8 June 1993

Doc. 6859

1403-3/6/93-3-E

REPORT

on economic assistance to Albania

(Rapporteur: Mr AARTS,

Netherlands, Group of the European People's Party)


Summary

      The Albanian people have suffered enormously from the isolation imposed by dictatorial rule, and decades of extreme misallocation of resources will require great governmental determination in order to hold on to the central pillars of the modernisation programme, until positive results become tangible also for the broader population. Hence the importance of increased international co-operation for the future of democratic institutions and economic development, which are closely intertwined in the former communist countries. Destabilisation in Albania would further unsettle the war-torn and conflict-ridden Balkan region.

I. Draft resolution

1.       The Assembly greatly welcomes the considerable efforts undertaken by the Albanian Government and Parliament to introduce a democratic form of government, as well as economic reforms based on the principles of a market economy.

2.       At the same time the Assembly is aware of the magnitude of the tasks to be accomplished by the Albanian authorities, reconstructing a country devastated by decades of extreme misallocation of resources and self-imposed isolation. Hence the vital importance of increased international aid to deal with the enormous problems of economic restructuring.

3.        Contributing to the solution of these problems through international co-operation is important for the future of democratic institutions and economic development which are closely intertwined in the former communist countries. Destabilisation in Albania would further unsettle the war-torn and conflict-ridden Balkan region.

4.       Consequently, the Assembly calls on the governments of Council of Europe member states and on the European Community:

i.       to extend any conceptual and material assistance to Albania to prevent that country becoming a destabilising factor in the Balkan region, and to mobilise the country's human resources;

ii.        to ensure that international aid, both bilateral and multilateral, continues to be provided over coming years, in order to alleviate the "transformational recession" in Albania;

iii.        to increase foreign trade with Albania — by opening their markets and offering favourable trade conditions to it — in order to secure the restructuring process of the Albanian economy;

iv.        to help in establishing a modern transport and telecommunications infrastructure;

v.       to assist in building an efficient administration at national and local level, built on unambiguous laws and a functioning judiciary;

vi.       to help in closing legal gaps in various economic and social regulations, and provide technical assistance for that purpose;

vii.       to stimulate contacts at all levels, such as exchanges between students and teachers, and to promote vocational training notably in such sectors as industry, banking, business administration and management.

5.        Finally, the Assembly encourages the Government and Parliament of Albania:

i.       to achieve social and economic development and to create the institutional and legislative framework conditions for this purpose, in particular as they relate to democracy, human rights and the social protection of vulnerable groups;

ii.       to pay particular attention to the need to establish clear legislation governing business, including foreign investment; a fair and authoritative juridical system; and a functioning banking and financing sector and infrastructure, fundamental to any sustained economic development;

iii.        to continue the privatisation of agriculture, not least by supporting new forms of co-operative initiatives in financing, production and marketing;

iv.       to develop the long-term tourism potential of the country in a prudent, responsible way, not least by investments in tourist and recreational facilities, while paying due attention to the need to preserve the cultural heritage and the environment;

v.        to undertake measures designed to promote and develop the mining sector, notably by investments from various sources, which could in the longer term supplement agriculture as a corner stone of an export-oriented growth strategy;

vi.        to maintain and strengthen pluralist society and democracy, and to ensure protection of minorities, in conformity with Council of Europe and other international standards.

6.       The Assembly calls on the Albanian Government, donor governments and multilateral institutions to manage external aid to Albania in a responsible and efficient way.

II. Draft recommendation

1.       The Assembly is aware that without a stable democracy, efficient political and legal institutions and a functioning administration, social and economic development cannot be sustained.

2.       The Assembly therefore recommends that the Committee of Ministers:

i.       intensify its co-operation with Albania, notably through assistance in the fields of democratic institution-building, human rights and social protection standards, legislation and public administration;

ii.       provide adequate funds for this purpose with a view to facilitating Albania's accession to the Council of Europe.

III. Explanatory Memorandum

by Mr AARTS

Contents

Page

A.       Introduction       5

B.       From isolation towards reform: a profile of Albania        5

      1.       General       5

      2.       Political and economic developments in 1991-92       6

      3.       Towards economic reform (April 1990-March 1992)       8

      4.       The reform programme of the present Albanian Government       9

C.       Economic assistance to Albania: an overview        11

D.       Concluding remarks        13

APPENDIX:       Relations and co-operation between the Council of Europe

      and Albania


A.        Introduction

1.       The present memorandum has been drawn up following a visit by the committee on Economic Affairs and Development to Albania in December 1992. The visit was extremely instructive. The committee thanks the Albanian Parliament and Government for their invitation and hospitality during our visit.

2.       Your Rapporteur, and several of his colleagues, on this occasion prepared a motion for a resolution on assistance to Albania (Doc. 7628). The motion is short, but it springs from a feeling of extreme urgency, on the part of its signatories as a result of what they saw.

B.       From isolation towards reform: a profile of Albania

1.       General

3.       For many centuries, Albania and her people have suffered violent conquests and occupations by other nations. The Ottomans invaded the country in the 15th century and their involvement lasted some 500 years. After Russia's victory over the Ottoman empire in 1877, the Treaty of San Stefano called for the division of Albania between Montenegro, Bulgaria and Serbia. Albanian independence was proclaimed in Vlorë on 28 November 1912 — which made Albania the last country in the Balkans to achieve its independence — notwithstanding virtually half of the nation not being included in independent Albania.

4.       The country's independence only lasted until the Italian army invaded Albania in 1939. During the second world war it was annexed by Italy and later occupied by Germany (1943). From November 1944 onwards Albania experienced an uninterrupted period of strong centralist rule under Enver Hoxha, the unchallenged communist leader until his death in 1985.

5.       Indeed, during more than four decades, until the beginning of 1991, Albania was one of the least known and least accessible countries in the world. It dwelt in self-imposed isolation, ruled by an authoritarian regime that attempted to carry out one of the most far-reaching experiments in communist orthodoxy. Although not much was known about the country's economy, Albania was usually characterised as the poorest and least developed nation in Europe, probably the only one in the continent with standards of living resembling those of Third World countries.

6.       Compared with other European countries, the agricultural sector is relatively important: during the 1980s, it accounted for one-third of the country's GNP, and employed nearly 50% of the total working population. The share of the industrial sector in GNP was 44%, while that in employment was 22%. The remainder was accounted for by the services sector, of which construction was the most significant. Transportation and communication systems are poorly developed in Albania and are similar to those in low-income developing countries.

7.       The country's dire economic problems derive primarily from an extreme misallocation of resources over four decades of central planning, radical egalitarianism (except for the ruling elite) and an uncompromising policy of self-reliance (especially since 1978, when links were broken off even with China, its last "ideological ally").

8.       Albania had, by the middle of 1991, joined the reform movement sweeping central and eastern Europe. In June 1991, the first non-communist coalition government in the post-war era was formed. Diplomatic relations with many countries were resumed, and Albania joined international organisations such as the International Monetary Fund, the World Bank, and the European Bank for Reconstruction and Development.

9.       As Albania attempts to reform its political and economic system and rejoin the world community, and as more information about the country becomes available, the picture that emerges is one of an exhausted economy in the midst of a profound crisis, probably more serious than that experienced by any other transition economy.

2.       Political and economic developments in 1991-92

10.       Since the first student demonstrations took place in January 1990, Albania — like Bulgaria and Romania — has been undergoing a two-stage political transition. Concurrently, the already critical condition of the Albanian economy deteriorated further in 1991. As institutions collapsed, inappropriate financial policies and social unrest exacerbated macro-economic imbalances and impaired production growth.

11.       In 1991 three governments succeeded each other. Following the first free elections in forty-five years, the Party of Labour (later renamed the Socialist Party), supported by rural votes formed a government in April of that year. Following large-scale strikes and protracted unrest, a coalition government of "national stability" (comprising members of all parties, including the Socialist and the Democratic Party) was formed in early June. Members of the Democratic Party held most of the key ministerial positions in the economic field and were primarily responsible for initiating new economic policies and legislation. However, in early December 1991, the Democratic Party members of the coalition government resigned, accusing the Socialist Party of stalling legislation on political and economic reform.

12.       Indeed, the new general elections on 22 March 1992 marked a radical break with the past: the Democratic Party — whose leader, Mr Berisha, became the new President of Albania on 9 April 1992 — won two-thirds (92 of 140) of the seats in parliament.

13.       Yet, from a political viewpoint the consolidation of the democratisation process in Albania is certain to come up against two major obstacles: (1) destabilisation of the Balkans, and in particular the former Yugoslavia where the other 50% of Albanians live — mainly in Kosovo (90% of its population is of Albanian stock); and (2) the disastrous economic situation.

14.       The present Albanian Government, which took office after the March 1992 elections, has inherited a collapsing economy with spiralling poverty, and a breakdown of the social order. From December 1990 the country has experienced a virtual paralysis of its economic activities: with social unrest persisting and essential inputs unavailable, gross industrial output is estimated to have reached only about 60% of the previous year's level. Most state enterprises had either shut down or were operating at very low capacity by the end of 1991. Unemployment was thought to be about 30% to 40% of the active population.

15.       Food shortages became widespread, with crop production estimated to have dropped by more than 35%. The "spontaneous privatisation" resulting from the dismantling of collective farms (which owned 75% to 80% of the arable land) — and the uncertainty about ownership rights as well as continuing shortages in seeds and spare parts for machinery etc. — sharply constrained farming activities. As a result, large areas of field crops were not sewn, inducing substantial declines in yields.

16.       In addition to low production, the availability of food was further impeded by the breakdown of the state distribution and marketing systems: the role of the grumbullims, the state distribution entities, diminished considerably as farmers preferred to sell their products on emerging free markets. Hence, in 1991, free agricultural markets did not fully develop, while the formerly organised system collapsed. The severe inadequacy of transport aggravated the situation.

17.       The Albanian authorities have largely lost control over financial policies. In 1991, the country's budget deficit (excluding grant inflows from abroad) grew to the equivalent of 36% of GDP. The deficit widened further in the first half of 1992 to a staggering 74% of GDP. The budget came under particular pressure because of a sharp decline in profit transfers from state enterprises, reflecting the collapse of domestic output, and increased wages, subsidies and employment compensation — resulting from political pressures. The widening fiscal imbalance sparked rapid monetary growth. After remaining virtually fixed for several decades, consumer prices were partially liberalised in November 1991, and are estimated to have increased by 104% during 1991. Inflation reached a monthly rate of 10% to 15% by March 1992.

18.       As a cumulative result of the disruptions in the production and distribution systems and of lax financial policies, the worsening of Albania's external position was inevitable: exports fell by more than 40%, constraining the country's ability to import essentials (raw materials, machinery, spare parts), as available foreign currency was used primarily to import food. The balance-of-payment difficulties intensified in 1992: imports were expected to double to around 500 million United States dollars, while exports were unlikely to exceed 65 million United States dollars.

19.       Moreover, inappropriate external reserve management — the Albanian State Bank attempted at boosting reserves through speculation in international currency markets and lost more than 150 million United States dollars (115% of 1990 exports) on such activity between 1988 and 1990 — led to a virtual exhaustion of foreign reserves and to the accumulation of sizable arrears on external payments. Albania's convertible currency debt rose from a negligible level to about 550 million United States dollars, representing eight to nine times the income received from the export of goods and services.

20.       In spite of its dramatic economic situation, Albania has some assets: it is well endowed with natural resources, which could in the longer term complement agriculture as the cornerstone of an export-oriented growth strategy. The Albanian sub-soil is very rich both in energy products (deposits of oil, with reserves estimated at 200 million tonnes, natural gas, and a substantial electricity-generating capacity from hydro-electric power), and in metal ores. A few years ago, Albania was the third largest producer of chrome. There is also a substantial potential for mining ferro-nickel, copper, coal, bitumen and salt. In addition, tourism may eventually become an important economic factor.

21.       Certain members of the Committee on Economic Affairs and Development have drawn attention to the dangers of touristic overexploitation of a fragile country such as Albania, both physically and as regards the need to preserve a unique cultural heritage. Other members pointed to other countries which have succesfully reconciled tourism expansion with environmental protection. They believe that international co-operation with Albania could help it master also this difficulty.

3.       Towards economic reform (April 1990-March 1992)

22.       The Albanian Government has pursued economic reform at a moderate pace since April 1990. Even though it was trying to shed its legacy of economic and political isolation, its starting conditions and reform prospects were daunting. The administrative system had virtually collapsed, and social unrest (and crime) was on the rise. Despite poor economic performance and against many obstacles, the authorities nevertheless made efforts in effecting liberalisation measures, in particular relating to structural reforms in the agricultural sector.

23.       The external sector reforms of the Albanian Government focused on removing legal impediments to foreign credit and investment and on partially liberalising foreign trade and exchange restrictions. In July 1990, two decrees were approved by the Albanian Parliament, which lifted the constitutional ban on foreign borrowing. In addition, the decrees allowed foreign direct investment, established legal protection against arbitrary expropriation, and permitted joint ventures of foreign firms with Albanian enterprises. The state monopoly on foreign trade was phased out and replaced by a system of export and import licensing in December 1990. Foreign trade has been entirely liberalised since August 1991. All trade has been conducted in convertible currencies since January 1991.

24.       The domestic economy reforms of subsequent Albanian governments in 1991 aimed at diminishing the role of central planning and at allowing private initiatives. By a decree of March 1991 private ownership was allowed for all types of property (except, initially, land), and a special credit programme was introduced for new private economic institutions. Privatisation was again addressed in legislation in August 1991: the new privatisation law created the Preparatory Commission for the Process of Privatisation (PCPP) and the National Privatisation Agency (NPA) — responsible for valuing state assets and state enterprises, and intermediating between the state and buyers.

25.       However, implementation remained slow, mostly due to continued legal ambiguities and to the fact that the law only covered small- and medium-sized entities. Nevertheless, as a result of the tolerance of private activity, as of early 1992 about 11 000 small retail shops and other commercial entities have been privatised. Moreover, a number of new small-scale private trading entities (around 4 400) were established throughout the country, giving rise to a rapid development of parallel markets.

26.       Reforms proceeded more rapidly in the agricultural sector: private trade in agricultural products has been allowed since mid-1990 and the criteria for the distribution of land and other property of collective farms were established in August 1991. As of mid-1992, about 70% to 75% of arable land previously controlled by collective farms had been distributed to private occupants. However, the new owners have no legal right to sell their property.

4.       The reform programme of the present Albanian Government

27.       Albania has reached agreement with the IMF on a one-year stand-by arrangement, effective from August 1992. This has confirmed the commitment of the new, democratically elected Albanian Government to a macro-economic adjustment programme, financial policy control and market-oriented reform.

28.       As described above, during 1991 Albania portrayed a grim picture of poverty and economic decline. It was against this bleak background that the Albanian Government introduced its macro-economic programme in July and August 1992. The government's strategy has been to take emergency measures aiming at halting the drastic decrease in production, while laying the foundations for structural reform.

29.       Some of the most radical elements of the programme concern the foreign trading mechanism. The new government has introduced a floating exchange rate policy for the lek, and has eliminated nearly all quantitative import controls. It has also permitted banks to accept deposits denominated in foreign currency, and has allowed enterprises to hold on to their foreign currency earnings. (In the first days after the lek started floating on 1 July 1992, it depreciated by 55%. However, by the end of 1992 the government was able to stabilise the foreign exchange rate at nearly 97 leks per 1 United States dollar as opposed to 120-130 leks before the stabilisation measures.)

30.       One of the main elements of the programme has been the comprehensive liberalisation of the price system — with the aim to increase efficiency in the allocation of resources and re-establish incentives to produce, especially in agriculture. Almost all prices were freed on 1 August 1992. Prices of a few basic consumer goods (primarily food) remained centrally administered, but these prices had been raised by 300% to 400%. These factors, and a concomitant deep cut in budgetary subsidies have doubled the price level.

31.       To contain inflation in the new free-price environment, financial policies have been tightened drastically. Expenditures have been reduced sharply: the largest cuts have been in subsidies, but the Albanian Government has also taken action to limit public sector pay increases, and reduce spending on the military and on internal security.

32.       This policy has brought some results: the budget deficit which had been forecast to 30% of GNP in 1992, was reduced to less than 20% — owing to the rigorous application of the stabilisation programme. Inflation decreased, in November and December 1992, to a monthly rate of 4% to 5%, a level very close to the target set by the IMF stand-by arrangement. At the same time, unemployment is estimated to stand at about 70% of the active population, and the financial situation of enterprises worsened in 1992. (Unpaid bills have increased from 1 thousand million leks in January 1992 to 12.6 thousand million leks.)

33.       In a joint effort with the IMF, the Albanian Government has also worked out an action plan for the development of the enterprise sector. This plan foresees the writing off of the enterprises' debts; restarting production in some enterprises of vital economic importance, such as mining and energy; and the introduction of measures aimed at increasing financial discipline.

34.       Concurrently, rapid privatisation of public enterprises would be undertaken, including measures such as: the adoption of new legislation on privatisation, together with the restitution to and compensation of the former owners; the privatisation of state farms (which would complete the change in ownership structure in the agricultural and housing sectors).

35.       According to preliminary calculations, as a result of the restructuring programme under way, nearly 40% of enterprises might have to be closed down in the course of 1993. To counter spreading strikes, a new law is in the making to reform Albania's social security system. The government's macro-economic programme also includes an income policy, but given official projections for inflation, the targeted wage adjustments would imply a continuing decline in real wages.

36.       From recent information given by the Finance Minister of Albania at the second annual meeting of the European Bank for Reconstruction and Development in London on 26 and 27 April 1993, which the Chairman of the Committee on Economic Affairs and Development was able to attend, it appears that Albania is making some significant progress in certain sectors: notably by arresting the sharp decline in output, freeing prices, eliminating subsidies, fostering agricultural production and privatising large sectors of the economy, notably land ownership. Much progress has been made in adopting new legislation and in providing framework conditions. However the public deficit has grown alarmingly and inflation is not completely under control. Most industry is not yet privatised and it may prove difficult to find (foreign) candidates. A revised privatisation law will soon be presented to parliament.

37.       Albania has suffered enormously from its self-imposed isolation, and decades of extreme misallocation of resources will require great governmental determination to hold on to the central pillars of the modernisation programme until positive results become tangible also for the broader population. Hence the vital importance of increased international co-operation to deal with the enormous problems of economic restructuring, and to mobilise the country's human resources.

C.        Economic assistance to Albania: an overview

38.       Albania can well be considered a test case for the effectiveness of western assistance to the transition economies. While its economic situation certainly appears to be more disastrous than that of any of the other central and east European countries, the country's advantages (its small size, its natural and human resources, and its geopolitical importance) might help bring about more rapid economic recovery.

39.       At any rate, in the course of 1990-91 Albania received the highest per capita amount of aid 1 280 — granted by the Group of 24 countries (essentially the OECD area) and international financial institutions (IMF, World Bank, EBRD) to the central and east European countries. As regards the distribution of aid per donor, the European Community (member states and Community budget) provided 88% of total aid, or 362 million ecus (303 million ecus from the member states and 59 million ecus from the Community budget). Half the aid took the form of emergency food supplies to Albania. Humanitarian aid is also important, that is a housing construction programme for former political prisoners (financed from the Community's PHARE programme).

40.       Among the European Community member states, Italy is the largest donor, providing two-thirds of the Community's aid to Albania. Germany, with 9,4% of aid, and Greece with 7,6% are other main donors. Outside the European Community, the Turkish contribution is considerable (7,7% of total aid). Half the aid consists of non-repayable grants, 20% of export credits and the rest of loans.

41.       Following attempts by nearly 40 000 Albanians to flee to Italy during 1991, and in response to the Albanian Government's request for food aid, the Group of Twenty-Four (principally Italy) responded by committing over 200 million United States dollars in food and commodity aid, of which a substantial sum has subsequently been disbursed by Italy. As of mid-1992, total assistance committed by the G-24 countries and the World Bank amounted to 900 million United States dollars, of which almost 600 million United States dollars in grants and the rest on a concessional basis.

42.       Albania has also become eligible for IDA (International Development Association) resources in view of its per capita income (plausible estimates of 1991 GNP per capita range from 600 United States dollars to 720 United States dollars), its lack of creditworthiness for borrowing on market terms, and the potential for IDA resources to make a critical contribution to its reform efforts.

43.       In the wake of the successful conclusion of a one-year stand-by arrangement between the IMF and the Albanian Government, the G-24 countries providing co-ordinated external assistance to the central and east European countries met exceptionally on 22 and 23 July 1992 in Tirana. (International organisations at the meeting included the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, OECD, the Council of Europe and United Nations Specialised Agencies.)

44.       The participants agreed that two main problems confront Albania and its people today: how to overcome the humanitarian and social problems caused by the breakdown of the economy, and how to revive the economy on a market-oriented basis. The main efforts to solve these problems should be made by Albania itself, but the G-24 countries confirmed their willingness to support these efforts.

45.       In the first place, the G-24 donors were encouraged to continue their humanitarian and emergency aid to help the Albanian people cover their food needs until the 1993 harvest. In addition, they were urged to mobilise exceptional balance-of-payment assistance — complementary to the assistance provided by the IMF — to support the macro-economic stabilisation programme of the Albanian Government. The European Community has decided on a first grant of 35 million ecus (42 million United States dollars) in December 1992, and envisages another tranche for 1993. (In sum, within the Group of Twenty-Four a total amount of 165 million United States dollars has been raised, with a view to ensuring a sustainable balance-of-payment situation and strengthening the country's foreign currency reserves.

46.       A declaration on co-operation was signed by the EFTA countries and Albania in December 1992. It will favour the expansion and liberalisation of trade relations between EFTA countries and Albania (co-operation on customs and tariff matters; and removal of technical barriers to trade). An important part of EFTA co-operation with Albania consists of training programmes; from trade policy seminars to scholarships.

47.       Since Albania's adherence to the European Bank for Reconstruction and Development in December 1991, the Bank has developed a wide range of technical assistance programmes in Albania. The priority areas of EBRD operations in that country include the energy sector, tourism, telecommunications, and various training programmes for Albanian officials in banking, business administration and management.

48.       In December 1992, 7,5 million ecus were committed by the Bank to helping in the modernisation of telecommunications, and it has also contributed to the elaboration of guidelines for the development of the tourism industry, and to a legal framework for the Albanian oil sector. The Bank assists the Albanian Ministry of Trade in establishing and operating a business promotion centre to provide foreign investors with information on potential investment opportunities, on relevant laws and regulations and, lastly, to facilitate investment approval procedures.

49.       Similarly, experts from UNDP's Management Development Programme assist the Albanian Government to set up a Management Training Centre in Tirana. It will improve the government's ability to foster reforms in the field of public administration.

50.       Yet, to ensure the success of economic change in the medium term, there is a need to close legal gaps in the economic and social regulations. A great handicap in establishing a new legal framework is that during the "cultural revolution" the Ministry of Justice was abolished in Albania. The ministry was re-established only in 1990 and has had to start from scratch. The government's priorities are civil code, commercial code, company law, civil procedure code and penal code. In 1992 a law was passed guaranteeing an independent judiciary, but there is an enormous lack of experienced lawyers.

51.       Over the past two years the Council of Europe has developed a number of co-operation and assistance programmes with Albania (for the detailed description of these activities, see appendix to this document). The main instruments for implementing these programmes are legislative assistance, expert appraisals and training.

52.       A new development in the working methods of the Council of Europe's co-operation programmes has been the establishment in Tirana — at the request of the President of Albania, Mr Sali Berisha — of a task force which provides the Albanian authorities with legal advice on the reforms of institutions and legal systems. The members of the task force present in Tirana co-ordinate also the various Council of Europe co-operation and assistance activities with Albania.

D.        Concluding remarks

53.       The Albanian people have suffered enormously from the isolation imposed by dictatorial rule, and decades of extreme misallocation of resources will require great governmental determination in order to hold on to the central pillars of the modernisation programme, until positive results become tangible also for the broader population. Hence the importance of increased international co-operation to deal with the enormous problems of economic restructuring.

54.       In conclusion, your Rapporteur wishes to stress once again the urgency of the task of assisting Albania. The country finds itself in a highly volatile and dangerous region, with an acute risk of military conflict. Destabilisation of Albania would further unsettle the already war-torn and conflict-ridden Balkan region, especially when one considers that so many Albanians live outside Albania's borders.

55.       Moreover, your Rapporteur is convinced that the Council of Europe is in a unique position to help countries like Albania develop a national agenda which includes the political, the legal and the economic aspects of the transition process.

56.       Finally, your Rapporteur wishes to present proposals as a basis for consideration and international action in the form of a preliminary draft resolution and draft recommendation.

APPENDIX

Relations and co-operation between

the Council of Europe and Albania

Information note

prepared by the Secretariat

on the instructions of the Chairman

      Over the past two years the Council of Europe has developed co-operation and assistance programmes with the countries of central and eastern Europe (Demosthenes programme). These are designed to facilitate the establishment of institutions founded on the principles of pluralist democracy, human rights and the rule of law. Albania has been a beneficiary of the Demosthenes programme since June 1991. The Council of Europe assistance to Albania will be intensified in 1993.

      Within the framework of the Demo-droit Programme, five seminars have been requested by the Albanian authorities for implementation in the course of 1993. They are to deal with the function of clerk of a court of justice, the training of notaries with a view to the privatisation of the profession, the efficiency and fairness of civil justice, the independence of the judicial system and the legislative reform of central administration and the civil service. Furthermore a European law week is planned to be held at the University of Tirana.

      These "upstream" activities have been supplemented by "downstream" action designed to ensure that legislative reforms are implemented by the legal profession as intended by legislators, and to arrange for these professionals to be "retrained" in a way of thinking imbued with the principles of the rule of law and respect for human rights. This is the purpose of the Themis Plan. As regards the Themis Plan the Albanian authorities have shown particular interest in the training of judges, attorneys, prosecutors, prison staff and officials of the prison administration as well as officials of the Ministry of Justice and lawyers in charge of drafting laws.

      The Lode programme is a comprehensive programme covering all aspects of co-operation in the field of local government (from legislative expertise to staff training).

      The main instruments for implementing the plan are legislative assistance, expert appraisals, and training. As a beneficiary country of the "Lode" plan, Albania will participate in projects amounting to 625 000 French francs during the 1993 to 1995 period.

      In addition, mention should be made of a special Council of Europe project for Albania, namely, S.O.S. Children of Albania. This operation was launched by the European Ministers of Education attending the Standing Conference of Ministers on 16 and 17 October 1991 in Vienna. The conference adopted a resolution drawing the attention of governments of member states to a request by Albania for urgent assistance concerning school premises, equipment and transport. In response to this resolution, the Council of Europe launched an emergency relief operation in favour of Albanian schools. More particularly, the Secretary General was instructed to take, within the framework of Council of Europe competences, appropriate urgent measures in favour of Albania in the schools field, in order to contribute through an emergency help programme to the implementation of national measures. To date numerous convoys of materiel, including school buses, have been delivered to the children of Albania.

      The Parliamentary Assembly of the Council of Europe, at its 23rd Sitting on 5 February 1992, examined a report of the Committee on Migration, Refugees and Demography (Doc. 6555, Rapporteur: Mr Böhm) and adopted Recommendation 1179 (1992) on the exodus of Albanian nationals.

      It should also be recalled that at its 470th meeting in February 1992, the Ministers' Deputies, further to Assembly Recommendation 1171 (1992) on the situation of hospitals in Albania, replied to Written Question No. 342 from Mr Ruffy and Mrs Lentz-Cornette on emergency measures for the benefit of Albania. It instructed the Secretary General to take account, in the context of the emergency aid for Albanian schools, of the priority needs of the Tirana Paediatric Institute. The renovation and equipment project for the hospital is well under way, thanks to a contribution of nearly 6 million French francs by Switzerland. However, in spite of voluntary contributions from seven member countries (Cyprus, Greece, Liechtenstein, Luxembourg, San Marino, Sweden and Turkey), offers of equipment from Hungary and Spain, and a small sum (approximately 100 000 French francs) transferred at the end of 1992 from the emergency aid to the Albanian schools operation, nearly 7 million French francs still have to be found.

      Negotiations are now under way for a joint European Community/Council of Europe programme for Albania with a view to strengthening the respect of human rights and the rule of law, notably through the training of the legal professions and through assistance in the drafting of the new Civil and Criminal Codes and Procedures. The Task Force Albania will also be entrusted with the implementation of this programme.

      Reporting committee: Committee on Economic Affairs and Development.

      Budgetary implications for the Assembly: none.

      Reference to committee: Doc. 6728 and Reference No. 1837 of 1 February 1993.

      Draft resolution and recommendation unanimously adopted by the committee on 1 June 1993.

      Members of the committee: Mr Holtz (Chairman), Dame Peggy Fenner, Mr Lotz (Vice-Chairmen), MM. Aarts, Becker, Gudmundur Bjarnason, Bloetzer, Bonnici, Brach, Colombo (Alternate: Ferrari), Davis, Demiralp, Mrs Durrieu, MM. Efraimoglou, Fabra, Flückiger, Garcia Sanchez, Gasperoni, Gassner, Goerens, Gregory (Alternate: Brennan), Mrs Haglund, MM. Hellström, Kempinaire, Kiliç, Kittelmann, Konecny, Koritzinsky (Alternate: Gundersen), Le Grand, Lewandowski, Mesoraca (Alternate: Covi), Paire, Pinto, Pirinski, Rehn (Alternate: Särkijärvi), Rodrigues, Rokofyllos, Schwimmer, Mrs von Teichman, MM. Thoft (Alternate: Gjellerod), Townend, Valleix, Mrs Verspaget, Mr Wingtens.

      N.B. The names of those members present at the meeting are printed in italics.

      Secretaries to the committee: MM. Torbiorn and Mezei.