation and extreme marginalisation remained very high.
An
action plan to address the situation of children living and/or working in the
street was prepared, but has yet to be adopted. The Ministry of Social Welfare
and the Ministry of the Interior have set up a task force to address the
situation of children living in the street, which is, however, not yet
operational. The
results of the 2010 national child labour survey have not been updated; statistics
in this field remain very poor and rely on data from civil society
organisations. The use of children to cultivate and harvest cannabis is an
issue of serious concern. Some measures have been taken to prevent child
trafficking with the introduction of mandatory notarised declarations for
children exiting the country in the presence of only one of their parents.
However, Albania remains a source country for trafficked children and forced
child labour.

As
regards socially vulnerable and/or persons with disabilities, the
framework law on inclusion of and accessibility for people with disabilities
was adopted in July, covering all groups of people with disabilities. In
December, an inter-ministerial working group was set up to look at the
implementation of accessibility guidelines and legislation in state
institutions, at central and local levels. The appointment of a wheelchair user
as deputy minister was a step towards promoting the rights of people with
disabilities. Some steps were taken towards the recognition of the Albanian
sign language as an official language for deaf people. Training was provided to
teachers in schools and kindergartens in order to promote the inclusion of
children with disabilities. However, according to a recent study conducted by a
civil society organisation, 64 % of children with disabilities do not
attend schools. People with disabilities continue to face difficulties in
accessing education, employment, healthcare, social services and
decision-making.

In
the area of anti-discrimination policies, the Commissioner for
Protection against Discrimination imposed three fines on public institutions in
2013. Complaint procedures and the commissioner’s role in court proceedings
need to be further clarified. Solid anti-discrimination case-law has not yet
been established and the implementation of the law on protection against
discrimination needs to be improved. Outreach work and awareness-raising
carried out by the commissioner resulted in an increase in complaints in 2013
and should be continued.

As
regards the rights of lesbian, gay, bisexual, transgender and intersex
(LGBTI) persons, cooperation between the state authorities and civil
society organisations on this issue improved. The International Day Against
Homophobia was celebrated in May by Tirana’s third pride parade and a number of
other activities throughout the country. There were no cases of homophobic
speech by politicians or state officials. Draft amendments to revise the family
code and provide legal recognition of the cohabitation of same-sex couples
remains to be adopted. An inter-ministerial working group to ensure
implementation of the action plan on the rights of LGBTI people has
still not been set up and public awareness of LGBTI rights remains very low.

Labour
and trade union rights are generally respected. The new
National Labour Council held its first meeting in December and met again in
April and June. The council is comprised of seven representatives of the
Council of Ministers as well as 10 representatives from each employer’s and
employee’s organisations. However, two-way social dialogue remains to be
improved and social partners’ autonomy needs to be increased. Until the revised
labour code is adopted, several gaps remain regarding the conformity with
international labour standards.

Reform of property
rights is a cross-cutting issue for consolidating the rule of law and for
fostering investment and economic development. The 2012 property reform
strategy and related action plan need to be reviewed to ensure that they remain
coherent and sustainable in terms of targets and sources of funding. The
government communicated its action plan for the establishment of an effective
compensation mechanism, enforcing the judgments of the European Court of Human
Rights (ECtHR) on property rights. The government approved four decisions for
the execution of ECtHR judgments, providing for financial compensation to claimants.
The electronic immovable property registration system has been extended to a
total of 10 branches of the Immovable Property Registration Office. The
Property Restitution and Compensation Agency’s (PRCA) mandate and the deadline
for finalising property restitution and compensation were both extended by one
year to deal with some 8 000 pending claims from former owners of property
confiscated during the communist regime. PRCA established a new electronic
register identifying all decisions issued since its establishment and listing
them in chronological order in view of facilitating its work and ensuring
effective remedies. The resolution of claims for restitution or compensation by
former owners needs to be speeded up. Working groups were set up to examine
legislative changes, identification of compensation mechanisms and estimation
of financial costs, and the setting up of an inventory of available state
assets and property with which to physically compensate owners whose property
was expropriated. However, the restitution and compensation framework should be
reviewed with the aim of creating a realistic, transparent and sustainable
framework for compensation. Amendments to the Legalisation Law were adopted in
May to facilitate the process by reducing fees and administrative procedures,
and setting out legal solutions to problematic cases. The deadline for
registering properties constructed before January 2009 was extended, and
discounts made available to citizens paying the registration fee. Very few measures
have been taken to finalise the first registration of properties in order to
ensure certainty of ownership. Cooperation on policymaking and legislation
between institutions has improved, but overall it needs to be strengthened and
responsibility for the sector among different ministries and agencies to be
clarified. Significant efforts continued to be devoted to the digitalisation of
information held by the Immovable Property Registration Office, but
coordination with databases of other public institutions is still lacking. No
steps have been taken to integrate the electronic land and property databases.
Further action is needed to prevent the eviction of vulnerable groups as a
result of implementing the normative act on the restitution of buildings to their
former owners, so that the right to housing for vulnerable people is also taken
into consideration.

As
regards the respect for and protection of minorities, inter-ethnic
relations remained good. A working group has been set up to
evaluate the existing legal and policy framework and to prepare and adopt
improvements to the legislation on minorities. Adopting comprehensive
legislation would help to address legal gaps that have been identified and
clarify state policies towards minorities. This
legislation should follow a broad consultation process, and take into
account the February 2014 Resolution by the Committee of Ministers of the
Council of Europe on the implementation of the Framework Convention for the
Protection of National Minorities. Steps need to be taken to abolish any
grounds for different treatment between national and ethno-linguistic
minorities, and ensure equal access in practice to rights for people
from all minorities.

The
implementation of policies on Roma inclusion remains inadequate overall,
including implementation of the operational conclusions from the December 2011
seminar on the inclusion of Roma and Egyptian communities. A second seminar on
Roma and Egyptian inclusion took place in February, whose operational
conclusions should feed into formulating Albania’s further Roma policy. Roma
families evicted from their settlements in August 2013 were transferred to a
transition centre, which was quickly set up, in October. A sustainable
long-term housing solution for these evicted people has not yet been
identified. Roma and Egyptian people continue to face very difficult living
conditions and frequent social exclusion and discrimination, particularly
regarding access to health care, social protection, education, employment and
housing. The new law on property legalisation was adopted in May without prior
consultation with relevant stakeholders and has increased the risk of further
evictions of Roma families from their informal settlements, which remain a
particular concern. As local government units do not have sufficient budget and
administrative capacity for Roma and Egyptian inclusion policies, cooperation
between central and local government should be improved. Data collection on
Roma and Egyptian people needs to be improved, and data should be analysed and
used effectively to define policy and actions at state and local levels.

As
regards cultural rights, the use of and access to education in minority
languages needs to be increased. Albania has not yet adopted the
European Charter for regional and minority languages.

In
the area of protection of personal data, the number of complaints
submitted to the Commissioner for Data Protection slightly increased,
from 22 in 2012 to 26 in 2013. Most of the cases are related to the use of
personal data by public institutions during last year’s electoral campaign. The
commissioner approved the 2014-17 strategy and action plan on personal data
protection, and new guidelines for the use of video surveillance by private
agencies. The freephone number for citizens’ complaints is operational. The
commissioner’s cooperation with relevant institutions, such as the Prosecution
Office and the National Authority for Electronic and Mail Communication, has
improved. The number of inspections and awareness-raising activities continued
to increase. The
new law on access to information transferring responsibility for related
complaints to the commissioner has been adopted in September. Capacity
in the commissioner’s office needs to be strengthened accordingly. The commissioner
is still not listed among the institutions to be consulted when legislative
proposals are being drafted. Data protection requirements have to be ensured
when developing IT systems in the public administration. The right to personal
data protection is frequently violated by the media, while the publication of
court decisions is not always in line with data protection requirements.

Conclusion

Overall,
Albania has made some progress in the area of judiciary and fundamental rights.

As
regards the judiciary, some progress can be reported. The functioning of the
judicial system continues, nevertheless, to be affected by politicisation,
limited accountability, poor interinstitutional cooperation, insufficient
resources and backlogs. The disciplinary system for magistrates needs to be
substantially reinforced. Corruption in the judiciary remains a concern. Over
the next year, Albania will need to vigorously pursue judicial reform, through constructive
cooperation with all stakeholders and continued engagement with the Venice
Commission, the approval of provisions replacing the repealed Law on Judicial
Administration, the phasing out of the system allocating
cases to judges by court presidents, and the adoption of constitutional
amendments and legislation to ensure the independence, accountability and
efficiency of the justice system.

There
has been some progress in the area of anti-corruption; however corruption
remains a serious concern in many areas. Albania will
have to intensify its anti-corruption efforts, adopt the anti-corruption
strategy and action plans, enforce the amended legislative framework, and
strengthen cooperation between law enforcement agencies. It will also need to
remove obstacles to conduct proactive, efficient investigations of inexplicable
wealth and corruption-related offences, including via the effective use of
financial investigations, leading to a credible and solid track record of
prosecutions and final convictions in corruption cases, notably at high levels.

In
the area of fundamental rights, some progress has been made. Over the next
year, Albania will need to implement the operational conclusions of the second
seminar on Roma and Egyptian inclusion, prevent the forced evictions of
vulnerable groups and identify a sustainable long-term housing solution. The
preparation of comprehensive legislation on minorities should follow a broad
consultation process. The protection of women against all forms of violence
needs to be considerably strengthened. Regarding children’s rights, Albania
should allocate concrete budget lines for the child protection system, and
focus on guaranteeing staff continuity and minimum standards of operation.
Albania will also need to review the 2012 property reform strategy and ensure
the protection of property rights, by developing technical standards of legal
ownership that end conflictual or unclear cases.

4.24. 
Chapter 24: Justice, freedom and security

In
the area of migration policy, implementing legislation was introduced
regarding the issue of residence and work permits to foreign citizens.
Implementation of the readmission agreement continued smoothly. During 2013, 11 946
refusals of entry of Albanian citizens to the Schengen area were recorded.
Agreements for exchanging information on asylum and migration have been signed
with Austria and the UK. Reception capacity close to the border needs to be
increased, as do the technical and financial resources of the Border and
Migration Police, in order to address the growing irregular migration flow to
Albania. Work on preparing a new national migration strategy has not started
yet. Further action is needed to ensure the effective implementation of the
strategy and action plan for returned migrants.

A new law on asylum
was adopted in September 2014. By July, Albania had granted asylum to 286
people, mainly from Iran and Syria, with 250 applications pending.
Interpretation services were provided with state budget funds, but sufficiently
qualified interpreters are lacking. However, Albania’s reception system needs
to be strengthened to cope with the increasing number of asylum-seekers. Access
to the asylum procedure is not always possible. The conditions for the issuance
of ID and travel documents to refugees and persons granted complementary
protection have been completed, but no such documents have been issued yet. The
pre-screening process at borders needs to be strengthened to provide access to
effective international protection to asylum-seekers. To date, Albania has no
specialised structures for collecting country of origin information. Procedures
to determine international protection status, including access
to legal assistance and representation, need to be further improved.

As regards visa
policy, Albania is yet to align its legislation with the EU positive and
negative lists. The visa-free travel regime between Albania and the EU
continued unhindered, but irregular migration flows from Albania increased
considerably in 2013. The number of asylum applicants from Albania grew by 47 %
between 2012 and 2013, the second highest figure in the region. An increasing
trend of asylum requests lodged by Albanian nationals was reported in a number
of EU Member States and Schengen associated countries. Albania must take
immediate action in the framework of the post-visa liberalisation monitoring
mechanism to address asylum abuse through closer operational cooperation and
information exchange with EU Member States, carrying out investigations of
facilitators of irregular migration, more effective border controls,
information campaigns for travellers and, most importantly, by providing
sustainable assistance for minority communities. Efforts in these areas need to
continue systematically and through proper allocation of resources.

In the area of external
borders and Schengen, the joint police cooperation centres, established
at the border points with Kosovo and the former Yugoslav Republic of Macedonia,
are fully operational, and a police cooperation centre with Montenegro is
currently being set up in Muriqan. Their activities include the exchange of
statistical reports, risk analysis, cases of drugs and forged documents, and
information on vehicles and people. Practical cooperation with Frontex in joint
risk analysis is consolidated and the first ever Frontex joint return operation
under the method of self-collection was organised with the cooperation of the
Albanian authorities in May. In October 2013, a readmission agreement was
signed with the Republic of Moldova. A new integrated border management
strategy and an action plan covering 2014-20 were approved. Cooperation and
coordination among the institutions involved in managing the blue border has
improved through the work of the Interinstitutional Maritime Operations Centre.
Connection to the MEMEX criminal intelligence information system and to the
civil registry system has been ensured. Maritime surveillance, monitoring,
identification and communication systems have improved, and are now fully
operational, with the radar and communication surveillance systems covering the
entire blue border area. IMOC risk assessments began taking into account the
expiry of the speedboat ban by increasing maritime surveillance coverage. IMOC’s
operational capacity and the financial and technical sustainability of its
surveillance systems still need to be ensured through appropriate planning of
budgetary resources.

In the area of judicial
cooperation in civil and criminal matters, the Fourth Additional Protocol
to the European Convention on Extradition entered into force in June. Albania
has adopted three agreements with Kosovo on mutual legal assistance,
extradition and transfer of convicted persons. In view of concluding a
cooperation agreement, Eurojust has been assessing the level of data protection
in Albania from a legal and administrative point of view.

In the field of police
cooperation and the fight against organised crime there has been some
progress. Cooperation between the Albanian police and the prosecutor’s office
with EU Member States continued, leading to good results. However, law enforcement
institutions need to step up coordination and information exchange to maximise
their capacity to investigate serious and organised crime. Continuous
specialised joint training activities involving police officers, prosecutors
and judges remain necessary. Albania needs to develop and introduce strategic
threat assessments relating to organised crime in its territory, in close
cooperation with Europol. There is a need to improve proactive and
intelligence-led investigations. There is no systematic use of special
investigative techniques and financial investigations.

Key legislation
was adopted, covering police organisation and the control of firearms. The new
Law on the State Police provides for the creation of a National Bureau of
Investigation, tasked with investigating organised crime and high-level
corruption cases. The Albanian State Police (ASP) budget increased by 10 %
compared to the previous year. Since October, several organisational changes
were introduced, resulting in significant staff turnover. Internal control
standards to fight corruption and mismanagement should be further improved. The
new Law on the Service for Complaints and Internal Affairs in the Ministry of
Interior should be fully implemented and external and independent oversight of
the police activities should be provided.

Amendments
to the Criminal Procedure Code, enacted in July, introduced prison sentences of
up to twenty years for persons who possess or transport explosives for criminal
purposes. Measures have been taken to improve the quality of asset
investigations through increased monitoring and special analysis conducted by
the police and the serious crimes prosecution office. In April, the joint
investigation units in Tirana, Vlora and Durres were provided with additional
prosecutors. However, the efficiency of investigations is often jeopardised by
frequent changes of responsible judicial police officers. Further work is
needed on improving cooperation between the police and prosecutor’s office
during investigations. Internal procedures and methods relating to collecting
evidence and telecommunications interceptions need to be improved. The
harmonisation of statistics across institutions on the track record of
investigations, prosecutions and convictions needs to be improved. The capacity
of the forensic laboratory, especially regarding DNA interpretation and the DNA
database, is limited. Evidence collection, reporting, and the use of special
investigative techniques need to be upgraded.

ASP officers
have participated in the European Police College (CEPOL) exchange programme on
the basis of a cooperation agreement. CEPOL has provided expertise for reforms
to police training curricula. In May, an operational agreement with Europol was
ratified, providing for joint operations and exchange of strategic and
operational information, including personal data on known and suspected
criminals. Albania needs to actively implement the agreement and intensify the
exchange of information. There has been progress in implementing the action
plan against the trafficking of stolen vehicles, through participation in
international operations organised by Europol and the South-East European Law
Enforcement Centre.

As
regards the fight against money laundering, the number of investigations
has slightly increased. However, the number of convictions remains low. The
fight against illegal gambling activities intensified. Amendments to the
Anti-Mafia Law are being prepared. Further efforts are needed to ensure the correct
legal interpretation and effective implementation of the legal framework, in
particular on separating the money laundering offence from the predicate
offence and the possibility of using circumstantial evidence. Problems persist
in implementing the Anti-Mafia Law, in particular as regards confiscation of
seized assets. Proactive investigations into inexplicable wealth need to be
stepped up. Interinstitutional cooperation and technical skills in the field of
financial investigations need to be strengthened. A track record of high-level cases
has yet to be developed.

As regards trafficking in human beings, the
2014-16 national strategy for the fight against trafficking is being finalised.
The Office of the National Anti-Trafficking Coordinator (ONATC) was given its
own annual budget for the first time. The national referral mechanism has been
revitalised, with the setting up of a task force and the intensification of
activities on prevention and awareness-raising. Three mobile units were
established in Tirana, Vlora and Elbasan, resulting in increased identification
of victims and potential victims. Regional meetings were held on a regular
basis. Joint inspections by the Labour Inspectorate and the ASP have been
carried out in Tirana to tackle forced labour and internal trafficking. A special
helpline became operational in March. Albania remains a source country for
trafficked adults and minors, including children forced into begging. Internal
trafficking remains a concern and proactive investigations need to be further
stepped up. Analysis capacity should be improved, taking into consideration the
contributions of civil society. The ONATC needs to be further strengthened.
Despite amendments to the Criminal Procedure Code in 2013 to criminalise
internal trafficking of adults, no such cases have been investigated to date.
These amendments do not cover the internal trafficking of minors. A
comprehensive, multidisciplinary and victim-oriented approach to trafficking in
human beings is not yet in place and identification of victims needs to be improved.
Further action is needed to improve the coordination and referral mechanism and
ensure that victims, especially minors, have unhindered access to assistance,
support and protection, including re-integration upon return. It is essential
that work on prevention and addressing the demand for trafficking in human
beings is stepped up. The number of convictions is still very low and no asset
investigations have been undertaken to date. Albania should fully transpose the
standards set up in the Palermo Convention and relevant EU Directives into the
Albanian Criminal Code and Criminal Procedure Code in order to ensure the
efficiency of investigations and the protection and compensation of victims.

As regards the fight against cybercrime, a
working group tasked with drafting a policy document on cybercrime has been set
up. Police and prosecution officials need to receive specialised training. The
number of prosecutions for cybercrime increased, but is still low.

Fighting
organised crime and corruption is fundamental to countering criminal
infiltration of the political, legal and economic systems.

Albania
continued to implement the strategy and action plan on the fight against
terrorism. In July, amendments to the Criminal Code and Criminal Procedure
Code allowed for the imprisonment of up to 15 years of any Albanian citizen
involved in and/or recruiting others to participate in armed conflicts outside
of the Albanian territory. The adoption in October 2013 of a new law on
measures against terrorist financing and of guidelines on rules and procedures
for allowable expenses from the funds and other assets seized from designated
people allowed for further alignment with the international standards set by
the Financial Action Task Force (FATF). However, certain strategic deficiencies
remain, in particular relating to the terrorist asset freezing programme and
the framework for international cooperation to counter terrorist financing.
Albania will need to step up its capacity to prevent radicalisation, including
developing adequate measures to address the phenomenon of foreign fighters.

Regarding cooperation
in the field of drugs, there is good cooperation with the European
Monitoring Centre for Drugs and Drug Addiction. A national action plan to
tackle the cultivation of narcotic plants is under implementation. Compared to
the last reporting period, prosecutions and arrests increased significantly.
There has been a significant increase in the amount of cocaine and marijuana
seized, but a slight decrease in the amount of heroin seized. For the period
September 2013 to July 2014, successful police operations resulted in the
seizure of 61.1 kg of heroin, 23.1 kg of cocaine and 99 tons of marijuana (in
comparison to 61.8 kg of heroin, 3.3 kg of cocaine and 20 tons of marijuana for
the period from September 2012 to July 2013). Security of seized drugs’ storage
and effective destruction procedures need to be ensured. Albania continues to
be used for transit and storage of different types of drugs and remains a
significant producer and exporter of cannabis. More robust action is needed to
effectively address this problem in a sustainable manner. Work needs to be
stepped up and risk assessment and international cooperation need to be
improved.

The authorities
have taken serious steps to fight against the cultivation of cannabis, which
remains a serious concern. A major police operation in the village of Lazarat,
in the southern region of Gjirokastra, resulted in numerous arrests, the
seizure of 65 tons of marijuana and the destruction of over 133 000
cannabis plants. Another major police operation in the Dukagjin area in
Northern Albania resulted in the destruction of 136 000 cannabis plants.
Cooperation with Italian authorities has increased on the mapping of
cultivation areas through aerial surveys. It is crucial that further steps
continue to be taken to eradicate large-scale production of cannabis.

As regards customs
cooperation, the 24-hour digital camera monitoring system is operational.
The number of investigations of customs officials increased compared with
previous years. (see Chapter 29 — Customs union).

For measures
against counterfeiting the euro, see Chapter 32 — Financial control.

Conclusion

Albania
has made further progress in the area of justice, freedom and security, in
particular in border management, judicial cooperation and the fight against
organised crime. Proactive police operations have led to large seizures of
drugs and destruction of cannabis plants. Cooperation between law enforcement
institutions needs to be strengthened to increase the efficiency of
investigations. Adequate budget planning and allocations are essential. The
increased level of unfounded asylum requests from Albanians in EU Member States
is a matter of concern, and measures to combat this will need to be continued
and intensified. Albania will also have to focus on stepping up its efforts in
the fight against trafficking of human beings and in the field of money
laundering, including implementing the Anti-Mafia Law and carrying out
proactive criminal and financial investigations and prosecutions, resulting in
convictions at all levels. Drugs trafficking in general, and the cultivation
and trafficking of cannabis in particular, remains a cause for serious concern.

4.25. 
Chapter 25: Science and research

There
was a very limited increase in the number of entities participating in calls
for proposals for the EU framework programme for
research (FP7),
with an overall success rate of 14.4 %, compared to the EU average of 21.6 %.
The agreement associating Albania to the new EU research and innovation
programme Horizon 2020 (covering 2014-20) was
signed in July 2014, allowing for retro-active participation of
entities from the country as from 1 January 2014. The
necessary administrative measures for participation, i.e. nomination of
national contact points and representatives in programme committees, have been
put in place. The Agency for Research, Technology and Innovation (ARTI)
generally lacked the means to be more active in promoting cooperation on research
and innovation, although it organised technical workshops in preparation of
Horizon 2020.

As regards the
integration into the European Research Area, no actions were taken and
the level of investment in research is still very low (less than 0.4 % of
Albania’s GDP). Due to a lack of reliable statistics it is difficult to measure
the exact level, in particular the expenditure on research by the private
sector. Albania nominated a representative in the European Research Area
Committee.

With respect to
the Innovation Union, the national strategy for research and innovation
2016-20 envisages some measures to boost innovation, but still needs to be
adopted together with an action plan on implementation. Albania
has
been active in cooperating at regional level and co-signed the Western Balkan
Regional R&D Strategy for Innovation adopted in October 2013.

Conclusion

There
has been limited progress in the area of science and research. Further capacity
building and investment in research are required to ensure integration into the
European Research Area and contribute to the Innovation Union. Increased
efforts for successful participation in the new research framework programme
Horizon 2020 will also be necessary. Overall, preparations are not sufficiently
advanced.

4.26. 
Chapter 26: Education and culture

In
the area of education, training and youth, Albania increased its
participation in the Tempus programme and, for the first time, an Albanian
university was selected for a Jean Monnet Chair. An agreement was signed with
the EU in June 2014 for Albania’s partial participation in the new ‘Erasmus+’
programme. An independent commission for higher education and scientific
research reform was established with the aim of reforming governance of the
education system, including the finalisation of the draft law on higher
education. A new accreditation process for all public and private universities
started in May, including accreditation of particular courses. This led to the
revocation of licences and suspension of activity for a number of higher
education institutions. The transparency and inclusiveness of the recruitment
procedure of teachers and school directors needs to be improved. Education
is an area at high risk of corruption. Further progress has to be made in the
development of the Albanian qualifications framework. Albania’s results in the
latest PISA study, published in December, slightly improved.

Regarding
vocational education and training (VET), a draft 2014-20 national strategy for
jobs and skills and a related action plan were finalised and are awaiting
adoption, while a monitoring plan still needs to be prepared. All
responsibilities for VET have been brought under the responsibility of the
Ministry of Social Welfare and Youth.

Quotas
for the enrolment of Roma, Egyptians and disadvantaged students in public
universities continued to be applied for the academic year 2013-14. Roma and
Egyptian children are still not fully integrated in the education system which
occasionally leads to segregation and exclusion.

In
the area of culture, participation in the Culture and Europe
for Citizens programme has increased. An agreement for Albania’s participation
in the culture strand of the new Creative Europe programme was signed in July,
but an agreement for the 2014-20 Europe for Citizens programme remains to be
signed. As
a result of the adoption in March of amendments to the 2011 Law on Arts and Culture,
the National Centre for Art and Culture was dissolved and its responsibilities
for financing artistic and cultural activities were transferred to the Ministry
of Culture. The number of Regional Culture Directorates was reduced from nine
to six, reducing administrative costs but not staff numbers. Their geographical
areas of responsibility were also revised to ensure better coverage of the
country.

Conclusion

Some
progress has been made in the field of education and culture. Further action is
needed to improve the quality of educational provision at all level.
Strengthening the capacity of teachers is key in this regard, as is improving
the transparency and quality of the appointment procedure of teachers, school
directors and regional directorates. Overall, preparations in this field are
moderately advanced.

4.27. 
Chapter 27: Environment and climate change

In
the area of environment further work is needed on aligning the horizontal
legislation, in particular with the Directives on Environmental
Impact Assessment and Environmental Crime. A more effective
system to prosecute and penalise environmental crimes needs to be implemented. Environmental
impact assessments are still not carried out systematically prior to the launch
of infrastructure projects. Public access to information and consultation
remains limited. Cooperation with civil society organisations needs
to be strengthened. The lack of implementation of environmental
legislation is a major problem.

As
regards air quality, the National Strategy for Air Quality, the Law
on Ambient Air Quality and implementing legislation on air quality
assessment have not yet been adopted. Overlap and fragmentation of
responsibilities between the National Environment Agency and the Institute of
Public Health still persist regarding air quality monitoring. There are no
plans at local level to ensure ambient air quality and no measures have been
undertaken to combat known breaches of the standard values.

As
regards
waste management, amendments made in October 2013 to the Law on
Integrated Waste Management are not in line with the acquis. A national
advisory body on waste was set up in July. In October, a waste management
committee was set up to plan and coordinate the implementation of policies in
this field, but the capacity in waste management authorities remains very
limited. Waste separation is almost non-existent and recycling rates are very
low. Most waste continues to be disposed of unsafely in legal and illegal
dumpsites, or burned. Waste management remains a serious cause for concern.

In
the area of water quality, the law on integrated water management came
into force in December. The water supply and sewerage strategy has not yet been
adopted. A new wastewater treatment plant was put into operation in Shiroka
(Shkodra lake), bringing the total number of functioning wastewater treatment
plants to five. Three other plants are completed, but not yet operational and
two are under construction. Implementation of the acquis in
the area of water quality remains at a very early stage.

In
the field of
nature protection, in January, parliament enacted a law banning hunting,
but hunting continues. Effective protection for designated protected areas
still needs to be guaranteed. Illegal activities such as hunting, fishing,
logging, natural resources extraction and construction remain frequent in
protected areas.

In
the area of industrial pollution control and risk management, the law
transposing the EU Directive on the control of major-accident hazards (the ‘Seveso
II’ Directive) has not yet been adopted. Effective
checks to reduce the discharge of pollutants from industrial plants are not yet
in place. Self-monitoring by industries is rarely enforced. A framework law on chemicals
management aiming at bringing Albania in line with the EU acquis and at regulating
the import and export of chemical substances is awaiting adoption. There
have been no developments in the area of environmental noise.

As
regards civil protection, the National Strategy for Disaster Risk
Reduction and Civil Protection 2014-18 is yet to be adopted.

Regarding climate
change, Albania
associated itself with most of the formal EU positions in the international
context. It has also associated with the Copenhagen Accord, but it has not
yet put
forward a mitigation commitment by 2020. Albania needs
to put forward by the first quarter of 2015 its intended nationally determined
contribution to the 2015 Climate Agreement, consistent with those of the EU and
its Member States. Albania should focus on developing and adopting a
comprehensive climate policy and strategy in line with the expected EU 2030
policy framework on climate and energy. Substantial efforts are needed
to fully integrate climate considerations into all relevant sectoral policies
and strategies.

No
progress can be reported as regards alignment with the climate acquis. Priority
should be given to the establishment of a monitoring, verification and
reporting system for greenhouse gas emissions in line with the EU Monitoring
Mechanism legislation.

Albania
participated regularly in the Environment and Climate Regional Accession
Network (ECRAN) project. Climate awareness at all levels remains low. The
establishment
of an inter-ministerial working group on climate change aims at improving the
cooperation between
all relevant stakeholders. The administrative and technical capacity in the
climate sector remains limited, while allocated resources and funding remain
largely insufficient. The administrative set-up on climate
change requires considerable strengthening in order to achieve progress in the
alignment with EU climate acquis.

The former
Environment and Forests Agency was re-organised in January and renamed National
Environment Agency. Its administrative capacity was strengthened. A State
Inspectorate of Environment Forests and Waters (SIE) was also established in
January. Yet, the environmental inspection system is only partly aligned with
the EU acquis, and its limited resources do not provide a credible
guarantee that infringements are being properly monitored and punished.
Particular efforts are needed in terms of inspection planning, effective
cooperation between environmental inspectors and other supervisory authorities,
and improvement to reporting procedures and the evaluation mechanism of the SIE’s
work.

Conclusion

There
has been little progress in the fields of environment and climate change.
Significant further efforts are needed in all areas to strengthen
administrative capacity and to ensure proper implementation and enforcement of
legislation and its further alignment with the acquis. Waste management
is particularly poor and the quality of water and air is low. Overall,
resources remain limited and substantial investments are needed. Systematic
strategic planning needs to be established. The country needs to put forward by
the first quarter of 2015 its intended contribution to the 2015 Climate
Agreement. Overall, preparations are at an early stage.

4.28. 
Chapter 28: Consumer and health protection

Regarding
horizontal aspects in the area of consumer protection, guidelines
setting out the procedures for handling consumer complaints were adopted in
September. Further action is needed to empower consumers by providing
information, conducting awareness-raising activities and through consumer
education. The strategy on consumer protection and market surveillance
2014-2020 has been finalised.

In the area of product
safety-related issues, guidelines on methods of risk classification and on
serious risk assessment were adopted in December. The standard operation
procedures for market surveillance inspectors were approved in May, but the
market inspectorate is not yet in place.

In the area of
non-safety-related issues, Albanian authorities assessed how second tier
banks enforce consumer protection legislation on consumer credit and issued
their confidential report to the banks in December on follow-up actions to be
undertaken.

As regards horizontal
aspects in the area of public health, amendments to the Law on
Healthcare Insurance, adopted in December, introduced changes to the
calculation of healthcare contributions, including the removal of the maximum
salary threshold. Corruption remained widespread in the healthcare system and the
public hospital sector was underdeveloped. Primary healthcare continued to lack
appropriate funding, human resources, and the coverage of insurance-based care
remained very low. The national electronic health record system and the
e-health strategy have yet to be adopted.

In
the area of tobacco control, the Law on Health Protection Against
Tobacco Products, to more effectively enforce the tobacco ban in public places,
was amended in February. Further efforts are needed for its proper
implementation. Smoking remained widespread in public places and tobacco
products continued to be sold in the streets, in particular by minors.

With
regard to communicable diseases, the drafting of the 2015-20 national
strategy for HIV/AIDS control is ongoing. Implementing legislation ensuring the
right to health for people and children living with HIV/AIDS, and people at
risk of HIV/AIDS, has not yet been adopted. Integrated mosquito control has
advanced. The new Law on the Control of Infectious Diseases has not yet been
adopted and the national guidelines on antimicrobial resistance are still being
prepared. Public health and microbiology laboratories of hospitals need further
improvement and additional human resources.

In the area of blood,
tissues, cells and organs, blood safety, transfusion practices and
voluntary non-remunerated donations were improved through the implementation of
the prevention of infection transmission through safer blood and components
project. Work has been done on promotional actions for voluntary blood
donations and blood donor management practices. A working group has been
established to review and draft regulations on blood transfusions.

In
the area of patients’ rights in cross-border healthcare, preparations
have not yet started.

Implementing
legislation in the field of mental health services was adopted in
October, setting out the responsibilities of mental health
professionals and the physical restraint standards for mentally ill patients. In
the area of drug abuse prevention, a new specialised drug treatment
centre was established at the Tirana University Hospital Centre. The action
plan on drugs control and a data system for reporting on drugs has not yet been
adopted.
As regards health inequalities steps were taken to improve access for
Roma people to healthcare through community nurses and home visits. Delivery of
health cards to Roma families remains slow and further work is needed to ensure
access to good and safe quality healthcare for the most vulnerable groups,
especially in rural areas. Nutrition education programmes have
continued, but child malnutrition remains a matter of serious concern. In the
field of cancer screenings, for the first time, collection of data on
breast cancer started, showing a near ten-fold increase compared to 2012
estimates. Preparations continued on establishing cervical cancer, breast and
colorectal screening. A structure for cancer screening services and a cancer
registry system remain to be established.

Conclusion

Little
progress has been made in the area of consumer protection and some progress in
the field of health. The healthcare sector remains substantially
underfunded, understaffed, and lacks adequate healthcare management. This
hampers the proper implementation of public health legislation and policies.
Substantial work is needed to build sustainable market surveillance, including
offsetting up a market inspectorate, training inspectors, and building capacity
in the Consumer Protection Unit and Consumer Protection Commission. Overall,
preparations are being initiated.

4.29. 
Chapter 29: Customs union

In
the field of customs legislation, a new Customs Code which aims at
further approximation to the acquis was adopted in July with partial
entry into force planned in 2015. National nomenclature has been aligned to the
2014 EU nomenclature. In the framework of CEFTA, since 1 April 2014, Serbia,
Albania, Montenegro and the former Yugoslav Republic of Macedonia started
applying the regional Convention on Pan-Euro-Med Preferential Rules of Origin.
Transaction value is increasingly being used for valuation purposes although
complaints concerning the use of reference prices persist.

As regards administrative
and operational capacity, the 24-hour camera surveillance system at border
crossing points is operational. The customs laboratory is operational but lacks
the necessary information management system. The General Directorate of Customs
(GDC) serves as the national focal point for the EU chemical, biological
radiological and nuclear centre of excellence. ATA Temporary Import Convention
Carnet procedures have been regularly implemented. Further action is required
to prepare for interoperability of the GDC’s IT systems with the EU.

Albania and
Kosovo signed a joint agreement on transit facilitation in June. The GDC
increased its investigative action and reported several cases of fraud and
internal corruption to the prosecutor’s office. The customs authorities
continued to identify and block counterfeited products entering Albania, but
enforcement of intellectual property rights legislation must be improved.
Concerns remain over irregular practices and corruption in the customs
administration.

Conclusion

There
has been some progress on customs union. A more acquis-compliant Customs
Code was adopted and administrative capacity was strengthened. IT
interoperability with the EU requires further action. Overall, preparations are
moderately advanced.

4.30. 
Chapter 30: External relations

In the area of common
commercial policy Albania has continued coordinating its trade policy with
the EU in the World Trade Organisation. Administrative capacity for developing
trade policy and ensuring interinstitutional coordination needs to be
strengthened. The 2013 training plan on trade policy and EU common commercial
policy was only partly completed. There were no developments on export
credits. As regards export controls on dual-use goods
Albania is taking part in an EU regional outreach programme to increase the
effectiveness of export-control systems for dual-use items. Further
action is needed to align export control legislation with the acquis.

In the area of bilateral
agreements with third countries, in March, Albania ratified the Third
Additional Protocol to the Agreement on Amendment of and Accession to the
Central European Free Trade Agreement. In January, the Council of Ministers
adopted, in principle, an agreement for economic and technical cooperation with
the Republic of China. Albania is negotiating bilateral agreements for the
reciprocal promotion and protection of investments with the United Arab
Emirates, Canada, Iceland, Turkey, Slovakia, Morocco and Lebanon. Negotiations
are ongoing for agreements on economic and technical cooperation with Bosnia
and Herzegovina, Montenegro, Brazil, South Korea and Kosovo.

Conclusion

There
has been little progress in the area of external relations. Albania has
maintained good cooperation with the EU within the World Trade Organisation and
the Central European Free Trade Agreement and is participating in a regional
programme to strengthen the export control of dual-use goods. Administrative
capacity for dealing with trade policy matters needs to be increased. Overall,
preparations are moderately advanced.

4.31. 
Chapter 31: Foreign, security and defence policy

The
regular political dialogue between the EU and Albania on foreign and
security policy issues continued. (For more information on relations with other
enlargement countries and EU Member States, see Political criteria —
Regional issues and international obligations.)

As regards the common
foreign and security policy (CFSP), Albania aligned itself, when invited,
with all relevant EU declarations and Council decisions (100 % alignment).
(As regards the International Criminal Court, see Political criteria
— Regional issues and international obligations.)

Albania aligned
itself with and implemented restrictive measures introduced by Council
decisions, including EU restrictive measures in the context of Russia’s illegal
annexation of Crimea and events in eastern Ukraine. Albania voted in favour of
the UN General Assembly Resolution on Ukraine’s territorial integrity.

Regarding conflict
prevention, Albania has declared its support for the EU programme for the
prevention of violent conflicts.

In the field of non-proliferation
of weapons of mass destruction and disarmament issues, Albania has made
some progress in implementing the action plan for the destruction of surplus
weaponry. The destruction of surplus conventional ammunition is well on track.
The online register of weapons and ammunition under the management of the
Albanian State Police has not yet been set up. With regard to chemical,
biological and radio-nuclear threats (CBRN), a national CBRN team has been set
up to support the drafting of the national security strategy. Albania ratified
the UN Arms Trade Treaty in June 2014.

Albania
continued to engage actively in cooperation with international organisations.
In March, Albania deployed four observers to two OSCE Missions in Ukraine.
Albania marked the fifth anniversary of its NATO accession.

As regards security
measures, the security agreement with the EU on the exchange and mutual
protection of classified information is still being negotiated.

Albania
continued to participate in civil and military crisis management operations
under the common security and defence policy (CSDP). Albania continued
to take part in the EUFOR ALTHEA military mission in Bosnia and Herzegovina
(contributing one officer). Albania’s participation as from July in the EU
training mission in Mali was confirmed. Amendments to the Criminal Code,
adopted in August, made it a criminal offence for Albanian citizens to
volunteer to fight in foreign military conflicts.

Conclusion

Albania
continued to participate in civil and military crisis management operations.
The country continued its full alignment with EU declarations and Council
decisions in the field of foreign and security policy. There has been no
progress towards the completion of the online register of weapons and
ammunition under the management of the Albanian State Police. Overall,
preparations in this field remain well on track.

4.32. 
Chapter 32: Financial control

In
the area of public internal financial control, the Central Harmonisation
Unit for Financial Management and Control (CHU/FMC) has continued to provide
training on FMC requirements to budget spending units. However, application of
the managerial accountability principle remains a challenge. The CHU/FMC should
therefore focus on measures which will lead to greater commitment from senior
management. An effective FMC system in Albania will depend upon the support of
committed authorising officers and skilled finance directors in budget spending
units. Although improvements are required both in the administrative capacity
of internal audit units within budget spending institutions and in the quality
of their reports, the Central Harmonisation Unit for Internal Audit (CHU/IA) is
mostly focusing on the training and certification of internal auditors. Its
primary purpose should be to provide strategic guidance and act as a mentor for
internal audit units. As concerns centralised budget inspection, the Public
Financial Inspection Directorate within the Ministry of Finance is still not
fully staffed and is awaiting the adoption of implementing legislation on procedures
to conduct financial inspections. Their full operation is necessary for an
effective fight against fraud and for detecting irregularities.

In the field of external
audit, the 2013‑2017 Strategic Development Plan of the High State
Control (HSC) was adopted in 2013. Amendments to the HSC law, making it fully
compatible with the standards of the International Organisation of Supreme
Audit Institutions (INTOSAI), are still awaiting parliamentary approval. The
operational capacity of the HSC needs to be further strengthened to achieve
full audit coverage. Parliament’s review of HSC reports remains limited with no
systematic follow-up.

As regards the
protection of the EU’s financial interests, staff in the Ministry of
Finance’s Public Financial Inspection Directorate, which will serve as the
anti-fraud coordination service (AFCOS), regularly participated in meetings
with the Commission and other anti-fraud coordination services. However,
administrative capacity in this area needs to be further strengthened.

With regard to
the protection of the euro against counterfeiting, the Bank of Albania’s
National Analysis Centre checked an increasing number of counterfeit domestic
and foreign currency banknotes, including euro banknotes. The forensic
laboratory became fully operational.

Conclusion

There
has been some progress in the area of financial control. The Albanian
government is preparing a comprehensive public financial management strategy
and an action plan for the period 2014-20, which will include reforms also in
this area. Further efforts are needed in PIFC implementation. The legislation
and performance of the High State Control need to be further aligned with
INTOSAI standards and Parliament needs to ensure proper follow-up of audit
reports. Overall, preparations in this area are moderately advanced.

4.33. 
Chapter 33: Financial and budgetary provisions

There
have been limited developments in the fields of traditional own resources,
the value added tax-based resource and the gross national
income-based resource. Concerning the VAT-based resource, the
National Institute of Statistics (INSTAT) has initiated a preliminary analysis
to define the methodology for estimating VAT fiscal evasion. As regards the GNI
resource, Albania has continued to produce the GDP indicator according to ESA
95 standards and to publish it on the INSTAT website. Preliminary work has
started on complying with ESA 2010 standards. (For developments in
the underlying policy areas, see Chapters 16 — Taxation;
18 — Statistics; 29 — Customs union; and 32 —Financial control.).

Albania
has put in place the main administrative infrastructure for the
underlying policy areas that indirectly affect the own resources system. In due
course, work should be done to set up the institutions and the coordinating body
in charge of preparing the administrative conditions for applying the own
resources rules. Effective tools to fight tax evasion and fraud need to be
further developed. Despite steps taken to strengthen the public finance
management system, the informal economy remains widespread.

Conclusion

In the area of
financial and budgetary provisions, Albania will need to set up a coordinating
body in due course to steer pre-accession preparations in the own resources
field. Overall, preparations in this field are at an early stage.

Statistical
Annex

STATISTICAL DATA || || || || || || ||

|| Albania || || || || || || || ||

|| || || || || || || || ||

|| Basic data || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Population (thousand) || 1) || 3 063e || 2 936e || 2 919e || 2 907e || 2 902e || 2 899e ||

|| Total area of the country (km2) || || 28 750 || 28 750 || 28 750 || 28 750 || 28 750 || 28 750 ||

|| || || || || || || || ||

|| National accounts || || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross domestic product (GDP) (million national currency) || 2) 3) || 583 369 || 1 143 936b || 1 239 645 || 1 300 624 || 1 335 488p || 1 180 823be ||

|| Gross domestic product (GDP) (million euro) || 2) 3) || 4 541 || 8 661b || 8 999 || 9 268 || 9 608p || 8 419e ||

|| GDP (euro per capita) || 4) || 1 482 || 2 958b || 3 089 || 3 191 || 3 312p || 2 904s ||

|| GDP (in Purchasing Power Standards (PPS) per capita) || || : || 7 023e || 7 089e || 7 409e || 7 513ep || : ||

|| GDP (in Purchasing Power Standards (PPS) per capita), relative to the EU average (EU-28 = 100) || || : || 27 || 26 || 30 || 30 || 30 ||

|| Real GDP growth rate: change on previous year of GDP volume (%) || 3) 4) || 7.9 || 3.4b || 3.7 || 2.5 || 1.6 || 1.4be ||

|| Employment growth (national accounts data), relative to the previous year (%) || || : || : || : || : || : || : ||

|| Labour productivity growth: growth in GDP (constant prices) per person employed, relative to the previous year (%) || || : || : || : || : || : || : ||

|| Unit labour cost growth, relative to the previous year (%) || || : || : || : || : || : || : ||

|| **3 year change (T/T-3) in the nominal unit labour cost growth index (2005 = 100) || || : || : || : || : || : || : ||

|| Labour productivity per person employed: GDP (in PPS) per person employed relative to EU average (EU-27 = 100) || || : || : || : || : || : || : ||

|| Gross value added by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || 2)3)5) || 23.6 || 19.4b || 20.7 || 21.0 || 21.8p || 22.2e ||

|| Industry (%) || 2)3)5) || 7.3 || 11.6b || 14.3 || 14.3 || 14.4p || 15.3e ||

|| Construction (%) || 2)3)5) || 10.4 || 17.1b || 14.6 || 14.4 || 12.2p || 12.3e ||

|| Services (%) || 2)3)5) || 58.6 || 51.9b || 50.4 || 50.4 || 51.6p || 50.2e ||

|| Final consumption expenditure, as a share of GDP (%) || 2) || 80.9 || 91.6b || 88.9 || 88.9 || 88.5p || : ||

|| Gross fixed capital formation, as a share of GDP (%) || 2) || 38.4 || 32.7b || 28.4 || 29.4 || 25.8p || : ||

|| Changes in inventories, as a share of GDP (%) || 2) 6) || 1.3 || 1.8b || 1.9 || 2.0 || 2.8p || : ||

|| Exports of goods and services, relative to GDP (%) || || 18.4 || 29.6 || 32.4 || 34.0 || 33.3p || 40.2ps ||

|| Imports of goods and services, relative to GDP (%) || || 39.0 || 53.8 || 53.0 || 56.7 || 51.9p || 60.7ps ||

|| || || || || || || || ||

|| Industry || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Industrial production volume index (2010 = 100) || || : || 84.4 || 100.0 || 111.9 || 118.7 || 135.1 ||

|| || || || || || || || ||

|| Inflation rate and house prices || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Consumer price index (CPI), change relative to the previous year (%) || 7) || 3.5 || 2.3 || 3.6 || 3.4 || 1.9 || 1.9 ||

|| **Annual change in the deflated house price index (2010 = 100) || || : || : || : || : || : || : ||

|| || || || || || || || ||

|| Balance of payments || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Balance of payments: current account total (million euro) || || -316 || -1 330 || -1 019 || -1 225 || -978 || -1 035 ||

|| Balance of payments current account: trade balance (million euro) || || -1 149 || -2 304 || -2 083 || -2 242 || -1 999 || -1 720 ||

|| Balance of payments current account: net services (million euro) || || 100 || 174 || 232 || 135 || 213 || -16 ||

|| Balance of payments current account: net income (million euro) || || 150 || -138 || -90 || -25 || -72 || 21 ||

|| Balance of payments current account: net current transfers (million euro) || || 583 || 938 || 922 || 906 || 880 || 680 ||

|| of which government transfers (million euro) || || 31 || 27 || 45 || 29 || 33 || 17 ||

|| **3 year backward moving average of the current account balance relative to GDP (%) || || : || -13.9 || -14.1 || -13.3 || -11.6p || -11.9e ||

|| **Five year change in share of world exports of goods and services (%) || || : || : || : || : || : || : ||

|| Net inward foreign direct investment (FDI) (million euro) || || 230.7 || 688.7 || 788.5 || 608.9 || 647.8 || 923.2 ||

|| Foreign direct investment (FDI) abroad (million euro) || || 0.0 || 28.2 || 4.8 || 21.4 || 17.9 || 30.0 ||

|| of which FDI of the reporting economy in the EU-28 countries (million euro) || || : || : || : || : || : || : ||

|| Foreign direct investment (FDI) in the reporting economy (million euro) || || 230.7 || 716.9 || 793.3 || 630.4 || 665.8 || 953.2 ||

|| of which FDI of the EU-28 countries in the reporting economy (million euro) || || : || : || : || : || : || : ||

|| **Net international investment position, relative to GDP (%) || || : || : || : || : || : || : ||

|| || || || || || || || ||

|| Public finance || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| General government deficit / surplus, relative to GDP (%) || || -6.9 || -7.1 || -3.1 || -3.5 || -3.4e || : ||

|| General government gross debt relative to GDP (%) || || 58.5 || 59.9 || 57.7 || 59.3 || 62.0 || : ||

|| || || || || || || || ||

|| Financial indicators || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross foreign debt of the whole economy, relative to GDP (%) || 8) || 17.2 || 41.3 || 46.2 || 52.5 || 56.5 || : ||

|| Gross foreign debt of the whole economy, relative to total exports (%) || 8) 9) || 93.1 || 142.4 || 140.2 || 152.1 || 166.5 || : ||

|| Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || 1 113 || 2 154 || 1 999 || 1 973 || 2 023 || 2 109 ||

|| Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || || 2 376 || 4 378 || 4 387 || 4 611 || 4 816 || 4 942 ||

|| Money supply: M3 (M2 plus marketable instruments, million euro) || || 3 069 || 6 599 || 7 114 || 7 626 || 8 080 || 8 192 ||

|| Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 217 || 3 335 || 3 506 || 3 862 || 3 990 || 3 906 ||

|| **Annual change in financial sector liabilities (%) || || : || : || : || : || : || : ||

|| **Private credit flow, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| **Private debt, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| Interest rates: day-to-day money rate, per annum (%) || || : || : || : || : || : || : ||

|| Lending interest rate (one year), per annum (%) || 10) || 11.90 || 12.46 || 11.29 || 11.17 || 10.28 || 9.52 ||

|| Deposit interest rate (one year), per annum (%) || 11) || 7.80 || 6.78 || 6.40 || 5.87 || 5.38 || 4.17 ||

|| euro exchange rates: average of period (1 euro = ... national currency) || || 128.47 || 132.06 || 137.79 || 140.33 || 139.04 || 140.26 ||

|| Trade-weighted effective exchange rate index (2005 = 100) || || : || : || : || : || : || : ||

|| **3 year change (T/T-3) in the trade-weighted effective exchange rate index, 42 countries (2005 = 100) || || : || : || : || : || : || : ||

|| Value of reserve assets (including gold) (million euro) || || : || 1 646 || 1 905 || 1 912 || 1 972 || 2 015 ||

|| || || || || || || || ||

|| External trade in goods || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Value of imports: all goods, all partners (million euro) || || 1 486 || 3 261 || 3 472 || 3 876 || 3 798 || 3 675 ||

|| Value of exports: all goods, all partners (million euro) || || 340 || 780 || 1 169 || 1 400 || 1 532 || 1 756 ||

|| Trade balance: all goods, all partners (million euro) || || - 1145 || -2 481 || -2 303 || -2 477 || -2 266 || -1 919 ||

|| Terms of trade (export price index / import price index * 100) (number) || || 101 || 73 || 72 || 78 || 83 || 86 ||

|| Share of exports to EU-28 countries in value of total exports (%) || || 91.3 || 84.8 || 70.2 || 72.9 || 75.6 || 76.7 ||

|| Share of imports from EU-28 countries in value of total imports (%) || || 81.6 || 65.9 || 66.5 || 65.3 || 63.2 || 64.2 ||

|| || || || || || || || ||

|| Demography || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Crude rate of natural change of population (natural growth rate): number of births minus deaths (per thousand inhabitants) || || 11.2e || 4.7e || 4.8e || 4.9e || 5.0 || 5.3 ||

|| Infant mortality rate deaths of children under one year of age (per thousand live births) || || 17.4 || 10.3 || 9.6 || 8.7 || 8.8 || 7.9 ||

|| Life expectancy at birth: male (years) || || : || 73.7e || 74.7e || 75.3e || 75.5e || 76.0 ||

|| Life expectancy at birth: female (years) || || : || 78.7e || 79.4e || 79.8e || 79.7e || 80.3 ||

|| || || || || || || || ||

|| Labour market || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Economic activity rate for persons aged 20–64: proportion of the population aged 20–64 that is economically active (%) || 12) || 72.3 || 69.6be || 69.7e || 75.6e || 73.2e || 68.0e ||

|| *Employment rate for persons aged 20–64: proportion of the population aged 20–64 that are in employment (%) || 12) || 55.5 || 60.4be || 60.3e || 64.9e || 63.4e || 57.2e ||

|| Male employment rate for persons aged 20–64 (%) || 12) || 70.6 || 73.2be || 71.5e || 72.8e || 71.4e || 65.1e ||

|| Female employment rate for persons aged 20–64 (%) || 12) || 40.6 || 48.9be || 49.8e || 57.2e || 55.4e || 49.9e ||

|| Employment rate for persons aged 55–64: proportion of the population aged 55–64 that are in employment (%) || 12) || 27.5 || 48.9be || 48.3e || 54.7e || 57.7e || 52.4e ||

|| Employment by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || 5) || 50.6 || 44.1be || 41.8e || 45.4e || 51.1e || 44.6e ||

|| Industry (%) || 5) || 7.1 || 10.0be || 11.0e || 10.6e || 10.9e || 9.8e ||

|| Construction (%) || 5) || 6.6 || 9.9be || 9.9e || 8.2e || 6.5e || 7.3e ||

|| Services (%) || 5) || 35.7 || 36.0be || 37.3e || 35.8e || 31.6e || 38.2e ||

|| Unemployment rate: proportion of the labour force that is unemployed (%) || 12) || 22.8 || 13.8be || 14.0e || 14.0e || 13.4e || 15.6e ||

|| Male unemployment rate (%) || 12) || 18.8 || 12.2be || 12.6e || 13.6e || 14.5e || 17.5e ||

|| Female unemployment rate (%) || 12) || 28.4 || 15.9be || 15.9e || 14.4e || 12.1e || 13.2e ||

|| Youth unemployment rate: proportion of the labour force aged 15–24 that is unemployed (%) || 12) || 35.5 || 27.2be || 30.5e || 23.6e || 27.9e || 30.2e ||

|| Long-term unemployment rate: proportion of the labour force that has been unemployed for 12 months or more (%) || 12) || : || 9.1be || 10.6e || 10.2e || 10.8e || 11.4e ||

|| || || || || || || || ||

|| Social cohesion || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Average nominal monthly wages and salaries (national currency) || || 17 218 || 40 874 || 44 375 || 46 665 || 50 093 || 52 150 ||

|| Index of real wages and salaries (index of nominal wages and salaries divided by the inflation index) (2000 = 100) || || 111.6 || 209.8 || 216.1 || 223.5 || 238.2 || 243.0s ||

|| *Early leavers from education and training: proportion of the population aged 18–24 with at most lower secondary education who are not in further education or training (%) || || : || 35.5e || 31.9e || 35.2e || 31.6e || 30.5 ||

|| || || || || || || || ||

|| Standard of living || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Number of passenger cars relative to population size (number per thousand population) || || 43.5e || 88.2 || 104.4 || 106.3p || 106.6 || 122.0 ||

|| Number of mobile phone subscriptions relative to population size (number per thousand population) || || 120.6e || 1 444.0e || 1 584.4 || 1 841.8 || 2 015.0 || 1 828.2s ||

|| || || || || || || || ||

|| Infrastructure || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Density of railway network (lines in operation per thousand km2) || || 14.3 || 13.9 || 13.9 || 13.9 || 13.9 || 12.0 ||

|| Length of motorways (kilometres) || || : || : || : || : || : || : ||

|| || || || || || || || ||

|| Innovation and research || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Public expenditure on education relative to GDP (%) || || 3.3 || 3.4 || 3.5 || 3.3 || 3.4 || : ||

|| *Gross domestic expenditure on R&D relative to GDP (%) || || : || : || : || : || : || : ||

|| Percentage of households who have internet access at home (%) || || : || : || : || : || 14.1 || : ||

|| || || || || || || || ||

|| Environment || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| *Index of greenhouse gas emissions, CO2 equivalent (1990 = 100) || || : || : || : || : || : || : ||

|| Energy intensity of the economy (kg of oil equivalent per 1 000 euro GDP at 2000 constant prices) || 13) || 386.5 || : || : || : || : || : ||

|| Electricity generated from renewable sources relative to gross electricity consumption (%) || || : || : || : || : || : || : ||

|| Road share of inland freight transport (based on tonne-km) (%) || || : || : || : || : || : || : ||

|| || || || || || || || ||

|| Energy || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Primary production of all energy products (thousand TOE) || || 933 || 1 263 || 1 643 || 1 494 || 1 676 || : ||

|| Primary production of crude oil (thousand TOE) || || 335 || 577 || 744 || 895 || 1 031 || : ||

|| Primary production of hard coal and lignite (thousand TOE) || || 15 || 3 || 3 || 2 || 2 || : ||

|| Primary production of natural gas (thousand TOE) || || 8 || 8 || 13 || 15 || 15 || : ||

|| Net imports of all energy products (thousand TOE) || || 1 001 || 895 || 552 || 668 || 320 || : ||

|| Gross inland energy consumption (thousand TOE) || || 1 934 || 2 104 || 2 106 || 2 162 || 2 014 || : ||

|| Electricity generation (thousand GWh) || || 3.7 || 5.2 || 7.7 || 4.1 || 4.8 || 7.0 ||

|| || || || || || || || ||

|| Agriculture || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Agricultural production volume index of goods and services (at producer prices) (previous year = 100) || || : || 102.0 || 107.3 || 103.9 || 104.5 || : ||

|| Utilised agricultural area (thousand hectares) || || 1 139 || 1 138 || 1 201 || 1 201 || 1 201 || 1 190 ||

|| Livestock numbers: live bovine animals (thousand heads, end of period) || || 708 || 494 || 493 || 492 || 498 || 468 ||

|| Livestock numbers: live swine (thousand heads, end of period) || || 106 || 160 || 164 || 163 || 159 || 112 ||

|| Livestock numbers: live sheep and live goats (thousand heads, end of period) || || 2 933 || 2 540 || 2 581 || 2 517 || 2 619 || 2 734 ||

|| Production and utilisation of milk on the farm (total whole milk) (thousand tonnes) || || 984 || 1 045 || 1 070 || 1 101 || 1 105 || 1 155 ||

|| Harvested crop production: cereals (including rice) (thousand tonnes) || || 502 || 630 || 662 || 701 || 697 || 662 ||

|| Harvested crop production: sugar beet (thousand tonnes) || || 38 || 0 || 0 || 0 || 0 || 0 ||

|| Harvested crop production: vegetables (thousand tonnes) || || 677 || 730 || 860 || 890 || 914 || 867 ||

: = not available

b = break in series

e = estimated value

p = provisional

s = Eurostat calculation

- = Europe 2020 indicator

** = Macroeconomic Imbalance Procedure (MIP) indicator

Footnotes:

1) Based on retro projection made by INSTAT.

2) In 2014, data for reference year 2008 and more recent reference years were revised as a result of implementing the latest versions of the SNA and ESA. Earlier years have not been revised.

3) 2013: flash based on quarterly estimation, gross value added and not GDP at basic prices.

4) In 2014, data for reference year 2009 and more recent reference years were revised as a result of implementing the latest versions of the SNA and ESA. Earlier years have not been revised.

5) Based on NACE Rev. 1.1.

6) 2001: change in inventories and statistical discrepancy.

7) 2001 and 2009: variation between December of one year compared with December of the previous year.

8) Data disseminated by the Bank of Albania.

9) 2001: Debt Outstanding Disbursed cumulative stock covering external public debt and external publicly guaranteed debt, but excluding IMF credit. Exports are calculated according to national accounts concepts.

10) Average weighted rate applied on new 12-month loans over the respective month, on 12-month maturity.

11) Deposit interest rate represents the average weighted rate for newly accepted deposits over the respective month, on 12-month maturity.

12) 2001: census data.

13) Kg of oil equivalent per thousand euro at 2004 constant prices.

[1]               Until 1
July 2014, the rapporteur for Albania was Mr Nikola Vuljanic. The current
rapporteur is Mr Knut Fleckenstein.

[2]               Enlargement
Strategy and Main Challenges 2014-15, COM(2014) 700.

[3]               ‘Report
from the Commission to the Council and the European Parliament on Albania’s
Progress in the Fight Against Corruption and Organised Crime and in the
Judicial Reform’, COM(2014) 331 final from 04.06.2014.

[4]               These
are reforming the public administration and the judiciary, fighting corruption
and organised crime, strengthening the protection of human rights and
anti-discrimination policies, and implementing property rights.

*               This designation
is without prejudice to positions on status, and is in line with UNSCR 1244/99
and the ICJ Opinion on the Kosovo declaration of independence.