To what extend has the privatization process been successful in Albania?
Romina Kostani
“Private property has more significance for people in Albania than in other socialist countries because of its near total abolition some twenty years later” (Hashi & Xhillari, 1999). The term privatization has become one of the most discussed topics in the last two decades in Albania. It started in the year 1991, based on the law Nr. 7501, with the privatization of farm lands, continued with that of big public companies and it is still happening in the year 2012. Privatization is not an easy process to be applied. It needs a long time to study the market, to find the most efficient method of how to privatize and also, to find the best competitors who to sell the companies to. Most of the changes in the Albanian economy during the first years of transition are based on the process of transferring the ownership from public to private. My purpose is to create a brief overview of the history of privatization during the last 20 years in Albania. The paper consists of three main points. Firstly, the definition of privatization will be given and the reasons the government should apply it. Secondly, the methods of this process with an eye in Albania will be discussed. The third point will give a more detailed view of the process in Albania. Which were the steps, meaning what was privatized during the years? Who were the ones that profited and the ones that lost from this process? Finally, with two main examples and a survey made by Mema (2005), some of the post – privatization changes in the Albanian privatized enterprises will be stated. “Privatization is therefore a complex interlocking set of measures to change the way raw materials are converted into consumption goods by changing control, production and pricing from the public to the private sector” (Goldstein, 1997, p. 530). Based on the Encyclopedic Dictionary of Economics, Banking and Business, (Hoti, I., 2001), the aims of privatization consist on finding the macro economical equilibrium in an efficient use of a country’s resources, reducing its expenses, its public deficit and as well as unemployment. Privatization means productivity growth by liberalizing the market and also reducing the state’s control in economy. It arises the market freedom and creates space
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for concurrency. With privatization, the political role of the government vanishes and the decisions taken within a company are more realistic. The privatization in Albania passed into these steps: firstly, the land privatization, based on the law Nr. 7501, according to which, farm lands were distributed to the farmers. Secondly, the privatization of the wholesale and retail trade units, which were given to the salesmen with a low price. Thirdly, the privatization of state flats. They were given to the people who were living in those apartments. Fourthly, the privatization of Small and Medium Enterprises (SMEs). Most of them were given to that part of the population, who had contributed in its founding or its development. Fifthly, the privatization of large state enterprises, which started some years after the period of transition and as a process, was more achieved than the ones in the first four steps, since Ministry of Privatization was already founded. We will now see a detailed view of the problems that occurred after applying the process, who were the ones that gained and who were the ones that lost from it. Privatization of land of the collective and state farms was a well applied law, even though some objections. Privatization of the wholesale and retail trade units, given to the salesmen in a very low price, created privileges only for one social group and even by denying the rights of the owners of the land these shops were built on. Ina Aleksi, Kalo and associates (n. d), say that “During the years 1991 – 1993, according to the urban privatization, about 220.000 state apartments were privatized, and 97 per cent of them were paid for in cash at the moment of sale. The sale of state apartments to their users was a necessary step that had positive results. This step was both politically and socio–economically necessary. Hence to this, many Albanian families became possessors of the apartments they lived in, so they became owners. From the political point of view, this step was an important move toward the detachment from the old system. From socio-economic point of view, it created more favorable conditions for migration of families inside the country as well as outside it”.
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In the years of communism, it was very difficult to move in inside Albania and absolutely prohibited outside the country. With the fall of the system and the privatization of the state flats, as stated by Ina Aleksi, Kalo and associates (n. d), “people had less problems when they wanted to migrate because they could sell (or buy) an apartment. It also relieved the state budget from having to maintain these apartments, and it created favorable conditions for private individuals to maintain these apartments. It made it possible for owning families to make additional investments in their apartments, improving their quality, and allowing a higher standard of living�. But, in spite of positive sides to the process, as mentioned also by Mema (1997) and Ina Aleksi, Kalo and associates (n. d), the negative side was that they were sold to their tenants at a very low price, which was actually only a small part of the real market price. This resulted to a fact that many people were left homeless. SMEs privatization was, most of the time, made out of the auction. As mentioned by Mema (1997), the people who had contributed in those enterprises were the only ones who won from this. And this was only a very small percentage of the whole population. A lot of people were left aside and did not profit anything .Privatization of big public institutions is the most achieved process in the Albanian economic history. This is because of the foundation of the Ministry of Privatization and also because during the years, the Albanian economic experts had learned much from the past. The process of privatizing the big national assets ran slowly through the years, and the method used was the one with tenders. However, as pronounced by Mema (2005), the privatization lacked a program in most of the cases and the decision makers did not pay full attention to privatization implications. Some experts say that either the process happened very quickly or the price was too low. As stated by Mema (2005), it is very difficult to find the right answer to the question of what is happening with the privatized enterprises. In a survey made by him, the results say that around 67% of the enterprises had undergone several changes. 68 % had made changes in both structures of management as well as the production. 62% had made changes in the marketing structures and only 3
33% of the enterprises asked had not made any changes in the managing structures. In order to give a better view, let us take two examples:
AMC (Albanian Mobile Communication), for some years after privatized, had very expensive service and low quality. This problem began to resolve after the entering of the 3rd mobile company, Eagle Mobile, when both Vodafone and AMC started reducing the prices as the concurrence was harsh.
On January 13th, 2004, Raiffeisen Bank and Ministry of Finance signed the Share Purchase Agreement by which the Government of Albania agreed to transfer 100% of the shares of Savings Bank of Albania to Raiffeisen Bank for $ 126 million. After the privatization, Raiffeisen Bank maintained the powerful role of Savings Bank of Albania, and not only that, but it also increased its role in the Albanian banking system. According to the employees, Raiffeisen was the first bank in Albania to operate with the ATM service. Also, it was the first bank to install POSs, increase the number of its services, apply the multi-cash service (for business), the first bank in Albania to give credit cards etc.
Privatization in Albania was a new process which had its own weaknesses and achievements. It started with the privatization of farm lands and state flats. These were two of the first steps applied, that opened the way to the real privatization process. The process continued with the privatization of SMEs, which was most of the time made out of the auction and the people who had contributed for years were the ones that gained from it. The most achieved privatization process was without doubt the privatizing of big public institutions. The foundations of the Ministry of Privatization and the experience gained during the years helped the experts make a better choice. However, some analyst’s think that the selling’s price was low and the government lacked a program. Despite the contradictions, the privatization process helped keep the government away from business, increase the variety of services, 4
products and the foreign investments in Albania. It also led to a higher life standard. Some of privatized enterprises resulted as a success, some of them faced problems, but in general, it was the right choice since it opened the way to concurrence and market liberalization.
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References Aleksi I, Kalo & Associates. (n. d). Privatization and various structural reforms in Albania. Retrieved from: www.seelegal.org/upload/documents/Albania/Albania_Article_1.doc
Goldstein, M. (1997). Privatization success and failure: Finance theory and regulation in the
transitional economies of Albania and the Czech Republic. Retrieved from:
http://www.jstor.org.library.esc.edu
Hashi,I. &Xhillari, L. (1999). Post-Communist Economies. Privatisation and Transition in Albania.
Retrieved from:
http://web.ebscohost.com.library.esc.edu Mema F. (1997). Privatizimi ne Shqiperi: arritje, te meta, e ardhmja. Publishing House TOENA, Tirane. Mema, F. Sallaku,S. (n. d). Privatization and its efficiency in Albania. Retrieved from http://bankofalbania.org/web/pub/fatmirmema_ang_135_1.pdf
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