Academic journal article European Journal of Sustainable Development

Albanian Industry Problems and Perspectives, in Front of the Crisis and International Labor Allocation

Academic journal article European Journal of Sustainable Development

Albanian Industry Problems and Perspectives, in Front of the Crisis and International Labor Allocation

Article excerpt

1. The Problems of Albanian Industry and its Transformation in Post- Transition Period.

Like every other post-comunism country, the economic structure of Albania was radically transformed with the liberalisation of prices and markets during '90. The transition process resulted to a new restructuring of country's economic structure. The industry in the 90s constituted 58.4% of GDP; in '95 the percentage decreased in 19.6%, while it touched its historical minimum at about 7.8% in 2000. Meanwhile agriculture in the 90s accounted for 25.1% of GDP, and in '95 it reached 36.2% of GDP1. According to Stieglitz, the path from a planned to a market economy was even more harder from the initial prediction (Stieglitz, 2002).

Market liberalization in the early '90s was followed by a strong increase of market prices. To face this increment, the Government was forced to raise wages fostering in this way the inflation with dramatic consequences for the country2. According to International Monetary Fund the export declined by 50% in 1992. Stabilization program prepared by the World Bank and IMF had a strong monetarist trace as its primary target was inflation stabilization3. A further significant reform in that period was that of mass privatization and full market liberalization.

According to Sachs market liberalization was important to face the massive licensees and other social costs (Sachs, 1990). While according to Blanchard, privatization of public enterprises was very important for the development of a communist country (Blanchard et. al 1991). While Stieglitz adds that rapid privatization would improve public balance and generate revenues for the country (Stieglitz, 1992). Later it became clear that the stabilization and liberalization of the economy, associated with restrictive monetary policy, market liberalization, trade openness all accompanied with the privatization of all public industry within a few years, moreover with a lack of private investors class, was almost impossible.

For the economic development of Albania, WB decided to apply the Harrod - Domar model4. Once there was a lack of financial capital to invest and privatize public enterprises, foreign investors were invited5. However, the final result was not the expected one; initially the securities were distributed which gave no result in the long term. According Angjeli privatization process failed, due to the lack of reputable buyers and also as a consequence of compromising the privatization auctions (Angjeli, 2007). While Stieglitz adds that privatization does not help the economy if it is not associated with significant institutional reforms. He argues that privatized enterprises need to be restructured, and also need advantageous fiscal and monetary reforms that encourage investments (Stieglitz 1999). Mc Dermott (2002) has shown that privatizations in Czech Republic are also problematic because the governments have not able to attract investors.

A part of public enterprises in Albania were privatized by those who worked there and the managers who were unable to draw up medium and long term strategies (King, 2003). While the other part had a huge lack of financial capital, backward technology or were damaged and stolen over time. This made even more difficult their functioning in the future (Kule et. al 2002). Finally the failure of privatization process brought a significant reduction of industrial sector, as can be observed from the chart below.

As it can be seen from the graph, Albania in the early '90s had a considerable increase of agriculture in the total GDP. After the 7501 reform that transformed state cooperatives in small private activities, which on one side improved the standard living of families as they managed to produce the minimum vital for surviving6, and on the other side it is noted a change in agriculture production, therefore a significant reduction of Albanian traditional products like cotton, sunflower, potatoes, sugar-beets, which had a negative impact on trade balance. …

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