Good morning and thank you for coming here.
The purpose of this briefing is to give you our regular update on what the World Bank has recently done in Albania, and I would also like to use this opportunity to give a few observations and farewell remarks about my experience in Albania, and particularly about priorities for the future.
As you may already know, the World Bank measures its operational progress in fiscal years which end on June 30th. Thus, we just completed our fiscal year 2013, so it is a good opportunity to take stock of what has happened. It has been a very challenging year for the country’s economy, as well as for Albania's Western Balkan neighbors. The impacts of the prolonged eurozone crisis and recession have been felt stronger than before, with growth hitting record lows, budget revenues underperforming, non-performing loans reaching new highs and the private sector having difficulties to access finance. In addition, for Albania, a host of power sector problems further exacerbated acute fiscal and economic pressures for most of the year. This assessment, however, must be taken in the context of a fact that the entire Western Balkan region went into a double-dip recession in calendar 2012, with growth in Albania, albeit very weak, still performing better than in most of its peers.
On a positive note, even during this time, our partnership with Albania has yielded a number of good highlights and achievements, and I would like to go briefly over just a few:
- The Bank of Albania, in cooperation with other authorities, was able to adopt bold measures that strengthened financing sector resilience, which performed quite well under the circumstances. I would like to acknowledge the cooperation of the majority and the opposition in passing important amendments to the civil code procedures related to the banking sector. Overall, despite the pressures, the banking sector remained robust and actions by the Bank of Albania have been swift and commendable.
- Over the past year, seven projects that we financed were completed making a visible difference on the ground. Examples include more than 110 km of new and improved local roads, better social services, such as equipped and better managed hospitals and a modern pension archive; strengthened disaster management infrastructure, over 20 new or expanded schools meeting the EU standards, science and computer labs in public universities, municipal investments in the Lake Shkodra area that enhanced its environmental and touristic values; and increased public access to environment information and consultations.
- There was also an important progress achieved under several ongoing projects and programs that support investments, reforms and institutions that are essential for sustained long-term growth in Albania. Just a few examples: Saranda port rehabilitated, street addressing completed in several cities, drainage improved in a number of flood-affected areas, land registration services modernized in Tirana, with the service time and quality visibly improved, as attested by customer surveys. A program to support youth employment with Tirana and Durres municipalities has received its first graduates. And in May 2013, Albania was declared compliant with the international Extractive Industry Transparency standards, which is a good achievement.
- Two new investment projects and two new grant-funded Technical Assistance programs of the cumulative value of near $100 million have become effective. These programs support improvements in social assistance administration, management of irrigation and water resources, community-based use of natural resources; and budget planning and execution. We look forward to successfully implementing them with the new government.
And finally, over the past fiscal year, we stepped up policy dialogue, analytical support and technical advice. Most of you were here for the launching of two Regional Economic Reports for South East Europe, we also held the Fiscal Policy Roundtable; a program called REPARIS that aims to strengthen and align with the EU accounting procedures made very good progress; and we also made contributions to a national Public Finance Management Strategy, as well as an analysis of pension reform options. Again, we hope going forward to continue to provide extensive analytical and technical advice. We are giving more attention to the regional work, to help countries learn from each other and benchmark their approaches and achievements against each other. Our regional work over the past years included analytical work and recommendation on jobs, health financing, innovation strategy; and on strengthening monitoring and evaluation capacity. Our focus on regional activities will continue.
That was a brief summary of what we did over the past year, let’s now talk about the future. Let me first congratulate all Albanians on the historic elections. This has been a testimony that Albanians are committed to democracy and belong to Europe. These latest developments are also a good legacy for the outgoing government, whose tenure includes an impressive record of achievements. We have worked very well with our government counterparts, and on behalf of the World Bank, I would like to extend our gratitude for excellent collaboration.
I would like to congratulate the new majority on a decisive win, and wish them success in carrying out a huge responsibility. The World Bank stands ready to assist the government with a large reform agenda in any possible way we can, and my colleagues and I in the remaining time look forward to working together. We have already started our discussions on the key economic priorities.
Let me stress just three priority areas, which I see as fundamental for a European, Albania and encourage the new government to focus on.
First, it will be very important to increase trust in and credibility of public institutions. And this includes a number of things:
- Giving more attention to the transparency of decision-making and data
- Ensuring true independence of supposedly independent institutions
- Enforcing and ensuring the rule of law – under which I mean, indiscriminate application and enforcement of law - because few things are more detrimental to the rule of law than the perception that it applies in a selective and unfair manner
- For credibility of public institutions it is also critical to maintain professional, de-politicized Public Administration. Albania has been fortunate to attract, in recent years, some highly trained professionals, many of whom graduated from the best international universities, and it would be crucial to keep qualified and well-performing personnel working for Albanians. I consider this a real test of the new government’s commitment to the EU integration ideals and I wish them to pass it with distinction.
Second priority area is to continue, accelerate and expand structural reforms. This is always important, but particularly in the current challenging time in Albania, regionally and globally.
- A large number of reforms have been ongoing. Ssome of them, like the integrated planning system, date back to the previous socialist government; many of them are in line with best international and regional practice. It would be important to accelerate the reforms which have proven good internationally and focus on improving and fine-tuning the implementation. Some examples of such reforms include social assistance, water resource management, accounting procedures, inspections.
- In some areas, of course, reforms need to be expanded. One of the priority areas where the country urgently needs a second generation of reforms is the power sector. Another area which requires a careful look is national-local government arrangements.
- My key advice to the new government, based on many years of development experience, is to exercise strategic selectivity. A major risk to any new government coming with an ambitious agenda is overestimating a country's capacity to move in all direction at once. It’s very important to sequence interventions and only start reforming those which are absolutely necessary, while letting good reforms continue as they were designed before.
Third priority area is fiscal consolidation and arrears clearance.
- It is absolutely critical to complete the process of clearing arrears and outstanding bills to the private sector. And no matter how ambitious the agenda that a new government might have, there is no fiscal space for new significant investments.
- It is very important to develop a dedicated and credible program to gradually rebuild the fiscal space.
- In this context, particular attention should be given to improving quality of public expenditure. We are preparing a major report, called Public Finance Review, that will provide recommendations in this area and, we hope, will help Albania to move in that direction.
- We also recommend the new government to consider the introduction of a fiscal rule, the establishment of an independent fiscal council, and resumption of a program with the International Monetary Fund (IMF). It will go a long way to help Albania resume sustainable growth.
Let me finally conclude by thanking everyone I worked with: government, opposition, civil society, entrepreneurs, professionals, media, donor community and my staff. It has been extraordinary professional and personal experience, an honor and a privilege. No matter where I go next, I will always remain a friend of Albania and will always hold my love for this country in my heart.
I sincerely wish the people of Albania to live up to their aspirations and hopes, and to continue proving to the world and to themselves what a wonderful nation they are.