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# 52012SC0334

**COMMISSION STAFF WORKING DOCUMENT ALBANIA 2012 PROGRESS REPORT accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2012-2013 /\* SWD/2012/0334 final \*/**

  

TABLE OF CONTENTS

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

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

1.2........ Context 4

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.
Introduction
1.1.
Preface

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

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

· briefly describes relations between Albania and the Union;

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

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

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

This report
covers the period from October 2011 to September 2012. Progress is measured on
the basis of decisions taken, legislation adopted and measures implemented. As
a rule, legislation or measures which are being prepared or awaiting
parliamentary approval have not been taken into account. This approach ensures
equal treatment across all reports and enables an objective assessment.

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

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

1.2.
Context

The Stabilisation and Association Agreement
between the EU and Albania was signed in June 2006 and entered into force in
April 2009.

Albania
presented its application for membership of the European Union on 28 April
2009. Following a request by the Council, the Commission submitted its Opinion on Albania’s application in November 2010. In
December 2010, the Council endorsed the Commission Opinion’s recommendations. In its conclusions, the Council noted that the opening of accession
negotiations will be considered by the European Council, in line with
established practice, once the Commission has assessed that the country has
achieved the necessary degree of compliance with the membership criteria and,
in particular, has met the key priorities[3] set out
in the Commission’s Opinion. The Commission’s 2012 progress report, like that
of 2011, focuses on implementation of these key priorities.

1.3.
Relations between the EU and Albania

Albania is participating in the Stabilisation
and Association Process.

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

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

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

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

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

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

2.
Political criteria

This section
examines the progress made by Albania towards meeting the Copenhagen political
criteria, which require stability of institutions guaranteeing democracy, the
rule of law, human rights and respect for and protection of minorities. It also
assesses Albania’s progress in addressing the twelve key priorities identified
in the European Commission’s Opinion on Albania’s application for membership of
the European Union. In this context, Albania adopted an Action Plan for
addressing the recommendations of the Opinion in March 2012.

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

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

2.1.
Democracy and the rule of law

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

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

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

Parliament

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

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

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

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

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

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

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

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

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

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

Government

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

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

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

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

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

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

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

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

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

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

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

Public
administration

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Observance of international human rights law

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

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

Civil and
political rights

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Respect
for and protection of minorities, cultural rights

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

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

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

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

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

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

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

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

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

2.3.
Regional issues and international obligations

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

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

Albania maintains a 2003 bilateral immunity agreement with the United States
granting exemptions from the jurisdiction of the International Criminal
Court. This does not comply with the EU Common Position on the integrity of
the Rome Statute or with the related EU guiding principles on bilateral
immunity agreements. Albania needs to align with the EU position.

Regional cooperation
and good neighbourly relations form an essential
part of Albania’s process of moving towards the European Union. Albania
continued to take an active part in regional initiatives, including the South
East European Cooperation Process (SEECP), the Regional Cooperation Council
(RCC), the Energy Community Treaty and the European Common Aviation Area
Agreement. Albania holds the chairmanship of the
Central European Free Trade Agreement (CEFTA) in 2012 and the chairmanship of
the Multinational Advisory Group of the RACVIAC-Centre for Security
Cooperation. As a result of an initiative launched by
Albania in the framework of its MARRI (the Migration, Asylum, Refugees Regional
Initiative) presidency, an agreement entered into force between Albania,
Montenegro and the former Yugoslav Republic of Macedonia to ease border
crossing procedures between the countries. Nationals of these countries are now
able to travel between them with biometric identity cards for a period of up to
three months.

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

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

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

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

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

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

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

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

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

3.
Economic criteria

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

3.1.
The existence of a functioning market economy

Economic
policy essentials

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

Macroeconomic
stability

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

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

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

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

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

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

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

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

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

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

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

Interplay
of market forces

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

Market
entry and exit

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

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

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

Legal
system

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

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

Financial
sector development

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

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

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

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

Existence
of a functioning market economy

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

Human and
physical capital

Public expenditure on education is
estimated to have reached 3% of GDP in 2011, while the budget allocation
planned for 2012 is slightly lower at 2.8%. Spending on education will aim to
improve the overall quality of service delivery at all levels, with particular
focus on achieving the OECD standards on the teacher/student ratio, adding 400
teachers and increasing the number of science laboratories. A campaign to modernise
textbooks and syllabuses to bring them more into line with labour market needs
has been started. No developments can be reported with
regard to increasing public spending on research and
development (R&D). The budget for R&D remains quite low, at 0.04% of
GDP in 2012, similar to that allocated in 2011. There is a lack of scientific research institutions and
collaboration between universities and industry on R&D is weak. The ‘brain gain’ system of bonuses given to employees of the public administration
who graduated abroad restarted in 2012 after being suspended in 2011.

According to provisional official data, investment
stood at 33.1% of GDP in 2011, slightly lower than in 2010. Public capital
outlays are estimated to have reached 6.2% of GDP in 2011 and are expected to
be slightly lower in 2012 at 5.8%. Health, education, infrastructure and
agriculture remain priority areas within public investment. However, the main
public investments (about 55% of total public investment) are concentrated on road infrastructure. Insufficient road
maintenance and illegal construction along roads remain causes for concern.
Rail transport remains underdeveloped. Further investment in infrastructure is
needed in order to attract investors and stimulate tourism. Albania’s electricity generation remains vulnerable
due to an over-reliance on hydropower plants. Unfavourable weather conditions
seriously dented electricity output, which fell by 48% in 2011. To avoid load
shedding, electricity was imported, which had a negative impact on economic
growth and the trade balance. In addition, the electricity system needs
significant investment to reach the requirements related to security of supply.
An unreliable supply of electricity is an obstacle for businesses, as it
disrupts production and pushes up costs. In an effort to improve generation
capacity to meet demand, the government continued to issue concession permits
in 2011 for construction of new hydropower plants. Nevertheless, the number of
concessions that are operational remains low, reflecting mainly a weak legal
framework. Private plant operators generate only 2% of the total supply. Overall,
higher levels of investment are needed to make the Albanian economy competitive
on regional and international markets. Redirecting more expenditure towards
growth-promoting categories, such as human capital and productive physical
infrastructure, including the supply of electricity, would boost long-term
growth.

Sectoral
and enterprise structure

The relative
shares of agriculture, industry and services in gross value added (GVA) broadly
unchanged in 2011 from the previous year. Services remain the main contributor
to Albania’s gross value added GVA at roughly 60%, with trade, hotels and
restaurants accounting for the bulk of this sector. Agriculture’s share in GVA
increased to some 21% at the expense of construction which fell to slightly
less than 11%. The decline in manufacturing’s share in GVA was offset by higher
gross value added from the extractive industries. Agriculture remains the
largest employer with 54% of total employment in the first half of 2012. Inward processing
performed well during 2011 but energy production contracted.

Albania’s manufacturing
base remains concentrated around three main sub-sectors which accounted for
some 83% of total exports of goods in 2011 and which are either dominated by
low value-added products or vulnerable to fluctuations in global commodity
prices: textiles and footwear (32%), minerals, fuel and electricity (30%) and
building materials (21%).

Weak tax and expenditure policies and poor
law enforcement, including in the fight against corruption, have been fuelling
a sizeable informal sector. Some steps were taken during the year to address
informality, including the extension of use of fiscal devices (cash registers)
across the country. However, implementation remains a challenge to the
administration. The informal economy continues to impede fair competition on
the market, and strengthening law enforcement remains a government priority.
SMEs continued to benefit from credit support schemes and the European Fund for
South-East Europe (EFSE). Overall, the structure of the economy remained
unchanged. While some measures were taken to combat the sizeable shadow
economy, informality remains a challenge. Albania’s
production base lacks diversification in terms of both sectors and export
markets, leaving the economy vulnerable to industry-specific shocks.

State
influence on competitiveness

Subsidies remained almost unchanged
compared with the previous year, at 0.3% of GDP in 2011. For 2012, the budget
projects a decline in subsidies to € 11.4 million or about 0.1% of GDP.
Subsidies are granted to a limited number of sectors, namely railways, energy
and water supply as well as horizontal State aid schemes. Financial viability
of the electricity sector remains elusive as losses in the electricity network
and distribution deteriorated further in 2011, bill collection rates continued
to decline, while tariffs are still below cost-recovery putting undue pressure
on public finances. The cost of importing electricity to compensate for the fall
in electricity output was not transferred to end-users, prompting the
government to provide an additional € 14.2 million in loan guarantees in
January 2012 to KESH. KESH’s finances remain exposed to the outcome of a
netting-off agreement reached in March 2012 with CEZ, the power distribution
company. This agreement is part of the implementation of the protocol on
partial financial settlement of outstanding mutual debts signed by the Albanian
authorities, CEZ and the Energy Community Secretariat (ECS) in November 2011.
It has not yet been fully implemented and the dispute between KESH and CEZ over
outstanding mutual debts remains unsolved. Overall, state intervention remains limited. However, the impact on the
public finances of the lack of diversification and full financial viability of
the electricity sector and its high reliance on climate conditions remains a
concern.

Economic
integration with the EU

The openness of the Albanian economy
continued to increase in 2011. Trade in goods and services stood at almost 90%
of GDP in 2011, up from 86% a year earlier. Despite a decline in 2011, the EU
remains Albania’s main trading partner. Around 80% of Albania’s total foreign
sales of goods are directed to the EU, with textiles and footwear accounting
for more than half of total exports. Around 65% of goods imports originate from
the EU. Despite the uncertain economic conditions in some EU Member States,
exports to the EU increased by roughly 8.5% year on year in the January-July
period. A significant increase in both exports and
imports to and from CEFTA countries was recorded in 2011. During 2011, trade in
goods with CEFTA grew by roughly 33%, accounting for 17.2% of total exports and
13.5% of total imports. The EU also remains the main
source of inward investment in Albania, although its share in total FDI stock
has declined in the last four years.

Following a period of heightened price
competitiveness pressures, the real effective exchange rate (REER) fell
significantly in 2010, mainly due to the depreciation of the lek in nominal
effective terms. The REER remained generally stable during 2011 and in the
early months of 2012. Cost competitiveness has also improved since 2010, with
estimates pointing to a sharp deceleration in unit labour costs helped by
higher productivity growth. Overall, the EU remained Albania’s leading trading
and investment partner. Trade with CEFTA countries increased.

4.
Ability to take on the obligations of membership

This section examines Albania’s ability to take on the obligations of
membership – that is, the acquis as expressed in the Treaties, the
secondary legislation and the policies of the Union. It also analyses 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

No progress was
made in the area of general principles.

Albania has
made overall progress as regards horizontal measures, particularly
in the fields of standardisation and conformity assessment.

There was good
progress on standardisation. The
General-Directorate for Standardisation (GDS) continued to work towards
fulfilling the conditions for applying for full membership of the European
Committee for Standardization (CEN) and of the European Committee for
Electrotechnical Standardization (CENELEC) in 2012. The Managing Board for
Standardisation adopted internal regulations in line with CEN and CENELEC
membership principles. Progress towards adopting European standards (ENs)
continued. The GDS has adopted about 95.5% of ENs as Albanian standards,
including all harmonised ENs. The number of standards translated remains low,
as most ENs are adopted by the ‘cover page’ method. Standards of the European
Telecommunications Standards Institute are not yet adopted at national level.
The code on development, adoption, approval and implementation of standards was
approved and a working group on adoption of the national standards on oil and
petrol was established. However, no progress can be reported on the preparation
of the national strategy on standardisation.

There has been progress on conformity
assessment. The December 2011 Law on the Marketing
and Market Surveillance of Non-Food Products aims at further approximation
to the acquis. Yet, its alignment with the acquis still needs to
be assessed.

Some progress
can be reported in the field of accreditation. The total number of accredited conformity assessment bodies increased to
21. In November 2011, the General-Directorate for Accreditation (GDA) became an
associate member of European co-operation for Accreditation. Preparations for
applying for full membership are underway. The GDA supported the organisation
of proficiency testing in the fields of construction materials and water
quality. It established four technical committees: on testing and calibration
laboratories, on inspection bodies, on accreditation of medical devices, and on
certification bodies of environmental management systems and environment auditors.
However, no progress was made on aligning the Law on Accreditation with the
2008 horizontal acquis.

There was some
progress on metrology. The General-Directorate for Metrology (GDM) was reinforced with 10 additional technical staff. Its laboratory
capacity was increased and its areas of measurement were extended. Work on the
new premises of the National Metrology Centre in Tirana is nearing completion.
The European Association of National Metrology Institutes gave a positive
assessment to the quality management system of the GDM. Yet, little progress
was made on approximating the Law on Metrology and its implementing legislation
to the acquis. Alignment with the Directives on non-automatic weighing
instruments and on measuring instruments is still pending. The draft
communication strategy in the field of metrology is awaiting adoption.

There was
progress in the area of market surveillance. The December 2011 Law on the Marketing and Market Surveillance of Non-Food Products aims at
further approximating the Albanian legislation to the acquis. However,
the planned market surveillance inspectorate has not yet been established.

There was
limited progress in the ‘Old Approach’
product legislation. The government adopted a technical
regulation on the labelling of detergents and some regulations on
pharmaceuticals.

Some progress
has been made in the ‘New
and Global Approach’ product legislation. Technical
regulations were adopted in the
field of noise emissions from outdoors equipment aiming
at bringing the legislation closer to the acquis.

There was no progress in the area of procedural
measures. Legislation drafted with the aim of alignment with the acquis
on the return of cultural objects has not yet been adopted. There were no
developments in legislative alignment on civil firearms.

Conclusion

There has been progress in the area of free
movement of goods, notably as regards standardisation. Further efforts are
needed on overall legislative approximation and on establishing an adequate
market surveillance inspectorate. Overall, preparations are moderately
advanced.

4.2.
Chapter 2: Freedom of movement for workers

There has been no progress in access to
the labour market. Amendments
to the Law on Foreigners, aiming to grant EU citizens access to the Albanian
labour market without any obligation to hold a work permit, are awaiting
adoption.

Some progress was made in the preparations
for participation in the EURES (European Employment Services) network.
The National Employment Service has launched a programme to computerise all
employment offices, including the creation of job-seekers and employers
databases, with the aim of making the system compatible with the EURES network
standards.

There has been little progress as regards coordination
of social security systems. A bilateral agreement on social security with
Belgium has been signed. Negotiations with Hungary and the former Yugoslav
Republic of Macedonia have continued and negotiations with the Czech Republic
and Romania have started.

There were no developments as regards the European
Health Insurance Card.

Conclusion

There has been little progress in the area
of freedom of movement for workers. Some preparations have been made for
future participation in EURES and coordination of social security systems.
However, further efforts are required to align the legislation on access to the
labour market with the acquis. Overall, preparations in this area are
not very advanced.

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

There has been
no further progress in the area of right of establishment. Preparations for simplification of
procedures and reduction of construction permits process are at an early stage.

Progress in the
area of freedom to provide cross-border services was limited to
preparation of an action plan for alignment with the Services Directive. No
progress was made towards approving the institutional framework and developing
adequate administrative capacity within the relevant institutions.

In the field of postal services, no
progress was made with approval of the national postal strategy or with
definition of tariffs and weights for reserved services for the public postal
operator. There is also no separation of regulatory functions from
policy-making and exercise of the ownership control in the postal sector. The
new organisational structure of the Electronic and Postal Communications
Authority (EPCA) is pending adoption by the Albanian parliament.

There has been some progress towards mutual
recognition of professional qualifications. Preparations for regulating the
professional order of engineers and architects are advanced. Legislation
implementing the Law on Regulated Professions was approved in autumn 2011, with
the aim of regulating the procedures for the state examinations for local
professionals. Processing of applications for academic and professional
recognition of diplomas awarded by a relevant foreign body has been shortened.
Preparations to introduce an on-line application for such recognition are
advanced.

Conclusion

There has been some progress in the area of
establishment and freedom to provide services, particularly towards mutual
recognition of professional qualifications. However, preparations for alignment
with the Services Directive are still at an early stage. Further efforts are
required for alignment of the postal legislation with the acquis. Overall,
preparations are moderately advanced.

4.4.
Chapter 4: Free movement of capital

In the field of capital movement and
payments, no further progress can be reported. Albania has relatively
liberal rules in place on investment; however, restrictions on acquisition of
real estate by foreigners remain in place. Further efforts are required to
strengthen inter-institutional coordination to promote and enforce the Law on
Foreign Investment in practice.

There has been little progress on
approximation of legislation in the area of payment systems. The
adoption of the Law on Payment Systems by the parliament is still pending.
Progress has been made on improving the banking legislation. The Law on Banks
was amended in November 2011, with the aim of reflecting developments on the
financial market and managing the systemic risks. These amendments removed the
exclusivity over electronic payment from banks, allowing other payment
institutions to exercise this activity. They also gave banks the right to open
branches and agencies in and outside Albania and to offer cross-border
payments.

As regards electronic payments, the volume
settled through the Albanian Interbank Payment System (AIPS) decreased compared
with 2010, but the volume and value of transactions increased, especially in
the first seven months of 2012. Both the volume of payments and the value of
transactions cleared through the Albanian Electronic Clearing House (AECH)
increased. However, the Albanian economy is still largely cash-based.

There has been progress in the fight
against money-laundering. Amendments to the Criminal Code were adopted in
March, reflecting the recommendations of the MONEYVAL Committee. The new
legislation establishes the autonomy of money-laundering crime from the
predicate offence. Amendments to the Law on Prevention of Money Laundering and
Terrorist Financing were adopted in June, with the aim
at improving the control of suspicious bank transactions inside and outside the
country. Albania also adopted a number of guidelines and sublegal acts
regarding money-laundering. Electronic reporting was improved through training
organised by the General-Directorate for the Prevention of Money-Laundering.
The relevant modules were expanded with capabilities to guarantee data
integrity, which is important for accomplishment of the core function of the
Financial Intelligence Unit.

There was a significant increase in reports
of suspicious transactions, from 211 in 2010 to 383 in 2011. During the
reporting period, there were 271 reports of suspicious transactions. Exchange
offices, accountants and the Central Office for the Registration of Immovable
Property submitted reports of suspicious transaction for the first time in
2011. The number of assets investigations rose, followed by an increase in the
number of cases sent to court for sequestration purposes and of seizures upon
court order. However, the number of convictions for money-laundering remains
very low. (See also Chapter 24 - Justice, freedom and security)

Conclusion

There has been progress as regards
legislative measures in the area of free movement of capital with the adoption
of amendments to the Criminal Code, the Law on Banks and the Law on Prevention
of Money Laundering and Terrorist Financing. Further efforts are needed towards
approximation of the Law on Payment Systems with the acquis. Overall,
preparations are moderately advanced.

4.5.
Chapter 5: Public procurement

No progress can be reported as regards general
principles.

Little progress was made in the area of
award of public contracts. The proportion of direct contracts in
relation to competitive negotiations decreased in 2011, but still remains high.
Further efforts are needed, particularly on improving the transparency of terms
of reference and selection procedures and ensuring publication of tender
notices in real time. Albania has an advanced e-procurement system, but there
is still room for improvement.

Provisions related to works and service
concessions are not aligned with the acquis. Adoption of a new Law on
Concessions is still pending and relevant preparations are lagging behind. Albania
has no specific legislation on public-private partnerships.

The legislation implementing the Public
Procurement Law has not been adopted yet. The administrative capacity of the
Public Procurement Agency (PPA) was increased but still is not commensurate
with its duties and the increasing number of complaints. In March, the Public
Procurement Commission (PPC) was placed under the Prime Minister. The
consequences for its operational independence need to be assessed.

A clear division of roles between the PPC,
the PPA and the Public Procurement Advocate (PPAd) has not yet been
established. This systemic problem has resulted in duplications of functions
and in problems when it comes to addressing complaints and monitoring
implementation of public procurement and concession contracts. The
responsibility of the PPA for legislative initiatives is not always respected.

The PPA organised awareness-raising and
training activities, mainly on competitive dialogue, framework agreements,
subcontracting, centralised procurement, review measures and procedures,
concessions and public-private partnership. A national
training plan and a communication strategy in the field of public procurement
were prepared in January 2012.

Some progress was made in the field of remedies.
The Regulation on the organisation and functioning of the PPC was amended in
February in order to avoid conflicts of interest and to regulate the procedures
for addressing claims on public action in accordance with the public
procurement regulation.

Conclusion

There has been little progress in the area
of public procurement, particularly as regards approximating the legislative
framework on public procurement and concessions to the acquis. The
division of responsibilities between all public procurement institutions
remains poorly defined and further efforts are required to secure their
administrative capacity and independence. Overall, preparations are
moderately advanced.

4.6.
Chapter 6: Company law

There was some progress in company law.
Legislative alignment with the acquis regulating the minimum capital
requirements for public limited liability companies advanced, with the adoption
of the amendments to the Law on Entrepreneurs and Companies in October 2011.
The Corporate Governance Code came into force in January 2012, subject to
implementation by companies on a voluntary basis. Preparations for bringing the
Albanian legislation into line with the acquis in the field of
cross-border mergers are on track. Further efforts are needed as regards
reporting and documentation requirements in the case of mergers and divisions.

No specific developments can be reported as
regards the introduction of electronic signature. Further efforts are required
to put in place the necessary technical infrastructure

Little progress was made in corporate
accounting. In January 2012, amendments made to the International
Accounting Standards and the International Financing Reporting Standards were
adopted as national standards by the National Accounting Council of Albania
(NACA). However, no progress can be reported with alignment with the Fourth and Seventh Company
Law Directives.
No progress was made on increasing the capacity of the NACA.

There was little progress in the field of auditing. Regulations on
investigation and discipline and on quality control of statutory auditors have
been adopted, but the overall legislation has not yet been fully aligned with
the acquis. Further efforts are required to strengthen the human and
financial resources of the Public
Oversight Board (POB) and to guarantee its independence.

Conclusion

There has been some progress in company
law. Albania approved the Corporate Governance Code, further aligning its
legislation with the acquis. Further legislative efforts are needed on
reporting and documentation requirements in case of mergers and divisions and
on corporate accounting and auditing. Overall, preparations are moderately
advanced.

4.7.
Chapter 7: Intellectual property law

No progress was made on alignment with the acquis
in the area of copyright and neighbouring rights. The new Law on
Copyright has not yet been adopted.

Little progress can be reported in the
field of industrial property rights. In September 2011, the
Patent Regulation was amended with the aim of unifying some national procedures
with procedures of the European Patent Office and the Patent Law Treaty.

There has been
limited progress with enforcement. In March 2012 Albania amended
provisions of the Penal Code on infringement of industrial property rights, in
compliance with the obligations set by the TRIPS Agreement. However, the
amended Penal Code does not cover infringement of copyright. This falls under
the new Law on Copyright which is awaiting adoption. The number of criminal
proceedings brought to court against unauthorised users of artistic property
increased. Yet, further efforts are required to ensure effective implementation
of the national strategy for the enforcement of intellectual and industrial
property rights (IPR), including on enhancing inter-institutional cooperation.
In 2011 there was only one inter-ministerial meeting to monitor implementation
of the strategy. A second meeting was held in May 2012.

In February 2012, the Albanian Competition
Authority and the General-Directorate for Patents and Trademarks (GDPT) signed
a Memorandum of Understanding (MoU) aiming at strengthening their cooperation
in the field of IPR. The GDPT also signed a MoU with the Intellectual Property
Office of Kosovo. The General-Directorate for Customs approved a manual on
statistics on counterfeit products and some related standard notification
forms.

The IT system of the GDPT was improved with
new hardware and an upgraded version of the Industrial Property Administration
System. Nevertheless, further efforts are required to improve the online
services and increase the s number of staff at GDPT.

The restructuring and strengthening of the
Albanian Copyright Office (ACO) is still outstanding, pending adoption of the
Law on Copyright. A market surveillance inspectorate covering IPR enforcement
has not been established.

The ACO continued awareness-raising
activities on copyright enforcement and provided training for judges from
magistrates’ schools and district courts. However, the level of understanding
and awareness of copyright and related rights, and especially of collective
management systems, remains low. The judiciary lacks appropriate experience and
qualifications. Overall, major deficiencies remain, such as insufficient
administrative capacity, low fines, insufficient public awareness and
enforcement in general.

Conclusion

Progress has been limited in the
field of intellectual property law. Substantial efforts are still required to
address existing shortcomings in effective enforcement of intellectual and
industrial property rights which impinge on Albania’s commitments under the SAA. Overall,
preparations are not very advanced.

4.8.
Chapter 8: Competition policy

Progress has been made in the field of
anti-trust and mergers. The adoption of the Regulation on agreements of
minor importance in November brought the legislation closer to the acquis.
The Albanian Competition Authority (ACA) adopted six decisions on
anti-competitive agreements (cartels) and two on abuse of dominant
positions. Ten proposed mergers were authorised without remedies.
Moreover, the ACA issued three recommendations to other government
institutions. The ACA issued a recommendation to the Electronic and Postal
Communications Authority (EPCA) concerning a merger between two
telecommunications operators with EPCA’s positive response. The ACA’s
recommendation to the Bank of Albania (BoA) to increase transparency regarding
citizens’ access to information on banks interest rates was accomplished
through their on-line publication. The government has not yet followed the ACA’s recommendation to establish a Bank
Ombudsman.

The ACA concluded investigations into the
bread market and security services and imposed fines for illegal price-fixing.
After investigating the supply of fixed telephone services with prepaid cards,
the ACA issued specific recommendations. It also initiated preliminary
investigations into potential abuses of dominant market positions in a range of
sectors: compulsory third-party motor insurance; international shipping
services; loading and unloading of liquid petroleum gas; the sugar and rice
import market; the vegetable oil production market; and the import,
manufacturing and wholesale trading market of cement.

The ACA continued its advocacy and
public-awareness activities. Some progress was made as regards the
administrative capacity of the ACA. The total number of staff increased by one
legal expert and recruitment of an IT and forensic expert is on-going, while
two administrative posts were converted into technical posts, in accordance
with the new structure of the ACA approved in January. Training helped to
strengthen its investigative capacity.

Some progress was made in the field of State
aid. The State Aid Commission (SAC) authorised four new State aid schemes,
mainly related to promoting employment. Moreover, the SAC initiated an ex-officio
investigation into a potential State aid scheme by the Ministry of Public Works
and Transport on which it gave a negative opinion. The number of notifications
remains very low, pointing to not all schemes being notified to the SAC before
adoption, as required under the State Aid Law.

The regional State aid map has been adopted
by SAC, based on the NUTS II division of the country and is in line with the acquis.
Further efforts are required to complete a comprehensive review of the
overall legal framework for State aid control to bring it into line with the acquis.

No progress was made as regards the
administrative capacity of the State Aid Sector (SAS), which also serves as the
SAC Secretariat. Its current number of staff (four) is completely inadequate.
The operational independence of the SAC and the SAS has yet to be confirmed.
The SAS conducted several training programmes for its staff and carried out an
awareness-raising campaign.

Conclusion

Some
progress can be reported in the area of competition. Legislative alignment with
the acquis on anti-trust and merger control advanced and the regional State
aid map was adopted. Further efforts are required to safeguard the
administrative capacity and the operational independence of the State aid and
competition authorities. Overall, preparations are on track.

4.9.
Chapter 9: Financial services

Progress has been made in the area of banks
and financial conglomerates. The Bank of Albania (BoA) adopted regulations
aiming at partial alignment with the acquis on procedures for
intervention in the domestic foreign exchange market; credit risk management,
capital adequacy, liquidity risk management, and establishment, licencing and
functioning of the bridge bank In November 2011, the Law on Banks was amended
further to approximate the legislation to the acquis (See also
Chapter 4 – Free movement of capital.). Amendments to the Law on Deposit
Insurance were adopted in July 2012. No progress was reported on establishment
of a Banks Ombudsman, as
recommended by the Albanian Competition Authority in 2011.

The Supervisory Department (SD) of the BoA
continued revising the regulatory framework in accordance with the provisions
of Basel II and with the aim of approximating the Albanian legislation to the acquis
on the supervisory review process and disclosures. The SD is in the process
of adopting the European Risk Assessment System (RAS). The new method covers
all types of risks and is currently being tested in all its aspects. Due to
restructuring, the staff of the SD has decreased from 49 employees last year to
43.

Little progress can be reported in the
non-banking area. Implementing legislation on collective investment
undertakings was adopted in October 2011. The Albanian Financial Supervisory
Authority (AFSA) renewed the mandates of the seven Board members and a new
Chair of the Board was appointed. The AFSA lacks adequate administrative and
supervision capacity and its staff remained unchanged. The non-banking
institutions came up to 21, since the BoA licenced two institutions in the
field of factoring and investment,

Little progress
can be reported in the area of insurance and occupational pensions. The
legislation on life insurance and re-insurance is not aligned with the acquis.
The Albanian insurance market remained small. It slightly increased by the end
of 2011, but during the first half of 2012, registered a shrinking of
activities. Voluntary insurance increased particularly during the first half of
2012. The AFSA licensed the third operator in the field of voluntary pension
funds. By the end of 2011, the number of voluntary pension contributors had
increased by 26% as compared with 2010 and increased by 2.9% in the first
quarter of 2012. Nevertheless, the private pension market remains small in
terms of both number of contributors and amount of contributions. Following the
liberalisation of the motor insurance sector in 2011, the Albanian Competition
Authority (ACA) initiated in April 2012 an investigation into a potential
agreement on a fixed price in this sector as well as an inspection in May 2012
on the way the insurance companies handle claims and use the Compensation Fund.
Uninsured driving remains high. There has been progress in upgrading the
information provided through Information Center of Compulsory Insurance (ICCI),
while the bonus-malus system is not yet in place.

There has been no progress in financial market
infrastructure, mainly due to the fact that the Law
on Payment Systems has not yet been approved.

There has been no progress on aligning with
the acquis in the area of securities markets and investment services.
The securities market continues to be dominated by government T-bills and
long-term bonds.

In the field of investment services, in
March 2012 the AFSA approved implementing legislation on the establishment,
calculation, financing and administration of the Compensation Fund. The AFSA
also issued the licence for the first collective investment undertakings
management company and approved the first prospectus for issuing bonds. However,
the securities stock market remains underdeveloped, with no companies listed on
the stock exchange. There was no progress towards adoption of regulations in
line with the Prospectus, Market Abuse and Market in Financial Instruments
Directives. There were no developments regarding the system for judicial appeal
and the legislation governing investor compensation schemes.

Conclusion

There has been some progress in the area of
financial services. The banking legislation was further aligned with the
acquis and the investment market was further developed. Additional efforts
are needed in the areas of insurance and occupational pensions, financial
market infrastructure and the securities market and investment services.
Administrative capacity in the banking and non-banking sectors remains
insufficient. Overall, preparations are moderately advanced.

4.10.
Chapter 10: Information society and media

There was some progress in the area of electronic
communications and information and communications technologies (ICT).
Competitive conditions in telephony markets have progressed due to the
introduction of carrier selection and number portability. The Agency for
Electronic and Postal Communications (AKEP) approved the first reference
unbundling offer for local loop access and set mobile termination rates by
applying the cost accounting method that it has developed (based on a bottom-up
long-run incremental costs model). A working group on implementation of the
universal service has been set up.

However, adoption of the amendments to the
2008 Law on Electronic Communications and implementing legislation is still
pending. The draft Law on Rights-of-Way has been awaiting adoption in
parliament since 2010. The uncertainties arising from the current arrangements
of rights-of-way hinder the development of the sector as a whole. The 112
emergency number has not been implemented yet. No progress can be reported on
liberalisation of access to spectrum. A third UMTS/3G licence tender failed as
the bids did not reach the reserve price. In August 2012, AKEP announced a
tender for granting the two remaining frequencies at a considerably lower reserve
price. AKEP’s new
organisational structure is awaiting adoption in parliament. Its administrative
capacity and resources remain weak.

During the year, mobile take-up in Albania
showed the strongest growth among the enlargement countries, with the penetration
rate reaching 185% at the end of 2011. The fixed telephony and broadband
penetration rates also grew, to 12% and 4.9% respectively, but are still low by
regional and European standards.

Progress in the field of information
society services has been uneven. The GovNet network infrastructure has
been further improved and extended. However, various parallel networks are
under development, which raises doubts about the effectiveness of the current
system. The National Institute of Statistics has started to gather information
on information society indicators. The Albanian Post has started to issue
qualified certificates for e-signature. Progress was made on
institution-building with the establishment of the National Cyber Security
Agency as a new computer emergency response team. The National Agency for the
Information Society has improved its technical capacity. However, the
administrative capacity to develop and implement policies and legislation
remains weak. The amended Law on e-commerce is still pending. Regulation of
conditional access is still awaiting the adoption of the draft Law on
Audiovisual Media Services. A new national plan with ambitious targets on
broadband development has been prepared.

There has been little progress in the field
of audiovisual policy. Discussions and consultations were held with
various stakeholders and international partners, bringing some improvements to
the draft Law on Audiovisual Media Services, notably as regards the
independence of the regulatory authority. However, adoption of this law in
parliament has been delayed and is still pending. In May 2012, the government
adopted a digitalisation strategy and an action plan based on a
region-by-region approach, but implementation has not yet started. Several
frequencies are used illegally by high-definition broadcasters without a
licence. According to the strategy, the final deadline for completing the
digital switchover is June 2015. This new deadline raises potential concerns
about timely implementation of the digitalisation process.

The regulatory
authority — the National Council on Radio and Television (NCRT) — still lacks
sufficient administrative and technical capacity. Concerns remain over its
independence. The editorial independence of the public service broadcaster has
not been strengthened.

Conclusion

There was little progress in the field of
information society and media. While a number of pro-competitive regulatory
measures were taken for electronic communications, concerns remain about the
overall reform and liberalisation of the sector, legal uncertainties and the
capacity and independence of the telecoms regulator. Adoption of the Law
on Audiovisual Media Services has been further delayed. In spite of some
progress as regards the independence of media, concerns remain, particularly
regarding the independence of the regulator. Effective implementation of the
digital switchover strategy needs to be ensured. Overall, preparations in the
area of information society and media are not very advanced.

4.11.
Chapter 11: Agriculture and rural development

Progress can be
reported on horizontal issues. The agriculture budget in 2012 is mainly
allocated to direct support schemes linked to production. The public advisory
services continued providing information and training to farmers and food
business operators in the country. Various acts on land administration and
protection have been adopted. However, the pace of setting up a functional land
register remains very slow. The policy on land use needs to be streamlined and
statistics on land conversion, degradation and fragmentation to be improved.
Preparations for the agricultural census are ongoing. A pilot test was carried
out in five districts. However, the census initially scheduled for mid-2012 has
been postponed to October 2012. Preparations in the field of horizontal issues
are at an early stage.

No progress can
be reported in the common market organisation. Preparations in this area
are not very advanced.

In the area of rural
development, progress had been made on setting up and building the capacity
of the Paying Agency and Managing Authority to manage and control rural development funds under the Instrument for Pre-accession
(IPARD). A draft accreditation package has been submitted to the Commission.
However, this progress has been partially reversed by reorganising the Ministry
in a way that the coherence and functionality of the Managing Authority has
been undermined. The administrative capacity of all
operational authorities, including the National Authorising Officer, the
National Fund and the Auditing Authority, needs strengthening. Ownership of the
pre-accession preparations needs to be increased and, as an essential part of
it, staff retention ensured. Albania needs to prepare for the new strategic
framework in the field of agriculture and food strategy for 2014-2020. Overall,
preparations in the field of rural development have not advanced much.

There was
little progress in quality policy. The Ministry of Agriculture
has received proposals from the regions regarding the identification of
agricultural products and food to be registered as products of protected
origin. Recent amendments to the Penal Code contain general provisions
regarding the adoption of penal sanctions for the infringement of rights for
geographical indicators. Preparations in the area of quality policy are at an
early stage.

Progress in the
area of organic farming has been limited. Albania continued providing
direct payments and training on organic production to organic farmers.
Preparations in the area of organic farming are at an early stage.

Conclusion

Progress was uneven in the area of
agriculture and rural development, in particular with setting up rural
development institutions. Efforts are needed regarding capacity-building (of
both private and public players) in rural development, setting up a land
register and defining strategic priorities for agriculture and land use.
Ownership of the pre-accession preparations should be increased and staff
retention ensured. Overall, in the area of agriculture and rural development,
Albania has started to address its priorities.

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

Some progress can be reported in the area
of general food safety. The National Food Authority (NFA) has been fully
established and staffed. Powers, responsibilities and communication between the
Ministry of Agriculture, Food and Consumer Protection (MoAFCP) and the NFA need
to be clearly defined. The number of official controls increased in 2011;
hence, enforcement of control rules has improved. Although more than 13,000
food establishments have been entered in the AKUnet database, this data needs
to be updated and validated in order to be used with regard to risk
classification and official controls. Risk assessment capacity is still not
established and the Scientific Committee and Panels have not been created yet.
Rules on risk management activities have not been adopted and implementing
procedures have not been developed. Preparations in the field of general food
safety are at an early stage.

There has been little progress in veterinary
policy. A new Veterinary Law entered into force re-assigning the powers
over animal health and welfare to the veterinary service. Staff levels, particularly at central level, remain inadequate. A definition of the tasks, functions and responsibilities of the
veterinary service is still lacking, thus hindering sound management of
clinical waste, fallen stock and animal by-products, which have become serious
issues in terms of bio-security.

An integrated animal database (including
the animal health database) has been developed improving the registration of small ruminants and their vaccination against
brucellosis. The lack of clear instructions and systematic recording, reporting
and analysis of animal movements remains a serious concern in connection with
disease transmission and traceability of animal products. Reporting of diseases
by local veterinarians and submission of samples to check the health status of
animals remain insufficient. Preparations in the veterinary field are not very
advanced.

Progress was made in the field of placing
on the market food, feed and animal by-products. Albania continued the
approximation to the EU regulations on the import of food, monitoring of
substances and residues in animal products, hygienic conditions and controls
for bivalve molluscs and fish
and the control of veterinary medicinal products. Food business operators’ awareness of the new hygiene rules remains
low, and alignment of food and feed establishments with hygiene standards a
challenge. Preparations in this area are at an early stage.

No progress can be reported in phytosanitary
policy. Preparations in this area are not very advanced.

No progress can be reported with
approximation to the acquis on genetically modified organisms.
Preparations in this area are still to be launched.

Conclusion

Progress has
been limited in the areas of food safety and
veterinary and phytosanitary policy. Efforts are needed to improve the
definition of powers, responsibilities and
communication relating to risk management, registration of movements of
animals, control of animal diseases, and upgrading of food and feed
establishments. Overall, preparations in the areas of food safety and veterinary and phytosanitary policy are at an early stage.

4.13.
Chapter 13: Fisheries

The new Fisheries Law, which lays down the
basic principles for management of fishing activities, has been adopted.
Its compliance with the acquis needs to be established. Implementing
legislation is being prepared. Changes to the legal framework will need to be
accompanied by corresponding administrative rearrangements to avoid
fragmentation of functions, lack of communication and insufficient enforcement
of the law.

As regards resource
and fleet management, Albania has fulfilled task 1 set
by the General Fisheries Commission for the Mediterranean (GFCM) and is
currently following its recommendations on setting up a fishing fleet register.

In the area of inspection and control,
there has been limited progress regarding technical implementation capacity.
Following the installation of a satellite-based vessel monitoring system (VMS),
boat movements are monitored at the Inter-institutional Maritime Operational
Centre (IMOC) and the Fisheries Directorate of the Ministry of the Environment,
Forests and Water Administration. The sustainability of the VMS needs to be
ensured through the provision of adequate financial resources. The
restructuring of national inspection services involving merging the fishery
inspection service with the forestry and environment inspectorate has not been
accompanied by any clear division of tasks between the Fisheries Directorate
and the Inspection Directorate.

Catch and landing data are still not
reliable, as inspectors do not verify catches on a 24/7 basis. Both the
reporting method and the incomplete record of catches compromise the statistics
for the Fisheries Directorate, and therefore the development of reliable
management plans. The number of inspectors is not sufficient to cover the main
sites along the coast. Inspections to fight illegal small-scale coastal fishing
remain rare and are not coordinated with other bodies such as the Coast Guard
or the Border Police.

In the areas of structural action, State
aid and market policy, no developments can be reported.

As regards international agreements,
Albania attends the GFCM and is participating in the AdriaMed project. However,
the country is not regularly represented at meetings of the International
Commission for the Conservation of Atlantic Tunas (ICCAT) and has not submitted
its 2012 inspection plan for implementation of the Recovery Plan for Bluefin
Tuna. There has been little progress in this area.

Conclusion

There has been limited progress in the area
of fisheries. There is still a need for increased resources and technical
capacity for monitoring, control and surveillance of the competent services,
including the IMOC, and for more regular participation in the ICCAT. The
division of reporting and communication tasks within the Ministry of the
Environment, Forests and Water Administration is not sufficiently defined.
Overall, preparations are not very advanced.

4.14.
Chapter 14: Transport policy

In November 2011, the government adopted
the revised five-year National Transport Plan as the main instrument for
decision-making and strategic planning in the transport sector in Albania.

There was very little progress on road
transport. The Road Code was amended in December 2011, introducing new
provisions on professional training and initial qualifications of trucks and
buses’ drivers. Implementing legislation was adopted on vehicle registration.
Since September 2011, digital tachograph
cards are being issued for drivers and companies.
First initiatives on road maintenance concessions have started on the high
level network with some remaining road maintenance issues. Further legislative
alignment with the acquis is needed in the field of admission to the
occupation of road transport operator and access to the road haulage market.
There were no developments on roadworthiness tests, driving licences and
vehicle inspections. There are no plans to introduce speed limiters. Adoption
of the new technical standards for road transport is still pending. Road safety
continues to constitute a major problem. The road death toll in the country
remains exceptionally high. Road safety rules are not enough dissuasive and
properly enforced and no effective road safety campaign have been carried out.
The legislation on dangerous goods has not yet been adopted.

Little progress
has been made in rail transport. The border crossing
agreement with Montenegro has been finalised in August 2012. The new Railway
Law is still awaiting adoption. A network statement has not yet been published.
Resources allocated to maintenance of rail infrastructure are insufficient,
with the risk of further deterioration of the network.

There was no
progress to report as regards inland waterways transport.

There was no
progress on combined transport.

In the case of air transport, little
progress has been made on legislative alignment with the acquis.
Amendments to the Air Code were adopted in November
2011. Implementing legislation has been adopted with a view to further aligning
air traffic management and aviation safety regulations with the acquis.
Implementing legislation aiming at alignment on slot allocation entered into
force in September 2011. Legislative amendments were adopted in November 2011
to increase the independence of the Albanian Civil Aviation Authority (ACAA). However,
implementation of the first phase of the European Common Aviation Area
Agreement remains slow. There were no developments regarding ground handling
and airport charges, which remain expensive. The reliability of air traffic
monitoring is a cause for concern. The ACAA still lacks qualified staff and
relies heavily on external experts for safety oversight duties. The
administrative and technical capacity in the air transport sector remains weak.

Some progress
can be reported on maritime transport. The reorganisation of the
Maritime General-Directorate has been completed. Ship Registry and Seafarers
Units have been established along with a new Sector dealing with Flag State
Control and Port State Control. The Maritime Code was amended in November 2011,
expanding the right to provide cabotage services to EU flag-carriers and
abolishing the requirement that ships’ captains must be Albanian nationals. A decision on reporting
formalities for maritime traffic from or to European Union ports was adopted,
aiming at alignment with the acquis. The detention rate of vessels
flying the Albanian flag has improved. However, further efforts are required to
strengthen the Flag state and Port State Control. Albania has not yet requested
membership to the Paris Memorandum of Understanding on Port State Control and
remains on the black list flag of this organisation.

No progress can
be reported in the area of satellite navigation. Albania currently has no plans
to participate in the Galileo satellite navigation programme.

Conclusion

There has been
little progress on transport policy, mainly concerning cabotage in the maritime
sector. Further efforts are required on alignment with the transport acquis and
to implement legislation effectively. Administrative and technical capacity
remains weak across the different modes of transport, particularly in the case
of aviation and road safety. Rail infrastructure maintenance is a concern and
needs more resources. Overall, preparations are not advanced.

4.15.
Chapter 15: Energy

There was little progress on security of
supply. Albania improved its interconnection capacity through the
inauguration of a new substation in Tirana but further efforts are
required to complete interconnections with neighbouring countries. Electricity
generation capacity has improved through the construction and the
operation of several small hydropower plants but the country remains
over-dependent on hydrological conditions. No progress was made with
implementing the acquis on security of electricity supply in line with
the Energy Community Treaty. Albania, which is not connected to any
international oil or gas pipeline, signed in September a Memorandum of
Understanding with Greece and Italy on the Trans-Adriatic Pipeline (TAP), in
the framework of the Southern Gas Corridor.

There was some progress towards enforcement
of the legal obligation to hold a 90-day emergency oil stock reserve.
Administrative measures were imposed on companies that failed to fulfil their
obligations. Further efforts are still required to strengthen the technical and
enforcement capacity in order to ensure that the legislation is fully
implemented.

There has been little progress with the internal
energy market. The restrictions on allocation of interconnection capacity
were formally removed. Auctions open to third parties have been being held
since February 2012. The government continued to issue concession permits for
the construction of small hydropower plants. However, the number in operation
remains limited due to legislative gaps hindering enforcement of contracts (See
also Chapter 5 — Public procurement). The establishment of more than one
hundred small hydro-powers plants is foreseen yet, no Strategic Environmental
Assessment or socio-economic study have been carried out so far to assess their
overall impact.

No progress was made on aligning the Power
Sector Law with the acquis. Albania’s legal framework still substantially fails to comply with the
Energy Community obligations. Albania has not yet
started aligning its legislation with the EU’s third internal energy market
package. The generation and wholesale supply operations of the state-owned
company KESH have not yet been unbundled. Distribution and network losses
increased and bill collection rates further deteriorated. Domestic production
of electricity decreased by 47% in 2011, mainly due to bad hydrological
conditions. Despite some improvements in power generation during the first half
of 2012, this has resulted in financial difficulties for KESH, which had to
request subsidies and a state guarantee on loans. In addition, a dispute
between KESH and the distribution company CEZ over
outstanding mutual debt remains unsolved and may
endanger the stability of the electricity sector. The Energy Regulatory Entity
(ERE) approved a decision on electricity tariffs for 2012 and developed a new balancing model for the electricity market. While the electricity wholesale price has increased significantly
due to higher imports, the regulated electricity prices have only increased
slightly. ERE has repeatedly reduced the regulated generation price to offset
the impact of higher imports. The monitoring and enforcement powers of the ERE
remain weak, as does its independence. No substantial progress was made in
preparing the implementing legislation in the field of gas, including the tariff methodology.

There was no progress in the field of renewable
energy. The Law on Renewable Energy remains to be adopted. Substantial
efforts are required to increase use of Albania’s significant potential for
renewable energy, to adopt the national renewable energy action plan and to
achieve the target in 2020. Administrative barriers remain as regards licensing
and authorisation of renewable energy investments and connection of renewable
energy producers to the grid.

There was no progress on energy
efficiency. The new Law on Energy Efficiency remains to be adopted.
Substantial efforts are needed to prepare the implementing legislation and to
implement the national energy efficiency action plan for
2011-2018.

Very little progress was made with nuclear
energy, nuclear safety and radiation protection. Albania still lacks
an adequate legal framework and administrative capacity in this field. Albania
adopted the basic legislation on protection from non-ionising radiation. A
regulation was adopted in May 2012 on the protection of the general public
against ionising radiation. However, further efforts are still needed to align
the legislation with the acquis and to ensure nuclear safety and safe
radioactive waste management, security, non-proliferation and radiation
protection.

Conclusion

There has been little progress in the
energy sector. Lack of diversification hinders security of electricity supply.
Energy market reforms require significant efforts to ensure the viability of
the sector. The administrative capacity and independence of the energy
regulatory Entity require further strengthening. Overall, preparations are not
very advanced.

4.16.
Chapter 16: Taxation

There was some progress in the field of indirect
taxation. Value Added Tax (VAT) refund procedures showed some
improvement in the amount reimbursed. Yet, delays in VAT refunds persist
and the new VAT law drafted aiming at further approximation to the acquis
is still awaiting adoption. Use of fiscal devices (cash registers) by
businesses increased, but further efforts are needed to strengthen enforcement
of legislation and reduce tax evasion.

The new Excise Law that entered into
force on 1 October brings the Albanian legislation closer to the acquis.
However, the excise structure and rates are not yet in
line with the related EU Directives. Responsibilities for excise were
transferred from the tax administration to the customs administration as of 1
July 2012. Implementing legislation was approved on the use of new
fiscal stamps as of 1 March 2012.

There was little progress in the field of direct
taxation. The threshold for personal income declarations was
increased to approximately € 14,000. Personal income declarations started
to be applied for the first time in 2012. Further efforts are required to
ensure adequate technical and analytical capacity for managing the personal
income declaration process. Draft legislation aiming at alignment with the acquis
on mergers and savings is awaiting adoption.

There was limited progress as regards administrative
cooperation and mutual assistance. An agreement signed
with Ireland to avoid double income and capital taxation and prevent tax
evasion entered into force in January 2012.

There was some progress in the field of operational
capacity and computerisation. The Taxpayers Advocate continued
actively to address complaints from taxpayers but its administrative capacity
and operational independence remain weak. In December 2011 the government
approved the structure of the Tax and Customs Academy but the Academy is not
yet operational. A training strategy was adopted for staff of the Tax
Investigation Directorate. Tax officials received training on collection of
information and on investigation of tax evasion and made progress on exercising
their judicial powers. The number of cases of tax evasion which were identified
and reported by regional tax offices to the Tax Investigation Directorate
increased and more cases of potential criminal offences were referred to
Regional Prosecution Offices.

Consultations with businesses and civil
society took place through the Business Advisory Council and the Taxation
Council when drafting the Laws on VAT and Excise. However, the level of
participation by businesses in drafting policy and legislation remains low.

Measures were taken to strengthen internal
auditing and to fight corruption in the tax administration. Performance audit
practices and monitoring indicators were established, manuals on internal audit
were prepared and staff received training on the internal Code of Ethics.
However, corruption in the tax administration remains a
cause for concern.

As regards computerisation, an
electronic filing system for payrolls of social and health security
contributions was introduced and a new program to register revenue collection
was developed. However, the IT system is not adequate for the needs of the GDT.
Electronic payment of taxes remains underdeveloped due to limited facilities
offered by commercial banks and telephone operators.

Conclusion

There was some progress in the field of
taxation. Legislation on indirect taxation was further aligned with the acquis
and the capacity of the Tax Administration for investigation and internal audit
were strengthened. Further efforts are required in the fields of direct
taxation, tax collection, VAT refunds and IT. Overall, preparations are moderately
advanced.

4.17.
Chapter 17: Economic and monetary policy

There has been no progress on monetary
policy with a view to alignment of legislation to the acquis. The
Law on the National Bank was not adopted and no progress was achieved on the
procedure for dismissal of the Governor, the personal independence of the
Council members and the accountability of the National Bank.

The Bank of Albania continued to monitor
the inflation rate and intervened by downgrading the basic interest rates five
times within a short period, keeping inflation within the target range.
Monetary policy remained sound and exchange rate stability was broadly
preserved.

Albania has
made little progress in the field of economic policy in terms of
legislative alignment with the acquis. The Economic and Fiscal Programme
(EFP) for 2012-2014 was adopted in February. Its key objectives include
macroeconomic stability and fiscal consolidation, while maintaining a high
level of public investment and sustaining economic growth with a view to achieving
fast convergence with EU income levels. The programme is a policy coordination
instrument based on several medium-term government strategies. It broadly
follows the European Commission’s requirements on format and content, although there are some gaps
in the data. Public finance data do not comply with the ESA95 methodology.
Considerable further efforts are needed towards improving the relevant labour
and wage statistics and forecasts and addressing the link between the reforms
and their fiscal and budgetary implications.

The EFP fails
to present any medium- and long-term strategy or to quantify the budgetary
impact of the measures. Capacity for economic policy formulation and
coordination remains weak.

Conclusion

Albania has
made no progress on legislative alignment with the acquis in the field
of monetary and economic policy. Little progress has been made with preparation
of the economic policy document. There is insufficient capacity for policy
formulation. Overall, preparations in the field of economic and monetary policy
are not yet sufficient.

4.18.
Chapter 18: Statistics

Little progress can be reported in the area
of statistical infrastructure. The budget and staff of the National
Statistics Institute (INSTAT) increased, in advance of the 2011 population and
housing census and of the agricultural holdings census, which is expected in
autumn 2012. The infrastructure at INSTAT’s main office
in Tirana has improved with the establishment of a data processing centre in
September 2011. However,
INSTAT regional offices still lack basic infrastructure and internet access.

In March
2012, the Law on Statistics was amended to place INSTAT
under the direct authority of the Prime Minister. Yet, the amendment neither
addressed the issue of the professional
independence of INSTAT nor introduced
a provision concerning the role of INSTAT as the coordinator of the national
statistical system. It also failed to ensure broad representation in the
Statistical Council. The 2012-2015
official statistics programme, which should plan production of the statistical
data necessary for observation of the economic, social and environmental
situation in Albania, has not yet been adopted.

Good progress has been made with classifications
and registers. The codification of units in the business register
based on the NACE Rev.2 classification has been completed and covers both
enterprises and local units. The quality of the business register data was
improved using information collected in the census of economic enterprises but
the quality of the data on local units has
to be raised. The procedure for assessing the activity status of enterprises
and local units (active/not active) has been completely reviewed, based on
available statistical sources and a new method, which is consistent with the EU
standards.

There has been progress in the area of sectoral
statistics. Work is under way on improving quarterly national accounts and
regional GDP calculations. Institutional sectoral accounts are being developed.
Further efforts are needed to improve accuracy and the level of detail in order
to align with EU standards.

INSTAT conducted a population and housing census
in October 2011, making efforts to meet international standards. The first
preliminary results were published in December 2011. Data processing is
continuing. Preparatory activities are in progress for
the 2012 census of agricultural holdings. The methodological framework for the
agricultural census was finalised on the basis of a pilot exercise run in
December 2011. Further efforts are still needed to make sure that the operation
will be conducted successfully.

In the area of the
other sectoral statistics, some progress has been made in the direction
of improving data editing processes and estimation criteria for structural
business statistics.

Conclusion

Some progress has been made in the area of
statistics. INSTAT conducted a population
and housing census in October 2011. Substantial efforts are needed to
improve some areas of sectoral statistics, including securing the forthcoming agricultural
census. The independence and administrative capacity of INSTAT have to be
secured. Overall, preparations are moderately advanced.

4.19.
Chapter 19: Social policy and employment

There was no progress in labour law.
Amendments to the Labour Code, including a roadmap for
alignment with the acquis in the field of labour law, are pending
adoption.

There has been little progress on health
and safety at work. The State Labour Inspectorate
has been strengthened with the creation of a new Directorate for Standards of
Inspection of Social Services with five employees. However, no progress has
been made towards establishing the remaining 23 local offices of the State
Labour Inspectorate. Several accidents at work and a deadly explosion in
October 2011 hit a chrome mine due to poor technical working conditions.
Overall, health and safety at work conditions and enforcement of the
legislation continue to be insufficient.

There was little progress in the social
dialogue. A Tripartite Commission for
Equal Opportunities was established within the National Labour Council
(NLC). Representativeness criteria for NLC
membership are being discussed with social partners. However, the current
system of representation in the NLC does not comply with the International Labour Organisation’s
(ILO) standards. Trade unions have expressed concern
over the unwillingness of a state institution to sign collective agreements.
Bipartite social dialogue and collective bargaining in the private sector
remain underdeveloped.

There has been
little progress as regards employment policy. An action plan for youth employment is being implemented but no
action plan for employment has been adopted yet. As regards the labour
market situation, the level of inactivity remains high, especially among women,
as does the official unemployment rate, although it decreased slightly in 2011,
to 13.3%. The actual level of unemployment is however distorted by the
importance of subsistence agriculture. Unemployment primarily affects youth,
vulnerable groups and also, as a new trend, returnee emigrants. The employment
rate showed a slight increase (by 1.6), although at a decelerating rate in
2012. An evaluation of active labour market measures
has been initiated. Measures were taken to promote
first employment of job-seekers and employment of women from vulnerable groups.
However, the total budget for employment promotion programmes in 2012 was
decreased by 40% compared with 2010, leading to a reduction in the number of
participants. In 2011, 4,880 people received public
vocational training that is 3.5% of the total number of unemployed officially
registered. Currently, there are nine vocational centres in big cities,
plus a mobile vocational training centre in North-Eastern Albania. Some efforts
have been made to fight informal employment which continues to make up a
substantial share of employment in Albania. 2011 Labour Force Survey data are
expected in October 2012.

The National Employment Service (NES) is
working on computerisation of all employment offices in order
to create databases of job-seekers and employers. However, the levels of
performance and attractiveness of the NES remain low. The administrative
capacity of the NES at both national and local levels requires further
strengthening.

No progress can be reported with
preparations for the European Social Fund. (See also Chapter 22 –
Regional policy and coordination of structural funds.)

There has been
little progress in the area of social inclusion. The mid-term evaluation of implementation
of the Strategy for Social Inclusion for 2007-2013 has not been finalised yet.
No recent data exist on the level of poverty. Very little progress has
been made on implementation of policies targeting Roma inclusion, partly due to
the lack of financial and human resources allocated at the level of local
government units. Roma unemployment, which was already high, has further
increased. Child labour is notably affecting Roma.

No progress was made regarding employment
of people with disabilities. The Law on Employment Promotion has not been
properly implemented and the employment quota has not been enforced. The framework Law on the Rights of People with Disabilities is
awaiting adoption.

Some progress
can be reported in the area of social protection. Legislation implementing
the Law on Social Services and Assistance was adopted to expand the categories
eligible for economic aid and to raise the aid ceiling for the benefit of large
families. The Law on Collection of Compulsory Contributions for Health and
Social Insurance was amended in February 2012 to introduce electronic
declarations of payments as from July 2012. In February 2012, the government
reviewed the pension scheme with the aim of increasing its efficiency and
addressing the low level of private contributions. However, the social
insurance and pension schemes have not been functioning properly. Disability
and pension payments have suffered from delays and disruption. Difficulties
with contributions and contributor/recipient ratios remain a concern. The
electronic database of pensions has not been completed and the difference in
treatment between genders has not been revised.

Moderate progress can be reported in the
area of anti-discrimination. The Law on Protection from Discrimination
is largely in line with the acquis, but its implementation remains
insufficient. A strategic plan (2012-2015) for implementing the Law on
Protection from Discrimination and an action plan of the Commissioner for
Protection from Discrimination (CPD) have been adopted. The CPD has focused on
strengthening its capacity and raising awareness. The CDP has signed
cooperation agreements with several ministries. However, the number of cases
brought to the attention of the Commissioner remains low and, as yet, has not
generally led to financial sanctions against the perpetrators. General awareness of the law and of the possibilities to appeal to
the CPD remains low.

Little progress can be reported in the area
of equal opportunities between women and men. There is still a gap
between the legal framework and the actual level of equality in relation to
employment, pay, access to entrepreneurship and credits. In July 2012, a
Council of Ministers decision on gender mainstreaming in the medium-term budget
programme for all line Ministries was approved. Awareness-raising activities
have focused on women’s political participation and gender quota, women’s
entrepreneurship and combating violence against women. However, women continue
to be under-represented in the labour market, in particular in political and
economic decision-making. Sufficient financial and human resources are lacking
at central and local government levels leading to slow implementation of the
2011-2015 national strategy on gender equality.

Conclusion

There has been little progress in the
fields of social policy and employment. The labour market continues to be
shaped by high informality, low participation of women, and relatively high
youth unemployment. Social inclusion of persons with disabilities and the Roma
minority remain insufficient. Sustainability of funding needs to be addressed
to ensure successful implementation of social assistance and protection
reforms. Implementation of policies in this area continues to be a challenge.
Overall, preparations are not very advanced.

4.20.
Chapter 20: Enterprise and industrial policy

Some progress has been made as regards enterprise
and industrial policy principles. Albania continued to implement the
Small Business Act, notably in the areas of company registration and business
start-up. The National Registration
Centre for Business extended the coverage of electronic registration. A new
one-stop shop was established in February in Tirana to reduce the time taken
for issuing local government licences and permits. A new package of regulatory
reforms was launched in March to reduce delays in registering property,
obtaining construction permits and connecting businesses to the electricity
grid. Yet, weaknesses persist as regards the provision of support to Small and
Medium Enterprises (SME), innovation policy and environmental standards. There
was no progress with approval of legislation related to regulatory impact
assessment.

There was some progress on implementation
of the Business Innovation and Technology Strategy. An Innovation Fund of
approximately € 285,000 has been established for 2011-2014. The Albanian
Investment Development Agency has been fully staffed and its board adopted the
regulation for the implementation of the Innovation Fund.

There was little progress in the field of enterprise
and industrial policy instruments. Measures to facilitate
access to finance for SMEs continued under the Credit Guarantee Fund for SMEs
and the European Fund for South-East Europe. Implementation of the credit
support scheme financed by the Italian government continued, with preparations
being finalised for a second phase of the scheme covering the period 2012-2014.

Albania is an associate partner in the
Competitiveness and Innovation Programme (CIP-EIP). In March 2012, it also
became a member of the European Enterprise Network. Preparations for alignment
with the directive on late payment are at an early state.

In the area of sector policies, some
progress has been made on enforcing regulations on mining. The government
revoked licences of companies failing to fulfil their obligations. There was
some progress on implementation of the tourism strategy, mainly related to
product diversification and improving access to tourist areas. Preparations for
drafting a new tourism strategy and revising the Law on Tourism have started.

Conclusion

There was some progress in the area of
enterprise and industrial policy. Some measures were taken to facilitate access
to financing for SMEs and to improve the regulatory framework for doing
business. Overall, preparations are moderately advanced.

4.21.
Chapter 21: Trans-European networks

In the area of transport networks,
Albania has made some progress. It continued to participate in the Memorandum
of Understanding on the development of the South-East Europe Regional Transport
Network which was included in the revision of the trans-European transport
network (TEN-T) proposed by the Commission in October 2011.

As regards road infrastructure,
construction of the Tirana-Elbasan road and of a new stretch on the North-South
corridor near the border with Montenegro is progressing well. Some
infrastructure projects have been delayed because of expropriation problems and
lack of financial resources. Special attention needs to be paid to
comprehensive environmental impact assessment. A call for tenders for the
maintenance concession on the Milot-Morine motorway was launched in February
2012. Maintenance and infrastructure management are two issues yet to be
addressed. Substantial financial resources are still needed to maintain and
upgrade transport infrastructure properly. As regards rail infrastructure, no
measure has been undertaken to rehabilitate the network. As regards port
infrastructure, construction of the passenger terminal in Durres was completed
in May 2012. Work is underway at Shengjin port and has recently started in
Durres and Saranda. Work planned in Vlora has not started yet.

There was some progress as regards energy
networks. A new electricity transmission substation was inaugurated in
Tirana in November 2011. It is one of the largest in Albania and it forms part
of the interconnection network with Montenegro. Preparations for upgrading the
400kV transmission line with Kosovo have been delayed. Preparations for
construction of the interconnection between Vlora and Brindisi are slow. There
were no developments towards a strategy for the introduction of natural gas.

Conclusion

There was some progress in the area of
trans-European networks. Rail transport remains underdeveloped and substantial
investment is needed to maintain and upgrade transport infrastructure.
Concerning energy networks, further efforts are required to complete
electricity interconnection lines with neighbouring countries and to start
developing a strategy for the introduction of natural gas. Overall,
preparations are not very advanced.

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

The acquis on regional policy and
coordination of structural instruments does not require transposition into
national legislation. Nevertheless, several areas of the legislative
framework have an impact on regional policy. No particular
developments can be reported in the legislative framework. Preparation of a
self-standing Law on Regional Development was abandoned as relevant policy
measures are now included in the National Strategy for Development and
Integration (NSDI) for 2013-2020.

There has been some moderate progress in
the institutional framework. An accreditation package for IPA component
I was finalised and submitted to the European Commission for assessment in
February. Amendments to the legal basis putting in place structures for
implementation of IPA components II, III and IV (precursor instruments of EU
Cohesion Policy) are awaiting adoption. Implementing and operational agreements
will have to be signed between the National Authorising Officer, the Head of
Operating Structures and the bodies forming the operating structures for
components III and IV once the legal basis has been adopted. The national
roadmap for the transfer of management responsibility to the national
authorities in respect of IPA components II, III and IV has been revised. In
order to segregate the programming and monitoring functions, the Ministry of
Integration has revised its internal organisational structure and created a
separate Monitoring Section.

Some modest
progress has been made on strengthening the administrative capacity of
the IPA bodies. A training plan for the staff of the IPA bodies was prepared
following completion of the needs analysis in June 2011. As a result, training
on strategic planning, programming, monitoring, procurement, irregularities,
risk management and other relevant fields was provided through technical
assistance and by the Training Institute for Public Administration. Additional
staff have been recruited in the Central Contracts and Finance Unit. However,
serious operational weaknesses, especially lack of expertise and staffing,
remain within the line ministries that will be in charge of IPA assistance once
decentralisation has been achieved. Adequate administrative capacity remains to
be built up at all levels.

Some progress
has been made on programming. Preparations for drafting the National
Strategy for Development and Integration (NSDI) for 2013-2020 started in
February; its adoption is planned by March 2013. The NSDI will be a synthesis
of all government strategies and policies, including regional policy, and will
guide the medium-term budget programme. The revised draft operational
programmes for IPA components III and IV were submitted to the European
Commission for comments in September 2011. Significant strengthening of
administrative capacity in the areas of programming and project preparation is
needed. Development of a project pipeline remains a major issue.

There has been some moderate progress in
the areas of monitoring and evaluation. The monitoring and
evaluation procedures are being revised to reflect the new approach to IPA
programming. A designated monitoring unit has been established in the Ministry
of Integration with a planned staff of two. Training on monitoring and
evaluation procedures has been provided as part of the technical assistance.

Some progress can be reported in financial
management, control and audit. Internal manuals on financial management and
the internal control framework have been prepared and training has been given
on financial management. The analytical accounting system necessary for the
Central Contracts and Finance Unit and the National Fund for managing the
financial transactions for IPA components I, II, III and IV is fully
functional.

Conclusion

There has been some progress in the areas
of regional policy and coordination of structural instruments. Considerable
efforts are needed to establish the necessary institutional and administrative
capacity at central and local levels and to develop a pipeline of mature and
quality projects. Overall, 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 moderate progress in completing the legal
framework for judicial reform. Implementation of the judicial reform strategy
and the relevant action plan started, albeit slowly. Budget allocation and
planning, the level of human resources, and interinstitutional cooperation
remain areas of concern. Albania needs to further
accelerate the implementation of the judicial reform strategy in order to
ensure the independence, efficiency and accountability of its judicial
institutions.

Working groups were set up within the Ministry of Justice
(MoJ) to review key legislation on the functioning and organisation of the High Court, the Constitutional Court, the High Council of Justice (HCJ), the
School of Magistrates,
the Judicial Budget Administration
Office, and the Judicial Administration. The results of these working groups still need
to be finalised. The Law on Administrative Courts, the Law on the National
Judicial Conference, and the Law on the Profession of Lawyer were adopted, as
well as amendments to the Criminal Code (see also anti-corruption policy).

Some progress has been made with regard to
the independence and impartiality of the judiciary. A set of rules on transfers of judges has been approved by the HCJ in September. The neutrality,
efficiency and independence of the High Court and the Constitutional Court are
still not fully guaranteed under the current legal framework.

An audio-recording system is gradually
being installed in the courts but has not yet been connected to the case
management system. Court decisions are not published systematically and the
quality of decision-drafting remains low.

In relation to accountability in the
judiciary, constitutional provisions restricting the immunity of judges were
adopted. Steps have been taken to address overlapping
inspection powers between the inspectorates of the HCJ and of the Ministry of
Justice through the implementation of a Memorandum of Understanding on
inspections; yet, the risk of overlapping persists. Amendments to the Law on
the HCJ related to inspections have yet to be finalised. Evaluations have not
yet been conducted with all judges. There has been little progress in the area
of disciplinary responsibility and integrity safeguards.

The School of Magistrates is providing good
quality curricula and training, on ethical and other issues. However, the
School’s budget is largely insufficient to cover its planned activities.

Only limited
progress was made regarding the efficiency of the judiciary, though some
steps have been taken to address the problem of unreasonable delays in court
cases often caused by postponement of court proceedings. The lack of a
comprehensive legal framework in line with European standards, with clearly
organised courts and judicial staff, hampers the efficiency of court
activities. Hearings often continue to be held in judges’ offices and working
conditions in courts remain inadequate. Court management remains poor due to a
lack of human and financial resources. Court backlogs, the excessive length of
proceedings and number of sessions undermine the efficiency of the judicial
system.

Regarding enforcement
of court decisions, the new private bailiff system is in place.

Moderate progress was made on anti-corruption policy.
The implementation of the anti-corruption strategy and
specific measures in different sectors and areas under the 2011-2013 action
plan has continued, albeit slowly. Reports on the implementation of the action plan by line
ministries and other relevant institutions are not yet published regularly.

There has been
moderate progress in strengthening the legal framework. This includes the
implementation of recommendations of the Group of States against Corruption
(GRECO) related to incrimination and political party financing. Amendments to
the Law on Notaries were passed introducing the digitalisation of notaries’
activities. Progress was made through the adoption of necessary constitutional
changes to abolish the unlimited immunity of high-level public officials and
judges.

There was
limited progress as regards the institutional framework and the establishment
of specific mechanisms to fight corruption. Efforts were made to improve
interinstitutional cooperation, partly by setting up two
interinstitutional working groups on exchanging information and standardising statistics on corruption
cases. The High Inspectorate for Declaration and Audit
of Assets (HIDAA) signed Memoranda of Understanding to promote cooperation with
several institutions such as the Supreme State Audit, IPRO, ALUIZNI and the
Ministry of Justice.

There was no
progress regarding the institutional role played by the Department of Internal
Control and Anti-Corruption (DIACA). It does not have sufficient institutional
independence, authority and administrative capacity to accomplish its tasks.

Joint
Investigative Units, although continuing to be good instruments for
investigating and prosecuting corruption cases, have inadequate human resources
and technical equipment, as do most investigation and law enforcement agencies.
A lack of technical equipment for special investigative measures hampers the effectiveness of anti-corruption policies. Internal
control departments across ministries often lack specialist expertise and
remain insufficiently focused on fighting corruption. The
level of cooperation between law enforcement agencies, in particular between
the police and prosecutors, remains insufficient.

Proactive
investigations based on effective use of intelligence and risk assessments are
still lacking in Albania. Few corruption cases end in convictions. A convincing
track record of investigation, prosecution and convictions in corruption cases
at all levels, including senior officials, has not yet been established.
Criminal statistics and statistics on conflict of interest cases need to be
strengthened. Corruption in the judiciary remains a particularly serious
problem. Corruption also remains a particularly serious problem in the tax,
education and health sectors.

Albania has
further enhanced the legal and institutional framework for the protection of fundamental
rights. Appointment of the new Ombudsman helped improve the functioning of
the national human rights institutions. Most of the complaints received by the
Ombudsman relate to allegations of ill-treatment by police, of non-execution of
court decisions, of delays in judicial proceedings and of violations of the
right to employment by the public administration. However, there are still some
legal gaps and implementation of legislative and policy tools in the field of
fundamental rights continues to be slow and to be largely reliant on civil
society and donor funding.

Progress can be noted regarding prevention
of torture and ill-treatment. Follow-up of the Ombudsman’s
recommendations has improved and the State Police started cooperating- with two
non-governmental organisations. A new database, known as ADAM, was introduced
for compiling data on escorted, arrested and detained persons. Amendments to
the handbook on the rules and treatment of arrested and detained persons in
police stations were adopted. However, concerns remain over reported cases of
ill-treatment and failure by police to systematically observe procedures for
arrest and custody. Plans have been made for building a special medical
institution for treating mentally ill offenders, but it will take time until
its establishment and additional specialist care needs to be awarded to this
category of detainees.

Progress has been made concerning the prison
system, with continuous training and improvement of standards. Standards of
living in prisons still vary depending on provision of food and equipment by
families. Four new regional offices of the Probation Service were opened and
plans for additional resources have been approved. Continued over-use of
pre-trial detention is a concern.

Little progress was made regarding access
to justice. The implementation of the Law on Free Legal Aid has been slow
and neither the bylaws regarding the recruitment of free legal aid lawyers nor
the procedures to request free legal aid are implemented effectively. The State
Commission for Legal Aid has only handled a limited number of cases. Access to
justice for vulnerable groups is impeded, especially by high judicial
administration fees.

Some progress
was made in the field of freedom of expression with the adoption of
amendments to the Criminal and Civil Codes removing prison sentences for libel
and defamation and repealing special protection of public officials. However,
these offences still remain punishable by potentially high fines under the
Criminal Code. Concerns remain over insufficient transparency of ownership, use
of the media to promote political and economic private interests and lack of
progress in strengthening the editorial independence of the public service
broadcaster.

Freedom of
assembly and association has generally been respected.
Civil society development continues to be impeded by difficulties in accessing
funding, including from the Agency for Support to Civil
Society. Consultation of civil society in the legislative process is not
systematic. Freedom of thought, conscience
and religion continued to be respected.

Some progress was made regarding women’s rights and gender equality. Albania has signed the Council of
Europe Convention on Preventing and Combating Violence
against Women and Domestic Violence. It has started to implement the 2011-2015
national strategy on gender equality and domestic violence and gender-based
violence. Amendments to the Criminal Code were adopted, introducing further protection from domestic violence and one
national shelter for victims of domestic violence is operational. Coordination between national and local institutions
remains insufficient. Women’s participation in decision-making remains limited.

There has been uneven progress in the area
of children’s rights. The adoption of the action plan of the national strategy for child protection 2012-2015
is a positive step. The process of establishing local child protection units
continues, albeit with much reliance on civil society and donors to provide
services. Effective progress in implementation depends on strengthening human
and financial resources and coordination between central and local level. The juvenile justice
strategy and action plan have not been adopted. Over-use of pre-trial detention
for juveniles is a serious concern.

There has been limited progress regarding socially
vulnerable and/or persons with disabilities. Work on the draft law
is ongoing and differentiated status for certain disabilities remain. Persons
with disabilities continue to face difficulties in accessing education,
employment, health care and social services.

Moderate progress was made in the area of anti-discrimination
policies. The Office of the Commissioner for
Protection from Discrimination launched a strategic plan for 2012-15 and an
action plan for 2012 and focused on awareness raising and capacity building.
However, general awareness of the Law on Protection from Discrimination remains
low and a track-record of cases brought to final completion has to be built up.
A plan of measures for non-discrimination on the basis of sexual orientation
and gender identity has been adopted. At the same time, discrimination against
lesbian, gay, bisexual and transgender persons, the Roma minority and other
vulnerable groups persists. Albania does not publish data collected on hate
crimes and hate-related incidents. In the reporting period, there were no
convictions for crimes related to racism and xenophobia.

Labour and trade union rights have generally been respected and a
dialogue has been launched regarding the criteria for membership of the National
Labour Council. Progress remains to be achieved on collective bargaining in the
public and private sector.

Some progress was achieved in the area of property
rights, notably through the adoption of a new law on registration of
immovable property and through the adoption of a cross-cutting strategy and
action plan. Efficient coordination and monitoring is necessary to ensure the
implementation of the strategy and consistency between the legislation in force
and future initiatives. Consultations with stakeholders need to continue in
this respect. The land registry has not yet been completed. Former owners still
have unresolved claims for compensation for and restitution of property
confiscated under the communist regime.

Although inter-ethnic relations remained
good overall, very limited progress can be noted in
enhancing the legislative and policy framework regarding
respect for and protection of minorities and cultural rights. The mandate of the State Committee for
Protection of Minorities has not been enhanced nor has work started towards
drafting a comprehensive legislation on minorities which was recommended by the
Advisory Committee of the Framework Convention for the Protection of National
Minorities. The full results of the October 2011
population and housing census, which included optional questions on ethnic
origin and religious affiliation, have not been published yet.

Very limited progress was made regarding Roma
inclusion. Implementation of policy tools in this field continues to be very
slow, notably due to inadequate resources and insufficient coordination between
the local and national institutions. Roma continue to face very difficult
living conditions and discrimination. There is concern over forced evictions of
Roma and the authorities’ poor response to the community’s housing problems.
Difficulties arise from the lack of unified official statistics regarding the
Roma population in Albania.

Some progress
was made in the area of protection of personal data, with amendments to
the Law on Personal Data Protection aimed at further approximation with the EU acquis.
The Office of the Commissioner for Personal Data is still not listed among the
institutions which always need to be consulted on draft legislative proposals. The
Office adopted and implemented two procedural manuals. It performed more
inspections and adopted several sector-related instructions.

There have been no developments regarding EU
citizens’ rights; amendments to the Law on Foreigners await adoption.

Conclusion

Overall, there
has been some progress in implementing policies on the judiciary and
fundamental rights, notably through efforts to address the relevant key
priorities set out in the Commission Opinion. Yet, significant gaps in the
legislative framework remain, in particular as regards judicial reform.
Consistent implementation of legislative and policy tools remains a challenge
in all areas under this chapter. Albania’s alignment with European standards
and the acquis in the field of the judiciary and fundamental rights is
not very advanced.

4.24.
Chapter 24: Justice, freedom and security

Some
progress has been achieved in the area of migration policy. Progress was
achieved in gathering and publishing analytical information on legal and
irregular migration. Implementation of the readmission agreement has continued
smoothly. In 2011 just 15,185 return cases were recorded, due to a sharp
decline in returnees from Greece. The institutions in charge of implementing
the strategy and action plan for returned migrants should be reinforced.
Adoption of the new National Migration Strategy is still pending. Preparations
in this area are advancing moderately.

In
the area of asylum, no significant progress has been made. The
institutional and legal framework is partly in place. However, preparations in
this area need to be stepped up. By August 2012, Albania had granted asylum to
81 individuals, with 20 more applications pending. Refugees and persons granted
complementary protection have yet to be provided with ID documents. An
effective pre-screening process needs to be ensured at the border in view of
potential new migration trends and the possible rise in illegal transits by
third-country nationals. Preparations are moderately advanced.

Some
progress was made on visa policy. An amendment to the Law on Foreigners,
aiming to adapt the visa arrangements to the acquis is still pending.
The implementation of visa liberalisation progressed smoothly overall.
Following an increase in unfounded asylum applications from Albanian nationals,
Albanian authorities reacted promptly and cooperated with Member States.
Efforts to ensure public awareness of the rights and obligations stemming from
visa liberalisation and to prevent abuse need to continue. Since July 2012, the
Total Information Management System (TIMS) has been linked to the civil
registry database at border-crossing points. The Commission has continued
monitoring post-visa liberalisation and presented its third monitoring report
to the European Parliament and the Council in August 2012.

There
has been progress in the area of external borders and Schengen. A
protocol for joint patrolling was signed with Kosovo, an agreement on
establishment of a new joint border control point was signed with Montenegro
and an agreement on exchange of information was signed with the former Yugoslav
Republic of Macedonia. Mobile border patrols started operating, covering the
green border. The ban on speed boats remains in force. Threat assessment
capacity in the Border and Migration Police (BMP) needs to be strengthened.
Cooperation and coordination of institutions involved in managing the blue
border needs to be tightened and the financial sustainability of surveillance
mechanisms needs to be ensured. Risk analysis and intelligence in the
Interinstitutional Maritime Operations Centre (IMOC) need to be reinforced,
including its connection to the MEMEX criminal intelligence information system.
Overall, preparations in this area have advanced.

There
has been progress on judicial cooperation in civil and criminal matters.
The Third Additional Protocol to the European Convention on Extradition entered
into force but has not been applied yet. Cooperation agreements were signed
with EULEX, Europol, Austria, the Netherlands, Russia and the former Yugoslav
Republic of Macedonia. The smooth implementation of the extradition agreement
with Italy has to be ensured. Albania adopted a law facilitating cooperation
with EULEX in the framework of the investigation into alleged trafficking of
human organs. Preparations for concluding a cooperation agreement with
Eurojust have advanced. Overall, there has been moderate progress in this area.

In
the field of police cooperation and the fight against organised crime —
one of the key priorities set in the Commission’s Opinion — some progress can be reported. Greater use of MEMEX has
improved data exchange within the Albanian State Police (ASP). However, the
operational capacity of the forensic laboratory, especially DNA interpretation
and a DNA database, needs further support. A decision was taken to restructure
the witness protection services with the purpose to increase their
effectiveness and meet EU standards. An action plan against trafficking of
vehicles has been adopted and progress has been made on detecting trafficked
vehicles at the borders. The implementation of the ‘anti-mafia law’ has
resulted in an increase in the seizure of criminal assets. However, efforts in
this area need to be intensified substantially through closer coordination
between law enforcement and judicial authorities, leading to effective recovery
of illicitly-obtained assets.

Interinstitutional
cooperation has progressed in investigations of financial crime and
money-laundering. However, there is an urgent need for key institutions to step
up coordination and information exchange and thus maximise their capacity to
investigate serious and organised crime. Continuous specialised training
involving police officers, prosecutors and judges remains necessary. Standard
operating procedures for managing serious crime scenes have been introduced.
Threat assessment and proactive investigations should be further promoted.
Preparations in order to build a solid track record of investigations,
prosecutions and convictions at all levels are moderately advanced.

Progress
was reported in the fight against trafficking in human beings, even
though Albania is still a source country for trafficking in human beings and
internal trafficking remains a concern. Progress was made in the engagement of
the Office of the National Anti-Trafficking Coordinator (ONATC). A joint
working group was established in order to improve the investigation and trial
proceedings. Standard operating procedures for identification and referral of
victims/potential victims are in place and are being implemented effectively. A
new national referral mechanism has been established.

Progress
can be reported in the fight against money-laundering. Taking into account
MONEYVAL recommendations, amendments to the Criminal Code were adopted establishing
the autonomy of money-laundering crime from the predicate offence and the crime
of self-laundering. The penalty for this crime was also enforced. There has
been an increase in reports from banks, notaries, the Immovable Property
Registration Office and the General-Directorate for Customs. The number of
asset investigations, of cases sent to court for sequestration purposes and of
seizures upon court order increased. However, the number of convictions for
money-laundering remains significantly low compared with the scale of the
problem. Money-laundering and corruption crimes do not fall under the
competence of the Serious Crime Court.

Regarding
the ASP’s human resources, the diversity strategy continued being implemented.
Some progress was made in recruitment of female police officers. However, there
remains a need to comply fully with best practice regarding transfer,
selection, appointment and promotion procedures. Internal control should be
enforced in order to address corruption in law enforcement.

There
has been some progress with international cooperation, notably through the
installation of secure communication links with Europol, and information
exchanges have continued. Operational cooperation with neighbouring countries,
EU Member States and Europol needs to be further enhanced through the exchange
of criminal intelligence and the carrying out of joint operations.

Albania
has started implementing the national strategy and action plan on the fight
against terrorism. Effective structures must be developed in
order to guarantee timely and relevant security intelligence. Preparations in
this area are moderately advanced.

There
has been modest progress regarding cooperation in the field of drugs.
Seizures and prosecution overall increased. The new national
anti-drug strategy was adopted in June, pursuing the objectives of increasing
strategic coordination among law enforcement agencies, and addressing supply,
demand and harm reduction. International cooperation is being ensured and the
intelligence-led approach, as well as an increased use of risk assessment,
should be continued involving all relevant institutions. Good cooperation was
established between the European Monitoring Centre for Drugs and Drug Addiction
and the National Office of Drugs Data set up in 2011. Police operations against
cultivation of cannabis have been stepped up. Progress in seizures at entry
points will need to be intensified. Organised crime groups continue taking
advantage of Albania’s location as a transit country. More targeted and
proactive investigations and operations remain necessary.

Some
progress took place in the area of customs cooperation. Good border
cooperation was noted between the customs authorities and the police in the
fight against illegal trafficking of vehicles. This positive move should be
supported by further development of intelligence in this area, see Chapter
29 – Customs union.

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

Conclusion

Albania
has made some progress in the area of justice, freedom and security,
particularly in border management, international cooperation in investigations
and the fight against organised crime. Efforts need to be stepped up on
coordination between law enforcement institutions and consolidating a track
record of investigations, prosecutions and convictions. Overall, preparations
in this field are advancing.

4.25.
Chapter 25: Science and research

There has been limited progress in research
and innovation policy. The Agency for Research, Technology and Innovation
(ARTI) has strengthened its administrative capacity and continued its efforts
to promote cooperation on research and innovation under the Seventh EU
Framework Programme through its website and awareness-raising activities. No
progress was made towards integration into the European Research Area and
contribution to the Innovation Union was limited. The national level of
investment in research and technological development is still very low and has
not increased since 2010, despite the targets set in the national strategy for
science, technology and innovation for 2009-2015.

With respect to Albania’s participation in the EU's Seventh Framework
Programme (FP7), the number of submissions increased, but the number of
successful FP7 projects funded is still very low. ARTI stepped up its promotion
efforts and training sessions, attended several EU networking events and
actively followed the work on the WBC.INCO.NET project under FP7. ARTI has
signed bilateral cooperation agreements with Italy, Greece, Montenegro, the
former Yugoslav Republic of Macedonia, Slovenia and Turkey.

As regards integration into the European
Research Area (ERA), there has been little progress on implementation of
the national strategy on science, technology and innovation. Some measures have
been taken to strengthen human capital-building, such as increasing the Fund
for Excellence stimulating external mobility, establishing the national
Euraxess Portal (ARTI) and starting to set up a network. No progress was made
on establishing centres of excellence. There was no increase in the level of
investment in research and no action to stimulate investment in research and
innovation by the private sector or to support private-public partnerships. In
addition, the level of investment in research as a share of GDP is difficult to
establish due to the lack of reliable statistics. The national funding for
research has not increased but the system has improved thanks to a new
selection process for projects to be funded directly by the departments.
However, no international peer review is being applied so far. The Albanian
Business Research and Innovation Centre (AIDA) started to stimulate innovation
by entrepreneurs by granting technology audits to SMEs with innovative ideas.
This action is in line with the EU Innovation Union flagship.

Conclusion

There was little progress in the area of
science and research. Further efforts are required at national level to
strengthen the research and innovation capacity and increase the country’s competitiveness. The level of investment
in research remains very low and the human capital-building requires
strengthening. Overall, preparations are not very advanced.

4.26.
Chapter 26: Education and culture

There has been good progress in the areas
of education, training and youth. The Law on Pre-university Education
was adopted in June 2012. Further training has been provided to build the
capacity of teachers and to adapt training and educational provision to the
labour market. The National Inspectorate for Pre-university Education has
continued to carry out inspections applying new guidelines for the inspection
and evaluation of kindergartens and schools. Progress was made in the fight
against corruption in education via the progressive digitalisation of the State
school-leaving examinations (‘matura’) and preparation of a national code of
ethics for pre-university and university teachers.

Further efforts have been made to build up
the capacity of the vocational education and training (VET) sector at secondary
level. The capacity of the Ministry of Education and Science has been
strengthened. Some curricula have been reformed to reflect the needs of the
labour market better. Four VET schools were constructed.

A comprehensive reform of the higher
education system, including financial aspects, is being prepared. A database
has been set up to track student numbers and results. A university performance
and ranking scheme is being examined. The Albanian Qualifications Framework
(AQF) is being developed but further efforts are needed to develop
qualifications, define competences and turn them into study programmes. The
independence of the accreditation agency has improved and efforts have been
made to evaluate higher education institutions. The licence of one private
university has been partially suspended for non-compliance with the law.
However, efforts need to continue as regards evaluation and inspection of all
higher education institutions and programmes, especially those in private
universities. Participation by Albanian universities in the Tempus programme
improved substantially in the last call. Awareness raising activities for the
Youth in Action programme were carried out. Participation of young people in
the programme continuously increased. A new youth strategy is being developed.

In the area of culture,
good progress can be reported. Albania has concluded a Memorandum of
Understanding on the Culture programme and started to participate in 2012.
Network and capacity-building for participation in the Europe for Citizens
programme were developed, but participation remains limited. A new strategy on
cultural heritage (2012-2020) is being prepared.

Conclusion

There was good
progress in the fields of education and culture in aligning with European standards,
particularly in the areas of higher education and in the development of VET.
Further efforts are required to improve transparency in private higher
education institutions. In 2012, Albania started to participate in the Culture
programme. Overall, preparations are moderately advanced.

4.27.
Chapter 27: Environment and climate change

As regards the environment, there
has been some progress in the horizontal legislation. Cooperation with
civil society and public access to information improved. However, the Laws on
Environmental Impact Assessment and Environmental Permits are still not aligned
with the acquis and include serious deviations such as the ‘silent
consent’ concept. Adoption of the Law on Strategic Environmental Assessment is
pending. Lack of implementation and enforcement of the legislation remains a
concern. Relevant environmental impact assessments and public consultations are
not systematically carried out and environmental permits are not systematically
issued before launching infrastructure projects. Sanctions are not dissuasive
enough and not properly enforced.

As regards air quality, some
progress was made with ratification of certain protocols to the Convention on
Long-Range Transboundary Air Pollution. Air quality monitoring and reporting
improved slightly. A new Air Protection Law, setting out a comprehensive
framework for air quality policy, is pending. Air management plans for the main
municipalities, including Tirana, are still pending. Due to the low budget
allocated to this sector, only two air quality stations are fully operational.

Some progress was made on waste
management, with adoption of the Law on Integrated Waste Management.
Implementation of the law will have to be carefully monitored to guarantee that
waste is managed and imported legally. Adoption
of the regional waste management plans is still pending. Medical and veterinary
waste treatment is not properly managed. Municipalities
are facing difficulties in managing the growing volume of waste. There is still
no procedure for management and control of the landfills in place and several
uncontrolled dumpsites are still in use.

Little progress has been achieved on water
quality. The National Water Supply and the Sewerage Services Sector
Strategies were adopted and the Water Supply and Sewerage Master Plan was
developed. Adoption of the Water Law is pending. Three
wastewater treatment plants are now operational while four more have been
completed but are not yet in operation. There is little
capacity to assess the quality of water or of waste water discharged by
industrial plants. In this respect, there was no progress on identifying
sensitive areas. Development of river basin management plans, including at
regional level, is still at an early stage.

Little progress can
be reported in the field of nature protection. Proposed candidate sites
in Albania for the Emerald Network were accepted by the Berne Convention in
December 2011. Rules for establishment of special protection zones in the
NATURA 2000 network were adopted. One new protected
area was designated in 2011, increasing the proportion of the total national
territory protected from 13.7% to 15.1%. Two new management plans have been
developed for the Prespa and Shkodra national parks. However, budget and human
resources are insufficient to protect and manage these areas properly. Enforcement of the legislation remains
weak. Hunting permit control has not improved and cases
of illegal hunting have been reported. Preparatory work has started for
approximation with and implementation of the EU nature legislation and for
establishment of the NATURA 2000 network.

There was no progress in the area of industrial
pollution control and risk management.

There is no progress to report in the chemicals,
noise and civil protection sectors.

Regarding climate
change, Albania has made no progress on general policy development. A
comprehensive climate strategy remains to be developed. Climate considerations
are being increasly integrated in the energy policy, but substantial efforts
are required in order to fully integrate climate change into all relevant
sectoral polices and strategies.

Albania
regularly associated itself with EU positions in the international context.
However, while having associated itself to the Copenhagen accord, the country
did not put forward yet a mitigation commitment by 2020. Albania should
consider taking mitigation commitments consistent with those of the EU and its
member states for the purpose the post-2020 climate agreement to be reached by
2015.

As regards
alignment with the climate acquis, no significant progress was made.
Albania remains at a very early stage. Some initial steps were taken to
identify stationary installation for the purpose of future implementation of an
Emissions Trading System. Significant efforts are required to strengthen the
country’s monitoring, reporting, and verification capacities. The limited
administrative capacity and the weak inter-institutional cooperation are
delaying the preparation and implementation of a climate policy in line with the
acquis. The administrative structure on climate change requires
considerable strengthening in order to address the significant capacity,
cooperation and coordination needs.

Albania
participated regularly in the climate component of the Regional Environmental
Network for accession (RENA). A successful high level conference was organised
in June 2012 under the RENA on EU-Albania climate cooperation. Efforts need to
continue on awareness raising at all levels and promoting cooperation between
all relevant stakeholders.

As regards administrative capacity in
the environment sector, the number of staff was
increased in the Ministry of Environment, the inspectorates and the river basin
agencies. Some progress can be reported on
strengthening the judiciary, particularly on training judges and prosecutors on
environmental issues. However,
the Ministry of Environment still lacks financial and human resources. The
cooperation and coordination with the Ministry of Public Works needs to be
improved. Also, the capacity of the Ministry of Public Works to design and
manage water and waste management infrastructure projects is weak. Insufficient
resources are allocated to ensure sustainability of such projects. The
Environment Agency needs extensive investment in equipment and training to
manage issues such as permit applications, permit monitoring, environmental
monitoring and sampling and legislative enforcement. The National Environment
Inspectorate is understaffed. Local authorities have limited budgets and scarce
administrative tools to develop the infrastructure and services required. Coordination within the central government and between state and
local authorities is weak. The Environmental Fund has
not yet been created.

Conclusion

While there has been some progress in
alignment with acquis in the field of environment, there was very
little progress in the field of climate change. Efforts are urgently
needed to align, implement and enforce legislation. Public
awareness and consultation on legislative initiatives or public investments
remain weak. There is a need for greater political
commitment and coordinated action in these sectors. Substantial
investment is needed while current resources allocated
remain limited. Environment needs to be better integrated into other policy
areas, such as energy or transport. Concerning climate change, substantial
efforts are required on awareness-raising, setting a more strategic approach
for the country, aligning with and implementing the acquis, as well as
strengthening administrative capacities and inter-institutional cooperation. Preparations in the area of the environment are still at an early
stage, whereas preparations in the area of climate change remain at a very
early stage.

4.28.
Chapter 28: Consumer and health protection

There has been some progress in consumer
protection.

With regard to horizontal aspects,
the new consumer protection strategy is being finalised. Some progress was made
on strengthening the administrative capacity of the Consumer Protection Unit
(CPU) which serves as a secretariat for the Consumer Protection Commission
(CPC). The number of staff was increased and its political independence was
strengthened. As regards enforcement of legislation, the CPC has been assessing
potential infringements in areas such as telecommunications, public and private
higher education and electricity and has taken some administrative measures.
Both the CPC and the CPU have continued awareness-raising activities. Since
April 2011, consumers can use an online complaint handling system
managed by the CPC Secretariat.

Some progress has been made on product
safety-related issues. The Law on General Safety of Non-Food Products,
aiming at alignment with the acquis, was adopted. However, a market
surveillance system is not yet in place. Some progress can be reported with non-safety-related
issues. Implementing legislation, aiming at alignment with the acquis,
was adopted on distance marketing of financial services.

There has been little progress in the area
of public health. The Institute for Public
Health has been reorganised. New infrastructure for primary healthcare services
has been established. A training system has been set up, but does not include
EU health legislation yet. In January 2011, the government adopted a decision
reforming hospital services financing but implementation remains slow. A feasibility study on e-health was completed. The national
electronic health strategy is pending.

Little progress
has been made in the area of tobacco control. The
tobacco advertising ban was applied and a plan for
introducing pictorial warnings on tobacco packets has been prepared. The task force for protection of health from tobacco and alcohol use by
minors increased its number of inspections and the level of fine collection in
Tirana. The State Sanitary Inspectorate continued to perform inspections in the
rest of the country. However, the fine collection rate remains low and tobacco
products continue to be sold on the streets, notably by minors. Overall, the Law on Health Protection from
Tobacco Products has not been sufficiently implemented.

Some progress
has been made in the area of communicable diseases. A gap analysis is being conducted on communicable diseases
legislation in order to compare Albania’s legislation with the acquis. At
national level, immunisation coverage for 2011 was about 95%. Preparations for
implementation of a new modern vaccination system have continued. Guidelines on
control of hospital infections were adopted in April 2012. HIV/AIDS prevention
by means of the Global Fund grant (2007-2012) has mainly targeted Roma.
Awareness-raising activities have taken place. Preparations for implementation
of the International Health Regulations continued. The regional development
centre was established within the Department of Infectious Diseases at the
Institute of Public Health but lacks sufficient financial and human resources.
Adoption of the implementing legislation ensuring the right to health for
persons and children living with HIV/AIDS and people at risk is still pending.

No progress can
be reported in the areas of blood, tissues, cells and organs and
patients’ rights in cross-border healthcare.

Some progress
can be reported in the area of mental health. The Law on Mental Health
was adopted in June 2012. Training of general practitioners on mental health
actively continued. A ten-year mental health strategy and action plan for the
development of mental health services are awaiting adoption. There is an urgent
need to establish a sustainable mental health services system, based on
adequate funding, a well-trained mental health workforce and accessibility for
all minorities and socially vulnerable groups, including in rural areas. In
addition, there is a significant lack of doctors specialising in treating
persons with intellectual disabilities. More community-based mental health
services of high quality focusing on recovery should be established as an
alternative to institutional care.

Some progress
can be reported in drug abuse prevention. The new
2012-2016 national drug control strategy was adopted in June 2012. The National
Information Centre for Drugs has been set up as a unit of the Department of
Epidemiology and Health Systems in the Institute of Public Health. In March
2012, the Drug Dependence Treatment Centre at the Mother Theresa Hospital in
Tirana was opened as the first comprehensive drug treatment centre in Albania.

There has been
little progress on reducing health inequalities. In December 2011, a
circular from the Ministry of Health was issued to include on birth certificates
the ID number and maiden name of the mother in order to avoid false/wrong
declarations at maternity hospitals, and prevent non-registration of children,
particularly from the Roma community. A number of awareness-raising campaigns
on healthcare and services were carried out for Roma, along with health
screenings and vaccination campaigns. Further efforts are needed to make
healthcare services and vaccination accessible for Roma and other vulnerable
groups (especially young people with HIV/AIDS and young drug users) across the
whole country, notably in rural areas.

Progress has
been made towards reducing alcohol-related harm by assessing use of
alcohol and other substances among students and making available tools for
screening substance use among adults. There has been
some progress in the field of cancer screening, in particular for breast
cancer. The national strategy for cancer control (2011-2020) was approved. However, further efforts are needed to
implement screening programmes in line with the acquis.

Conclusion

There has been some progress in the areas
of consumer and health protection. However, implementation and enforcement of
the legislation remain very weak. The market
surveillance system is not yet in place. Low awareness in the health protection
system, both amongst professionals and the public, is hampering transparency
and enforcement. The health sector remains under-financed. Overall,
preparations are not very advanced.

4.29.
Chapter 29: Customs Union

There has been progress in the customs
legislation. Legislation was adopted with a view to accession to the
Regional Convention on Pan-Euro-Med preferential rules of origin, to the
International Kyoto Convention on Simplification and Harmonisation of Customs
Procedures and to the Harmonised System Convention. In August Albania was
granted informal observer status at the EU/EFTA Joint Committees on Common
Transit and Simplification of Formalities and Related Groups. Albania stated
that it had decided to join the Common Transit Convention. Yet, the ATA
Convention on Temporary Importation has still not been implemented. The
Directorate for Intellectual Property Rights in the Customs Administration
approved a manual for lodging actions against counterfeit products, statistics
were introduced and guidelines with related standard forms were published. Albania
updated its customs tariff in line with the 2012 version of the EU Combined
Nomenclature. Secondary legislation was approximated to the acquis by
abolishing administrative fees for customs warehouses and temporary storage.
Yet, the new draft Customs Code and its implementing provisions, which aim at
further approximation to the acquis, are still awaiting adoption. The
rate of use of transaction value remains low by EU standards.

Declaration of casual imports by travellers
and of goods of a non-commercial nature sent by mail was simplified and
authorisations for free warehouses for energy products were issued. However,
progress on use of simplified procedures and trade facilitation remains limited.
Further efforts are required in this area, including on development of the
concept of ‘authorised economic operator’ and on awareness-raising for customs
officers and the business community.

Some progress was made in administrative
and operational capacity. A Memorandum of Understanding for Albania’s
participation in the EU Customs 2013 programme was signed in July. Digital video monitoring is operational in
most customs houses. A module was added to the IT system (Asycuda) to cover
movements of excise products and to include the application for fiscal
warehouses. Construction of an IT server room at the
customs headquarters has been completed in accordance
with the standards of the Telecommunications Industry Association. However, IT
interconnectivity and interoperability with the EU systems require further
efforts. The customs laboratory is not yet operational. Efforts are also still
required to improve infrastructure at border crossing points. The number of
physical controls decreased slightly thanks to improvements in the targeting
process with the aid of risk profiles. No progress was made with systematic
development of post-clearance controls.

An action plan on human resources and
training was adopted for 2012 and the Business Strategy and the Business Change
Management Plan for the Customs administration were approved in July. New
departments on IT and Excise were introduced in the General Directorate of
Customs (GDC). The organisation and structure of the Training Academy was
approved but the Academy is still not operational. Some measures have been
taken to address corruption in the Customs administration. An internal
regulation for the Directorate for Internal Investigations and Anti-corruption
of the DGC was adopted. A toll-free number and a web link for reporting
corruption were introduced and awareness-raising measures on the role of
citizens in fighting corruption were organised. Cooperation with relevant
institutions such as banks, the High Inspectorate of Declaration of Assets, the
Immovable Property Registration Office and through the Joint Investigative Task
Force, continued. However, further efforts are still necessary, as the
perception of corruption in the customs administration remains high. Customs
officials have not yet been granted civil servant status.

Conclusion

There was progress in legislative
approximation in the field of the Customs Union. Shortcomings remain in the
overall administrative and operational capacity, including the compatibility of
IT systems with EU requirements. Further efforts are required on customs
valuation and trade facilitation. Overall, preparations are moderately
advanced.

4.30.
Chapter 30: External relations

In the area of the common commercial
policy, moderate progress has been made.

Albania has generally continued to
coordinate with the European Commission and to align with the policies and
positions of the European Union towards third countries in international
organisations, in particular the World Trade Organisation.

There has been limited progress as regards
administrative capacity for trade policy. The Directorate for Trade and
Integration Policies organised training activities for its staff and staff of
line ministries on various aspects of trade and services. There was no progress
on adoption and implementation of the overall training plan on trade policies
and on the EU common commercial policy.

There was some progress in the field of
dual-use goods. In December 2011 the
General-Directorate for Customs (GDC) and the State Export Control Agency
(SECA) concluded a Memorandum of Understanding on cooperation in the field of
military and dual-use goods and technology controls. Continuous contacts at
expert and managerial levels are in place between the GDC and the SECA. The
specific military and dual-use goods risk profile was updated in December 2011.
Training on controls for dual-use goods, risk analyses and post-clearance were
organised for field customs officers.

Regarding conclusion and implementation of
bilateral agreements with third countries, Albania has started to
implement the Additional Protocol for the liberalisation of trade in
agriculture in the CEFTA framework. Bilateral investment treaties were
signed with Azerbaijan and Qatar.

Little progress can be reported in development
policy and humanitarian aid. The Ministry of Foreign Affairs
assigned one person to follow issues related to EU development policy and
humanitarian aid.

Conclusion

Albania has continued its good cooperation
within the WTO and CEFTA. However, limited progress was made with strengthening
the administrative capacity of the institutions involved in trade policy.
Overall, preparations in the area of external relations are moderate.

4.31.
Chapter 31: Foreign, security and defence policy

The regular political dialogue
between the EU and Albania on foreign security policy issues continued. (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 all 70 EU declarations and Council decisions (100% alignment).
(As regards the International Criminal Court, see Political criteria 2.3 –
Regional issues and international obligations.)

Albania implemented the
EU’s restrictive measures
applied to third countries, introduced
by Council Decisions.

No additional developments can be reported
concerning conflict prevention.

In the field of non-proliferation,
Albania has continued implementing the action plan for the destruction of
surplus weaponry and has aligned its positions with the EU and other
international organisations. As regards small arms and light weapons, no
progress can be reported on finalisation of the online register of weapons and
ammunition under the management of the State Police.

The country has engaged
actively in cooperation with international organisations (UN, OSCE,
Council of Europe, etc.). Since 23 May, Albania holds the rotating chairmanship
of the Committee of Ministers of the Council of
Europe.

On security measures,
the security agreement with the EU on exchanges and mutual protection of
classified information is still pending.

Albania has demonstrated a growing
commitment to participate in civil and military crisis management operations
under the common security and defence policy (CSDP). Albania
signed, in June, the Framework Agreement on participation in EU crisis
management operations and has continued to take part in the EUFOR Althea
mission in Bosnia and Herzegovina (one general staff member and a five-person
explosive and ordinance disposal team). During the reporting period, Albania
deployed a contingent of five police officers to Afghanistan to work as
trainers as part of the EUPOL mission supporting the rule of law. Albania has
contributed two naval officers to the EU NAVFOR Atalanta operation in Somalia.
Albania has also cooperated with NATO in the Libya operation.

Conclusion

Albania continued to align with the acquis
in the field of foreign, security and defence policy and has shown continued
political commitment to participate in civil and military crisis management
operations. Further efforts are
required to complete the online register of weapons and ammunition under the
management of the State Police. Overall, preparations in this field
remain on track.

4.32.
Chapter 32: Financial control

Some progress can be reported in the area
of public internal financial control (PIFC). The Public Financial
Inspection Directorate (PFID) has been set up within the Ministry of Finance
but still needs to be fully staffed. Recruitment of budget inspectors across
administration has been completed. Training is on-going. This should contribute
to separating internal audit and inspection and clarifying the role of internal
audit as support for management. However, while the primary legal framework for
centralised budget inspection is in place, implementing legislation on
procedures to conduct financial inspections is still being prepared.

With regard to financial management and
control (FMC), there is a need to rethink the FMC arrangements within line
ministries to avoid the present conflicts between the Organic Budget Law, the
FMC Law and the Government Decision on Standards and Procedures for the
Internal Organisation of Public Administration Institutions. Further training on the
full implications of introduction of the FMC Law is necessary. With regard to
internal audit, a decision by the Council of Ministers on the criteria for
establishing internal audit units in public entities was adopted in April 2012.
The Central Harmonisation Unit for Internal Audit has started to review the
training programme for internal auditors. Overall, the quality of internal
audits still needs to be improved.

There has been progress in the area of external
audit. A new Chairman of the Supreme State Audit Institution (SAI) was
appointed by Parliament in December 2011. After some years of standstill, the
draft amendments to the Law on the SAI to bring it fully in line with the
standards of the International Organisation of Supreme Audit Institutions
(INTOSAI) have been prepared and have been submitted to the adoption procedure.
The SAI conducts all the main types of audits but inspection-type
regularity/compliance audits still make up the vast majority of its audits
(around 90% in 2011). Training of SAI auditors during 2011 has been limited.
Whereas there is evidence of greater acceptance of SAI’s recommendations by auditees, the efficiency of the parliamentary
follow-up to SAI’s audit
reports has to be improved.

There has been
little progress on protection of the EU’s financial interests. Recruitment of staff for the PFID, which serves as a contact point for the European Commission
and its European Anti-Fraud Office (OLAF), is on-going. However, administrative
capacity in this area needs to be built up.

Little progress
can be reported with protection of the euro against
counterfeiting. Albania continues to participate
actively in the Pericles programme. Following the
decision by the Supervisory Council of the Bank of Albania to establish the
National Analysis Centre, an expert in examining and investigating counterfeit
banknotes was recruited in February 2012.

Conclusion

There was limited progress in the area of
financial control. Substantial efforts are still required to address existing
shortcomings in implementation of the PIFC legal framework, introduction of the
managerial accountability principle and alignment of external audit to INTOSAI
standards. Overall, preparations are still not very advanced.

4.33.
Chapter 33: Financial and budgetary provisions

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

Albania already has in place the main administrative
infrastructure for the underlying policy areas indirectly affecting the own
resources system. The institutions and coordinating bodies in charge of
preparing the administrative conditions to apply the own resources rules
will need to be designated in due course.

In addition, effective tools to fight
against tax evasion and fraud and to decrease the informal economy are to be
further developed.

Conclusion

There has been
no particular progress in the rules on administration of own resources system
itself, including GNI, VAT and traditional own resources. Overall, preparations
for financial and budgetary provisions are at an early stage.

Statistical Annex

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

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

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

Basic data || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Population (thousand) || 8) || 3 063 || 3 153 || 3 170 || 3 185 || : || 2 832p

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

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

National accounts || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Gross domestic product (GDP) (million national currency) || || 583 369 || 967 670 || 1 089 293 || 1 148 082 || 1 222 462 p || 1 279 773 p

GDP (million euro) || || 4 541 || 7 828 || 8 870 || 8 693p || 8 872p || :

GDP (euro per capita) || || 1 482 || 2 483 || 2 798 || 2 737p || 3 080pb || :

GDP (in Purchasing Power Standards (PPS) per capita) || || : || 5 800 || 6 500 || 6 500 || 7 339pb || :

GDP per capita in PPS (EU-27 = 100) || || : || 23 || 26 || 28 || 30pb || :

Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) || || 7.9 || 5.9 || 7.5 || 3.3e || 3.7ep || 3.0p

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

Labour productivity growth: GDP growth per person employed (% change on previous year) || || 30.3 || -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 || 1) || 23.6 || 19.0 || 18.7 || 18.7 || 19.3 || :

Industry || 1) || 7.3 || 9.4 || 9.8 || 10.1 || 11.7 || :

Construction || 1) || 10.4 || 14.8 || 14.9 || 14.2 || 11.0 || :

Services || 1) || 58.6 || 56.8 || 56.6 || 57.0 || 58.0 || :

Final consumption expenditure, as a share of GDP (%) || || 80.9 || 90.4 || 89.5ep || : || : || :

Gross fixed capital formation, as a share of GDP (%) || || 38.4 || 38.7 || 40.9ep || 39.2ep || 37.0ep || :

Changes in inventories, as a share of GDP (%) || || 1.3 || -2.4 || -3.8ep || : || : || :

Exports of goods and services, relative to GDP (%) || || 18.4 || 28.1 || 29.4e || 29.0p || 32.9p || 34.6p

Imports of goods and services, relative to GDP (%) || || 39.0 || 54.8 || 56.0e || 53.5p || 53.7p || 57.7p

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

Industry || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Industrial production volume index (2005=100) || || : || 90.8 || 117.9 || 116.5 || 139.6 || 121.1

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

Inflation rate || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Annual average inflation rate (CPI, % change on previous year) || || 3.5 || 3.1 || 2.2 || 2.3 || 3.6 || 3.4

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

Balance of payments || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Balance of payments: current account total (million euro) || || -316 || -831 || -1 370 || -1 346 || -1 056 || :

Balance of payments current account: trade balance (million euro) || || -1 149 || -2 104 || -2 431 || -2 304 || -2 083 || :

Balance of payments current account: net services (million euro) || || 100 || 13 || 69 || 121 || 182 || :

Balance of payments current account: net income (million euro) || || 150 || 217 || 55 || -101 || -77 || :

Balance of payments current account: net current transfers (million euro) || || 583 || 1 043 || 937 || 938 || 922 || :

of which government transfers (million euro) || || 31 || 60 || 31 || 27 || 45 || :

Net foreign direct investment (FDI) (million euro) || || 231 || 492 || 731 || 732 || 837 || :

Foreign direct investment (FDI) abroad (million euro) || || 0 || -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) || || 231 || 481 || 675 || 706 || 827 || :

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

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

Public finance || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

General government deficit/surplus, relative to GDP (%) || || -6.9 || -3.5 || -5.5 || -7.0 || -2.9 || -3.5

General government debt relative to GDP (%) || || 58.5 || 54.8 || 53.8 || 59.5 || 58.5 || 58.9

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

Financial indicators || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Gross foreign debt of the whole economy, relative to GDP (%) || || 17.2 || 16.6 || 17.1 || : || : || :

Gross foreign debt of the whole economy, relative to total exports (%) || 2) || 93.1 || 95.0 || 118.0 || 134.0 || 128.0 || :

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || 1 113 || 1 963 || 2 303 || 2 154 || 1 999 || :

Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || || 2 376 || 4 094 || 4 520 || 4 378 || 4 387 || :

Money supply: M3 (M2 plus marketable instruments, million euro) || || 3 069 || 6 129 || 6 643 || 6 599 || 7 114 || :

Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 217 || 2 377 || 3 227 || 3 335 || 3 506 || :

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

Lending interest rate (one year), per annum (%) || 3) || 11.9 || 11.7 || 11.8 || 12.5 || 11.3 || :

Deposit interest rate (one year), per annum (%) || 4) || 7.8 || 5.7 || 6.9 || 6.8 || 6.4 || :

Euro exchange rates: average of period - 1 euro = … national currency || || 128.470 || 123.620 || 122.800 || 132.060 || 137.790 || :

Effective exchange rate index (2005=100) || || : || : || : || : || : || :

Value of reserve assets (including gold) (million euro) || || 834 || 1 477 || 1 694 || 1 650 || 1 904 || :

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

External trade || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Value of imports: all goods, all partners (million euro) || || 1480.2 || 3043.6 || 3582.1 || 3247.4 || 3467.4 || 3876.3

Value of exports: all goods, all partners (million euro) || || 343.2 || 786.2 || 916.7 || 791.4 || 1172.4 || 1403.0

Trade balance: all goods, all partners (million euro) || || -1136.9 || -2257.5 || -2665.4 || -2455.9 || -2294.9 || -2473.3

Terms of trade (export price index / import price index) || || 101.5 || 98.1 || 96.0 || 97.6 || 98.4 || 108.3

Share of exports to EU-27 countries in value of total exports (%) || || 91.1 || 83.1 || 79.7 || 77.4 || 70.1 || 72.7

Share of imports from EU-27 countries in value of total imports (%) || || 81.0 || 59.7 || 60.7 || 64.3 || 64.5 || 63.9

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

Demography || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || 12.5 || 5.9 || 6.3 || : || : || 4.6p

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 10.8 || 6.2 || 6.0 || : || : || :

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

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

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

Labour market || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Economic activity rate (20-64): share of population aged 20-64 that is economically active (%) || || : || 72.2 || 69.3 || 69.6 || : || :

\* Employment rate (20-64): share of population aged 20-64 in employment (%) || || : || 62.7 || 60.8 || 60.4 || : || :

Employment rate male (20-64) (%) || || : || 71.4 || 72.1 || 73.2 || : || :

Employment rate female (20-64) (%) || || : || 54.2 || 51.0 || 48.9 || : || :

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 || 1) 5) || 57.7 || 47.9 || 44.6 || 44.1 || : || :

Industry || 1) || 7.7 || 10.4 || 9.3 || 10.0 || : || :

Construction || 1) || 6.1 || 8.2 || 8.5 || 9.9 || : || :

Services || 1) 5) || 28.5b || 33.5 || 37.6 || 36.0 || : || :

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

Share of male labour force that is unemployed (%) || 6) || 14.2 || 14.4b || 12.5 || 12.2 || : || :

Share of female labour force that is unemployed (%) || 6) || 19.9 || 12.2b || 13.5 || 15.9 || : || :

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || 6) || : || 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 || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Average nominal monthly wages and salaries (national currency) || || 17 218 || 33 750.0 || 36 537.0 || 40 874.0 || 44 375.0 || 46 665.0

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2000=100) || || 11.6 || 83.1 || 91.7 || 109.8 || 116.1 || 123.5

\* 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 || 35.0 || : || :

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

Standard of living || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Number of passenger cars per 1000 population || || 43.6 || 75.2 || 83.3 || 88.2 || : || 106.3p

Number of subscriptions to cellular mobile telephone services per 1000 population || || 120.8 || 736.5 || 935.3 || 1 314.1 || : || :

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

Infrastructure || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

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

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

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

Innovation and research || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

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

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

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

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

Environment || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

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

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 386.5 || 306.6 || : || : || : || :

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

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

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

Energy || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Primary production of all energy products (thousand TOE) || || 933 || 1 080 || 1 159 || 1 263 || 1 643 || 1 494

Primary production of crude oil (thousand TOE) || || 335 || 564 || 578 || 577 || 744 || 895

Primary production of hard coal and lignite (thousand TOE) || || 15 || 15 || 20 || 3 || 3 || 2

Primary production of natural gas (thousand TOE) || || 8 || 16 || 8 || 8 || 13 || 15

Net imports of all energy products (thousand TOE) || || 1 001 || 1 020 || 1 033 || 1 299 || 1 306 || 1 456

Gross inland energy consumption (thousand TOE) || || 1 934 || 2 130 || 2 119 || 2 104 || 2 106 || 2 162

Electricity generation (thousand GWh) || || 3.7 || 3.0 || 3.9 || 5.2 || 7.7 || 4.1

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

Agriculture || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Agricultural production volume index of goods and services (producer prices, previous year=100) || || : || 100.4 || 107.4 || 102.0 || 107.3 || :

Total utilised agricultural area (thousand hectare) || || 1 139 || 1 121 || 1 146 || 1 164 || 1 201 || 1201

Livestock: cattle (thousand heads, end of period) || || 708 || 577 || 541 || 494 || 493 || 492

Livestock: pigs (thousand heads, end of period) || || 106 || 147 || 161 || 160 || 164 || 163

Livestock: sheep and goats (thousand heads, end of period) || || 2 933 || 2 729 || 2 620 || 2 540 || 2 581 || 2 517

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 984 || 1 016 || 1 040 || 1 045 || 1 070 || 1 101

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 503 || 494 || 608 || 630 || 662 || 701

Crop production: sugar beet (thousand tonnes, harvested production) || || 39 || - || - || - || - || -

Crop production: vegetables (thousand tonnes, harvested production) || 7) || 677 || 672 || 715 || 730 || 860 || 890

: =
not available

- =
not applicable

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)            Data
according to NACE Rev 1.1.

2)            2000
- 2003, 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; data on GED
from 2003 are disseminated by Bank of Albania.

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

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

5)            Break
in series 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.

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

7)            Including
melons.

8)            The
2011 population data are provisional figures from the 2011 census of population
and housing. The estimates for previous years have not been adjusted to be in
line with the new census results.

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

[2]               Enlargement Strategy and Main Challenges 2012-2013,
COM(2012) 600.

[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; the 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, see COM (2010)680.

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

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