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DE RUEHTI #0382/01 1360855
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O 150855Z MAY 08
FM AMEMBASSY TIRANA
TO SECSTATE WASHDC IMMEDIATE 7090

UNCLAS TIRANA 000382 
 
SENSITIVE 
 
AIDAC 
 
SIPDIS 
 
DEPT FOR EUR/SCE 
STATE FOR USAID AID/A/COO: ELIZABETH MCKEON 
EE/AA: SARAH BERRY 
EE/ECA: MICHAEL FOSTER 
 
E.O. 12958:N/A 
TAGS: PGOV PREL EAID AL
SUBJECT: ALBANIA, SCENESETTER FOR HENRIETTA FORE, ADMINISTRATOR OF 
UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT AND U.S. DIRECTOR 
OF FOREIGN ASSISTANCE 
 
SUMMARY 
 
¶1.  (SBU) Henrietta Fore, Administrator, U.S. Agency for 
International Development and Director of United States Foreign 
Assistance will visit Albania from May 17-19, 2008. Administrator 
Fore's purpose in visiting Albania is to convey to the Government of 
Albania (GoA), judicial officials, business and civic leaders, in 
scheduled public appearances and private meetings, the importance of 
taking concerted action to reduce corruption in order to improve 
Albania's business and investment climate and accelerate the 
country's progress toward NATO membership. Ms. Fore's visit comes 
two months after an arms depot on Tirana's outskirts exploded, 
killing 26 people and touching off a spasm of political 
recriminations and corruption accusations; some six weeks after 
Albania received its NATO invitation; a few weeks after a major 
survey showing corruption is still a serious problem in Albania. 
Ms. Fore's visit also coincides with the review by the Millennium 
Challenge Corporation (MCC) of the GoA's $18 Million anticorruption 
Threshold Country Plan to follow its current, successful MCC 
Threshold Program. END SUMMARY. 
 
¶2.  (SBU) DOMESTIC POLITICAL OVERVIEW: Albania is a multi-party 
parliamentary democracy, with eleven parties represented in 
Parliament.  The majority coalition selects the Prime Minister (Head 
of Government), currently Sali Berisha, who has held the post since 
July, 2005.  The President of the Republic (Head of State) is 
selected by Parliament to a five-year term.  President Topi was 
elected in July 2007 in an orderly transition of power.  National 
elections will be held again in 2009. Albania's two largest parties, 
the Democratic (DP) and Socialist (SP) Parties, descend from the 
Communist Party, and many of Albania's senior leaders were trained 
in the communist system.  A younger generation has begun to emerge 
on the political and economic scene some 17 years after the fall of 
communism. The political system is highly polarized, but trust and 
cooperation among majority and opposition have improved over the 
last several months.  Recently, the two major parties coalesced to 
pass electoral and constitutional reforms in the context of NATO 
integration.  The Government has a solid majority in Parliament, and 
this was the first time the two joined in a common legislative 
effort. NATO allies extended an invitation to Albania in April 2008, 
with accession targeted for 2009. 
 
¶3.  (SBU) ECONOMIC DATA: Since the fall of communism in 1990, Albania has 
 
set itself on the path toward an open market economy.  Beginning in 
2001, Albania has experienced a rapid expansion of its economy and 
has maintained a remarkable degree of macro-economic stability over 
the past seven years characterized by an average economic growth 
rate of almost 6 percent from 2001 through 2007, low inflation 
averaging 2.5% and a budget deficit within an IMF target of 3.8% of 
GDP in 2007.  Albania's nominal GDP in 2007 totaled $10.6 billion 
and is expected to reach $12 billion in 2008.  The Albanian 
currency, the lek, has appreciated against the dollar and remained 
stable against the euro. The country has seen rapid economic 
progress since the economic collapse of 1997.   The GDP and export 
growth rates were the fastest growing in Southeast Europe from 1997 
to 2005.  Per capita income more than doubled in the last five 
years, to $3,353 in 2007.  The number of Albanians living in poverty 
was reduced in 2005 to 18.5% of the population, down from 25.4% in 
2002 (World Bank 2005 Poverty Assessment), lifting 220,000 people in 
a population of over 3.1 million out of poverty in just three years. 
 However, the country remains among the poorest in Europe and ranked 
65 of 177 on the UNDP's 2004 Human Development Index. 
 
¶4.  (SBU) Albania also has a low level of foreign direct investment and a 
 
growing trade deficit which amounted to an estimated 27.1% of GDP in 
¶2007.  Unemployment is high, officially at 13.8% in 2007.  However, 
a high level of remittances (approximately 14% of GDP) from abroad 
softens the unemployment impact on the general population.  Labor 
costs are among the lowest in the region and the country boasts a 
young workforce by European standards, with a median age of 29 
(compared to 40 in Italy).  Services lead GDP composition with 
approximately 47% of the total; agriculture comes second at 23%. The 
remaining major economic sectors are industry (12%), construction 
(10%) and transport (9%). The private sector accounts for more than 
75% of GDP and over 62% of employment.  In 2006, Albania signed the 
Stabilization and Association Agreement with the European Union 
which is seen as the first step to eventual EU membership.  Albania 
is also part of CEFTA (Central European Free Trade Agreement), a 
regional free trade agreement which is expected to take effect this 
summer.  The EU remains, by far, Albania's main commercial partner, 
providing 61% of Albania's imports and receiving 88% of total 
exports.  Trade with Italy and Greece represent the largest share of 
EU trade with a combined 44% of imports and 82% of exports.  On 
December 1, 2006, the Interim Agreement between Albania and the 
European Union entered into force.  The Interim Agreement will 
 
 
reduce the average nominal tariff on EU imports and is expected to 
increase imports from EU countries.  The U.S. accounts for a small 
share of Albania's trade volume, just 2% of the total.  Albania is a 
member of the WTO and cooperates closely with the IMF and World 
Bank. 
 
THE CORRUPTION PICTURE: ALBANIA 2008 
 
¶5.  (SBU) For a Government elected in 2005 on a pledge to root out 
corruption, the last year has brought a string of mixed, mostly bad 
news, from a number of surveys and reports. Transparency 
International (TI) released its "Corruption Barometer Survey" in 
December 2007 showing Albania performing in the highest quintile 
globally, alongside Cambodia, Cameroon and Nigeria, in terms of the 
degree to which it is affected by bribery. TI also reported that 71% 
of Albanians had "paid a bribe to obtain a [public] service," 
compared to 30% in 2005. The TI Corruption Perception Index 
published last fall, meanwhile, showed that Albania is perceived as 
the most corrupt country in southeastern Europe, though Albania's 
low score showed a slight improvement in 2007 (2.9) over 2006 (2.6; 
10 is highest score). Albania has improved its overall corruption 
perception ranking, thus continuing slight improvements over several 
years. 
 
¶6.  (SBU) A USAID-funded Annual Corruption in Albania Survey (2008) that 
 
was released this May 2008, meanwhile, appeared to reinforce the 
backsliding perception. The survey found that 92% of Albanians think 
corruption is widespread, a decline of 8 points over 2006; that 47% 
of Albanians believe corruption increased over last year (47.2%), 
13% more than in 2006. Nearly 70% of people surveyed reported paying 
a bribe for medical treatment, while 60% reported having little or 
no trust in the judicial system. By a 3 to 1 margin, the 
USAID-funded survey found, Albanians do not think the judges are 
impartial when conducting trials. 
 
¶7.  (SBU) In November 2007, the Millennium Challenge Corporation presented 
 
a mixed picture of Albania's performance. On the one hand, Albania 
fell short in the "Ruling Justly" category of the country scorecards 
used to determine MCC Compact eligibility, meaning that Albania 
scored below its income group median in this area. On two key 
measures in this category, the Control of Corruption and Rule of Law 
Indicatorsators -- considered "hard hurdles" to qualify for an MCC 
Compact -- Albania scored in the bottom quartile of its income 
group, prompting the MCC to not consider Albania for compact status. 
 
 
¶8.   (SBU) Albania in fact improved according to most MCC indices 
over the last two years. The MCC took note of the overall trend and 
invited the GoA to apply for a "Stage II" Threshold Program to 
follow the current, successful Threshold Program which expires in 
September 2008. On April 18, 2008, The Government of Albania 
submitted its Threshold Country Plan (TCP) to the MCC, where it is 
now being reviewed.  As with its previous TCP, the GoA pledged to 
put in place preventive and enforcement measures aimed at reducing 
corruption and improving judicial performance. 
 
RECENT ANTICORRUPTION ACTIONS 
 
¶9.  (SBU) Reports and surveys aside, the GoA has in fact taken steps 
to fight corruption over the last few years.  Progress is slow and 
concrete results elusive. So far, while the Prime Minister Berisha 
pledges "zero tolerance" against corruption, the fact remains that 
the first successful high-level prosecutions on corruption charges 
just occurred.  Few officials, high or low, have served any serious 
jail time.  In the last few years, though, independent audit 
agencies, such as the High Inspectorate for the Declaration and 
Audit of Assets (HIDAA), have been actively auditing asset and 
conflict of interest declarations, with the result that scores of 
petty officials have been dismissed for conflict of interests or for 
filing fraudulent declarations. However, no official has yet to be 
prosecuted for conflict of interest violations or for concealing 
assets on declarations. 
 
¶10. (SBU) Over the last year, the Government has mounted a law 
enforcement counteroffensive against corruption, establishing a 
special investigative unit, a serious crimes court and a witness 
protection unit (all with US Department of Justice support).  Under 
the new Prosecutor General, Ina Rama, a special investigative unit 
("Task Force") has aggressively pursued lawbreakers over the last 
half-year, arresting some 70 officials on corruption charges, most 
recently placing under house arrest the Director of the Tax 
Department on charges of kidnapping and torture. 
 
¶11. (SBU) Other initiatives pushed or brokered by President Bamir 
Topi - a former Democratic Party stalwart and Member of Parliament 
 
who seeks to preserve his presidential role of remaining above the 
partisan fray -- were aimed at paving the way for a long overdue 
reform of the Albanian judiciary, seen by most Albanians as corrupt. 
 In February 2008, the Albanian Parliament passed a law by 
multiparty consensus that addresses a multitude of problems plaguing 
the judiciary, from poor quality judges, to slow resolution of 
cases, to unethical conduct and unprofessional court decisions, to 
weak enforcement of judgments. The law has yet to be implemented. 
(Ref A) 
 
¶12. (SBU) GoA reform efforts under the Millennium Challenge Account 
(MCA) Threshold Program (begun in September 2006) to reduce petty 
corruption in three areas of public administration: taxation, 
procurement and business registration have begun to take hold.  The 
business registration reform has been an unequivocal success in 
sealing off opportunities for bribery in business registration while 
simultaneously streamlining registration procedures.  As of May 
2008, it now takes an average of one day to register a business (as 
opposed to several weeks in 2006, prior to the MCC program) and some 
9,000 new businesses have been registered under the new system.  In 
the tax administration, the MCC project introduced measures like 
e-filing, which reduced the contact with tax official and the 
resultant "negotiations" between taxpayers and officials that were 
fertile terrain for corruption.  In procurement, the MCC project 
with cooperation from the Public Procurement Agency, launched in 
march 2008 an electronic procurement system, which is now being used 
by all GoA ministries, a measure that will likely, in the longer 
term, increase competition for government procurements while 
reducing the cost of the average procurement, in addition to 
reducing the opportunities for corruption in the procurement 
process. 
 
GERDEC TRAGEDY 
 
¶13. (SBU) But it is the tragedy on March 15, 2008 that may well 
define the Berisha Government's corruption-fighting record. On that 
day, a munitions depot located in a populated area only a few 
kilometers outside Tirana (the town of Gerdec) exploded, killing 26 
people and injuring more than 300.  In the days following the blast, 
political recriminations and accusations by opposition forces that 
abuse of power led to the tragedy forced the Minister of Defense, 
Fatmir Mediu, to resign his post. Prosecutor General Rama 
subsequently asked Parliament to lift the immunity of the former 
Minister, also a Member of Parliament, in order to permit an 
investigation for Mediu's alleged role in the tragedy. (Refs B and 
C.) The U.S. Southern Ammunition Company, Inc. was the primary 
contractor and subcontracted to an Albanian firm to do munitions 
dismantling at the site. While representatives of the company denied 
responsibility for the blast, saying their contract involved 
small-caliber ammunition and not the larger ordnance that exploded 
at the Gerdec depot, the tragedy nonetheless tarnished the high 
esteem in which the U.S. was held by the Albanians. 
 
¶14.  (SBU) A few encouraging signs have emerged from the ashes of Gerdec. 
 
The Albanian media (which, while highly politicized, ranks high in 
public perceptions as a corruption-fighting agent) did a creditable 
job of shedding light on the circumstances surrounding the Gerdec 
tragedy in the immediate aftermath of the explosion.  The 
Prosecutor's Office, for its part, has begun an intensive 
investigative process that had heretofore been absent in Albania. 
(The U.S. sent an experienced forensics team from the Bureau of 
Alcohol, Tobacco and Firearms in response to her request for 
assistance). 
 
CORRUPTION OUTLOOK 
 
¶15. (SBU) Albania must implement a rigorous program of broad-based 
reforms to strengthen government institutions, improve adherence to 
the rule of law, and reduce corruption while respecting democratic 
norms if it is to make steady progress toward NATO membership, which 
looms larger than ever following the invitation at the NATO summit 
in March.  The lack of strong, effective institutions and respect 
for the rule of law impedes progress in all areas, including 
attracting the investment needed for economic development. 
Institutions crucial to Albania's democratic development, including 
NGOs, the media, and business coalitions, are still relatively 
immature, and it will take years of work to build them up to create 
a strong, sustainable democracy. 
 
¶16. (SBU) You may choose to emphasize the importance of these issues, and 
 
in particular the need for aggressive near-term actions, such as the 
lifting of immunity for public officials, stepped-up law enforcement 
that respects the independence of institutions, rapid progress on 
judicial reforms, and the completion of the reforms to which the GoA 
committed itself under the MCA Threshold Program.  It is worth 
 
 
reminding the GoA that the U.S. Government's decision on Albania's 
Stage II MCA Threshold Country Plan has not yet been made; that the 
US will be watching the GoA's actions over the next few months to 
satisfy itself that the its commitment to anticorruption reforms 
remains strong. 
 
WITHERS