Albania Scandal

A controversy tied to a massive road project deals a blow to Prime Minister Berisha’s promise to rid Albania of endemic corruption

The road linking Albania and Kosovo stretches 234 kilometers, a mountainous, pot-holed coil connecting two of Europe’s poorest countries.

The drive normally takes about seven hours, with the speedometer rarely topping 40.

“During the winter the road is a tough cookie to crack,” says Gjergj Erebara, a Tirana-based editor and political commentator. “Parts of it are often icy, which makes it pretty dangerous considering that you are taking curves 800 meters up in the mountains.”

That is all expected to changed by the end of 2009, when a new four-lane highway from Durres on the Adriatic coast into Kosovo is slated for completion.

Albania’s largest public-works project in decades, the new road is expected to strengthen already deep ties (more than 90 percent of Kosovo’s population of 2 million is of Albanian descent) and ease travel for the hundreds of thousands of Kosovars who cross the border on summer holidays.

Analysts have dubbed it the “patriotic highway” owing to the widely perceived political motive for the project, pointing to the lack of a feasibility study into whether it will return the money invested. It was expected to be the crown jewel among electoral assets for Albanian Prime Minister Sali Berisha’s right-wing coalition heading into next year’s parliamentary balloting. Instead it has turned into the government’s biggest headache.

In late November, following a 17-month investigation, Prosecutor General Ina Rama indicted Foreign Minister Lulzim Basha on charges that he abused his office in connection with the tender for the highway. Prosecutors say the deal with American-Turkish consortium Bechtel-Enka to build the most challenging portion of the road, 61 kilometers from Rreshen to Kalimash, has cost the country hundreds of millions of euros.

Albania’s Supreme Court accepted the case, rejecting arguments by Basha’s lawyers and the government that the prosecution is unconstitutional.

Rama was voted in by the current parliamentary majority after her predecessor was fired for a poor showing against organized crime, but her corruption probes into senior officials have put off many of her onetime backers, including Berisha. The government has lashed back with a campaign many of its critics, including some U.S. and European Union officials, call unconstitutional.
RISING COSTS, CONSPIRACY THEORIES

Albania’s Transparency International ranking as the most corrupt state in the Balkans notwithstanding, the country’s highest officials have up till now remained formally unscathed. Basha is the first sitting minister to be indicted since Albania emerged from communist rule in 1991.

The charges stem from his tenure as transport minister from 2005 to 2007. Prosecutors maintain that Basha and his then-chief legal aide, Andi Toma, illegally favored Bechtel-Enka. They allege the minister allowed construction to begin before there was a finished blueprint for the work and, in breach of Albanian law and regulations for public tenders, accepted a much higher price per work unit than was charged for similar projects.

The price tag for the Bechtel-Enka work, which covers a little more than a third of the highway’s full length, has leaped from 416 million euros in the initial contract to more than 1 billion euros, according to prosecution filings. Prosecution experts and the state supreme auditing office say the Transport Ministry’s actions cost Albanian taxpayers 114 million euros—232 million euros if the costs are calculated in comparison with sections of the road being built by other companies.

In 2006 and 2007 Bechtel-Enka registered a profit of more than 44 percent on the project, netting 67 million euros on work orders of 151 million euros.

Basha and Toma have denied any wrongdoing. Basha contends the charges against him were fabricated by opposition Socialist leader Edi Rama (no relation to the chief prosecutor) and opponents of the highway out to sabotage the project. In a recent press conference he accused opposition members of working on Serbia’s behalf to scuttle the road link with Kosovo.

Edi Rama and his mercenaries have sabotaged the road for eight years,” Basha said, calling the opposition leader the political heir of Koci Xoxe, a communist-era minister executed as a Serbian spy in 1949.

The Socialists dismiss Basha’s charges and have called on him to resign.

“This indicted minister is trying politicize the charges against him, doing terrible damage to Albania’s and Kosovo’s image,” Socialist parliamentarian Arta Dade said. “An indicted minister cannot represent Albanian diplomacy.”
INVESTIGATING THE INVESTIGATORS

Ina Rama was named prosecutor general in November 2007, the first woman to hold the post. The 36-year-old was previously a judge on the Appeals Court of Serious Crimes.

Her appointment came after President Bamir Topi, a former deputy in Berisha’s Democratic Party, dismissed former Chief Prosecutor Theodhori Sollaku at the urging of a parliamentary commission, which took Sollaku to task for failing to crack down on organized crime. A month before his ouster Sollaku had filed a request with parliament to lift Basha’s immunity from prosecution.

A promise to rid Albania of endemic corruption was a centerpiece of ex-President Berisha’s “Clean Hands” platform when he returned to power in 2005, but opponents claim the problem has only worsened—a view seemingly shared by the public. In a March 2008 survey by the Institute for Development and Research Alternatives, 92 percent of Albanians said corruption was widespread among public officials, an 8-point jump from the previous year.

The Basha prosecution is not the only case fueling such views. Former Defense Minister Fatmir Mediu is under investigation in connection with the March explosion at an army depot outside Tirana that killed 26 people, wounded more than 300, and left some 3,000 homeless. He has also been linked to a suspect arms deal with a Miami-based company to supply the Afghan military.

Another senior official, tax office chief Arben Sefgjini, is on trial for murder in connection with the torture and killing of a Macedonian businessman in 1995, when Sefgjini headed the Tirana office of Albania’s secret service.

Berisha, while voicing support for the fight against corruption, is also backing a new law to more strictly regulate the office of the prosecutor general. The measure would strip prosecutors of their protection against a police arrest without a formal indictment and limit their independence by allowing the Justice Ministry to probe their investigations.

The bill has come in for criticism from interest groups, the opposition, and the United States for limiting the prosecutor general’s independence, which is guaranteed by the Albanian Constitution. Rama has found a strong ally in U.S. Ambassador John Withers, who has repeatedly condemned Berisha’s moves against her office.

“Her responsibilities are not only to investigate some of the most difficult and controversial cases that Albania has known, but in a larger and more profound sense, to make a profound contribution to the building of Albanian democracy through defending the independence of her institution and of the judiciary in general against political pressure,” Withers said in October. “When the history of Albanian democracy is written, there will be a special chapter in it for people like Ina Rama.”

Albania’s NATO ambitions have received strong backing from Washington, with President George Bush voicing his support on an historic visit in June. U.S. lobbying was critical in ensuring Albania received an invitation to NATO’s April summit in Bucharest.

Withers has explicitly linked actions targeting the prosecutor to Albania’s democratic credibility.

“I frankly see no legitimate reason for the government or the parliament to make these moves,” he said. “My advice, and that of my government, is to let the prosecutors do their job as the independent actors that they are.”

EU ambassadors in Tirana also condemned the government’s moves, saying in a joint statement that they “are troubled by recent developments concerning the judicial system in Albania.”

Rama has assured her office she will stand firm. “We will resist with determination any kind of pressure,” she said. “Our only protection is the law.”

this article source is from : http://www.businessweek.com/globalbiz/content/dec2008/gb20081222_022306_page_2.htm

Albania passed a law that envisages dismissal of former secret agents

Tirana. Albania passed a law that envisages dismissal of former secret agents from public and high-ranking posts, media report. The new act was approved with 72 votes. 63 of Albanian MPs voted against it, while only one abstained.
According to Prime Minister Sali Berisa, Albania must “take the shame out of the communism”.
The new act affects all former members and collaborators to the secret police which was active from November 1944 till December 1990.
The opposition boycotted the vote, declaring the act will be used by Berisa in the combat against the political rivals.

Albania bans former secret police from public service

TIRANA, Dec. 22 (Xinhua) — The Albanian parliament adopted on Monday a law banning from public service the people who served in the country’s secret police before 1990.

Lawmakers in the country’s 140-seat assembly voted with 74 for it, 2 against. One abstained and the rest 63 boycotted the vote.

The law bans from public service all people linked to the former secret police, Sigurimi, from November 1944 to December 1990, when the overhauled its social system and changed from communism to capitalism.

The opposition Socialists and other smaller parties boycotted the vote, saying they feared the law might be used against them.

The United States and Britain had expressed concerns about the legislation, and had asked for postponement.

http://news.xinhuanet.com/english/2008-12/23/content_10544912.htm

Albania passes new law on former secret police

TIRANA, Albania (AP) — Albania on Monday passed a law removing from public posts people linked with the feared former Communist secret police, despite criticism from opposition parties and concerns within the international community.

Lawmakers voted 74-2 for the law, while one abstained. The remaining 63 deputies in the 140-seat Parliament boycotted the vote.

Prime Minister Sali Berisha said Albania needed “to cleanse itself from the communist calamity.”

The law applies to all former members and associates of the Sigurimi secret police, from November 1944 when Albania was liberated from Nazi occupiers until the collapse of Communism in December 1990.

The opposition Socialists and other smaller parties boycotted, saying they feared the law would be exploited by Berisha’s Democrats to hit at political opponents.

The Organization for Security and Cooperation in Europe urged a postponement of the debate.

“The law has serious constitutional and political implications, and postponing the vote to allow for wider consultation and public debate would be welcome,” the OSCE Office for Democratic Institutions and Human Rights said in a statement.

The United States and Britain also urged postponement.

For more than four decades, Albania was a xenophobic Communist dictatorship in which the secret services wielded vast power.

source:http://www.google.com/hostednews/ap/article/ALeqM5iJnbDNeasS4wKJKR4L_vHTG2tARAD957UVC01

ALBANIA’S parliament voted on Monday to open secret communist-era files to screen candidates for office, but the opposition and judges saw it as a manoeuvre to sideline rivals rather than cleanse society of guilt.

The law was approved only with votes of the Democratic Party of Prime Minister Sali Berisha and its allies after they ignored appeals from the United States, among others, to postpone the vote to allow time for broad consultation.

“We consider this law a measure of respect for all those who went through the most savage calvary of class struggle, those that had their bones broken, were executed without trial and had their properties taken,” Mr Berisha said.

Under late Stalinist dictator Enver Hoxha’s 40-year rule, 5037 men and 450 women were executed and up to 34,135 people were jailed, including 1000 who died and 308 who went mad.

The law denies access to public office to ex-members of the bodies that ordered and used violence under the Stalinist regime and informed for the notorious Sigurimi secret service.

A five-member commission will work until 2014 to screen candidates, confirming suitability after it checks documents.

The main opposition Socialist Party saw the second such law since Albania toppled communism 18 years ago as an attempt by Mr Berisha to sack prosecutors investigating corruption.

Two dozen prosecutors and judges, including those investigating a blast at an army base that killed 26 people and possible government corruption in the building of a key road, would have to quit their jobs once the law takes effect.

Opposition Socialist Party leader Edi Rama regretted that the law was not up to European standards.

“It is disappointing that 18 years after the fall of the communist dictatorship, the Prime Minister of Albania and the government forces want to open the files of the communist dictatorship to close the files of corruption,” Mr Rama said.

http://www.theaustralian.news.com.au/story/0,25197,24836718-12335,00.html

Albania’s political parties

Europe’s main security and democracy forum urged Albania’s political parties on Monday to improve a disputed new electoral code that has prompted 10 members of parliament to go on hunger strike.

Sitting in the debating chamber under a banner declaring “votes are sacred”, the MPs entered the seventh day of their fast as police manned cordons outside the building, where hundreds of protesters had gathered.

The lawmakers, all from small parties, believe the proposed new regional system of proportional representation will greatly reduce their number of seats at next year’s general election.

The ambassador of the Organisation for Security and Cooperation in Europe, Robert Bosch, told reporters it would “not rubber stamp” the election code.

The OSCE then issued a statement saying that “the draft Electoral Code, which was prepared by the Albanians themselves, was an achievement, but that it still needs some fine tuning”.

“For that reason, it needs to be discussed in the proper fora by the parties, but not under coercion by any one grouping,” the OSCE said, referring to the hunger strike.

The ruling Democratic Party and main opposition Socialist Party had been expected to force the new code through parliament in a vote on Monday.

But they postponed it until Tuesday, apparently in response to the OSCE comments and the protest by Socialist Integration Movement (SIM) and Christian Democratic (CHD) supporters.

CHD leader Nard Ndoka said they had asked for two weeks to re-negotiate the draft code.

The draft law does not formally require the OSCE’s approval, but its opinion is important because its observers will be the arbiters of whether the election, expected next spring, is free and fair.

The European Union has made it clear that the vote must be of a high standard if Albania wants to advance to join the 27-member bloc.

Albania, which for decades was one of Europe’s most rigid communist states, has yet to hold elections that meet international standards.

Albanian economy in 2008

The International Monetary Fund (IMF) told Albania on Tuesday it should strengthen economic fundamentals since its economy could not be completely immune to the global crisis that was slowing growth worldwide.

Gerwin Bell, the IMF mission chief, said the Balkan state’s limited integration in global markets was an important buffer but its exports were expected to fall, remittance payments could be affected and investors might re-assess risks.

“With a sharp deterioration of global growth prospects now under way, it is important that Albanian policy makers further strengthen economic fundamentals,” Bell told a joint news conference with Albanian Finance Minister Ridvan Bode.

“Obviously, the government cannot influence exogenous global events, but it can and should take extra steps to shore up confidence domestically as, in the current environment, policies should be erring on the side of caution,” Bell said.

“This would allow Albania to weather these turbulent times and still record significant growth of between 3.5 and 4 percent in 2009, with continued low inflation and an improved current account position,” he added.

Bell said the Albanian economy in 2008 had so far performed strongly and October’s annual CPI was fixed at 2.8 percent — in line with the central bank’s target range — while growth has remained buoyant and on track to reach 6 percent in 2008.

“However, growth in tax revenue has now slowed,” he added.

The IMF has monitored the Albanian economy since 1991, when the once isolated Stalinist Balkan nation toppled communism. The fund’s ongoing three-year programmes — worth together $27.9 million — expire in January 2009.

Once the current agreement expires in January, Bode said he expected the IMF to return to Albania after the 2009 spring elections to discuss a new agreement that had “less objectives”.

The IMF’s call for prudent policies in the current global turbulence have not dented the enthusiasm of the Albanian government that sees growth at six percent as its passes the biggest ever budget of five billion dollars.

“We are proud to keep preserving despite the turmoil and turbulence of the banking and financial system in the world a very high economic growth,” Bode said.

“The economic growth of 6 percent planned in the 2009 budget is again a powerful backing for the real economy to give hope and possibility to the Albanian economy,” Bode added. (Reporting by Benet Koleka, editing by Ron Askew)

source : guardian.co.uk

Lulzim Basha Albanian media in Tirana

Tuesday, 18 November 2008

Albania supports the decision of the Government of the Republic of Kosovo to reject the six-point plan, said Albania’s Foreign Minister Lulzim Basha during a statement for the Albanian media in Tirana.

Foreign Minister of Albania Lulzim Basha said that Tirana is carefully following with serious concern the latest developments in Kosovo.

“Prishtina has its aspirations to continue the implementation of the Ahtisaari Plan. Albania fully supports Prishtina’s stance against the six-point plan and calls for quick deployment of EULEX in the entire territory of Kosovo,” said Basha.

Albania’s Foreign Minister also criticized the way of dialogue has been conducted between UN, Belgrade by  largely ignoring Prishtina. “Kosovo is a sovereign country and has its legitimate power guaranteed by its sovereign constitution to accept or reject such decisions. Albania supports their decision to categorically reject this plan.”

This is the first reaction coming from a high Albania Government official regarding the six-point plan issue.

Albania’s capital expenditures

Tirana, Nov. 19, 2008 ( – Almost 89 per cent of Albania’s capital expenditures during 2008 have been spent for the Albania-Kosovo highway, – data published by Ministry of Finance suggests.

For the nine months ending on Sept. 30, Albania had spent 40 billion lek, (€328 million), from its 45.5 billion capital expenditures budget for the highway. About half of this sum was raised in the international market as syndicated loans. Albania will need to invest another €250 million to complete the 60 kilometer long highway.

The Albanian Government admitted in August that the highway linking the country’s coast with Kosovo will cost €630 million, more than €200 million than the original contract of €418 million.

The admission came in a letter by Albania’s government to the International Monetary Fund.

The highway, which links the port of Durres with Kosovo, is the country’s biggest public works project in decades, however its has been dogged by allegations of irregularities and corruption.

Prosecutor-General Ina Rama is probing alleged irregularities in the tender for the construction of the highway won by the American-Turkish consortium, Bechtel-Enka.

Former Prosecutor-General Theodhori Sollaku began an investigation last year into alleged irregularities surrounding the awarding of the tender.

The investigation led to a request by Sollaku that parliament lift the immunity of Foreign Minister Lulzim Basha, who was at the time of the tender, the Minister of Transport.

Basha’s immunity was lifted by parliament at the end of December.

A few weeks earlier, President Bamir Topi had dismissed Sollaku, following a call for his sacking by a parliamentary commission, and nominated Rama, a former Serious Crimes Court Judge, as his replacement.

Local media have reported that several other officials from the roads department of the Transport Ministry are being investigated along with Basha.

Although Basha has sought to characterise the investigation as a politically-motivated attack by Sollaku, since Rama took over, she has continued to push ahead with the probe.

Co-operation with Albania

German Development Co-operation with Albania

Abstract of the Evaluation “Public-Private Partnership (PPP) in German Development Cooperation” – Country Study Albania –

Summary

As part of an evaluation of its Public-Private Partnership Programme, which is being implemented by the Federal Ministry for Economic Cooperation and Development (BMZ) and its agencies for technical and financial co-operation, a number of country studies have been carried out. Two countries from south-eastern Europe, namely Albania and Romania, were also selected for evaluation.

The overall evaluation was launched on the back of a basic study by the Hamburg Institute of International Economics (HWWA), followed by the present field studies and finally a conceptual assessment.

The results of the HWWA basic study constitute the basis for the TOR of the field studies.

The main aims of the field studies (country studies) are

• to analyze and assess the targets, planning, implementation, management, effectiveness and significance of selected PPP projects carried out under bilateral development co-operation (DC) and under the PPP Facility,
• to assess their relevance for, and impact on, the quality of German DC in the respective partner countries,
• to draw up recommendations on the further conceptual, institutional, organizational and procedural development of the PPP instrument in general and in the country-specific context of German DC, and
• to identify lessons learned from the PPP instrument in the sense of best practices.

To arrive at the findings, the field studies have scrutinized an individual PPP measure and also assessed a group of representative PPP measures (country portfolio) and derived lessons learned from them.

Core questions raised in the field studies are

• goal coherence between private and public players within the framework of PPP measures,
• corporate interests and linking them with DC goals,
• harmonizing the PPP approach and the focal areas of DC in the respective country,
• identifying the contribution of DC towards strengthening private sector involvement,
• the costs and benefits of the DC contribution,
• the characteristics of the respective PPP efforts and chances for combining activities.

In addition, sound judgements on the following development policy issues were expected from the evaluation:

• identifying the general framework for PPP,
• assessing the chances for technology transfer,
• assessing the developmental relevance of the individual projects,

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• assessing the PPP approaches in connection with the sector-based structure of development cooperation involvement.

Investigating PPP projects in Albania is particularly important because in Albania the practical implementation of PPP projects by the Kreditanstalt für Wiederaufbau (KfW) within the framework of bilateral DC is already well advanced. The investigations in Albania have also offered the possibility of observing the “birth pangs” of important PPP projects under bilateral German DC which are significant in terms of both concept and financial volume.

Findings

The Albanian Government is eager to increase investments in utilities and public infrastructure through PPP projects in order to meet the pronounced demand for investments in the rehabilitation of public infrastructure. However, practical experience gained so far is very limited. The Government has shown an impressive determination to create an enabling environment for PPP investments through the decentralisation of utilities and the privatisation of former public assets. The efforts are guided by the intention to increase PPP for investments and management in privatised utilities placed under the decentralised authority of cities, regions and communities.

In these efforts to establish an enabling environment, the Albanian Government is supported by the World Bank and the European Commission. With regard to the water and sewage sector the German financial development arm, the Kreditanstalt für Wiederaufbau (KfW), is playing a mayor role. KfW has not only provided for investments in a number of important Albanian cities, but is also developing and testing new concepts to increase the efficiency and sustainability in the country’s water and sewage sector.

The Albanian efforts for privatisation and for preparing the ground for increased PPP are guided by the understanding that private investments and management support will be required to improve the disastrous situation in a sector where functioning water and sewage services are still rather the exception to the rule.

However, until now only limited practical experience has been gained with the implementation of PPP projects in Albania. At present, two PPP projects in the water sector under preparation by the Kreditanstalt für Wiederaufbau (KfW) form part of German financial co-operation with Albania. Both projects involve the water works of two medium-sized cities. KfW is following a different kind of PPP approach for each of the projects. For the city of Elbasan, a German water works company, Berlinwasser International, has signed the very first concession agreement in Albania to run the privately-owned water utilities infrastructure for the next 25 years. KfW is co-funding investments with a 70% contribution. Funding under market conditions is not available at present in Albania, due to the hazardous political and economic environment. In the second PPP project KfW has arranged for a management contract for the water works of the city of Kavaja to prepare the ground for a more substantial private participation at a later stage.

The Albanian Government hopes that, with the successful implementation of this first concession agreement under a PPP arrangement, it will attract more investment in the sector. For KfW and German DC, these PPP projects represent a test case for the “concession model” in venturesome environments linked to the mobilisation of private capital investments.

KfW has reached its strong position in the water and sewage sector in Albania over many years of investments, first in emergency measures, later also through standard investments under bilateral financial cooperation. KfW has increasingly focused on the water and sewage sector, building on its comprehensive long-term practical experience. This made it possible to build up know-how and knowledge in the sector gradually through analytical studies commissioned by KfW and the World Bank. Recently, KfW has worked out a sector strategy paper to launch a broader discussion on development in the sector with the Government and the other partners. The sectoral concentration of KfW’s efforts has proven to be a key success

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factor. It also has substantially increased opportunities to inform on the changes in the general environment and to provide advice on the overall process of reform.

Recommendations

PPP projects should be implemented only in sectors where a substantial sectoral competence level has been reached and for which the German implementing agency has shown itself to possess management and co-ordination capacities.

It would be helpful if the analysis and assessment of the general environment were based on a specific set of proven criteria taking into account specific PPP requirements.

It is recommended that the concept of PPP projects should take account of the generally increased need for planning and preparation compared to standard bilateral projects.

It seems advisable to get the companies and private partners involved in PPP projects to make a commitment to a standard set of ethical principles and development guidelines. This commitment might follow the recommendations of the Global Compact.

The co-ordination of programmes and activities among the German implementing agencies should be improved. Agency-specific capacities, e. g. know-how and experience in capacity building within GTZ, could thus be applied in a complementary manner to projects implemented by KfW as well.

The decentralised structure of German DC should be adapted to the growing need for co-ordination and management support of PPP projects. Part of the capacity of the “GTZ-Büro” in Albania should be oriented towards services for PPP projects co-funded by KfW..

Systematic Knowledge Management needs to be established for the water and sewage sector in Albania, with the World Bank and the European Commission as main partners of KfW.

Donor co-ordination needs to be improved for the water and sewage sector in Albania. KfW should seek for practical ways to increasingly involve the EU in its efforts in the sector and to provide services (a model case might be Bosnia Herzegovina where KfW is implementing an EU-funded programme).

KfW should analyse opportunities to establish an “International Fund for Investments in the Water and Sewage Sector in Albania”. The creation of such a fund would provide a strong incentive for the privatisation of utilities and public infrastructure. In particular, the World Bank and the EU should be involved in the establishment of such a fund. Private investors should also become involved.

Conclusions

It has become apparent in the case of Albania that risk management is crucial to securing public as well as private investments. This also includes the need for intensive involvement in institutional development and capacity building. Partners in the PPP have to understand that in its initial stage a PPP project constitutes a process of common learning, which requires a high level of trust and the creation of a solid basis for respecting each other’s interests.

The need for increased funding in the water and sewage sector in Albania could be covered through the establishment of an “International Fund for Investments in the water and sewage sector in Albania” with public and private investors involved.

Basic data

Water Works Elbasan

Start of project: 2002

End of project: 2027

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Public contribution in € millions: 17.8 (70%)

Implementing agency: KfW

Private Partner: Berlinwasser International (BWI)

Private contribution in € millions: 5.34

Water Works Kavaja

Start of project: 2002

End of project: 2005

Public contribution in € millions: 1.5 for Management Support (PU)

Plus financial co-operation-Investments of € 11.70 million for rural water supply and sewage systems in the Kavaja region

Implementing agency: KfW

Private Partner: (determined by public tender)

Private contribution: indirectly, through bonus system

Date for the field trips for this Evaluation: January 2002