TABLE OF CONTENTS

1........... Introduction. 4

1.1........ Preface. 4

1.2........ Context 4

1.3........ Relations between the EU and Albania. 5

2........... Political criteria. 6

2.1........ Democracy and the rule of law.. 6

2.2........ Human rights and the protection of minorities. 16

2.3........ Regional issues and international obligations. 23

3........... Economic criteria. 24

3.1........ The existence of a functioning market economy. 24

3.2........ The capacity to cope with competitive pressure and market forces within the Union. 29

4........... Ability to take on the obligations of membership. 31

4.1........ Chapter 1: Free movement of goods. 31

4.2........ Chapter 2: Freedom of movement for workers. 32

4.3........ Chapter 3: Right of establishment and freedom to provide services. 33

4.4........ Chapter 4: Free movement of capital 33

4.5........ Chapter 5: Public procurement 34

4.6........ Chapter 6: Company law.. 35

4.7........ Chapter 7: Intellectual property law.. 36

4.8........ Chapter 8: Competition policy. 36

4.9........ Chapter 9: Financial services. 37

4.10...... Chapter 10: Information society and media. 39

4.11...... Chapter 11: Agriculture and rural development 40

4.12...... Chapter 12: Food safety, veterinary and phytosanitary policy. 41

4.13...... Chapter 13: Fisheries. 42

4.14...... Chapter 14: Transport policy. 42

4.15...... Chapter 15: Energy. 44

4.16...... Chapter 16: Taxation. 45

4.17...... Chapter 17: Economic and monetary policy. 46

4.18...... Chapter 18: Statistics. 47

4.19...... Chapter 19: Social policy and employment 47

4.20...... Chapter 20: Enterprise and industrial policy. 49

4.21...... Chapter 21: Trans-European networks. 50

4.22...... Chapter 22: Regional policy and coordination of structural instruments. 51

4.23...... Chapter 23: Judiciary and fundamental rights. 52

4.24...... Chapter 24: Justice, freedom and security. 56

4.25...... Chapter 25: Science and research. 58

4.26...... Chapter 26: Education and culture. 59

4.27...... Chapter 27: Environment and climate change. 60

4.28...... Chapter 28: Consumer and health protection. 61

4.29...... Chapter 29: Customs Union. 63

4.30...... Chapter 30: External relations. 64

4.31...... Chapter 31: Foreign, security and defence policy. 65

4.32...... Chapter 32: Financial control 66

4.33...... Chapter 33: Financial and budgetary provisions. 67

1. Introduction 1.1. Preface

Since March 2002, the Commission has reported regularly to the Council and Parliament on progress made by the countries of the Western Balkans region. This is the second report on the country’s progress following the publication of the Commission Opinion on Albania’s application for membership of the European Union, issued in November 2010.

This report on progress made by Albania on preparing for EU membership:

· briefly describes relations between Albania and the 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 developments as regards Albania’s capacity to take on the obligations of membership, that is the acquis expressed in the Treaties, the secondary legislation and the policies of the Union.

This report covers the period from October 2011 to September 2012. Progress is measured on the basis of decisions taken, legislation adopted and measures implemented. As a rule, legislation or measures which are being prepared 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 has drawn detailed conclusions regarding Albania in its separate communication on enlargement[2], based on the technical analysis contained in this report.

1.2. Context

The Stabilisation and Association Agreement between the EU and Albania was signed in June 2006 and entered 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 endorsed the Commission Opinion’s recommendations. In its conclusions, the Council noted that the opening of accession negotiations will be considered by the European Council, in line with established practice, 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[3] set out in the Commission’s Opinion. The Commission’s 2012 progress report, like that of 2011, focuses on implementation of these key priorities.

1.3. Relations between the EU and Albania

Albania is participating in the Stabilisation and Association Process.

Overall, Albania has been implementing its obligations under the Stabilisation and Association Agreement (SAA) well. It participated in the regular political and economic dialogue between the EU and the country through the SAA structures and contributed to the smooth functioning of the various joint institutions. Meetings of the Stabilisation and Association Committee and Council were held in March and May 2012 respectively. Six subcommittee meetings were held in the reporting period. Furthermore, the SA Council agreed to set up a special group on Public Administration Reform within the SAA structures. Multilateral economic dialogue between the Commission, EU Member States and potential candidate countries in the context of pre-accession fiscal surveillance took place at an expert meeting in May 2012.

Visa liberalisation for citizens of Albania travelling to the Schengen area has been in force since December 2010. The Commission set up a post-visa-liberalisation monitoring mechanism to assess whether the implementation of reforms introduced by the country was consistent with the visa roadmap and sustainable. This was complemented with an alert mechanism to prevent abuses. The Commission presented its second monitoring report to the European Parliament and the Council in December 2011 and adopted the third in August 2012. A readmission agreement between the European Union and Albania has been in force since 2006.

Pre-accession financial assistance is provided under the Instrument for Pre-Accession Assistance (IPA). In the framework of IPA component I - Transition Assistance and Institution Building, the EU allocated a total amount of approximately € 530 million for Albania in the period 2007-13. The yearly envelopes of the National Programme under this component provided € 82 million for 2011 and € 86.9 million for 2012. The Multiannual Indicative Planning Document (MIPD) for 2011-2013 envisages a sectoral approach with the focus on Justice and Home Affairs, Public Administration Reform, Transport, Environment and Climate Change, Social Development, and Agriculture and Rural Development. IPA assistance in the framework of this component is implemented under the supervision of the EU Delegation in Tirana.

In the frame of IPA component II – Cross-border Cooperation, Albania participates in the management and implementation of three programmes within the Western Balkans (with Montenegro, the former Yugoslav Republic of Macedonia and Kosovo*); one bilateral cross-border cooperation programme with an EU Member State (Greece); and three multilateral programmes (including EU Member States), i.e. the ERDF European trans-national programmes ‘South East Europe’ and ‘Mediterranean’, and the Adriatic regional programme.

Civil society has received financial support from the EU under the IPA Civil Society Facility (2011-2012) and through the European Instrument for Democracy and Human Rights. The IPA provided support to national civil society organisations (CSOs) in the fields of justice (access to justice, fight against corruption and monitoring/improvement of living conditions in detention system), protection of vulnerable groups (disadvantaged women, children and the elderly, and minority groups) and environmental protection. The objectives of this assistance include wider involvement by civil society in decision-making, strengthening of CSOs’ management and organisational capacity and improvement of their legal and fiscal framework.

The EU has co-financed Albania’s participation in the following EU Programmes: ‘Seventh Research Framework Programme’; ‘Entrepreneurship and Innovation Programme’ (EIP) of the ‘Competitiveness and Innovation Framework Programme’, ‘Youth in Action’, ‘Europe for Citizens’ and ‘Culture’.

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 assesses Albania’s progress in addressing the twelve key priorities identified in the European Commission’s Opinion on Albania’s application for membership of the European Union. In this context, Albania adopted an Action Plan for addressing the recommendations of the Opinion in March 2012.

This section also monitors compliance with international obligations, regional cooperation and good neighbourly relations with enlargement countries and Member States.

It analyses fulfilment of the 2010 Opinion’s key priorities in particular.

2.1. Democracy and the rule of law

The ruling majority and opposition reached a political agreement in November 2011 which marked the end of the political stalemate stemming from the 2009 parliamentary elections. This agreement established a plan and timetable for carrying out electoral reform, for improving the parliament’s rules of procedure and for adopting all pending laws requiring reinforced majority.

The ruling majority and opposition remained generally committed to the key political reforms stemming from this agreement and political dialogue has improved considerably ever since. The process of working on the implementation of the 12 key priorities has, overall, been an inclusive one. Yet there were short periods of confrontational rhetoric between government, opposition and other state institutions, notably in relation to investigations into the events of 21 January 2011 and to the nomination by parliament of a member of the High Council of Justice. Since November 2011, significant progress has been made by adopting pending reinforced majority laws, appointing an Ombudsman, adopting amendments to the electoral code, and towards revising parliamentary rules of procedure. This created a climate of cross-party cooperation, which enabled reform progress also in other areas under the political criteria.

The presidential elections in June 2012 were conducted in line with the Constitution, but the political process surrounding them did not build on the positive cross-party dialogue launched in November. Yet, constructive dialogue resumed shortly thereafter as demonstrated notably by the completion of electoral reform, a key element of the November political agreement.

Parliament

From November 2011, following the political agreement, dialogue and rhetoric in the parliament improved significantly, and a more constructive atmosphere was noted, in particular during committee and plenary meetings. This allowed progress in a number of areas.

All pending laws requiring a reinforced three-fifth majority vote were adopted, including notably amendments to the criminal and civil code and the long pending Law on Administrative Courts. An Ombudsman was appointed following a transparent and merit-based selection process with public hearings, followed by a consensual vote in the parliament. A hearing and voting process in parliament was conducted for the presidential nomination of a judge to the High Court. These are key priorities of the Opinion.

The working group on the improvement of parliament’s rules of procedure established in November 2011 reached agreement on a large number of draft amendments to the rules of procedure (including two amendments in relation to the role of the European integration committee) and prepared amendments to the law on the status of MPs. Amendments to the rules of procedure are pending adoption in the Assembly. The working group did not agree on two issues raised by the opposition, namely re-introducing secret voting on presidential decrees and granting equal speaking time rights to the opposition when speaking in reply to the Prime Minister.

Progress was made in the functioning of parliamentary procedures (a key priority of the Opinion), with the adoption of a considerable number of acts, including laws, decisions, resolutions and declarations. In a significant number of cases these were approved by consensus. Progress was also noted in terms of improving public consultation in the legislative process. Under its new chairman, the Committee on European Integration (CEI) was actively involved with the Ministry of Integration in developing and monitoring relevant parts of the Action Plan for addressing the recommendations of the Opinion. The CEI involved civil society in the review of the Action Plan. The chairman of the CEI attended the Stabilisation and Association (SA) Council meeting of May 2012 and for the second time it was possible to issue a joint statement at the SA Parliamentary Committee in July, which was agreed by both parties.

However, work needs to continue to further improve the functioning of the parliament. The working calendar of the parliament does not always give enough time to standing committees for proper review and for public hearings on draft laws, which, as a result, are often adopted in an expedited manner potentially to the detriment of quality. Draft laws are often not accessible to the public. Building on the recent completion of the adoption of pending laws requiring a reinforced majority, the parliament needs to create an effective targeted approach and methodology for preparing and negotiating such laws. Further efforts are required to strengthen the parliament’s oversight function, including reinforcing the use of interpellations with members of the government and written questions and answers. Work is needed on analysing and modifying the legal framework in view of necessary enhancement of the role of the CEI. In this context, relations between the CEI and other parliamentary committees are to be improved.

Some progress was made in strengthening the administrative capacity of the parliament Secretariat through training of staff and expert advice, including by international experts. A multiannual training strategy for the parliament’s staff was adopted in May 2012. The unit for legal approximation in the parliament was strengthened by the hiring of a further adviser. Efforts were made to increase transparency in the functioning of the parliament’s administration. This holds in particular true for budgetary aspects through publication of expenditures’ reports for the first half of 2012 on the Parliament’s website. However, the administrative capacity of the parliament needs substantial further strengthening in particular in relation to the European integration agenda.

In July 2012 parliament conducted a hearing and approved the presidential nomination of a judge to fill one outstanding vacancy in the High Court (a key priority of the Opinion). There were no hearing and voting processes in parliament for presidential appointments to the Constitutional Court in the reference period.

On 11 June 2012, Parliament elected Mr Bujar Nishani as President of the Republic in the fourth round of the elections with 73 votes out of 76. Opposition MPs attended the session but did not vote. The election was in line with the Constitution, yet expectations of a consensual candidate were not met. In the first three rounds of the election, which would have required a reinforced three-fifths majority vote, no candidates were officially put forward as consultations between the ruling majority and opposition had not led to the emergence of a candidate who could gather broad support.

On electoral reform, a key priority of the Opinion, representatives of both government and opposition in the ad hoc parliamentary committee established in November 2011 worked in an overall spirit of constructive cooperation. The committee achieved good results and agreed on amendments to the electoral legislative framework addressing the majority of the recommendations of the OSCE/ODIHR 2009 and 2011 election observation missions. These include provisions on registration of electoral subjects, gender quotas, electoral campaign funding and complaints and appeals mechanisms. The composition of the Central Election Commission and the system of appointment of its members were also revised in view of increasing its independence and impartiality. The revised electoral code was consensually adopted by Parliament on 19 July.

Overall, the functioning of parliament and political dialogue has considerably improved as a result of the November 2011 political agreement. This allowed significant progress to be made through the adoption of all pending laws requiring a reinforced majority, the appointment of an Ombudsman, the conduct of a hearing and voting process for the presidential nomination of a judge to the High Court, and adoption of amendments to the electoral code. It is now essential that revised parliamentary rules of procedure are adopted. On 11 June 2012, a new president was elected in the fourth round of the election with the votes of the ruling majority only. Although in line with the Constitution, the presidential election failed to meet all expectations of inclusiveness and put a strain on the consolidation of political dialogue and cooperation. This contributed to a temporary slowdown in reform efforts in core areas requiring political consensus, which was overcome shortly thereafter.

Government

The government and ruling coalition consisting of the Democratic Party and the Socialist Movement for Integration remained in place and stable in the reference period. In March and June 2012, a government reshuffle took place.

The Ministry of European Integration (MEI), in cooperation with the Parliamentary Committee for European Integration, played the key role in the revision of the Action Plan to address the Opinion’s key priorities. The revision process was transparent and participatory, and included consultations with non-governmental actors. The Action Plan has been improved by clarifying the content of measures and specifying deliverables. A monthly monitoring mechanism was smoothly implemented. Good cooperation between the chair of the Parliamentary Committee on European Integration and the Minister of European Integration on the country’s EU reform challenges continued beyond work on the action plan, including through joint participation at the May 2012 EU-Albania SA Council.

There has been progress in updating the National Plan for the Implementation of the SAA (NPISAA). The updated NPISAA was approved by a Council of Ministers decision in July 2012, which inter alia specifies the responsibilities for implementation as well as monitoring and reporting requirements. The decision tasks the line institutions to decide amongst themselves the distribution of institutional responsibilities for transposition and implementation of individual acts of EU law within three months of entry into force of the decision. Once implemented, this distribution will be an important step towards the comprehensive revision and more realistic planning of NPISAA

There has been some progress in coordinating processes for aligning legislation with the acquis. The MEI has continued working on legislative gap analysis. An IT system for legal approximation (IMS), which is a part of ‘e-cabinet’, the government’s overall IT system, has been introduced. The system contains information on measures of legal alignment with the acquis. The introduction of the IMS increases the transparency and efficiency of the system for planning and monitoring the alignment process, although the timing and quality of relevant mechanisms require further improvement.

The policy-making and legislative drafting processes in line ministries are still subject to shortfalls in prior analytical work and there is not enough transparency or consultation with relevant stakeholders. Staff turnover and weaknesses in analytical capacity have had an impact on the quality of legislation drafted. More attention should be paid to the implementation and enforcement of legislation.

There has been only moderate progress regarding the coordination of the EU integration process. Comprehensive and sustainable capacity development of the 35 interinstitutional working groups and further improvement of policy coordination among institutions is necessary.

Regarding local governance, no progress was made on territorial administrative reform. Small local government units are in many cases not economically sustainable. The Law on Territorial Planning was adopted in 2009 but implementation is slow.

There was no improvement in revenue collection by local authorities during 2011. Significant additional efforts are needed to strengthen both the administrative efficiency and the financial sustainability of municipalities. Particular attention is needed in the areas of strategic planning, human resources management and financial control. Further efforts are needed to ensure transparency and a strategic approach in central funding for municipal projects, particularly for infrastructure. Local government decision-making lacks transparency and consultation with civil society organisations and other relevant stakeholders.

Lengthy and over-politicised debates concerning the composition of local government bodies in some cases hindered their effective functioning and the consolidation of representative democracy at local level. The existence of two separate local government associations, split in membership between the two main political parties, has hindered cooperation at municipal level and weakened the position of local authorities vis-à-vis the central government. Due to political disagreement between the associations, Albania has not been able to select and thus be represented by a delegation in the Congress of Local and Regional Authorities of the Council of Europe since May 2011.

Local governments have slowly started implementing the Council of Ministers’ June 2011 decision on the structure and organisation of public institutions. The percentage of civil servants with temporary contracts remains particularly high in local authorities.

Overall, there has been some progress with regard to the work of government. This includes good progress on coordinating the EU integration process through the revision of the action plan to address the Opinion’s key priorities, which was conducted in a transparent and participatory manner. Good cooperation between the chair of the Parliamentary Committee on European Integration and the Minister of European Integration on the country’s EU reform challenges continued, including joint participation at the May 2012 EU-Albania SA Council. Legislative drafting capacity and the planning process for aligning legislation with the acquis need to be further improved, notably through the effective implementation of the Council of Ministers decision on the NPISAA. As regards local government, the decentralisation of state responsibilities has not been matched by appropriate transfers in administrative and financial resources from central to local level. The existence of two separate local government associations is not conducive to improving the institutional relations between central and local government in view of a successful and transparent decentralisation process.

Public administration

Progress can be reported in the field of public administration reform, which is a key priority of the Opinion. In May, the parliament adopted the Law on Administrative Courts by a qualified majority. The law is an important step in reforming the judicial system, ensuring legal review of administrative decisions by independent courts, increasing transparency and fighting corruption in the civil service. The Law on the Organisation and Functioning of Public Administration, a structural law which aims at fighting fragmentation and coordination deficiencies and creating a general legal framework for the organisation of public administration, has been adopted. The government approved the draft Law on the Civil Service in August 2012 and it is currently in parliamentary procedure where it requires a qualified majority for adoption. The draft Law on General Administrative Procedures has not been finalised.

There is some progress regarding the implementation of legislation and administrative acts. The Council of Ministers’ decision on defining the structure and organisation of public institutions has been implemented by 13 of the 14 ministries. The implementation of the Law on Inspections is progressing very slowly. The General Inspector was appointed only at the end of 2011. The relevant required secondary legislation is still not in place. The Prime Minister’s Order setting a maximum limit of 2.5% on temporary contracts has been considerably implemented. In most cases, the central government institutions failed to request approval by the Department of Public Administration (DoPA) for recruitment based on temporary contracts or even disregarded the DoPA’s refusal.

The DoPA still lacks the authority to play an effective role in monitoring public institutions under its remit and to enforce its decisions. Data gathering by the DoPA has improved. However, problems remain in terms of reliability and clear administrative rules on data collection and storage. The Human Resources Management Information System (HRMIS) is not fully operational. Its first pilot phase, for making the salary module functional, was successfully concluded in five institutions in April.

The Training Institute for Public Administration (TIPA) has conducted training activities in accordance with the 2012-2015 training plan, despite the shortages of premises and resources. A working group for drafting the final report for the future opening of the Albanian School of Public Administration (ASPA) was established in August.

The Civil Service Commission (CSC) has had only four of the required five members since September 2011, which impedes the institution’s decision-making. Its annual budget has been gradually reduced and political support for its role has been diminishing. Nevertheless, the CSC has intensified its work and carried out several inspections in public institutions. The rate of execution of CSC decisions by state institutions remains very low, even when these decisions are upheld in court and become legally binding. The CSC remains a significant independent oversight body for public institutions and a fundamentally important tool of the parliament for monitoring the executive’s use of the civil service.

The civil service continues to suffer from shortcomings related to politicisation and a lack of meritocracy in recruitment, promotion and dismissal of civil servants. In key sectors the public administration faces important challenges in fulfilling its tasks, including the management and follow-up of assistance programmes and the implementation of legislation aimed at alignment with the EU acquis.

Little progress was made in the area of auditing. A new Head of the Supreme State Audit Institution (SSAI) was appointed in December 2011 and an action plan has been launched to strengthen the institution. In 2011, the SSAI conducted 152 audits, mainly of legality, regularity and evaluation. Difficulties with the implementation of the structure of programmed audits and especially system audits were evident. The number of recommendations issued by SSAI to state authorities increased, while those non-implemented almost doubled compared to 2010. The SSAI report was approved by the parliament in May 2012. Considerable efforts are needed to increase the capacities and the performance of the SSAI.

Progress was made with the appointment of the Ombudsman in December, a key priority of the Opinion, which required reinforced majority in parliament. The open and transparent process resulted in a consensual decision in the parliament. A second regional office has been established in Fier. The institution needs sufficient financial and human resources, as well as continuing political support, to be able to fully implement its core duties.

Overall, there has been progress in public administration reform (a key priority of the Opinion) mainly through the adoption of the Laws on Administrative Courts and on the Organisation and Functioning of Public Administration as well as through the appointment of the Ombudsman. It is now essential to adopt the amendments to the Civil Service Law. Further efforts are needed to implement the adopted legislation and administrative acts. The legislative and institutional framework for public administration is still marked by deficiencies that need to be addressed with a view to strengthening professionalism, depoliticisation, meritocracy, transparency and accountability.

Judicial system (See also Chapter 23 – Judiciary and fundamental rights)

There has been moderate progress in judicial reform, which is a key priority of the Opinion. Implementation of the July 2011 cross-cutting Judicial Reform Strategy and the relevant Action Plan, revised in March 2012, has started. There are concerns over interinstitutional cooperation, budget allocations, budget planning, and the level of human resources in this sector. Albania needs to further accelerate the implementation of the judicial reform strategy in order to ensure the independence, efficiency and accountability of its judicial institutions.

A number of working groups were set up within the Ministry of Justice (MoJ) to review key legislation in the justice sector. Adoption of these laws requires a reinforced majority vote in parliament. The Law on Administrative Courts was adopted in May for implementation next year, and the Laws on the National Judicial Conference and the Profession of Lawyer were adopted in July and September respectively. The Law on Administrative Courts provides for first instance administrative courts to be set up at central and regional level, and for a court of appeal and a dedicated chamber in the High Court. This should ease the case burden of other courts and allow specialised judges to deal with administrative cases, provided that the necessary resources are allocated.

Some progress has been made with regard to the independence and impartiality of the judiciary. A set of new rules governing transfers of judges on the basis of their merits and other objective criteria was adopted in September 2012. Reform of the laws on the High Court and the Constitutional Court are still pending. The process of appointing judges to these courts remains an issue of concern due to possible politicisation. The neutrality and independence of these institutions are still not fully guaranteed.

A countrywide evaluation of judges is under way. However, the new harmonised evaluation system has not yet been fully implemented. This has had an impact on the Commission’s work on transfers, promotion and the appointment of judges, as it still needs to be demonstrated that these are based on merit and subject to accountability.

A new Vice-President of the High Council of Justice (HCJ) was appointed in August. Given the importance of the HCJ, its administrative and organisational structure needs to be reviewed urgently in order to increase its efficiency, accountability and transparency.

The School of Magistrates is providing good quality curricula, including training courses on ethical issues. However, the school’s budget remains insufficient to cover its planned activities.

Further efforts are needed to extend the computerised system of management and random allocation of cases to all courts, in particular in Tirana, to achieve a uniform and harmonised system. This would also promote sound collection of statistics. Appropriate IT support for the courts is lacking, as is a strategic approach to further development of IT solutions in the judicial sector. An audio-recording system for court proceedings is gradually being introduced.

Publication of court decisions is still not systematic. Decisions are published with delays, in a way that is not consistent between the courts, and, in some cases, does not provide adequate protection of personal data. However, as from July, specific provisions entered into force on the processing and publication of personal data within the judicial system. Further, a new judicial web portal was created in July. The updating of an electronic database at the Judicial Documentation Centre remains problematic due to a lack of staff.

In relation to accountability in the judiciary, steps have been taken to address overlapping inspection powers between the inspectorates of the HCJ and of the Ministry of Justice through the implementation of a Memorandum of Understanding on inspections; yet, the risk of overlapping persists. Poor drafting of judgments, in particular insufficient reasoning, remains an issue of concern.

Good progress has been made in combating corruption within the judiciary through the adoption of constitutional amendments limiting the immunity of judges. The reform allows for the investigation and criminal prosecution of judges without prior authorisation. The implementation of these provisions should be carefully monitored and relevant amendments introduced in the Code of Criminal Procedure. Poor working conditions, a lack of adequate safety arrangements for courts and judges and generally low remuneration, plus the absence of adequate controls and the opaque system of appointments, promotions and transfers, continue to be key risk factors for corruption in the judiciary.

A code of ethics for judges is in place but effective implementation remains a challenge. Inspections have been carried out but further training and a concrete implementation mechanism remain essential. An online procedure allowing citizens to complain against judges and court proceedings was set up in May.

Limited progress was made regarding the efficiency of the judiciary. Although a study on the possible territorial reorganisation of courts and reallocation of the number of judges in the courts was made, implementation of its conclusions was delayed. Court efficiency is also hindered by the absence of an accurate civil registry and a proper address system.

The lack of a comprehensive legal framework on judicial administration in line with European standards, with clearly organised courts and judicial staff, hampers the transparency and efficiency of court activities. Hearings often continue to be held in judges’ offices and little progress has been made in improving working conditions in courts. This can have a negative effect on the impartiality of the proceedings. Some progress has been made regarding the training of chancellors, court officers and judicial administrators and a budget has been allocated for continuous training activities. However, the overall budget allocated to courts and judicial staff needs to be increased to make the training sustainable.

Court management remains poor due to a lack of human and financial resources. The annual budget for the judiciary has barely increased. In 2012 it amounts to € 69.6 million, which represents 0.71% of the GDP.

Limited resources also contribute to the heavy workload in courts, including the Constitutional Court and the High Court, both of which have significant backlogs of cases. In the case of the High Court, the backlog is also a reflection of the Court’s very broad competence.

The Code of Civil Procedure and the Code of Criminal Procedure need to be amended to increase the efficiency of court proceedings. Both codes are currently under review. The new law on the profession of lawyer provides for enhanced procedures against lawyers in cases of professional misconduct. Further changes are needed to effectively address the problem of unreasonable delays in court cases, caused by postponement of court proceedings. These are often due to the absence of lawyers and/or prosecutors, in criminal cases, or by the absence of lawyers and/or witnesses, in civil ones. Court backlogs and the excessive length of proceedings undermine the efficiency of the judicial system. The Chamber of Lawyers lacks effective supervisory and training capacities.

Enforcement of court decisions remains weak, particularly in cases where state institutions are the defendants. Albania has yet to provide the Council of Europe with clear data on enforcement of decisions relating to restitution/compensation for property nationalised under the communist regime. The introduction of an effective remedy for the non-execution of final decisions is needed.

The new private bailiff system is in place and a budget for the National Chamber of Private Bailiffs has been allocated for the first time.

As regards the Law on Mediation, regulations on the activity of mediators and first licences have been issued. However, a Chamber of Mediators has not yet been set up. Amendments to the Law on Arbitration are awaiting finalisation and adoption.

The verdict in the so-called Gërdec case (the 2008 explosion which killed 26 people) was delivered in March. Five of the 29 accused were given prison sentences ranging from 6 to 18 years; the remainder received lower sentences or were acquitted. Appeal proceedings are pending. In a parallel development, the Constitutional Court overturned in May a High Court decision dropping charges against a former Defence Minister concerning his alleged role in the Gërdec case; the matter will now be reconsidered by the High Court.

In relation to the death of four demonstrators during the events of 21 January 2011, the criminal proceedings have so far led to the house arrest of a former commander of the National Guard and the pre-trial detention of an officer of the Guard for their alleged involvement in the shooting. One other person is under house arrest, and another has been acquitted, for obstructing justice by contaminating evidence. Investigations on the alleged involvement of opposition Members of Parliament in instigating the events are ongoing. These proceedings need to be completed by prosecution and courts without undue interference.

Overall, moderate progress has been made in addressing judicial reforms, which is a key priority of the Opinion. The judicial reform strategy and the relevant action plan of March 2012 have started to be implemented. The Law on Administrative Courts, the Law on the National Judicial Conference, and the Law on the Profession of Lawyer have been adopted. Steps have been taken to restrict the immunity of judges. The new private bailiff system is operational. However, important legislation to further strengthen the independence, accountability and efficiency of the judiciary still awaits finalisation, adoption and implementation. In this respect, it is now essential that amendments to the Law on the High Court are adopted. Court organisation, transparency, case backlogs, and the rate of enforcement of decisions continue to raise concern for the efficiency of the judiciary, as does budget allocation. The proceedings to shed light on the events of the 21 January 2011 need to be completed through a credible judicial process. Good progress is reported in the fight against corruption in the judiciary, through the limitation of the immunity of judges. Albania needs to further accelerate the implementation of the judicial reform strategy in order to ensure the independence, efficiency and accountability of its judicial institutions.

Anti-corruption policy (See also Chapter 23 – Judiciary and fundamental rights)

Moderate progress was made regarding policies to fight corruption, which are a key priority of the Opinion. The implementation of the anti-corruption strategy and specific measures in different sectors and areas under the 2011-2013 action plan has continued, albeit slowly. Reports on the implementation of the action plan, including from line ministries and other relevant institutions, are not yet published on a regular basis.

There has been moderate progress in strengthening the legal framework. This includes the implementation of recommendations of the Group of States against Corruption (GRECO) related to incrimination and political party financing. Amendments to the Criminal Code on acts of corruption by foreign officials and on imposing major penalties for corruption in the private sector were adopted in March 2012. Regarding political party financing, the Central Election Commission adopted a decision in January 2012 to fulfil the GRECO’s latest recommendation.

Amendments to the Law on Notaries were passed, introducing the digitalisation of notaries’ activities. The implementing legislation still has to be finalised and brought into force.

Some progress was made, through constitutional changes, to restrict the immunity of high-level public officials and judges, which is not only a fundamental obstacle to proper investigation into possible corruption cases in Albania but also contributes to the wider public perception of persistent impunity of some members of society in this area.

The Department of Internal Control and Anti-Corruption (DIACA) does not have sufficient institutional independence, authority and administrative capacity to accomplish its tasks. Weaknesses in cooperation between DIACA and other institutions are reflected in a lack of progress in its reporting, coordination and monitoring activities. Limited staff, particularly experts specialised in prevention and prosecution, and a lack of financial resources remain a serious constraint on the DIACA’s work.

Efforts were made to improve interinstitutional cooperation. Two interinstitutional working groups were set up to exchange information and devise a standardised format for a consolidated data system for criminal offences involving corruption and organised crime. The High Inspectorate for Declaration and Audit of Assets (HIDAA) signed a Memorandum of Understanding (MoU) with the Supreme State Audit, aimed at setting up a database on suspected corruption in the public administration. An MoU has also been signed with the Ombudsman. MoUs were signed between HIDAA and the Immovable Property Registration Office (IPRO), the Agency for the Legalisation, Urbanisation and Integration of Informal Areas/Constructions (ALUIZNI) and the Ministry of Justice respectively in order to facilitate exchange of information on immovable properties. MoUs between HIDAA and both the High Council of Justice and the High Court have not yet been drafted. An analysis of the implementation and effectiveness of existing agreements needs to be conducted. On 6 June 2012, a Council of Ministers decision established that all notaries and General Prosecution will have access to the real estate registry.

Amendments to the Law on the Prevention of Conflict of Interest in the Exercise of Public Functions and the Law on the Declaration of Assets and Audit of Assets and Financial Obligations of Elected and Some Public Officials were adopted. The changes to these laws aim to strengthen the competence and authority of HIDAA in this area and introduce certain legal improvements facilitating investigations.

The Financial Investigation Unit has signed agreements on exchanging information with the customs service, the Immovable Property Registration Agency and the vehicle registry. The implementation of this agreement and the actual degree of access to information needs to be checked. Digitalisation of the relevant information remains a challenge. No progress was made in setting up a central registry of bank accounts.

Joint Investigative Units (JIU) continued to be good instruments for investigating and prosecuting corruption cases. The HIDAA made progress in the detection of suspicious declarations; there have been some police investigations of corruption cases and prosecution of low and mid-level officials has increased. However, convictions in corruption cases remain rare. There is not yet a convincing track record of investigations, prosecutions and convictions in corruption cases at all levels including senior officials. A lack of expertise in financial investigations and of technical equipment for special investigative measures hampers the effectiveness of investigations in corruption cases. A particular concern is the general culture of a reactive approach to investigating corruption cases and the almost complete lack of proactive investigations. Intelligence from different sources has not systematically been followed up on and risk assessment is not systematically used.

Limited human and financial resources remain a constraint for the Joint Investigative Units, the HIDAA, the Prosecutor’s Office and the different departments dealing with anti-corruption measures. Internal control departments often lack specialist expertise and remain insufficiently focused on fighting corruption. The level of cooperation between law enforcement agencies, in particular between the police and prosecutors, remains insufficient. Institutions in charge of investigations, inspections, and sentencing remain vulnerable to political pressure and undue influence. Civil society still plays a limited role in the fight against corruption. Criminal statistics and statistics on conflict of interest cases need to be strengthened.

The new code of ethics adopted by the General Director of Taxes was published and disseminated. However, corruption in tax services, and particularly tax inspection, is an issue of great concern that seriously affects the business environment. Cameras have been installed at several customs border points. The effectiveness of such systems needs to be checked in the absence of other more targeted measures to fight customs corruption. There are not enough checks on tax and customs officers’ assets.

The overall planning and implementation of anti-corruption measures in the justice system remains insufficient. There is not yet a track record of disciplinary measures against judges or sound auditing of judges’ assets. Corruption in the judiciary remains a particularly serious problem as the judiciary should be one of the key institutions in the fight against corruption.

As part of the school curriculum, a manual for teachers has been drafted as a pilot to raise awareness of relevant corruption risks. However, corruption in the education system remains an issue of concern especially in higher education establishments, which are insufficiently inspected. In the health sector, the effectiveness of anti-corruption measures is called into question by insufficient monitoring of reporting requirements, such as those on the use of medicines in hospitals. Bribery of medical personnel is still inadequately followed up on.

With regard to specific preventive measures such as awareness-raising initiatives, progress is limited. Existing ‘green’ lines and e-templates to report cases are insufficiently focused on fighting corruption and have yet to produce meaningful results.

Overall, moderate progress was made in the fight against corruption, which is a key priority of the Opinion. Steps were taken to restrict the unlimited immunity of high-level public officials and judges. Some efforts were made to improve interinstitutional cooperation, exchange of information and the prosecution of generally low and medium-level cases. However, the absence of a proactive approach and lack of resources and equipment continue to obstruct effective investigations. There is no adequate track record of investigations, prosecution and convictions at all levels. Corruption is prevalent in many areas and continues to be a particularly serious problem.

2.2. Human rights and the protection of minorities (See also Chapter 23 – Judiciary and fundamental rights)

Observance of international human rights law

Albania made progress in acceding to international human rights instruments by signing the Council of Europe Convention on Preventing and Combating Violence against Women and Domestic Violence in December 2011. Its ratification, and that of the UN Convention on the Rights of Persons with Disabilities, signed in December 2009, is pending. Delays in application and non-compliance with judgments of the European Court of Human Rights (ECtHR), particularly in relation to property rights and the right to a fair trial, continue to be an issue of concern. During the reporting period, the ECtHR delivered judgments on eight applications finding that Albania had violated rights guaranteed by the European Convention on Human Rights (ECHR). A total of 98 new applications have been submitted to the ECtHR since September 2011, bringing the total of pending applications to 379.

As regards promotion and enforcement of human rights, the new Ombudsman has taken on a proactive role since his appointment. However, the Ombudsman’s Office still has difficulties in securing sufficient funding to fulfil its legal obligations, notably for monitoring visits. The Office of the Commissioner for Protection from Discrimination (CPD) has focused its activities on awareness raising and strengthening the capacity of its staff. Cooperation agreements have been signed with line ministries and the Commissioner has started to systematise case management. Nonetheless, the number of cases handled by the Commissioner remains relatively low. Albania’s respect for human rights continues to be monitored by international bodies.

Civil and political rights

There has been progress in the prevention of torture and ill-treatment and the fight against impunity, which is part of a key priority of the Opinion. The General Directorates of Prisons and State Police have carried out thematic training courses and inspections. The General Directorate of the State Police set up a working group to address the Ombudsman’s recommendations and started cooperating with two NGOs for the provision of training and monitoring of police premises. Amendments to the handbook on the rules and treatment of arrested and detained persons in police stations were adopted and a new electronic database for escorted and arrested persons introduced. A new form was introduced, based on the Istanbul Protocol, for medical staff to document cases of ill-treatment in the prison system and a sample register model for treating complaints of escorted and arrested persons in police stations was approved. Some police holding cells which were in very poor condition have been taken out of use. However, some cases of ill-treatment and excessive use of force have still been reported and conditions in some prisons and police holding cells remain below standard. Despite the positive trend in this field, there are still reports that procedures for processing accompanied or arrested persons were not systematically observed. Cases of ill-treatment continue to be often handled through administrative rather than judicial procedures. The majority of the Ombudsman’s recommendations in this field were addressed to the State Police. There has been an increase in follow-up of the Ombudsman’s recommendations, yet a number of recommendations remain unimplemented or partially implemented.

Joint work between the Ministries of Justice and Health led to a decision to build a dedicated special medical institution for treating mentally ill offenders, including those under mandatory treatment. However, it will take time for this facility to be established and concerns remain over the currently insufficient specialist care and treatment for this category of patients. The Law on Mental Health was adopted in April 2012.

In June 2012, the Albanian State Police launched a database of persons directly involved in blood feuds. This could help to address the lack of reliable data in this area. More decisive action by the authorities is needed to address this problem. At the end of 2011, concern arose over the issuing of false blood feud certificates by a civil society organisation enabling application for asylum in some EU Member States.

Progress has been made concerning the prison system, with continued implementation of training programmes, an increase in the activities offered to prisoners and a general improvement in the standards of treatment of detainees. Increased follow-up of the Ombudsman’s recommendations has had a positive impact on detention conditions. Over recent years, several new penitentiary facilities have been built which need to be sustained through adequate maintenance budgets. Adoption of the regulation for penitentiary infrastructure planning is pending. Prisoners’ living standards continue to vary according to the availability of food or equipment provided by their families. Installation of locked cabinets has improved confidentiality of personal medical data which needs to be ensured through continued training of prison staff on safeguarding detainees’ right to privacy and confidentiality. Progress on replacing individual padlocks, a safety hazard, with more modern systems is slow.

The establishment of the Probation Service has had a positive impact on reducing overcrowding and preventing reoffending. Four new regional offices were open in January 2012 and plans for developing the Service, including hiring additional probation specialists, have been approved. This will help reduce the case-load per specialist and improve the functioning of the Service. The Law on Electronic Monitoring of Offenders came into force in April 2012 and a tender was launched to select an electronic monitoring provider. Continued over-use of pre-trial detention for low-risk offenders and juveniles remains a concern.

Little progress was made as regards access to justice. The implementation of the Law on Free Legal Aid has been slow due to insufficient budgetary allocations and a lack of coordination between relevant institutions. Additionally, neither the bylaws regarding the recruitment of free legal aid lawyers nor the procedures to request free legal aid are implemented effectively. The State Commission for Legal Aid has handled few cases and public awareness of the law and the Commission’s services is insufficient, including among local government staff working with vulnerable groups. Access to justice for vulnerable groups is not ensured, notably due to the high judicial administration fees. The excessive length of judicial proceedings remains a concern.

Freedom of expression is generally upheld in Albania. Good progress was made as regards defamation with the adoption in March 2012 of the amendments to the criminal and civil codes abolishing prison sentences and special protection of public officials. However, defamation remains a criminal offence, exposing journalists to potentially high fines. The moratorium on the use of defamation suits by government officials against journalists continues to be generally implemented. On the other hand, the number of defamation proceedings between politicians, notably MPs, raises concerns. The adoption of the law on Audiovisual Media Services has been further delayed. The public broadcaster’s editorial independence from the government has not been strengthened. The government is still directly interfering with managerial appointments. The monthly public broadcasting fee has increased but the fee collection system is still not sustainable and needs to be reviewed.

Economic pressure on the media market has further increased, affecting the already precarious labour conditions of journalists. A high number of journalists work without formal employment contract, which has a direct impact on self-censorship. There is still no self-regulatory body and the capacity of journalists’ trade unions remains weak. As regards the audio-visual and print media market, ownership transparency has improved but sources of financing remain opaque. Editorial independence continues to be hampered by private political and economic interests. There are concerns that public advertising is directed to television channels that are supportive of the government.

Freedom of assembly and association has generally been respected. The reporting period was marked by several demonstrations by citizens (former political prisoners, property claimants, disability organisations) and rallies by political parties. As regards civil society organisations, difficult access to financial sources, particularly affecting small NGOs in rural areas, still limits the capacity of Albanian civil society for advocacy and networking. The Agency for Support to Civil Society published its third call for proposals in November 2011 with a relatively short deadline for applicants to acquire and prepare the necessary documentation. No progress has been made in alleviating the conditions for voluntary activities in NGOs or improving the overall fiscal environment for NGOs. Social assistance and community-based services provided by Albanian NGOs suffer from a lack of public funding. As regards institutions’ cooperation with civil society, dialogue needs to be further strengthened at central and local levels. Civil society is regularly involved in the policy development process and in legislative drafting but consultation is often a formalistic process which falls short of true cooperation.

Freedom of thought, conscience and religion continued to be respected. All five official religions continue to receive support from the state budget. Discussions on urban plans for new religious buildings in the capital continued.

Economic and social rights (See also Chapter 19 – Social policy and employment)

There has been some progress regarding women’s rights and gender equality, which is part of a key priority of the Opinion. Albania has started to implement the 2011-2015 national strategy on gender equality and the fight against domestic violence and gender-based violence, for instance by drafting an action plan including costing and training courses for ministerial gender equality employees. In July 2012, a Council of Ministers decision on gender mainstreaming in the medium-term budget programme for all line Ministries was approved. Coordination between central and local government and awareness of the requirements of the Strategy need to be improved. The network of full-time gender equality officers consists of 17 persons in municipalities and 2 in line ministries. Women continue to be under-represented in policy-making and politics. Electoral code amendments approved in August 2012 included increased penalties for parties not respecting the gender quota while not providing for rejection of lists that are not in line with the quota. Stricter application of the gender quota is necessary in view of preparation for the next parliamentary elections. Implementation of existing laws and policies on women’s rights needs to be stepped up.

Amendments to the Criminal Code introducing sanctions of up to five years of imprisonment for the specific offence of domestic violence were adopted in March 2012. Awareness-raising has led to an increase in domestic violence cases reported to the police. The process of strengthening the network of National Referral Mechanism for victims of domestic violence is on-going, albeit at a relatively slow pace. However, the system of assistance to victims is not fully professional, with staff often not sufficiently specialised and unaware of some policies implemented by the central government. The national shelter for victims is operational but still relies to a large extent on external funding. Serious concerns over the running of the shelter led to changes in management which have had a positive impact on the protection of victims. Domestic violence still remains widespread and the need to strengthen the protection of women against all forms of violence remains. Albania remains a source country for trafficking in human beings and recent improvements need to be complemented with a victim-centred approach, including reintegration services and witness protection.

There has been uneven progress in the area of children’s rights, which is part of a key priority of the Opinion, with policies in place but implementation remaining slow and largely reliant on external assistance. In April 2012 the action plan of the national strategy for child protection 2012-2015 was approved, and implementing measures for the Law on the Protection of the Rights of the Child were adopted. The signature of a joint order of the Ministers of Interior and Labour, Social Affairs and Equal Opportunities in August 2012 aims to increase coordination for effective management of cases of children at risk of abuse. There are currently 11 child rights units at regional level and 62 child protection units (CPUs) at municipal and commune level. A programme addressing corporal punishment and psychological violence in schools has been launched. The National Council for the Protection of the Rights of the Child has so far been convened once. There is systematic reliance on civil society organisations to provide child protection services at local level. Dependence on donors puts into question the sustainability of such structures and there is a need to ensure that decentralised management of policies is matched with adequate resources at local level. Coordination between central and local governmental structures needs strengthening. No progress was made regarding monitoring and support to children who leave residential childcare institutions at the age of 15. A Council of Ministers Decision approved in April 2012, aiming at increasing the number of children in foster care, provides for the State to cover the full costs of foster care for all eligible children from September 2012. The juvenile justice strategy and action plan have not been adopted. Over-use of pre-trial detention for juveniles is a serious concern, with a majority of juveniles spending their whole sentence in pre-trial detention. Introducing legal provisions on children under the age of criminal responsibility and on juvenile witnesses and victims of crime is needed. Internal trafficking in human beings, child begging and informal child labour remain issues of concern and need to be addressed consistently.

There has been limited progress in the implementation of policies targeting the socially vulnerable and/or persons with disabilities, which falls under the key priority on anti-discrimination. The inter-ministerial working group drafted and held consultations on a framework law on the rights of persons with disabilities but it has yet to be adopted. There continues to be unequal access to rights due to the differentiated status of certain groups and the lack of official status for certain disabilities. Implementation of the national strategy on persons with disabilities continues to be inadequate and the quotas for employment stipulated by the Law on Employment Promotion are not enforced. The Law on the status of blind persons and the Law on the status of paraplegics and tetraplegic persons were amended in March 2012. Some associations of disabled persons have protested against the introduction of new criteria and procedures for disability benefits related to energy, public transport and telephone bills that were prompted by previous abuses of the scheme. The amendments to the Law on Social Assistance and Services led to the revision in February 2012 of the decision defining criteria, procedures and amounts of general social support payments, thus excluding persons with disabilities from benefiting at the same time from the economic aid and disability allowances. The Law on Pre-University Education adopted in June provides for assistant teachers in classes with children with disabilities. Until now, many children with disabilities have not been integrated into the public education system.

Moderate progress has been made regarding the implementation of anti-discrimination policies, which is part of a key priority of the Opinion. In April 2012, the Office of the Commissioner for Protection from Discrimination (CPD) launched a strategic plan for 2012-15 and an action plan for 2012. The CPD focused on capacity building and awareness-raising and was consulted on draft legislation. Public knowledge of the Law on Protection from Discrimination and awareness of the right to appeal to the CPD remain low. There remains under-reporting of potential cases of discrimination. In the reporting period, the CPD handled 41 cases, including 11 ex-officio investigations. The CPD imposed an administrative sanction in one case. There is a need to build a track record of cases brought to final completion to encourage potential victims to bring their cases to the Commissioner.

An inter-ministerial working group, with civil society participation, has drafted a plan of measures for non-discrimination on the basis of sexual orientation and gender identity 2012-2014. NGOs ran a training course on the rights of lesbian, gay, bisexual and transgender persons (LGBT) for the public administration. A diversity festival was organised by civil society and financed by donors, with presence of the State authorities, in Tirana on 17 May 2012, to mark the International Day against Homophobia and Transphobia. In the run-up to this event, derogatory homophobic statements were made by a member of government and a political party representative. The Prime Minister denounced these statements, and the Commissioner for Protection from Discrimination investigated the cases and issued recommendations. LGBT persons continue to suffer from discrimination and difficulty in accessing social and health services, notably for transgender persons.

Labour and trade unions rights have generally been respected. Dialogue has been launched with the trade unions on the criteria for membership of the National Labour Council. Trade unions reported that state institutions were unwilling to sign collective agreements in the public sector. Collective bargaining in the private sector remains underdeveloped. Gaps remain in the enforcement of legislation on child labour.

As regards reforming the legal and institutional framework in the area of property rights, a key priority of the Opinion, a new law has been approved on registration of immovable property, which reorganises the Immovable Property Registration Office (IPRO) as a self-financing institution and contains provisions on digitalisation of property registration. Amendments were made to the law on restitution and compensation for property, setting new criteria for land evaluation and extending the deadline for property restitution and compensation to 2014. A new Directorate for Coordination has been set up in the Ministry of Justice.

A cross-cutting strategy and action plan for reform of property rights was adopted, following technical discussions with the donor community and the presentation of the draft to some stakeholders. The strategy aims to complete initial registration and consolidate an electronic public register for properties, complete the processes of restitution, compensation and legalisation, create an efficient compensation scheme and a physical and financial fund for people whose property has been expropriated, contribute to fighting corruption in the sector, and modernise the information system on property rights. Legislation in force and future initiatives in this sector have to be fully coordinated with the objectives of the strategy. Territorial planning, institutional coordination and interrelations, and the setting up of efficient monitoring and implementation structures remain significant challenges in this respect. Broader consultations of stakeholders accompanied with determined action are needed to ensure sustainability in the implementation of the strategy.

The land registry has not yet been completed and land and property databases remain under the control of different agencies without sufficient coordination. Initial registration of immovable property needs to be completed to create certainty of ownership. Legal impediments must be removed to facilitate registration, giving owners clear and undisputed title to property. Compensation and restitution claims by former owners for property confiscated during the communist regime are met at a very slow rate. The Government has yet to communicate a clear timetable for enforcement of ECtHR judgements regarding property rights.

Respect for and protection of minorities, cultural rights

Inter-ethnic relations remained good overall, despite very limited progress in enhancing the legislative and policy framework for the protection of minorities. The Third Opinion of the Advisory Committee of the Framework Convention for the Protection of National Minorities (FCNM) was published on in June 2012. The Opinion recommends the adoption of a comprehensive legislation on minorities. This would help address identified legal gaps and the legal fragmentation in this sector and clarify state policy towards minorities, including establishing proper legal criteria for the recognition of minorities and ensuring effective access to rights for all minorities. The mandate and capacity of the State Committee for Minorities have not been reviewed.

The population and housing census, which included optional questions on ethnic origin and religious affiliation, took place in October 2011. The full results have not been published yet and it is important that the processing of data be carried out in accordance with EU standards. Insufficient clarity over the scope of application of fines for refusal to declare or false declarations included in the census law resulted in calls for boycott on the part of some minority organisations, which, according to preliminary data, were not widely followed. In December 2011, the Constitutional Court issued an explanatory report on its decision on unconstitutionality of the inclusion of ‘nationality’ (ethnicity) in the civil registry, focusing on the constitutional principles of non-obligation to declare ethnicity and of protection of sensitive personal data. This decision was criticized by representatives of the Greek minority who have called for full respect for the principle of self-identification. It remains to be seen how access to specific rights related to this civil registry entry will be guaranteed. Regarding cultural rights, public education in minority languages is still not available for all minority groups and Albania has not adopted the European Charter for regional and minority languages.

Very limited progress was made as regards Roma inclusion, which is part of a key priority of the Opinion. The government has approved administrative decisions to facilitate birth registration procedures; however, there continues to be insufficient coordination between different institutions involved in the registration of births. Roma have benefited from the distribution of free textbooks for compulsory education but financial constraints lead to continued high rates of school drop-out and low enrolment of Roma children in pre-school education.

Implementation of the national strategy on improving Roma living conditions, the national action plan for the Roma Decade and the operational conclusions of the December 2011 seminar on inclusion of the Roma and Egyptian communities in the framework of Albania’s EU integration continues to be very slow, due to inadequate resources and insufficient coordination of the institutions involved at local and central level. There is a need to upgrade the status of the Roma Technical Secretariat to enhance its capacity to effectively enforce and coordinate implementation of policies. Technical working groups on Roma are established in 10 regions to monitor, evaluate and make plans to improve Roma living conditions. However, local government units are still insufficiently involved and aware, with critical services for Roma still being largely provided by civil society organisations and financed by international donors, which may put into question their sustainability in the medium term.

The Roma still face very difficult living conditions and frequent discrimination, particularly regarding access to employment and adequate housing, leading to marginalisation. Despite much attention from the international community, civil society and the Ombudsman and some limited efforts by the government, the response of the central and local authorities’ towards relocating and assisting the remaining Roma families from those forcibly removed from their settlement near Tirana train station in February 2011 has been largely inadequate. Preparations for infrastructure projects are heightening the risk of such evictions. Central and local governments need to develop intervention plans to address forced evictions and ensure alternative housing for families in vulnerable situations.

Overall, there has been moderate progress in the field of human rights and the protection of minorities.

There has been progress towards meeting the key priority that calls for improving the treatment of detainees, for strengthening the judicial follow-up of cases of ill-treatment and application of the Ombudsman’s recommendations. Measures have been taken to improve conditions of detention and strengthen cooperation with the Ombudsman. Some cases of ill-treatment are still reported and police do not systematically follow proper procedures for arrest and custody. Living standards in prisons still vary. There are plans for establishing a special medical institution for mentally ill detainees, but the need for additional specialised care and improving treatment remains. Delays in court proceedings and the as yet insufficient resources of the Probation Service continue to lead to over-use of pre-trial detention.

Progress towards meeting the key priority that calls for reinforcing the protection of human rights notably for women, children and Roma and effective implementation of anti-discrimination policies has been uneven. Amendments to the Criminal Code on domestic violence are a positive step. Implementation of policies for child protection needs to be strengthened. There is a need to adopt legislative measures for persons with disabilities and to review legislation in view of addressing potentially discriminatory provisions against LGBT persons. The Commissioner for Protection from Discrimination has worked on raising awareness but additional efforts are needed to establish a track record of cases brought to final completion. There is still discrimination against certain vulnerable groups, such as LGBT persons and Roma. Inter-ethnic relations remain good but no measures have been taken to address weaknesses in the overall legislative and institutional framework in the field of minorities. Implementation of policy tools for Roma inclusion and access of this community to social protection and services are still insufficient, leading to marginalisation. Policies in the field of human rights are largely supported by civil society and donors. It is important for Albania to prioritise policies in these areas in order to ensure sustainability.

Some progress was achieved in the area of property rights, notably through the adoption of a new law on the registration of immovable property and through the adoption of a cross-cutting strategy and action plan for reform in the field of property rights, a key priority of the Opinion. Efficient coordination and monitoring is necessary to ensure the implementation of the strategy and consistency between legislation in force and future initiatives. Consultations with stakeholders need to continue in this respect. The first registration of properties has not yet been completed. Compensation and restitution claims by former owners are met at a very slow rate.

2.3. Regional issues and international obligations

The Council of Europe (CoE) has continued to monitor the extent to which Albania is fulfilling its membership obligations and has closely followed political developments in the country through specialised CoE bodies and through its permanent external office in Tirana, headed by a special representative of the Secretary General. In May 2012, Albania took over the chairmanship of the Committee of Ministers of the Council of Europe.

Albania has cooperated fully with EULEX to allow full investigation of allegations raised in the resolution adopted by the Parliamentary Assembly of the Council of Europe. In May 2012, parliament unanimously adopted a special law allowing EULEX investigators to carry out investigations on Albanian territory.

Albania maintains a 2003 bilateral immunity agreement with the United States granting exemptions from the jurisdiction of the International Criminal Court. This does not comply with the EU Common Position 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 European Union. Albania continued to take an active part in regional initiatives, including the South East European Cooperation Process (SEECP), the Regional Cooperation Council (RCC), the Energy Community Treaty and the European Common Aviation Area Agreement. Albania holds the chairmanship of the Central European Free Trade Agreement (CEFTA) in 2012 and the chairmanship of the Multinational Advisory Group of the RACVIAC-Centre for Security Cooperation. As a result of an initiative launched by Albania in the framework of its MARRI (the Migration, Asylum, Refugees Regional Initiative) presidency, an agreement entered into force between Albania, Montenegro and the former Yugoslav Republic of Macedonia to ease border crossing procedures between the countries. Nationals of these countries are now able to travel between them with biometric identity cards for a period of up to three months.

Albania continued to act as a constructive partner in the region, further developing bilateral relations with other enlargement countries and neighbouring EU Member States.

Relations with Bosnia and Herzegovina remained good. A bilateral agreement allowing travel for respective citizens with biometric ID cards only is under preparation.

Relations with the former Yugoslav Republic of Macedonia continued to develop, with the entry into force of agreements on travel by citizens between the two countries and on cooperation as part of the EU accession process. An agreement was signed on setting up a joint centre for the exchange of information between their respective border and migration police corps.

Cooperation intensified with Montenegro in economic and trade relations. The two countries initialled an agreement on cooperation in education and signed an agreement on recovery of Albania’s debt to Montenegro, an agreement on opening a joint border crossing point and a cooperation plan on defence.

Relations with Serbia remained good. Several high-profile bilateral meetings took place. An agreement on veterinary co-operation was signed in April 2012. A readmission agreement and an agreement on reciprocal movement of citizens were also signed.

Albania continued its very good relations with Kosovo, with which it signed protocols on border police cooperation, including joint patrolling.

Albania continues to have good relations with Croatia and with Turkey.

Relations with neighbouring EU Member States Greece and Italy remained very good. Regarding the maritime border agreement with Greece, there are no developments to report.

Overall, Albania continued to play a constructive role in contributing to the stability of the region. Albania continued to implement the Stabilisation and Association Process conditions in this regard.

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.

3.1. The existence of a functioning market economy

Economic policy essentials

Despite a generally polarised political landscape, the main parties agree on the key essentials of a market economy. Nevertheless, the political situation renders the adoption and implementation of structural reforms more challenging. The government’s main economic policy objective is still to preserve macroeconomic stability, which was broadly maintained. However, the increase in the fiscal deficit in 2011 led to a further rise in the relatively high public debt, aggravating Albania’s macro-financial vulnerability. Progress on structural reform remains insufficient. In particular, the privatisation programme has practically stalled and the institutional set-up to protect property rights and enforce the rule of law is weak. Albania submitted its sixth Economic and Fiscal Programme, covering the period 2012-2014, in February 2012. The programme presents an optimistic medium-term macroeconomic scenario. The treatment of risks to the budgetary outlook and the structural obstacles is still insufficient. Overall, the consensus on the main fundamentals of a market-oriented economy was maintained.

Macroeconomic stability

According to provisional data, economic growth decelerated to 3.1% in 2011 from 3.8% a year earlier. Domestic demand was the main driver of GDP growth, spurred by gross fixed capital formation, which rose by 3.6%. Private consumption growth slowed down to 2.6%, suppressed by weak lending to households and a further decline in workers’ remittances. The contribution made by net exports to GDP growth was negligible. The Albanian economy contracted by 0.2% year on year in the first quarter of 2012, driven by strong declines in industry and construction output, partly due to adverse weather conditions. As a result, electricity output declined leading to disruptions in the extractive sector. Agriculture and other services output increased. Consumption expenditure and investment remain weak partly reflecting the uncertain global economic situation. Per capita GDP in terms of purchasing power parity was estimated at 31% of the EU‑27 average in 2011, up from 28% in 2010. Overall, the Albanian economy continued to grow in 2011, driven by domestic demand, but economic activity practically stagnated in the first quarter of 2012.

The annual inflation rate averaged 3.5% in 2011 and remained within the Bank of Albania’s (BoA) target range of 2-4%. The main contributors to inflation were international food and fuel prices. Lower prices for imported food and the unwinding of base effects led to a deceleration of inflation in 2012, which reached a low of 0.6% in February. Inflation accelerated in the subsequent months, reaching 2.8% in August. The supervisory council of the BoA cut the key repo rate in five equal steps, starting from September 2011, by a total of 125 basis points to a multi-year low of 4%.

Notwithstanding several measures adopted by the monetary authorities, the level of euroisation in Albania remains high. Foreign-denominated loans stood at 68% of the total credit outstanding in 2011, of which more than half consist of un-hedged loans, while foreign currency-denominated deposits account for 50%. Such high euroisation constrains the room for manoeuvre of monetary policy and could be a potential source of instability in the financial system, since it could expose banks to currency mismatches or indirect credit risks.

Albania continued to pursue a free-floating foreign exchange rate system. The lek was more stable in 2011, compared with the previous year, depreciating by some 2% against the euro. During the first eight months of 2012, the Albanian currency appreciated marginally reaching 1.8% year on year in August. Overall, monetary policy remained sound, inflation kept within the target range and exchange rate stability was broadly preserved.

Labour market conditions improved somewhat during 2011, but unemployment remained high at 13.3%, down slightly from 13.7% in 2010. Employment grew on the back of private non-agriculture job creation. In the first half of 2012, employment continued growing although at a decelerating rate of some 1%. Unemployment remains persistently high, while long-term unemployment accounts for around three quarters of total jobseekers, reflecting its structural nature. Labour market statistics continue to be weak and are distorted by the large informal sector. Overall, labour market outcomes slightly improved. Although lower, unemployment remains persistently high.

The current account deficit widened to 12.2% of GDP in 2011, from 11.3% a year earlier, primarily reflecting a higher trade gap and a lower services account surplus. The large trade deficit increased to 23.8% of GDP in 2011, from 23% in 2010, due to a slowdown in exports and an increase in imports. Unfavourable weather conditions in the second half of 2011 dented Albania’s hydropower generation which resulted in a switch from exporting to importing electricity and disruptions in the extraction industries that lasted until the first quarter of 2012. The current account imbalance improved in the first half of 2012 as electricity output recovered in April and exports of goods turned positive which, together with a drop in imports, led to a lower trade gap. In addition, the services account posted a surplus in the first half of 2012 helped mainly by strong inbound tourism which more than offset a decline in remittances.

During 2011, net FDI inflows declined by 10%, reflecting the volatile global economic conditions, difficulties in neighbouring economies and the repatriation of capital which coincided with the fragile political climate in the country in the beginning of the year. As a result, FDI inflows covered some 65% of the current account imbalance, down from 78% in the previous year. Net FDI increased by some 30% in the first half of 2012, partly reflecting a favourable base effect caused by depressed inward investment figures in the corresponding period of the previous year. Higher FDI was reported in the oil extraction and banking sectors, the latter linked to bank recapitalisations. Although declining since 2010, Albania preserved a relatively comfortable level of international reserves at around 4.4 months of imports. Overall, the high current account deficit remains a source of vulnerability, especially in view of the potential adverse impact of the volatile global and regional economic situation on FDI and declining workers’ remittances.

The government deficit increased from 3.1% of GDP in 2010 to 3.5% in 2011, as planned, although only after a mid-year budget re-balance. Total revenue growth decelerated to 1.8% and stood at 25.1% of GDP, reflecting a lower tax yield amid weak consumer expenditure and a sharp fall in non-tax receipts. Following a contraction in 2010, total expenditure increased by 3.7% to 28.6% of GDP in 2011 as a result of higher capital outlays and social transfers. The 2012 budget envisages a fiscal deficit of 3% of GDP, based on an assumed real GDP growth of 4.3%. In the period January-July 2012, total government revenue increased by 4%, compared with the same period of the previous year, but was 5.4% lower than planned, partly reflecting optimistic projections. Expenditure was broadly in line with plans, although payment arrears are a cause for concern. In July 2012, the government adopted the 2013-15 medium-term budget programme (MTBP) based on a downward-revised GDP growth rate of 3% for 2012. The MTBP aims at maintaining total public debt at 60% of GDP and net borrowing not exceeding 3% of GDP in 2012. Domestic borrowing remains the primary source of deficit financing. Overall, the budgetary framework remains weak at the planning stage, reflecting optimistic revenue projections, and also at the execution stage.

The public debt increased from 58.5% in 2010 to 58.8% in 2011, including 3.7% of GDP in government guaranteed debt. In the first half of 2012, public debt continued to increase, reaching 59.4% of GDP. Albania’s relatively high and increasing public debt continues to show a short-term bias (50% of the debt has a maturity of one year or less) which requires frequent re-financing, although some three fifths of the debt is domestic. However, the bulk of the domestic debt is held by banks, which poses a risk if banks decide to reduce their exposure to government debt as a way to adjust their balance sheets. Any increase in interest rates would further limit the fiscal space. At such a high level, public debt remains a source of macro-financial vulnerability. Overall, the relatively high and increasing government debt remains a cause for concern. Further budgetary consolidation is needed to address this source of macro-financial vulnerability.

Some progress was made on improving the tax administration. The fiscal amnesty scheme, which aims to regularise undeclared assets and income, was introduced during the second half of 2011 and extended until the end of August 2012. Based on the preliminary results published in February, some € 10.7 million (0.1% of GDP) were collected as a result of the scheme. For the first time, the tax administration introduced an income declaration for taxpayers to file with the tax offices within 2012. The Laws on Excise was further aligned with the acquis while preparations for aligning the Law on VAT are advanced. The reference wages introduced in 2007 as a measure to reduce tax evasion will be removed while the frequency of profit tax payments by businesses has been reduced from a monthly to a quarterly basis. Despite these efforts, gaps remain in both revenue collection and administrative capacity. A fully-fledged tax compliance system is still lacking and enforcement continues to be weak, as does revenue collection at both central and, especially, local government levels. Some improvement was achieved in the VAT refund procedure during the first half of 2012; however, delays persist, putting an additional burden on businesses. Overall, some progress in the tax administration was achieved, but structural deficiencies remain.

Overall, macroeconomic stability has been maintained, as Albania was less affected by adverse external economic conditions. Monetary policy has successfully helped to keep inflation stable and anchor inflationary expectations. The high level of euroisation continues to limit the effectiveness of the monetary transmission channels. The relatively high and rising government debt limits the fiscal space and remains a source of macro-financial vulnerability. Essential structural reforms are still missing.

Interplay of market forces

According to official data, the private sector continues to account for 80% of GDP and employs about 82% of the labour force. No major privatisation took place during 2011. A law authorising the privatisation of Albpetrol — a state-owned oil company - was adopted by parliament in December, while a bidding deadline was fixed for September 2012. Preparations for the privatisation of the remaining state-owned shares of Albtelecom (16.75%) have started, although the bidding deadline was postponed to December. Privatisation of INSIG, a state insurance company, remains an objective for 2012, together with that of three hydropower plants owned by KESH, the state-owned electricity generation company. Regulated prices are estimated to account for 8% of the consumer price index (CPI). Some progress was achieved in the form of the adoption of a new water fee structure that, amongst other things, aims to align the tariff structure to ensure cost recovery. Overall, state involvement in the economy remains limited and mainly concentrated on energy, transport and water supply.

Market entry and exit

Business registration and licensing continued to perform well through the established network of one-stop shops. Some improvements were made in the business registration system by implementing the electronic commercial register for mergers and acquisitions and for the division and transformation of companies. A further reduction was recorded in the time and steps needed to start a business. E-procurement and e-tax filing are already in place and functioning. However, the procedure for granting building permits remains lengthy, delaying the revival of the ailing construction sector. The reform of inspectorates dealing with business and economic activities is at an early stage. No progress was made in the field of e-signature and no particular development can be reported towards implementation of the amended Law on Protection of Foreign Investors regarding property ownership.

No progress was made on reducing the timing and procedures for market exit, which remain slow. During 2011, about 3,900 requests for voluntary business closures were filed with the National Registration Centre (NRC). The structure of the Bankruptcy Supervisory Agency was approved in January 2012. The Agency’s performance remains to be assessed.

Overall, Albania has made good progress on facilitating business entry into the market. The procedures for market exit remain slow and ineffective.

Legal system

The national strategy and action plan on property rights was adopted in June. Little progress was made in the fields of land registration and of restitution of property to former owners. The process of initial registration of immovable property has not yet been completed. Overall, the lack of secure property rights and the weak institutions remain causes for concern and further efforts are required to address these issues.

Businesses still face delays in court procedures and the perception of widespread corruption in the justice system persists. Some improvement was achieved in collateral execution with the introduction of a private bailiff’s office. However, weak contract enforcement and execution of collateral remain major obstacles for businesses. Informal methods of contract enforcement, by-passing the legal system, are still widespread. The Law on the Establishment of Administrative Courts was adopted in parliament in May 2012. Overall, weaknesses in rule of law, incomplete reform of property ownership and corruption are continuing to have an adverse effect on the business environment.

Financial sector development

The financial system remains dominated by the banking sector, which accounts for 85% of GDP and comprises 16 commercial banks, which are all privately owned. The share of foreign ownership stands at some 90% of total assets. Despite the banks’ dominance, the share of bank lending stood at around 43% of GDP, suggesting that there is significant scope for stronger financial intermediation. Credit growth increased by 11.7% in 2011, up from 8.6% a year earlier. During 2012, lending growth decelerated to 7% year on year by July. Outstanding loans to non-financial corporations, which account for the highest share of total bank loans, grew by 15.4% year on year in December 2011 but decelerated in the first half of 2012, reaching 9.7% in July. Lending to households was weaker during 2011, shrinking at an increasing rate in the first seven months of 2012, mainly on account of lower foreign currency credit. The growth in the stock of lek-denominated credit outpaced that of foreign currency lending during 2011. This trend continued through July 2012, reflecting both moderate demand for credit as well as more conservative lending policies by banks. Still, around 68% of the total credit outstanding is in foreign currency, of which more than half consists of un-hedged loans, suggesting that the banking system remains vulnerable in the event of unfavourable exchange rate movements. Deposit growth decelerated to 14.5% in 2011, from 15.5% a year earlier, and slowed down further to 10.6% year on year by July 2012. The banking sector’s share of external borrowing in total liabilities followed an upward trend during 2011, increasing from 4.9% in December 2010 to 6.8% at the end of 2011, and then stabilised at 7% in the first half of 2012.

In general, the Albanian banking system remained capitalised and liquid. Following a decline in the first half of 2011, the capital adequacy ratio was restored to 15.6% by the end of the year, well above the minimum required. Nevertheless, non-performing loans continued to rise during 2011 and stood at 21.21% of total loans in June 2012. In response, the banking sector raised provisions from 10.8% of total loans at the end of 2011 to 12.2% in the second quarter of 2012 which, in turn, had an adverse impact on profitability. The process of execution of collateral has been slow, partly reflecting a weak judicial process, delaying the cleaning-up of banks’ balance sheets.

Several precautionary steps to strengthen the stability of the banking sector were adopted in 2011. The Law on Banks was amended in November 2011, giving the BoA new powers to ask branches of foreign-owned banks to convert into subsidiaries. In June 2012, the BoA adopted regulations on the creation of the ‘bridge bank’ facilitating a resolution in the event that a bank runs into difficulties. Furthermore, the regulatory and supervisory framework has been enhanced by means of more conservative regulatory limits, differentiated by currency, on banks’ liquidity indicators and guidelines on the obligations of the commercial banks to meet the minimum reserve requirements. Parliament adopted some amendments to the law on deposit insurance in July 2012. Overall, the banking sector remains well-capitalised and liquid. However, the high level of non-performing loans is a cause for concern.

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

Existence of a functioning market economy

Macroeconomic stability was maintained, as Albania was less affected by adverse regional and global economic conditions. Although positive, GDP growth decelerated and remained below historical averages. Despite slightly higher employment, structural imbalances in the labour market and the current account remain high. The government deficit worsened amid weak revenue and higher expenditure and, as a result, public debt increased. The relatively high level of public debt combined with its short-term structure remains a source of macro-fiscal vulnerability. The planned privatisation programme stalled. Some reforms to facilitate market entry were introduced, but efforts to ensure an orderly market exit for businesses slowed. Weaknesses remain in the rule of law, particularly in contract enforcement and property rights. Overall, although some progress was made on establishing a functioning market economy, Albania needs to consolidate its public finances and redu