Albania - Prospects for Reform

Prospects for reform

In 1992, after close to fifty years of communist-imposed isolation following five centuries of Ottoman domination, the Albanian people had little awareness of the outside world and possessed Europe's least developed trade network. The Albanians faced the daunting task of reviving their moribund factories and workshops and learning the realities of modern capitalism while building a market economy from scratch. Burgeoning unemployment, falling output, acute food shortages, and widespread lawlessness eroded most grounds for optimism in the prospects for rapid success. Individual Albanian factories could not switch on assembly lines because idled plants, farms, mines, and generators elsewhere in the production chain were not supplying essential inputs. For most enterprises, importing these inputs was impossible because Albania's nascent foreign-exchange market was not yet fully operative. Despite Albania's dire circumstances, World Bank and European Community economists projected that the country's resource base and labor force could provide the basis for an escape from poverty if the government, with the international community's financial help, took urgent steps to establish the institutions and infrastructure needed to support a market economy and stimulate small-scale private entrepreneurship in the farm sector.

The government's immediate objective was to restore a secure food supply for the general population and provide income and employment for rural inhabitants. Albanian leaders turned to the international community for direct food aid and technical and material assistance for the farm sector. Boosting agricultural output was also a prerequisite for resuming industrial production because many factories needed inputs of raw materials produced in the farm sector. Overall resumption of production had to be coordinated between state enterprises so as to create economic demand and establish a smooth flow of supplies. In 1992, despite the country's inability to pay its international creditors, Albania looked to the IMF, World Bank, and individual Western countries to lend the money needed to jump start and stabilize the economy. Over the longer term, the Albanian economy's fate depended on the country's political leadership restoring law and order, attracting private investors from abroad, and obtaining credits and aid from Western governments for the modernization of industry and agriculture. The last task was especially important because the lack of expertise in international trade and poor quality of Albania's exports precluded the country's earning the foreign exchange necessary to improve infrastructure and increase production. Chronic unemployment was almost certain to be a reality in Albania until urbanization significantly slackened population growth.

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Despite Albania's small size and its communist regime's almost pathological yearning for secrecy, a surprising amount of literature is available on the Balkan state's economy. The best descriptions of Albania's Stalinist system are Adi Schnytzer's Stalinist Economic Strategy in Practice and Örjan Sjöberg's Rural Change and Development in Albania. Stavro Skendi's Albania, Peter R. Prifti's Socialist Albania since 1944, and Robert Owen Freedman's Economic Warfare in the Communist Bloc offer valuable historical insights into Albania's economic development. Gramoz Pashko, the Albanian economist best known in the West, has also contributed several clearly written, compelling papers on Albania's communist economic system, including "The Albanian Economy at the Beginning of the 1990s." Both the Economist Intelligence Unit and Business International publish regular studies of the Albanian economic situation, which are particularly useful to persons exploring the possibility of trading with the country or setting up business operations there. (For further information and complete citations, see Bibliography).

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