Lljaz Fishta - Dilaver Sadikaj*

SÜDOSTEUROPA, 40. Jhg., 10/1991 lljaz Fishta - Dilaver Sadikaj* Economic Reform and the Process of Privatization of Albania’s Economy Problems of Past Development of Albania’s Economy Actually, the privatization of the economy has become a problem of great dis cussion. This problem does not represent a phenomenon neither of a single state, nor a particular zone. It is now in the center of attention also in the states of Eastern Europe, whereas in the West European states it already exists as a problem, hence it has assumed world proportions. The privatization of the economy is on the agenda not only in theory but above all as a question of special practical importance. The present-day developments have brought to the fore the fact that this phenomenon has to do with efficiency of the social production. Actual experi ence shows that the market economy and private ownership are superior to the concentrated and commanded economy, because they give a powerful im pulse to productive initiative, and along with other elements such as the prog ress of science and technology, contribute directly to the rapid progress of pro duction. For this reason, the privatization of the economy is a strategic objective. In the East European countries, Albania included, the process of privatization is supported by the political and economic thinking and is serving to pass from the concentrated and commanded to the market economy. After the Second World War, fundamental transformations of economy were made in Albania: the creation of the state and cooperative sectors in var ious branches of the economy, the limitation and gradual liquidation of pri vate property and of the market economy. These changes were accompanied by some achievements: between 1950 and 1980 the total industrial output increased 41 times, and 6-8 times between 1960 and 1980. In 1980, total agricultural output was 4.8 times higher than in 1950, and 2.9 times greater than in I960.1 Transport, education, culture etc., developed as well. But we must admit that these achievements did not satisfy the real need of the people an did not realize the promises given to them right after the Second World War. The above mentioned achievements could not guarantee the nar rowing of distinctions existing between backward Albania and the other coun- * Prof. Dr. I. Fishta und Dr. D. Sadikaj, Instituti i Historise, Tirane. ! Referred to figures the Statistics Department at the Ministry of Economy. 532 Iljaz Fishta - Dilaver Sadikaj tries of Europe, especially of Western Europe. Moreover, from 1980 up to 1990, completely undesirable phenomena occurred. Over this period of time, a considerable fall of investments in the economy was registered. This tendency was accompanied with the fall of industrial production, agricultural produc tion, and consequently of the people’s supply with mass consumer goods, with a budgetary deficit which in June 1991 reached 3.2 billion leks. It should be pointed out that these phenomena were noticed at a time when the population of Albania increased at relatively high annual rates: between 1980 and 1985 it grew by 2.1-2.2 per cent annually.2 Consequences of these phenomena were catastrophic. Albania was caught in a profound and complex crisis unknown over the whole post 2nd World War period.3 This grave situation in the economy of Albania has its source in factors of subjective and objective, of internal and external character. Of decisive impor tance has been the fact that the economic system applied in Albania had seri ous defects. The potential reserves of this system ran out very quickly. Besides this, during the process of application many mistakes were made. The concen tration of the economy in the hands of the state, overestimation of state and cooperative property and in this regard the adoption of measures for the liqui dation of private ownership and the market economy, the state management of great investments in heavy industry, setting up of big projects in some cases with backward know-how and no preparation to realize and to run them, as was e. g. the case with the metallurgical plant in Elbasan, weak points in the organization of production and labour, the concentration of attention on gen eral interests underestimating the personal ones; overestimation of moral in centives against material ones, those were some of the grave mistakes which led to the fall of overall production and to the lack of interest of the people in work. Very harmful consequences for the development of the economy had the policy of self-isolation applied especially after Albania broke up relations with China. Until then Albania had taken credits from some countries, in particular from the Soviet Union and China. Beginning with 1978 Albania received no credits. The overvaluation of self-reliance and the lack of an extensive cooper ation with other states, especially with the advanced states of Western Europe, for the exploitation of Albanian resources became an obstacle for a progress of Albania’s economy at contemporary rates and according to contemporary technology. 2 V. Misja, Y. Vejsiu, A. Berxolli: The population of Albania, Tirana 1987, p. 74. 3 Ylli Bufi: Speech to the People’s Assembly on the program of the Government of Stability, Zeri i Popullit, June 13,1991. Process of Privatization of Albania’s Economy 533 The Economic Reform of 1990 The economic reform initiated in May last year (the law of May 8, 1990) had during its first period (until the beginning of 1991)4 as its main objective the perfection of the economic mechanism in the industrial enterprises and in ag ricultural cooperatives. On the basis of the principles and criteria of this mechanism, the state deter mined for the enterprises only the value volume of the production to be selled, instead of the quantitative production plan it used to give before. The enter prise was given in a concentrated form the fund of payments: it was granted the right to decide itself on the number of new workers to be employed, in cluding here the engineering-technical staff and other specialists. Important changes deriving from the application of the new economic mechanism oc curred in financial relations. The enterprise had to pay off in a concentrated way only the financial obligations towards the budget. 90 per cent of the profit realized by the enterprise would be used by the enterprise itself for reproduc tion and material incentives of the working people and only 10 per cent would be handed over to the state budget.5 1991: Shock Therapy Versus Gradual Transition? 1991 became the year of radical turn in the life of Albania. Political pluralism established in this period brought about new changes in all kinds of activity of the Albanian state. The promotion of the process of democratization was re flected in the economy, too. From the beginning of 1991 and especially with the decree of the Presidium of the People’s Assembly of March 12 this year,6 the economic reform passed in a new qualitative period. The objectives set in May 1990 on the perfection of the economic mechanism which should be completely applied at the begin ning of 1991 were overpassed although not yet completely applied. Since that time, the problem of transition of the centralized command economy into a market economy was put on the agenda. The privatization of economic own ership has become a strategic goal which pervades all parts of its development, the road of integrating Albania’s economy into the European economy. The objective of the change of Albania’s economy from a centralized com mand economy to a market economy brought on the agenda also the question of finding ways how to realize it: based on the conditions of Albania and the European experience, which would be the possible alternatives for the realiza tion of this process, as easy as possible and without traumas? 4 Zeri ipopullit, No. 3, May 1990. 5 Zeri ipopullit, No. 3, March 1991; Decree-Law No. 7475, March 12,1991. 6 Ibidem. 534 Iljaz Fishta - Dilaver Sadikaj According to the world experience, there are two ways for the solution of this great problem: First, the application of a shock therapy or the road of immediate privatiza tion and rapid transition to a market economy. Secondly, the gradual transition of the centralized economy into a market economy, accompanied by state control. The First alternative creates the possiblities for a rapid switch of the econ omy of Albania into a market economy and stirs up great competition. This serves to establish strict discipline at work, to increase productivity, and un doubtedly it will be accompanied by the growth of overall production and the increase of the profits on the part of the enterprises. But this alternative is fraught with dangers since it would be accompanied by unfavorable results: rapidly increasing unemployment, disorder in the mar ket in the field of prices as well as great quick differentiations in the Field of ownership, the polarization of various strata of population. These phenomena cannot be easily and quickly understood by the different groups of the popu lation. Logically, the application of such a road of privatization would be ac companied by psychological worries and political tensions among various strata of population. The second alternative, that of a gradual transition from the centralized economy to a market economy leads to a slower increase of production, that is, of the economy. But it may bring about better solutions with regard to the above mentioned phenomena and it appeases some of these phenomena, such as unemployment, disorders in the Field of prices, etc. The state may interfere and exert its influence in different forms, through the Fiscal system, in the Field of prices ets.

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