How corruption and lack of accountability can set a country on fire: The tragic tale of ammunition trade in

The integration in the European Union and NATO is the only common political objective for the Albanian political class. The right wing came in power in 2005, under the slogan “With clean hands” – a fight in all fronts against corruption. Part and parcel of the ideology was the thinking that private sector can do better in terms of efficiency, transparency and corruption-free services than the government structures. It is under this thinking that the Prime Minister proudly points to Albania's now having the smallest government per capita in Europe1. It has enacted a 10% flat tax on both personal incomes and business profits. This rate is lower than Albania's previously low maximum rates of 23% on individual incomes and 25% on profits. Social security levies have been lowered by 31%. Tariffs with European countries have been eliminated. Government personnel is been cut by almost 30%, and the cost of procurement is down 20%. Total revenues have surged from 22% of GDP to 27%. Even the IMF strongly advised Albania against slashing tax rates, but such advice was ignored. To make government more efficient, the prime minister initiated a program with Estonia--a pioneer in this--to bring high tech to tax collection and government contracts.

While the Government proudly declares that the inflation is under control and that it is successfully fighting the corruption, most of the Albanians have to face a very tough life. The country continues to depend heavily on remittances, which according to some sources are as high as 13.5 percent of the GDP, although the figure could be much higher, according to the Bank of Albania. The Albanian emigrants have remitted more than the international assistance or 3 times more than the FDI in the country. An important part of the government attention in the last years has been on the fight against informal economy. However, it has to be noted, that the whole informal economy fight has as its main objective to collect more taxes and social security contributions. There is nearly no mentioning of informality in terms of labour relations and working conditions, which appear to be highly problematic in Albania, particularly in sectors such as building and construction, mineral extracting industry and textile, where many serious accidents have been registered and sometimes with casualties in people. The most extreme case has been the one of the Bulqiza mine, where 7 workers have died in the last 16 months. No matter the very dangerous working conditions in these sectors, workers have no choice but to continue their work and the casualties continue…

1 Forbes, 2008. http://www.forbes.com/forbes/2008/0407/015.html

1 Gerdec, , 15 March 2008

It is against this very gloomy reality that the tragedy of 15 March, in Gerdec, Tirana, should be considered. At least 24 people are known to have been killed, 4,200 houses destroyed more than 300 wounded by a series of massive explosions at an arms dump near the Albanian capital, Tirana on 15 March 2008. Many of the wounded people are still in serious conditions, and the number of casualties may rise. They happened as workers were dismantling obsolete munitions in a factory, which was a central collection point for an arsenal amassed by Albania's former dictatorship. Albania has about 100,000 tons of excess ammunition stored in former army depots across the country, according to Defence Minister Fatmir Mediu. The dismantling of the excess ammunition is part of the country’s reform to join the NATO, which is promised to happen in early April 2008. The tragedy of Gerdec, more than any other event showed the very face of the political, economic and social system in Albania. As such, the story of Gerdec has many facets, each of them worth to be analysed separated and in relation to each-other.

The international press has reported on the tragic story, referring to people working in the factory as specialists. The truth is rather different. The most obvious facet of the Gerdec tragedy is the life story of many poor Albanians who were willing to get such a dangerous job, for which they were paid hideously low. The stories told from people working there are shocking. They reported to have not been trained for the job, but only told not to smoke inside the factory. The price of dismantling one projectile was from 10 to 13.3 leke (approx: 10 euro cent). Attempting survival, in a country which continues to be the poorest in Europe, many of them would bring their wives and children to help dismantle as many pieces as possible. Children of the age 12-16 were reported to have been seen working in the factory and teenagers as old as 18 were employed from the private employer. Most of these workers were not officially registered as employed by the firm. They worked in black market, and so were their wives and children. The concerns over child labour and the responsibility of the state structure were denounced from many political subjects and organizations, such as CRCA, which has asked also the Minister of Labour to resign.

The catastrophic blast in Gerdec is a typical complicated story of corruption, which involves very high levels of politics and of state structures that were completely obsolete in controlling such a dangerous business. Often done in the name of small government, it reflects clear signals of government/politics capture. Although, the case is now under the investigation of the Attorney General, it is clear that the tragedy is a direct consequence of a corruptive affair of millions of Euros. Different sources report that there are violations of official procedures, which have created spaces for the sub-contracting private firm to

2 benefit not only from the sell of scrap metal from the dismantling of ammunition in the international market2, but also to benefit illegally millions of euros through illegal sell of ammunition. The international traffic of weapons is another serious facet of the story.

The state capture? (Extracted from the Albanian Newspaper Shqip)

On 28 of December 2006, Mihal Delijorgji – a young, talented and successful businessman, registers its business the “Albdemil” company, with the main objective “dismantling and export of all kinds of ammunition”. The headquarters of the company are declared to be in Gerdec. Patrick Cornelious Henry III, a representative of the American company SAC (Southern Ammunition Company), is a co-partner of Albdemil company. Until this time, there was no legislation in Albania which permitted a private company to trade or ammunition.

On 14 March 2007, two months and a half later, the Council of Ministers decides that the state company MEICO (established with the purpose of ammunition export-import on behalf of the government) can contract “different subjects” to sell and dismantle ammunition. Up to this moment, MEICO – the state company – had the monopoly of trading any ammunition in and out of the country. Likewise, the dismantling of the ammunition up to this moment, was done only by the military factories under the strict surveillance of the Armed Forces, though the projects financed from international donors. Any ammunition trade was done with special decision of the Council of Ministers.

On 5 April 2007, amidst opposition from the left wing political parties, the Parliament approves the law on “The state control on the import-export activities of military goods of the double use technology”. After the Decision of the Council of Ministers of March 14, 2007, this law takes totally away the state monopoly on the ammunition of trade and opens up for the private operators.

In the same day that the law is approved by the President of the country, 17 April 2007, the private company “Albdemil” is registered in the Court of Tirana as a private subject with main activity “Trade, export-import, of the military goods and dismantling of the ammunition”. Seven days later, “Albdemil” registers in the Directory of Taxes and in the same day is given the certification of the recognition. This is particularly strange, given that all the reports in doing business in Albania, point to the long waiting time to be registered and certified. The day after, the Minister of Defence signs and approves the project “On the procedure of treating the weapons, technique and equipments of the Armed 2 There are also voices who argue that there is a percentage of gold as high as 3% in the scrap from the ammunition. But the technology in Albania can not separate these elements. (http://www.gazeta-shqip.com/ artikull.php?id=38935)

3 Forces regarding selling for dismantling of an amount of ammunition”. On the very same day, the Minister of Defence, orders the United Command, to make at the disposal of the dismantling the ammunitions, the facilities of the former- military base in Gerdec. This was the same place where the company “Albdemil” had its headquarters. The high officials claim that the order of the Minister has circumvented the Armed Forces from the surveillance of this process, although up to that time the dismantling was done only from them. In the meanwhile, the work to create the dismantling factory had already started in Gerdec.

What lies beneath?

The American company SAC, was selected (it is unclear whether there were other companies) in the waiting hall of the Secretary General of the Ministry of Defence, based on a presentation provided with a laptop according to the V. Colonel Ndreu. But what is SAC? SAC was established in 1975 and its main activity is trading bicycles and equipments for sportive weapons. The company is reported to have many problems with taxes in the US and has been sued 9 times from the tax authorities for not complying to the rules. Albanian newspapers claim that behind Southern Ammunition Company and Patrick C Henry III, is just a ghost company which has sold its American name to benefit from weapon and ammunition traffic in Albania. Mero Baze, a well-known commentator close to the right-wing political parties, argues that there are good reasons to believe this is a pure history of high corruption. The SAC was presented from the Minister of Defence as one of the three most specialised companies on dismantling ammunition in the world. The scenario seem to have been very simply, says Baze, the Albanian company Albdemil, has been promised this contract from the Ministry of Defence. Albdemil found an American company that had something to do with the ammunition, paid to them part of the profit and ensured the monopoly in this very profitable business. Indeed, the first declarations of the government said that the Ministry of Defence has contracted SAC, which then in return has sub-contracted Albdemil. SAC did nothing to help the poor budget of the Albanian government, but just took out its part by selling its name. But, as the General Attorney is working on giving the real history behind this contracting and subcontracting, there are many issues to be considered.

The SAC, in which Albdemil has also its share, was given a first contract from Ministry of Defence for not more than $2,200 thousand. The second contract, dated 28 December 2007, in between MEICO and SAC specifies the conditions under which SAC would accept the goods from the seller. The point 7.4 of the contract says, if during the dismantling process there will be ammunition which contains steel, instead of brass, this ammunition will be turned back to the seller (Albanian government). Such a condition was not part of the first contract.

4 The workers employed in that factory confirm that the way they cleaned the brass projectile shells was special. After being dismantled, they were cleaned carefully so there was no sign of any gun powder. They were then separated from the rest of the scrap metal, and were then loaded in trucks towards Rinas airport. For every ton of ammunition, there was nearly 70 percent of scrap metal. Only in the first phase of the project there were about 1,875 tons of scrap metal which is being sold in the market of the neighbourhood countries with about 5-6 thousand Euro per ton. There were about 20 thousand tons of ammunition being dismantled in the first phase, resulting in about 14 thousand of scrap metal or about 70 million euro. This amount does not include the sell of other elements. The second contract (which could not be terminated) foresees the dismantling of a huge amount of ammunition, which profits amount to billions of euro.

But there is more to that…

Why was such a dangerous business placed in an inhabited area? One answer is that parallel to the business of dismantling ammunition and selling the scrap metal, the Albanian company was also involved in hidden business of selling ammunition with main destination Afghanistan. From a simple check in the Albanian Centre for International Trade, it results that Albania has been trading bullets with Argentina, Iran, Iraq, Israel, Georgia in the last years. Whether, this were only the coverage and were later on sold elsewhere this is not yet clear and it may need an international investigation. It is however, shocking that to get the best of profit, someone would place the business in the middle of villages. Gerdec is close to the airport and the Durres harbour. So the company would have the lowest costs of transportation each other way, given that the transport of the ammunition from the military bases to Gerdec as specified in the contract was on the Ministry of Defence. The Ministry of Defence decided to shoulder all the economic risk of this transport and not only.

The whole contracting to the private company is more shocking considering the fact that there are three state-owned companies which are specialized in dismantling ammunition. They are placed in special areas, isolated from the inhabited areas. The process of dismantling is done from special machineries far from the workers, who are specialized for many years and get training for more than a week every new type of ammunition that they are going to dismantle. The factory of Polican is one of the three state-owned specialized companies that operate based on projects of dismantling. 3,500 workers of this company that have been working on dismantling ammunition for 40 years have no work to do, waiting for contracts from the Ministry of Defence, which apparently was too busy to contract with the private company - Albdemil. Albdemil from the other side was far too greedy to let any other company dismantle ammunition. This is

5 the reason why in the moment of explosion there were hundred, thousand of projectiles stored in the factory, although according to the contract the Albanian military should have sent only an amount of ammunition that was possible to be dismantled in a day. From 2005 to February 2008, the Ministry of Defence has given the Albdemil about 41% of the total ammunition to be dismantled. Given the existence of three state-owned companies, Albdemil thought of better collecting as much as possible ammunition, no matter what is written in the contract.

The tragedy of Gerdec raises many serious issues, but so far we have seen only the Minister of Defence resigning. The Prime Minister has accused all the institutions, but has not taken any responsibility. Truly, Gerdec is testimony of institutional failure, but the main question hanging is: What happened to the reform of fighting the corruption that the Prime Minister declared so proudly when he came in power? In fact, in the last years thousand of civil servants were fired from the public administration, either in function of a small government, but more often to employ completely incompetent staff, which had only one merit – being militants of the political parties. Shouldn’t we all think that the reforms to fight the corruption were nothing more than attempts to control the state with people that were only puppets led by the Prime Minister? What the Prime Minister calls today failure of public administration is only the direct result of the reforms undertaken by him. The public administration, in the ministries and other central institutions, was fatally hit from with massive, illegal lay-offs of the professionals only to be replaced by dangerous, incapable and coward militants. The Prime Minister implemented a reform of public administration which sought to employ people who could be easily controlled and ordered to sign corrupted documents, so after they could also be accused and even condemned, just to close any case. Indeed, the Albanian public administration today is now crowded with such people, completely dependant on the political parties, people who are afraid and who are totally unprotected but from the following blindly the orders of their leaders.

It is extremely sad that if this tragedy wouldn’t have happened, the bosses of the military business would have continued their business as usual. The wealth of poor Albanian, which during the totalitarian system was transformed in ammunition, during the so-called democracy is being transformed in gold and deposited in the bank accounts of few mafia bosses and their political allies. All these issues are now raised in the media, from the political parties and civil society organisations. Indeed, a state that is not even able to stop illegal constructions should have it much harder to monitor and regulate the activity of the private sector and all the perversities it may produce. The question that we do not hear is: Are we privatising the state in the name of liberalisation movement? Who is going to say stop to the decisions taken in full secrecy? Who

6 is going to challenge the ideology of privatisation and mobilise the society to stop the privatisation of public services and other vital services? Isn’t there enough evidence in the last 17 years?

And to conclude, as our government is very much committed to the construction of nuclear power in the country and in the wake of the Gerdec tragedy, is Albania going to be the next Chernobyl?

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