EBRD: Moderate progress made in transition to market economy

Tirana Times
By Tirana Times November 20, 2015 11:12

Story Highlights

  • The report shows Albania continues lagging behind in the financial sector with huge transition gaps in the private equity, capital markets, insurance and other financial services

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TIRANA, Nov. 16 – More than two decades after the collapse of the country’s communist regime, the Albanian economy still has some indicators representing little or no change from a rigid centrally planned economy in the corporate, energy, infrastructure and financial sectors, according to the latest 2015-2016 Transition report published by London-based European Bank for Reconstruction and Development.

The report shows Albania continues lagging behind in the financial sector with huge transition gaps in the private equity, capital markets, insurance and other financial services.

On a 1 to 4+ scale with 1 representing little or no change relative to a rigid centrally planned economy and 4+ representing the standards of an industrialized market economy, Albania scored 1 in private equity, -2 in capital markets, 2 in insurance and other financial services, and -3 on banking and finance to micro, small, medium-sized enterprises.

The report describes Albania as one of the countries where loan application procedures for SMEs tend to be relatively hierarchical and further streamlining may be useful. “Importantly, the streamlining of loan application procedures is within the remit of banks themselves and does not require changes to the institutional or legal environment,” says the report.

Albania slightly improved road infrastructure which was placed on a positive watch at -3 but the degraded state-run railway system was rated at 2 indicating a large transition gap as the sector has seen a huge decline both in passenger and goods transport due to lack of investments.

“In Albania the government has relaunched the procurement process for the €40 million Milot-Morine highway public-private partnership” says the report about the highway linking Albania to Kosovo which is set to become the country’s first toll road.

Water and wastewater infrastructure also ranks poor at 2+ as Albania continues facing regular cuts to tap water despite its abundance in water resources and wastewater infrastructure hasn’t yet been put in place even in tourist areas.

In the energy sector, Albania was rated -3 on natural resources and 2+ on electric power, indicating a medium transition gap. In the corporate sector, Albania made progress in the general industry which was placed on a positive watch at 2+. Agribusiness and real estate are rated at -3 compared to 3+ for the ICT sector.

“One notable example is Albania, where concrete reforms have been implemented in order to make it easier to start a business and transfer property, and where a concerted effort is under way to reduce the size of the informal sector,” says the report.

In the sustainable resources initiative transition gaps, Albania’s sustainable energy was placed on a negative watch at 3+. “The negative outlook for Albania reflects the government’s hesitation in approving and transposing key sustainable energy legislation and a deteriorating business environment for owners of hydro-power plants,” shows the report.

In the youth inclusion, Albania has a large transition gap on youth employment and medium gaps in labour market structure and quality of education.

Albania and other EU aspirant Western Balkans continue lagging behind other former communist countries that have joined the EU since 2004 in completing their transition to market economies which lays the ground for future sustainable growth, says a recent IMF report tracing 15 years of economic transition in the Western Balkans.

The report notes Albania’s poor diversification of exports and its gaps in infrastructure and financial market development with poor access to credit and savings.

Albania started the transition process as an isolated and autarkic state with virtually no elements of a market economy, but made swift progress, particularly in trade and foreign exchange liberalization, where reforms went further than in the rest of the Western Balkan states as early as 1992, says the IMF report.

Tirana Times
By Tirana Times November 20, 2015 11:12