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Press Conference of Jane Armitage, World Bank Country Director and Regional Coordinator of Southeast Europe

September 13, 2011

J.A. I had the opportunity to travel a little bit in the country and visit some of our projects in the South. The main reason of my visit is the participation at the conference “Towards better governance, which is the end of a program that we are supporting since several years now, with trust fund resources from a number of donors to identify the progress and the challenges in governance in Albania. I do encourage you to go to a website, to look at some of the papers. They are translated; there are some presentations about various aspects of governance, so I do encourage you to look at that.

Florian Papadhimitri, AS tv channel: What is your opinion on the current property rights situation?

J.A. Thank you very much for this question.  Indeed one of the central themes of the workshop today on governance concerns property rights. As we have explained governance is very important because is a very important indicator that investors, foreign investors and domestic investors look at when decided whether to invest. And in particular the security of property rights is something that is absolutely fundamental for investors. This is a question that affects not only Albania but many countries in the region because of the legacy of the communism when the private property was expropriated, nationalized whatever the word is that you use. After the fall of communism there was a process of try to return the land to the former owners and to start to establish again a framework for private property. This is a very complex issue, one that successive governments to Albania have been trying to resolve through changes in laws and also with help of the World Bank and other development partners such as the European Commission, USAID, to try and help people to register their property titles.

I think there is a general understanding that this is an area where Albania needs to speed up this process of regularizing the property titles. It is not just a problem, because of the legacy of the communism, but also over the last twenty years there has been very significant internal migration, so people came from mountain areas and rural areas and came to the cities and in some cases have build properties and invested in areas where they don’t have ownership of the land. There are many different people claiming the land and this is a process that does need to be regularized for the future competitiveness of Albania.

We are going to be working with the government. We have a project that is focused on improving land administration in the country. We expect to strengthen our efforts going forward, having done this analytical work to identify some of the problems. This will be a priority area for us to work with the government to improve the security of property rights going forward.

Aurora Sulce, News 24 TV channel: My question is related to a specific World Bank financed project with the Ministry of Health, for the purchase of medical equipments for regional hospitals. The contract was awarded to a company that didn’t offer the best price. Minister Vasili said there were interventions from the World Bank. I would like to know your position about that?

J. A.  Thank you very much for your question. I think you are all aware that we have made a very clear public statement that goes into details of our concerns and why we took a decision finally in accordance with our internal procurement guidelines, that we are not able to finance the contract given the decision that the ministry had taken to award the bid to a particular company.
So, I don’t want to repeat what we have already said very clearly and what we have shared with the media and the public in terms of why we took this decision. I would just like to say that the World Bank has very clear guidelines, policies and rules about procurement that takes place under the project that are financed by the World Bank. And very often the countries where we work would say these rules are very complicated, they take a very long time, and they lead to a lot of delays, because the process is so complex. But we believe very strongly that following these procurement guidelines will help countries to get the lowest possible costs for the goods and services that they are buying but that meet the technical standards and the quality that is been deemed appropriate and that this process uses competitive bidding. Sometimes is local competitive bidding, often is international competitive bidding and this process is a competition where firms offer goods and services but based on very clearly specified technical criteria. Overall, this is a very good process and helps the countries to get the best possible bid and therefore to use public resources efficiently and in a transparent way.

Perhaps that sounds a little abstract, but let me give you a very real example that we looked at during my recent visit to the field over the last couple of days. The World Bank is providing finance to the government for the rehabilitation of the port of Saranda. And this is really important to improve tourism which will generate employment and growth in the southern cost. So following our procurement guidelines the government requested bid internationally for companies to rehabilitate the port. And the price of these services is one million dollars cheaper than our original estimates. This reflects the fact that with the global recession there are a lot of businesses in the area that need business and so they came in with very competitive bids. Right quality but much lower costs then we had expected. So this process has led to the saving of almost one million dollars which we can now use. We will work with the government to use these savings maybe to provide more rural roads or water supply or sanitation. This is just one example where the international competitive bidding can lead to significant savings and much better prices. Here we have a good example from Albania.

Rajmonda Lajthia from Vizion Plus TV Channel: Referring to the same example for the purchasing of medical equipments in Albania do you have a comment for the Albanian procurement procedures?

J. A. I think that the e-procurement initiative that the government has introduced is a very important one that will help increase transparency and will encourage bidders to participate. But indeed one of the topics that we discussed during the session this morning was based on surveys perception of the business sector as to how transparent the public procurement process is. What we see is improvements over time but still there are concerns expressed by the private sectors in surveys about areas where they feel sometimes about the process as not being fully transparent. The Albanian procurement law is a good law. It is in line with best international best practices. But as with all laws what is important, is that it is implemented in accordance with the law. These surveys that I mentioned are very important for the government to hear the perceptions of business and citizens how they feel about the way public procurement is implemented in Albania. In the workshop some data is presented from a survey that the World Bank does together with the European Bank for Reconstruction and Development (EBRD) for the whole region that asks firms to answer a number of questions about their perception of public procurement. And these surveys are conducted every few years and they will allow the government, the donors and civil society to see the trends. To see whether Albania is doing better and how it is doing compared to other countries. We will be putting our presentations onto our website and you will be able to see some charts and into a nutshell they show that perceptions of corruption and the incidents of firms paying bribes has been declining over the last few years in Albania, based on survey. So it is declining, but it is still relatively high and it is higher than in some other neighboring countries. So there is still more to do.

Now a new survey is going to take place this year, in 2011. It will be extremely interesting to see the results of this survey because we will be able to see if the introduction of e-procurement has indeed led to a further decline in the incidents of firms paying bribes and in the perception of the transparency of the public procurement. So let’s take another look at this next year when we get the latest data.

Ervin Qafmolla, freelance journalist: Discussions have been held regarding the pension reform in Albania. The Prime Minister has proposed a 5 year postponement of the age to retire. Has the World Bank been involved in such decisions or at least does the World Bank perceives that the recommendations of the Bank are being taken on board by the government?

J. A.  Thank you very much for your question. Pension reform is one of the most difficult and one of the most important reforms facing most countries in the world, developing countries, countries in East Europe but also rich countries in Europe and in United States. Economists everywhere worry about the impact of what we call a demographic transition. That in all countries in the world people are living longer and longer which is a very good thing. But if people are living to be eighty or ninety where before they would die much earlier as life expectancy increases, this places a lot of pressure on the government to provide pensions as people live longer. The other side of the demographic transition is that also people are having fewer children and in many countries the size of the work force is getting smaller so you got fewer workers who are contributing into the pension system and more and more old people who are receiving benefits. So it’s a really major problem throughout the world. There are a number of different reforms that can be introduced that can improve the financial sustainability and viability of the pension systems. For example we can increase the retirement age. Sometimes you can equalize the retirement age for men and women. In some countries women can retire much earlier. There is also in many countries the ability for member of a workforce to retire earlier, if they are doing a dangerous job they can retire at fifty or fifty five. There are rules about how many years you have to contribute before you can draw your pension. There are also rules about the level of pension that you get. Is it a fifty percent replacement of your wage? Is it sixty percent? and so on. There are rules about how the pension that old people get they are adjusted to account for inflation or wage productivity increases. There are many reforms that can help make the pension system more sustainable. A very important part of well functioning pension system is that the data is accurate. It is very important that this database is accurate. The World Bank through an existing project is supporting the social insurance institute to strengthen its archives and its data collection process. But in addition the government has asked the World Bank to send a team of experts to help them to look at different options to improve the financial sustainability, to run models that calculate if you increase the retirement age, if you equalize the retirement age for men and women, if you change the replacement rate, if you indexation…many different parameters. We will be working with the government to help them to run these models. To see what options they have to improve financial sustainability. This will start in October.

Klodian TomorriTop Channel: My question is related to macroeconomic context. Given the fact that many countries in the world are now facing the so-called debt crisis which is considered to be even bigger in consequences than the financial crisis two or three years ago and as Europe is considered as a hot spot for this crisis, a World Bank report considers Albania has a poor fiscal system; do you think that there will be any consequences in the region and more particularly in Albania?

Thank you. I think everyone is very concerned that this broad crisis in debt in the Euro zone and the likely reduced level of growth is going to have a negative impact on the developing countries in Europe…, Albania, the Western Balkans and some of the other countries in the Eastern Europe. Albania is very closely linked to the economic prosperity in Western Europe. Its exports, its level of remittances, the level of foreign direct investments are all partly determined by its neighbors in Western Europe. As you know for the last decade Albania had very high sustained level of economic growth between 6 and 7 percent and this led to improvement of standard of living and the reduction of poverty. Unfortunately with the global financial crisis that begun at the end of 2008 Albania was not immune to this global recession. It did not suffer the very sharp declines and the negative growth that affected some countries but it was not able to keep up this growth of 6 and 7 percent, instead the growth fall around 3 percent. It is very difficult to make accurate projections, nobody can do that.
It is very likely that the growth rate going forward would not be as high as we had hoped. Instead of being 5–6 percent, perhaps will be in the range of 3–4 percent. But the rate of growth will depend not only on the external environment but continued progress in reforms. If Albania continues to improve governance and the investment climate, then it can still attract foreign investment and that, will help sustain its growth rates.

But as you mentioned we also have a strong dialogue with the government in terms of fiscal consolidation. It is not an option for Albania to increase public spending significantly to try and compensate for the low rate of growth externally. Its level of public sector debt is just below the 60 percent. It is sustainable but we believe that it is appropriate for this level of public sector debt as the percentage of GDP to gradually decline. In order for the level of public sector debt to decline, Albania will need to keep its public sector deficits no greater than three percent. We have an excellent dialogue with the Government, with the Ministry of Finance and they recognize the need to keep the level of the deficits around 3 percent in order to have public sector debt decline gradually. So we have a shared appreciation of the importance of this. When the Ministry of Finance is preparing its budget, we have advised them and they agree, that given all the uncertainty in Europe, it will be prudent to have more conservative projections of growth and revenues so there are no nasty surprises. So while nobody can predict what is going to happen the Ministry is better to be conservative in terms of project growth and the revenues when preparing the upcoming budget for 2012.