VZCZCXRO6742
OO RUEHIK
DE RUEHTI #0730 3170549
ZNR UUUUU ZZH
O 130549Z NOV 09
FM AMEMBASSY TIRANA
TO RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 8587
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

UNCLAS TIRANA 000730 
 
SIPDIS 
 
Sensitive 
 
For the MCC Board from Ambassador Withers 
 
E.O. 12958: N/A 
TAGS: EAID PREL PGOV ETRD ECON KMCA MCC AL
 
SUBJECT:  Embassy Concerns Over Albania's Consideration for MCC 
Compact Status 
 
¶1.  (SBU) The November 9 release of the FY2010 Scorecard marked an 
important milestone for Albania, technically qualifying it as 
eligible for consideration for Compact Status.  Most notable is the 
fact that for the first time, Albania scored slightly above the 
median in terms of "Control of Corruption."  Albania's eligibility 
for consideration for a Compact is recognition of the progress, 
albeit modest, that has been accomplished in Albania in recent years 
in the three MCC policy categories.  While a few important 
benchmarks were achieved, Embassy Tirana has strong reservations 
about Albania's capacity for a substantial Compact based on the 
GOA's lack of administrative and fiduciary capacity to effectively 
implement the significant responsibilities inherent in any Compact. 
Two areas of concern are particularly worrisome: endemic corruption 
throughout senior officialdom in particular and the broad society in 
general; and the stark lack of government capacity to manage funding 
levels. 
Corruption 
---------- 
¶2.  (SBU) In recent years initiatives such as the National Business 
Registration Center (the so-called "One-Stop-Shop"), along with 
e-taxation and e-procurement programs have made tangible progress in 
reducing opportunities for corruption.  The plain fact, however, is 
that corruption in Albania remains endemic and entrenched at all 
levels of government and society.  Although prosecutions and 
convictions of corrupt, mainly lower level government officials have 
increased in the last two years, there remains a crippling 
atmosphere of impunity for the highest GOA officials. 
¶3.  (SBU) In just the last six months, for example, two current 
government ministers have had abuse of office charges -  involving 
graft in a billion dollar road project and a major demilitarization 
scam - dismissed or dropped based on shaky rulings by the courts. 
There is growing credible evidence that the Prime Minister's 
immediate family, senior members of the opposition party, and 
numerous members of the parliament engage in corrupt acts on a large 
scale.  The actions generally go unreported and unpunished.  The 
Embassy has documented in recent months numerous cases of political 
interference in the judicial system, itself riven by pandemic 
corruption, to protect senior level malfeasants. 
¶4.  (SBU) Embassy Tirana urges the MCC Board carefully to  consider 
how this endemic corruption would impact the effectiveness of a 
Compact program in Albania.  Despite gains in a number of World Bank 
and other indicators regarding corruption, the scale of corruption 
remaining in Albania raises serious doubts about Albania's capacity 
for implementation of a substantive Compact.  Without a tight 
oversight mechanism, the Embassy cannot be sure that substantial 
amounts of U.S. taxpayer money would not go to wrongful and illegal 
uses. 
Government Capacity 
------------------- 
¶5.  (SBU) The GOA's ability effectively to budget for, spend and 
account for its own funds remains woefully inadequate - not only 
because of corruption, but because the government lacks the 
necessary expertise and bureaucratic structures necessary to manage 
its money in all but the most elementary ways.  In recent years the 
Albanian Ministries of Defense and Health, to name just two, have 
been unable to spend their modest budgets due to a lack of 
procurement procedures and expertise.  In 2008, the Ministry of 
Defense was forced to return nearly one half of its entire budget to 
the treasury.  Other government officials are in such fear that they 
will be charged with fraud or corruption that they refuse to spend 
money at all, leaving large amounts of budgetary funds unspent. 
¶6.  (SBU) The GOA has no experience managing the potentially large 
amounts of money involved in a Compact.  Large grants would likely 
quickly overwhelm the GOA's ability to adequately account for and 
spend such funds, impinging on the effectiveness of any possible 
Compact for Albania.  Embassy Tirana believes that any Compact for 
Albania would need very strong oversight provisions by some 
international agency, such as USAID, that would assist the GOA to 
more effectively manage and spend funds responsibly. 
¶7.  (SBU) A full Compact for Albania would at least in theory 
provide momentum for change in Albania in the areas of poverty 
reduction and economic development - but only if the program is 
properly administered, a dubious proposition in the Albania of 
today.  Thus, while recognizing the considerable progress made in 
Albania since the collapse of civil order in 1997, Embassy Tirana 
continues to hold grave doubts about the Government of Albania's 
ability effectively to implement a Compact and the potentially large 
amounts of money involved.  Continued endemic corruption and poor 
government capacity to manage funds raise serious concerns about 
Albania's effective capacity to implement a compact.  Embassy Tirana 
urges the MCC Board in the strongest terms to consider fully these 
concerns as it prepares for the December 9 board meeting.  At 
minimum, effective oversight mechanisms that ensure transparency and 
GOA fiscal responsibility in the administration and implementation 
of Compact funds must be a central part of any Compact for Albania.