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# 52011SC1205

**COMMISSION STAFF WORKING PAPER ALBANIA 2011 PROGRESS REPORT /\* SEC/2011/1205 final \*/**

  

TABLE OF CONTENTS

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

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

1.2........ Context.......................................................................................................................... 3

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

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

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

2.2........ Human rights and the protection
of minorities................................................................. 15

2.3........ Regional issues and international
obligations................................................................... 22

3........... Economic criteria.......................................................................................................... 23

3.1........ The existence of a functioning
market economy.............................................................. 23

3.2........ The capacity to cope with
competitive pressure and market forces within the Union........ 28

4........... Ability to assume the
obligations of membership............................................................. 30

4.1........ Chapter 1: Free movement of goods............................................................................. 30

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

4.3........ Chapter 3: Right of establishment
and freedom to provide services................................. 32

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

4.5........ Chapter 5: Public procurement...................................................................................... 35

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

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

4.8........ Chapter 8: Competition policy....................................................................................... 37

4.9........ Chapter 9: Financial Services........................................................................................ 38

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

4.11...... Chapter 11: Agriculture and rural
development.............................................................. 41

4.12...... Chapter 12: Food safety,
veterinary and phytosanitary policy......................................... 42

4.13...... Chapter 13: Fisheries.................................................................................................... 43

4.14...... Chapter 14: Transport policy........................................................................................ 44

4.15...... Chapter 15: Energy....................................................................................................... 46

4.16...... Chapter 16: Taxation.................................................................................................... 47

4.17...... Chapter 17: Economic and Monetary
policy.................................................................. 48

4.18...... Chapter 18: Statistics.................................................................................................... 48

4.19...... Chapter 19: Social policy and
employment.................................................................... 49

4.20...... Chapter 20: Enterprise and
industrial policy................................................................... 52

4.21...... Chapter 21: Trans European
Networks......................................................................... 52

4.22...... Chapter 22: Regional policy and
coordination of structural instruments........................... 53

4.23...... Chapter 23: Judiciary and
fundamental rights................................................................. 54

4.24...... Chapter 24: Justice, freedom and
security...................................................................... 59

4.25...... Chapter 25: Science and research................................................................................. 62

4.26...... Chapter 26: Education and culture................................................................................. 63

4.27...... Chapter 27: Environment.............................................................................................. 64

4.28...... Chapter 28: Consumer and health
protection................................................................. 66

4.29...... Chapter 29: Customs Union.......................................................................................... 68

4.30...... Chapter 30: External relations....................................................................................... 69

4.31...... Chapter 31: Foreign, Security and
Defence Policy......................................................... 70

4.32...... Chapter 32: Financial control........................................................................................ 71

4.33...... Chapter 33: Financial and
budgetary provisions............................................................. 72

Statistical Annex......................................................................................................................... 73

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 first
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 assume 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 2010 to September 2011. 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 Council invited the Commission to focus its
2011 progress report on implementation of these key priorities in particular.

1.3.
Relations between the EU and Albania

Albania is participating in the Stabilisation
and Association Process.

Overall, Albania has continued to smoothly
implement its obligations under the Stabilisation and Association Agreement
(SAA). It participated in the regular political and
economic dialogue between the EU and the country through the SAA
structures and contributed to the sound functioning of the various joint
institutions. Meetings of the Stabilisation and Association Committee and
Council took place in April and July 2011 respectively. All subcommittee
meetings were held in the reporting period. Furthermore, the multilateral
economic dialogue between the Commission, EU Member States and potential
candidate countries in the context of the pre-accession fiscal surveillance
took place at an expert meeting in May 2011.

Visa
liberalisation for Albanian citizens was granted by
the European Parliament and the Council as of 15 December 2010. It applies to
holders of biometric passports travelling to the Schengen area . This decision
was based on fulfilment of the specific conditions set out in the roadmap for
visa liberalisation. Implementation of the visa free regime has been smooth so
far. To ensure the continued implementation of the commitments, a post visa
liberalisation monitoring mechanism was established in view of increased
numbers of asylum seekers from the region. The Commission presented its first
monitoring report to the European Parliament and the Council in June 2011. An
agreement on readmission between the European Union and Albania has been in
force since 2006.

Pre-accession financial
assistance to Albania is provided under the Instrument for Pre-Accession
Assistance (IPA). Through IPA National Programmes, the EU allocated a total of
€ 83.2 million in 2010 and € 82.0 million for 2011. The year 2010 also saw
progress in the preparation of the Multi-Annual Indicative Planning Document
(MIPD) 2011-2013, which adopts a sectoral approach with the focus on Justice
and Home Affairs, Public Administration Reform, Transport, Environment and
Climate Change, Social Development, Agriculture and Rural Development. The MIPD
2011-2013 for Albania was adopted in July 2011. IPA assistance is implemented
by the EU Delegation in Tirana.

Albania
continues to participate in the implementation of three cross border
cooperation programmes at "internal borders" within the Western
Balkans (Montenegro, the former Yugoslav Republic of Macedonia, Kosovo[4]);
in one bilateral cross border cooperation programme with an EU Member State
(Greece); and in three multilateral programmes (including EU Member States),
i.e. in the ERDF European Trans-National Programmes South East European Space and
Mediterranean Space, as well as in the Adriatic regional programme.

IPA projects in
support of civil society in the period 2009-2011 focused on civil
society organisations dealing with the fight against corruption, organised
crime and human trafficking, with environmental protection and education, and
also with poverty alleviation. The Commission has reviewed the Civil Society
Facility to reach out more effectively to local community-based organisations,
to better target needs in each country and to provide longer-term seed-funding
to NGOs.

Albania
continues to participate actively in three EU Programmes: the 7th
Framework Programme (FP7) for research, technological development and
demonstration activities (2007-2013), the Entrepreneurship and Innovation specific
Programme (EIP) of the Competitiveness and Innovation Framework Programme
(2007-2013) and the Europe for Citizens Programme. IPA funds are used to meet
part of the costs of participation in all three programmes.

2.
Political criteria

This section
examines the progress made by Albania towards meeting the Copenhagen political
criteria, which require stability of institutions guaranteeing democracy, the
rule of law, human rights and respect for and protection of minorities.

It also
monitors 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

Albania's
domestic political scene has been dominated by the continuation of the
political stalemate and the partial boycott of Parliament by the opposition.
This political deadlock dates back to the June 2009 general elections. The
outcome of these elections, which were considered by OSCE-ODIHR as meeting most
international standards, although marked by shortcomings, was contested by the
Socialist Party. The violent incidents of 21 January 2011, which led to the
death of four demonstrators, amplified the climate of mistrust not only between
political forces but also vis-à-vis State institutions. The local elections of
8 May, as a result of the controversial vote count of misplaced ballots and
contested results in Tirana, further accentuated the polarization between
ruling majority and opposition. All of this diverted attention from much-needed
EU policy reforms. Against this background, the government made some efforts to
move ahead on the EU integration agenda, and in particular to prepare an action
plan to address the recommendations of the Commission's 2010 Opinion. These
efforts were mirrored by good cooperation between the ruling majority and
opposition on the Action Plan in the parliamentary committee for European
integration and joint work to achieve agreement on necessary reforms. Efforts
were also made to launch working groups on electoral reform, although these
stalled.

Parliament

Some modest progress was made in the
organisation of the proceedings of Parliament. This includes a limited number
of amendments to the Parliament's rules of procedure, some of which - such as
moving the free speaking time to the end of a Parliamentary session, are an
improvement over past practice. Other improvements include changes introduced
by order of the Parliament's Speaker in January 2011 such as those involving
chairpersons of parliamentary standing committees in the setting of the
parliamentary agenda, and the full transcription and publication of the minutes
not only of parliamentary sessions but of all parliamentary committee meetings.

In March 2011, the Parliament established a
committee of inquiry, with the support of a large majority of Members of
Parliament (MP), to investigate the management and activities of the leading
bodies and services of the Parliament during the period September 2005 to
December 2010. The committee held one meeting before the local government
elections in May.

However, parliamentary work continued to be
seriously hampered by the political stalemate between ruling majority and
opposition, the lack of constructive political dialogue and increased
confrontational rhetoric fuelled by the events of 21 January and the
controversial process and outcome of the mayoral election in Tirana. The
opposition ended its long boycott of parliamentary work on 5 September.

Due to the political deadlock, progress
regarding legislative scrutiny and the oversight function of the executive
remains insufficient. Some amendments to the rules of procedure, proposed and
adopted with votes of the ruling majority, include taking tougher disciplinary
measures against Members of Parliament. The inquiry committee into the leading
bodies and services of the Parliament has not been mandated to conduct an
analysis of the parliament's rules of procedure.

There have been some serious efforts to establish
inter-party cooperation in the European Integration Committee, chaired by the
opposition, in particular to work on the Opinion follow-up action plan. The
Minister and the Deputy Minister of European Integration reported a number of
times to the committee on European integration matters, which had not been the
case before. Agreement has not yet been reached on key reform steps and
measures to address the key priorities of the Opinion, which were included in
the opinion follow-up action plan.

On the whole, the proper functioning of
Parliament based on constructive and sustained political dialogue between all
parties – which is a key priority of the Opinion – is not yet ensured.

During the reporting period the Parliament
passed more than one hundred laws. However, the adoption of a number of
much-needed laws requiring a three-fifths majority, which is a key priority of
the Opinion, and where a consensus between majority and opposition is needed,
is still pending. The limited or interrupted cooperation between ruling
majority and opposition in parliamentary committees, the continuing restraints
on access to specialist expertise, although improvements have been made in some
cases, and further limited consultation with third parties, including civil
society, raise questions about the quality of adopted laws.

Several
measures were taken to strengthen the administrative capacity of the
parliament, including the recruitment of additional staff. Additional advisory
staff was provided to the Integration Committee in March 2011. Further steps
were taken to strengthen the Parliament's infrastructures and to facilitate
communication both within Parliament and with the public. A high quality
network was installed, and online broadcasting of plenary sessions and the modernisation
of other facilities contributed to increased transparency. However, there is
still lack of administrative capacity in Parliament, and the politicisation of
appointments which hampers the independence and professionalism of staff,
remain a cause for concern. Consultation of civil society in the legislative
process remains insufficient.

In June 2011, a
Constitutional Court ruling requested by the ruling majority concluded that
criteria for appointments to the Constitutional Court and High Court were to be
defined in cooperation between the President and the Parliament. The hearing
and voting process for presidential appointments, which has resumed after a
period of suspension, continued to be marked by politicisation and
confrontational rhetoric. Parliament has not yet ensured an orderly hearing and
voting process for constitutional and high court appointments, which is a key
priority of the Opinion.

No progress was
made in amending the legislative framework for elections in line with
OSCE/ODIHR recommendations, which is a key priority of the Opinion. In October
2010, the government initiated a cross-party round table to address the need
for electoral reform. It invited all parties to propose amendments in line with
OSCE/ODIHR recommendations. In March 2011, a political agreement was signed by
the parties of the ruling majority (without the opposition) to set up a
bipartisan parliamentary committee on electoral reform after the 8 May local
elections. This committee has not yet been established. Electoral reform is
blocked by the political stalemate and lack of political dialogue between the
main parties.

The 8 May local government elections took
place in a highly politically polarised atmosphere, which affected the overall
conduct of the process. According to OSCE/ODIHR's final assessment, while the
elections were competitive and transparent, mistrust between political parties
prevailed and the parties did not discharge their electoral duties in a
responsible manner. This climate adversely affected the administration of the
elections. The OSCE/ODIHR assessment also pointed out that, despite a
competitive process in terms of campaigning, numerous violent incidents marred
the campaign period. Political parties did not comply with the gender
requirement quota, which resulted in a low level of participation by women.
Notable progress was made regarding the improvement of voter lists. However,
problems relating to their accuracy persisted.

The OSCE/ODIHR observation mission noted
that, while voting proceeded relatively well on Election Day, significant
problems occurred in around 10% of voting centres. It also pointed to an
overall positive, but lengthy counting process. In particular, the
determination of the results of the Tirana mayoral election became a highly
controversial process and the decisions of the Central Election Commission
(CEC) were taken along partisan lines, lack reasoning and included
inconsistencies. Political and legal controversy also occurred with regard to
the handling of appeals by the Electoral College, in particular regarding
Tirana.

Overall,
despite a number of positive aspects, such as the competitiveness of the
process, transparent technical preparations, relatively good conduct on voting
day, a positive counting process, plurality and diversity of media coverage,
the conduct of elections, which is a key priority of the Opinion, only
partially met the best international standards and practices. Although the
Electoral Code remains a good legal and technical basis for the electoral process,
the electoral reform is a necessity for further progress. In this context, the
role of the political parties is important not only as the main actors in
reform processes, but also in ensuring that the political climate does not
negatively influence the process and consequently does not have an adverse
impact on the expression of the will of voters. The implementation of the
OSCE/ODIHR recommendations for these elections as well as of those made in 2009
should constitute a priority for Albania's institutions and political class.

Overall, despite some improvements to parliamentary rules and practice and
an increase in the Parliament's administrative capacities, the performance of
the Parliament on legislative and oversight functions, which is a key priority
of the Opinion, remains insufficient. The long-standing political stalemate,
which was further fuelled by the 21 January events and controversy over the
Tirana mayoral elections, has seriously hampered both parliamentary work and
the necessary sustained and constructive political dialogue. The political
stalemate also hampered establishment of a consensus enabling the
implementation of relevant EU reforms. The opposition's partial boycott has
obstructed parliamentary business. In this regard the end of the opposition's
boycott and their return to parliamentary work on 5 September is a positive
step towards the normalisation of political dialogue. An inclusive political
environment conducive to cross-party consensus needs to be fostered in
Parliament. The climate of polarization and mistrust between the government and
opposition has affected the local elections of 8 May; there are areas where
international standards were met, in the conduct of these elections, a key
priority of the Opinion, and areas where this was not the case. Electoral
reform, a key priority of the Opinion, has stalled. Parliament has not yet
ensured an orderly hearing and a vote on constitutional and high court
appointments, which is a key priority of the Opinion.

Government

The government
coalition between the Democratic Party (DP) and the Socialist Movement for
Integration (SMI) remained in place during the reporting period. In January
2011, following allegations of corruption, the Deputy Prime Minister and
Minister of Economy, Ilir Meta, resigned. Lulzim Basha, running as candidate
for mayor of Tirana, resigned from his position as Minister of the Interior.

The Ministry of
European Integration (MoEI) has made significant efforts in preparing an Action
Plan to address the Opinion's key priorities, which was coordinated with line
Ministries and other relevant institutions. The MoEI actively consulted on the
Action Plan with all key stakeholders and reported on it to the parliamentary
Committee on European Integration. The Action Plan was adopted by the Council
of Ministers in June. It has still not been approved by Parliament. Agreement
on the Action Plan in Parliament is particularly relevant for reform areas
requiring consensual decisions.

Steps have been
taken to assess the legislative gap as regards alignment with the acquis and to
prepare adjustments to the National Plan for the Implementation of the SAA
2009-2014 (NPISAA) accordingly. However, the NPISAA does have some
shortcomings, including the lack of full coverage of acquis chapters. It
also lacks a comprehensive assessment of the administrative capacities for the
implementation of the acquis.

In order to
fully play its role, the MoEI will require further resources in order to steer
and manage the EU approximation process in full consultation with the relevant
line ministries. The use of an IT system to improve the planning process, which
has been ready since April 2011, has been delayed due to the pending adoption
of amendments to the rules of procedure of the Council of Ministers. Progress
on preparations for the harmonisation of legislation with the acquis has
been limited, in part due to local elections which have taken up considerable
attention on the part of politicians at central level.

Legislative
drafting in line ministries needs to be improved by strengthening preparatory
work and by appropriate consultations. Specific rules on improving transparency
and consultation in the legislative process, which Albania
is committed to adopt, need to be completed. The
consultation process with civil society and other partners needs further
strengthening.

Policy
coordination needs to be developed further, particularly in relation to the
Inter-institutional Coordination Committee for European Integration (KKNIE).
The KKNIE often does not meet in the format laid down in the government
regulation, and preparation of decisions for the government is hampered. The
members of inter-institutional working groups are appointed on an ad-hoc basis,
which contributes to the weakening of institutional memory. Some of the working
groups have not met since October 2010. Despite these shortcomings, the KKNIE
has played a role in defining the action plan for addressing the key priorities
of the Opinion.

There were some
developments in local government legislation. In November 2010,
Parliament approved amendments to the Law on Local Government Taxes, giving
local government units a mandate to reimburse small businesses for the cost of
purchasing and installing fiscal devices. The increasingly difficult relationship
between the DP-led central government and the majority of SP-led local
government units has continued to impact on the process of decentralisation
reform, which had previously been successful.

The management
of local government taxes remains weak. Local government authorities continue
to lack the administrative capacity to improve revenue collection, increase
their fiscal autonomy and improve their performance accordingly. Several local
government units were unable to approve the 2010 municipal budget - a situation
which continued during 2011. The access of local government units to loans, as
provided for by the law on local borrowing, remained limited.

Overall, considerable efforts were made by government and by the
Parliamentary Committee for European Integration to advance and coordinate
reforms on EU integration, and in particular to prepare an action plan to
address the recommendations of the Commission's 2010 Opinion. The quality of
legislative drafting and consultation with third parties require further
improvements. The decentralisation reform process was adversely affected by the
difficult relationship between central and local government.

Public
Administration

Some limited progress can be reported in
the area of public administration reform, which is a key priority of the
Opinion. The Government has adopted a policy paper exploring various changes to
be put in place by means of a new Law on the Civil Service. On this basis,
amendments to the Law on the Civil Service were prepared. A policy paper on a
new Law on Organisation and Functioning of the State Public Administration and
an initial draft of this new law were prepared and communicated to stakeholders
within the public sector. In June 2011, as part of the inspection reform,
Parliament adopted the Law on Inspections. In the same month, a Council of
Ministers decision defined standards and methods for the establishment of
public bodies in terms of structure and organisation.

However, public
administration reform has not advanced much overall. Important legislative acts
requiring a three-fifths majority in Parliament, such as the law on general
administrative procedures, the law on functioning of public administration and
the law on administrative courts, are awaiting adoption.

Pending adoption
of amendments to the Civil Service Law, the civil service is suffering from
important shortcomings, especially in respect of the merit principle in
recruitment procedures, allocation of temporary contracts, rules on promotion
and mobility and dismissal of civil servants. The functioning of the civil
service continues to suffer from politicisation, in particular as regards
appointments. Implementation of Prime Ministerial (PM) Order of October 2010
setting a maximum limit of 2.5% temporary appointments in civil service
positions remains poor. Evidence of proper implementation of the PM order still
has to be provided.

The Human Resources Management Information
System (HRMIS) is not yet operational and its database is incomplete.

The capacity of the Department of Public
Administration (DOPA) was further increased by four additional staff and it can
be considered as adequate overall. However, in the institutional context, it
lacks the authority to play its role effectively. DOPA's capacity to collect
and elaborate data from Ministries and to draft relevant reports remains
insufficient. Data on the recruitment of civil servants since the adoption of
the PM order in October 2010 are incomplete and not up-to-date.

The Training Institute for Public
Administration (TIPA) has encountered serious difficulties in implementing
planned training activities, and at the same time has had to cope with a
substantial reduction of its operational budget. In June, with the vote of the
ruling majority, Parliament appointed the fifth member of the Civil Service
Commission. This post had been vacant since 2009, which led to difficulties in
the decision-making process.

Limited progress was made on new types of
auditing, such as certification and performance auditing, which is being developed
gradually by the supreme audit institution (SAI). However, reporting to the
Parliament on audit findings and the follow-up of audit recommendations still
need to be improved in order to enable the SAI to fulfil its role in the
national governance framework.

No progress was
made on the appointment of the Ombudsman, a key priority of the Opinion,
which has been pending since February 2010. Given the importance of this
independent institution, there is a need for an effective, transparent and non
politicised process of appointment. Nonetheless, the
institution has proved to be active and responsive in investigating cases and
drafting ad-hoc and comprehensive annual reports.

Overall, despite some reform measures such as the Council of Ministers decision on structure and organisation of
public bodies of June 2011, essential steps in public
administration reform, which is a key priority of the Opinion, including
amendments to the civil service law, have not been completed. Adoption of
relevant legislation is pending and contingent on overcoming the persistent
political stalemate. Implementation of the existing laws and administrative
acts remains weak. In the institutional context, DOPA continues to lack
sufficient authority to take up its role fully. Establishing an
independent, merit-based and professional civil service free from political
interference has yet to be achieved. Appointment of the Ombudsman is still
pending.

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

There has been
some limited progress in completing the legal framework for judicial reform. A
Judicial Reform Strategy and Action Plan, consulted with a broad group of
stakeholders were adopted in July. They form a good basis for reform efforts.
Adoption but also implementation of the strategy and action plan is a key
priority of the Opinion. Implementation is only starting; it will require the
allocation of adequate human and financial resources as well as sound
inter-institutional cooperation. A new law on mediation in conflict resolution
and relevant by-laws in line with EU standards were adopted in February 2011.
In addition, by-laws to the judicial police law have now been adopted.

However,
relevant legislation such as the law on administrative courts and amendments to
the criminal code, which requires a three-fifths majority vote in Parliament,
is pending. Further important legislation requiring a three-fifths majority
vote such as the law on judicial administration and the law on the National
Judicial Conference still need to be prepared and brought to Parliament.

No further
progress has been made as regards the independence of the judiciary.
There have been concerns about undue interference or hindrance of independent
investigation and prosecution of possible criminal offences following the
events of 21 January, which saw the death of four demonstrators. The process of
appointing judges to the High Court and the Constitutional Court remains an
issue of concern in terms of the length the process and most of all in terms of
the risk of politicisation. The neutrality and independence of these
institutions are still not fully guaranteed.

Regarding the
professionalism of the judiciary, efforts have been made to align the work of
the High Council of Justice (HCJ) with European standards by means of amending
the evaluation system for judges, improving the reasoning behind appointment
decisions taken by the HCJ and the creation of a Commission on transfers,
promotion and appointment of judges. The effectiveness of the changes made to
the evaluation system now needs to be verified in practice. The timing of the
implementation of the new evaluation system has to be decided.

As regards impartiality,
a computerised case management system and random allocation of cases in criminal
and civil procedures are in place in most judicial offices. Further efforts
need to be made in order to have a fully uniform and harmonised integrated case
management system functioning in all courts, including the sound gathering of
statistics. There is a code of ethics applicable to judges but its effective
implementation remains a challenge.

In relation to accountability
in the judiciary, the issue of overlap of inspection powers between the inspectorates
of the HCJ and of the Ministry of Justice (MoJ) is still unresolved. In the
absence of a revision of the law on the HCJ, which would require a three-fifths
majority vote in Parliament, the MoJ and HCJ have adopted a Memorandum of
Understanding to clarify some aspects of the overlapping inspection systems.

No progress has
been made in combating corruption within the judiciary. One of the main factors
obstructing investigations into possible cases of corruption in the judiciary
is the full immunity enjoyed by judges. It will be necessary to limit or abolish
the immunity of judges, which requires changes to the constitution. The poor
working conditions and relatively low salaries of judges are risk factors for
corruption in the judiciary.

No further
progress was made regarding the efficiency of the judiciary. Reforms of
the High Court planned by the MoJ aimed at improving the efficiency of the
Court and reforming its internal organisation have been delayed.

Working
conditions in courts are still poor in general and hearings often take place in
judges' offices, which hampers transparency and efficiency. There is still no
sound and adequate system of training for court administrators.

Court
management remains poor due to a lack of human and financial resources, in
particular in district courts of first instance. The yearly budget for the
judiciary is € 69 million, which corresponds to 0.7% of the Albanian GDP.
The backlog of court cases, and in particular the large number of cases older
than three years, is still a problem. Unreasonable delays in court cases, which
are often caused by postponement of court proceedings due to the absence of
either the lawyers or the judges, and the unjustifiably large number of trial
sessions for cases remains a matter of serious concern. The National Chamber of
Advocacy has started drawing up a draft proposal to reform the disciplinary
measures mechanisms for lawyers. Weaknesses in the drafting and insufficient
reasoning of judgments remain a cause for concern. Criminal proceedings in the
so called Gërdec case (the deadly blast in 2008 which killed 26 people) have so
far included 152 hearings. There is a risk that unjustified and persistent
delays in proceedings prevent fulfilment of the principle of a fair trial as
enshrined in the Albanian constitution.

Enforcement of court decisions is weak, in particular in cases where state
institutions are the defendants. The new private bailiff system has started to
operate, but there is a need to improve case management for bailiffs. Further
efforts are needed in order to increase enforcement rates.

The workload of
the Constitutional Court is increasing, especially in relation to the alleged
violations of the right to a fair trial. Moreover, the Court lacks adequate
office space and equipment for its effective functioning.

Overall, limited progress was made in completing judicial reform, which is a
key priority of the Opinion. The judicial reform strategy and its action plan
were adopted in July. They form a good basis for reform efforts. Implementation
is only starting; it will require the allocation of adequate human and
financial resources as well as sound inter-institutional cooperation. Important
legislation requiring a three-fifths majority vote in Parliament such as the
law on administrative courts is pending adoption. Court backlogs and the
excessive length of proceedings undermine the efficiency of the judicial
system. Budgetary appropriations for the judiciary remain insufficient overall.
The rate of enforcement of decisions is still poor. No steps have been taken to
combat corruption in the judiciary, including limiting or abolishing the
immunity of judges.

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

Some progress
was made regarding the government's policies to fight corruption. In relation
to the strategic policy approach on corruption, a new anti-corruption action
plan for the period 2011-2013 encompassing individual action plans for all
government ministries/agencies concerned was adopted in June 2011. The quality of action plans, including indicators to monitor
progress, has improved. Implementation of action plans is proceeding.

There has been
progress in strengthening the legal framework by implementing recommendations
of the Group of States against corruption (GRECO) related to the issue of incrimination
and political party financing. Regarding incrimination, recommendations were
partly implemented; the Criminal Code amendments are awaiting adoption in
Parliament by a three-fifths majority vote. Regarding political party
financing, all recommendations but one were implemented; the latter is partly
implemented because there is no clear deadline for submitting party annual
financial reports.

The institutional
framework to combat corruption has been further developed. With a view to
improving coordination in the implementation of the anti-corruption strategy, a
clearer distribution of responsibilities was defined between the
inter-ministerial working group (IWG), the inter-ministerial Technical Group
and the Technical Secretariat of the IWG. A new
internal control department was established in the General Directorate of
Customs. However, as in the Directorate of Tax Office, this department focuses
more on financial control tasks than explicitly on anti-corruption measures.
Free phone numbers for citizens to report suspected cases have been installed
in a number of institutions concerned.

Efforts to improve inter-institutional cooperation were
made through the signing of memoranda of understanding (MoU) foreseeing in
particular an increased exchange of information and cooperation on
investigations. The Department of Internal Control and Anti-Corruption (DIACA)
and the High Inspectorate for Declaration and Audit of
Assets (HIDAA) have each signed separate such memoranda
with the High Council of Justice
(HCJ) and with an anti-corruption NGO. However, the
implementation and effectiveness of such MoU still have to be verified in
practice.

Some limited preventive measures were taken by launching
awareness-raising initiatives.

However, overall implementation of anti-corruption measures
remains insufficient. Corruption is prevalent in many areas and remains a
particularly serious problem.

There are shortcomings in the administrative capacity of
relevant institutions and in the proposed mechanisms to ensure proper
monitoring of the implementation of the anti-corruption action plans. The DIACA
in particular has not been strengthened sufficiently as regards its staff and
its monitoring competences; its ability to effectively coordinate
anti-corruption policies accordingly remains limited. Reporting
on anti-corruption measures and implementation by responsible authorities needs
to be improved. Criminal law statistics as well as statistics on conflict of
interest cases and prevention measures remain insufficient or unreliable.

There continues to be a lack of human resources and
technical infrastructure in a number of investigation and law enforcement
agencies. Joint Investigative Units, although continuing to be good instruments
for investigating and prosecuting corruption cases, have insufficient human
resources and technical equipment. HIDAA, although an important player in
combating corruption, has limited resources to undertake extensive inspections
and full audits of asset declarations by officials. In the light of this, HIDAA
needs to further strengthen cooperation and exchange of information with other
services such as the Financial Investigation Unit, Customs services, or the
Immovable Property Registration in order to be able to conduct administrative
investigations more effectively.

Investigation into possible corruption cases is hampered by
the lack of access to the various registries (e.g. car registry and land
register) by investigation and law enforcement agencies and by the lack of a
central register of bank accounts.

Proactive investigation, i.e. systematic, targeted and
risk-based investigations into possible corruption areas and cases, is lacking
in Albania. The full immunity of high level officials remains a major obstacle
to effective and successful investigation. Immunity of judges is only rarely
lifted and the lack of confidentiality in a case following the lifting of
immunity seriously impedes effective investigation. Following an initiative by
a number of Members of Parliament in the ruling majority MPs can waive their
immunity in cases of criminal prosecution on corruption charges by signing an
individual voluntary declaration at the start of their mandate; this followed
the amendment of parliamentary rules and regulations on immunity from criminal
prosecution. While this expresses political will to tackle high-level
corruption, the legal validity of these declarations is open to question. An
amendment of the relevant constitutional provisions may be required in order to
limit or abolish immunity both for judges and for MPs.

Although cooperation between agencies, including joint
training, has improved further, the exchange of relevant information is often
late or ineffective. Cooperation between law enforcement agencies and
prosecution on the one hand, and courts on the other, remains insufficient.

Little progress has been made in developing a solid track
record of proactive investigations, prosecutions and convictions in corruption
cases at all levels, which is a key priority of the
Opinion. In particular, investigation of medium and
high level corruption cases is rare. The General Prosecutor launched an
investigation on charges of corruption and misuse of office against the former
Deputy Prime Minister (PM), Ilir Meta, following the publication of a
controversial video. This subsequently also led to charges being brought
against the former Minister of Economy, Dritan Prifti. The case concerning
former deputy PM Meta is currently the only high-level case which has gone to
court.

Overall,
limited progress was made in the field of anti-corruption policy, which is a
key priority of the Opinion. Although the legal framework and inter-agency
structures are mostly in place, implementation of specific actions on the other
hand remains ineffective overall and the results are insufficient. Public
awareness campaigns are only just starting. The immunity of certain public
officials, the absence of a proactive approach and the lack of resources and
equipment continue to seriously obstruct effective investigation. There is no
solid 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 has continued the process of
ratification of international human rights instruments by ratifying the
Council of Europe Convention on Human Rights and Biomedicine. Ratification of
the UN Convention on the Rights of Persons with Disabilities, signed in
December 2009, is still pending. Delays in application and non-compliance with
judgments of the European Court of Human Rights (ECtHR) are an issue of
concern. Albania's decision to extradite a murder suspect to the United States
in breach of an interim measure of the Court was criticised by the Rapporteur
of the Parliamentary Assembly of the Council of Europe.
During the reporting period, the ECtHR delivered 5 judgments finding that
Albania had violated rights guaranteed by the European Convention on Human
Rights (ECHR). A total of 83 new applications allocated to a decision body have
been made to the ECtHR since October 2010. In September 2011, 321 allocated
applications regarding Albania were pending before the ECtHR.

As regards promotion and enforcement of
human rights, the appointment of the new Ombudsman has been pending since
February 2010. Due to this legal void, the process of appointing three
Commissioners of the Ombudsman's Office in November 2010 did not follow the
procedures laid down by law. The Office of the Commissioner for Protection from
Discrimination has become operational since January 2011 and moved to permanent
premises in August, while recruitment of staff is nearing completion. Its
capacity to manage cases and encourage potential victims to come forward needs
to be strengthened. The allocation of sufficient resources to ensure the
full independence of human rights bodies has not been guaranteed. Albania's respect
for human rights continues to be monitored by international bodies. Following the events of 21 January, exceptional visits were
made by both the Committee for the Prevention of Torture and the Commissioner
for Human Rights of the Council of Europe. The latter underlined the need for
thorough, impartial and credible investigations into these events and called
for the persons responsible to be held accountable.

Civil and Political Rights

Taking additional measures to improve the
treatment of detainees in police stations, pre-trial detention and prisons;
strengthening the judicial follow-up of case of ill-treatment and improving the
application of recommendations of the Ombudsman in this field is a key priority
of the Opinion.

With regard to the prevention of torture
and ill-treatment and the fight against impunity, some progress has
been made in the penitentiary system, but there remain concerns over arrest and
police custody. The General Directorate of Prisons has organised training
events, multidisciplinary and thematic inspections, and has made efforts to
address reported cases of ill-treatment. A new methodology on treatment of
detainees was approved in January 2011. There has been some progress in
procedures relating to the follow-up of recommendations of the Ombudsman in
this field, with a specific working group being set up within the Ministry of
Justice. However, it remains to be seen whether this will lead to the better
application of the recommendations. Amendments to the manual on the rules and treatment
of arrested and detained persons in police units have been drafted.

Cases of ill-treatment and excessive use of
force continue to be reported, particularly during arrest and police custody.
Such abuses were for instance reported in the aftermath of the events of 21
January 2011. Procedures for processing accompanied or arrested persons are not
systematically observed. There is no evidence of any substantial progress on
increasing the judicial follow-up of cases of ill-treatment. Budgetary allocations
to the National Prevention Mechanism against Torture remain insufficient. The
Memorandum of Understanding between the Ministries of Justice and Health
regarding the care of mentally ill offenders is under negotiations but its
signature is still pending. Mentally ill persons convicted of crime and under
obligatory treatment continue to be held in the Institute of Kruja, instead of
a specialised forensic institution. The treatment of mentally ill offenders
still needs to be improved. The lack of a permanent appropriate solution for
the placement of those under obligatory treatment remains a serious concern.

Blood feuds and extra-judicial killings
continue to affect some sections of the population, with some families still
choosing self-isolation for fear of reprisals. Although there is a lack of
fully reliable data on the numbers involved, sources indicate that this
phenomenon continues to exist and remains an issue of concern.

Some progress has been made concerning the prison
system. Improvements in penitentiary infrastructure have continued.
Capacity-building activities have been held for prison personnel and some
attention has been paid to the treatment of vulnerable persons in prisons. In February 2011, amendments to the
Council of Ministers Decision on the approval of the overall
regulation of prisons were adopted. In April 2011, a Decision to include convicted and pre-trial detainees in
the category of economically inactive persons, allowing access to free health
insurance, was adopted. Development of the probation service and opening of new
offices (now in 8 of the 12 regions) has helped to reduce overcrowding, which
stood at around 10% in June 2011. Efforts have been made by the management in
some penitentiary facilities to improve the living conditions of persons
deprived of their liberty, for instance through increased outdoor breaks.
Vocational training continues to be developed.

However, important problems remain, particularly with regard to poor conditions in
some older prisons and pre-trial detention centres, as well as in police
commissariats. Moreover, infrastructure planning is not always adequate. There
have been several instances of collective complaint movements by groups of
prisoners about living conditions and the use of physical and psychological
violence by staff. These need to be thoroughly investigated. The living
conditions of prisoners largely depend on what is provided by their families,
including food. Conditions in health care facilities and the lack of heating in
many institutions, including in some refurbished premises, are causes for
concern. The use of individual padlocks on cell doors poses a risk to detainees
in the event of an evacuation. Medical examinations upon entry into
penitentiary institutions have not been conducted systematically and there are
concerns over the confidentiality of medical data in prisons and police
commissariats. There are further problems concerning confidentiality of phone
calls and accessibility of complaint forms for the Ombudsman. Continued over-use
of pre-trial detention for low-risk offenders and particularly for juveniles
remains a concern.

As regards access to justice, a
memorandum of understanding was signed in March 2011 between the State
Commission for Legal Aid and the Commissioner for Protection from
Discrimination to set provisions for free legal assistance for victims of
discrimination. The State Commission for Legal Aid was set up, by-laws have
been adopted, but the law remains to be fully implemented. Adequate mechanisms
for the objective assignment of lawyers to cases have still to be developed. Access
to justice for vulnerable persons and victims of domestic violence is hampered
by the lack of implementation of the Law on Free Legal Assistance. Persistent
delays in judicial proceedings call into question citizens' effective access to
justice.

Freedom of
expression continues to be generally respected,
although progress in this field has been very limited. A positive development
is the enhanced role of investigative journalism in revealing and denouncing
corruption. The media provided extensive coverage of the May 2011 local
elections and some outlets took a step towards increased independence by not
broadcasting ready-made tapes provided by political parties. The moratorium on
the use of defamation suits by government officials continues to be
implemented. Although the Court of Appeal overturned
the large fine imposed on a TV channel in a case involving a high-level
politician, the application of the principle of proportionality of fines against
media outlets or journalists is not always respected. Concerns
have been raised in a number of cases over what media outlets describe as
biased application of fiscal rules, financial pressures and bias in judicial
proceedings. There has been a case of violence against a journalist who was
attacked by unknown assailants on grounds reportedly related to his work.
Editorial independence continues to be hampered by political and business
interests, which also leads to self-censorship. No measures have been taken to
enhance transparency in media ownership. Amendments decriminalising defamation
and libel are pending a three-fifths majority vote. The independence of the
public service broadcaster has not been increased and although three
journalists' associations or trade unions exist, there still is no
self-regulatory body for the media. Overall, there has been limited progress on
completing the legal framework on the media. More efforts are needed to ensure
media independence and freedom.

Freedom of
assembly and association has generally been
respected and no cases of deliberate prohibition of public gatherings have been
reported. The reporting period was marked by a succession of rallies and
demonstrations gathering supporters of the two main political parties. Although
these were generally peaceful, there is serious concern regarding the violence
that ensued during the demonstrations of 21 January 2011, in which four people
were killed. The investigation into these events is ongoing, albeit very
slowly.

The strategy on
human rights defenders is being implemented. The Agency for Support to Civil
Society is operational and has launched two calls for proposals. Albanian civil society lacks cooperation and capacity; most
organizations remain dependent on donors, leading to excessive competition for
funds in the sector. Civil society has been consulted on some legislative
initiatives, particularly in the field of human rights. However, no systematic
dialogue is in place and consultation of NGOs in the
legislative process remains insufficient overall.

There have been developments in the field
of freedom of thought, conscience and religion, which continues to be respected. In November 2010, the Albanian Evangelical Alliance signed an agreement with the
government according to which Protestantism became the fifth official religion
alongside the Sunni Muslim, Bektashi, Orthodox and Catholic religions. Based on
this agreement the Albanian Evangelical Alliance will also be entitled to
receive support from the state budget, as is the case for the other official
religious groups.

Economic and Social Rights (see also Chapter 19 – Social policy and employment)

Taking concrete
steps to reinforce the protection of human rights, notably for women, children
and Roma, and to effectively implement anti-discrimination policies is a key
priority of the Opinion.

Some progress has been made regarding women's rights and gender equality. The 2011-2015
extension of the National Strategy on Gender Equality and the Fight against
Domestic Violence was adopted in June 2011. The National Referral Mechanism for
victims of domestic violence was established in 17 municipalities. Amendments to the Law on Measures against Domestic Violence made it
a legal obligation for the local government units to implement the Mechanism
and provided for improved access to justice for victims of domestic violence.
The national shelter for victims of domestic violence is operational, standards
for care of victims in residential public and non-public centres have been
adopted and training of health care workers to enable them to deal with cases
of gender-based violence has taken place. Some awareness-raising campaigns have
been organised to enhance participation of women in public life and to empower
them economically. Some progress was made in the application of the gender
quota compared to the last elections.

However, the gender quota was not respected
throughout the country in the May 2011 local elections. In its report, the
OSCE/ODIHR recommended that consideration should be given to increasing the
amount of the fine for electoral subjects that do not respect the gender
requirement and making receipt of public financing dependent on respecting
these provisions. Only five women were elected mayor and two head of a commune.
Women continue to be under-represented in the labour market, policy-making and
politics. Implementation of existing legislative and policy tools in this field
continues to be weak. Coordination between institutions at local and central
level needs to be increased substantially. For the moment, the network of
gender equality officers consists of only 15 persons in municipalities
throughout Albania. Domestic violence still remains widespread and the
protection of women against all forms of violence needs to be considerably
strengthened in practice.

There has been
some progress in the area of children's rights.
The Law on the Protection of the Rights of the Child
was adopted in November 2010.
This law establishes several institutional mechanisms to ensure respect of the
rights of children by the family, state and third parties at central and local
level. A State Agency for the Protection of the Rights of the Child has been
established and the members of the National Council for the Protection of the
Rights of the Child have been appointed. However, the Council has yet to become
operational. Child Rights' Units are now established in 9 regions and Child
Protection Units in 28 municipalities and communes. Secondary legislation
related to the Albanian Adoption Committee has been approved by the Council of
Ministers and the pilot project on foster care involving 80 children continues
to be implemented. A juvenile justice strategy addressing neglected aspects,
such as the protection of child victims and witnesses of crime, and measures
concerning offenders below the age of criminal responsibility, is pending. The
State Police has started implementing an operational plan on preventing trafficking, maltreatment,
sexual exploitation and coercion of juveniles to work or beg. It remains to be
seen whether its implementation will lead to any substantial progress on
reducing child labour. Although the Law on Protection of the Rights of the Child foresees the protection of
children from physical and psychological violence, concerns remain regarding
the exertion of violence against children, including use of corporal punishment

Progress in the
treatment of socially vulnerable and/or persons with disabilities is
insufficient. A working group led by the Ministry of Labour, Social Affairs and
Equal Opportunities is preparing a law on persons with disabilities. The lack
of access to equal rights resulting from the differentiated status for certain
groups still persists. Individuals with mental disabilities still do not have an
official status. Implementation of the national
strategy on persons with disabilities continues to be inadequate and employment
quotas are not enforced. In April 2011, a group of persons with disabilities
staged a hunger strike to demand better conditions and increased welfare
payments.

Some limited progress has been made
regarding the implementation of anti-discrimination policies. The Office
of the Commissioner for Protection from Discrimination has carried out several
awareness-raising campaigns and training events. The Office has been consulted
on draft legislation. Its website is operational and complaint forms have been
made available online. So far, only eight cases of alleged discrimination have
been submitted to the Office, with two of them leading to recommendations from
the Commissioner. General awareness, particularly at
the local level, of the provisions of the Law on
Protection from Discrimination among the public and key professional groups
(law enforcement, judges, education and healthcare workers) remains low.
Greater knowledge of the law among citizens and professionals is needed in
order to ensure its successful implementation. NGOs working with the lesbian,
gay, bisexual and transgender (LGBT) community in Albania have been
strengthened in the past year. In July 2010, the Ministry of Labour, Social
Affairs and Equal Opportunities organised a public event on the protection of
human rights of LGBT persons in Albania. However, the increased visibility of
the community has not led to any substantial improvement in overall acceptance
of LGBT persons and they continue to suffer from discrimination and
marginalisation. Several cases of violence and ill-treatment targeting the
transgender community have been reported. Homophobia remains widespread, including
on the part of public service professionals.

Labour and trade union rights have generally been respected and some progress has been made
towards encouraging sectoral and bipartite social dialogue. The operation of
the National Labour Council has improved but membership criteria remain
unclear. A new umbrella organisation for employers has been registered.
However, collective bargaining at the private sector level has not been
developed.

Property rights remain an issue of great concern. There has been little visible progress in developing a comprehensive strategy for
property reform, which is a key priority of the Opinion, or for reforming the
relevant legal and institutional framework. The coordination structure in the
Ministry of Justice has not yet been established. Despite the progress made,
the process of initial registration of immovable property has not yet been
completed.

In order to integrate the electronic
databases for land and property, the Government has committed to establish the
Register of Territory. However, specific technical measures and legal
instructions have yet to be put in place. Overall, the land and property
databases remain isolated in the Immovable Property Registration Office and
there is no coordination with the databases of other public institutions.

Other issues such as the property tax (a
commitment of the National Strategy for Development and Integration) and legal
clarifications in order to distinguish between property and development rights
are not addressed. As a result, land market regulation and balanced land
development have not made any significant progress.

Unresolved claims by former owners for
compensation and restitution of property confiscated during the communist
regime persist. Some measures have been taken by the Property Restitution and
Compensation Agency (PRCA) following its restructuring. The rules of the
special fund for compensation of properties have been improved and its
financial resources increased. An initiative to revise the evaluation methodology
and value map for the territory of the country is in the inception phase. The
PRCA earmarked € 7.3 million for compensation of 1012 ex-owners. The
Government has not communicated a timetable for enforcement of ECtHR judgements
regarding property rights.

Respect for and Protection of
Minorities, Cultural Rights

There has been very limited progress in the
field of protection of minorities. Albania submitted its third country
report on implementation of the Framework Convention for the Protection of
National Minorities to the Council of Europe in January 2011. In May 2011,
Albania changed the format of its civil status certificates; these no longer
include the notion of "nationality" or ethnicity of individuals, but
only their citizenship. Some minority representatives expressed concern over this
initiative. No progress has been made towards strengthening the capacity of the
State Committee for Minorities. No measures have been taken towards
re-evaluating the distinction between national and ethno-linguistic minorities.
Albania has still not adopted the European Charter for regional and minority
languages. Although inter-ethnic relations remain good overall, there has been
some deterioration in the climate for minorities, particularly in the context
of preparations for the population census. After a first trial and sentencing,
the case of the death of a Greek-speaking Albanian citizen in Himara in 2010 is
now on appeal. The population and housing census, initially due to take place
in April 2011, was postponed to October 2011. Albania decided to include
optional questions on ethnic origin and religious affiliation in the census
questionnaire. The collection of such data could serve to develop appropriate
policies towards minorities based on updated statistics. Respect for
international standards, including the principle of free self-identification,
is of crucial importance.

As regards the Roma, a quota for
Roma and Egyptian students taking up bachelor and master's studies established
in the academic year 2010-2011 has been implemented. Another measure aimed at
increasing attendance of Roma children in compulsory school education was the
free distribution of textbooks; however, its implementation has not come up to
expectations due to flaws in the system of reimbursement. The level of
pre-school enrolment among Roma children continues to be lower than in the rest
of the population. Preparatory classes for five year old children who have not
attended kindergarten are being developed. The Roma Technical Secretariat has
made efforts to assess progress in implementation of policies through
preparation of monitoring reports.

However,
implementation of the Strategy on improving Roma living conditions continues to
be slow, due to inadequate resources and insufficient coordination of
institutions involved at local and central level. Local level action plans for
implementing the strategy have not been developed and responsibilities have not
been clearly devolved. Despite an effort by the Roma Technical Secretariat to
strengthen the functioning of the regional committees on planning and
evaluation of social needs by including the National Action Plan for Roma
Decade into their agenda, there continues to be a general lack of awareness at
local level. There have been no specific budgetary allocations for the
provision of critical social services for Roma and there is excessive reliance
on civil society and international donors in this field. The resources of the
Roma Technical Secretariat at the Ministry of Labour, Social Affairs and Equal
Opportunities have not been increased. Although registration campaigns and
awareness raising activities have been held, a number of Roma still lack
official registration. The Roma still face very difficult living conditions and
frequent discrimination, particularly regarding access to education, social
protection, health, employment and adequate housing. Serious concerns arose
over the forcible removal of around 45 Roma families by citizens from their
settlement near Tirana train station in February 2011. The families affected
have been provided with alternative but somewhat inadequate temporary
accommodation by the authorities in the form of tents in a remote area of the
city. They have been assisted by the international community and
non-governmental organisations, particularly as regards the judicial follow-up
of the case in which two persons were sentenced for destroying the settlements,
but not for the physical and psychological injury to the victims.

Overall,
progress in the field of human rights and respect for and protection of
minorities has been uneven. Property rights remain an issue of serious
concern. There has been little progress towards the adoption and implementation
of a coherent property reform strategy and action plan. This is a key priority
of the Opinion and is vitally important for the consolidation of property
rights. The fragmentation of responsibilities and lack of coordination between
institutions hampers effective implementation of policy and creates legal
uncertainty and a systemic risk of corruption.

There has been partial progress on
addressing the key priority on reinforcing the protection of human rights and
the effective implementation of anti-discrimination policies. There have
been important developments in this area, in particular the adoption of the Law
on Protection of the Rights of the Child, the adoption of the new National
Strategy on Gender Equality and the Fight against Domestic Violence, and the start
of implementation of the Law on Protection from Discrimination. However, some
important legislative gaps remain, including as regards persons with disabilities,
and implementation of existing legislative and policy tools in this field is
still inadequate. General awareness of the anti-discrimination legislation and
the complaints mechanism needs to be increased. Concerns remain over continued
discrimination against certain vulnerable groups, such as LGBT persons and
Roma. Implementation of policy tools targeting the Roma minority and access of
this community to social protection and services is still insufficient, leading
to persistent marginalisation.

Some progress has been made towards
addressing the key priority on improving the treatment of detainees and
application of recommendations of the Ombudsman in this field. Measures have
been taken to improve conditions of detention and systematise the follow-up of
the Ombudsman's recommendations by the Ministry of Justice. However, cases of
ill-treatment are still being reported, particularly during arrest and police
custody, and conditions in some places of detention remain poor. Furthermore,
the treatment of mentally ill offenders still needs to be improved and the lack
of a permanent appropriate solution for the placement of those under obligatory
treatment remains a serious concern.

2.3.
Regional issues and international obligations

The Council of
Europe (CoE) has continued monitoring the extent to which Albania is
fulfilling its membership obligations and has closely followed developments
relating to the political situation in the country through its specialised CoE
bodies and via a permanent external office headed by a special representative
of the Secretary General in Tirana which was opened at the beginning of 2011.

Albania
has undertaken to cooperate fully with EULEX for a complete
investigation of the allegations raised in the resolution adopted by the Parliamentary
Assembly of the CoE on inhuman treatment of people and illicit trafficking in
human organs in Kosovo, while at the same time rejecting the allegations. Continuous smooth cooperation by Albania,
notably on the facilitation of requests for international legal assistance on
its territory, is important.

Albania has aligned with the Council Decision advancing universal support for the International Criminal Court and promoting the
widest possible participation in it[5]. However, it still maintains the 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 part actively in regional initiatives, including the South East European
Cooperation Process (SEECP), the Regional Cooperation Council (RCC), the
Central European Free Trade Agreement (CEFTA), the Energy Community Treaty and
the European Common Aviation Area Agreement. Within the framework of the SEECP,
Albania endorsed in March the Regional Strategic Document and Action Plan on
Justice and Home Affairs 2011-2013. Albania held
the Presidency of MARRI (the Migration, Asylum, Refugees Regional Initiative)
until May 2011. In this context, it supported the proposal to create a
visa-free zone between the participating states that would allow citizens to
travel with biometric ID cards only. Albania has completed the process of
establishing visa-free regimes with all the countries of the region.

Albania is a constructive partner in the
region and has continued to develop bilateral relations with neighbouring
and other enlargement countries.

Relations with Bosnia and Herzegovina
have remained good. The implementation of existing bilateral agreements and
protocols has continued to proceed smoothly. Albania
continued its good relations with the former Yugoslav Republic of Macedonia.
An agreement for the full liberalisation of bilateral and transit
transportation between the two countries was signed. Albania continues to have
good relations with Croatia and Montenegro. Cooperation with
Montenegro focused on economic and trade relations. Albania has stepped up its
dialogue with Serbia. Albania's very good relations with Kosovo
were maintained.

Relations with
neighbouring EU Member States Greece and Italy remain very good.
In February 2011, Albania and Italy signed an agreement on representing and
protecting each other's interests in those countries where one of the parties
lacks diplomatic representation.

Albania's relations
with Turkey remain good. Turkey provided humanitarian assistance to
Albania following the floods which affected the country in December 2010.

Overall, Albania
continued to generally satisfy the Stabilisation and Association Process
conditions and to contribute to regional stability by fostering positive
relations with neighbours and regional partners.

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

In February 2011, Albania submitted its
fifth Economic and Fiscal Programme (EFP) covering the period 2011-2013. The
key objectives remained unchanged from the previous EFP and economic policy continued
to be directed towards ensuring macroeconomic stability accompanied by
expenditure-led budgetary consolidation. Progress on structural reforms was
limited. In the context of the still-difficult economic situation of Albania's
trading partners, the economic growth projected in the programme is on the optimistic
side. Despite a more polarised political landscape, there was broad agreement
on the key essentials of a market economy. Overall, consensus on the
fundamentals of a market-oriented economy has been maintained.

Macroeconomic stability

Economic
activity posted strong growth of some 3.8% in 2010, according to provisional
data. GDP growth in 2010 was mainly driven by foreign demand as exports of
goods rose by 63%, spurred mostly by exports of electricity due to a rebound in
energy prices combined with full-capacity production from local hydropower
generation, while domestic demand remained weak. Private
consumption growth decelerated to 2.2%, weighed down by weak consumer
confidence, loose labour market conditions, a decline in workers' remittances
and sluggish household credit. Gross fixed capital formation contracted by
5.2%, reflecting the substantial cuts in public spending as part of the
government's fiscal consolidation efforts. Provisional
data show that economic activity continued to expand during the first half of
2011. Real GDP grew by 3.4% year-on-year in the first quarter with construction
breaking its long contraction period and recording positive growth of 4.8%
year-on-year, while growth moderated in industry and services that had recorded
a swift recovery in 2010. Per capita GDP in terms of purchasing power parity
was estimated at 27.1% of the EU‑27 average in 2009, up from 25.9% in 2008. Overall,
the Albanian economy continued to grow, albeit below the previous high rates.

The current account deficit declined to 11.9%
of GDP in 2010, from 15.1% in 2009, reflecting an improvement in all the
components of the current account, most notably a strong recovery in exports of
goods. The still large trade deficit narrowed to 23.4%
of GDP in 2010, from 26.4% in 2009, in the wake of an
across-the-board rise in exports. Strong increases were
recorded in 2010 in energy exports, as the local hydropower
generation operated at full capacity, followed by mining
and construction materials. Albanian exports continued to depend heavily on the
textile and footwear industries, which account for 34% of total exports, although
their share is declining. Exports of mining products grew substantially in 2010
as new fields came into operation and global commodity prices recovered.
Remittances were down by around 11.7% in 2010, to 7.8% of GDP, as result from
weak international economic conditions in host countries. The current account
deficit deteriorated in the first half of 2011, as the trade deficit widened
due to the slowing down of energy exports and a 10% fall in workers'
remittances.

During 2010, FDI inflows increased by 17.2%,
primarily reflecting new investment in exploration and drilling for oil and gas
and new concessions in the energy sector. Net FDI in the first quarter of 2011
was around one-third that registered in the corresponding period of 2010.
Although FDI inflows increased year-on-year, a significant amount of foreign
capital was repatriated resulting in a sharp drop in net FDI. Portfolio
investment also increased, thanks to the €300 million Eurobond issue by the
government. Capital inflows declined by some 11%. Overall, the balance of
payments posted a surplus in 2010 which led to a corresponding rise in reserves
of some €179 million. Albania preserved a sufficient level of international
reserves at around 4.8 months of imports. Overall, despite an
improvement in 2010, further reducing the current account deficit remains
challenging, especially if the decline in workers' remittances persists.

Unemployment in Albania was high at 13.7%
in 2010, the same as a year earlier. Private non-agriculture employment increased gradually during the
year, while agriculture employment rose in the third quarter. Labour market
conditions improved somewhat in the first half of 2011. Employment grew by 2.2%
and 2.7% in the first and second quarters, respectively, mostly reflecting an
increase in private non-agriculture sector jobs. Unemployment in the first
quarter decreased to 13.5% and further to 13.3% in the second trimester. Labour market statistics continue to be weak and are distorted by a
large informal sector. Overall, unemployment remains high.

The annual average inflation rate rose to
3.6% in 2010 from 2.3% in 2009, remaining within the Bank of Albania's (BoA) target
range of 2-4%. The main contributors to inflation were international food and
fuel prices along with higher administrated prices for water and electricity.
Inflation accelerated to 4% in the first quarter of 2011 reaching a peak of
4.2% in May, before receding to 3.1% in August. The rise in inflation in the
first quarter of 2011 was primarily driven by higher prices for food and, to a
lesser extent, fuel, due to developments in the international commodity markets
as well as increases in indirect taxes in 2011 (VAT on medicines and excise
taxes). In response to rising inflationary pressures, the Bank of Albania
raised the key repo rate from 5% to 5.25% in March.

The level of euroisation in Albania remains
high. Foreign-denominated loans and deposits account for 67% and 47% of total
stock, respectively. Although necessary for the currency's stability, such high
euroisation constrains the room for manoeuvre in monetary policy and can be a
source of instability in the financial system since it may expose banks to
currency mismatches or indirect credit risks.

Albania continued to pursue a free-floating
foreign exchange regime. The lek depreciated by 4.3% against the euro in 2010 and
by a further 2.7% in August 2011. Overall, monetary policy remained
sound, maintaining price stability while inflation remained within the target
range.

During 2010, further progress was made in
improving the tax administration in the form of both general revenue collection
and administrative reforms. Electronic declaration has been made mandatory for
VAT taxpayers, while the relevant legislation allows
large taxpayers to file tax returns online. In 2011,
various measures have been taken to broaden the tax base, including introduction
of 10% VAT on medicines, a new system of fiscal stamps
on excise goods and medicines, the extension of VAT to cover professional
services and addition of more products subject to excise tax. In addition, the government declared a fiscal amnesty which aims to legalise
undeclared assets and income. Despite these efforts, gaps remain in both
revenue collection and administrative reform. A fully-fledged tax compliance
system is still lacking, law enforcement continues to be weak, while the
revenue collection at local government level remains weak.

The upward trend in the fiscal imbalance in
recent years was reversed in 2010, with the budget deficit falling to 3% of GDP
from 7%, a year earlier. This improvement in the budget balance was primarily
expenditure-led. Total expenditure stood at 29.6% of GDP, or 3.4 percentage
points less than in 2009. More than four-fifths of the reduction in expenditure
resulted from cuts in capital spending (by almost a third from the 2009
levels). Total revenue stood at 26.6% of GDP in 2010, 0.6 percentage points
higher than the previous year. The 2011 budget
envisages a fiscal deficit of 3.5% of GDP, based on assumed real GDP growth of
5.5%. The projected increase in the fiscal deficit is mainly due to the planned
rise in capital outlays as the government embarks on a renewed drive to upgrade
infrastructure. In the period January-July 2011, total
government revenue increased by 2.3%, while total expenditure rose by almost 6%
compared to the same period of the previous year. Tax revenues for this period
were lower than planned, reflecting over-optimistic projections. Moreover, tax
receipts underperformed primarily as a result of weak indirect tax revenue amid
sluggish domestic demand. The higher government expenditure was driven mainly
by an increase in current expenditure, specifically by social security
spending. The government deficit in the period January-July rose by a third compared
to the same period of the previous year. These developments
prompted the government to re-balance the budget in July by cutting expenditure
to a more affordable level of revenues, aiming to preserve the 2011 deficit at
3.5% of GDP. Tax receipts were revised downwards while
expenditure was cut, mainly as result of lower capital outlays and spending on
maintenance. At the same time, an increase in public service salaries and
pensions was granted in July 2011.

The primary source of deficit financing in
2010 consisted of domestic borrowing while, contrary to previous years,
privatisation receipts were limited. The domestic financing of the fiscal
deficit affects the level of interest rates for business and consumer borrowing
and diverts savings to the public sector. Albania also
issued its first-ever Eurobond on the international markets for €300 million with an interest rate of 7.5%
and a five-year maturity. Most of the proceeds from the Eurobond were used to
pay back a syndicated loan, while the rest is expected to finance public
investment. In 2010, the debt-to-GDP ratio stood at 58%, down from 59% the
previous year. Albania's relatively high public debt continues to show a
short-term bias which requires frequent re-financing, although some three fifths
of the debt is domestic. Still, in the event of an increase in interest rates,
the fiscal space would be further limited suggesting that, at such high levels,
public debt remains a source of macro-financial vulnerability. Overall, the fiscal deficit has been reduced
significantly, but pursuing and strengthening budgetary consolidation that
ensures a lasting reduction of the public debt remains a priority.

Overall,
macroeconomic stability has been maintained, as Albania weathered the lingering
adverse economic conditions in the region and beyond well. Monetary policy has
successfully helped to keep inflation stable. The high level of euroisation
continues to limit the effectiveness of the monetary transmission channels. The
relatively high public debt restricts fiscal space and remains a source of
vulnerability, underlining the importance of pursuing budgetary consolidation.

Interplay of market forces

The private sector contributes 80% of GDP
and around 82% of employment. State participation in
the economy remains low, but progress in the planned
privatisation reform stalled in 2010. No progress can be reported with the
government's remaining shares in some strategic companies. Overall, State involvement in the
economy is low.

Market entry and exit

Albania has made good progress with facilitating
business registration and business licensing procedures. The National Licensing
Centre has extended its services network to cities beyond Tirana. However, the
procedures for granting building permits remain lengthy, hampering the recovery
of the ailing construction sector. The e-signature system to allow online applications
for registration became operational in March 2011. The Albanian Investment
Development Agency, which serves as a one-stop shop for foreign investors, became
operational in June 2011. The Law
on foreign direct investment was
amended to grant special protection, under certain
conditions, to foreign investors in the
event of land ownership disputes. However, the impact on foreign investment cannot
be assessed, as the new legislation has not yet been applied in practice.

Some progress was achieved on bankruptcy
procedures with the establishment of the Bankruptcy Supervisory Agency. However,
the Agency is not yet operational. Some 130 bankruptcy
declaration requests were submitted during 2010 out of which 75% were analysed
and only 6 were accepted to follow the bankruptcy procedure. Overall, some progress was made to facilitate market entry.
However, bankruptcy procedures remain slow.

Legal system

Although some steps
were taken on legalisation of properties and registration of land ownership in
coastal and urban areas, a comprehensive strategy and
action plan to tackle the enduring issue of property rights has not been
adopted yet. Lack of secure
property rights and weak enforcement of the rule of law remain causes for concern.
Moreover, the business community continues to face
delays in court procedures, and weak enforcement of contracts and execution of
collateral. Informal methods of contract enforcement,
by-passing the legal system, continued to be widespread. Steps were taken towards establishing the private bailiff office,
but training and administrative capacity remain weak. Moreover, the delay in
establishing the administrative court due to lack of political consensus
remains an obstacle to investment.

Progress was achieved in the area of
regulatory reform and on strengthening the institutions that oversee it. In
2010, the government adopted a regulatory impact assessment (RIA) system with
the aim of improving the efficiency and effectiveness of the regulatory
decision-making process. Phasing-in of a simple version of RIA is scheduled to
commence in 2011, after which a decision will be taken on whether to switch to
a full system by 2013. The new Law on inspections was adopted in June 2011 laying
the foundations for restructuring the inspectorates. Overall,
weaknesses in the rule of law and widespread corruption are continuing to have
a negative effect on the business environment.

Financial sector development

Albania's financial system remains
dominated by the banking sector, which accounts for some 95% of the system's
total assets. Despite the banks' dominance, the share of bank lending to the
private sector and households was low at 38.7% of GDP in 2010, up from 37.5% a
year earlier, indicating that there is still significant scope for financial
intermediation. The banking sector remains well-capitalised, with the capital
adequacy ratio reaching 15.4% at the end of 2010 and falling slightly to 14.8%
in the second quarter of 2011, well above the legal minimum of 12% set by the
BoA. The profitability of the banking sector was positive during 2010, but
profitability indicators deteriorated in the first half of 2011. While
provisions have been adjusted accordingly, the level of non-performing loans
(NPLs) remains a concern for the banking sector. The ratio of NPLs was
estimated at 13.6% of total loans at the end of 2010 and rose sizeably to 16.6%
in the second quarter of 2011.

The concerns over the worsening quality of
the loan portfolio and subdued domestic demand kept banks from expanding
lending. Credit growth slowed to 8.6% in 2010, down from 20.5% a year earlier.
The private sector's loan portfolio grew at a more appropriate 10.6% in 2010
and was mostly directed to businesses, whilst household loans remained almost
unchanged from 2009. Lending growth increased slightly in the first half of
2011 and stood at 12.5% in July. The interest rates charged by commercial banks
on business and consumer loans continued to be driven by the interest paid on
government securities. Following sharp withdrawals in 2009, deposit growth
resumed during 2010, averaging 15.5% for the whole year as public confidence in
the banking system was gradually restored, especially in the second half of the
year. In the first half of 2011, deposit growth stood at approximately 15.8%,
year-on-year. External borrowing by the banking sector reached 4.9% by the end
of 2010 and rose to 6.4% by July 2011. The average yield of 12-month Treasury
bills stood at 7.2% at the end of 2010, down from 9.2% a year before, and
increased to 7.7% by August 2011.

The Bank of Albania's periodic stress tests
show that the direct exchange rate risk made some moderate impact due to the
low open foreign-exchange position of the banking sector. With respect to
liquidity risks, the banking sector appears to have a very good liquidity
situation for operations in the national currency, whereas operations in euro
call for constant monitoring. 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. GDP
growth accelerated, but remained below historical averages. Inflation
expectations remained anchored and the government deficit was brought down.
However, public debt remains relatively high. The planned privatisation
programme was delayed, the pace of reforms to facilitate market entry and exit
slowed and weaknesses in the rule of law, particularly in contract enforcement
and property rights, persist. Structural imbalances in
the labour market and the external account remain high.
Overall, although some progress was made in establishing a functioning
market economy, Albania needs to commit itself to
further structural reforms, amongst other things by bolstering economic policy governance,
enhancing labour market performance and protecting property rights.

Human and physical capital

During 2010, the budget expenditure on
education was estimated at roughly 3.4% of GDP. The budgetary allocation for
2011 is projected at 3% of GDP. Spending on education during 2011 will aim to
improve the overall quality of service delivery at all levels of education and
training with a particular focus on information technology and better matching
of vocational education with market demand. Public spending on research and
development accounts for 0.05% of GDP in the 2011 budget. Despite the
government's efforts to consider education and health among its priority
sectors, shortages of qualified employees persist, as a result of deficiencies
in the education and skills system. ICT was added to the curricula for 17 vocational
education and training schools. Some progress was achieved by the National
Employment Service in improving the information system on job vacancies. The
brain gain instrument which granted bonuses to public officials graduated
abroad was suspended due to budget cuts in July 2011.

Investment stood at 36.8% of GDP in 2009,
slightly lower than the 38.2% in 2008. Expressed as a percentage of GDP,
private-sector investment reached 27.2%. FDI inflows are estimated to have increased
by about 17% in 2010, to an estimated 8.8% of GDP, reflecting higher
investment, mostly in the hydrocarbons sector. Public investment was directed primarily at road infrastructure.
Construction of a new stretch of road
between Tirana and Elbasan started at an estimated cost of about €270 million,
financed mainly by soft loans from international financial institutions (IFIs). Rail transport remains underdeveloped. Further investment in
improving the infrastructure and logistics will be needed in order to attract
investors and stimulate tourism. Insufficient road maintenance and illegal
construction along roads remain causes for concern. In the energy sector, a number of concession agreements for construction and operation of
hydroelectricity generation plants were approved, and ddistribution
losses have been slightly reduced overall. However, bill collection rates
remain low at around 77%. Overall, spending on human and physical capital has increased. However,
further investment will need to be committed to improve the competitiveness of
the economy.

Sectoral and enterprise structure

The relative
shares of agriculture, industry and services remained broadly unchanged in 2010
from previous years, with slightly less than three fifths of Albania's GDP generated by the services sector.
Agriculture accounted for some 19% of output, but remains the largest employer
with 55% of total employment in the second quarter of 2011. The share of
construction fell to 11% in 2010 from 14.4% in 2009, while industry's share
increased to 11% in 2010 from 9.5% a year earlier. Inward
processing performed well during
2010 increasing its exports as compared with 2009.

Weak tax and expenditure policies and poor
law enforcement, including the fight against corruption, have been fuelling a
sizeable informal sector. Some steps were taken during the year to address
informality, amongst other things by requiring large taxpayers to declare taxes
online and proceeding with installing cash registers. However, since only
around half of the companies have installed the devices, the take-up rate
remains low. SMEs continue to obtain financing from a credit support scheme
financed by the Italian government. By December 2010, 49 businesses had
benefited from approximately €11 million under the scheme. An agreement signed
in April 2011 between the Albanian government and six commercial banks will
facilitate access to a €2.5 million credit guarantee scheme for businesses. Since
November 2010, five new additional micro-credit institutions have been included
in the credit registry.

Concerning network industries, the high rate of losses in
the electricity distribution system remains a persistent challenge to
electricity supply. The second third-generation (3G)
licence in the telecommunications sector was sold in September 2011. The fourth
mobile telecommunications company started operating during 2010. Prices in this
sector are set by the regulatory body and a revised tariff reduction scheme
entered into force in March 2011, aiming to regulate the market price. Overall, there
were no major changes in the structure of the economy. While some measures were
taken to combat the sizeable informal sector, informality remains a challenge.

State influence on competitiveness

Subsidies in
2010 are estimated to have declined to 0.3% of GDP from 0.4% in 2009. While
there is no specific financial assistance for companies, subsidies are granted
to a limited number of sectors, namely railways and water supply. State aid
granted to the energy sector has declined since 2009. Overall, State intervention remains
limited.

Economic integration with the EU

The openness of the Albanian economy
continued to increase. The sum of imports and exports of goods and services
stood at slightly more than 86% of GDP in 2010, up from 82% in 2009. Total
foreign trade in goods and services rose by 12% in 2010 compared with 1.5% in
2009. Both imports (7%) and exports (21%) of goods and services grew at a
faster pace than in 2009. The EU remains Albania's leading trading partner accounting for around three-quarters of both
exports and imports in 2010, with the combined share of
Italy and Greece amounting to 70% of total merchandise trade by volume. Overall, the EU remained Albania's leading trading and investment
partner in 2010. Trade with CEFTA countries increased. However, Albania's
production base is concentrated around just a few low value-added sectors and export
markets, leaving the economy vulnerable to specific shocks.

4.
Ability to assume the obligations of membership

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

4.1.
Chapter 1: Free movement of goods

There are no further developments to report
as regards general principles.

As regards horizontal measures,
there were positive developments in the legislative framework on accreditation
and standardisation.

The General Directorate of Standardisation
(GDS) continued its preparations to apply for full membership of the European
Committee for Standardization (CEN) and of the European Committee for
Electrotechnical Standardization (CENELEC) in 2012. The adoption of European
standards (ENs) as Albanian standards continued to make progress. The number of
ENs adopted is 17,442, in line with the adoption rate of 95% set
for 2011. However, the number of standards translated remains low in comparison
to the number of standards adopted, since most ENs have been adopted by the
cover page method.

The law on standardisation was amended in
February 2011 to include the possibility of adopting and publishing standards
prepared by the European Telecommunications Standards Institute (ETSI). The
managing board of standardisation was established and became fully operational
in November 2010. Since then it has held two meetings and has
taken decisions, including on its internal rules and work plan, as well as on the organisation
and functioning of the National Forum on Standardisation.

There were no legislative developments in
the area of conformity assessment. The law on general product safety,
essential requirements and conformity assessment of non food products is not
yet fully in line with the acquis. The use of the CE marking, especially
in cases where third party conformity assessment is needed, is not in line with
the acquis.

On accreditation, three new
conformity assessment bodies (CABs) were accredited. In total there are 16 CABs
accredited by the General Directorate of Accreditation (GDA). The documentation
of the GDA concerning the quality management system was revised to take the
findings of the 2010 pre-peer evaluation of the European co-operation of
Accreditation (EA) into account. The Advisory Board for
Accreditation has started to function on a regular basis. During 2010 the GDA supported the
organization of proficiency testing in the field of construction products, as
testing laboratories in this field make up the largest number of accredited
laboratories. Two new technical committees were established: the laboratory
technical committee and the inspection and certification committee. However, there was no progress in aligning the current law on
accreditation with the 2008 horizontal acquis.

A regional metrology centre became
operational in Lezha during the second half of 2010 but the National Centre of
Metrology in Tirana has not yet been completed. The transposition
of the New Approach Directives on non-automatic weighing instruments and
measuring instruments is still pending.

There has been some progress as regards market
surveillance. Market surveillance activities have increased
(especially in the area of toys, electrical equipment, textiles and footwear)
and dangerous products have been withdrawn from the market. Following the entry
into force in July 2011 of the new law on the General Inspectorate, a reform of
the inspectorates is ongoing, in order to achieve a more efficient market
surveillance structure. However, the present legislation does not fully
incorporate the requirements of the horizontal acquis.

There was progress in the area covered by
the 'Old Approach' product legislation. The March 2011 law on
fertilisers partly transposes the acquis. Legislation on
pharmaco-vigilance and good manufacturing practice in the field of pharmaceuticals
was adopted in November 2010 and January 2011 respectively. Secondary legislation aimed at approximation in the fields of motor
vehicles was approved in June 2011. Albania adopted legislation on accession to the UNECE Conventions of 1958 and 1998 on Vehicle
Regulations.

There has been limited progress on
legislative approximation to the acquis in the area covered by the 'New
and Global Approach' product legislation. Technical regulations on cableway
installations designed to carry persons, on radio equipment and
telecommunications terminal equipment were approved and the law on the civil
use of explosive materials was revised.

In the area of procedural measures, there is no progress to report in alignment with the acquis of legislation on
the return of cultural objects and on civil firearms.

Conclusion

There has been progress in
the area of free movement of goods, particularly with regard to adopting EN
standards as Albanian standards and in establishing the managing board of
standardisation. Further efforts are needed in
order to harmonise Albanian legislation with the New and Old
Approach directives, as well as to align the horizontal legislation with the acquis
and to build up an adequate market surveillance infrastructure. Overall,
preparations in this area are moderately advanced.

4.2.
Chapter 2: Freedom of movement for workers

There has been no progress as regards access
to the labour market. The Law on Foreigners has not yet been amended as
planned for 2011, to give priority to EU citizens as regards demand on the
labour market. Albanian legislation in this field is not in line with the acquis.

There has been no progress as regards
preparations for participation in the EURES (European Employment
Services) network.

There has been limited progress as regards coordination
of social security systems. A bilateral agreement on social security is
still being implemented with Turkey and there are negotiations for further
agreements with Hungary, Belgium and the former Yugoslav Republic of Macedonia.
Albania has improved the management of the social insurance system. The
database of pensions and a database of contributions for self-employed persons
in agriculture and voluntarily insured persons have been established, as well
as electronic administration of monthly pay-roll of contributions and personal
accounts of contributors, a database of urban contributors and a database for
the periods during which persons who had worked in the former agricultural
cooperatives were insured.

The Health Insurance
Institute has not yet planned a strategy to prepare for introducing the European Health Insurance Card upon
accession.

Conclusion

There is little progress to report in the
area of freedom of movement for workers. Some efforts have been made as regards
coordination of social security systems. However, Albania still needs to amend
its legislation with regard to access to the labour market. Preparations have
not yet started with regard to EURES and the European Health Insurance Card.
Overall, preparations in the area of freedom of movement for workers are at an
early stage.

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

Progress as regards the right of establishment has
been limited to developments in the simplification of registration and
licensing procedures. Albanian legislation and procedures are not
discriminatory as regards foreign operators or their branches.

No progress can be reported on the freedom
to provide cross-border services. The Minister of Economy, Trade and Energy
has been tasked with inter-ministerial
coordination for transposition of the Services Directive. However,
preparations are at a preliminary stage, including as regards developing the
required institutional capacity.

There has been some progress in the field
of postal services. The Council of Ministers approved a regulation defining the procedures for issuing general licences, the
content of these licences and the conditions for amending, suspending or
revoking them. However, a
postal strategy and a decision on the definition of tariffs and weight of
reserved services for the public postal operator are still pending. The regulatory department for postal services
has not yet been established in the Electronic and Postal Communications
Agency, which is the national regulatory body, and this hinders the effective
separation of regulatory functions from policy making in the postal sector.

There have been some
legislative developments in the field of mutual recognition of professional
qualifications. The government enacted administrative provisions for the
mandatory state exams for the acquis-regulated professions of doctor, dentist, pharmacist, nurse,
midwife, veterinarian and architect.
The National Examination Agency, established in December 2010 and
operating under the supervision of the Ministry of Education and Science, is responsible for organising and monitoring these exams. Fully
qualified professionals from other countries are exempted from the exams and
are eligible to exercise their profession in Albania in accordance with the
applicable legal framework and under the same conditions than Albanian
nationals.

Conclusion

Albanian legislation and procedures in the
field of right of establishment do not discriminate against foreign operators
or their branches. Rules facilitating mutual recognition of professional
qualifications were laid down. However, transposition of the Services
Directive, including the development of adequate administrative capacity, is at
an early stage. Further efforts are required in the postal sector to ensure
regulatory capacity, independent of policy making. Overall, preparations are
not very advanced, particularly in the area of freedom to provide cross-border
services.

4.4.
Chapter 4: Free movement of capital

There was no progress in the field of capital
movements. Provisions regulating acquisition of real estate by foreigners
remained unchanged and uncertainties around real estate ownership rights
continue to discourage investment.

The law on foreign
investment was amended in order to grant special state protection, under
certain conditions, to investors in the areas of public infrastructure,
tourism, energy and agriculture against damage resulting from property
ownership claims. However, the impact on foreign investment cannot be assessed,
as the new legislation has not yet been applied in practice.

There was
limited progress as regards payment systems. The Bank of Albania (BoA) set up a working group to analyse legislative approximation measures, including on
provisions on cross-border payments. The BoA approved
regulations on the functioning of the Albanian Interbank Payment System (AIPS)
and the Albanian Electronic Clearing House (AECH) aimed at promoting the use of
non-cash payments by, inter alia, defining the bank's commissions and
increasing clearing sessions for payments. As regards electronic payments, the
volume of payments that were settled through AIPS increased compared to 2010,
although the value of transactions decreased slightly. There was an increase in
both the volume of payments and the value of transactions cleared through the AECH. The number of credit and debit cards in
circulation continued to increase, reaching 712,575 cards in the first half of
2011, of which 96% are debit cards. However, 95% of card transactions are cash
withdrawals, which is an indication that the Albanian economy is still largely
cash based. There is no complaint system in place for
the settlement of disputes between the customers and the payment service
providers, although there are some mechanisms for out of court arbitration.
There was no progress as regards the establishment of a Banks Ombudsman as
recommended by the Competition Authority.

Some progress can be reported as regards the fight
against money laundering. An amended law on money laundering, which includes
recommendations from MONEYVAL, entered into force in April 2011. The new law
provides the foundation for improving the ability to detect suspicious bank
transactions. It also addresses issues related to customer due diligence,
politically exposed persons, wire transfer rules, designated non financial
businesses and professions, 'shell' banks and unusual transactions. However,
the Penal Code has not yet been amended in order to reflect some of the
recommendations of MONEYVAL with regard to the financing of terrorism and money
laundering. The Financial Intelligence Unit has continued to strengthen its
cooperation with the Prosecutor's Office, the Albanian State Police and the
State Information Service. However, further efforts are required in order to enhance inter-institutional
cooperation and the analytical capacity and IT tools and the expertise of all
institutions involved combating money laundering and financial crime. Reporting of suspicious transactions showed a slight
increase (13%), but the number of suspicious transactions reports submitted by
the banking and non-banking sectors remains low and further attention should be
paid to their quality. Prosecution and convictions levels remain low and
further efforts in the implementation of the national strategy to fight
money laundering and financial crime, including as regards enforcing the
existing legal framework, are still required. Further
efforts are needed in order to improve the national performance on anti-money
laundering and prevention of terrorism financing by applying the provisions of
the Council of Europe Convention on Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime and on the Financing of Terrorism.
Statistical data on the use of these provisions are insufficient.

Conclusion

There was some progress
as regards the legislative framework on payment systems
and anti-money laundering. However, effective implementation of the national
strategy to fight money laundering and financial crime requires further efforts
and enhanced inter-institutional cooperation. Overall, preparations in the area
of free movement of capital are moderately advanced.

4.5.
Chapter 5: Public procurement

There was no
progress as regards general principles. No further developments took
place as regards alignment of the system of concessions, defence procurement mechanisms and review requirements
mechanisms with the EU standards.

There was some progress in the area of the award
of public contracts. The award of contracts for the supervision of
construction works financed with public funds has been brought under the
legislative framework for public procurement. However, the Concessions Law does
not include provisions relating to works and service concessions and fails to
draw a clear distinction between concessions and other public contracts. Award
procedures for concessions have continued to be based on unsolicited proposals.
Provisions on the determination of abnormally low tenders are not in line with
the acquis. This, together with the mandatory disclosure of the funding
limits available to the contracting authority, restricts the scope for
competitive award procedures.

There was some progress in the field of remedies.
The Council of Ministers approved decisions on the functioning of the Public
Procurement Commission, including on the review of appeal procedures and the
determination and payment of fees.

The Public Procurement Agency (PPA) has
only limited means to efficiently monitor compliance with public procurement
legislation. Secondary legislation envisaged by the public
procurement law to that end has not yet been adopted and the current staffing
of the PPA does not allow it to properly discharge its duties. A clear
definition of the roles and responsibilities of all institutions involved in
public procurement (PPA, Public Procurement Commission and Public Procurement
Advocate) has yet to be established. The proportion of non-competitive and
non-transparent procedures remains relatively high.

Conclusion

The legislative framework on public
procurement and concessions is not fully in line with the acquis.
Efforts are required with regard to strengthening the institutional framework
and clearly defining and delimiting the competencies of all public procurement
institutions in order to avoid the overlapping of tasks and to remove the
remaining loopholes in the system. No comprehensive system of administrative
monitoring and control of the application of public procurement rules and
contracts has so far been introduced. Overall, preparations in the field of public
procurement are moderately advanced.

4.6.
Chapter 6: Company law

There has been no progress in the
field of company law as regards further aligning Albanian legislation with the acquis on
cross-border mergers, on reporting and documentation requirements for mergers
and divisions and on minimum subscribed capital requirements for public limited
companies.

Progress has been limited as regards
implementation of the electronic signature. In February 2011, Albanian
Post received the first e-certificate enabling identification of
sender/recipient, privacy, encryption and digital signature. However, overall,
the technical infrastructure is lacking. A Corporate Governance Code has not yet been adopted.

Limited progress can be reported in the field of corporate accounting. Transposition of the Fourth and Seventh Company Law
Directives has not yet been achieved. The staff of the National Accounting
Council (NACA) received some training and the NACA continued its
awareness-raising campaigns on the implementation of auditing and International
Financial Reporting Standards. However, the inspection capacity of NACA remains
insufficient to monitor their implementation.

There was some progress in the field of auditing.
The
Public Oversight Board (POB) for the audit profession approved the code of
ethics for audit professionals and its own internal regulation on quality
control of audit of public interest entities. It also approved regulations on
investigation and discipline and on quality control for auditors. The Institute
of Authorised Chartered Accountants continues to serve as the technical
secretariat of the Board and worked on drafting some of these regulations.
Further efforts are required in order to increase the administrative
capacities, resources and budget of the POB so as to ensure its independence.

Conclusion

There has been little progress in the area
of company law. The capacity of the National Accounting Council and the
operational independence of the Public Oversight Board for the audit profession remain weak. Overall,
preparations in the area of company law are moderately advanced.

4.7.
Chapter 7: Intellectual property law

There was no progress as regards alignment
with the acquis in the area of copyright and neighbouring rights.
The new law on Copyrights is still pending adoption.

No progress can
be reported as regards legislative alignment on industrial property rights. No
inter-institutional meeting on monitoring the implementation of the National
strategy for the enforcement of the intellectual and industrial property rights
(IPR) has yet been held.

Progress with regard to enforcement
has been limited. The Copyright Office carried out awareness-raising campaigns
through training activities for its own staff
and for Collective Management Agencies and state authorities
including tax and customs administration, police,
National Council of Radio and Television, the judiciary and prosecution. A Memorandum of Understanding between the Directorate General of
Customs and the Directorate General of Patents and Trademarks (GDPT), aimed at
strengthening cooperation, was signed in November 2010.
The system of acceptance and processing of applications
for patents, utility models, industrial designs, trademarks and geographical
indications is now fully automatic as a result of IT improvements in the GDPT.
Further efforts are required to strengthen the capacities of GDPT, to secure
the IT system and to increase online services. The number
of staff of the GDPT has remained unchanged.

The number of infringement cases brought before
the justice system increased, but it is still at a very low level. The
Copyright Office and the regional offices still have to be restructured and
strengthened, pending the adoption of the new Copyrights law and the
implementation of the reform of the inspectorate. The establishment of a market
surveillance structure covering IPR issues is awaiting the implementation of
the new law on the General Inspectorate which entered into force in July 2011.
Substantial efforts are still needed in order to address major weaknesses in
the sector, such as insufficient administrative capacity, low level of fines,
lack of appropriate experience and qualifications among the judiciary,
insufficient awareness and enforcement in general. Albania has not succeeded in
meeting its SAA obligations of guaranteeing by 1 December 2010 a level of
protection of intellectual, industrial and commercial property rights similar
to the one in the EU, including as regards enforcement.

Conclusion

Overall, progress has been limited in the
field of intellectual property law and Albania has not succeeded in meeting its
SAA obligations on time. Substantial efforts are still needed in order to
address many remaining shortcomings which are hampering the effective
enforcement of intellectual and industrial property rights. Preparations are
not very far advanced.

4.8.
Chapter 8: Competition policy

There was some progress in the area of antitrust,
including mergers. The government adopted regulations on Investigation
Procedures, on the functioning of the Albanian Competition Authority (ACA), on
Agreements of Minor Importance ("de minimis"), and group
exemption regulations for technology transfer agreements, research and
development agreements and specialisation agreements respectively. These regulations are
aligned with the acquis in all essential respects. The Albanian
Parliament issued a resolution binding all executive bodies to consult the ACA
whenever primary and secondary legislation is drafted.

There was no progress as regards the
administrative capacity of the ACA. Its staff of 35 remains unchanged and
efforts are required to strengthen it in line with the tasks assigned to the
ACA.

The ACA adopted two decisions concerning
anti-competitive agreements (cartels) and two decisions concerning abuses of
dominant positions. The ACA issued fines of approximately € 245,500 for
infringements of the competition rules. Seven proposed mergers were notified to
the ACA and were authorised without conditions. The ACA concluded enquiries
into the banking, pharmaceuticals and energy sectors, and subsequently issued
recommendations to the Albanian government. It also initiated in-depth
investigations in the bread markets and in the markets for loading/unloading
and depositing liquid natural gas in port facilities.

There was some progress in the field of State
aid. The State Aid Commission (SAC) adopted a decision on State aid to the
Albanian Post as well as Guidelines on State aid in the Postal Sector, bringing
Albania's policy for postal services closer to the acquis. A decision on
subsidies to the Albanian railways, which was deemed not to be in line with the
acquis, was revoked. No investigations were initiated ex-officio.
Finalisation of the regional State aid map is still pending.

The administrative capacity of the State
aid authority remained unchanged and efforts are required to strengthen the
State Aid Sector (SAS) in line with its responsibilities. The de facto
operational independence of the SAC requires continued monitoring.

Conclusion

Albania has made moderate progress in the
area of competition. However, the responsible authorities lack the appropriate
administrative capacity, and measures are still required in order to safeguard
the operational independence of the State Aid Commission. Preparations are overall
on track.

4.9.
Chapter 9: Financial Services

There was some progress in the area of banks
and financial conglomerates. In December 2010, the Bank of Albania (BoA)
adopted legislation on risks arising from large exposures of banks, on capital
adequacy, and on risk management in the activity of non-bank financial
institutions. These amendments furthered legislative alignment with the acquis.
The January 2011 law on operational risk management brings the regulatory
framework for banks, branches of foreign banks, non-bank financial
institutions, savings and credit associations and their unions closer to the acquis
and to the Basel practices on operational risk management and supervision. The
BoA also approved the regulation on credit risk management.

The BoA has continued its efforts to
improve its administrative capacity by increasing the staff of its Supervisory
Department from 32 to 49 people. Revisions of manuals on risk supervision based
on operational risk management are underway.

There has been some progress in the
non-banking financial sector. The Albanian Financial Supervisory Authority
(AFSA) approved several regulations in the field of collective investment
undertakings.

AFSA has moved to improved premises, the
technical infrastructure has been enhanced and staff have received additional
training. However, some members of the AFSA board continued to work after the
expiration of their mandates. In addition, AFSA's administrative capacities are
inadequate and require additional staff.

There has been some
progress in alignment with the acquis in the area of insurance and
occupational pensions. AFSA licensed the first two voluntary pension fund management
companies. Licensing of a third fund is in progress. AFSA continued its efforts
to improve the regulatory framework in the field of voluntary pensions by
issuing implementing legislation for the law on voluntary pension funds.

The law on certified accounting experts was
amended to now apply to both insurance companies and pension funds. There was some progress in the field of compulsory
insurance in the transport sector. Parliament
approved laws to liberalise the motor insurance sector, allowing insurance
companies to set their own premiums tariffs. Preparations for the establishment
of an Information Centre of Compulsory Insurance are advanced, and include
plans to apply the bonus-malus system. Positive growth of 4% was recorded in
the insurance market, and foreign presence increased. The private pensions
market is also growing but remains underdeveloped.

AFSA has continued its efforts to
strengthen supervision of the insurance market by introducing a risk-focused supervision methodology and
improving reporting and the implementation of the Management Information
System. However, further efforts are still required in this area.

There are no
developments to report in the field of financial market infrastructure.

There has been little progress in alignment
with the acquis in the area of securities markets and investment
services. In December 2010, the regulation on deadlines, conditions and
procedures for the authorisation of banks as custodians of bonds was approved
as implementing legislation, following the approval of the law on corporate
local government bonds.

However, the
securities stock market remains underdeveloped, with no companies listed on the
stock exchange. There are no multilateral trading facilities and no specific
rules are in place. Alignment with the Prospectus Directive, markets in
financial instruments Directive (MiFID), the Market Abuse Directive and the undertakings
for collective investment in transferable securities (UCITS) Directive is at an
early stage. No system for judicial appeal is in place in the authorisation
procedure and there is no legislation governing investor compensation schemes.

Conclusion

There has been some progress in the field
of financial services. Progress has been made in the alignment of legislation
with the acquis in the field of banks and financial conglomerates and
insurance and occupational pensions. However, there remains insufficient
administrative capacity in the non-banking financial sector to enforce market
surveillance and proper implementation of legislation. Further efforts are
needed with regard to the securities markets. Investment services legislation
and infrastructure are at an early stage. Overall, preparations are moderately
advanced.

4.10.
Chapter 10: Information society and media

There has been some progress in the area of
electronic communications and information technologies. The Agency for
Electronic and Postal Communications (AKEP) issued a decision to review tariffs
in the mobile telephony sector by 2015. Competition in the mobile telephony
market has been intensified with the introduction of a fourth operator. There
has been progress on the introduction of some competitive safeguards, such as
mobile number portability and decisions on new reference interconnection offers
and long-run average incremental cost accounting. Carrier selection and pre-selection is to be
implemented in autumn 2011 for international calls and in 2012 for national
calls. The second UMTS/3G licence was awarded in September 2011, however, no
timetable for release of further (3G) licences to encompass the full
possibilities of the spectrum has been communicated.

However, important reforms, such as
adoption of amendments to the 2008 Law on electronic communications and
secondary legislation, are pending. Furthermore, local loop unbundling and
rebalancing of tariffs has not been achieved. Liberalisation of access to
spectrum is insufficient. No licence for fixed wireless services has been
awarded either. While mobile penetration is high, the markets for fixed
telephony and broadband are underdeveloped by European and regional standards
(with penetration levels at around 11% and 3.5% respectively). At the same
time, the plans and the process of tendering to build a nationwide broadband
network are raising concerns about feasibility and competition. The
administrative capacity and resources of AKEP remain weak. Consequently, insufficient
implementation of regulation and legal certainty are still hindering the
creation of effective competition.

Progress in the
field of information society services has been uneven. The GovNet
network infrastructure has been improved and extended. Following the licensing
of the first agency for issuing of e-certificates in February 2011, the
applications for e-signature have begun to be sent in to the Albanian Post. The
revised action plan for implementation of the strategy on information society
has been adopted. However, the administrative capacity to implement policies
and legislation in this field remains weak. The National Agency for the
Information Society still does not have the necessary administrative and
technical capacity and human resources. Albania is working on amending the Law
on e-commerce with a view to fully aligning with the e-commerce directive.
Regulation of conditional access, unsolicited communications and itemised
billing are all provided for in the draft Law on Audiovisual Media Services,
which is pending adoption. Albania has not yet adopted a broadband strategy and
the broadband penetration rate is low.

There has been little progress in the field
of audiovisual policy. Albanian legislation is still only partly aligned
with European standards on media regulation and the Audiovisual Media Services
Directive. The draft Law on Audiovisual Media Services has not yet been
adopted. Concerns have been raised that some provisions
of the draft Law are not commensurate with European standards on independence
of the regulatory authority. The deadline for the
digital switchover has been extended from the end of 2012 to the end of 2015;
no concrete measures for this transition have been taken as yet and the
digitalisation strategy has not yet been adopted.

The National Council on Radio and
Television continues to lack sufficient administrative and technical capacity
and concerns remain about its independence. The public service broadcaster has
not increased its editorial independence. There has been no progress regarding
the adoption of amendments to the Criminal Code decriminalising libel and
defamation which require a 3/5 reinforced majority in Parliament. The full effective implementation of the existing law on access to
information has not been ensured.

Conclusion

Progress in the
field of information society and media has been uneven. Some measures were
taken to improve competition in the electronic communications sector but
concerns remain over the liberalisation of the market, including spectrum
management, and the capacity and independence of the national regulatory
authority. Alignment with the EU acquis is not completed, in particular
as regards e-commerce and conditional access. Furthermore, important
legislative acts, notably in the area of audiovisual policy and for improving
media freedom, have not yet been adopted. The capacity for implementation of
legislation and policies remains weak. Overall, preparations in the field of
information society and media are advancing slowly.

4.11.
Chapter 11: Agriculture and rural development

There has been progress on horizontal
issues.

In 2010, around € 7,5 million were
committed to agriculture for direct support schemes. Aid has been
allocated for plant and livestock production, agro-processing, farm machinery,
and the setting up of a credit guarantee fund.

Rules for the improvement of land
administration and protection were adopted. A law governing the putting into
use of abandoned agricultural land has been approved. Preparations for the
agricultural census to take place in 2012 are on track. The collection of data
for the completion of the agricultural land register has continued. However,
the electronic land cadastre has not yet been established, and farm and animal
registers still have to be completed. Access to credit and advisory services
needs to be further developed.

There is little visible progress with
regard to the alignment with the Common Market Organisation. In the area
of animal products, measures have been introduced for the measurement
and evaluation of production and methods for assessing the genetic values of
breeding animals for bovines, small ruminants and pigs. Good progress can be
observed with regard to rural development. Good progress has been made
in setting up the structures for the implementation of the Instrument for
Pre-Accession Assistance for Rural Development (IPARD) programme, the
segregation of duties has been defined at the Albanian Rural Development Agency
(ARDA) and staffing improved. Both the rural development strategy and the
agriculture and food strategy need to be updated. The capacity for carrying out
policy analysis and designing rural development policies needs to be
strengthened.

Some progress has been made in the area of quality
policy, in particular regarding preparations by the authorities for the
introduction and promotion of geographical indications.

While some organic farming has been
subsidised through direct schemes, most activities in the sector have been
driven by donor funding.

Conclusion

Overall,
some progress has been made in the field of agriculture and rural development.
The basic implementing structures for rural development programmes have been
set up. Financial resources have continued to be allocated with a positive
effect on agricultural production and farm competitiveness. However, the
capacities for carrying out policy analysis or design rural development
policies remain weak. The implementation of IPARD requires a leading role and
ownership of the Ministry of Agriculture in order to enable the best use of
knowledge and technical support.

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

Some progress has been observed in the area
of general food safety. The National Food Authority (NFA) has
significantly increased its operational capacity and started to expand its
activity across the 12 regions of the country. However, the repartition of
competences between the Ministry of Agriculture, Food and Consumer Protection
(MAFCP) and the NFA still needs to be clarified and a clear chain of command
has to be established. The National Food Authority has not yet developed its
risk-assessment capacity and the Scientific Committee and Panels have not yet
been established.

In the area of veterinary policy,
progress has been limited. There is still a need to adopt a new veterinary
framework law. The division of responsibilities between the animal health and
welfare services of the MAFCP and the NFA has not been clarified. There is
still no unified chain of command and responsibilities remain fragmented among
the different institutions. The level of staff, particularly at the central
level, remains inadequate. In the area of identification and registration of
animals, most bovines have been registered and their movements are
reported. Nevertheless, reporting is not always done in a reliable and timely
manner. The harmonized animal database (which also includes the animal health
database) is under development and is expected to improve the timeliness of
reporting. Some preparatory actions for the registration of small ruminants
(sheep and goats) have taken place.

Capacity to manage the transposition of EU
legislation and the implementation of disease eradication programmes, and to
ensure timely communication of information, remains limited. As regards placing
on the market of food and feed and animal by-products, the food hygiene package
has been adopted and feed hygiene legislation aimed at
aligning with the acquis has been drafted. Technical documentation to
sustain sufficient risk management capacity with regard to official controls
has been prepared. IT infrastructure and a database for electronic registration
of food establishments, recording of official controls and accessing the Rapid
Alert System for Food and Feed has been developed and tested. More specialised
staff will need to be recruited, in order to carry out official controls on
food and feed hygiene. However, enforcement of adopted legislation is weak due
to the lack of financial resources for official control. Only a few
establishments in the meat, fish and dairy sectors apply hazard analysis and critical control
point-based procedures and self-controls. Laboratory capacity needs
to be improved.

The administrative capacity is not yet in
place for the pesticide residue controls on food and feed of plant and animal
origin, even though the relevant legislation has been transposed. Further
expansion of the remit of the National Food Authority in the field of plant
health protection is planned during 2011.

In the area of food safety rules,
there has been some progress as regards the adoption of implementing
legislation in various areas.

Limited progress has been achieved in the phytosanitary
sector. Responsibility for plant health has been allocated to the NFA and for
plant protection to the Directorate of Crop Production Policies.

No progress has been made with regard to
the transposition and implementation of acquis on genetically modified
organisms.

Conclusion

Overall, some progress has been made with
regard to the establishment of the National Food Authority, the registration of
bovines, the adoption of the hygiene rules and an implementing regulation for
food safety. However, financial resources need to be provided in order to
ensure the proper implementation and enforcement of legislation. Substantial
efforts are required as regards harmonization of national legislation with the acquis,
repartition of competencies, communication and cooperation between services and
the strengthening of human resources.

4.13.
Chapter 13: Fisheries

The sector remains fragmented as regards
responsibilities and communication, with fish production and fishery
inspections being housed in two different departments of the Ministry of
Environment, Forests and Water Administration, and with fish diseases being
covered by the Animal Health Directorate in the Ministry of Agriculture, Food
and Consumer Protection (MAFCP) and processed fishery products being covered by
the Food Safety Department in the MAFCP and the National Food Authority. Work
on drafting a new fisheries law has been advancing with the aim of
strengthening the surveillance and monitoring system in fisheries, to enable
the sector to apply the satellite-based vessel monitoring system and to combat
illegal, unreported and unregulated fishing.

As regards resource and fleet management,
the fishing fleet has been registered and vessels have been classified into
categories. However, the application of an operational fishing fleet register,
according to the recommendations of the General Fisheries Commission for the
Mediterranean (GFCM) is still pending.

In the area of inspection and control,
administrative capacity remains very weak, with only a small number of
administrative staff responsible at a central level for fisheries and
aquaculture. The Parliament has approved a new inspection law, which provides
for the merging of the Forestry, Fisheries and Environment inspectorates. Staffing
of the maritime guard has been increased. However, qualified and experienced
local fisheries inspectors continue to be assigned tasks related to
aquaculture, veterinary and zootechnical issues. Availability of funds for the
monitoring programme remains very low.

Most inspections have been conducted in the
main lakes to tackle unlicensed fishing and use of illegal fishing means.
Almost no infringements have been reported as regards sea fishing. The lack of
means and resources for fishery inspectors has made it difficult to inspect and
enforce legislation, especially concerning small coastal fishing. The control system for fishing activities needs to be strengthened
considerably and more specialised personnel are needed. The enforcement and
collection of fines remains a challenge.

A Vessel Monitoring System ("Blue
boxes") has been installed in all fishing vessels over 12 metres to
strengthen the surveillance of the fishing fleet. Ensuring reliable, systematic
and improved collection of data on the fishing fleet, catches, landings and the
biological status of the stocks in Albanian waters continues to be an area of
concern. The coverage of the main fishing area is not
yet complete and the operations depend to a large extent on donor project
resources.

In preparation
for management of structural actions, there is a need for reinforcement
and training of staff, backed up by EU expertise. Albania still provides State
aid to support development of fisheries infrastructure in the four fishing
ports and excise-free fuel for fishing vessels.

Measures on market
policy have remained at a preliminary stage, in particular as regards
producers' organisations and the collection of market data.

In the context
of the implementation of international agreements, the country has
continued to attend the General Fisheries Commission for the Mediterranean and
the AdriaMed project. Albania has submitted neither the report of fishing
capacity and inspection plans for the 2011 season, nor its annual fishing
plans, to ICCAT in relation to the Recovery Plan for Bluefin tuna.

Conclusion

Overall, there has been some progress in
the area of inspection and control and positive signs related to the increased
importance attached to the role and the future of the fishery sector in
economic development. Technical capacities to strengthen the surveillance and
monitoring system in fisheries and combat illegal, unreported and unregulated
fishing have been upgraded. Nevertheless, enforcement of regulations in inland
waters and coastal areas remains weak due to the lack of resources.
Inter-institutional cooperation will need to be improved.

4.14.
Chapter 14: Transport policy

In February, the Ministry of Transport and
Public Works finalised the revised five year Albanian National Transport Plan,
as the main instrument for decision-making and strategic planning for the
transport sector in Albania.

There was progress on road transport.
Legislative alignment with the EU acquis is fairly advanced,
including on weight and dimension requirements for vehicles. No progress can be
noted as regards roadworthiness tests, driving licences and registration
documents. Implementation has started in all other areas. Some actions were
taken to transpose the legislation on the inspection of vehicles. However, road
safety remains a cause for serious concern. The steady increase in road
traffic, combined with insufficient road maintenance, illegal constructions
along the roads and poor driver discipline, continue to pose problems. In
February the government adopted the National Road Safety Strategy and the
Action Plan for Road Safety for 2011–2015, which confirmed the importance of
digital tachographs and speed limiters. However, the
implementation of both the strategy and action plan by means of a work
programme remains a challenge. The legislation on dangerous goods has
not yet been adopted.

Little progress
has been made in rail transport. The national railway company Hekurudha Shqiptare (HSH) is now operating with four business units;
a first step to account separation according to EU rules. The State compensates HSH for passenger services. Progress has been made in negotiations for a
border crossing agreement with Montenegro. Rail freight traffic, in particular
the international service to neighbouring Montenegro, has increased. Little progress has been made in the
preparation of the reform of railway legislation. No progress can be reported
in the setting up of independent railway institutions,
infrastructure managers and rail operators, which are a precondition for open
access to the Albanian rail network. A draft for a network statement has not
been published. Problems in
sustaining rail infrastructure quality remain due to insufficient funds for
maintenance.

Some progress
can be reported on maritime transport. The General Maritime Directorate
established in 2010 in Durres is now operational and fully staffed. While
progress was made in terms of the establishment of a ships register and of a
safety authority, the reorganisation of Ports' Control and the establishment of
Flag state Control are still ongoing. According to statistics for 2010 under
the Paris Memorandum of Understanding on Port State Control, the detention rate
of vessels flying the Albanian flag was 16 %, which is still well above the EU
average of 1.78 %. Cabotage remains reserved to national flag-carriers and it
is still obligatory that ships' captains must be Albanian nationals.

As regards inland waterways transport, it
is limited to a regular line on Komani Lake.

As regards combined transport,
Albania is in the initial phases of development.

As regards
air transport, Albania has made limited progress
with the implementation of the first phase of the European Common Aviation Area
Agreement. Some progress can be reported in the transposition of the Air
Traffic Management legislation. Progress was also made on aviation security,
with the exception of the National Civil Security Programme. Further efforts
are also needed to improve the implementation of acquis on ground handling and
on allocation of slots. The National Supervisory Authority has been set up and
staff training is ongoing. However, there was no progress regarding
implementation of air safety legislation. The Civil Aviation Authority lacks
qualified inspectors and has therefore not been in a position to discharge its
responsibilities with regards to the oversight of approved undertakings and
license holders. A State Safety Programme has not been developed and a level of
safety oversight in compliance with international safety standards has not yet
been ensured.

As regards satellite
navigation, Albania does not currently plan to take part in the Galileo
satellite navigation programme, once it becomes operational.

Conclusion

While there was
progress in the area of road and maritime transport, progress has remained
limited in the fields of rail and air transport. Aviation safety legislation
has yet to be implemented effectively. Albania's administrative structures in
the different transport sectors need to be made more effective. Overall,
preparations are not very advanced.

4.15.
Chapter 15: Energy

There was some
progress on security of supply. A new 400 kV interconnection line with Montenegro became operational
in April 2011. However, the electricity supply remains fragile and vulnerable
to hydrological conditions, due to the country's almost exclusive dependence on
hydro power plants for domestic generation. Further efforts are required in
order to implement the acquis on the security of the electricity supply
in line with Albania's obligations under the Energy Community Treaty.

As from 1
January 2011, the law provides for the oil stocks reserve obligation to be
increased to 90 days, in line with the EU oil stocks directive. The government
has taken measures to impose sanctions and suspend the license or activities of
operators failing to fulfill their obligations. Actual compliance with the
legal requirements has yet to be demonstrated.

Progress has
been limited as regards the internal energy market. Preparations are
ongoing to restructure the state-owned generation and wholesale company KESH. The Albanian Competition Authority considers that the lack of an
effective functional and financial separation of the public wholesale supplier
and the generation elements of KESH is hindering competition. The Power Sector Law, which regulates the electricity sector, and its
implementing legislation are not yet in line with the acquis. A
significant part of the transmission and distribution capacity is still
reserved for the wholesale supplier. Distribution losses have been slightly
reduced overall. Bill collection rates levels remain around 77%. Vigorous
efforts are still required in these areas. The market model has yet to be
adapted in order to ensure the economic viability of the electricity sector.
Albania has no gas market and secondary legislation for the June 2008 Natural
Gas Sector has not yet been approved. Further efforts are needed in order to
strengthen the monitoring and enforcement powers of the Albanian energy
regulator ERE, as well as its independence.

There has been
no progress in the field of renewable energy. The legislative and
regulatory framework is not in line with the acquis. Existing
administrative burdens and the absence of rules for the cost of connection to
the grid or for grid reinforcements are hampering the integration of new
renewable energy producers. There was no progress regarding the implementation of Albania's biofuels
target. A National Renewable Energy Action Plan providing for reaching the
target for the share of renewable energy in the final energy consumption in
2020 has not yet been prepared. Albania needs to make further
efforts to improve the use of renewable energies.

There was no
progress in the area of energy efficiency as regards bringing the Energy
Efficiency Law into line with the acquis. The government approved a
National Energy Efficiency Action Plan for the period 2011-2018 but the legal
framework and inter-institutional distribution of responsibilities for its
implementation has yet to be established.

There was some
progress on nuclear safety and radiation protection. Albania ratified
the Convention on Nuclear Safety and the Joint Convention on the safety of
spent fuel management and the safety of radioactive waste management, which
became effective in September. Decisions were approved on protection of the
professionally exposed to ionizing radiation and on radon concentration and
radionuclide levels. The Radiation Protection Commission (RPC) issued two
decisions relating to the Code of Practice for users in Nuclear Medicine and to
dosimetry levels for medical exposure. As regards enforcement, the RPC approved
regulations on inspection reporting and on the procedure for the approval of
trading, transfer and transport of radioactive sources. However, further efforts are still required to transpose and implement the
Euratom acquis. Compliance of recent regulatory developments with the acquis
remains to be verified. The capacity of the regulatory
authority is still not sufficient to implement and enforce legislation in line
with international standards. Preparations for drafting the national strategy
and policies for radioactive waste management are at an early stage. Albania's
conditioned waste store has not yet been properly licensed according to
international standards, and its placement close to populated areas is a
concern.

Conclusion

Progress has
been very limited in the energy sector. The Power Sector Law is not in line
with the acquis. Market reform in the electricity sector has not yet been
effectively achieved and further efforts are required in order to ensure its
economic viability. Further efforts are required in the field of renewable
energy, as well as on strengthening the capacities and institutional
independence of the regulatory authorities for electricity, gas and radiation
protection. Overall, preparations in the area of energy are advancing slowly.

4.16.
Chapter 16: Taxation

Some progress can be reported in the area
of indirect taxation. There were some legislative amendments regarding VAT
exemptions and reduced rates. Electronic declaration has been made
mandatory for VAT taxpayers and the introduction of fiscal devices (cash
registers) progressed. VAT refund procedures improved but further efforts are
still required, including as regards risk analysis, in order to reduce delays.
The VAT law is not yet in line with the acquis.

Approximation to the acquis in the
area of excise progressed slightly with the adoption of a new list of
excisable products and rates, including on minimum rates for cigarettes. However, further efforts are required in order to bring the excise structure and rates into line with the acquis,
including as regards the reduced rates for beer applied to small
breweries.

There was little progress in the area of direct
taxation. Some amendments were made in the area of personal income tax by
providing detailed rules on income declaration, including on its scope and the
declaration of deductible expenditures. However, further efforts are required
as regards transposition of legislation and proper implementation of the
principles of good governance.

There has been no progress as regards administrative
cooperation and mutual assistance.

Limited progress can be reported as regards
administrative and operational capacity. Cooperation with taxpayers is
improving. Measures were taken to support e-form declaration, and a taxpayers' service Centre in Tirana started
operation in December 2010. However, the capacity of
the Taxpayer's advocate is still limited and there has been no assessment of
the functioning of the Taxation Council. Transparency
and consultation with business representatives in the legislative process
remains limited. A Code of Ethics was approved in February 2011, but
anti-corruption measures require further efforts, as the perception of
corruption in the tax administration remains high. The Training Academy of the Tax and Customs Administration is still not operational, which hinders training activities. The
capacity of the Taxation administration, including as regards IT, remains
unchanged overall. The decentralised IT system is no longer adequate for the
needs of the tax administration. It is outdated and its risk analysis and
accounting functionalities are limited. Further efforts are required to enhance
audit, investigation and intelligence capacities and on combating tax fraud and
avoidance.

Conclusion

There was little progress in the area of
taxation. Further efforts are required on approximation to the acquis on
direct and indirect taxation and to improve the system of refunding VAT.
Enhancing administrative and technical capacity and combating corruption in the
tax administration require further efforts. Preparations are moderately
advanced.

4.17.
Chapter 17: Economic and Monetary policy

There has been
limited progress in aligning Albania's legal framework with the acquis
on monetary policy. A new draft Law on the National Bank, aimed at
further alignment with the acquis, including provisions covering
procedures for dismissal of the Governor, the personal independence of Council
members and the accountability of the National Bank, has not yet been adopted.

Little progress
has been made in aligning with the acquis in the field of economic
policy. In February 2011 Albania submitted its Economic and Fiscal
Programme (EFP), making reference to the Macroeconomic and Fiscal Framework
2012–2014. The EFP broadly covers all relevant data, but it contains weaknesses
in respect to labour market and wage statistics. It also failed to adequately
address the impact on the country of the economic conditions of Albania's
trading partners. The EFP is not clear on the planned fiscal policy measures in
the medium term and their budgetary costs. It is also vague on the overall
strategy, while the link between the reforms and the fiscal objectives is not
clear. The public finance data in the report are not in compliance with the
ESA95 European system of accounts.

The capacity
for economic policy formulation and coordination is insufficient.

Conclusion

There has been limited progress in aligning
with the acquis in the areas of economic and monetary policy, although
weaknesses persist in its economic and fiscal policies. Overall, preparations
in this area are not very advanced.

4.18.
Chapter 18: Statistics

Progress in alignment with the acquis
can be reported in the area of statistical infrastructure. There were
increases in the budget and staff of the national statistics institute
(INSTAT), in advance of the 2011 population and housing census. The
infrastructure has been updated to use the latest technology for data
processing and data dissemination. However, provisions of the Law on statistics
as regards the role of INSTAT as coordinator of the national statistical system
are insufficient. It also fails to ensure a broad representation of all providers
and users of official statistics in the statistical council. The legal
framework governing the recruitment and dismissal of its Director General does
not sufficiently guarantee the professional independence of INSTAT.

Some progress has been made with regard to classifications
and registers. The first release of the updated business register and the
economic census data were based on European Nomenclature of Economic Activities
(NACE) Rev.1.1. The codification of units in the business register according to
NACE Rev.2 has started and will be published when the law which officially
introduces NACE Rev.2 is adopted. INSTAT agreed a subdivision of the country
into statistical regions consistent with the EU Nomenclature
of Territorial Units for Statistics (NUTS). The results from the
Enterprise Census have been used for updating the business register.

In the area of sector statistics,
there has been good progress and efforts were made to upgrade several
statistical domains. Regarding business statistics, INSTAT carried out the
census of economic enterprises in November and December 2010. Improvements in
quarterly national account statistics took place in the field of basic
statistics calculation as well as for statistics methodology.

Some progress has been made regarding the
timely publication of consumer price index, foreign trade statistics and short
term statistics. In the area of price statistics, improvements have been made
regarding the revision of the construction cost index and compilation of import
prices. Agricultural and agromonetary statistics need considerable further
upgrading.

The methodological framework of the census
of agricultural holdings, due to be conducted in June 2012, is being prepared
and a pilot census will be held in November 2011. The preparatory activities
for the October 2011 population and housing census are advancing but further
efforts are still needed to ensure the successful conduct of the census.

Conclusion

Progress has been made on alignment with
the acquis, especially in sector statistics and through the
modernisation of the statistical infrastructure. However, weaknesses persist,
particularly in agricultural, social, business and macroeconomic statistics.
Further efforts are needed in order to align with the acquis. The professional
independence of INSTAT is not sufficiently anchored in the legislation and
efforts are required to ensure it has adequate human and financial resources.
Overall, preparations are moderately advanced.

4.19.
Chapter 19: Social policy and employment

No progress can be reported in the area of labour
law.

There has been some progress in the area of
health and safety at work. The occupational safety and health strategy
has been adopted and, in February 2011, the Council of Ministers approved two
decisions that are part of the measures intended to implement the Law on Health and Safety at Work. A decision designed to align
with the EU Directive on requirements for the provision of safety and health
signs at the workplace was adopted in December 2010. Awareness-raising
activities have been carried out to disseminate knowledge of health and safety
at work. The process of transposing EU directives continues to be slow.

The State Labour Inspectorate has stepped
up its cooperation with other institutions, in particular the Ministry of
Health, with whom it has carried out a series of joint inspections. However,
the State Labour Inspectorate has not been further strengthened in terms of
human and financial resources, and no progress has been made towards establishing
the 24 local offices, as there is still only a single local office located in
Saranda.

Some progress can be noted in the area of social
dialogue. The National Labour Council was convened in regular
meetings with a widened scope to cover more topics with nationwide relevance.
The Council amended the regulation on its organisation and functioning in
November 2010 and a Social Memorandum of Understanding was signed in February
2011 between the government, employers' and workers' associations. However, the
establishment of clear and measurable representativeness criteria for
membership in the Council has not yet been finalised. Actions were taken to
promote sectoral and bipartite social dialogue and a new umbrella organisation
of employers has been registered. However, there has been little progress
towards developing collective bargaining in the private
sector.

There has been limited progress as regards employment
policy. Monitoring of the employment strategy has started. However, no
action plan for employment has been adopted. There has been very limited
improvement regarding the labour market situation. The level of inactivity
remains high and the unemployment rate though slightly decreasing, still stands
at 13.7%. Unemployment affects primarily those with lower skills, young people
and those in remote regions. Although Albania has continued to implement a
range of active labour market measures, there are still concerns over reported
abuses of the subsidised employment programmes, and expenditure for active
labour market measures remains low. Informal work arrangements continue to be
widespread. Labour market statistics continue to be weak.

Efforts to train National Employment
Service (NES) staff, including in regional and local offices, and to develop
guidelines for counselling, have continued. The budget for regional and local
NES structures was significantly increased. The "job vacancies bank"
system has been completed in order to improve the information available on the
NES website. However, there is an ongoing need for further training of staff,
computerisation of services across the country, cleaning registries, liaising
with employers, formalising work and providing more effective counselling
services.

Preparations
for the European Social Fund have not advanced. (See also Chapter 22 - Regional policy and coordination of
structural instruments)

There has been
uneven progress in the area of social inclusion. The first monitoring
report on the national strategy on social inclusion 2007-2013 reflects the progress
in assessing and addressing risk factors that accompany economic growth. There
has been some progress in poverty reduction, however, pockets of
persistent poverty remain in rural and mountainous areas. Little progress has
been made in the concrete implementation of the Strategy for the improvement of
the living conditions of the Roma minority.

Progress as
regards the employment of persons with disabilities has been limited,
particularly in the context of labour market measures to be implemented by the
National Employment Service at central and local levels. Quotas on employment
of persons with disabilities have not been enforced. Furthermore, the system of
indexing the disability allowance has been changed, resulting in decreased
living standards.

There has been
some progress as regards social protection. The Law on Social Assistance
and Services has been amended, expanding the categories that are eligible for
economic aid. The Law on Compulsory Health Insurance was also adopted,
establishing a mandatory health insurance scheme and transferring its
management to the Health Insurance Fund. The law divides insured persons into
the categories of economically active and inactive, with the contribution of
the latter category being covered by the state. Albania has been working
towards improving the management of the social insurance system, completing the
database of pensions and re-organising and strengthening the administration of
the social insurance system. A child allowance system was introduced in March
2011 for families benefitting from economic aid. However, the existing social
assistance scheme has not been functioning properly, as payments to eligible
families are too low to have a positive impact, especially for children. The
Albanian pension scheme is faced with serious financial problems in terms of
its deficit and the small number of contributors. Evasion of social insurance
contributions remains widespread. The participation of the economically active
population in the scheme has been low. The legal framework of the pension
scheme, particularly with regard to the differences between genders, has not
been revised.

There has been some limited progress on anti-discrimination.
The Law on Protection from Discrimination is largely in
line with the EU acquis. However, its implementation is making slow
progress. Despite the
organisation of a series of awareness-raising campaigns by the Office of
the Commissioner for Protection from Discrimination, general
awareness of its provisions remains low. Furthermore, these
activities have focused primarily on the public, and key professional groups
remain insufficiently informed about the law.

There is little progress to report in the
area of equal opportunities. There remains a gap between the legal
framework and the true level of equality between men and women in relation to
employment. Their access to entrepreneurship and loans is also inferior and
there continues to be a significant pay gap between men and women.

Conclusion

Progress has been uneven in the field of
social policy and employment. Some steps have been taken to implement
legislation in the field of health and safety at work and some progress has
been made in the areas of social dialogue, social assistance and protection
reform. Sustainability of funding will be key to ensuring successful
implementation of these reforms. The labour market continues to be
characterized by inactivity and a high informality; implementation of policies
also remains insufficient, particularly as regards vulnerable groups and social
inclusion. Overall, preparations in the area of social policy and employment
are not very advanced.

4.20.
Chapter 20: Enterprise and industrial policy

There has been progress as regards enterprise
and industrial policy principles. Implementation
of the Small Business Act advanced. The National Licensing Centre extended its
services network to nine cities. Procedures related to doing business were
further simplified in the fields of public procurement and taxation. Work on
regulatory reform continued, with the establishment of a regulatory impact
assessment system (RIA Light) which was considered more appropriate to the
circumstances of the country.

A Business Innovation and Technology Strategy for the period
2011-2016 was approved in February 2011. The strategy provides for the
establishment of a Business Relay and Innovation Centre (BRIC) as part of the
Albanian Investment and Development Agency (AIDA). BRIC will serve as the main mediator and facilitator to promote innovation and
technology development in business and to liaise with the Technology and
Innovation Agency, the National Agency of Information Society, universities and
centres of excellence. Both BRIC and AIDA became operational in June 2011. There has been no progress as regards transposition of the
directive on late payment.

In the field of enterprise and
industrial policy instruments, progress was made as regards access
to finance for SMEs through a credit support scheme financed by the Italian
government, the European Fund for Southeast Europe and the setting up of the Credit Guarantee Scheme for SMEs. An
agreement was signed in April 2011 with a group of six second-tier banks to
facilitate the access by businesses to the € 2.5 million Credit Guarantee
Scheme.

Albania
participates in the European Network of Female Entrepreneurship Ambassadors
initiative financed under the Competitiveness and Innovation Programme.

As regards sector policies, the Council of Ministers and the
Minister of Economy approved new secondary legislation on mining. A new mining
strategy was adopted in July 2011.

Conclusion

There was some progress on simplifying the
regulatory framework for business and on facilitating access to finance for
SMEs. Institutions have been established to facilitate innovation and
technological development. Preparations are moderately advanced.

4.21.
Chapter 21: Trans European Networks

In the area of transport
networks, Albania made some progress. It continued to participate actively
in the South East Europe Transport Observatory and to implement the Memorandum
of Understanding on development of the South East Europe Core Regional
Transport Network.

As regards road network infrastructure,
Albania is nearing the completion of its major road corridors, thereby making a
major contribution to the development
of the infrastructure networks in the Balkans with a view to their future
integration into the Trans-European Transport Networks. Work on
the north-south corridor of around 400km between the borders of Greece and
Montenegro has progressed. The highway linking Kosovo to the north-south
corridor and the port of Durres is now open. However, insufficient road
maintenance remains a concern.

As regards rail network infrastructure,
there is no progress to report.

Port
infrastructure is currently being improved. The port terminal building in
Durres is being upgraded and there are preparations for extending the wharfs.
The port infrastructure of Vlora is being rehabilitated. The port of Durres and
the private port of Vlora, Petrolifera, are now connected to the rail
network. There are preparations for improving the wharf at Shengjin port. A
Coastal Ports Strategy has been drawn up which recommends that heavy commercial
port activities in Durres City should be moved to Porto Romano.

As regards energy
networks, there remain limitations as regards interconnection. A new 400 kV
Overhead High transmission Line (OHL) for interconnection with Montenegro
became operational in January 2011. Preparations for the construction of the
OHL Elbasan-Tirana have advanced. There were no developments with regard to the
development of a natural gas strategy.

Conclusion

Overall, some progress was made in the area
of trans-European networks. However, the rail transport sector remains
underdeveloped and further efforts are required as regards maintenance of the
transport infrastructure

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

Limited progress has been made as regards
the legislative framework. Though it is not required by EU acquis,
a law on regional development, which is intended to lay the foundation for
domestic regional development policy, is under preparation. The government
adopted the division of Albania into three regions for statistical purposes
according to the criteria of the EU's Nomenclature of Territorial Units for
Statistics (NUTS 2).

There are some
developments to report in the institutional framework. The bodies
involved in the implementation of IPA Component I were legally established.
They have the minimum required staff and have received extensive training. In
addition to the legal basis for the structures of IPA components III and IV
adopted in 2010, the Albanian authorities adopted in January 2011 a decision to
put in place structures for IPA component II. As for IPA component IV
preparations, there was very limited progress. A clear definition of the future
composition of the operating structure is missing.

With regard to administrative capacity,
some progress has been made and most of the key staff dealing with IPA
Components III and IV are also involved in the implementation of IPA component
I. Nevertheless, there is a need to build up further adequate administrative
capacity, particularly in line ministries. A workload analysis in line
ministries has still to be carried out in order to assess the staffing
requirements for the implementation of IPA components II, III and IV. The
Central Contracts and Finance Unit (CFCU) has not yet recruited the minimum
number of staff required for the implementation of IPA component I. A workload
analysis has yet to be carried out in order to assess the necessary staffing
requirements within the CFCU as regards their involvement in the implementation
of IPA components II, III and IV.

Training events on financial management,
procurement, irregularities and audit were held for staff of the CFCU, National
Fund and the Audit Authority. Harmonisation of the procurement legislation with
EU requirements regarding the tendering process is a precondition for an
effective financial control. A training needs' assessment has been initiated
which is designed to lead to the drawing up of training plans for 2011 and
2012.

On programming, some progress was
made. The draft Strategic Coherence Framework document was prepared and was
submitted to the European Commission for comments in February 2011. The draft
Operational Programmes for IPA components III and IV have been prepared and
were sent to the European Commission for comments in April 2011. An ex-ante
evaluation of these Operational Programmes is ongoing. The quality of the draft
programming documents does not fulfil yet the IPA III and IV requirements.
Involvement of social partners in the process and implementation of the partnership
principle have been limited for component IV. Efforts to establish and develop
a related pipeline of projects should overall be strengthened.

With regard to monitoring and evaluation,
there is limited progress to report, given that the national systems and
mechanisms to measure the quality and impact of development programmes are
currently being put in place.

Some progress can be reported in the area
of financial management and control. The Minister of Finance approved
the Regulations of the Audit Authority (AA). The approved recruitment plan of
the AA provides for the recruitment of 5 additional inspectors in 2011. The
current audit staff of the AA are either certified or going through the
certification process.

Conclusion

Overall, there has been limited progress in
the area of regional development and coordination of structural funds.
Considerable efforts are needed in order to establish the necessary
institutional and administrative capacity and to develop a mature pipeline of
projects in the area of regional development. Preparations in this area are
still at an early stage.

4.23.
Chapter 23: Judiciary and fundamental rights (see also Political criteria)

There has been
some limited progress in completing the legal framework for judicial reform. A
Judiciary Reform Strategy and Action Plan, consulted with a broad group of
stakeholders were adopted in July. They form a good basis for reform efforts.
Implementation is only starting; it will require the allocation of adequate
human and financial resources as well as sound inter-institutional cooperation.

Regarding the independence
of the judiciary, no progress was made. The independence of the High
Court needs to be guaranteed, including through a revision of the current
system of appointments in order to avoid politicisation. The neutrality and
independence of the Constitutional Court needs to be guaranteed, including
through a proper process for the appointment and hearing of judges in
Parliament, free from political influences.

In relation to accountability
in the judiciary, the full immunity enjoyed by judges remains one of the main
factors obstructing investigation into possible cases of corruption in the
judiciary. Widespread corruption is a key factor hampering the accountability
of the judiciary. The Ministry of Justice (MoJ) and the High Council of Justice
(HCJ) have adopted a Memorandum of Understanding to address the overlap of
inspection competences between the inspectorates of the two institutions, as a
transitory measure before a new HCJ law is adopted.

Regarding the efficiency
of the judiciary, some limited progress was made. The HCJ introduced changes to
the system of evaluating judges and made improvements in the reasoning of
appointment decisions; in addition, the Commission on transfers, promotion and
appointments of judges was created. However, the effectiveness of the new evaluation
system needs to be verified in practice. Reforms of the law on the High Court
aimed at improving efficiency are delayed. Working conditions in courts are generally
still poor and hearings often take place in judges' offices, which hampers
transparency and efficiency. The yearly budget for the judiciary remains
insufficient.

Court
management remains poor due to a lack of human and financial resources, in
particular in first instance district courts. The backlog of court cases is
still problematic. Unreasonable delays in court cases due to postponement of
court proceedings because of the absence of lawyers or judges remain a matter
of serious concern. A computerised case management system and random allocation
of cases in criminal and civil procedures are in place in most – but not all – judicial
offices.

A new law on 'mediation
in conflict resolution' and relevant by-laws in line with the EU standards were
approved in February 2011. However, important legislation – requiring a
three-fifths majority vote in Parliament - is pending adoption, such as the law
on administrative courts and amendments to the criminal code. Further important
legislation requiring a three-fifths majority vote such as the law on judicial
administration and the law on the National Judicial Conference still need to be
prepared and brought to Parliament.

Enforcement of court decisions is weak, in particular in cases where state
institutions are the defendants. The new private bailiff system has started to
function but improvements to case management for bailiffs are needed.

Some progress
was made with regard to the government's policies to fight corruption. In
June 2011, a new anti-corruption action plan for the period 2011-2013, which
includes improved individual action plans for government ministries and
agencies, was adopted. Implementation of previously
adopted action plans has continued.

As regards the legal
framework, there was some progress made in implementing recommendations of the
Group of States against corruption (GRECO) related to the issue of
incriminations and political party financing. Recommendations regarding incriminations
were partly implemented and all but one of the recommendations regarding
political party financing were implemented.

In June 2011, rules of procedures on the
functioning of the inter-ministerial working group (IWG), the inter-ministerial
Technical Group and the Technical Secretariat of the IWG were adopted by the
IWG with the aim of defining a clearer distribution of responsibilities between
relevant bodies and improving the coordination of the anti-corruption strategy.
A new internal control department was established in
the General Directorate of Customs. In addition, inter-institutional cooperation was improved by the signing
of memoranda of understanding between both the Department of Internal Control
and Anti-Corruption (DIACA) and the High Inspectorate
for Declaration and Audit of Assets (HIDAA) with the High Council of Justice (HCJ) and an
Anti-Corruption NGO. Some
limited awareness raising measures were initiated.

There are shortcomings in the proposed mechanisms as well
as in the administrative capacity of relevant institutions which should ensure
proper monitoring of the implementation of the anti-corruption action plans.
The DIACA, in particular, was not sufficiently strengthened and its ability to
effectively coordinate anti-corruption policies remains limited. Corruption reporting and statistics in particular remain
insufficient.

A number of investigation and law enforcement agencies
continue to suffer from a lack of human resources and technical infrastructure.
Joint Investigative Units, although continuing to be useful instruments for
investigating and prosecuting corruption cases, have insufficient human
resources and technical equipment. HIDAA, as an important player in combating
corruption, has limited resources to undertake extensive inspections and full
audits of asset declarations by officials. Although there have been further
improvements in cooperation between different agencies, including joint
training, the effective and timely exchange of relevant information is often
lacking.

Proactive investigation as part of systematic, targeted and
threat-based investigations into possible corruption areas and cases is largely
insufficient in Albania. A serious obstacle to effective and successful
investigation remains the full immunity of high level officials. Immunity of
high level officials is only rarely lifted and the lack of confidentiality in a
case following the lifting of immunity seriously impedes effective and
successful investigation. In line with the recommendations of the Venice
Commission, the limitation of immunity for both judges and MPs requires an
amendment to the relevant constitutional provisions. Investigation into
possible corruption cases is also hampered by the lack of access to different
registries (e.g. car registry and land register) by investigation and law
enforcement agencies and by the absence of a central register of bank accounts.

Implementation of anti-corruption measures remains
insufficient and the corruption that is present in many sectors remains a
particularly serious problem. Little progress was made in developing a solid track
record of proactive investigations, prosecutions and convictions in corruption
cases at all levels. Investigation of high level corruption cases, in
particular, is rare.

In the past
year, Albania has further enhanced the legal and institutional framework that
regulates fundamental rights, in particular with the adoption of the Law
on Protection of the Rights of the Child. Some important gaps remain
nonetheless, particularly as regards persons with disabilities and juvenile
justice. In 2010, the number of complaints received in the Ombudsman's Office
amounted to 1651, which represents a fall of 54% compared to the previous year,
with the majority of cases referring to the Albanian judicial system (10%).
Operation of human rights institutions is hampered by the continuing vacancy of
the post of Ombudsman and the still ongoing recruitment in the Office of the
Commissioner for Protection from Discrimination. Moreover, the allocation of
sufficient resources to ensure full independence of these bodies has not been
guaranteed.

As regards the prevention of torture and
ill-treatment, some progress has been made in the penitentiary system, but
concerns remain as regards arrest and police custody. Amendments to the manual
on the rules and treatment of arrested and detained persons in police units
have been drafted. However, the application of procedural safeguards against
excessive use of force by police officers has not been guaranteed and cases of
ill-treatment during arrest, interrogation and police custody continue to be
reported. The treatment of mentally ill offenders still needs to be improved. The
lack of a permanent appropriate solution for the placement of those under
obligatory treatment remains a serious concern.

Some progress has been made in the prison
system and several penitentiary centres are being constructed or
refurbished with a view to approximating with European standards. Efforts have
been made to strengthen the capacity of staff and increase their knowledge of
human rights, particularly in the treatment of vulnerable groups. The probation
service continues to be developed but its resources to deal with the increasing
case load remain limited. Some older penitentiary facilities are in very poor
condition; there is often no heating, even in some refurbished wings.
Additionally, there are concerns over the fact that procedures for medical
examinations upon entry and confidentiality measures for medical files are not
consistently followed.

There was
limited progress regarding access to justice. The legal aid commission was
set up, by-laws have been adopted, but the law remains to be fully implemented.
Adequate mechanisms for the objective assignment of lawyers to the cases are
still to be developed.

There has been very limited progress in the
field of freedom of expression. The application of the principle of
proportionality of fines in cases involving media outlets or journalists is not
systematically respected. Key legislation fostering media freedom has not been
adopted and editorial independence continues to be hampered by political and
business interests.

Freedom of
assembly and association has generally been
respected but the violence which led to the killing of four demonstrators in
January is a cause for serious concern. The Agency for civil society has started disbursing funds to civil society
organisations. However, the capacity of most organisations remains weak and
they are highly dependent on donors. Freedom of thought, conscience and religion
continues to be respected and Protestantism was recognised as the fifth
official religion.

There has been some progress in the field
of women's rights and gender equality. On the policy side, there
have been a number of developments with the adoption in
June 2011 of the new national strategy on gender equality and the fight against domestic violence, and the
establishment of the national referral mechanism on domestic violence in 17
municipalities. However, Albanian women continue to be discriminated against in
access to certain fields and to be under-represented in the labour market and
politics. During the local elections in May 2011, the gender quota was not
respected throughout the country.

An important legislative step was taken to
enhance the protection of children's rights with the adoption of the Law
on Protection of the Rights of the Child. This law remains to be fully
implemented through effective functioning of bodies provided for in the law. Progress in the treatment of socially vulnerable and/or persons
with disabilities is insufficient. The legal framework has not been
completed and implementation of the national strategy for persons with
disabilities continues to be slow.

Some limited progress can be reported as
regards implementation of anti-discrimination policies. The Office of
the Commissioner for Protection from Discrimination has organised a number of
awareness-raising activities and training events to disseminate information
about the Law on Protection from Discrimination and the possibilities of appeal
to the Commissioner. However, the number of cases brought before the
Commissioner is low and the capacity of the Office still needs to be
strengthened. Additionally, overall awareness of the provisions of the law
among citizens and professionals is low, especially at local level. Albania
collects data on hate crimes and hate-related incidents but does not make it
public. There were no convictions for for crimes related
to racism and xenophobia in the reporting period.

Labour and trade union rights have generally been respected and there have been efforts made to
improve the functioning of the National Labour Council. However, clear
membership criteria still need to be adopted.

While the adoption and implementation of a
coherent national strategy and action plan on property rights, a key
priority of the Opinion, is still pending, fragmentation of responsibilities
and lack of coordination between the different institutions hampers effective
policy implementation and creates legal insecurity and a systemic risk of
corruption.

The legal framework for respect
for and protection of minorities and cultural rights has not been
enhanced. Although inter-ethnic relations remain good overall, there has been
some deterioration in the climate for minorities, which can be linked to the
preparations for the upcoming population census, which will include optional
questions on ethnic origin and religious affiliation. The State Committee for
Minorities remains weak and the distinction between different defined groups
still leads to some differentiation in practice. There
have been positive initiatives to foster education of Roma, although this
community continues to face very difficult living conditions and frequent
discrimination. Implementation of policy tools in this field is slow.

New Internal Rules for Data Protection and
Public Security were approved by the Ministry of Interior aiming define the
procedures for the protection of personal data managed by the State
Police. The Commissioner for Data Protection has continued implementing the Law
on Protection of Personal Data. The Commissioner for Data Protection has
approved several instructions, including on protection of personal data in the
media. It has also signed cooperation agreements with the Ministries of Justice
and Education and Science as well as the Agency for Electronic and Postal
Communications. However, the role of the Commissioner for Data Protection is undermined by the lack of systematic consultations
on some key pieces of legislation.

There have been no developments in relation
to EU citizens' rights; the Law on foreigners has not been amended to give
priority to EU citizens as regards demand on the labour market.

Conclusion

Overall,
although Albania has made some efforts to develop legislation in this field,
there are still significant gaps. Furthermore, an important challenge for
Albania lies in the implementation of its legislative and policy tools, which
remains insufficient overall. Albania's alignment with European standards and
the acquis in the field of judiciary and fundamental rights is at an
early stage.

4.24.
Chapter 24: Justice, freedom and security

As
regards migration, some progress has been achieved. The smooth
implementation of the readmission agreement is continuing. In 2010, 52,919 return cases were recorded, mostly from
Greece. The Strategy and action plan for returned migrants is being implemented
successfully, but risk analysis and monitoring of migration flows still need to
be improved. The National Migration Strategy has not been fully
implemented until the end of 2010. The legislative framework still needs to be
fully aligned with the acquis. Preparations in this area are moderately
advanced.

In the area of asylum, some progress has been made.
Until September 2011, 78 refugees and 30 asylum seekers were recognised. The
institutional and legal frameworks are in place. However, legislation is not
fully in line with acquis, and the ongoing revision of relevant
legislation has not been completed. No ID
documents have been provided so far to refugees and persons granted complementary
protection. Preparations in this area need to be stepped up.

Some progress has been made in the area of visa policy.
Albania continues to apply a visa-free arrangement for citizens of certain
non-EU countries included in the negative list of Regulation 539/2001. The Albanian visa regime is not fully aligned with the EU
requirements. Preparations in this area need to continue.

Visa liberalisation for Albanian citizens was granted
as of 15 December 2010. It applies to holders of biometric passports travelling
to the Schengen area. This decision was based on substantial progress in the
area of justice, freedom and security and fulfilment of the specific conditions
set out in the roadmap for visa liberalisation. Implementation of the visa free
regime has been smooth so far. However, relatively small
numbers of asylum-seekers and irregular migrants were detected in the Schengen
area. In order to ensure ongoing implementation of the commitments taken, a
post visa liberalisation monitoring mechanism has been established. The
Commission presented its first monitoring report to the European Parliament and
the Council in June 2011.

There has been progress in the area of external borders
and Schengen. Agreements, which enable joint and synchronised patrols of
borders by the police, have been signed between Kosovo and Albania and the
former Yugoslav Republic of Macedonia. The Border and Migration Police (BMP),
which is now a clearly structured department within the State Police with
sufficient resources and technical equipment, has continued to receive
training. Standard Operating Procedures are now in place. The upgrading of
infrastructure at Border Crossing Points (BCPs) has continued. Eleven new BCPs
were taken over by Border Police and Customs between November 2010 and January
2011. All 24 BCPs are connected in real time to the Total Information
Management System (TIMS), providing access to the national database on travel
documents and wanted persons and to the Interpol database. Albania has also
made some progress in setting up risk assessment capacity.

The development of inter-institutional surveillance of the
blue borders has continued smoothly. A ban on speedboats is still in force.
Full coverage of coastline surveillance needs to be
implemented. The Inter-institutional Maritime
Operations Centre needs the relevant financial allocations to ensure its
operation.

The BMP has limited access to the MEMEX criminal
intelligence information system. Further deployment of this system to BCPs is
necessary in order to increase the development of intelligence-led policing.
BMP threat assessment capacities also need to be strengthened. Further joint efforts are needed to combat all types of cross border
crime, including trafficking of stolen vehicles.
Capacities for green border surveillance and inland control need to be
improved. Preparations in this area are on track.

There has been some progress in the area of judicial
cooperation in civil and criminal matters. As regards judicial cooperation
in criminal matters, Albania signed and ratified the Third Additional Protocol
of the European Convention "on Extradition", which sets out the rules
for a simplified extradition procedure. Cooperation with Eurojust has been
good. Albania needs to focus its efforts in particular on data protection, in
order to be able to conclude a cooperation agreement with Eurojust. Preparations in this area are advancing.

There has been some progress in the field of police
cooperation and the fight against organised crime, the latter being among
the key priorities of the Commission's Opinion. Cooperation agreements on
exchange of information were signed with the UK and Italy. Albania has
increased the confiscation of criminal assets. The Agency for the management of
confiscated assets has started to auction such assets. The use of undercover
agents and special investigative measures has also increased. The legal
framework in place needs to be implemented, in particular since the entry into
force of the so-called "anti-mafia" law.

The police need to increase their capacity to provide
reliable evidence for tracking suspicious transactions. Common standard
operating procedures between police and prosecution need to be developed in
order to further enhance cooperation and trust between them. By-laws of the judicial
police law are adopted and need to be implemented.

The increased use of the MEMEX criminal intelligence system
has improved data exchange within the Albanian State Police. There has been
progress on the encoding of archive data. At the same time, it remains
incomplete. The system contains police data, but not information on
investigations led by the prosecution service. However, line intercepts and the
use of undercover agents are limited to the central level. Intelligence
gathering capacities need to be increased in order to improve the quality of
evidence. A reliable system for reporting statistics is needed. There is no
reliable call-handling system in place. A sound case management system needs to
be developed for the law enforcement bodies.

The operational capacities of the forensic laboratory,
covert policing and witness protection services need to be further supported.
Regarding public order, it is necessary to develop the reporting capacities of
front-line officers and to further empower inspectors and chief inspectors in
order to increase the number of proactive investigations.

Regarding human resources, a diversity strategy has been
approved. The number of policewomen occupying high ranking position was however
not increased. Transfers lack transparency and are often not merit-based. The
Resource Management Information System needs to be further exploited and its
maintenance needs to be guaranteed. The link between career development and
training events across police services needs to be strengthened.

Trafficking in human beings is still an area of concern.
The Office of the National anti-Trafficking Coordinator has increased its
commitment, and policy and operational measures have enhanced the
identification and protection of trafficking victims. In February 2011, a
National Action Plan for combating human trafficking was adopted. Moreover, the
government has started providing some financial support to shelters supporting
victims. Albania remains a
country of origin for trafficking for the purposes of sexual exploitation and
forced labour.

A multidisciplinary approach to address trafficking in
human beings has to be implemented. Identification of victims needs to be
improved, and all actors likely to come in contact with a victim of trafficking
need to be properly trained. An effective and functioning National Referral
Mechanism to protect, assist and support victims of trafficking, especially
children, is crucial in this regard. Overall progress
has been achieved in this area, but the capacity of the law enforcement
agencies and international cooperation need to be considerably reinforced.

An amendment to the law against money laundering was
adopted in March, taking into account important MONEYVAL recommendations, and
improving the capacity for detection of suspicious bank transactions.
Cooperation in combating money laundering needs to be enhanced between the
institutions, and further efforts are needed in order to address the low level
of reporting of suspicious transactions by the banking and non-banking sectors.
Implementation of the existing legal framework has to be stepped up and the IT
tools and expertise of the relevant agencies need to be strengthened. The
quality of Suspicious Transaction Reports continues to present a challenge. The
capacities of law enforcement authorities to investigate and sanction money
laundering and financial crime remain weak.

Albania
has been active in international police cooperation. Cooperation with Europol
has been good. A secure line between Albania and Europol has been put in place
since June 2011. Further efforts on personal data protection are needed, in
order for Albania to be able to conclude an operational agreement with Europol.
Overall, preparations in this area are advancing, but increased efforts are
needed in order to develop threat assessment techniques, proactive
investigations, and to build up a consistent track record of investigations,
prosecutions and convictions.

There has been some progress in the fight against
terrorism. In January 2011, Albania became a member of the regional
initiative for international police cooperation for the fight against
terrorism. Preparations in this area are moderately
advanced.

There has been some progress in the cooperation in the
field of drugs. Cooperation with the European Monitoring Centre for Drugs
and Drug Addiction has improved, with the launch of a survey on drugs and
alcohol consumption.

Some efforts have been made in the investigation and
prosecution of drug trafficking cases, and the authorities are attentive to the
issue of drug cultivation. Cooperation with foreign law enforcement agencies is
good. The production and trafficking of drugs continue to be issues of concern.
Albania is still the main producer of cannabis in the region. There is concern
about the decrease in drug seizures compared to previous years. Further
development of investigative methods is required in order to conduct complex
investigations. The national drug strategy expired at the end of 2010. Administrative capacity to implement the forthcoming strategy needs
to be further developed. Preparations in this area are moderately advanced.

There has been some progress in the area of customs
cooperation. The Directorate General for Customs continued its good
cooperation and exchange of information with its counterpart structures in the
region, in the EU and elsewhere. There has been an increase in the capacity to
detect and prosecute fraud and smuggling of illegal goods. More systematic use
of performance indicators and risk assessment needs to be developed. Preparations in this area are progressing.

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

Conclusions

Albania
has made progress in the area of justice, freedom and security. Visa-free
travel to the Schengen area entered into force in December 2010 for citizens
holding biometric passports. Progress has been made on fighting organised
crime, notably through good international cooperation and implementation of the
'anti-mafia' law including confiscation of criminal assets. Efforts need to be
maintained for the effective implementation of the legislative framework and in
strengthening the fight against organised crime, which is a key priority of the
Commission's Opinion. This includes the building up of a credible track record
of proactive investigations, prosecutions and, where appropriate, convictions.
Measures to increase the expertise and empowerment of investigators and the
cooperation of law enforcement agencies need to be actively pursued. The fight
against drug trafficking, money laundering, trafficking in human beings and
protection of its victims must be intensified and conducted systematically, and
the legal framework for the confiscation of criminal assets systematically
enforced.

4.25.
Chapter 25: Science and research

In the area of research policy, the
Business Innovation and Technology Transfer Strategy for the period 2011-16 was
approved with the aim of increasing the capacities of Albanian SMEs to develop,
use, adapt and commercialise technology which contributes to the Innovation
Union. The Agency for Research, Technology and Innovation (ARTI), established
in 2010, is now operational. The level of investment in research is still very
low (estimated at 0.2% of GDP in 2010).

With regard to Albania's participation in
the 7th EU research framework programme (FP7), ARTI has increased its
capacities and also raised awareness and shared information on participation in
research programmes with the EU and other international partners. ARTI has
organised training sessions, workshops and FP7 information days, and
e-communication channels have also been used for dissemination purposes.

Administrative capacity has been improved
by the appointment of National Contact Points (NCPs) and representatives in most
FP7 management committees. The NCPs have taken part in several network events
and training sessions organised by the European Commission.

The number of submissions has increased,
but the number of successful FP7 projects funded is still low. Albania should
continue its efforts in implementing the Memorandum on Association to the FP7
and in closely monitoring its participation. Further efforts are required in
particular with respect to human capital building (Marie Curie Actions),
involvement of SMEs in research and innovation, and scientific excellence in
general.

ARTI became a member of the Central and
South-Eastern Europe Network for Research Innovation and Business that aims to
encourage and facilitate cooperation among private and public institutions
focusing on research and development within and outside the EU. ARTI also
became a member of the European Association of Research Managers and
Administrators (EARMT). As part of the European Research Infrastructure
Consortium (ERIC), Albania is establishing the LIFE-WATCH national centre.

As regards integration into the European
Research Area (ERA), the implementation of the National Strategy on
Science, Technology and Innovation (STI) 2009–2015 has been rather slow. The
establishment of centres of excellence is still under consideration and only
very limited action has been taken to improve mobility of scientists. The
database of scientists working in the country has been updated, but the
database of Albanian scientists working abroad still needs to be set up.
Albania has nominated its observer delegates to all the ERA governance bodies,
but is not attending on a regular basis due to lack of administrative capacity.
The amount of investment in research is difficult to monitor due to the lack of
reliable statistics on science and technology.

Conclusion

Overall, Albania has done a great deal to
increase research cooperation with the EU and other stakeholders, but has not
taken sufficient measures to strengthen the research capacity at national
level. With the establishment of ARTI, the necessary administrative capacity to
participate in FP7 has been improved. Concerted efforts are required in order
to facilitate Albania's integration into the European Research Area by, amongst
others, increasing public and private sector investment in research and
strengthening human capital. A start should be made on preparations to
contribute to the Innovation Union.

4.26.
Chapter 26: Education and culture

There has been some progress in the area of
education, training and youth. There have been further developments in
the area of teacher training, with the accreditation of certified training
agencies. The National Inspectorate for Pre-university Education has begun to
carry out inspections of pre-university education. A National Examination
Agency was established to provide assistance and evaluate the management of the
national examinations. It is also responsible for the collection of data for
the 2012 Programme for International Student Assessment (PISA). Albania's
participation in the latest PISA helps to identify gaps in the education
reform.

The amendments to the Law on Vocational
Education and Training (VET) were adopted, aiming to approximate EU standards
regarding formal and non-formal VET, life-long learning, teacher/trainer
licensing, and post-secondary education. The newly developed curricula for VET
provide for increased flexibility, geared to the specific needs of vulnerable
categories of students.

The law on the Albanian Qualification
Framework was adopted and some measures were taken to implement it. The
National Council was mandated to be an advisory body for the implementation of
the Qualification Framework and the Qualification Framework Implementation Unit
was established. There has been some progress as regards the institutional
framework for the accreditation of private higher education institutions.

Albania began participating in the EU
Programme "Europe for Citizens". It organized information days and
workshops in order to increase the so far limited participation. The promotion
of opportunities under the Youth in Action Programme has been stepped up. There
has been increased dissemination of information for EU programmes in the field
of higher education, namely Erasmus Mundus, Jean Monnet, Marie Curie and Tempus.
Further capacity building is necessary to increase the number of successful
applications for Tempus funds.

In the area of culture, a new
strategy on cultural heritage has been adopted.

Conclusion

Overall,
some progress was made in aligning with European Standards in the area of
education, in particular in the framework of the development of VET. Efforts
are still needed to maximise the benefits that can be drawn from the programmes
opened to Albania to further reforms, in particular in higher education. Good
governance capacity continues to need attention, in order to ensure efficient
management of decentralised programmes in the field of education and training.

4.27.
Chapter 27: Environment

As regards environment,
there has been some progress in the area of horizontal legislation.
The Law on Environmental Protection and the new Environmental Impact Assessment
Law have been adopted. The Law on Environmental Permitting was also adopted,
but the referral to some provisions under the National Licensing
Centre raises concern as to the conformity to European Standards. Transposition of the legislation on strategic
environmental assessment has not progressed. There was no progress in the areas
of access to justice and facilitation of public participation, which remains
rather weak.

There has been no
progress as regards air quality. Air quality is monitored in all main
cities, but poor methods and equipment do not provide consistent data. A new
Tirana air management plan has been prepared with the help of an EU project for
the Ministry of Environment, but has not yet been adopted by the Municipality
of Tirana.

Some progress was made on waste
management. A National Waste Strategy was adopted. However, the Law on
Waste Management is not yet adopted. There is no procedure in place for the
management and control of landfills and uncontrolled dumpsites remain the main
place for waste disposal. The implementation of the decision to allow the
import of waste for recycling purposes will have to be carefully monitored by
the authorities.

There has been no
progress in the area of water quality. Transposition and implementation
of key EU water legislation is at an early stage. The National Strategy for
Water Supply and Sewage and the Water Law has not yet been adopted. Centralised
wastewater collection only exists in bigger cities. There are only two
operational wastewater treatment plants in the country at the moment. Four new
plants have been completed, but are not yet operational. There is still no plan
to identify sensitive areas and assess their water quality, including the
quality of waste water discharged by industrial plants.

A modest progress can
be reported in the field of nature protection. Two new protected areas
were established in 2010, increasing the proportion of total national territory
covered by protected areas from 12.57% to 13.17%. No new developments however
can be reported on transposition and implementation of the EU nature
legislation and on preparations for the establishment of the NATURA 2000
network.

There was some progress
in the area of industrial pollution control and risk management. The transposition of the Integrated Pollution
Prevention Control and the Large Combustion Plants Directive progressed with
the new Law on Environmental Protection.

There is no progress to
report as regards environmental noise policies.

There has been some
progress regarding civil protection, where Albania is working with the
support of a number of donors on the introduction of a central emergency call
number, as well as on flood prevention and control measures.

Regarding climate
change, Albania made limited progress on general policy development.
Albania does not have a National Climate Change Strategy to address mitigation
and adaptation challenges. Climate awareness at all levels is poor.

At the international
level, Albania has aligned with the Copenhagen Accord but did not formulated
pledges for greenhouse gases (GHG) emissions' reduction. Albania is preparing
its third National Communication to UNFCCC. The country did not associate with
the EU position at the 16th session of the Ad-Hoc Working Group on Further
Commitments under the Kyoto Protocol and the 14th session of the Ad-Hoc Working
Group on Long-Term Cooperative Action under the UNFCCC. Albania is continuing to implement the
Montreal Protocol on ozone-depleting substances, although further steps to
align with the EU legislation are still required. The country has actively participated in the climate work
under the Regional Environmental Network for Accession.

As regards the preparation and adoption of
the climate change acquis, Albania is at a very early stage and the
government is currently conducting a gap analysis. There have been no concrete steps to gradually take a GHG
reduction/limitation target with a view to implementing the acquis,
especially the EU Emissions Trading Scheme, and to joining the EU
Effort-Sharing. Furthermore, efforts are required towards convergence with the
EU Monitoring Mechanism Decision.

As regards administrative capacity, the
Air, Water and Climate Change Sector was set up within the Ministry of
Environment, with one staff member covering climate change issues. A system of
environmental permitting and inspection is in place. However, the system does
not yet meet the requirements of the acquis. Administrative capacity, as
well as technical and financial resources for aligning with and implementing EU environment and climate change policy and legislation policy and legislation, are poor.

Conclusion

Overall, there has been little progress in
legislative developments and alignment with the environment acquis.
Implementation and enforcement need to improve across all sectors. As regards
climate change there was no progress on alignment and further efforts are
required to strengthen administrative capacity. Lack of public awareness and
proper consultation on legislative initiatives hampers transparency and
enforcement. Inter-institutional cooperation on environmental protection and
climate change issues remains poor. The more systematic integration of
environmental aspects into other sectors, including through a process of sound
environmental assessments at the strategic and project level, remains poor.
Preparations in the area of environment are still at an early stage whereas
preparations in the area of climate change are at a very early stage.

4.28.
Chapter 28: Consumer and health protection

Some progress has been made in the field of
consumer protection. The criteria governing the organisation and
management of consumer advice centres by the consumer associations have been
defined, while the Bank of Albania has taken decisions on transparency for
banking and financial products and services, and on consumer and mortgage
credit. As regards enforcement of legislation, the Consumer Protection Commission
(CPC) has been assessing cases of potential infringements and has taken
administrative steps. Most CPC decisions have been enforced by operators, and
the CPC has been informed of the payment of their fines.

In the area of product-safety
related issues, the Law "On the general safety of non-food
products", approximating the relevant provisions of General Product Safety
Directive, is under discussion in the Albanian Parliament. As regards non-safety
related issues, the Law on consumer protection has
been amended, aiming to regulate certain aspects of the consumer protection
area, to reinforce the independence and impartiality of the Consumer Protection
Commission and to increase the level of fines.

There has been some progress in the area of
public health. The Law on Compulsory Health Insurance has been
adopted, with the aim of improving standards of health financing.

Some progress has been made on tobacco.
An awareness raising campaign has been organised by the Institute of Public
Health (IPH) and training curricula for family physicians have been prepared. A
new service to encourage people to quit smoking and counselling on the
risks and harm to alcohol users has been introduced within the Tirana Regional
Health Authority. The current Law banning smoking in public places is still not
fully implemented.

There has been good progress regarding communicable
diseases. Immunisation with pneumococcal vaccination has begun, aimed at
reducing childhood infections and infant mortality. Two workshops have been
organised on HPV and Rotavirus introduction vaccines, and the respective action
plans have been prepared. Paediatricians, epidemiologists and other doctors
throughout the country have been trained on new vaccines. The programme
and database of web based national electronic vaccination registry has been
prepared, including vaccination coverage, stock management and adverse
reactions. The Influenza Lab has been upgraded and the plan for vaccination of
risk groups against influenza has been prepared. Albanian microbiologists have
been trained on biosafety and biosecurity. Hospital infection control
guidelines have been prepared by the Institute for Public Health in October
2010.

As regards the International Health
Regulations (IHR) implementation, the Albanian Institute of Public Health
(IPH) has been established as a focal point and a coordinating
institution. Country-wide, epidemiologists, public health professionals and
physicians have been trained on emergencies and IHR. Adoption of secondary
legislation to ensure the right to health for persons and children living with
HIV/AIDS and persons at risk is still pending.

A Law for the transplantation of tissues,
cells and organs, aiming to guarantee quality and safety standards during
transplantations, has been approved.

Progress has been
made in the area of mental health. Administrative capacity has been
strengthened with the establishment of specialised units in all regional health
departments. Several fully operational supported houses and daily centres have
been created in Tirana, Shkodra and Vlora, and institutional mental health care
has also improved. Training
of general practitioners on mental health is continuing. However, more skilled
staff and financial support will be necessary to ensure community based mental
health services of high quality that are focused on recovery.

Despite a number of alleviating measures, health
inequalities persist. Health authorities in Tirana have supported
immunisation activities, including door to door screening, for Roma families
and children as well as capacity development of health care providers to reach
vulnerable population groups with immunisation and other child health services.
However, there are still no reliable data with regard to the health care of
Roma newborns and breastfeeding mothers. Primary health care in general has not
been accessible for all groups, especially marginalised and young people (young
people with HIV/AIDS, young drug users and the Roma minority).

The National cancer control strategy
has been drafted and reviewed by all stakeholders involved in cancer control.
IPH has performed activities in the field of assessment of primary health care
needs, mapping of services, strengthening public health sections at local
levels to include reproductive health, cancers and awareness
raising materials. The National strategy on preventing and minimising the
damage from alcohol and the action plan for 2011-2015 have been
approved. The Clinic for the treatment of alcohol addiction has begun to
provide therapeutic services, and the first centre for treatment of alcoholics
has been established in Tirana. Albanian professionals operating in the
addictive treatment network have been trained in drug
demand reduction. In addition to the publication of the national drugs mapping
report, the national centre for drug information has been reactivated.

Conclusion

Overall, some progress has been made in acquis
approximation and strengthening consumer protection activities, as well as in
the area of public health, in particular as regards communicable diseases and
mental health infrastructure. In general, Albania needs to persevere with its
efforts in the areas of capacity building and enforcement of legislation, as
well as in aligning its legislation with the acquis in both areas. In
the area of public health, further efforts are also required in order to
tighten up measures against tobacco and to address health inequalities.

4.29.
Chapter 29: Customs Union

Progress was made on customs legislation.
Albania adopted its 2011 customs tariff in line with the SAA obligations and
with the changes in the EU Combined Nomenclature. Preparations for accession to
the Harmonised System Convention are ongoing. However, the customs code and its
implementing provisions are not yet in line with EU legislation. The procedures
for clearance of goods by travellers were improved, but overall further efforts
are needed as regards the use of simplified procedures and on trade
facilitation, including introducing the concept of authorised operator. The
Directorate for the Protection of Intellectual Property Rights (IPR) started
its activities and prepared and published an on-line manual and instructions on
IPR protection. However, implementation of IPR law remains poor and capacity in
this area is weak. The use of the transaction method in customs valuation rose
to 85%, but further efforts to reduce the use of reference prices are still
needed.

There was some
progress as regards administrative and operational capacity.
Inter-institutional cooperation improved, particularly with the police on
stolen cars and with the national agency for export countries on dual use
goods. The exchange of information with neighbouring countries through the
Systematic Electronic Exchange of Data System was introduced. There were some
improvements in the IT area with the upgrading of the Asycuda World system and
with the purchase of servers to build a new operational centre. Nevertheless,
efforts will be still required in order to make the IT system fully compatible with EU requirements. The
infrastructure at border crossing points improved, but further efforts are
needed in this area. There was a slight increase in inspections at the premises
of economic operators, but there is a need for the systematic development of
post-clearance controls.

Two new
Directorates were established: one in charge of debt and anti-smuggling and the
other focused on internal investigation and anti-corruption. The Directorate
General for Customs approved an Integrity Plan and its staff received training
on ethics, but further efforts are still needed as there continues to be a
strong public perception of corruption in the customs administration. A
Business Change Management Plan has not yet been adopted Further efforts are
required in the field of human resources management to increase transparency
and implement a system of formal appraisal. No progress has been made as
regards granting civil servant status to customs administration staff. The Training Academy of the Tax and Customs Administration is still not operational, which hinders training activities. The
strengthening of the intelligence capability requires further attention. Risk
profiles were updated and the rate of physical checks
rate dropped to from 14% to 13%. However, there is a need to better target risk
profiles and to improve risk-based controls and
simplify the procedures applied in order to facilitate legitimate trade by
reducing physical inspections. Work is in progress on
implementing the development plan for the Customs Laboratory.

Conclusion

There was some progress in the area of
customs union. Positive developments can be reported on legislative alignment
and administrative capacity, particularly as regards operational capacity and
IT. However, further efforts are required on alignment with the EU, including
on valuation and the use of simplified procedures and trade facilitation.
Enforcement capacity and management of human resources remain insufficient and
IT systems are not fully compatible with EU requirements. Overall, preparations
in this area are moderately advanced.

4.30.
Chapter 30: External relations

There has been some progress in alignment
with the acquis in the area of common commercial policy. Albania
continued to reduce duties in accordance with the provisions of the SAA and, on
1 January, full liberalisation was achieved.

The country has generally continued to
coordinate with the European Commission and to align with the policies and
positions of the EU towards third countries and with international
organisations, in particular the World Trade Organisation. There has been good
progress in the implementation of WTO commitments.

There were no particular developments to
report as regards export credits. Albania made
progress in the approximation of the EU acquis by passing legislation in
February to allow full implementation of the
list of dual use goods and technologies. Modest
progress has been achieved in strengthening human resources and administrative
capacities in the area of commercial policy. Implementation of the training plan
on trade policies and the EU's Common Commercial policies is behind schedule.

In terms of bilateral agreements with
third countries, Albania ratified the additional protocol for full
liberalisation of trade in agricultural products within the Central European
Free Trade Agreement (CEFTA). A free trade agreement with EFTA entered into
force in November 2010 for Albania. In June 2011, Albania signed the
Pan-Euro-Med convention on diagonal accumulation of rules of origin. Diagonal
cumulation of the rules of origin with Turkey became effective in August.

There is no progress to report in the areas
of development policy and humanitarian aid.

Conclusion

There has been some progress in the area of
external relations. Albania signed a Free Trade Agreement with EFTA and Albania
plays a constructive and active role within CEFTA. It coordinates its position
with the EU in the WTO. Institutional capacity in external relations is not yet
sufficient. Overall, preparations in this area are moderately advanced.

4.31.
Chapter 31: Foreign, Security and Defence Policy

The regular political
dialogue between the EU and Albania has continued to cover foreign policy
issues. (Concerning relations with other enlargement countries and Member
States, see Political criteria 2.3 – Regional issues and international
obligations).

As regards the common foreign and security policy (CFSP), during the reporting period, Albania aligned itself, when invited,
with 64 out of the 67 relevant EU declarations and Council decisions (95 %
alignment).

As regards restrictive
measures, Albania
aligned itself with most restrictive measures introduced by the Council's
Decisions.

No additional
development can be reported concerning conflict prevention.

Concerning non-proliferation,
Albania aligned itself further with the acquis by passing legislation in
February to allow full implementation of the list of
dual use goods and technologies. Albania
currently holds the Presidency of the UN "Convention on the prohibition of
the use, stockpiling, production and transfer of anti-personnel mines and on
their destruction". As regards small arms and light weapons, there
have been no new developments. Work is ongoing in order to establish an online
registry of weapons and ammunition under the management of the State Police.
The government endorsed an Action Plan for the Elimination of Excess Ammunition
in the Albanian Armed Forces.

The country continued
to engage actively in cooperation with international organisations (UN,
OSCE, Council of Europe, etc.). Albania held the Presidency of MARRI (the
Migration, Asylum and Refugees Regional Initiative) until May.

On security measures,
Albania has not yet concluded a security agreement with the EU on exchanges and
mutual protection of classified information.

The country is demonstrating
a continuing commitment to participation in civilian and military crisis
management operations in the framework of the common security and
defence policy (CSDP). The country continued to participate in the
EUFOR/Althea mission in Bosnia and Herzegovina (71 military personnel and an
11-person explosive and ordinance disposal team). At the end of 2010, Albania
completed its participation in the EU NAVFOR-Atalanta Operation in Somalia.

Conclusion

Albania has progressed in its bilateral and
multilateral relations and continues to align itself with the EU acquis
in the field of common security and defence policy.
Overall, preparations in this field are on track.

4.32.
Chapter 32: Financial control

Good progress can be reported in the area
of public internal financial control (PIFC). The primary legal framework
for PIFC and centralised budget inspection is now in place. The Financial
Management and Control (FMC) Law and amendments to the Internal Audit Law came
into force at the beginning of 2011. The implementing legislation is being
prepared. Also, the Law on
Financial Inspection came into force at the beginning of 2011. The setting up
of the Public Financial Inspection Directorate within the Ministry
of Finance and recruitment of ad-hoc budget inspectors is under way.

The implementation of FMC is still at an early stage. The Central Harmonization Unit for
Financial Management and Control (CHU/FMC) has developed a FMC implementation
plan for the public sector with expert support. Several awareness and information
seminars regarding the new concepts of FMC were organised at regional level.
Further high-level awareness-raising for managers and training initiatives for
civil servants on the implementation
of PIFC are needed. Efforts must be made to strengthen the
administrative capacity of internal audit, the use of various audit
methodologies and follow-up of audit findings by management.

Progress has also been made as regards external audit. The
amendments to the Law on the State Audit Institution (SAI) to bring it fully in
line with INTOSAI standards are under preparation. The SAI is gradually moving
away from inspection-type audit work to proper financial and performance audit
in line with the INTOSAI standards. A training programme of the SAI staff for
2011 has been prepared and several training sessions have been delivered.
Further improvements are needed as regards reporting to the Parliament and
efficiency of parliamentary follow-up to SAI's audit reports.

With regard to the protection of the EU's financial interests,
there is very little progress to report. The Public Financial Inspection
Directorate which was established by the Decision of Council of Ministers in
February 2011 will also act as the Anti Fraud
Coordination Service and as a contact point for the European Anti-Fraud Office.

With regard to the protection of the
Euro against counterfeiting, the Albanian authorities continue to cooperate
with OLAF, by actively participating in the Pericles programme. In particular
they hosted the "2010 Euro South East Conference" in Tirana and
participated in one meeting of the Euro Counterfeiting Experts Group in
Brussels.

Conclusion

Overall, progress has been made in the area
of PIFC and external audit. Further substantial efforts are needed in order to
strengthen the administrative capacity of all institutions responsible for
internal control. Amendments to the SAI Law have still to be adopted in order
to bring the legal framework fully into line with INTOSAI standards. There is
limited progress in the areas relating to the protection of EU's financial
interests.

4.33.
Chapter 33: Financial and budgetary provisions

There have been no particular developments
as regards traditional own resources, VAT resources and GNI resources.
For progress in the underlying policy areas, see chapter 16 – Taxation, 18 –
Statistics, 29 – Customs union and 32 – Financial control. .

As regards administrative infrastructure,
institutions are in place in the underlying policy areas that indirectly affect
the own resources system. However, in addition to further strengthening these
institutions, a fully operational coordination structure will be required in
order to ensure the correct calculation, forecasting, collection, payment and
control of own resources, and reporting to the EU concerning implementation of
the rules on own resources.

Conclusion

There is no particular progress to report
under this chapter. Overall, there are no significant differences between the
systems in Albania and the EU in terms of basic principles and institutions for
the underlying policy areas affecting the correct application of the rules on
own resources. In due course, a coordinating body will have to be set up to
streamline and steer pre-accession preparations in the own resources field.

Statistical Annex

STATISTICAL DATA (as of 30.09.2011) || || || || || || || || || || || ||

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

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

Basic data || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Population (thousand) || || 3 058 || 3 063 || 3 084 || 3 103 || 3 120 || 3 135 || 3 149 || 3 153 || 3 170 || 3 185 || :

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

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

National accounts || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Gross domestic product (GDP) (million national currency) || || 523 043 || 583 369 || 622 711 || 694 098 || 751 022 || 814 797 || 882 209 || 967 670 || 1 089 293 || 1 151 020p || :

GDP (million euro) || || 3 945 || 4 541 || 4 705 || 5 048 || 5 883 || 6 561 || 7 168 || 7 828 || 8 870 || 8 716p || :

GDP (euro per capita) || || 1 289 || 1 477 || 1 521 || 1 622 || 1 881 || 2 088 || 2 275 || 2 476 || 2 788 || 2 728p || :

GDP (in Purchasing Power Standards (PPS) per capita) || || : || : || : || : || : || 5 000 || 5 500 || 5 800 || 6 500 || 6 500 || :

GDP per capita in PPS (EU-27 = 100) || || : || : || : || : || : || 22 || 23 || 23 || 26 || 28 || :

Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) || || 6.7 || 7.9 || 4.2 || 5.8 || 5.7 || 5.7 || 5.4 || 5.9 || 7.5 || 3.3p || 3.9p

Employment growth (national accounts, % change on previous year) || || : || : || : || : || : || : || : || : || : || : || :

Labour productivity growth: GDP growth per person employed (% change on previous year) || || 8.0 || 30.3 || 7.7 || 7.6 || 10.8 || 8.1 || 7.8 || -9.4 || 19.0 || 4.4 || :

Real unit labour cost growth (national accounts, % change on previous year) || || : || : || : || : || : || : || : || : || : || : || :

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

Gross value added by main sectors (%) || || || || || || || || || || || ||

Agriculture and fisheries || || 25.5 || 23.6 || 23.4 || 23.5 || 22.3 || 20.6 || 19.4 || 19.0 || 18.7 || 18.8 || :

Industry || || 7.8 || 7.3 || 6.9 || 8.7 || 10.0 || 10.6 || 11.1 || 9.4 || 9.8 || 9.9 || :

Construction || || 8.3 || 10.4 || 12.0 || 13.7 || 13.9 || 13.8 || 14.3 || 14.8 || 14.9 || 14.2 || :

Services || || 58.5 || 58.6 || 57.6 || 54.0 || 53.8 || 55.0 || 55.2 || 56.8 || 56.6 || 57.1 || :

Final consumption expenditure, as a share of GDP (%) || || 86.0 || 80.9 || 86.0 || 86.1 || 89.0 || 88.9 || 87.4 || 90.4 || 89.5 || : || :

Gross fixed capital formation, as a share of GDP (%) || || 31.7 || 38.4 || 37.9 || 40.5 || 37.2 || 37.0 || 39.0 || 38.7 || 38.1 || : || :

Changes in inventories, as a share of GDP (%) || || 2.4 || 1.3 || 0.8 || -1.8 || -3.8 || -1.2 || -2.8 || -2.4 || -0.9 || : || :

Exports of goods and services, relative to GDP (%) || || 17.9 || 18.4 || 19.6 || 20.4 || 22.0 || 22.8 || 24.9 || 28.1 || 29.4 || : || :

Imports of goods and services, relative to GDP (%) || || 38.1 || 39.0 || 44.3 || 45.1 || 44.4 || 47.5 || 48.5 || 54.8 || 56.0 || : || :

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

Industry || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Industrial production volume index (2005=100) || || : || : || : || 98.2 || 100.2 || 100.0 || 104.4 || 90.8 || 117.9 || 116.5 || 139.6

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

Inflation rate || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Annual average inflation rate (CPI, % change on previous year) || || 4.2 || 3.5 || 1.7 || 3.3 || 2.2 || 2.0 || 2.5 || 3.1 || 2.2 || 2.3 || 3.6

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

Balance of payments || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Balance of payments: current account total (million euro) || || -185 || -316 || -444 || -350 || -340 || -589 || -471 || -831 || -1 370 || -1 346 || -1 056

Balance of payments current account: trade balance (million euro) || || -897 || -1 149 || -1 218 || -1 177 || -1 277 || -1 477 || -1 659 || -2 104 || -2 431 || -2 304 || -2 083

Balance of payments current account: net services (million euro) || || 12 || 100 || -8 || -72 || -41 || -140 || -32 || 13 || 69 || 121 || 182

Balance of payments current account: net income (million euro) || || 115 || 150 || 116 || 132 || 138 || 131 || 209 || 217 || 55 || -101 || -77

Balance of payments current account: net current transfers (million euro) || || 586 || 583 || 667 || 767 || 839 || 897 || 1 011 || 1 043 || 937 || 938 || 922

of which government transfers (million euro) || || 105 || 31 || 41 || 53 || 61 || 61 || 43 || 60 || 31 || 27 || 45

Net foreign direct investment (FDI) (million euro) || || 157 || 231 || 141 || 157 || 267 || 209 || 250 || 470 || 620 || 680 || 818

Foreign direct investment (FDI) abroad (million euro) || || 0 || 0 || 0 || 0 || -11 || -3 || -8 || -11 || -55 || -26 || -10

of which FDI of the reporting economy in EU-27 countries (million euro) || || : || : || : || : || : || : || : || : || : || : || :

Foreign direct investment (FDI) in the reporting economy (million euro) || || 157 || 231 || 141 || 157 || 278 || 213 || 259 || 481 || 675 || 706 || 827

of which FDI of EU-27 countries in the reporting economy (million euro) || || : || : || : || : || : || : || : || : || : || : || :

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

Public finance || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

General government deficit/surplus, relative to GDP (%) || || -7.6 || -6.9 || -6.1 || -4.9 || -5.1 || -3.5 || -3.3 || -3.5 || -5.5 || -7.0 || -3.0

General government debt relative to GDP (%) || || 60.2 || 58.5 || 63.9 || 61.5 || 58.3 || 56.8 || 56.8 || 54.8 || 53.9 || : || :

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

Financial indicators || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Gross foreign debt of the whole economy, relative to GDP (%) || || 17.0 || 17.2 || 22.1 || 25.1 || 23.4 || 25.1 || 26.2 || 26.7 || 34.8 || 38.3 || 41.4

Gross foreign debt of the whole economy, relative to total exports (%) || 1) || 94.9 || 93.1 || 112.5 || 103.5 || 106.0 || 110.0 || 105.0 || 95.0 || 118.0 || 134.0 || 128.0

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || 936 || 1 113 || 1 102 || 1 033 || 1 332 || 1 801 || 1 969 || 1 963 || 2 303 || 2 154 || 1 999

Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || || 1 995 || 2 376 || 2 430 || 2 555 || 3 080 || 3 434 || 3 879 || 4 094 || 4 520 || 4 378 || 4 387

Money supply: M3 (M2 plus marketable instruments, million euro) || || 2 475 || 3 069 || 3 083 || 3 225 || 3 942 || 4 614 || 5 415 || 6 129 || 6 643 || 6 599 || 7 114

Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 175 || 217 || 302 || 381 || 566 || 1 007 || 1 590 || 2 377 || 3 227 || 3 335 || 3 506

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

Lending interest rate (one year), per annum (%) || 2) || 24.0 || 11.9 || 15.0 || 12.2 || 15.5 || 12.4 || 12.9 || 11.7 || 11.8 || 12.5 || 11.3

Deposit interest rate (one year), per annum (%) || 3) || 8.0 || 7.8 || 8.5 || 8.3 || 6.6 || 5.1 || 5.2 || 5.7 || 6.9 || 6.8 || 6.4

euro exchange rates: average of period - 1 euro = … national currency || || 132.580 || 128.470 || 132.360 || 137.510 || 127.670 || 124.190 || 123.080 || 123.620 || 122.800 || 132.060 || 137.790

Effective exchange rate index (2000=100) || || : || : || : || : || : || : || : || : || : || : || :

Value of reserve assets (including gold) (million euro) || || 654 || 834 || 800 || 800 || 1 024 || 1 209 || 1 368 || 1 477 || 1 694 || 1 650 || 1 904

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

External trade || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Value of imports: all goods, all partners (million euro) || || 1179.6 || 1485.7 || 1590.2 || 1648.1 || 1849.2 || 2101.4 || 2435.0 || 3065.0 || 3569.4 || 3260.7 || 3471.7

Value of exports: all goods, all partners (million euro) || || 283.1 || 340.5 || 349.2 || 395.4 || 484.5 || 529.1 || 631.3 || 786.3 || 921.1 || 779.8 || 1169.2

Trade balance: all goods, all partners (million euro) || || -896.5 || -1145.3 || -1240.9 || -1252.7 || -1364.7 || -1572.3 || -1803.7 || -2278.7 || -2648.3 || -2480.9 || -2302.6

Terms of trade (export price index / import price index) || || 100.2 || 101.5 || 99.9 || 98.2 || 99.0 || 80.3 || 100.6 || 98.1 || 96.0 || 97.6 || 98.4

Share of exports to EU-27 countries in value of total exports (%) || || 93.1 || 91.2 || 92.7 || 93.8 || 90.9 || 89.4 || 88.6 || 83.1 || 79.7 || 84.7 || 70.0

Share of imports from EU-27 countries in value of total imports (%) || || 80.6 || 80.3 || 77.0 || 74.3 || 70.5 || 67.2 || 65.5 || 59.9 || 60.7 || 64.9 || 64.6

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

Demography || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || 11.4 || 12.5 || 9.5 || 9.3 || 8.1 || 7.2 || 5.5 || 5.9 || 6.3 || : || :

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 11.9 || 10.8 || 10.2 || 8.4 || 7.8 || 7.6 || 7.4 || 6.2 || 6.0 || : || :

Life expectancy at birth: male (years) || || : || : || : || : || : || : || : || : || : || : || :

Life expectancy at birth: female (years) || || : || : || : || : || : || : || : || : || : || : || :

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

Labour market || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Population (15-64): total of population aged 15-64 (thousand) || || : || : || : || : || : || : || : || : || : || : || :

Population in economic activity (15-64): total of population aged 15-64 that is economiclly active (thousand) || 4) || 1 283.3 || 1 101.1b || 1 092.5 || 1 089.3 || 1 088.2 || 1 085.4 || 1 084.5 || 1 373.1b || 1 271.4 || 1 331.9 || :

Total employment (15-64): total of population aged 15-64 that is employed (thousand) || 4) || 1 068.2 || 920.6b || 920.1 || 926.2 || 931.2 || 932.1 || 935.1 || 1 188.3b || 1 103.5 || 1 147.8 || :

Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) || 4) || 66.2 || 62.1b || 61.8 || 59.7 || 58.8 || 57.8 || 53.6 || 65.2b || 61.9 || 61.9 || :

\* Employment rate (15-64): share of population aged 15-64 in employment (%) || 4) || 55.1 || 51.9b || 52.1 || 50.7 || 50.3 || 49.7 || 46.2 || 56.4b || 53.8 || 53.4 || :

Employment rate male (15-64) (%) || 4) || 66.0 || 64.0b || 63.9 || 62.6 || 61.2 || 60.0 || 58.8 || 63.6b || 63.0 || 64.3 || :

Employment rate female (15-64) (%) || 4) || 44.1 || 39.6b || 39.7 || 39.1 || 38.9 || 38.8 || 38.1 || 49.3b || 45.6 || 43.6 || :

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) || || : || : || : || : || : || : || : || 46.6 || 44.0 || 48.9 || :

Employment by main sectors (%) || || || || || || || || || || || ||

Agriculture || 4) 5) || 71.8 || 57.7b || 57.7 || 58.2 || 58.5 || 58.5 || 58.0 || 47.9 || 44.6 || 44.1 || :

Industry || 4) 5) || 5.4 || 7.7b || 7.6 || 7.2 || 8.1 || 7.9 || 8.0 || 10.4 || 9.3 || 10.0 || :

Construction || 4) 5) || 1.2 || 6.1b || 6.1 || 6.0 || 5.5 || 5.5 || 5.7 || 8.2 || 8.5 || 9.9 || :

Services || 4) 5) || 21.5 || 28.5b || 28.6 || 28.5 || 27.9 || 28.1 || 28.3 || 33.5 || 37.6 || 36.0 || :

Unemployment rate: share of labour force that is unemployed (%) || 6) || 16.8 || 16.4 || 15.8 || 15.0 || 14.4 || 14.1 || 13.8 || 13.5b || 13.0 || 13.8 || :

Share of male labour force that is unemployed (%) || 6) || 14.9 || 14.2 || 13.6 || 12.9 || 12.4 || 12.1 || 11.8 || 14.4b || 12.5 || 12.2 || :

Share of female labour force that is unemployed (%) || 6) || 19.3 || 19.9 || 19.1 || 18.2 || 17.5 || 17.2 || 16.8 || 12.2b || 13.5 || 15.9 || :

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || 6) || : || : || 26.8 || : || : || : || : || 20.1b || 27.2 || 27.2 || :

Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) || 6) || : || : || : || : || : || : || : || 9.4b || 8.5 || 9.1 || :

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

Social cohesion || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Average nominal monthly wages and salaries (national currency) || || 14 963.0 || 17 218.0 || 19 659.0 || 21 325.0 || 24 393.0 || 26 808.0 || 28 822.0 || 33 750.0 || 36 537.0 || 40 874.0 || :

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2005=100) || || : || 11.6 || 21.1 || 27.8 || 42.8 || 53.3 || 60.9 || 83.1 || 91.7 || 109.8 || :

\* Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in further education or training (%) || || : || : || : || : || : || : || : || 42.0 || 39.0 || : || :

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

Standard of living || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Number of passenger cars per 1000 population || || 37.4 || 43.6 || 48.2 || 56.4 || 60.9 || 62.2 || 71.4 || 75.2 || 83.3 || 88.2 || :

Number of subscriptions to cellular mobile telephone services per 1000 population || || : || 120.8 || 259.4 || 370.6 || 403.6 || 488.0 || 606.5 || 736.5 || 935.0 || 1 306.9 || :

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

Infrastructure || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Density of railway network (lines in operation, per 1000 km²) || || 13.9 || 14.3 || 15.0 || 15.0 || 15.0 || 15.1 || 15.0 || 13.9 || 13.9 || 13.9 || 13.9

Length of motorways (thousand km) || || : || : || : || 0.0 || 0.0 || 0.0 || : || : || : || : || :

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

Innovation and research || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Spending on human resources (public expenditure on education in % of GDP) || || 3.1 || 3.3 || 3.0 || 3.1 || 3.2 || 3.2 || 3.1 || 3.2 || 3.5 || 3.4 || :

\* Gross domestic expenditure on R&D in % of GDP || || : || : || : || : || : || : || : || : || : || : || :

Percentage of households who have Internet access at home (%) || || : || : || : || : || : || 1.5 || : || : || 3.4 || : || :

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

Environment || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

\* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) || || : || : || : || : || : || : || : || : || : || : || :

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 400.5 || 386.5 || 356.3 || 370.6 || 384.0 || 366.5 || 328.9 || 306.6 || : || : || :

Electricity generated from renewable sources in % of gross electricity consumption || || : || : || : || : || : || : || : || : || : || : || :

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

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

Energy || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Primary production of all energy products (thousand TOE) || || 987 || 933 || 896 || 1 012 || 1 178 || 1 149 || 1 237 || 1 080 || 1 159 || : || :

Primary production of crude oil (thousand TOE) || || 314 || 335 || 308 || 359 || 443 || 418 || 500 || 564 || 578 || : || :

Primary production of hard coal and lignite (thousand TOE) || || 20 || 15 || 5 || 19 || 19 || 15 || 15 || 15 || 20 || : || :

Primary production of natural gas (thousand TOE) || || 12 || 8 || 8 || 12 || 9 || 10 || 10 || 16 || 8 || : || :

Net imports of all energy products (thousand TOE) || || 858 || 1 001 || 965 || 1 043 || 1 080 || 1 130 || 826 || 1 020 || 1 033 || : || :

Gross inland energy consumption (thousand TOE) || || 1 845 || 1 934 || 1 861 || 2 055 || 2 258 || 2 279 || 2 156 || 2 130 || 2 119 || : || :

Electricity generation (thousand GWh) || || 4.7 || 3.7 || 3.2 || 4.9 || 5.5 || 5.5 || 5.6 || 3.0 || 3.9 || 5.2 || :

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

Agriculture || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Agricultural production volume index of goods and services (producer prices, previous year=100) || || : || : || : || 102.9 || 105.1 || 101.2 || 102.5 || 100.4 || 107.4 || : || :

Total utilised agricultural area (thousand hectare) || || 1 144 || 1 139 || 1 140 || 1 121 || 1 122 || 1 077 || 1 120 || 1 121 || 1 146 || 1 164 || :

Livestock: cattle (thousand heads, end of period) || || 728 || 708 || 690 || 684 || 654 || 655 || 634e || 577 || 541 || 494 || 493

Livestock: pigs (thousand heads, end of period) || || 103 || 106 || 114 || 132 || 143 || 147 || 152e || 147 || 161 || 160 || 164

Livestock: sheep and goats (thousand heads, end of period) || || 3 045 || 2 933 || 2 773 || 2 919 || 2 739 || 2 701 || 2 770e || 2 729 || 2 620 || 2 540 || 2 581

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 948 || 984 || 1 010 || 1 060 || 1 064 || 1 076 || 1 102e || 1 016 || 1 040 || 1 045 || 1 070

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 566 || 503 || 519 || 489 || 499 || 511 || 508 || 494 || 609 || : || 662

Crop production: sugar beet (thousand tonnes, harvested production) || || 42 || 39 || 39 || 50 || 40 || 40 || : || : || : || 0 || 0

Crop production: vegetables (thousand tonnes, harvested production) || 7) || 620 || 677 || 669 || 675 || 678 || 685 || 688 || 672 || 715 || 730 || 860

: =
not available

p =
provisional

e =
estimated value

b =
break in series

\* =
Europe 2020 indicator

The balance of payments
sign conventions are used for FDI. For FDI abroad a minus sign means investment
abroad by the reporting economy exceeded its disinvestment in the period, while
an entry without sign means disinvestment exceeded investment. For FDI in the
reporting economy an entry without sign means that investment into the
reporting economy exceeded disinvestment, while a minus sign indicates that
disinvestment exceeded investment.

Footnotes:

1)             Debt Outstanding
Disbursed (DOD) cumulative stock covering external public debt and external
publicly guaranteed debt, but excluding IMF credit. Total exports are
calculated according national accounts concepts.

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

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

4)             Change of data source
in 2001 due to the change of data source; 2001-2006, administrative data
(information only for the male population aged 15-59 and for the female
population aged 15-54); from 2007 onwards, Labour Force Survey data.

5)             Data are provided
according to Nace rev 1.1

6)             2000-2006,
administrative data; from 2007 onwards, Labour Force Survey data.

7)             Including melons.

[1]               The rapporteur for Albania is Mr. Nikolaos Chountis.

[2]               Enlargement Strategy and Main Challenges 2011-2012 - COM(2011)
666.

[3]               The key priorities concern the following areas: the
proper functioning of parliament; adopting reinforced majority laws;
appointment procedures and appointments for key institutions; electoral reform;
the conduct of elections; public administration reform; rule of law and
judicial reform; fighting corruption; fighting organised crime; addressing
property issues; reinforcing human rights and implementing anti-discrimination
policies; improving the treatment of detainees and applying recommendations of
the Ombudsman. For the full text of the key priorities, please see COM
(2010)680.

[4]               under UNSCR 1244/1999

[5]               Council Decision 2011/168/CFSP of 29 March 2011.

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