PROCEEDINGS BOOK Tirana, November 2015

5th International Conference on European Studies

Perspectives of Integration in the European Union: The Balkans

Proceedings Book

The Department of Political Science and International Relations

Proceedings of the 5th International Conference on European Studies 5th ICES 6-7 November 2015, Tirana, Albania Proceedings book Editors: Assist. Prof. Dr. Salih Özcan PhD C. Jubjana Vila Zeka MSc. Griselda Lici MSc. Endri Pajollari Publisher:

All rights reserved Epoka University press

Contents

Introduction .......................................................................................................................................................... vii Organizing and Scientific Committee ...............................................................................................................viii The European Conditionality and the Legislation on Lobbying, Conflicts of Interest and the Fight against Corruption in the Balkans .................................................................................................................................. 10 Assoc. Prof. Angela Di Gregorio ...................................................................................................................... 10 Neo-liberal Globalization and the EU Integration of the Western Balkans: The Case of Albania.............. 25 PhD C. Jonilda Rrapaj ...................................................................................................................................... 25 Spatial Planning in the Balkans between Transition, European Integration and Path-dependency .......... 41 PhD C. Erblin Berisha & Assist. Prof. Dr. Giancarlo Cotella.......................................................................... 41 Relationship between Self Determination and Nationalism in the Balkans ................................................... 72 PhD C. Arenca Trashani ................................................................................................................................... 72 Kosovo’s State-building: Exceptional Case in International Political Practices ........................................... 92 PhD C. Enis Rexhepi ......................................................................................................................................... 92 Improving Territorial Governance and Speeding up the Integration Process into the European Union: Good Ways of Consolidating Democracy in Bosnia and Herzegovina? ....................................................... 108 Dr. Tanja Cerruti............................................................................................................................................. 108 Crimes against Environment in Albania and the European Union's Approach to the Protection of Environment through Criminal Law ............................................................................................................... 131 Dr. Enkelejda Turkeshi .................................................................................................................................... 131 Central and Local Government Relations in Albania: Toward Decentralization ....................................... 156 MSc. Endri Pajollari & Assist. Prof. Dr. Salih Özcan .................................................................................... 156 Albanian Society in Post communism: “Fear society” or “Free society” ..................................................... 167 Dr. Ina Zhupa .................................................................................................................................................. 167 Political Party and Party System Institutionalization in Albania ................................................................. 186 Sara Cela & Assoc. Prof. Dr. Bekir Çınar ...................................................................................................... 186 Ways to Establish Self-Regulation on the Part of the Albanian Electronic Media in Coherence with European Union Prospects ................................................................................................................................ 217 Dr. Belina Budini............................................................................................................................................. 217 Marketing of Political Parties on Social Media ............................................................................................... 225 Assist. Prof. Dr. Vusal Gambarov, MSc. Besjon Zenelaj, Geldi Belba ........................................................... 225

iv

Integration of Bosniak Community in Albania ............................................................................................... 243 PhD C. Eglantina Reka ................................................................................................................................... 243 EU’s Trade Policy with Western Balkans ....................................................................................................... 255 MSc. Griselda Lici ........................................................................................................................................... 255 Religious Integration – Adopted Standards for Albania ............................................................................... 279 PhD C. Ahmed Kalaja ..................................................................................................................................... 279 Regional Integration and Fiscal Harmonization in Southeast Europe ......................................................... 290 Dr. Georgi Ranchev......................................................................................................................................... 290 The Framework of Economic Factors in Albania ........................................................................................... 316 Dr. Albana Demi & PhD C. Eglantina Farruku ............................................................................................. 316 Returns to Education in the Albanian Labor Market .................................................................................... 322 Dr. Juna Miluka............................................................................................................................................... 322 Comparative Perspective of Financial Sector Development of Two EU Candidate Countries in Transition: Albania and Macedonia ..................................................................................................................................... 346 PhD C. Erinda Imeraj ..................................................................................................................................... 346 The Impact of Greek Crisis on the Western Balkan Countries..................................................................... 358 Adela Laci & PhD C. Erda Cani ..................................................................................................................... 358 Statistical Analysis of the Relation between Inflation and Unemployment in Democratic States using Spearman’s ƍ Correlation Coefficient with Application in Albania ............................................................. 369 Prof. Dr. Fejzi Kolaneci & Brunilda Hoxhalli ................................................................................................ 369 The Performance of Mortgage Loans in Albania in Recent Years, Elements of the Process of Mortgage Lending in the Banking System and its Risks ................................................................................................. 387 MSc. Armanda Tola (Keqi).............................................................................................................................. 387 Albania: the Path to Nominal (Economic) Convergence................................................................................ 400 Dr. Merita Boka Toska , Assoc. Prof. Guiseppe Torluccio, Godiva Rembeci ................................................ 400 Sustainability Reporting Initiative in Balkans’ Higher Education Institutions: The Case of ECOSSS.... 419 Assist. Prof. Dr. Xhimi Hysa, Assist. Prof. Dr. Mustafa Üç, PhD C. Sonila Gruda, Artir Maliqi .................. 419 The Effect of Gross Domestic Product and Money Supply on Inflation, Albanian Case ........................... 435 Emanuela Buci, Bora Kokalari, Jonada Tafa ................................................................................................. 435 Explaining Total Revenue in terms of CapEx, Current Expenditure and VAT; Albanian Case .............. 452 Ditmir Sufaj ..................................................................................................................................................... 452 Empirical Evidence of Elasticity of Export and Import Towards the Change of Prices and Income - The case of Republic of Macedonia.......................................................................................................................... 471

v

Merale Fetahi-Vehapi & Liridona Lutfiu ........................................................................................................ 471 Corporate Social Responsibility (CSR); Attitudes of Foreign Enterprises in Post-Communism Society: Case of Albania .................................................................................................................................................. 493 Prof. Dr. Güngör Turan & MSc Jona Hoxhaj................................................................................................. 493 Relationship between Albania and Turkey after Free Trade Agreement .................................................... 528 Xhensila Beka & Assoc. Prof. Dr. Eglantina Hysa ......................................................................................... 528 The Stability of Money Supply in the View of Monetary Unification ........................................................... 545 Phd C. Altin Zefi & PhD C. Elona Shehu ........................................................................................................ 545 Teenagers` Problems Related with Social-Networking .................................................................................. 563 Albi Dode, Genta Rexha, Lediona Nishani ..................................................................................................... 563 My Neighbors Children: Reflections on Possible Curriculum Design for Mutual Care ............................ 571 Slobodan Dan Paich ........................................................................................................................................ 571 School Leader Self-Development Assessment: A Review Paper ................................................................... 600 PhD C. Ibrahim Can Korkut ........................................................................................................................... 600 Gagauzians and Turkish Language within the Context of Balkans ............................................................. 617 Assoc. Prof. Dr. Fahri Turk............................................................................................................................. 617 Globalizimi dhe Integrimi në BE ...................................................................................................................... 630 Dritan Balla ..................................................................................................................................................... 630 Paqëndrueshmeria Historike e Sistemit Politik në Shqipëri.......................................................................... 640 PhD C. Xhensila Pine ...................................................................................................................................... 640 Politika të Sigurisë dhe Specifikat e Policimit në Komunitet në Shqipëri pas Rënies së Regjimit Enverist .............................................................................................................................................................................. 649 PhD C. Artur Beu ............................................................................................................................................ 649

vi

Introduction

The 5th International Conference on European Studies (ICES 2015) titled “Perspectives of Integration in the European Union: The Balkans’’ is hosted by Epoka University on 6th and 7th of November 2015 in Tirana, Albania. Most of the Balkan countries are experiencing a challenging EU integration process. It has been a long process including social, economic, political and many other types of reforms and areas of integration that are all within the scope of the 5th International Conference on European Studies (ICES'15). The main aim of the conference is to promote an interdisciplinary exchange of ideas, knowledge, research, information and recommendations between scholars, professionals and students in all major subfields of political science, international relations, economy, sociology, and other related topics focusing particularly on the EU integration perspectives of the Balkan countries. Submitted abstracts were reviewed by the Scientific Committee of the conference in order to comply with the ‘peer reviewed’ conditions including abstract quality and research content. Further information on ICES 2015 is provided in the conference webpage http://ices.epoka.edu.al/2015/index.php I would like to thank all participants for their scientific contribution to the 5th International Conference on European Studies. Also, I thank the organizing committee for designing and managing this important event. Yours Sincerely, Assist. Prof. Dr. Salih Özcan Co-Chair, 5th ICES 2015 Organizing Committee



vii

Organizing and Scientific Committee Organizing Committee Assist. Prof. Dr. Salih Özcan, Epoka University, Albania Assoc. Prof. Dr. Bekir Çınar, Süleyman Şah Üniversitesi, Turkey PhD C. Jubjana Vila Zeka, Epoka University, Albania PhD C. Reina Zenelaj Shehi, Epoka University, Albania MSc. Griselda Lici, Epoka University, Albania MSc. Endri Pajollari, Epoka University, Albania

Scientific Committee Prof. Dr. Güngör Turan, Epoka University, Albania Prof. Dr. Ayhan Tekineş, Beder University, Albania Prof. Dr. Yasin Sezer, Beder University, Albania Assoc. Prof. Dr. Bekir Cinar, Süleyman Şah Üniversitesi, Turkey Assoc. Prof. Dr. Filip Stanciu, South East Europe Lumina University Assoc. Prof. Dr. Uğur Ergün, Epoka University, Albania Assist. Prof. Dr. Avdi Smajlaj, Epoka University, Albania Assist. Prof. Dr. Eglantina Hysa, Epoka University, Albania Assist. Prof. Dr. Gönül Oğuz, University of Giresun, Turkey Assist. Prof. Dr. Mustafa Üç, Epoka University, Albania Assist. Prof. Dr. Salih Özcan, Epoka University, Albania Assist. Prof. Dr. Urmat Ryskulov, Epoka University, Albania Dr. Halim Nezihoglu, Atatürk Alatoo University, Kyrgyzstan

viii

ix

The European Conditionality and the Legislation on Lobbying, Conflicts of Interest and the Fight against Corruption in the Balkans Assoc. Prof. Angela Di Gregorio Department of International, Legal, and Historical-Political Studies University of Milano “La Statale”, Italy

Abstract The aim of this paper is to outline the general characteristics of the legislation on lobbying and the fight against corruption in the decision-making process. This analysis – applied to the candidate countries of the Balkans – will be carried out based on two main reference points; first, the requirements of the European conditionality (which take into account international best practices) and secondly, the experience of the ‘new’ member States of the European Union. In particular, we intend to determine how the pressures of democratic conditionality have encouraged the adoption of a legal framework in line with European standards, even if the gap between the rules and their practical enforcement is quite significant. Also, we will reveal critical aspects of democratic conditionality, while at the same time emphasizing the cultural features of the Republics of the former Yugoslavia. These include not only their negative aspects and traits but also some powerful positive ones such as some interesting measures for ensuring civic participation in the decision-making process that were in place during the socialist era. Keywords: Lobbying, European conditionality, Balkans, Law enforcement, Corruption, Conflicts of interest. 1. Introduction This paper deals with the legislation on the fight against corruption and the conflicts of interest of public officials in the Balkans countries candidates for EU membership1. I will focus primarily on the regulation of lobbying, which is the pressure of private interests on public decision, while considering at the same time interconnections between different laws and supervisory authorities. In making this analysis I tried to identify models of legislation, considering not only the ‘instructions’ of the so-called European conditionality2 but also the legislative framework of other European countries, especially new democracies (the first 1

. I will consider here all the Western Balkans, even if not all these countries obtained the official status of candidate. For more information see: http://ec.europa.eu/enlargement/. 2 . In the broadest sense, with reference non only to the European Union but also to the Council of Europe.

10

generation of post communist democracies). This approach is neccessary, not only in terms of standards to be followed but also for the fact that the European conditionality has been applied in a quite similar manner both to the first generation of post communist democracies and to the current candidates. It is therefore interesting to see how the previous candidates have responded to it and how effective the legislation adopted in these areas have been so far. The main points on which to focus are: 1. The cultural context of the candidate countries, which is the main conditioning factor in the fight against corruption and in the law enforcement. 2. The legislation and its assessment by the Group of States against corruption of the Council of Europe (GRECO). 3. The comparison between the new member States of the Union and the candidates. 4. The critical aspects, both in legislation and in law enforcement, coming back to the cultural contest. As for the cultural contest, it is well known that in the new democracies, the fairness of decisionmaking process is highly conditioned by corruption and lack of transparency. Italy also must be included in the list of countries with a high level of corruption in the public sphere. The situation is improving, also thanks to some relevant legislative changes, but it is not enough3 (corruption in the Balkans is a problem especially in the judiciary while in Italy it invests mainly local authorities and public procurement). If we look at the list of Transparency International4, the 2014 ranking indicates that Denmark is at the first place; Italy at place 69 (together with Greece, Romania, Bulgaria); and the Western Balkans as follows: Macedonia (64), Montenegro (76), Serbia (78), Bosnia-Herzegovina (80), Albania (110), Kosovo (110). The need to regulate in a specific act addressed to public decision-makers phenomena such as lobbying and conflicts of interest has been expressed in several EU countries. There is everywhere a general need for more transparency and civic participation but in the so called ‘new’ democracies it is also necessary to protect a fragile democracy, where connections 3

. Please refer to: Castarelli, G., Papi Rossi, A., 2013, Le misure anticorruzione. Legge 6 novembre 2012, n. 190, Torino, Giappichelli; Barbieri, M., Talamo, S., Lo Stato aperto al pubblico, 2014, Milano, Il Sole 24ore; Caringella, F., Giustiniani, M., Toriello, O., La riforma Renzi della Pubblica Amministrazione, 2014, Roma, Dike Giuridica Editrice. 4 . www.transparency.org/cpi2014/results (corruption perception index 2014).

11

between economics and politics often degenerate into scandals provoking political crisis. In all the former communist countries a certain legacy of the past (non only communist), inevitably exists (a greater role of the state in economy and an incomplete delimitation between public and private interests). Corruption is widespread, especially in the Balkans and the former Soviet Union countries, and it is an obstacle to the consolidation of market economy and to the European Union membership. At the same time, however, the countries of the region play a pioneering role in experiencing an advanced legislative regulation of lobbying, as well as of the prevention of conflicts of interest, and fight against corruption. Precisely because of this cultural background, the drafting of rules to promote transparency of decision-making is dealt with particular enthusiasm, especially to meet the demands from outside (OSCE, GRECO or the European Commission). As for the models of legislation, we must consider that in all the European countries there is a lack of uniform and clear regulatory patterns in these subjects. A specific law on lobbying, for example, was adopted in the UK only in 2014 while in Austria, France, Germany, and the EU institutions there are less stringent rules5. Such an explication is necessary to understand the limits of the conditionality process. In Europe, most of the legislations on lobbying have been adopted precisely in the former communist countries. On paper these laws are quite sophisticated, albeit with some gaps, revealing a large engineering effort and the knowledge of foreign models (the US model prevails in the absence of successful European examples). However, the failure of their enforcement confirms the problematic circulation of legislative models in countries culturally very different. The great heterogeneity of the post-communist area should be at the same time underlined. Countries of Central Europe and the Baltic could take advantage of a cultural environment which is more inclined to the fairness and transparency in the public sphere. Some of these countries, like for example Estonia, tend to a Scandinavian-style public behavior, where attitudes of high professional ethics and self-regulation predominate.

5

. Please refer to, Di Gregorio, A., Musselli, L., 2015, Democrazia, lobbying e processo decisionale, Milano, FrancoAngeli.

12

In general, the new EU Member States, when adopting legislation on lobbying and conflict of interest, introduced some innovative aspects. Also, there was a big discussion among specialists as for the need for a specific act regulating lobbying. Some authors suggested to adopt Codes of Conduct for lobbyists and ethical Codes for politicians or to introduce provisions on lobbying in the rules of procedure of different public bodies. In Hungary, the Lobbying Act was repealed in 2011: the new right-wing government led by Fidesz believed that it was a measure largely inoperative and unable to cope with the problem of corruption. Considering the complexity of issues at stake, one may think that it is better to adopt different pieces of legislation. In fact, with some exceptions, measures against corruption and conflicts of interest and promoting transparency and citizens’ participation to public decision-making are usually contained in separated acts. However, this could result in a lack of clarity and effectiveness. The interaction between different measures is confirmed by the fact that authorities in charge of control over lobbying activities are also involved in managing anti-corruption or ethics. In the candidate countries of the Balkans it is usually an anti-corruption authority or commission6: Slovenia (considered as a reference point): Commission for the prevention of corruption (2010); its predecessors were the Government’s Office for the Prevention of Corruption established in 2002 on the recommendation of the GRECO, replaced in 2004 by the Commission for the Prevention of corruption whose competences were sensibly expanded with the 2010 Act (lobbying oversight, whistleblowers protection, integrity of public sector, etc.) Macedonia: State Commission for the prevention of corruption (2002) Serbia: Anti-corruption Agency (2010) Montenegro: Agency for the Prevention of Corruption, 2016 (until the end of 2015 the Directorate for Anti-Corruption Initiative) Kosovo: Anti-corruption Agency (2007) 6.

In the GRECO reports it is underlined that the autonomy of these bodies needs to be strengthened and that they must be best equiped financially.

13

Bosnia-Herzegovina: Agency for the Prevention of Corruption and the Coordination of the Fight Against Corruption (2009) Albania: Government Commission for Fight against Corruption (1999); High Inspectorate for the Declaration and Audit of Assets (2005). 2.

The legislative framework on lobbying and conflicts of interest in the countries of

Central and Eastern Europe and the Balkans Specific laws on the regulation of lobbying activities have been adopted in Georgia (1998), Lithuania (2000), Poland (2005), Hungary (2006), Slovenia (2010). As for the candidate countries, the only laws currently in force are those of Macedonia (2008, amended in 2011) and Montenegro (2011 and 2014). Moreover, in the same countries rules designed to promote transparency of decision-making, with reference to Parliament and Government and the rest of public administration, are included in the legislation on the prevention of conflicts of interest (Lithuania 1997, Latvia 2002, Slovakia 2004, Albania 2005, the Czech Republic 2006, Macedonia 2007, Kosovo 2007, Montenegro 2009, Bulgaria 2010, Bosnia 2012), or the transparency in the political activity (Romania 2003). There is a legislation to prevent corruption or fight against corruption in almost all of these countries (for candidate countries see the laws of Macedonia 2002, Serbia 2008, Bosnia 2009, Montenegro 2014). We must consider also legislation on the political parties and their financing, on the behavior of state employees, on the status of MPs, the parliamentary rules of procedure (containing provisions on transparency of the legislative process and citizens participation, especially in Serbia, Montenegro and Albania7) and the Codes of ethical conduct (adopted by government in Montenegro, being adopted in Serbia, suggested by GRECO for Albania and Macedonia), the public procurement legislation (Bosnia 2004, Albania 2006, Kosovo 2004 and 2010, Macedonia 2004 and 2007, Montenegro 2009, Serbia 2002 and 2008) and the provisions on transparency of the income of public officials (mainly contained in the legislation on the prevention of conflicts of interest).

7

. In both cases there is not only the problem of legislative improvement, also recommended, but of implementation and the abandonment of the practice of the emergency legislative procedures that the government has encouraged. Generally NGOs dealing with the fight against corruption and favorising transparency – such as www.trasparentnost.org.rs – contest the lack of public and parliamentary debate in the legislative process considering that the government always prevails recurring to the emergency procedure (the same has been observed in Montenegro).

14

Debates on the adoption of specific laws on lobbying have been underway for several years in the Czech Republic, Slovakia, Bulgaria, Romania, Russia, Ukraine. In Serbia and Croatia draft legislations regulating lobbying have been prepared at the initiative of the associations of lobbyists8, while nothing yet exists in Albania, Kosovo and Bosnia despite the requests made by GRECO and the European Commission reports. In Bosnia, Kosovo and Serbia laws on protection of whistle-blowers have been recently adopted. The rules on whistle-blowers are instead included in the law regulating the prevention of corruption in Slovenia and Montenegro. Among the candidate countries of the Balkans, the legal framework of Macedonia and Montenegro is recent (or recently updated) and quite comprehensive, thanks to the European conditionality. This is confirmed by GRECO Reports on the prevention of corruption of legislators, judges and prosecutors, respectively of December 2013 and August 20159. However, in addition to problems of applying rules and the lack of civic education, it is noted that the Macedonian Law on lobbying provides transparency requirements only for lobbyists and not also for the MPs, and that it is generally only ‘embryonic’. As for Montenegro, the GRECO notes that the the 2011 Law has never been applied because it lacked the mandatory requirement of registration for lobbyists. The new 2014 Law properly established that requirement, so as to obtain the approval of GRECO, notwithstanding the lack of practical application of both the new and the old rules. The analysis of the legislation allows for some general considerations. Laws or draft laws are addressed in nearly all the cases only to professional lobbying. In fact, apart from a certain conceptual confusion (in particular between professional lobbying, in-house lobbying and advocacy), non-profit organizations are not included in the benefits of the law even if this exclusion can push the lobbyists who do not want to register to hide behind the screen of the NGOs. In the 2014 Law on lobbying of Montenegro, which is the most recent among the candidate countries, three kinds of lobbyists are considered, i.e. individual lobbyists, lobbying companies 8

. The Serbian lobbysts Association also adopted a code of conduct: www.drustvolobistasrbije.org/etickikodeks.html. In Croatia, a draft Act on Lobbying has been prepared – in close consultation with the Croatian Lobbyist Association, representatives from the private sector, legal professionals, trade unions and nongovernmental representatives – and awaits further development. The draft includes a broad definition of lobbying activities and lobbyists (not restricted to commercial activity), the institution of a register of lobbyists to be managed by the Ministry of Justice, the requirement to report on lobbying activities on a regular basis, and finally, sanctions in the event of non-compliance. 9. www.coe.int/t/dghl/monitoring/greco/evaluations/round4/ReportsRound4_en.asp

.

15

and NGOs. The difference between the lobbying activity of an NGO (allowed at the conditions required by law) and the civil initiatives (not included in this law) is not clear. The law seems to equate lobbying companies and NGOs conducting lobbying activities for third parties (Art. 9), even if the goals of these two legal persons are usually completely different. The registration of lobbyists is mandatory in all countries. In Montenegro the requirements for registration are particularly complex (the largest part of the Law) and differ for lobbyists and legal entities conducting lobbying activities. Considering the criticism of the European institutions to the previous 2011 Law, such an attention is understandable. However, this complexity makes the law unenforceable perhaps even more than the last. I have no data on the number of registered lobbyists but I assume that they are very few. The activity of unregistered lobbyists is much more widespread in the whole area. The most virtuous country of the former Yugoslavia, namely Slovenia, has about sixty registered lobbyists and it puts the data on-line, respecting the transparency requirement10. As for benefits to which registered lobbyists are entitled, in general it is about taking part in the procedure for adoption of legal acts by presenting proposals and explanations, conducting an assessment of the projects, explaining to the public the need to adopt, amend or cancel a measure, informing the public about legislation being prepared in parliament, in government or in other public or municipal institutions, receiving information and documents about the subject of their attention by public authorities, submitting opinions to the working bodies of the executive and legislative branches at central and local levels, organizing meetings between representatives of public bodies and their clients, organizing public meetings, expressing their opinion before the authority that shall adopt the decision, etc. No specific advantages are considered in the 2014 Law of Montenegro. With regard to obligations put on lobbyists, this is primarily the preparation and submission of periodic reports. Obligations or duties of authorities are provided for only in a few cases (art. 30 of the 2014 Law of Montenegro, art. 25 Law of Macedonia). In Montenegro the new Agency for the Prevention of Corruption will take over supervision of a series of rules, including those on lobbying, from January 2016. Until that date, the Directorate for Anti-Corruption Initiative (an institution within the Ministry of Justice) will carry out the tasks relating to lobbying 10

. www.kpk-rs.si/en/lobbying/register-of-lobbyists.

16

activities (Art. 47). No official information about this oversight function of the DACI is currently available. According to the 2014 Law (Art. 34, 35, 39) the lobbied person has a series of duties (prepare an official note containing detailed information about lobbyists who contacted her/him; refuse further communication with a lobbyists if the subject is contrary to the public interest or constitutional principles or otherwise inappropriate; notify the Agency about the illegal lobbying, etc.) and failure to comply results in financial penalties (from 500 to 20,000 euros, Art. 45). The inadequacy of the legislation examined mainly relates to the independence of supervisory bodies, and the absence or inadequacy of penalties for non-compliance with legal obligations (registration, periodic reports). Fines are so mild, compared to the potential gains of lobbyists, as not to represent a deterrent at all. However, the effort to make the public authority responsible for the transparency of its lobbying contacts should be considered positively, although the mechanism is rarely functional, being too bureaucratic or not sanctioned. In general, the shortages of the legislation examined consist, as already noted, in its poor implementation; at times in the lack of rules preventing the so-called revolving doors. 3. The Slovenian model If we compare the legislation on lobbying of Macedonia and Montenegro and that on conflicts of interest or fight against corruption of Albania, Kosovo, Serbia and Bosnia-Herzegovina (in which a specific law on lobbying has not yet been adopted, although in Serbia the draft has already been processed), we notice in all these cases that the Slovenian model is taken into account. In fact, the same public authority (an anti-corruption agency or commission) is the main reference point for monitoring the public officials’ behavior in order to prevent both corruption and conflicts of interest, including asset declaration and the supervision of the lobbying activities. Consequently, we can assume the existence of a particular sub-model for the former Yugoslavia republics, while Albania differs slightly (the anti-corruption institution is dependent from the government). However, the practical results of this legislation are generally disappointing and there is no cultural awareness. As suggested in the GRECO reports, it is necessary to invest much more on the public officials training.

17

Let us see more accurately some cases. Montenegro Up to January 1, 2016 there are two ‘binary’ but not parallel systems: 1. The Law on the Prevention of Conflict of Interest and the Commission for the Prevention of Conflicts of Interest 2. The Law on the Prevention of Corruption managed by the Directorate for AntiCorruption Initiative or DACI11. The law on the Prevention of Corruption, which was adopted on December 9, 2014 along with the new Law on Lobbying, states that starting from the first January 2016, the new Agency for the Prevention of Corruption will operate, taking the place of DACI and of the Commission for the Prevention of Conflicts of Interest. The new ‘super-body’, which should have greater guarantees of autonomy, will deal with the conflicts of interest and the fight against corruption, lobbying and statements of assets of public officials, and also the protection of whistleblowers (the Art. 4 lists minimum six functions). In fact, from January 2016, according to the Art. 115, the Law on Prevention of Conflicts of Interest and the Law on Civil Servants and State Employees will be formally repealed (both laws are fairly recent, going back their original versions respectively to 2009 and 2011). Serbia The main reference is the Law on the Anti-corruption Agency (LACA), adopted in 2008. The LACA is being amended following the GRECO suggestions in order to clarify and specify a certain number of provisions as well as to differently regulate some important issues, especially ones related to the conflict of interests, the holding of several public offices concurrently, the asset and income declaration by officials. The Law on Lobbying is also being adopted and there is a specific Law on the Protection of Whistleblowers (in force since June, 4 2015). Even here the Anti-corruption Agency handles everything, except the protection of whistle-blowers. The GRECO recommends the adoption of specific rules on the conflict of interests of MPs (suggesting to add specific rules for MPs in the same LACA or in the Law on National Assembly12). It also criticizes the bill on lobbying because it does not provide for the citizen 11 12

. http://antikorupcija.me. . www.coe.int/t/dghl/monitoring/greco/evaluations/round4/ReportsRound4_en.asp.

18

participation (but it confuses different things; special rules for the public participation are laid down in the rules of procedure of the Parliament, though not applied). In general, the Agency’s role should be strengthened, adding more resources, autonomy and personal. Albania The main piece of legislation is the 2005 Law on the Prevention of Conflicts of Interest in the exercise of public functions (which contains rules on conflicts of interest, accessory employment, activities and financial interests, gifts and contracts), considered by GRECO very advanced on paper. The same GRECO, however, marks the defects of the legal framework of the country, the lack of implementation, the need for more transparency and of an ethical conduct of MPs; ‘…the existing regulations mainly focus on restrictions and prohibitions, to the detriment of public disclosure and transparency…further efforts are needed not only to close the implementation gap but also to ensure that the information on persons exercising an official function is disclosed in a timely and efficient manner…moreover the lack of a clear commitment to ethical conduct has been marked’13. Another critical point is the continuing amending the legislation. With regard to lobbying, the GRECO recommends to regulate the MPs’ contacts with lobbyists and third parties but it does not make clear whether it is needed a specific law or an amendment to the Law on the Prevention of Conflicts of Interest. On the basis of the Law on the Prevention of Conflicts of Interests (Art. 41), the High Inspectorate for the Declaration and Audit of Assets (HIDAA) is the central authority responsible for the implementation of the law, while the authorities or structures responsible for the implementation of this law in the public institutions are: a) the superiors of the officials, according to the hierarchy, within a public institution; b) the directorates, units of human resources or units especially charged, according to the need and the possibilities of every public institution; c) the superior institutions. HIDAA has been established in 2003 as an independent body in charge of collecting public officials’ assets declaration and identifying cases of conflict of interest. HIDAA officers check 13

. www.coe.int/t/dghl/monitoring/greco/evaluations/round4/Eval%20IV/GrecoEval4(2013)9_Albania_EN.pdf.

19

the logical coherence of all declarations, and subject assets declarations from high-ranking officials and officials in positions. There is also a 2006 Law on the protection of whistleblowers and a 2006 Law on public procurement which establishes a Public Procurement Agency. Macedonia There are different laws (the 2002 Law on the Prevention of Conflicts of Interest, the 2007 Law on the Prevention of Corruption, the 2008 Law on Lobbying), but a single supervisory body, the State Commission for the Prevention of Corruption. The Commission is therefore responsible for many things: raising awareness of all public officials (including MPs) on conflicts of interest, lobbying, gifts, assets and interests. It has also supervisory tasks as regards statements on conflicts of interest and asset declaration. According to GRECO, legislation must be improved to ensure a more in-depth scrutiny of statements of interest and asset declaration submitted by MPs, judges and prosecutors, ‘in particular by streamlining the verification process under the aegis of the State Commission for the Prevention of Corruption’14. The Law on the Prevention of Corruption contains also rules on the cooling off period while GRECO recommends to improve the conflicts of interest legislation. As in the case of Serbia, it evaluates quite positively the rules on public participation in the legislative process but complains the lack of enforcement and also suggests the adoption of an ethical code for MPs. As we see, the legislation is not generally considered sufficient. Bosnia-Herzegovina The legislative framework at central level includes: Law on Conflict of Interest in BiH (6/02, amended several times); Law on the Agency for the Prevention of Corruption and the Coordination of the Fight Against Corruption (103/09, 58/13); Law on Whistleblower Protection in the Institutions of Bosnia-Herzegovina (100/13). The Agency for the Prevention of Corruption and the Coordination of the Fight Against Corruption was created in 2009. It is an independent and autonomous administrative body, which reports to the Parliamentary Assembly of Bosnia and Herzegovina. The Agency is 14

.www.coe.int/t/dghl/monitoring/greco/evaluations/round4/Eval%20IV/GrecoEval4(2013)4_TheFYROMacedo nia_EN.pdf.

20

responsible for preventive anticorruption activities and for coordinating the fight against corruption in public institutions as well as in the private sector. Among other things its responsibilities includes: preparation, coordination and supervision of the Strategy for the Fight against Corruption; monitoring and supervision of the implementation of Conflict of Interest regulations in public institutions; exam of corruption complains filed by the public; monitoring and supporting the implementation of laws and regulations aimed at preventing corruption; cooperating with national scientific and professional organizations, international organizations, the media and non-governmental organizations on prevention of corruption; developing educational programs on the prevention of corruption and the fight against corruption. Kosovo The legislative references are: Law no. 03/L-159 on Anti-Corruption Agency; Law no. 04/L050 on Declaration, Origin and Control of Property of Senior Public Officials and on Declaration, Origin and Control of Gifts of all Public Officials; Law no. 04/L-228 on Amending and Supplementing Law no. 04/L-050 on Declaration, Origin and Control of Property of Senior Public Officials and on Declaration, Origin and Control of Gifts of all Public Officials (which entered into force in 2014); Law no. 04/L-051 on prevention of Conflicts of Interest in Discharge of Public Functions. The Anti-Corruption Agency (ACA) is an independent body accountable to the Assembly, established in July 2006 and operating from February, 12 2007. The legal basis for the establishment of the Agency is the Law no. 03/L-159 on Anti-Corruption Agency which framed its responsibilities and scope of activity. The mandate of the Agency is focused on detecting and investigating corruption cases, on efforts to prevent and combat corruption and increase public awareness (Article 5). According to the Article 23 of the Law, the ACA should prepare the Anti-corruption Strategy to be approved by the Assembly and has the responsibility for its implementation. The ACA, to which public officials report cases of corruption, forwards all information regarding corruption to the Office of the Public Prosecutor, and monitors the assets of senior officials through a process of declaration of their assets.

21

4. Concluding remarks Considering the high number of countries analyzed, the complexity of national legislations, the numerous and not always clear European requirements, I will make only a few general concluding remarks. First, it is worth highlighting again the relevance of the cultural context. The relationship between public and private interests, more than other types of relationships, depends on the cultural context. Considering this, we could theoretically suggest stricter rules where democracy is at risk, with widespread phenomena of political malpractice and the absence of a developed civic and political culture. In addition, one of the features of the post-communist societies consists in the transition from a planned to a market economy. In this long and complex transition, the intertwining of public and private interests has provoked a high level of corruption and the misappropriation of public goods in a context of savage capitalism. Taking into account these economic and cultural conditions, a regulation from the top is needed to encourage proper behaviors elsewhere resulting from spontaneous imitation. Another aspect of which be aware of is the conceptual distinction between similar phenomena which deserve a different legislative regulation (public affairs, interest representation, advocacy and lobbying are often confused). This applies to all European countries. Important findings follow from the experience of the countries of Central and Eastern Europe that are already members of the European Union. Although they carefully followed European conditionality and adopted for example specific regulations on lobbying, these laws have in most cases failed. In fact, the pressure of interests on public decision-makers continues to operate outside of the legal requirements. The number of lobbyists included into official registers is very low. The system of sanctions is weak and not provided of incentives to register. Despite this European institutions, such as the Group of States against Corruption, continue to encourage the adoption of rules on lobbying. Their reports also do not include updated information on the executive power and civil service, where the risk of corruption is higher. Generally, assessments and recommendations of the European institutions are rather contradictory. They do not even suggest similar solutions for countries with compatible conditions. 22

Another sore point lies in the proliferation of legal instruments covering the different aspects of the fight against corruption, and the lack of coordination between them. This causes enforcement shortcomings. As evidenced by the reports of GRECO on the four candidate countries examined (Serbia, Montenegro, Macedonia, Albania15), ‘there is a noticeable gap between the law and practice’, though these countries have recently improved the legislative framework following the GRECO, European Commission and OSCE suggestions (and also the pressure of lobbyists associations). As for the participation of citizens, GRECO emphasizes an insufficient public participation in the legislative process, although there are specific provisions in parliamentary rules of procedure in almost all candidate countries. This calls for an interesting reflection on the cultural context. In the socialist Yugoslavia the tools for popular participation in decisionmaking were numerous, including social control16. The reintroduction of such institutions could be more useful than the import of formula that even abroad have proved to be unsuccessful. New democracies are especially sensitive to the issue of fighting corruption and consequently are focused on severe rules. However, as the practice demonstrates, an excessive rigidity of the rules or a hyper-regulation is likely to be paradoxical, pushing more and more the pressure of interests outside the legal track. Without a high sense of civic culture, like that existing in Great Britain or in Scandinavian countries, the balance must be found in the middle. The fragility of law enforcement is also due to the harshness of the rules, which pushes many lobbyists to act outside the law. The same public officials do not consider the mechanisms of voluntary registration credible. But such criticism also involves the (few) other laws adopted by Western European countries. The kind of regulation of lobbying which former communist countries adopt is repressive and non-promotional. Only in some cases (Poland) there is an effort to add to the classic objectives also rules designed to encourage participation. It is an innovative approach, which could lead to interesting developments.

15

. It would be enough to provide a single evaluation for all candidates of the Balkans. They have similar contextual situations from the point of view of traditions, culture, problems to be solved. 16 . It should be recalled that public debates on draft laws and constitutions represented, in the socialist state, a substitute for freedom to partecipate to the public decision-making.

23

As for the Western Balkans, their democratic development has been delayed and compromised by the war and the rebirth of nationalist forces. For them, therefore, the democratic conditionality is more complex, with additional requirements to the Copenhagen criteria. It seems, however, that these countries are diligent in adopting the legislation required or recommended, while the problems of implementation are abysmal. It also appears that the European authorities are using these countries as test subjects for a legislation very advanced on paper, but destined to fail in practice. Once again, the real problem is the cultural one. The culture of compliance, transparency and understanding of the characteristics of democracy (to act for the public good) is missing. How do you remedy this cultural deficit? Enhancing education, training at all levels of the civil service. Not with the multiplication of rules, or their continuous amendment. The real code of ethics is not a written text, but the one built with hard work in the conscience and transmitted by example at the highest levels. In short, new democracies are experiencing interesting innovations in the regulation of pressure of interest groups, particularly in the legislative process. However, they also testify the failure of regulations too advanced for the social and economic context in which they are called to apply. A part of responsibility rests with the same legislation (too severe or vice versa not equipped with appropriate sanctions) but also with the background difficulties of these societies, not very different from those observed in Italy, albeit for a different type of cultural heritage.

24

Neo-liberal Globalization and the EU Integration of the Western Balkans: The Case of Albania PhD C. Jonilda Rrapaj Department of International Relations, Ankara University, Turkey

Abstract The main rhetoric of the European Union for the Western Balkans, =since the mid 1990’s has developed around the idea that if the Western Balkans implement the reforms recommended by the EU, they will develop economically, build a healthy democracy based on a functional rule of law system. In case of the failure of the reforms to achieve these objectives, which indeed is often the case, the answer is founded in the (liberal) modernization theory which argues that the reasons for the failure must be found on the domestic problems and the wrong implementation of the reforms whose beneficiary properties are taken for granted. This paper argues that contrary to the modernization theory, despite the fact that Albania faces many domestic socio-economic problems, structural causes and mechanisms/processes, which emerge from the operation of global economic system (neo-liberal globalization) rest at the center of this failure. This paper, based on the insights of the neo-Gramscian perspective, analyzes the EU integration strategies towards Albania as part of the neo-liberal globalization project/agenda. The complex and dynamic relations based on consent and coercion during this process and the role of the European Commission as the main instrument of this strategy will constitute the focus of this paper. Here is underlined the fact that despite the EU discourse on the implantation of reforms on democracy, human rights and the rule of law as pre conditions for full membership, in practice the Commission initiatives are strongly focused and restricted to the neo-liberal restructuring of Albania while leaving no concrete space for full membership. By the same token, reforms on the rule of law and democracy are reduced on the requirements of the neoliberal economic-political model of accumulation. As a result the main elements of the Commission strategies such as the neo-liberal economy restructuration, rule of law and democracy have not developed proportionally, leading to the reproduction of a kind of authoritarian state. Keywords: Neo-liberal restructuring; Western Balkans; Albania; European integration policies.

25

Introduction The objective of this article is to analyze the impacts of global structural changes and the European Union (EU) integration policies as part of neo-liberal restructuring agenda in Albania. To begin with, it is important to highlight that the concept of transition which has become a buzzword to denote the socio-economic and political transformation of post-socialist countries, cannot be defined as just a shift from a planned economy to a free market democracy, rather it is a complex process of redefinition and restructuring of state society relationship (Shields, 2012: 17-18), which led to the emergence of a new configuration of social power relations. As Hermann puts it, despite the fact that “neoliberalism is an international agenda, the implementation of neoliberal policies is, nevertheless, dependent on local struggles and compromises” (2007: 6). Therefore, a complete analysis of the transition and integration (restructuring/transformation) of Albania, must include both domestic and external actors and factors. Yet it is impossible to touch upon all these factors in this paper. Thus, the examination will be focused on the effects of the international financial institutions policies and the EU strategy towards Albania in the context of neo-liberal restructuring. This is because, the neoliberal restructuring itself constitutes the very environment where Albanian politics – often accused as the main responsible for the failure to build a state of law – operate. This does not mean that domestic factors do not play an important role, rather it implies that incentives for the actions of domestic actors can be better understood and explained when placed into a structural conditional environment. Thus, contrary to the widespread belief that equates the failure to build a (democratic) state of law with corruption permeating all Albanian society – the latter seen as an intrinsic Albanian problem (Kajsiu, 2014: 5) – it will be argued that the main domestic actors (like political elites) act within the limits imposed by structural factors such as the implementation of neo-liberal policies. The main argument is that the central driving force of transition in post-socialist Albania is the neo-liberal restructuring agenda which is imposed both by international financial institutions such as the International Monetary Fund (IMF) and the World Bank (WB) and the EU integration policies.

26

The European integration as part of neo-liberal restructuring project Many Europeans as well as the bulk of them who aspire to be part of the EU, considerate it as an exceptional organization of the global system. Often the assumed exceptional character of the EU is based on the social rights and equality policies that European states offer to their citizens compared with their American and Asian counterparts (Hermann, 2007:1). However, the EU cannot be considered apart and immune from the globalization process. As everywhere else, structural changes in the global economic system reshaped also the socio-economic relations of the EU, which led to the emergence of new social power configurations (Bieler and Morton, 2001: 5).Therefore, Stephen Gill argues that taking into consideration the social structural and political arrangements during the 1960s, 1970s, and 1980s is crucial for understanding the European integration policies/process(1992: 159), since the neo-liberal restructuring became the underlying driving force of its revival. According to the neo-Gramsian perspective, globalization is the “trans-nationalisation of production and finance at the material level and the shift from Keynesianism to neo-liberalism at the ideological level”(Cox, 1993: 259-60; Bieler and Morton, 2001: 5).While on the global level, the main driving force was assumed to be the free market, unrestricted capital and financial mobility (Hermann, 2007:2), on the national level, the shift from Keynesianism to neoliberalism was based on low inflation and stability prices, and on the abandonment of the full employment(Cox, 1993: 259-60, 266-7). Indeed, these new arrangements caused many serious problems for many countries, particularly for the undeveloped ones. The international financial institutions, such as the IMF and the WB furthered this process through their carrot and stick policies, thus making the granting of credits conditional on meeting the neo-liberal restructuring packets such as budgetary restrictions and privatization of public companies, enterprises and services, and application of low taxes for private sector etc. (Hermann, 2007:4). Shortly, neo-liberalism become an agenda for restructuring the capitalist economy and the social system (ibid:2).Neo-liberalism imposes a new top down socio-economic order, through consent and coercion mechanisms. That makes governments more responsible for private enterprises or market forces and less responsible or responsive to welfare issues. The security of private sectors remains one of the main objectives of governments (Gill, 2001:47). In this context the rule of law and democracy are required (for developing countries) as long as they serve to neo-liberal restructuring policies. Accordingly, while some developed countries 27

embraced neo-liberal policies for competing with the global market, the rest accepted it in order to get aids/grants from the international financial organizations since their survival depended directly to this foreign financial assistance. The revival of European integration process in the 1980s developed also within the context of global structural changes triggered by the neoliberal response to the structural crisis of over accumulation that emerged in 1970s. The policies delivered by the EU and the re-launch of European integration – through the Internal Market (1985) and the signing of the Single European Act (1986)–by no means departs from the neoliberal mainstream. This re-launching coincided with the foundation of the European Round Table of Industrialists (ERT), an organization that represents the Europe’s biggest transnational industrial corporations (Apeldon, 2001: 48, 54). The increase of globally oriented capital in the EU, supported by the neo-liberal transnational historical bloc also forced the restructuring of the capital consistent with global capital (Gill, 2001: 75). The ERT lobbied strongly for the integration of the common market (Hermann, 2007: 8). Gill defines the Internal Market project as a turning point in the European integration process towards neoliberalism (2003: 63).Even though, the Internal Market primarily was introduced as the creation of a big home market in front of global market, it served to the globalization of the EU itself (Apeldon, 2001: 79). Indeed it is an important project for the neo-liberal restructuring of the EU, focused on free market by the deregulation and liberalization of national economies (ibid). Thus, European integration shifted from a “socio-economic and industrial space to…an advanced free trade zone within a free trading world” (ibid). The Maastricht Agreements and Economic and Monetary Union (EMU) also constitute important developments to be discussed in the terms of neo-liberal restructuring discourse (Gill, 2001: 50). As Apeldon puts it “the socio-economic content of Maastricht can in fact be interpreted as reflecting the transnational configuration of social and political forces within the European political economy at the beginning of the 1990s” (2001: 81). The formation of a transnational capitalist class played an important role in this new configuration of the social power relations. It succeeded in incorporating and manifesting its interest as the interests of all and therefore in establishing its hegemony. Contrarily, trade unions remained fragmented and as a result failed to protect their previous gains and efforts. The restructuring of the state-civil society relations such as the privatization of public services like pensions, health and education 28

and the implementation of monetary and fiscal policies in order to increase the credibility for private enterprises shifted the EU towards the neo-liberal economic system (Gill, 2001: 49). In a nutshell, social democracies were subordinated to the interest of globalizing capital. Consequently, most of social reforms included in the Maastricht treaty failed to be materialized because of big capital’s efforts. In regard to this, the EMU cannot be considered only as an economic project but as an attempt to institutionalize the neo-liberal norms in the region and reconcile regional integration with globalizing forces (Gill, 2001: 52). This was a requirement for the Internal Market (Apeldon, 2001: 80). EMU furthered the neo-liberal economic process by establishing an independent European Central Bank (ECB) with a monetary policy based on low inflation and price stability. Its role was to force states to apply fiscal policies in convergence with neoliberal criteria. Even though the fulfillment of the Single European Market and establishment of the ECB looks as just an economic integration in appearance, it is in fact a process of configuration of the new powers in Europe (Holman, 2010). As it is shown in this paper, the main issues of the reforms in the EU are focused on enhancing the implementation of neoliberal policies such as free trade, monetary and fiscal austerity policies, and the erosion of employment security. In some aspects, some states in the union have gone further by applying more radical neoliberal policies compared to the runners of neoliberalism, the US and the UK. All these reforms eroded the social model of European welfarestates. (Hermann, 2007: 23). In this respect, the EU strategy towards the Western Balkans must be analyzed primarily within this socio-economic structural context, considering the dynamics and complexity of the process of neo-liberal globalization. Otherwise the analysis risks remaining incomplete. Thus, the ideational/cultural factors which are so often utilized to explain the problems facing many developing countries as is the case of Albania, must be placed into this larger structure or process of neo-liberal transformation of the Western Balkans. To this purpose, having argued that the EU is an integral part of neo-liberal process, it will be scrutinized the EU integration policy and its impact to wards Western Balkans.

29

The EU strategy towards the Western Balkans During the early 1990s the EU strategy towards the Western Balkans was based on financial assistance programs such as PHARE, the main objective of which was the establishment of stability through democratic institutions, the rule of law, the return of refugees and protection of human rights etc. (Bartlett, 2008: 197).It was only after the Bosnian war that the EU adopted the “Regional Approach”, for all the Western Balkan countries that did not have any association agreements with it. The Regional Approach included a comprehensive framework for unilateral trade preferences, financial assistance and regional cooperation based on principle of conditionality (General Affairs, 1997). The European Commission defines the level of financial assistance that EU will provide to the respective country, according to the progress that it has done on meeting the required conditions. On the other hand, the starting of bilateral negotiations or association agreements were committed to many other strict and detailed conditions on providing economic reforms. Thus, in addition to the general conditions mentioned above, were required also macroeconomic policies for stabilization of economic environment, liberalization of price and trade, reforms in the rule of law, privatization of public or states enterprises, and reforms in the banking sector. The countries which meet these conditions would be able to benefit from trade preferences, financial assistance and progressing on contractual bilateral relations with the EU (Bartlett, 2008: 198). Indeed the conditionality was not an exception for the Western Balkans countries, since the EU strategy towards the CEE countries was based on conditionality as well (Türkes and Gökgöz, 2006: 675).The problem here is the so-called “negative conditionality” (Anastasakis and Bechev, 2003: 7), which is meant to offer no promise for a future membership to the EU, and in the case of Serbia even outright sanction. Therefore, Turkeş and Gökgöz define the Regional Approach as: “The manner in which conditionality applied in the case of the Western Balkans clarified the contours of a distinctly different mode of relations that the EU would maintain with the region: there was no prospect for rapid membership but the countries meeting the conditions were to be rewarded with trade concessions, financial assistance and economic cooperation on the part of the EU. It emphasized the borders of fragmentation in the region, pushing the

30

Western Balkans down to a lower rank in the accession partnership process.” (2006: 676) The Kosovo war may be considered as a turning point of the EU policies towards the Western Balkans. It demonstrated that the Commission as an actor and the EU as a structural factor have been insufficient for the stabilization of the region. Therefore, the EU envisaged a new strategy for the Western Balkans, so-called the Stabilization and Association Process (SAP).SAP would serve as an important contribution of the EU to the multilateral Stability Pact for Southeastern Europe (Hombach, 1999) by taking a leading role in the stabilization of the region, and also presenting a new strategy of the Commission in the Western Balkans (Kramer, 2000). Thereby, SAP would became the cornerstone of the EU strategies in the Western Balkans, as the major policy framework for domestic and foreign policies. According to the Commission’s suggestions SAP is focused on six key target areas such as: “Development of existing economic and trade relations with and within the region; development and partial redirection of existing economic and financial assistance; increased assistance for democratization, civil society, education and institution-building; co-operation in the area of justice and home affairs; development of political dialogue, including at regional level; development of Stabilization and Association Agreements [SAA]” (European Commission, 1999). In a similar vein with previous strategies, the SAP instruments were based also on conditionality. Therefore, according to the Commission’s progress reports, the countries which have made progress regarding the meeting of the SAP conditions, can pass to another level by signing a SAA with the EU. The SAA’s main framework focuses on: “Offering the prospect of full integration with EU structures; Establishing a functioning framework for a continuous political dialogue; Supporting the consolidation of a democratic regime and a state of law; Furthering economic reforms and the development of market structures; Establishing the administrative and economic pre-requisites for the later conclusion of a bilateral free trade agreement; Laying the foundations for extensive co-operation in

31

justice and home affairs; Establishing broad co-operation on all issues that would contribute to reaching these goals” (European Commission, 1999). In this context, the main financial instrument introduced to the region was the so-called Community Assistance for Association, Development and Stabilization (CARDS). Later, it would be replaced by the new Instrument for Pre-accession Assistance (IPA), which aimed bringing institutional reforms into line with the EU standards. A bigger picture suggests that the SAP and the SAA itself does not offer a really new and inventive EU policy for the region. They do not differ much in kind from other well-known European Agreements concluded between the EU and the CEE countries since early 1990s.Indeed, the novelty remains on the fact that for the first time, the SAA is “offering the prospect of full integration with EU structures” to the Western Balkans. In other words, it opened a process of gradual integration into the EU structures based on the Amsterdam Treaty and the Copenhagen Criteria, for the countries that meet the required conditions. Since then, the EU has also advanced trade relations with all the Western Balkan countries via autonomous trade measures and the early implementation of the SAA trade provisions. All the countries have signed the respective SAAs. In addition, while Bosnia-Herzegovina and Kosovo are potential candidates, Macedonia, Serbia, Montenegro and Albania are officially candidates for accession to the EU. As it is noticed above, the Balkan countries are involved at different stages in the process of integration (Türkeş and Gökgöz, 2006: 659). But, the fact that Commission has not produced yet any concrete plan or strategy for the full membership of the region or any particular country in the EU, indicates that its recommendations and strategies serve primarily to the purpose of stability in the region in order to avoid that problems of the region expand into the union and second to the neoliberal restructuring of the region rather than the process/goal of full membership. As Mustafa Türkeş and Göksü state, the EU strategy towards the Western Balkans does not include neither exclusion nor a full integration in the short period (ibid). Indeed the EU integration process is seen as a tool for neoliberal restructuring of the Western Balkans. The hegemonic/neoliberal project of the EU in the region, is a complex and dynamic process between the Commission and respective governments which includes both consent and coercion (Shield, 2014: 17-18). The asymmetrical power that the EU holds in this process, have

32

led to a top-down process on the restructuring of the socio-economic relations with the Western Balkans. The impact of this process will be further discussed below through the case of Albania. The Neoliberal Restructuring of Albania This part will focus on the impacts of the so-called transition, or neo-liberal restructuring project in Albania. While the neo-liberal restructuring can be seen as an Anglo-Saxon response (hence a project) to counter the structural crisis of over accumulation that begun in 1970s, and which was redefined in 1990s with the so-called post-Washington consensus (Wallerstein, 2000;SaadFilho, 2005), for the countries of the Western Balkans and Albania in particular neo-liberal restructuring become the very structure within which they had to transform themselves. Thus, as was argued in the introduction part of this paper, the concept of transition if is not associated with the redefinition of state-society and state-economy reconfiguration triggered by neo-liberal restructuring, remains a buzzword unable to penetrate both the social and political economy dimension of the transformations taking place in the Western Balkans. In a similar way with the countries in the region, Albania passed from a double transformation process, from a planned economy to a free market economy and from an authoritarian state to a parliamentarian democracy. It is important to stress the fact that Albania’s transition to neo-liberalism took place in the absence of the welfare-state. In other words, while the transition to neo-liberal restructuring of the Western countries was “tempered” by the presence of the welfare-state mechanisms (against whom neo-liberal agenda was directed), the transformation to neoliberalism of Albania lacked the supportive mechanisms of welfare-state such as industrial unions important to negotiate the reverse effect of mass unemployment caused by massive privatizations. To put it laconically, Albania entered communism before capitalism and dive into neoliberal globalization before experiencing the Keynesian/welfare-state. Such macro historical and structural constraints have defined the general framework of post-socialist Albania’s development. In 1991 Albania became a full member of institutions such as the IMF and the WB. From this moment the macroeconomic policy in Albania was developed under the influence and in accordance with the interests of global/Western capital (Chossudovsky, 2000: 388). Thus, in 1992 the IMF and the WB agreed to “came to the help” of the new Albanian government by offering financial aids. Additionally, again in 1992 Albania signed the Agreement on Trade and Economic Cooperation with the EU (at that time was called European Economic Community) 33

(Relations between Albania and the EU, 1992) and later become part of the EU financial assistance program, such as PHARE and other similar programs. As it was already mentioned above, all the foreign assistance was based on the principle of conditionality. Therefore, as a condition for aids, it was required the implementation of the “shock therapy” stabilization policy (Bartlett: 2008, 31) based on the neo-liberal policies such as stabilization, privatization, deregulation, deindustrialization, reduction of the power of labor, and the abandonment of social policies on behalf of social discipline. As a result, all the state companies and services were privatized in a short time while most of the new owners of these companies become foreign citizens. As such, all economic and financial barriers were removed in favor of free market (Chossudovsky, 2000: 388). In this context, the restrictive monetary and fiscal policies imposed in order to decrease the inflation and budget deficit (Bartlett, 2008: 31) and the rapid privatization of public companies and services caused dramatic consequences for all the society. The prevalence of unemployment, low wages, the lack of social assistance and services etc. led to a dramatic increase of organized crime and corruption, paving the way to informal economy, nonfunctional institutions, lack of the rule of law and political and economic instability. Privatization and the removal of customs barriers caused catastrophic impacts on the domestic industry and agriculture. Thus, all the domestic production became totally unprotected from the global market (Chossudovsky, 2000: 388). The lack of advanced technology in industry and agriculture made them unable to compete in the both global and domestic market. Everything (even the most basic nutriments) had to be imported from outside. This was in tune with the neo-liberal claim that “international trade and finance – rather than domestic consumption – should become the engines of development” (Saad-Filho, 2005: 114). As a result of pursuing the implementation of the “shock therapy”, fiscal and monetary austerity policies increased their impact both on the citizen’s life and in the state mechanisms, causing grave waves of emigration and state failure. These drastic reforms culminated in the total collapse of state in 1997, generally misconceived as a side-effect of the frenetic get-rich-quick behavior of Albanian individuals who invested everything on the pyramid schemes while overlooking its structural roots. Ironically, the very “shock-therapy stabilization policy” that was envisaged to deliver sustained economic growth and rising living standards, let Albania to ruin. Yet the biggest paradox rest on the fact that instead of applying social policies in order to repair the damage in the aftermath of Pyramid Crisis, Albania would enter a more strict neoliberal agenda “under the tutelage of the IMF and the WB” (Bartlett, 2008: 33) and the European 34

Commission. During this second stage (1997 onwards) the EU via Regional Approach, SAP and SAA strategies would play an even more important role in the neo-liberal restructuring of Albania. The consideration of the EU as a financial source for economic prosperity by the Albanian states elite’s strengthened the Commission’s hand on neo-liberal restructuring of the region. On the other hand, the lack of domestic production and continuous deindustrialization of the country made the country completely depended on the foreign financial assistance and loans. This increased the foreign influence on the government’s elites and led them to implement all the required reforms without considering the impacts on society. As it is demonstrated above, besides the Albanian economic history and policy choices (domestic factors), global structural changes and particularly top-down neo-liberal restructuring can be seen as the main factors that affected and defined the Albania’s post-socialist development. All of the domestic reforms were done in line with recommendations and requirements of the international community, such as the IMF, the WB, and the EU. Indeed the Pyramid Crisis of 1997 and state collapse, served as a legitimization of the view that the responsibility for the Pyramid Crisis rested mainly on the authoritarian practices of Berisha government and the corruption of ex-communist elites, while it can be viewed more clearly as the rational outcome of implementing the “shock therapy”. Thus, Albania instead of interrogating the logic of the socio-economic restructuring they embraced uncritically, and which was already criticized sharply in the countries of origin, 1998 onwards it embarked on furthering the neo-liberal agenda, ironically, under the auspices of the left-wing Socialist Party government of Fatos Nano. It is important to note at this point that both two main political parties dominating the post-socialist politics, the Socialist and Democrat Party embraced the same ideological philosophy (namely neoliberalism) as the only alternative. This ideological collapse become even clearer in the aftermath of Pyramid Crisis of 1997 when neo-liberalism was re-introduced under the Socialist Party. As Kajsiu rightly notes “by blaming corruption as the major obstacle to economic development, the international discourse on corruption diverted criticism away from the shortcomings of the neoliberal developmental model” (Kajsiu, 2014: 8) enabling as such the reproduction and re-introduction of neo-liberal policies such as the privatization of the public sector as central to anti-corruption measures (ibid). Because the corruption problem was equated with the abuse of public property, it offered as a natural solution to this problem the furthering of privatization. This anti-corruption discourse constructed by international institutions and embraced and reproduced by local political elites, 35

in turn legitimized the perpetuating of neo-liberal order (ibid: 9) as the sole alternative to “socialist regime”. In a nutshell, since the 1990’s the neo-liberal restructuring led to the emergence of an authoritarian and corrupted state apparatus, whose main concern at the first stage, has been the “primitive accumulation of capital” through illegal ways. While in the other Western countries it was the emergence of a transnationally oriented class that forced the (neo-liberal) transformation (Bohle, 2006: 75), in Albania, as mostly in the Western Balkans political elites were its main perpetrators. Thus this close relationship between business and political elites generated the so-called crony capitalism. At this point it is important to argue that the “capitalist class” and government elites in Albania are not independent from each other, rather they nurture/construct each other. Because, the roots of the emerging capitalist class in Albania lie in illegal sources (like money laundering or abuse/appropriation of public property for private gain), they did not possess the capacity nor the will to embark on massive employment initiatives via industrial investments. Therefore, at the initial stage, they lacked the “raw materials” to articulate their narrow interests as the interest of all society and construct a hegemony as such. Consequently, their “legitimacy” and “survival” depended on the connections they developed with politicians. On the other hand, the politicians (and high officials) themselves seem not to base their legitimacy on free elections, democracy, the rule of law and in what they offer to the voters, but on the support that comes from this capitalist class, by offering privileges to them. Another source of legitimacy of Albanian political elites comes from international financial institutions. Because Albania’s economy is completely dependent to foreign loans taken from the international financial institutions or the EU, political parties in Albania gain their legitimacy also through the “successful” implementation of neo-liberal reforms (which means deepening the societal crisis) imposed by international institutions and by meeting the conditions required by the EU accession agenda, therefore neglecting the social needs of their voters. In other words, because of austerity policies imposed by the IMF, the WB and the EU, governments except of the rhetoric of democracy, the rule of law and integration to the EU cannot offer anything concrete to the voters like job opportunities, and social policies. All they can offer them is turning a blind eye to corruption, and informality. In other words, while political elites could increase their wealth by appropriating the public properties illegally (this 36

is why often the capitalist class and political elites in Albania merge with each other), the ordinary people were tacitly allowed to “benefit” from the lack of rule of law like letting them to abstain from paying the taxes and by allowing the persistence of informal economy (Zaimi, 2014). Thus, it can be argued that in the first stage of Albania’s capitalist development, has existed an implicit consensus between the political elites, big private enterprises and ordinary people on the non-application of law and the persistence of informal economy. This situation helped the latter to survive in a fierce social environment created by neoliberal reforms. The current developments (since the last general elections of 2013) on a different direction suggest the dissolution of this implicit consensus. The capital and crony capitalism seems now to be fullyfledged, and as such its main duty is to protect the products/fruits of “primitive accumulation” by entering the realm of law (Zaimi, 2014). Thus, the system does not tolerate any more widespread informality. Yet this move must be read as the outcome of the strengthening of capital, since the neo-liberal agenda is alive and well and is re-launched even more furiously under the current policies following the Socialist’s takeover in 2013. Ironic as it may seem, neo-liberal order in Albania has acquired its highest legitimacy or hegemony during the “leftwing” governments. Conclusion To conclude, the social consequences of the top-down neo-liberal restructuring of Albania are high unemployment, an ever increasing gap between the rich and the poor, reduction of public social services, a high support for big private enterprises even when it has grave consequences for society in general, and high public loans etc. By the same token, the high level of emigration, the organized crime, and the rise of radical religious organization’s influence in the region is also encouraged by the increasing poverty and the failure of state instances to develop a solution. In this context, “organic intellectuals”, play an important role on presenting the neoliberal norms as the best model for the development of the country (see Civici, 2014). The fact that in Albanian politics, the “Third Way” approach or “neo-liberalism with a human face” represented by the “left-wing” Socialist Party governance is considered as the famous Thatcherian TINA (there is no alternative), demonstrates that neo-liberal agenda in Albania has acquired an “hegemonic” power. Indeed the neo-liberal promise of rising living standards, in reality has served the process of further subordination of the majority at the degree that has 37

made the hope of change seem futile, paving the way to the greatest wave of emigration toward the EU since the early 1990s. References Anastasakis, O. and D. Bechev (2003) EU Conditionality in South East Europe: Bringing Commitment to the process, https://www.sant.ox.ac.uk/sites/default/files/euconditionality.pdf, accessed 12 September 2015. Apeldon, Bastiaan von (2001) The Struggle over European Order: Transnational Class Agency in the Making of “Embedded Neo-Liberalism”, in A. Bieler, and A. D. Morton (eds.) Social Forces in the Making of Europe: The Restructuring of European Social Forces in the Global Political Economy. New York: Palgrave. Bartlett, W. (2008) Europe’s Troubled Region: Economic Development, Insitutional Reform and Social Welfare in the Western Balkans, New York: Routledge. Bieler, A. and A. D. Morton (eds.) (2001) Social Forces in the Making of Europe: The Restructuring of European Social Forces in the Global Political Economy. New York: Palgrave. Chossudovsky, M. (2000) Arnavutluk’un Suça Itilmesi, in Tarık Ali (ed.) Evrenin Efendileri? NATO’nun Balkan Seferi, Istanbul: Verso Publication. Civici, A. (2014)Transformimi i Madh: Nga Plani Drejt Tregut, Tirane: UET Press. Cox, R. (1993) “Structural Issues of Global Governance: Implication for Europe”, in S. Gill (ed.) Gramsci, Historical Materialism and International Relations (Cambridge: Cambridge University Press). European Commission, The Stabilisation and Association Process for Countries of SouthEastern Europe, Brussels, 26 May 1999, COM (99) 235. http://aei.pitt.edu/3571/1/3571.pdf , accessed 12 September 2015. General Affairs, (1997) http://europa.eu/rapid/press-release_PRES-97-129_en.htm?locale=en, accessed 10 September 2015 38

Gill, S. (1992) “The Emerging World Orderand European Change: The Political Economy of European Union”, in R. Miliband and L. Panitch (eds) The Socialist Register 1992: New World Order? (London: Merlin). Gill, S. (2001) Constitutionalizing Capital: EMU and Disciplinary Neo-Liberalism, in A. Bieler, and A. D. Morton (eds.) Social Forces in the Making of Europe: The Restructuring of European Social Forces in the Global Political Economy. New York: Palgrave. Gill, Stephen (2003) A Neo-GramscianAppproach to European Integration, in Alan Carfuny and Magnus Ryner (eds.), Neoliberal Hegemony and Transformation in Europe (Lanham: Rowman& Littlefield). Hermann, C. (2007), Neoliberalism in the European Union, FORBA Discussion Paper (3), 123. Holman, O. (2010) The double transformation in Central and Eastern Europe: a heterodox international political economy perspective, accessed 25 September 2015. Hombach, B. (1999) Stability Pact For South-Eastern Europe: A New Perspective For The Region,

http://sam.gov.tr/wp-content/uploads/2012/01/Bodo-Hombach.pdf,

accessed

20

September 2015. Bohle, D. (2006) Neo-liberal hegemony, transnational capital and the terms of the EU’s eastward expansion, Capital and Class, Spring 30 (1), 57-86. Kajsiu, B. (2014), A Discourse Analysis of Corruption: Instituting Neoliberalism Against Corruption in Albania 1998-2005, Burlington: Ashgate Publishing Company. Kramer, H. (2000) The European Union In The Balkans: Another Step Towards European Integration, Perception: Journal Of International Affairs 5 (3): 22-38. Türkeş, M. ve G. Gökgöz, (2006) “The European Union’s Strategy towards the Western Balkans: Exlusion or Ingration”, East European Politics and Societies, 20 (4), 659-690. Relations between Albania and the EU, http://www.punetejashtme.gov.al/en/mission/euintegration/relations-between-albania-and-the-eu, accessed 20 September 2015. 39

Saad-Filho, Alfredo and D. Johnston (2005) Neo-Liberalism: A Critical Reader, London: Pluto Press. Shield, S. (2012) The International Political Economy of Transition: Neoliberal Hegemony and Eastern Central Europe’s Transformation, New York: Routledge. Zaimi, A. “Nderhyrja Klasore e Rames”, https://rreth.wordpress.com/2014/12/30/nderhyrjaklasore-e-rames/, accessed on 23 February 2015.

40

Spatial Planning in the Balkans between Transition, European Integration and Path-dependency PhD C. Erblin Berisha1& Assist. Prof. Dr. Giancarlo Cotella2 1

2

Urban and Regional Development, Polytechnic of Torino, Italy Department of Regional and Urban Studies and Planning, Polytechnic of Torino, Italy

Abstract The proposed article aims at inquiring into the evolution of territorial governance and spatial planning systems of the Balkan region, since 1989. The first part sheds some light on the impact of the transition period and, in particular, on the consequences that the shift from a centralized economic and administrative model to a decentralized model based on free market rules had over spatial planning legislation and practice The second part focuses on European integration and on the Europeanization processes triggered by those policies undertaken by the EU during the pre-accession period, in relation to the different integration steps that the aforementioned countries had to go through. Finally, the last part explores more in details the role of the various actors that were/are involved in the process that led to the development of new spatial planning systems in the selected countries, their capability to influence the spatial planning systems’ patterns of change and the channels through which this influence was delivered. Keywords: Spatial planning systems, Path-dependency, Transition, EU Integration, Europeanization, Albania, Bosnia Herzegovina, Croatia. Introduction The evolution of spatial planning in the European Union (EU) member states is a widely investigated topic (Reimer et al, 2014). However, the Western Balkan Region1has been relegated, until now, at the margins of the academic debate. This clearly constitutes a gap, especially in relation to the process of European integration that is involving the area and it is the main reason behind the undertaking of the present research work. Aiming at providing a meaningful contribution to the debate, the objective of the contribute is to analyze the evolution of the spatial planning and territorial governance systems of three countries of the Western Balkan area that reached different stages in their process of joining the EU – Croatia, Albania and Bosnia Herzegovina – in order to unravel the complexity of their patterns of change. In order to do so, multiple factors of influence should be taken into consideration. Indeed, the 41

evolution of spatial planning legislation, discourse, instruments and practices is affected by exogenous influences (generating from the EU, the various international organization, international market actors etc.) that, in turn, have an impact in the different domestic contexts that depends on various domestic conditions (local planning culture, administrative culture, level of socio-economic development, etc.). The first part of the contribution focuses the definition of spatial planning systems and proposes a critical review of the methodologies upon which the most know comparative analysis on the matter are based. Then, the authors introduce the main lenses through which the evolution of territorial governance in the Western Balkan Region will be interpreted. They present the main features and implications of the process of transition towards a market economic model, the influence of the main international actors as well as the implications of the heritage of the communist period. Similarly, they reflect upon the EU integration process and the mechanisms of Europeanization triggered by the latter through the provision of strategic orientation, formal acts and monetary incentive systems. The third and fourth parts of the paper constitute the core of the analysis, describing as they do both the reform of the administrative structure for territorial governance in the countries at stake as well as the evolution of various aspects of their spatial planning systems. A conclusive section rounds off the contribution, summarizing the results of the analysis and highlighting the need for further research on the matter. Exploring the Evolution of Spatial Planning Systems in Europe A spatial planning system may be defined as the institutional framework allowing for (and regulating), in a specific country, the multiple and complex processes of vertical (between policy levels) and horizontal (between policy sectors and between public and private subjects) interactions addressing the spatial organization of social life. These ‘spatial planning activities and processes’ occur within frameworks of legally established objectives, tools, and procedures which, in modern states, are usually derived from fundamental constitutional rights (Janin Rivolin, 2012). According to the literature, however, spatial planning systems are not static objects, but change profoundly through time. They are indeed dynamic institutional arrangements subject to continuous patterns of change (see: ESPON 2007; Stead and Cotella, 2011; Janin Rivolin 2012, Reimer et al, 2014; Cotella & Janin Rivolin, 2015). Various studies were developed, since the beginning of the 1990s onwards, to understand and compare the evolution of spatial planning in Europe (among others: Newman &Thornley 1996; 42

CEC, 1997; ESPON 2007; Stead &Cotella, 2011; Reimer et al, 2014). Comparative spatial planning research was initiated by the work of Davies et al (1989), that analyzed the ‘families of law and government structure’ of various European states, and that was then used as a background for the definition of Newman & Thornley (1996) “families of law” (Nordic, British, Germanic, Napoleonic, East European), upon which a preliminary comparison of European spatial planning systems is founded. During the second half of the 1990s, the EU Compendium of Spatial Planning Systems and Policies (CEC, 1997) proposed a more complex and sophisticated methodology, introducing four so-called ‘ideal types’ of spatial planning – (i) regional economic, (ii) comprehensive integrated, (iii) land use management and (iv) urbanism – on the basis of a series of variables individuated ad hoc. However, as Getimis (2012) stresses, the comparative methods adopted in many of those studies present several differences ad limitations. As a matter of fact, the increasing diversities between territories, even in the same country, can hardly be interpreted through formal legal and administrative classifications, and similar limitations applies to the static ideal-types formulated in the EU Compendium (see: Stead and Nadin, 2009). Indeed, if we consider the spatial planning system(s) as institutional phenomena resulting from the sum of social, cultural, policy and economic behaviors that characterize a specific context, to take into account only the ‘law and government structure is not enough, as it would not allow for the production of relevant insight in the spheres of planning culture, discourse and practices (Nadin&Stead, 2008, Janin Rivolin, 2012). Following this argument Getimis (2012) argues for the need toanalyse spatial planning systems ‘in motion’, in order to fully grasp the flavor and to understand the causes (and the consequences) of the patterns of change that characterize each context. To add further complexity to the issues at stake,it is worth to mention that the context under scrutiny in this research presents several peculiar conditions. As a matter of fact, Croatia, Albania and Bosnia Herzegovina belong to the Western Balkan area and, until the edge of the 1990s, were positioned on the Eastern side of the Iron Curtain, hence belonging, to different extents, to the Soviet area of influence. After the collapse of the Soviet bloc, the various satellite states started their transition towards a market oriented economic model almost simultaneously. However, their transformation patterns present relevant distinctions, generating by a multitude of endogenous and exogenous features: the internal socioeconomic and cultural features of each context, the beginning of the Yugoslavian War, the interest of the International Monetary institution (e.g.: the World Bank and the International Monetary Fund – WB and IMF), the pace 43

of the European Union Integration process, etc.As one could imagine, this peculiar conditions had crucial implications for the evolution of the spatial planning systems of each of these countries. Also due to this reason, and to the fluidity that these systems maintained until the present days, they were not yet object of any comparative analysis or typological classification. In the light of the above considerations, the proposed analysis of the evolution of the spatial planning systems of the countries at stake build on three, intertwined assumptions: (i) the transition process in the Balkan area (hence in the selected countries) has been affected by various international actors (among which IMF, WB, EU etc.); (ii) the influence of these actors is mediated by endogenous factors an path-dependency logics and (iii) the spatial planning systems’ patterns of change are the result of the interaction between domestic conditions and external influence. Building on these assumptions, for each of the three countries chosen for the analysis, the following sections explore the patterns of change that concerned spatial planning since the beginning of the 1990s, when they started their transition towards westerninspired market economic models and their road toward the EU accession.

Transition, Path-Dependency and the Role of International Actors In 1989, after the collapse of the communist ideology, the European socialist countries opted for embracing the logics of the free market and democracy. For the Central Eastern European and the Western Balkan countries the opportunity to “return into Europe” was considered a unique opportunity and, in turn, immediately became the main political priority. To pursue the required transition and transformation process (see Adams et al 2011,Tsenkova&NedovicBudic, 2006) presented a wide range of challenge, and required the implementation of a number of complex systemic changes. These changes are mainly related with various dimensions: (i) polity dimension, i.e. the shift from a single party political arrangement towards a multiple parties system; (ii) institutional dimension, i.e. the decentralization of power from the central to the local level, in order to better manage the introduction of new market economic mechanisms; (iii) economic dimension, where economic power is transferred from the old vertical administrative hierarchies toward the private sector and the civil society and (iv) evolving logics of power between actors, i.e. the change of the dominant interest groups, the entrance in the game of new external actors (e.g.: the IMF, the WB, the EU etc.) and local actors (new local elites emerging together with the newly elected democracy institutions.

44

Among the actors that had an influence over the transition process in post-socialist European countries, those exerting the highest influence during the definition of regional and spatial policies may be divided into three categories: (i) supra-global institutions (United Nations, IMF, WB, NATO); supranational institutions (EU), governmental agencies and non-governmental organizations (NGOs). However, it has to be pointed out that, in transition context, the role and the influence of international actors is far from being homogeneous (Georgiadis, 2008). For instance, the EU approach towards the Western Balkan Region presented a high level of complexity. In fact EU uses different instruments: the Regional Approach during the period 1996-98and, after that date, the Stability Pacts and the Stabilization and Association Processes that later became Stabilization and Association Agreements binding for the Enlargement process. In general terms, one could argue that the evolution of the role of the international actors developed as a consequence of the main features of each domestic context. This appears evident when one analyses the role of NGOs in Croatia: whereas in other contexts NGOs created a system partially overlapping to local institution, in so doing instituting a set of clientelistic technocratic relations (Tendler, 2000; Braathen, 2005), in Croatia it is possible to observe a metamorphosis process that moves from humanitarian aid (assistance approach) to strategic actors focus on the medium-long period policies though international cooperation initiative (Đokic, Starc, & Stubbs, 2005). When it comes to the case of Albania, external actors affected the national context with cooperation initiatives focusing on spatial planning experiences that exerted a strong influence in terms of both economic and political conditionality (see the following sections for additional details). In Bosnia and Herzegovina, the international actors are directly involved in the definition of polity structure of the State. In this concern is important to highlight how the so-called Dayton agreement2 has re-establish the principles of private property, and defined the features of the compensation process and of the liberalization policy, all issues that, in turn, produced spill-over influence over spatial planning by mean of legal conditionality. From the point of view of spatial planning, the most notable change is the progressive shift from government to governance, reflected in new structures based on interaction among a multitude of local and regional actors, for the first time in 50 years incorporating private sector logics (Tsenkova & Nedovic-Budic, 2006). The new circumstances have promoted not only the development of new institutions but also the consolidation of a ‘new notion of planning’ that 45

struggled to regain its legitimacy and to adapt to the new economic, social and political mechanisms. This progressive redefinition of the role of spatial planning has occurred not without conflicts and pitfalls. In fact, during state socialism, the action was based on planning, scientific knowledge, and the party’s monopoly on power and decision-making. In the new models, instead, the market logics prevail, exercising innovativeness, attention to the social consensus, and economic activities independent from collectively reached decisions (Tsenkova&Nedovic-Budic, 2006).Similarly this process of transformation had favored the introduction, in the long run and in many cases only formally, of new principle of good governance’: legitimacy and voice (participation and consensus building); strategic direction and visions; performance (efficiency, effectiveness) accountability and transparency (Graham et al. 2003). In order to better understand the flavor and relevance of the transition period in the countries at stake, it is useful to reflect on some of the variables that were adopted to interpret these phenomena in the last 25th years (Table 1). Initial works concentrated on and to explain the modes to communist collapse; peaceful civil pattern, violent and military mode (Elster et al.1998), the type of communist regimes (cult of personality or bureaucratic-authoritarian), at that regard see Kitschelt et al. (1999) and the pre-communist tradition (tradition societies and industrial societies). These studies focus on the divergent patterns of change in a postcommunist trajectory in Eastern Europe, including the former Yugoslavia (in our case, Croatia and Bosnia) and Albania. How Elster et al (1998) suggest, in the Western Balkan postcommunist experience it is possible to identify both the modes to communist collapse (peaceful and violent). Indeed, if the communist collapse in former-Yugoslavia has been violent in contrast to Albania were we assisted to a peaceful collapse. This evidence, apparently insignificant, is important to put into context and interpret the type of national institution, administrative reform, market reform, international relation that characterized the postcommunist reorganization, as it influenced the orientation of the institutional choices made by the reforming elites in each country and, in turn, produced indirect impacts upon the domestic spatial planning evolution. More in detail, various authors (Tsenkova & Nedovic-Budic, 2006, Tsenkova2006) argues that the transition process can influence the national level of government in three different aspect; (a) political transition, communist system to democracy (systemic political change), (b) economic transition planned growth system to market (systemic economic change) and (c) 46

governance transition, central government decision-making to decentralized system of governance. For each of the transition States, the responses are to be explained in terms of economic change, social change, changes in urban governance and spatial change. However, if the trends of transformation are clear, unclear are the choices made by governments, organization, businesses and individuals to respond to post-socialist challenges (Nedovic-Budic 2001). Moreover, the internal (and external) environment is also in a states of flux, featuring the incremental adjustment of the physical, economic, social, and political structures (Musil 1993, Sykora 1994). From the above, it appears clear how a copious number of exogenous and endogenous factors, related with both the international geopolitical scenario and the domestic culture and heritage, have played a key role in the polity and policy choice during the transition process. Many of these factors brought along with them as many important opportunities to seize while, at the same time, contributed to limit the set of options available for the definition of the agenda, in this way contributing to affect the decisional process within the different national contexts (Shiefilds, 2004).

European Integration and Europeanization In addition to the legacy of the communist period and the impact of the transition, to understand the way the spatial planning systems of the countries at stake have been consolidating, of particular relevance is the process of European integration, a peculiar area of research that belong to the field of the so-called European studies. In this therefore useful to briefly introduce the European Integration process and the Europeanization mechanisms triggered by the latter, in order to then explore the institutional steps that characterize the latter in the countries at stake. According to Haas (1958), it is possible to describe the process and progression of European integration through the concepts of supra-nationality, national and sub-national interests and spillover effects. In other words, at certain moment in history a number of European States decided, on the basis of their own interests, to embark in an incremental process of sovereignty transfer to a supranational body, the European Union. The transfer of sovereignty on a particular issue may, in turn, generate spillover influence on other policy fields, and eventually lead to the acquisition of those field within the competences of the supranational body. Whereas this growth of competences under the EU sovereignty is often referred to as the ‘deepening’ side of the European integration process, the latter presents also a widening dimension, i.e. the process 47

through which the EU ‘enlarge’ its territory and population by progressively including new member states into its ranks. However, one should notice how the European integration process is by no mean a process with a defined end status. It may rather be described as an open-end process whose goals and means have been, and still are contested. According to several authors (among others: William Walters & Jenes Henr Haahr 2005), the idea of Europe has widely evolved since the 1950s and 1960s. The Treaties’ sequences3 signed by the Member States have changed the features of the European polity, deepened its policy scope and widened the territory that is affected by the latter. As far as the Western Balkan region is concerned, the European integration process is already ongoing and its likely to continue until the whole area becomes part of the EU. However, the process is characterized by very different speeds and Croatia is the only country that managed to become an EU Member State (Table 2). In this light it is important to understand the various steps through which the EU enlargement process works, and the way the EU can exert its adjustment pressure through each of them (Figure 1): pre-application agreement, candidate status, screening, negotiation of 33 different chapter, Accession treaty, and finally award of the Member States status. Whereas the EU signed Stabilization and Association Process Agreements with Croatia, Bosnia and Albania in 1999, the integration process of the latter has been rather slower. There are many reasons behind Albania’s slowfulfillment of the EU accession conditions. Firstly, the political instability from 1990 to 2000 that peaked with the civil war in 1997. Secondly, the slow pace and scarce effectiveness of the wider polity, policy, economic and social transformations. Due to this reasons, Albania was granted candidate status only in June 2014, as a recognition of its reform efforts and progress made. However, the country still needs to build on and consolidate the reform momentum and focus its efforts on tackling its EU-integration challenges in a sustainable and inclusive way (European Commission, 2014). When it comes to Bosnia Herzegovina, its relation with the EU is further complicated by various misunderstandings related with the political and economic accession criteria. More in detail, according to the 2015 Progress Report, Bosnia Herzegovina is required to further improve the cooperation and coordination between the State level, the Entity levels and the Brčko District Parliament (vertical and horizontal integration). In fact, a lack of clarity remains in the distribution of power between State, Entities, Cantons and Municipalities. Moreover, in order to introduce a new 48

administrative reform, is necessary to modify the domestic approach overcoming the politicization system towards a more appropriate political framework. For these reasons, but not only, Bosnia Herzegovina is still far from the accession into the European Union not with standing the entry into the force of Stabilization and Association Agreement (SAA) on 1 June 2015. It is easy to understand that the different pace that characterized the three countries under analysis in their path towards the EU affected, in turn, also the magnitude and quality of their Europeanization. A wide literature has, indeed, been developed in the last 20 years to understand the relation between European Integration and Europeanization, and it may be worth to point out the difference between them. First of all, as argued by Goetz and Hix (2000),the two concepts are part of a single equation in which European Integration act as the independent variable and Europeanization (i.e. the change of domestic context due to the impact of the EU) isthe dependent variable. However, the relation between these two variables is far from being linear, appearing instead rather obscure (Howell, 2002). Europeanization indicates a continual interaction or dialectic between the uniformity of the EU and the diversity of the individual member states (Howell, 2002), and may be seen as the main transmission belt of European integration (Borzel, 2003): on the one hand, the European integration process triggers Europeanization mechanisms that generates domestic changes in countries’ governmental, regulatory and discursive structures; On the other hand, Europeanization may be red as the driving force through which the Member states continue to interplay in the European integration process, in so doing influencing the way the EU supranationality evolves.

The Europeanization of spatial planning In the light of above, it ispossible now to focus on the various channels through which the process of Europeanization has contribute to influence the Member States, more or less explicitly, in a number of areas of policy fields, including spatial planning. Interestingly, it is possible to witness a substantial transformation of the domestic spatial planning institutions and policies as a consequence of the development and dissemination of concepts, tools and procedures at the EU level (Adams e al., 2011; Stead and Cotella, 2012; Giannakourou 2012) and this occurs despite the fact that, as argued by many authors, the EU Treaties do not include any reference to spatial planning or nor to the possibility of the EU to act on this matter to any extent (JaninRivolin, 2008, 2010; Jasenk’aKranjcevic 2005). 49

Despite the absence of regulatory restrictions and legal requirements, the European debate, the EU cohesion policy, the experiences of European territorial cooperation and the EU urban policy are indeed able to influence the practices of planning in the member states and beyond (Giannakourou 1998, Janin Rivolin and Cotella 2014, 2012, 2010, Böhme & Waterhout, 2008). The changes induced through Europeanization are studied in multiple ways in the literature. For instance, some authors understand the Europeanization of spatial planning as a consequence of multi-level governance (Janin Rivolin & Faludi, 2005; Janin Rivolin 2010); others emphasize the process of institutional transformation (Giannakourou 2005), or focus the attention on episodes of policy transfer and lesson drawing (Dühr & Nadin& 2007) additional perspectives direct the attention to the discursive integration processes that lead to co-generation and more or less structured exchange of knowledge (Böhme, 2002; Adams et al, 2011; Cotella et al., 2012; Adams et al., 2014). Despite the differences that characterize the various approaches, they all seem to focus around the process of evolution of domestic planning systems and/or of one or more particular dimensions of the latter (structure, tools, practices and discourses Janin Rivolin & Cotella, 2014, 2012, 2010). All these approaches are indeed complementary, and are all necessary to unfold the multi-dimensional, holographic nature of the processes of Europeanization and the possible channels of influence on the domestic systems (Doria et al., 2006; Dühr et al. 2010; Cotella & JaninRivolin, 2015). When analyzing the influence that the EU exert on the domestic systems of planning it is possible to operate a preliminary systematization of the channels and modes through which this influence is delivered. More in particular, it is possible to individuate three channels of topdown Europeanization influence – i.e. Dialogic, Institutional and Instrumental (Cotella & JaninRivolin, 2010, 2012, 2015) – pivoted around as many Europeanization catalysts – i.e. strategic orientations, formal acts, economic incentives (Reimer et al. 2014).

Dialogical influence through strategic orientations This channel of influence occurs through the diffusion and dissemination of the concept and ideas developed within the so-called European spatial planning knowledge arenas (Adams et al., 2011; Cotella et al., 2012) and crystallized in the EU strategic guidelines documents as the European Spatial Development Perspective (ESDP, CEC, 1999) and the EU Territorial Agenda (TAEU DE Presidency, 2007; TAEUHU Presidency, 2011). In addition to this, there exists a 50

lot of documents produced by the European Commission concerning territorial governance and cohesion, as the White Book on Governance(CEC, 2001), the Green Bookon territorial cohesion (CEC, 2008) and various documents focusing on the Urban dimension of community policies (CEC 1990, 1997, 1998).All these documents, despite their non-binding nature, exert a top-down dialogic influence towards the spatial planning discursive arenas that characterize the various domestic contexts that produce a change in the beliefs and expectations of local actors (Knill & Lehmkuhl, 1999), in turn potentially having the power to influence domestic policy and decision-making processes (Janin Rivolin 2012; Cotella & Janin Rivolin 2010).

Structural influence through formal acts In other circumstances, through binding instruments such as directives and regulations, the European Union imposes specific behaviors hierarchically, in turn leading to legal changes that affect the structure for spatial planning in domestic contexts (Janin Rivolin 2012; Cotella & Janin Rivolin 2010). It is possible to identify two main sectors in which this channel of influence is particularly active: the environmental policy, the energy and the competition policy. The European Water Framework Directive, the Habitats Directive, the Seveso I and II directives, and the directives concerning the Environmental Impact Assessment and the Strategic Environmental Assessment are examples in this concern. This influence, that occurs through mechanisms of legislative conditionality, is particularly relevant for those policy areas that lays under the umbrella of the European Union direct competences. Due to it, the Member states are obliged to adapt their own legal systems in accordance to the binding regulatory models imposed by the EU (Dühret al. 2010, Knill & Lehmkuhl, 1999). Instrumental influence through monetary incentive systems In order to increase the effectiveness of European meta-narrative (ESDP, TAEU), various incentive programs were put instituted at the EU level, with the aim to deliver its specific objectives on the Member States’ territories (Janin Rivolin 2012; Cotella & Janin Rivolin 2010). Among them, the pivotal role is played by the EU cohesion policy; in the recent past, a relevant place is being also covered by the former Community Initiatives INTERREG, URBAN and LEADER. These initiatives have the value of increasing the level of acceptability of certain strategies of spatial development by national states, in particular for some Eastern European States. The influence of the EU can here be detected only when we take into consideration the ways through which this complex system of incentives and tools is implemented (Faludi 2003), 51

with the EU that exercises a sort of 'economic conditionality' altering the possibility of domestic actors through the redistribution of resources and powers (Knill&Lehmkuhl, 1999). Europeanization and spatial planning ‘convergence’? Finally, few words should be spent on the actual implications of Europeanization for spatial planning in Europe. At a first glance, it is indeed possible to notice a phenomenon of harmonization of policies and practices and, more in general, an overall convergence of spatial planning systems throughout Europe. However, this does not imply any homogenization of the domestic planning styles but rather their further diversification (Giannakourou 2005), and this shows true, for instance, when one analyzes the Europeanization of spatial planning in the Mediterranean area (Italy, Greece, Spain, Portugal). As far as the new Member States and the candidate (or potential candidate) countries are concerned, the situation is further complicated by the different stage of integration as well as by the peculiar historical heritage. As a matter of fact, the identification of processes of convergence or divergence seems still an unresolved issue in comparative planning studies (Reimer et al, 2014) and various authors suggest the possibility of detecting, within different dimensions, both converging and diverging evidences. This view seems to reflect the complexity of spatial planning systems evolution and their dynamic nature, reinforcing the arguments of those scholars that find reductive to focus on static spatial planning configurations and prefer to focus on the reasons behind and quality of the changes (Reimer et al 2014, Janin Rivolin 2012). However, it is true that some planning systems presents a degree of convergence among them bigger than others. This may be imputable to the path-dependency logics, in other words to the actions of endogenous variables in the definition of domestic reactions to Europe in the different contexts.

Territorial Administrative Reform in Croatia, Albania and Bosnia Herzegovina After having introduced the main driving forces that contribute to influence the evolution of spatial planning in the Western Balkan Region since 1989, it is time to focus on the quality of the actual changes. As already introduced above, after the dissolution of the communist regimes of the '90s, the three countries at stake were involved, in different ways, in a shift from a highly centralized government and administration system to a more decentralized system. The implemented administrative reforms have been fluid and tumultuous, and are in some cases still ongoing. The evolution of the territorial administrative configuration in each States played a 52

pivotal role in influencing the evolution of the spatial planning system and, to some extent, one could argue that the heterogeneity that characterized the spatial planning reforms is also a consequence of the heterogeneous territorial governance systems that consolidated (see Table 3). Croatia With the end of the former Yugoslavia in the early 90s and the subsequent proclamation of the national independence, Croatia started to go through a period of reforms that interested various spheres, among which the administrative one stands among the most relevant. The aim of the latter was to align the Croatian administrative system with the new constitution. In this regard, the reform of 1992 on the local, regional and territorial organization into counties, municipalities and communes, introduce a dual system of local government: the first tier of the system of self-government is occupied by a set of municipalities and city, while the second tier is composed by the counties as a local units of self-government as well as government representation. The legislation defined the Croatian administrative system as composed by 21 counties, 70 cities, 418 municipalities and 2 districts. However, the process of decentralization leading to the administrative restructuring has not been clear and transparent. According to Maleković et al. (2011) the latter was actually accompanied by a process of re-centralization of power implemented through the county level, with various ministries that put in placea system of outpost located in parallel with the local self-governments, in order to continue to influence their administrative actions. Moreover, various authors argue that Croatian counties are too small. Whereas, on the one hand, the reduced dimension allows to respond effectively to local needs, on the other hand, it prevent the consolidation of an articulated system of governance and, consequently, any attempt to influence the central system (Maleković and Puljiz, 2009). This situation created a numbers of problems related to the increase of development disparities that contributed to consolidate the existing regional imbalances between the north and south. A second period of reforms in Croatia was related to the new relationship with the European Union. Croatia achieved in 2004 the European candidate status, and began many reforms, including the administration one, that had to considered also the regional strategies of the EU and its principles. As a consequence, the country adopted three NUTS 2 statistical regions in 2007, in order to better answer the needs of the EU pre-accession policy. Moreover, between 2005 and 2007 various powers and competences were transferred from the counties to the 53

municipal level – and in particular to Croatian cities – including those concerning spatial planning as institutionalized by the new law about spatial planning and constructions approved in 2007. In 2009, the central government also introduced a new framework law for the regional development, which provides various indications directly descending from, and related to the EU pre-accession and cohesion policy. Then, in 2010, a set of bottom-up strategies was put in place to in order to achieve higher coordination between local, regional and national actors on the basis of the principle of subsidiarity. In addition to this, the Regional Development Strategy 2011-2013 identifies a number of guidelines and principles aiming at a functional decentralization based on three factors: functional decentralization, fiscal decentralization, and territorial reorganization. Despite the describer reforms, however, the Croatian administrative system is still affected by several problems, among which the reduced territorial dimension of the counties, the limited fiscal capacity of local units, the lack of a vertical coordination between the central system and the regional level, the implementation of processes of centralization combined with a lack of local institutional capacity (Maleković et al. 2011, Maleković and Puljiz, 2009). Only with the new Regional Development Strategy 2011-2013, it has been possible to produce some attempts in the direction of a further coordination of the various administrative levels, partly pivoted around the statistic NUTS 2 regions introduced in 2007, as is possible to observe in Table 4. Albania In Albania, the local government reform is a debated topic since the fall of the communist regime. This generated a process of administrative decentralization characterized by various steps and influenced by various factors as the local needs, path-dependency logics and the influence of external actors (Dhimitri, Cucllari, &Cini, 2013). In fact, if among the causes behind the growing will of local administrative autonomy surely lays the end of communist control and the internal process of political and economic reform, the new framework of international relation has play a crucial role as well, and in particular the influence of the European Union. For these reasons, during the 1990s, the Albanian context has been characterized by an intense wave of reforms, aiming atthe decentralization of powers and competences from the central to the local. However, for at least a decade, the administrative proceeded in a somehow confused 54

way, and maintained a surprisingly centralist flavor. The first local administration level was composed by 44"Bashkia", composed by cities and neighborhoods, and 313 Komuna as a level that represents the rural areas. The second level was constituted by 36 "Rrethe", in continuity with the same regime administrative division. This level wasincorporated into the 12 prefectures which were introduced in 1993. In addition to this, this system wasparalleled by a set of state agencies that acted as outpost of the various central ministries. It is easy to imagine how, within a context of uncertain responsibilities’ distribution, the actual decentralization of finances as well as the efficiency of the public administration wascompromised. In this regard, after signing the chapter of the local "self-government" promoted by the European Community, Albania introduced a new administrative reform (Reform nr° 8652/2000) "on the organization and functioning of local government", better known as the Organic Law on Local Government. This reform was advanced in the article nr° 13 of the Constitution of 1999, which defines the role of the local government based on the administrative decentralization exercise with the principle of local autonomy (Brahimi et al., 2013). The reform provides the country with two levels of local government, 12 regions (the 'Qarku') and 373 local units of which 65 Bashkia, as municipalities level (urban areas) and 308 Komuna (rural areas). While the representatives of the lower level, mayors and members of municipal councils, are directly elected, the board of the region is the political body, which represents the local political interest. In fact, the board of each region is composed by representatives of the Bashkia and the Komunes located within the Qarku border. In this sense, they are not directly elected units, but acts as representative bodies. Furthermore, the reform keeps, as representatives of the national structure, 12 prefectures and a number of representative bodies linked to different ministries. Although some problems characterizing the administrative subdivision of the early 1990s were solved, there is still a long way to go. One issue still needing attention is the identification of the responsibilities of the regional level with the absence of a political legitimacy and the role of the administrative structure of the region (Toto 2014, 2012). This issue, together with requirements of EU cohesion and pre-accession policies, have given the right push for a new “regionalization" reform that reduces the numbers of "Qarku" in favor of NUTS2 regional units with a population of over 800,000 inhabitants. This new reform, that is now under elaboration, aims at answering therequirements of the EU integration process, calling for each candidate state to set up an administrative structure capable of efficiently intercepting and to managing 55

the pre-accession and the structural funds. Finally, the new configuration will also implement a reorganization of the lower administrative level (Bashkia and Komuna) based on the principle of "functional areas" defined as territorial areas where there are frequent interaction between inhabitants and economic institutions, social, and cultural development. In addition to this, in this contest there are some criteria related to the number of population, historical and traditional boundaries, and protection of the ethnic minorities. Despite the high expectations linked to this last administrative reform wave, one should notice how the latter is not producing the desired results yet. The last law linked to the reform (Law 115/2014) has indeed reduced the number of first level local units to 61 municipalities, but did not affect the number of Qarku yet. The reform criteria are still in process but, inevitably, they have to reflect the recommendations of the EU. In this regard see Table 5 that summarize the complex administrative reform in last 25year in Albania. Bosnia Herzegovina After the signature of the Dayton agreement in 1995, the State of Bosnia Herzegovina is subdivided into two entities – the Federation of Bosnia and Herzegovina (FBE, that groups the majority of Bosnian Muslims and Bosnian Croatian) and the Republika of Srpska (RS, that hosts the Serbian majority) – and a special unit – the territory subjected to "arbitration" of Brčko (DB); in that regard see Table 6. This agreement also divides, from an administrative point of view, the FBE in ten cantons which are, in turn, divided into several municipalities. The cantons benefit from a high degree of autonomy and are responsible for the land use planning, local business development and local economic development. As far as the Republica of Srpskais concerned, no meso-level subdivision was implemented, and the territory is only divided into municipalities (Osmanković, 2004). Although the political intention behind this agreement is acceptable, the criteria of this reform is quite questionable. On the one hand, the process of "regionalization" was thought for ethnical and political priorities, on the other hand, economic, geographic, infrastructural, spatial, urban and historical factors were completely ignored (Osmanković, 2004). In this contest, the apparent multi-level governance hides a centralized administrative structure at the level of the two entities, and specifically in the cantons for FBE, reserving to the central level a marginal role (Fagat, 2012). Osmanković (2004) emphasizes the importance of the role of the actors of the international community in this process, including in the role of the High Representative4, introduced by the 56

Dayton Peace Agreement as an International representative in Bosnia Herzegovina, the European Union and several national embassies. Evidence shows that the international actors have played a leading role in the creation of the administrative Bosnian system (BojičićDželilović, 2011). Spatial Planning Reform in Croatia, Albania and Bosnia Herzegovina In coherence withTosics (2005), it is possible to subdivide the transition period in three separate moments: (i) vacuum, a period was characterized by uncontrolled development, massive privatization and contradiction law; (ii) adaptation, initiative of new investment and planning instrument and the fragmentation of local governments and (iii) adjustment, continuation of the investments, and growing concern for public sector plans. However, each period was characterized by a multiplicity of transformation in terms of institutions, formal or/and informal rules, legal framework, political factors and social needs. Furthermore, as already mentioned, within each country the undertaken reforms were influenced by the domestic context.Table 7 quickly summarizes the main legal achievements in the field of spatial planning that characterized the three countries under analysis, whose contents will be presented more in detail in the following sections. Croatia Spatial planning in Croatia lays under the competences of the Ministry of Environmental Protection, Planning and Construction, and is framed by two main laws. A first law on spatial planning was approved in 1994 (OG 30/94), focusing on the institution responsible for spatial planning and regional development and paying particular attention to the protection and management of coastline areas. According to the law, at the local level, the counties and the city of Zagreb have to prepare the Physical Plan for the counties and the capital city, in order to define the aims of spatial organization, protection, use and management of the environment. The 1994 law, also provided the municipality with the duty to develop a more general municipal Spatial Development Plan, and the detailed Urban Development plans. The Spatial Development Plan of the municipality defines the conditions for the development of cities and identifies goals, establishes the functions, and defines; the areas to rebuild or rehabilitate, environmental protection and other areas with special natural values, cultural and important

57

monuments. In addition, the plan identifies and obliges municipalities to establish detailed plans for specific areas. The law and its further amendments, provided for a division of responsibilities between different levels of government (central, counties and municipalities). As we can see, there are a numbers of actors who are responsible for some areas, such as the management of waste, forestry, infrastructure, energy and telecommunications. As a consequence of the requirements of these legal acts, in 1997 the country approved the National Strategy of Spatial Planning, which identifies the aims of long-term spatial development in cohesion with the economic, social and cultural development. In addition, a National Spatial Program Schedule was approved in 1999, determining measures and activities in order to implement the national strategy of 1997. After reaching the status of member of the EU, 1st July 2013, Croatia adopted a new legal framework for spatial planning, through the adoption of a new Spatial Planning Law (OG 153/13) that came into force on January the 1st, 2014. Understandably, this reform reflects some principles defined at and promoted by the EU institutions. The first principle of the legislation is very important, and focusses on the actual approach to spatial planning (strategies, plans and programs) that, according to the legal text, aims at the sustainable spatial development of the national territory to be achieved through horizontal and vertical integration. Interestingly enough, the law also stress the need for a free access to al the spatial planning documents in order to guarantee the maximum level of transparency. It is also given a significant importance to the phases of monitoring and evaluation of plans and strategies, to be implemented in line with the EU standards. The law requires also the preparation of a Spatial Development Strategy of the Republic of Croatia considered as a key instrument for the national development. This Strategy should be based on a spatial development which takes into account the natural, economic, social, cultural and environmental conditions. It is important for the Strategy to contain the guidelines and priorities in order to achieve the aims of spatial development relating to the protection, preservation and environmental improvement. Whereas it is still early to see if the new legal framework will ensure spatial planning coherence and proves useful for the domestic environment, it is important to highlight that various EU principles have been shared and incorporated into the national legislation. This aspect is important because it is a direct result of a process of Europeanization through dialogic influence 58

that allowed for some ideas and concepts defined within the EU discursive sphere to trickle down into the national spatial planning discourse. Albania In Albania, spatial planning is under the responsibility of the Ministry of Public Works and Transports, at the central level, while at the subnational level, the competences for spatial planning are shared by both the 'Qarku' in the expression of the board of the region, and the municipalities in the figure of the Mayor and the elected City Council. With the law nr. 8405/1998 on Urbanism, the situation doesn't change a lot. Moreover, the reform didn't take into account the process of informal construction, and failed to identify the role that the public sector should have in the definition of private and public property, in so doing avoiding to deal with the most significant challenges of Albanian spatial development. With the beginning of the 2000, due to the signature of various agreements with the EU, a comprehensive legal reform of the Albanian spatial planning system became necessary, in order to take into account, the new conditions introduced with the various administrative reforms, the legalization of informal areas, the necessity to harmonize the administrative structures for managing pre-accession funds etc. In this context, the new Law on spatial planning (Law Nr. 10119/2009) was approved. The name of the law itself is symptomatic of a shift in the adopted approach, as the previous legal act referred to, and focused almost exclusively on urban planning. These innovations are significant, both at an institutional level with the introduction of the National Territorial Planningas well as at the discourse level, with the inclusion of concepts of clear EU inspiration. The law introduces, at different levels, different policy and planning tools, programs and assessment mechanisms and, for the first time, it introduces the use of integrated intersectoral plans. Unlike the previous reforms, this approach has developed along the guidelines of the ESDP and the TAEUs. Nevertheless, the law has not been fully understood by the local units yet. This is true for different reasons, including the professional inability to manage the required processes, but also the professional inertia, focusing on the conservation of the status quo. For these and other reasons, a new Law 'for the planning and development of the territory' (Law nr° 107/2014) was recently approved. It is still too early to assess the result of the new reform but, at the same time, it is interesting to note how the latter, in art. 4, underlines the importance to harmonize the system of national planning with the European Union directives. 59

Bosnia Herzegovina In Bosnia Herzegovina, spatial planning is an exclusive competence of the entities and of the the Brčko District (FBE, RS, DB). This configuration requires that the various levels of government have to structure themselves in the management of the territorial government of the Bosnian republic. In coherence with the attributed responsibilities, the entities legislate for the system of planning improvement and define the modes and conditions of land transformation and of the attribution of the building permits. The Federation of Bosnia and Herzegovina (FBE) established the Ministry of Spatial Planning (Ministry of Physical Planning) which is responsible for implementing policies on land management, implementation and application of the plans at the federal level, for the examination and for the harmonization the plans of each cantons at the federal level and, finally, for the identification of the strategic development guidelines and the management of natural resources. Along the lines of the FBE, also the Republic of Srpska has established its Ministry of Spatial Planning, Construction and Ecology, dividing spatial planning responsibilities through different departments: spatial and urban planning, construction and environmental protection.

Conclusions The proposed paper presented the evolution of territorial governance and spatial planning systems in Croatia, Bosnia and Albania since 1989, as a consequence of three main driving forces: (i) the transition from a command and control economy to free market economic models, (ii) the process of EU integration and (iii) the peculiar domestic conditions and needs and the path-dependency logics triggered by the latter. As it is possible to note, both transition and integration processes had irremediably affected the spatial planning in each of the countries under scrutiny. The outcomes of these processes are significant and various. Indeed, among the most obvious issues there is the change of national institution as a consequence of the international actors’ influences. The reasons of this institutional evolution are not obvious. In coherence with Vachudova (2005), this type of influence may be considered as ‘passive’, because it depends on each nation’s predisposition to adapt its institution in accordance to the international requirements and pressure. Indeed, the external influences, mostly by the international monetary organization and by European Union but not only, are not binding. In this perspective, it is possible to identify some common

60

elements in the institution introduced ex-novo during the transition and integration process in the three countries at stake: •

the introduction of central level offices for EU Integration;

•

the important role played by the Ministries of Integration as new key actors that are responsible for the relation between the domestic and the EU level

•

the introduction of new, democratically elected bodies at the various territorial level as a consequence of multiple administrative decentralization reforms

As already argued by several authors (among others: Pallagst, 2006; Schimmelfenning and Sedelmeier, 2006; Giannakourou, 2012), the transition and the EU accession processes, despite presenting several challenges, contribute to open several ‘windows of opportunity’ that, in turn, domestic actors try to seize in order to pursue their own agenda. With the support of the three channelsof influence introduced in the text above, it is possible to underline some notion related with each of the analyzed national context. In terms of the so called dialogical influence, the latest reform in field of administration and spatial planning in Croatia and Albania were affected by a broad set of European concepts and ideas both in terms of spatial objectives and procedures. Among others, particular attention was paid to subsidiarity, integrated planning, vertical and horizontal integration, transparence etc., but also territorial cohesion and sustainable development. These aspects became constitutive elements of the domestic political agendas at the national level, and therefore wereable to influence the domestic spatial planning discourse, in some cases trickling down to lower levels. Furthermore, this process contributed to produce more or less evident changesin the domestic planning culture. Similarly, through the pre-accession process, the EU was able to exert a share of legislative conditionality, putting pressure on the three countries to undertake processes of regionalization that, ultimately, led to more or less complex administration reforms. Last but not list, a pivotal role was played by the influence exerted by the international organizations through the set of various monetary incentive systems to back-up the undertaken reform. In this case, as a consequence of economic conditionality mechanisms, domestic actors had to choose specific reforms paths in order to secure the economic benefits coming from outside. One should also notice the importance of domestic socio-economic structurein affecting the pace of adoption and adaptation. In this regard is important to observe the processthat led to the development of the new planning laws in each country. Indeed, in the first period of transition process, the Albanian socio economic situation did not allow for a sudden adaptation of 61

previous institutional conditions, and in particular for the introduction of spatial planning frameworks able to take into account new variables as private property, market actor and forces, liberalization and decentralization process. However, the socio economic condition changed during the first part of 2000. In fact, in this period, the adaption process advances speedily also as a consequence of the EU influence. Inversely, through two years of intensive reforms (19971999), Croatia was able to speed up the adaptation process in terms of spatial planning tools and procedures, with the introduction of the National Spatial Planning Strategy and Program. As far as Bosnia is concerned the Dayton Agreement, while aiming at solving various elements of conflict resulting from the concluded war, proved to be a problematic solution for the establishment of a coherent spatial planning framework. In conclusion, it is important to underline that the collected evidences are unable to describe in a satisfactory way the present and future of the spatial planning patterns of change in the Western Balkan Region. To do so, it is essential to pursue further research in this context inasmuch as the described process are still in evolution and affected by an ongoing enlargement policy activities. The proposed considerations simply aim at providing a first glimpse on the evolutionary process of spatial planning in the countries at stake, and to identify potential variables that may serve as a basis for further more in-depth analysis. Note 1

For the purpose of this research, the Western Balkan region is considered to be composed by: Albania, Bosnia Herzegovina, Croatia, Serbia, Republic of Montenegro, FYROM (Former Yugoslavian Republic Of Macedonia), Kosovo. Similar geographical definitions were adopted in their studies by the World Bank and the European Commission. 2The Dayton Agreement,also referred to as Paris Protocol bythe General Framework Agreement for Peace,was stipulate in 1995 in Ohio (US). It preserved Bosnia as a single state made up of two entity, the Bosniak-Croat federation (Federation of Bosnia Herzegovina) and the Bosnian Serb Republic (Republic of Srbska). 3The EU is based on the following Treaties; Rome Treaties 1957, Merge Treaty-Brussel 1965, Single European Act 1986,Maastricht 1992,Amsterdam 1997, Nice 2001,and Lisbon 2007. 4The Dayton Agreement introduced the figure of the High Representative to (among other): monitor the implementation of the peace settlement, co-ordinate the activities of the civilian organization and agencies, produce periodic progress reports on the Bosnian situation, etc.

62

References Adams N. Cotella G. Nunes R.J. (2014) The Engagement of Territorial Knowledge Communities with European Spatial Planning and the Territorial Cohesion Debate: A Baltic Perspective. In: European Planning Studies, vol. 22 n. 4, pp. 712-734. Adams N. Cotella G. and Nunes R. (2011) Territorial Development, Cohesion and Spatial Planning: knowledge and policy development in an enlarged EU, Ashgate: Aldershot BöhmeK. Waterhout B. (2008) The Europeanization of Planning, in: Faludi (ED) European Spatial Research and Policy, MA: Lincoln Institute of Land Policy. Cambridge, pp. 225-248 Böhme, K. (2002) ‘Much Ado about Evidence: Reflections from Policy Making in the European Union’, Planning Theory & Practice 3 (1), pp 99-101 Börzel, T. a. (2003). How the European Union Interacts with its Member States. Political Science Series No. 93, 22 S. Bojičić- Dželilović, (2011) Decentralization and Regionalization in Bosnia-Herzegovina: Issues and Challenges, Research on South East Europe. London Scool of Economics Braathen, E. (2005) ‘Social Funds in Africa: a technocratic-clientelistic response to poverty’, in Cimadamore, A. et al (eds.) The Poverty of the State: reconsideration of the role of the state in the struggle against global poverty’.Buenos Aires: CLACSO; 289-314. Cotella G., Adams N., Nunes R. (2012) Engaging in European spatial planning: a Central and Eastern European perspective on the Territorial Cohesion debate. In: European Planning Studies, pp. 1-24. Cotella G., JaninRivolin U. (2015) Europeizzazione del governo del territorio: un modello analitico. In:Territorio, vol. 73, pp. 127-134. - ISSN 1825-8689 Cotella, G., &JaninRivolin, U. (2010) Institutions, discourse and practices: towards a multidimensional understanding of EU territorial governance. Paper presented at the 24th AESOP Annual Conference, Helsinki, Finland. CEC (1990) Green Paper on the Urban Environment, COM (1990) 218 final, Luxembourg: Office for Official Publication of the European Communities CEC (1997) The EU Compendium of Spatial Planning Systems and Policies, Regional Development Studies, Office for Official Publications of the European Communities, Luxembourg CEC (1998) Report on Community Policies and Spatial Planning: Working Document of the Commission Services, Brussels CEC (1999), European Spatial Development Perspective, Luxembourg (Office for Official Publications of the EC) 63

CEC (2001) European Governance. A White Paper: Commission of the European Communities, COM (2001) 428 final, BrusselsCEC (2008) Green paper on Territorial Cohesion, the Way Ahead, Inforegion Panorama, No. 28, Luxemburg: Office for Official Publications of the European Communities Dhimitri, E., Cucllari F., Cini M. (2013) Local Government Reform and Regional Development in Albania. International Journal of Innovations in Business, 277–292. Doria L. Fedeli V., Tedesco C. (2006), Rethinking European spatial policy as a Hologram. Actions, institutions, discourses, Aldershot: Ashgate. Đokic, Starc, & Stubbs, (2005) Participation in Transition: the problems and possibilities of participatory approaches to strategic development management in three localities in Croatia. OECD LEED Trento Centre for Local Development, Trento, Italy Dühr S. &Nadin V. (2007) Europeanization through transnational territorial cooperation? The case of INTERREG IIIB North-West Europe, Planning Practices and Research, 22(3) 373-394 DührS.Colomb&Nadin V. (2010) European Spatial Planning and Territorial Cooperation, London-New York: Routledge Kitschelt, H., Mansfeldova, Z., Markowski, R. and Toka, G. (1999) Post-Communist Party Systems: Competititon, Representation, and Inter-Party Cooperation, New York: Cambridge University Press. Elster, J., Offe, Cl. and Preuss, Ul. K. (eds.) (1998) Institutional Design in Post-Communist Societies: Rebuilding the Ship at Sea, Cambridge: Cambridge University Press. ESPON – European Spatial Planning Observation Network (2007) Governance of Territorial and Urban Policies from EU to Local Level. ESPON Project 2.3.2, Final report ESPON, Luxembourg ESDP (1999) European Spatial Development Perspective, Towards Balanced and Sustainable Development of the Territory of the European. Union European Commission Fagat A. (2012) Building Environmental Governance in Bosnia-Herzegovina: Europeanization and transnational assistance in the context of limited statehood. School of Politics and International Relation, University of London Faludi A. (2003) Unfinished Business, European Spatial Planning in the 2000s, Town and Planning Review, 121-140 Reimer M., Getimis P. and Blotevogel H. (2014) Spatial Planning Systems and Practices in Europe. A Comparative Perspective on Continuity and Change, London: Routledge Getimis P. (2012). Comparing Spatial Planning Systems and Planning Cultures in Europe. The Need for a Multi-scalar Approach. Planning Practice and Research, 27(1), 25–40. 64

Georgiadis G. (2008) The convergence–divergence debate revisited: framing the issues. Southeast European and Black Sea Studies. Routledge Giannakourou, G. (2012). The Europeanization of National Planning: Explaining the Causes and the Potentials of Change. Planning Practice and Research, 27(1), 117–135. Giannakourou G. (2005)Transforming spatial planning policy in Mediterranean countries:Europeanization and domestic change, European Planning Studies Graham J. Amos B. Plumptre (2003) Principle for good governance in the 21st Century. Policy Brief 15, Intitute on Governance, Ottawa Goetz K. &Hix S. (2000) Europeanised Politics? European Integration and National Political Systems. West European Politics Special Edition Vol 23 No. 4 Haas, E. B. (1958) The Uniting of Europe: Political, Social, and Economic Forces 1950-57, Stanford, CA: Stanford University Press Heritier, Adrienne, Dieter Kerwer, Christoph Knill, Dirk Lehmenkuhl, Michael Teutsch, and Anne-Cecile Douillet. (2001) Differential Europe: The European Union Impact on National Policymaking. Lanham, MD: Rowman and Littlefield Howell K. (2002) Developing Conceptualizations of Europeanization and European Integration: Mixing Methodologies, Shieffield JaninRivolin, Cotella G. (2014) A Conceptual Device for Spreading (Good) Territorial Governance in Europe, in 2nd ESPON Scientific Report, Luxembourg: ESPON JaninRivolin (2012) Planning Systems as IstitutionalTecnologies: a Proposed Conceptualization and Implication for Comparison. Planning Practice and Research, London JaninRivolin U. &Faludi A. (2005) The hidden face of European spatial planning: Innovations in Governance. European Planning Studies 13(2) 195-215 Knieling J. and Othengrafen F. (2009) Spatial Planning and Culture - Symbiosis for a Better Understanding of Cultural Differences in Plannig Systems. Tradition and Practices, Ashgate. Knill C., Lehmkuhl D. (1999), How Europe matters. Different mechanisms of Europeanization. European Integration online Papers (EIoP), Vol. 3, No. 7 Maleković S., Puljiz J., Bartlett W. (2011) Decentralization and Regional Policy in Croatia: The impact of EU Accession and the prospect of territorial reorganization. Research on South Eastern Europe, London Maleković S., Puljiz J. (2009) Challenges of a New Approach to Development on the Local and Regional Level in Croatia, in: New Croatian Local and Regional Self-Government, Croatian Academy of Science and Arts, Zagreb

65

Nadin, V., & Stead, D. (2008)European Spatial Planning Systems, Social Models and Learning. disP - The Planning Review, 44(172), 35–47. Nedovic-Budic Z (2001) Adjustment of planning practice to the new Eastern and Central European context. Journal of the American Planning Association 67, 38-52. Pallagst, K.M. (2006) European spatial planning reloaded. Considering EU enlargement in theory and practice, European Planning Studies 14(2), 253-272. Ruijsink S. Duka I. Rudina Toto R. (2013) Urban Planning and Free Market in Albania, HIS: Rotterdam. Schimmelfennig F. Sedelmeier U. (2005) The europeanization of Central and Eastern Europe, Cornell University Press, Ithaca, New York. Sedelmeier, U. (2006) Europeanisation in new member and candidate states. Living Reviews in European Governance, 6(1), 1–52. Stead D., Cotella G. (2011)Differential Europe: domestic actors and their role in shaping spatial planning systems, DisP – The Planning Review [special issue], 186(3). Stead D. &Nadin V. (2009) Planning cultures between models of society and planning systems, in: J. Knieling& F. Othengrafen (Eds) Planning Cultures in Europe: Decoding Cultural PhenomenaUrban and Regional Planning, Ashgate. Osmanković J. (2004) Regionalization and Regional Development in Bosnia and Herzegovina in the Post-War Period. Institute for Economic Research, Ljubljana. Progress Report (2015) Bosnia Herzegovina, Communication from the Commission to the European Parlament, the Council, the European Economic and Social Committee and the Committee of The Region. SWD (2015) final, Commission Staff Working Document, Brussels TAEU (2011) Territorial Agenda of the European Union 2020 - Toward an Inclusive, Smart and Sustainable Europe of Diverse Region. Agreed of the Occasion of the Informal Ministry Meeting on the Urban Development and Territorial Cohesion, Gödöllö, Hungary TAEU (2007) Territorial Agenda of The European Union: Towards a More Competitive and Sustainable Europe of Diverse Region. Agreed of the Occasion of the Informal Ministry Meeting on the Urban Development and Territorial Cohesion, Leipzig, Germany Tendler, J. (2000) Why are social funds so popular? in Shahid, Y. et al (eds.) Local Dynamics in the Era of Globalization. Oxford: University Press; 114-129. Toto, R. (2012). Rajonalizimi i Shqipërisë në debat - fuqizimi i decentralizimit dhe evoluimi drejt zhvillimit rajonal 2. Linjat e debatit për zhvillim rajonal apo rajonalizim në Shqipëri, 317– 344 Toto R. (2014), Shqiperia-Riforma Territoriale PerkundrejetRajonalizimit, pertejdecentralizimit, Ministria e Integrimit Europian 66

Tosics I. (2005) City Development in Central and Eastern Europe Since 1990: the Impact of Internal Forces, in K. Dimitrowska-Andrews and F. Hamilton, (eds.), Globalization and Transformations in Eastern and Central European Cities. The United Nations University,Tokyo Tsenkova S., Nedovic-Budic Z. (2006) The urban Mosaic of Post-Socialist Europe: Space, Institutions and Policy, Physica-Verlag, A Springer Company Tsenkova, S. (2006) Beyond Transitions: Understanding Urban Change in Post-socialist Cities. In Tsenkova, S. and Nedovic-Budic, Z. (eds) The Urban Mosaic of Post-socialist Europe. Heidelberg: Springer-Verlag, pp. 21-51. Vachudova A. (2005a)Europe Undivided: Democracy, Leverage and Integration After Communism. Oxford: Oxford University Press Villa, Ž. K. et. al. (2005) The Spatial Dimensions of Development in Croatia – from Theory to Policy Vacuum, 611–646. William W. and Haahr J. (2005)Governing Europe, discourse, Governmentality and European Integration, Routledge Advances in European Politics.

Tables and Figures Table 1 – Differences and similarities between the national contexts at stake Croatia

Albania

Bosnia

Pre-communist tradition

Industrial societies

Tradition societies

Tradition societies

Type of Communist Regime

Cult of personality/ bureaucratic-authoritarian

Cult of personality

Cult of personality/ bureaucratic-authoritarian

Mode to Communist collapse

Violent

Peaceful

Violent

Post-Communist political system

Democratic System (Apparently) after the collapse of former Yugoslavia

Democratic System (Apparently)

Political Instability after the collapse of former Yugoslavia (Ethnic violence)

Source: Author’s own elaboration

Table 2 – Croatia, Albania and Bosnia EU Accession’s steps Step

Accords Stabilization and Association Process

67

Croatia

Albania

Bosnia

1999

1999

1999

Potential Candidate PreAdhesion Agreement

Stabilization and Association Agreement (SAA)

Negotiation Adhesion

2000

2003

2001-2005

2006-2009

2007-2015

2004

2014

2007

2005-2007

2007

…

2006

…

…

2006-2011

…

…

2012

…

…

Candidate Status Program Signed PHARE, ISPRA, SAPARD, poi IPA

Screening

2000

Started Screening Step Chapter Discussed Period Treaty adhesion signed

Source: Authors’ own elaboration

Table 3 – Administrative structures of the countries at stake Croatia

Albania

Bosnia

First Level

Municipalities

Municipalities (Bashkia and Komuna)

Second Level

Counties

Qarku

Municipalities Counties Entity of FBE

Municipalities

Municipalities

Entity of Srpska

DistrectBrcko

Source: Author’s own elaboration

Table 4 – Territorial administrative units in Croatia 21 Counties

2 NUTS Region

Source: Authors’ own elaboration

68

Table 5 – Administrative divisions in Albania, Towards Territorial Reform 1992- 2014 1992 (Rrethe/District)

2000 (Qarku and Rrethe)

2014 (Qarku and Bashkia)

Source: Authors’ own elaboration on :Ministry of State for Local Issues

Table 6 – Administrative divisions in Bosnia, Dayton Agreement 1995 10 FBH Cantons, Brčko Distrect and Repiblic of Srpska

Dayton Agreement

Source: Authors’ own elaboration

69

Table 7– Main legal achievements in the field of spatial planning in the countries at stake

Administrative Reform

Croatia

Albania

Bosnia Herzegovina

Law on Local and Regional SelfGovernment (1992-OG 30/01, OG 153/09)

Organization and Function of Local Government (N. 7572/1992-8652/2000, 115/2014)

Dayton Agreement (1995)

Spatial Planning Reform

Law on Spatial Planning (OG 30/1994, OG 68/1998, OG 50/99, OG 153/2013)

Law on “Urbanism” 7693/1993, 8405/1998, 10119/2009, 107/2014

Spatial Planning and Land-use F BE (N. 52/02, 06/2006) RS (N. 84/02,. 40/13) DB (N. 9/03, 15/04)

Property Rights

Law on Restitution and Compensation of Private Property 1990/1996

On Rural Land (7501/1991) On Privatization of Public Property(7652/1992)

Property Right Law RS (N. 124/08)

Source: Author’s own elaboration

70

FIGURES Figure 1 – Adjustment pressure and adaptation process

Source: Author’s own elaboration

71

Relationship between Self Determination and Nationalism in the Balkans PhD C. Arenca Trashani Faculty of Law, University of Shkodra “Luigj Gurakuqi”, Albania

Abstract The former Yugoslavia is seen as a symbol of the federation, for more than 50 years even though in itself there were big contradicts between different parts of it. In fact the creation of the Yugoslavia has been the real deny of the nation of Croats, Albanians, Bosnians, Macedonians and others. A key element in this long process full of deep-armed conflicts was the application of the right of peoples to self-determination. A continuing debate among international lawyers is whether or not there exists a right to self-determination1. In the light of recent developments, especially after the Kosovo independence, paper calls for more specific guidelines regarding the right to selfdetermination, secession and for sure the right to territorial integrity. The so-called "international community" lacks a clear, principled and practicable policy towards self-determination claims. This is the key issue of this paper, trying through the evolution of the right to self determination and its relation to nationalism, how this concept has affected the meaning and the application of the right to self determination in the world wide and more specifically in the former Yugoslavia. So, using a comparative way but at the same time by exploring the specification of each case in discussion, to arrive to a clearer and solid principle of the right to self-determination. Keywords: Self-determination, Nationalism, International law, Former Yugoslavia. Introduction The principle of self-determination today postulates the right of people organized in an established territory to determine its collective political destiny in a democratic fashion and is therefore at the core of the democratic entitlement. Self-determination is the idea of a community’s right to control its own future, and thus physically to survive and prosper to the fullest extent possible2. This important right is intertwined with individual human rights, international peace and security, the principle of non-intervention and the right to territorial integrity. In view of its importance, the obligation to respect the right of self-determination has been emphasized in numerous resolution of the UN.

72

The collapse of communism was at first supposed by many to entail the triumph of liberal capitalism, but by the other side to give a new imagine beyond that of colonization to the right of the peoples to self-determination. Global capitalism has no time for national selfdetermination because its project is a global market of sellers and buyers. But nation states still dominate world politics, and there are still nations that seek self-determination in the face of oppressive states. The crisis of self-determination is, therefore, not over, even though the long way of it has brought it as e key principle in international law but still no consensus meaning of the principle has emerged. The so-called "international community" lacks a clear, principled and practicable policy towards self-determination claims. There is, accordingly, an urgent need to think clearly, systematically, and practically about what relations ought to obtain among the principles of state sovereignty, national self-determination and human rights. In this paper I would like to talk about the evolution of the right of peoples to self-determination from the time when it firstly came in the international relations. Some problems that deal with self-determination and its application are: the problem of the term ‘people’, who are those people which are entitled to apply this right? Which are the relation between self-determination and nationality, concept that have affected so much the meaning and for more the application of our principle in different part of the world. 1. The evolution of the concept of the right to self-determination The principle of self-determination is one of the most important and controversial issues of the modern international law. The long way to win this status was not at all so easy going. Individual rights are therefore necessary but not necessarily sufficient condition for the protection, development and strengthening of the identity of a group. With the notion of selfdetermination, we mean the right of all the people to determine always in full freedom when and as they wish, their internal and external political status, without external interference and to pursue as they wish their political, economic, social and cultural development.

1

Foster C., “Articulating self-determination in the Draft Declaration of the Indigenous

Peoples”, in EJIL, Vol. 12, No. 1, 2001, pg.142 73

Normally, the phenomenon of self-determination has developed as an answer to those governments who were refusing to accept a community within their jurisdiction as different from the rest of the community they represent, or where these communities by themselves refused to be represented by these governments but wanted to be represented by themselves. American and French Revolutions have been from the beginning very important in the development of the concept of self-determination, for sure enlightened by the English one also. These revolutions were based on natural law theory insofar as they reflected a rejection of the Divine Right of Kings3. The liberal ideas were taken by the most famous liberal philosophers of 17-18 centuries such as Locke, Montesquieu that have given the idea of the equality between all human beings. From these revolutions were taken the first liberal ideas of equality 4 the democratic will and plebiscite 5 and also the concept of liberty and sovereignty. In the United States, the United Kingdom and France the concept of selfdetermination thus developed from the notions of popular sovereignty, individual liberty and representative government 6 . For this reason, the principle of self-determination in the West Europe and USA was democratic and in close relation with the notion of state and democratic governance. In the 18 and 19 centuries the principles of self-determination given to “national” groups is developed as a natural corollary of developing nationalism. Instead of the relations between self- determination and state in the West Europe and USA, the principle in the Eastern Europe together with Italy and Germany was seen in a close relation with the concept of nation and as a result with nationalism. In comparison from developments in the West, in Eastern Europe all these seem to be far way from the way of thinking. Indeed, it was under the label of nationalism that claims to self-determination were usually sought until early in the twentieth century7. This was 2

Raic D., “Statehood and the law of self-determination”, The Hague, Kluwer Law International,2002, pg.173

3

In the Declaration of Independence of the United States of America of 4 July 1776 Thomas Jefferson stated that

all men are created equal and that to secure these rights, governments are instituted among men, deriving their powers from the consent of the governed. 4

French revolution was influenced by the so-called “contractual school of thought”, which was strongly

supported and introduced by a strong political philosopher John Locke 5

Tomuschat C. in “Modern law of self-determination”, Tomuschat C.(Ed), , Martinus Nijhoff Publishers,

Dordrecht, 1993, pg. 4. 6

Radan P., “The break-up of Yugoslavia and international law”, London, Routledge,2002, pg. 8.

74

typical for the Eastern European countries. The first to introduce the concept of nation state and nationalism were the Germans with their “Volk” theory of Herder8 and the Italians with their representative Mazzini9. These two representatives of the creation of the nation-state promoted both the emerging of nationalism that was then leading the principle of selfdetermination in the East Europe. The state was no longer perceived solely as a juristic and territorial concept and a simple historical fact. There was no relationship between ethnic groups and the state, therefore no relations between our principle and the state. The groups who were aiming to achieve their right to self-determination were convinced that the creation of the nationstate was the best solution for them. The first one to proclaim it as the principle of self-determination and to make it part of the international law was the American President Wilson with its famous speech before the senate called “Fourteen Points” of 8 January 1918. To president Wilson stays the merit to have given to our principle a place in international law and international relations, even though at the time he was referring to self-government, which was his favourite concept, and not to selfdetermination. By self-government he meant the right of a population to choose its own form of government; this right was ongoing and was therefore synonymous with democratic government10. According to Wilson way of thinking self-government was the ability of the people to select by them a democratic government, which was the only guarantee against the oppression and conflict. This belief in the fundamental importance of democratic government influenced Wilson’s attitude towards the belligerents, so that he saw the war as a “battle between the forces of democracy and

7

According to Herder, who published “Ideen zur Philosophie der geschichte der

Menschheit”, in the latest of the eighteenth century, the most natural state was that based on a community which shared the same national character of all its individuals. 8

Giuseppe Mazzini was the founder of the Young Italians and perhaps the founder of the

liberal nationalism which helped for the creation of the nation-state in the Italian unification. 9

Cassese A., „Self-determination of peoples“, Cambridge University Press, Cambridge, 1995, pg.19.

75

autocracy”11. After the First World War the new states in Eastern Europe that emerged by the dissolution of big empires claim to apply the principle of self-determination on the basis of independence, power and unity of nation. This was still a different view from that of the great powers, which still saw the principle in relation to the state more than to the nation. The Eastern European countries gave at this period a great importance to the history. On the creation of their states with the aim to extent as much as possible their borders in the neighbouring countries. At the centre of the attention at Paris Peace Conference on 1913 came the history and the nation much more than the economic issues. Indeed the post-World War I order in Balkans exacerbated and created ethnic tensions with arbitrary borders separating many people from their homelands and from their “ethnic brethren”12. Despite Wilson’s sincere motives and ideas, the Allied Powers applied self-determination in an arbitrary manner13. This derives from the creation of the new states especially in the East Europe were more than the self-determination of the people were taken in view political, strategic and economic interests and also those parties which were loyal to the Great Powers was given the right to form they own states such as the Polish, the Yugoslavs, the Czechs and Slovaks. Instead of others such as Croats, Slovenians and Albanians were denied such a right within the so-called the Kingdom of Yugoslavia. Self-determination was considered only for “nations” which were within the territory of the defeated empires; it was never thought to apply to overseas colonies. The creation of new nation states did indeed satisfy the nationalist aspirations of many, but did

10

Pomerance M., “The United States and self-determination: Perspectives on the Wilsonian conception”, in

American Journal of International Law, 1976, pg.19 11

Crawford, Beverly "Explaining Cultural Conflict in the Ex-Yugoslavia: Institutional

Weakness, Economic Crisis, and Identity Politics." In The Myth of "Ethnic Conflict": Politics, Economics, and "Cultural" Violence, edited by Beverly Crawford and Ronnie D. Lipschutz. University of California Press/University of California International and Area Studies Digital Collection, Edited Volume #98, 1998. pg201 http://repositories.cdlib.org/uciaspubs/research/98/7 12

Raic D., “Statehood and the law of self-determination”, pg.190. 76

not eliminate the ethnic minorities, nor the desire of such groups for a further readjustment of boundaries so that they also might achieve ethnic self-determination14. Between the two wars self-determination was perceived as a political claim, which was applied by all the “peoples” without distinctions. Under the League of Nations system the principle gained a deep importance because of the particular interest and importance given by the League to the national minorities. Even though self-determination was excluded by the Covenant of the League as a principle of international law, self-determination was included at the Article 22 of the Covenant of the League of Nations. Self-determination was only indirectly recognized as applicable to the territories placed under mandate, and this regime was limited to “ those colonies and territories which as a consequence of the late war have ceased to be under the sovereignty of the states which formerly governed them and which are inhabited by peoples not yet able to stand to themselves under the strenuous conditions of the modern world”15. The national groups who were not recognized as new states was given the status of mandates which gave them protection under the ‘minorities treaties’ adopted under the auspices of the victorious powers. Under the League of Nations the Aaland Island dispute was the first one case in which the League has to face the problem of the principle of self-determination. According to the Commission of Jurists at that time, self-determination was not part of international law in normal situation: “Although the principle of self-determination of peoples plays an important part in modern political thought, especially since the Great War, it must be pointed that there is no mention of it in the Covenant of the League of Nations. The recognition of this principle in a certain number of international treaties cannot be considered as sufficient to put it upon the same footing as a positive rule of Law of Nations.

13

Musgrave T., “Self-determination and national minorities”, Oxford, Clarendon Press, 1997, pg.32.

14

Art.22 of the Covenant of the League of Nations

77

On the contrary, in the absence of express provisions in international treaties, the right of disposing of national territory is essentially an attribute of the sovereignty of every state. Positive international law does not recognize the right of national groups, as such, to separate themselves from the State of which they form part by the simple expression of a wish, any more than it recognizes the right of other states to claim such a separation”16 But anyway the Commission admits that in abnormal situation the above saying can be changed: “From the point of view of both domestic and international law, the formation and dismemberment of States as a result of revolutions and wars creates situations of fact which, to a large extent, cannot be met by the application of the normal rules of positive law…under such circumstances, the principle of self-determination of peoples may be called into play”17 So with these last remarks the Commission proved that the principle of self-determination has a role to play in the settlement of disputes, but any way the principle was not more than a principle of justice and liberty, expressed in a vague way which leads to different interpretations. After the Second World War, with the creation of the United Nations, the principle of self- determination does not enjoyed the legal status it has today, but anyway till the end of the Second World War its meaning have changed dramatically. The principle is mentioned only twice in the Charter of the United Nations of 194518 and this only with the insistence of the Soviet Union. Despite the fact that self-determination in the Charter is referred to ‘only’ as a “principle” and not as a legal right, its appearance in a conventional instrument establishing an international organization which would be open to universal membership was a very important step in the evolution of self-determination into a positive right under international law.19 Although the Four Powers had not devised any effective means for the use and expansion of the principle, they had at least identified self-determination as a major objective of the new world organization20. It was the first time that self-determination appears in a multilateral treaty and it serves just as a guide or a start point of action for the organization. Since the beginning of the existence of the UN, the principle of self-determination was much more present that in the case of the LN. For this we can see in the following chapters of the UN Charter XI and XII were it is talked about the non-self- governing territories and international trusteeship system in which there was laid down a new regime for those territories whose peoples have not yet 78

attained a full measure of self- government. Anyway at the time of the adoption of the UN Charter it was more than clear that the principle of self-determination was not yet explicitly a legal right and till the beginning of the area of decolonization it was still remaining a principle. The references to self-determination in the Charter are general in nature and do not provide any detail about how it is to be implemented21. Since the end of Second World War 1945 and the adoption of the UN Charter the UN has dedicated a lot of resolutions passed by the General Assembly to the right of selfdetermination and have brought major changes in international law. Self-determination became a driving legal force as from 1960, when the UN General Assembly adopted Resolution 1514 (XV) on the Granting of Independence to Colonial Countries and Peoples. Resolution 1514 (XV) was the most important General Assembly Resolution to associate the concepts of self-determination and decolonization, and it has become the definite statement of the General Assembly with regard to colonial situation. After being treated in a number of Resolutions of the General Assembly 22 at the time of decolonization self-determination won a place at the beginning of both International Covenants on Human Rights.

18

The principle is mentioned only in the Art 1/2 , in relation with friendly relations among

nations and also in the Art.55 in relations with equal rights of peoples. 19

Raic D., “Statehood and the law of self-determination”, pg.200.

20

Cassese A., „Self-determination of peoples“, pg. 38

79

Common Article 1 of the 1966 Covenants on Human Rights states: “all peoples have the right to self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development.”23 The inclusion of the right to self-determination in the Covenants of Human Rights was of great importance because it creates a close link between our right and individual human rights. Individual human right are rights, which are for every human being. This has to be said also for the right to self-determination. Article 1 has been a major impetus to self-determination’s development into a legal principle encompassing the internal decision making process, for it is Article 1(1) which established a permanent link between self-determination and civil and political rights24. A very important document on the way of declaring the right to selfdetermination as a right not limited to decolonization was Resolution 2625(XXV) of 24 October 1970 adopted by the General Assembly of the UN after seven years of work of the Special Committee, by a consensus vote. In this document self-determination has a wider meaning: “By virtue of the principle of equal rights and self-determination of people enshrined in the Charter of the United Nations, all peoples have the right freely to determine, without external interference, their political status and to pursue their economic, social and cultural development, and every state has the duty to respect this right in accordance with the provisions of the Charter”25 This Resolution, intended to offer, even though after almost 25 years from the adoption of the UN Charter, quite a complete overview of the main principles of international law26. Resolution 2625(XXV) does not put at all, any limitation on the application of the right to self- determination only for decolonization as it use the wording of all peoples. Also in the 2 21

Foster C., “Articulating self-determination in the Draft Declaration of the Indigenous Peoples”, pg.142

22

The most important after Resolution 1514 was Resolution 1541 (XV) of 15 December 1960, the purpose of

which was to enumerate a definitive list of factors, known as ‘principles’, to guide members in determining whether an obligation existed to transmit information under Article 73 (e) of the Charter. 23

Declaration on Granting of Independence to Colonial Countries and Peoples, UN Doc.A/Res/1514, 14

December 1960 Cassese A., „Self-determination of peoples“, pg.54. 24

Declaration on Friendly Relations, UN resolution 2625 (XXV), 24 0ctober 1970

25

Palmisano G., “Nazioni Unite e autodeterminazione interna”, pg. 198

80

paragraph dedicated to the principle of self-determination the Declaration stressed for the states “duty to promote, through joint and separate action, realization of the principle of equal rights and self-determination of peoples, in accordance with the provisions of the Charter”27. The use of the phrase ‘all peoples’ in paragraph 1 and 2 to ‘all States’, and the enumeration of a goal which did not necessarily refer to colonial situations, were evidence of the Western desire to extend the principle of self-determination beyond colonial context, and to make it universal in application28. The ongoing character of the right of peoples to self-determination is proclaimed in other very important documents of universal and regional application. Just to name some of them: the OSCE Helsinki Final Act, the African Charter on Human and People’s right and also in the Vienna Declaration and Program of action adopted by the World Conference on Human Rights. In this respect, it seems noteworthy that a common feature of these instruments is that they all refer to “all peoples” and not merely to ‘colonial’ or ‘oppressed’ peoples as the holders of the right of self-determination, a terminology that in itself denotes a universal and continuous character of at least some aspects of the right29. The end of the cold war and the end of the communist bloc also bring a new area for the development of the right to self-determination. As a result of a nationalistic pressure there were and still are deep conflicts in the Eastern Europe and especially in the Western Balkans. The dissolution of Yugoslavia showed how can be self-determination applicable to the situation also out of the context of colonialism. Self-determination has been invoked during all the process of dissolution of the former Yugoslavia as a result of a collapse of the central state structure, as the main action to legitimate the break-way of the republics30. Quite visibly, selfdetermination has become a tool for attempts to revive historical developments that have extended not only over decades, but centuries.

26

Declaration on Friendly Relations, supra note,

27

Musgrave T., “Self-determination and national minorities”, pg 75

28

Raic D., “Statehood and the law of self-determination”, pg.228

81

The big question in the case of Yugoslavia dissolution was whether such a process could be directed and regulated by a principle of international law such as self- determination. Also another big question was that of the degree of applying the legal principle of self-determination. In the case of Yugoslavia was raised the question if the struggles for liberation, such as that of the Kosovo Albanians has to be legitimated as a fair struggle for the right of peoples to selfdetermination. 2. The “people” Concept Violation of the right of self-determination creates a situation, which has repercussions on many areas of international law 31. The right to self-determination is part of the so-called collective rights whose for many reasons are much more difficult and complex to be studied, much more than human rights. This is primarily because the notion “people” is ambiguous and used in different contexts 32. Who are these peoples, which are entitled to apply the right to self- determination and up to what level? According to the international documents after the Second World War: “…self-determination is a right to all the peoples…” So with people we have to understand a group which can be holder of the right to self-determination which can exist only if it lives in a distinct territory, where it constitutes the majority, and it is able to speak its own language, develop its own culture, cultivate its traditions or practice its particular religion. An important issue here, whether the claimants can be seen as a people within the terms of the principle of self-determination of peoples, and this also have been developed over the years under national and international law, is of big importance. As a starting point to identify the term people for sure are the legal basis of the right to self-determination, but as Crawford has observed, ‘from the perspective of international law, the key feature of the phrase “rights of peoples” is not the term ”rights”, but the term “peoples”33.

29

Cassese A., „Self-determination of peoples“, pg. 257

30

M.Akerhurst, „A modern introduction to international law“, p.255.

31

Michalska A., Rights of peoples to self-determination in international law”, in “Issues of

self-determination”, Twining W. (Ed.), Aberdeen, Aberdeen University Press,1991, pg.71. 82

The first thing to be said is that the term ‘people’ is a separate term from that of the ‘state’ and this was seen from the Charter of the UN. This distinction between a ‘people’ and a ‘state’ was clearly confirmed in the subsequent interpretation of Charter principles by resolution 2625 (XXV), which declared in the paragraph 1 that ’all peoples’ had the right to self-determination and that ‘every state’ had ‘the duty to respect this right’34. At the beginning it was difficult to identify who are those peoples whose were entitled to self- determination. Often, the term people is linked with the term nation or better to say people often were qualified as nations and what is more important here is to differ the term people from the term minorities. Romantic theory dealt people with nation and the classical one dealt people with the giving territory. It was accepted that a people is defined according to a given territorial criteria. With this it was accepted that people was to be intended the whole people living in a giving territory without the distinction of race, ethnicity, creed or colours35. It seems possible to conclude prima facie that political self-determination is a concept, an idea, a doctrine about the legal-political relationship between a people and the state36 In the context of post-1945 decolonization, it soon became evident that primary, and often sole, definition of “peoples” was that of non European inhabitants of former colonies, without further regard for ethnicity, language, religion, or other objective characteristics of such colonized peoples 37 . It was clearly understandable not only by the UN documents but also by the International Court of Justice in the Namibia case where it was affirmed that selfdetermination was already developed for the Trust Territories:

32

Crawford J., “The rights of peoples: “Peoples” or “Governments”?”, in Crawford J. (Ed), “The rights

of peoples”, Oxford, Clarendon Press, 1988, pg.55 33

Musgrave T., “Self-determination and national minorities”, pg.149

34

For more see: Higgins R., “Problems and process, International law and how to use it”, Oxford, Clarendon

Press, 1994, pg. 124 35

A.Cobban, “The nation state and national self-determination”, 1969, p.39

36

Hannum H., “Autonomy, sovereignty and self-determination: The accommodation of conflicting rights”, pg. 36

38

“the subsequent development of international law in regard to non- self-governing territories…made the

principle of self-determination applicable to all of them”.

83

It was the Resolution 2625(XXV) that gave to all the peoples the right to self-determination so in a sense made the right to self-determination of universal use. This can be seen not only from the fact that the enumerated purposes of self-determination set out in resolution 2625(XXV) extend beyond decolonization, but also because the reference to ‘a government representing the whole people belonging to the territory’ would not be necessary if self-determination applied only to colonial territories39 With the passing of self-determination to another standard, as a universal right, the problem of defining the term “people” became more complex, this because when it is talked about right to self-determination this is dealt soon with the right to attain statehood. Seeing the problems that emerge with a creation of new state entity there have been always attempts to limit as much as possible the holders of the right to self-determination. The Resolution 2625(XXV) of the UNGA requires from all States to behave in compliance with the principle of selfdetermination and so to have a government, which is representing the whole people of its territory. The most significant parts of the Declaration that have been used to assign a meaning to a people are the references to maintaining the continued territorial integrity of existing states40 Making reference to representative government, Resolution 2625 extends the application of self- determination beyond the decolonization process. So it means that the problems facing after the decolonization period are now with independent states, which are facing the multinational problem. Now, international law has recognized subgroups of a state as holders of right of self- determination. The characteristics of such a group have been the core of the discussion for the application of self-determination out of the decolonization context. Normally the meaning of people that are entitled with the right of self-determination or to define the characteristics of such groups is not 37

Namibia case, ICJ Rep. 1971, pg.31.

38

Crawford J., “Aboriginal self-government in Canada”, 1988, pg.54.

39

Radan P., „The break-up of Yugoslavia and international law”, pg 52.

84

easy because this is not a static concept, so any effort to define definitely the meaning of people is fruitless because this can’t be defined of static conditions. The International Commission of Jurists set up in 1972 to investigate the events in East Pakistan, defined people in terms of ethnic criteria which where: “…we find that their members have certain characteristics in common…The nature of more important of these common features may be: -

historical

-

racial or ethnic

-

cultural or linguistic

-

religious or ideological

-

geographical or territorial

-

economic

-

quantitative”41

These are the main characteristics or criteria to identify a group, which can be called a people, entitled to exercise the right of self-determination. Since only peoples are entitled to self-determination in contemporary international law, minorities must demonstrate that they are peoples in order to qualify for self-determination42. But self-determination and minorities are locked in a relationship which is part of the architecture of the nation state, since whenever a state is forged, the result is the creation of minorities43Any way when self-determination takes place it usually affects minorities in one way or another, whether the act of self-determination is an act of decolonization, an exercise of popular sovereignty, or results in the formation of a new state. 40

International Commission of Jurists ‘East Pakistan Staff Study’, in International Commission of Jurists Review, Vol. 8, 1972, pg. 23.

41

Musgrave T., “Self-determination and national minorities”, pg. 170

42

Thornberry P., “International law and the rights of minorities”, Clarendon Press, Oxford, 1991,pg. 13

3 Relationship between self-determination and nationalism Claims for self-determination are frequently in conflict with each other and no clear standards have been established to distinguish those claims that will be accepted from those that will 85

not. Nationalism has played and in some places continues to play a key role in these movements for the right of people to self-determination. An important issue from the beginning was to define the concept of nationalism which turns to be very important on the question of selfdetermination. In brief, nationalism is a theory of political legitimacy, which requires that ethnic boundaries should not cut across political ones, and, in particular, that ethnic boundaries within a given state – a contingency already formally excluded by the principle in its general formulation – should not separate the power-holders from the rest44. For most writers, nationalism is a modern ideology the can be found only by the late of the eighteenth century, but what is more important in our study is the way how it implicates on the evolution and on the claims of the peoples for the right to self- determination. Fundamentally, nationalism fuses three ideals: collective self-determination of the people, the expression of national character and individuality, and finally the vertical division of the world into unique nations each contributing its special genius to the common fund of humanity45 Nationalism as we have mention also on the evolution of self-determination as a legal principle of international law was one of the main objectives that affected the right of peoples to self- determination. The notion of self-determination in Eastern Europe, and more specifically in the Balkans, grew out of the phenomenon of nationalism. And is by no means true that nationalism plays a key role the emergence of the right of peoples to self-determination. While in West nationalism developed as a political expression of the rising middle classes within the established

4 Gellner E. “Nations and nationalism”, Basil Blackwell Publisher, Oxford, 1983, pg.1 5 Smith A., “Theories of nationalism”, Holmes & Meier Publihsers, New York, 1983, pg 23

86

states, in the Balkans it developed as a cultural movement in societies, which had not for the most part experienced Renaissance, reformation or Enlightenment46. The right to self-determination during its evolution by the East European countries is seen as a right to self-determination of the peoples in close relationship with the concept of nationalism, and this is especially typical for the Balkan countries. Unlike the Balkans, in Western Europe, mainly France and England the process of nation-building was a gradual process of building a sense of belonging to a community and all this was preceded by the existence of a state and limited within state borders. This was affected also by the fact that the process of nation – building in the Balkans happened to be more lately and always in struggle with foreign occupations. The process of creating national states on the democratic principle of one nation – one state has been underway for some two hundred years, starting in Europe and then, after some delay, spreading to the rest of the world47. This is the unhappy consequence that in those places where nationality might support democracy and social justice it is becoming an irrelevance, while in places where nationalism remains strong it is likely to be used to prop up authoritarian and repressive regime48. When we speak of nationalism in East Central and Western Europe, or the problem of creating a genuine European “identity” within the process of European integration, the question is raised whether nationalism as an ideology is always the same in form and content throughout Europe49.

6 Andrew V. Bell-Fialkoff and Andrei S. Markovits "Nationalism: Rethinking the Paradigm in the European Context." In The Myth of "Ethnic Conflict": Politics, Economics, and "Cultural" Violence, edited by Beverly Crawford and Ronnie D. Lipschutz. University of California Press/University of California International and Area Studies Digital Collection, Edited Volume #98, pg.158 , 1998. http://repositories.cdlib.org/uciaspubs/research/98/6 47 Tudjman F. “Nationalism in contemporary Europe”, East European Monographs, Boulder, Columbia University Press, New York, 1981, pg.1 48

Miller D., “On nationality”, pg. 155

87

For sure the answer is no, because the theories of nationalism are differently created and developed in the Europe. If the Western liberal tradition emphasised choice as a legitimate criterion in establishing nationality, the Germanic and the East European tradition did not50. They shared experiences and myths producing British and French nationalism took their shape primarily from the shape of the state, rather than from the myths of primordial ethnic groups, nationalism became more tied to the notion of citizenship within a territory than to the notion of ethnic identity51 In the case of Balkans there was a shift from the normative principle of individual freedom and democratic internal structures – founded on the separation of state and society and the notion of human rights – to the political necessity and even obsession to form a strong union by creating a nationally conscious collective identity. The existence of politically centralized units and of a moral political climate in which such centralized are taken for granted and are treated as normative is a necessary though by no means a sufficient condition of nationalism52 Equality is the basic underlying normative concept. Thus the quest for self-determination can only be legitimised under serious conditions of inequality, as a means to escape exploitation, discrimination and exclusion in order to achieve a new status of equality53 The role of the state should not be to impose some preformed definition of national culture on people who resist it, but to provide an environment in which the culture can develop spontaneously rather than being eroded by economically self-interested action on the part of particular individuals54.

49

Marko J., „Equality and difference: Political and legal aspects of ethnic group relations”

50

Sharp A. „The genie that would not go back to the bottle. National self-determination and

the legacy of the first world war and the Peace Settlement”, in “Europe and ethnicity. The First World War and contemporary ethnic conflict”, ed. Dunn S. & Fraser T. G., Routledge, London, 1996, pg. 14. 51

Ivanov A., „The Balkans divided: Nationalism, minorities and security“, pg. 39

52

Gellner E., Nationalism, pg. 4

88

This explains also the decline of nationalism even though it has caused a lot of armed conflicts all over the world. But this decline comes after centuries of conflicts on the name of nationalism. The decline of nationalism especially in the Western Europe was due to a number of reasons such as the regional organization. The boundaries especially after the Second World War have not that importance as they have and still in a way continue to have in the Balkans. There is a related political movement, “regionalism”, which can seem to shade into nationalism where linguistic or cultural characteristics define the region55. But at the same time we agree that regions for sure are not nations, that’s why the policy of the Western Europe especially of the EU was directed towards the principle of decentralisation and in the creation of the regions mostly than that of nations or centralized politics orientated towards central governments of states and this process of decentralisation of 1970s and 1980s have largely satisfied moderate nationalist demands. The new regionalist movements in Western and Southern Europe are examples of a national paradox, insofar as ethnic mobilization stands in conflicts with the nation state56. Also some other important reasons are the participation on changing cultural and political configurations and also cultural homogenisation. This is because democracy is made of large participation of the people in the decision-making. During the history of the development of the right to self-determination that was put in movement by the nationalist movements, the people were aiming for total independence that seek to destroy the existing states or usually leave the boundaries of a state intact. This depended on the scale of nationalism and on the degree of the compromise made by the parties in the conflict.

53

Marko J., „Equality and difference: Political and legal aspects of ethnic group relations”,pg. 77

54

Miller D., „On nationality“, Clarendon Press Oxford, 1995, pg. 88.

55

Kellas J. , “The politics of nationalism and ethnicity”, pg. 86.

56

Marko J., „Equality and difference: Political and legal aspects of ethnic group relations”, pg.69

89

In the case of the Balkans countries nationalism was experienced at the 18th and 19th centuries but suddenly we find it playing a key role at the end of 20th century, this because of the changing system. One obvious feature is that regime change seems to be the most important factor in explaining the sudden rise of nationalism in the former Yugoslavia. Nationalism found fertile ground among the Balkan intelligentsia precisely because this philosophy was immediately relevant to local conditions57 The principle of national self-determination won increasing recognition in European politics, but its full implementation in Balkan was impeded. Applying the right to self-determination in the Balkan countries was equal on creating the nation states based on the concepts of nationalism. More than ever the spirit of nationalism was coming out from the different group peoples at the beginning of 1990, each of them with the fixed idea to create their own state and in this case to apply the right of peoples to self-determination without respecting at all at least the limits of human rights towards each other. Conclusions The principle of self-determination has made remarkable steps toward its establishment as a legal principle of international law. The way was not easy but 50 years after the UN Charter, we have a right to self-determination proclaimed and protected the same as the rest of the individual and collective rights of international human rights law. In the case of the former Yugoslavia there was a shift from the normative principle of freedom and democratic structures – founded on the separation of state and society and the notion of human rights – to the political necessity and even obsession to form a strong union by creating a nationally conscious collective identity. It was the first time, after the period of decolonization that the western community has accepted the proposal that the process of self-determination could legitimately occur within one section of a state’s territory amongst one part of that state’s population. And the dissolution of the former Yugoslavia presents a clear case of the application of the right to self-determination based on nationalism and the right of people to self- determination. 57

Lane A., „Yugoslavia. The search for a nation state”, in “Europe and ethnicity”, Dun

S. & Fraser T. G (ed), Routledge, London, 1996, pg. 33

90

Nationalism helped in a way the evolution of the right to self-determination, simply identifying those groups who saw themselves different from other part of the society within a state who wanted to be recognized as such with the help of the right to selfdetermination. Just the reason of being different on language, history and culture made those groups of people conscious of having their right to be self-governed. Last but not least we have to admit that the only way to produce peace and stability in the region is to invest not just on the economic grow but also on the social restructuring of the Balkan society through European integration process which could see collaboration and realization of the dream of the people of the region to be part of the European Union. The role of the EU as the guarantor of world peace together with the precedent of the actions in its close peripheral regions is like to encourage a sliding toward an indirect intervention in resolving internal national conflicts58

58 Francisco Lentamedia, „ International recognition of self-determination within the European Union, ECPR, Pan – European Conference on EU Politics, Institutions and politics (Conflict resolution and Regional Autonomy) 25-27 September 2008, pg 15

91

Kosovo’s State-building: Exceptional Case in International Political Practices PhD C. Enis Rexhepi South East European University, Macedonia, & U.S. Embassy Pristina (Kosovo)

Abstract This paper analyzes Kosovo’s state-building and its exceptionality compared to other countries. Its independence was conducted under international supervision through specific political implementing mechanisms. In terms of stability and peace, NATO installed the KFOR mission in Kosovo, and UN the UNMIK mission after the 1999 war. The Ahtisaari Plan, commissioned by the UN, is embodied in the Kosovo’s Constitution. ICO was in charge to ensure its implementation, while ISG was responsible to monitor Kosovo’s self-proclaimed independence. Recently, the European Union established EULEX to enforce the rule of law in Kosovo. Its political and legal model is “sui generis” and produces a unique phenomenon in international relations, incorporating foreign political elements inside the domestic constitutional order. Keywords: State building, Coordinated Independence, New International Institutions. Introduction The paper has an academic importance as could explain modern concepts of state-building as in the case of Kosovo. Kosovo’s independence and state building process is unique in comparison with the historical practices; Kosovo's statehood derives from a history of struggle for freedom, war as a result, and international intervention (NATO, UN) to ensure peace. Kosovo’s state building has special political and legal character regarding international political circumstances, since it blends local constitutional framework with international bodies; this coexistence is exceptional. This research will crystallize special relations between Kosovo and international supervisory mechanisms of its independence (ISG, ICO) that derive from the Ahtisaari Plan which is a part of the Kosovo Constitution. The research question is quite specific and new to social science; academic treatment of this phenomenon may produce mater that will be explored by future researchers. Today, Kosovo is a democratic state with constitution which integrates universal human principles and applies high standards of minority rights and freedoms. The international community in Kosovo 92

oversees the implementation of multi-ethnicity, and the protection of minorities as a prerequisite for functional state. The birth of Kosovo state and international recognitions Kosovo’s declaration of independence on February 17, 2008, marked an important date in the political journey of the newly state. Shortly before 15:00 pm, 109 members of the Assembly of the Republic of Kosovo gathered in the assembly hall to attend solemnity of declaration of independence. After the vote on the agenda by MP’s, Kosovo’s Prime Minister Hashim Thaci came to floor and read the Declaration of Independence in which Kosovo was declared independent and democratic state. The Declaration of Independence is the answer of the people’s call to build a society that honors human dignity and affirms the pride and purpose of its citizens, while protecting and promoting the diversity of the people. As stated in the declaration, Kosovo is declared a democratic republic secular and multiethnic, led by the principles of non-discrimination and equal protection under the law, and accepting full obligations contained in the Ahtisaari Plan - obligations which will be incorporated in the constitution. In the declaration, Kosovo welcomes the continued support of the international community for established democratic support through international civilian presence, which will supervise the implementation of the Ahtisaari Plan. The declaration states full cooperation with these presences to ensure peace, prosperity, and stability in Kosovo. Kosovo will adhere to the principles of the United Nations Charter, the Helsinki Final Act, and other acts of OSCE, and the international legal obligations and principles of international community that mark the relations among states, respecting the sovereignty and territorial integrity of all its neighbors. Through the Declaration of Independence, Kosovo takes its international obligations including those achieved by the Mission Interim Administration of the United Nations in Kosovo (UNMIK) and treaty obligations and other obligations of the former Socialist Federal Republic of Yugoslavia, including the Vienna Conventions of Diplomatic and Consular relations. The statement noted the efforts to contribute to good neighborly relations and cooperation with the Republic of Serbia, while promoting reconciliation among peoples(Kosovo, 2008). Immediately after the declaration of independence, Kosovo was internationally recognized as an independent state from U.S, United Kingdom, France, Turkey, Albania, Afghanistan, Costa Rica, to continue with Australia, Senegal, Latvia, Germany, Estonia, Italy, Denmark, Luxembourg; today officially/unofficially it marks 111 recognitions(kosovothanksyou.com). Kosovo’s declaration of independence has been described as ‘coordinated independence’ 93

meaning a new concept of state formation appeared for the first time in history(Renata, 2007). If you refer to the International Public Law (IPL), we see that IPL recognizes the principles of subject in international law; subject who owns the rights and obligations in international level. This means that IPL recognizes only the entity which is part of the international system under the rule of IPL (Elena Andreewska; Azizi, Abdulla, 2008). Due to the imperfect nature of IPL, there isn’t any legal clarification when an entity meets the requirements to be a state, or not! Current IPL principles deal only with appearance (birth) of state, the moment when state is actually present. This moment is taken as the starting legal situation, and it does not matter how this state was founded, if it has been created in accordance with the existing legal order, or international one (Zejnullah, 2009). The firm document on which Kosovo’s statehood could be based is “Montevideo Convention" on the rights and obligations of states, which in Article I say’s: "The state, as a subject of international law should possess the following qualifications: a) A permanent population; b) A defined territory; c) Government; d) Capacity to enter into relations with other states(Elena Andreewska; Azizi, Abdulla, 2008, p. 33)" The reaction of the United Nations (UN) on the occasion of the Kosovo’s declaration of independence was silent; even though at that time Kosovo was administered by the United Nations Mission in Kosovo (UNMIK), operating under the full authority of resolution 1244 of UN Security Council. The UN authorities didn’t decline the Kosovo’s declaration of independence, even though they were supreme authority in Kosovo since the Special Representative of the Secretary General as head of UNMIK was the most senior international official in Kosovo. He enjoyed maximum civilian executive powers envisaged and provided by UN Security Council Resolution 1244 (1999), and is the final authority on interpretation of them(General, 1999).To remind the reader that UN had authorized UNMIK mission to protect the fundamental human rights proclaimed by the "Universal Declaration on Human Rights in 1948(Charter of the United Nations)". 94

Three Montevideo principles were fulfilled after Kosovo’s independence, while fourth principle was fulfilled in May 2009 when Kosovo was accepted in CEFTA; and June 29 in World Bank (WB) and International Monetary Fund (IMF). Interesting statistic is reflected with countries that have recognized Kosovo's independence, and their composition within various international organizations; out of 192 UN countries 111 have recognized Kosovo as an independent and sovereign state, that percentage falls around 57.51% of total UN members, then 3 out of 5 states of the UN Security Council which is about 61.05%. Another statistic shows that 23 of the 27 European Union (EU) countries have recognized Kosovo that percentage falls to about 82.14%. And 24 of the 28 states of the NATO have recognized Kosovo state that percentage translates to 85.71%. Analyzing these percentages we can easily conclude that Kosovo has won qualitative recognitions (powerful countries), and in the practices of international relations and diplomacy, this political acceptance means the strengthening of the subjectivity in international level. The political organization of the Republic of Kosovo The Republic of Kosovo is characterized as the new parliamentary republic with a president who has a unifying role and considered political authority defined by constitution. Kosovo has a strong government elected in a democratic vote. Kosovo President is head of state and represents the unity of citizens. The executive is vested to the Prime Minister and the relevant ministers. The Prime Minister is also the head of government, ministers and deputy ministers of state. Judicial and prosecutorial system is independent in its functioning and is constructed from: the Supreme Court of Kosovo, the Kosovo Judicial Council, the State Prosecutor, Kosovo Prosecutorial Council and Advocacy. The Constitutional Court is the final authority on the interpretation of the Constitution, while legislative authority is distributed between Assembly (adopts laws) and the Government of Kosovo (which proposes laws). Kosovo's local administration is composed of 38 municipalities. International Institutions (NATO, UN) in the Republic of Kosovo and their history The Albanian-Serbian conflict has its roots in the early history from Conference of Ambassadors in London 1912; disestablishment of Kosovo’s autonomy by Milosevic regime in 1974; students protest in 81-86, and War and persecution of the civilian population in 1999.Many international diplomatic forces were advocating solving this war; starting from the peace conference in Rambouillet; to the initiatives of U.S. envoy Holbrooke(Weller, 95

2009).Unfortunately all these efforts failed, and cleansing conducted by Serb forces couldn’t be stopped! Earlier on February 06, 1999 parties met in Rambouillet (France), at the international community's efforts to stop the fighting and ensure peace. On 18 March Kosovo side acknowledged the Rambouillet Agreement, while Serbian side rejected it. Serbs accounted that NATO will not have courage and undertake any military attack against Serbian targets, but their calculations went wrong. On March 24, 1999 NATO began military action against Serb targets; the action lasted 78 days in a row, and forced Serbian forces to sign “Kumanovo Agreement” and withdraw from Kosovo. Western countries agreed that something had be undertaken in order to stop the bloodshed and genocide on European soil, in this context NATO intervention was the only rational decision, and had a vital character. Emphasizing the growing importance of human subjectivity in international law as the indisputable, arguments in which western countries were called were numerous, ranging from: a) United Nations Universal Declaration on Human Rights (1948(Charter of the United Nations, p. Preamble) b) European Convention on Human Rights and the rights and fundamental freedoms(Europe, 1950, p. Article 2). c) Convention (IV) relative to the Protection of Civilian Persons in Time of War(ICRC, 1949, pp. Article3, no1). So, the international norms don’t recognize the right of government to rule a population with repression and against its will, and violate human rights as result of repression. But, on other hand UN Charter of 1945 in article 2/4 bans the use of force against territorial/political integrity, and independence of any country; an argument that Serbia referred before NATO intervention. Blending these controversial principles come the “Kumanovo Agreement” was reached on 09 June 1999 by Yugoslav Army/Police commanders Svetozar Marjanovic and Obrad Stevanovic, and General Michael Jackson NATO representative; agreement envisioned entrance of 30,000 NATO soldiers in Kosovo to stop the conflict and maintain peace. Since agreement was signed by Military Generals it is binding for their mother countries, since according to IPL if Generals reach agreements of peace, these agreements are automatically binding for respectful country! Shortly after the agreement was signed it opened the possibility of the NATO (KFOR) deployment on June 10, 1999.

96

Immediately after NATO, on June 10, 1999 the UN endorsed the start of its mission in Kosovo known as UNMIK (The United Nations Interim Administration Mission in Kosovo). The mandate of UNMIK was to help Kosovo to restore normal and peaceful living conditions under resolution 1244, simultaneously ensuring return for all refugees and displaced persons to their homes. The UNMIK was organized and oversaw the development of the Provisional Institutions of Democratic Self-Government (PISG) until a political settlement(UNSCR, 1999). UNMIK was organized in four columns (Pillars), both of which were led by UN, one by OSCE and other by EU. The four pillars of UNMIK accounted for: police and judiciary, the civil administration, democratization and institution building (OSCE), and reconstruction and development (EU). UNMIK plans to hand over authority to the EULEX mission failed as a result of Russian opposition to the Kosovo’s unilateral declaration of independence, so the Secretary General of UN Ban Ki-moon decided to reconfigure UNMIK for a temporary period. According to some articles, UNMIK will give way to the upcoming EU mission in the regions of Kosovo Albanians majority, and keep some control in the northern part of Kosovo inhabited by Serbs(Tribune, 2006). UNMIK mandate is still ongoing and it’s not determined when it would finish, as it will require cancellation of 1244 UN resolution! These international missions’ acknowledge Kosovo’s exceptionalism in its political and legal buildup; making Kosovo’s state building unique compared through political timeline of other states. Kosovo’s State Building: Exceptional Case in International Political Practices Widely accepted form of political organization in the world is state – nation, often seen as the only legitimate unit of political rule. Until the Declaration of Independence, and the adoption of Constitution, Kosovo was ruled by a constitutional framework based on UN Resolution 1244 which allows the Provisional Institutions of Self-Government (PISG) certain powers reserved to the Special Representative of the Secretary General of United Nations. The basis for the establishment of UNMIK was Resolution 1244 of the Security Council of the United Nations, this resolution left the status of Kosovo's unresolved. Prior to 2005 there were several negotiations between representatives of Kosovo and Serbia under the chairmanship of the UN to find a compromise solution for Kosovo's status. In November 2005, negotiations for a final agreement began in Vienna, Austria. Martti Ahtisaari, the former Finnish president, led the team of the Special Envoy of the United Nations for Kosovo (UNOSEK) that was engaged in extensive talks with the negotiating teams from Belgrade and Pristina and the international partners. On March 26, 2007, President Ahtisaari presented his comprehensive package to 97

Security Council of the United Nations (UNSC) in New York to solve the Kosovo problem. In late April 2007, a fact-finding mission of the UNSC visited Brussels, Belgrade, Pristina and Vienna. On 29 July 2007, because of political differences remaining on the issue of Kosovo in the UNSC the High Representative for the Common Foreign and Security (CFSP) Javier Solana appointed Ambassador Wolfgang Ischinger as the EU representative in the troika team of EU – U.S. - Russia, charged with facilitating a further period of engagement between Belgrade and Pristina about Kosovo's future. Secretary General of United Nations Ban Ki-moon welcomed the initiative of the Contact Group to resolve the Kosovo issue by recommending that the international community must find a solution that is timely, addresses the key concerns of all communities living in Kosovo and provides clarity for Kosovo's status, since status quo is not sustainable. Once they reviewed the circumstances and gathered facts about the process, on December 4, 2007 the final report on Kosovo was released by Troika. The report noted that parties discussed a wide range of options, such as full independence, supervised independence, territorial partition, substantial autonomy, confederal arrangements and also a silent status "agreement to disagree". According to the report the parties were unable to reach an agreement on the final status of Kosovo; neither party was willing to cede its position on the fundamental question of sovereignty over Kosovo (UNSC, 2007, pp. 11-12). Since the agreement couldn’t be reached, Kosovo continued its political journey alone, hoping for the support of friendly countries which lined up with the demands of Kosovo people. Key Provisions of the Settlement foresee multi-ethnic democracy. Kosovo’s multi-ethnic society will govern itself democratically and in full respect for the rule of law, human rights and fundamental freedoms, while promoting peace and prosperity for all its inhabitants. Kosovo will enshrine the above principles in a new constitution. The Ahtisaari Plan also defines other key elements that must be included, such as the protections and rights of members of all communities as described below. Kosovo will have the right to negotiate and conclude international agreements and to seek membership in international organizations. A central element of the Plan is protecting and promoting the rights of all people and communities in Kosovo, including the protection of their culture, language, education, and community symbols. The Plan also provides for the representation of Kosovo’s non-Albanians in key public institutions to safeguard their rights and to encourage their active participation in public life. Plan proposes wide-ranging local municipal powers. The Kosovo Serb community will have a high degree of responsibility over its own affairs, to include health care and higher 98

education. Serb-majority communities will have extensive financial autonomy and will be able to accept transparent funding from Serbia and to take part in inter-municipal partnerships and cross-boundary cooperation with Serbian institutions. Six Serb-majority municipalities will be established or greatly expanded: Gracanica, Novo Brdo, Klokott, Ranilug, Partes, and Mitrovica-North. Kosovo’s justice system will be ethnically integrated, independent, professional, and impartial. The Plan also mandates the creation of a new Constitutional Court. The Plan sets forth provisions to safeguard the Serbian Orthodox Church in Kosovo. Protective Zones will surround more than 40 key religious and cultural sites to preserve their dignity. The Serbian Orthodox Church will be granted property rights, will be exempt from taxes and customs duties, and will be free to maintain links with the Serbian Orthodox Church in Belgrade. All refugees and internally displaced persons will have the right to return and reclaim their property and personal possessions in accordance with international law. The Settlement calls upon Kosovo and Serbia to cooperate fully with the International Commission of the Red Cross to resolve the fate of missing persons. The Settlement prescribes procedures to settle property disputes and for continued privatization, both with substantial international involvement. The Plan also defines ways to determine Kosovo’s share of Serbia’s international debt. The Plan encourages a high level of local involvement in developing a professional, multi-ethnic security sector, under democratic control and international oversight. The Kosovo Police Force will have a unified chain of command throughout Kosovo, with police reflecting the ethnic composition of the municipalities in which they serve. The Kosovo Security Force (KSF), a professional multi-ethnic force, will be established. It will have a maximum of 2,500 active members and 800 reserve members. The current Kosovo Protection Corps (KPC) will be disbanded within one year of the establishment of the KSF. Kosovo will have continued international supervision and support, with three main components: An International Civilian Representative (ICR) – The ICR will supervise implementation of the Plan and have ultimate authority over its interpretation. This individual will serve in a dual role as ICR and European Union Special Representative. The ICR will have authority to annul decisions or laws and to sanction or remove public officials whose actions are determined by the ICR to be inconsistent with the letter or spirit of the Plan. The ICR will be the final authority in Kosovo regarding the civilian aspects of the Plan. A European Security and Defense Policy (ESDP) Mission will monitor, mentor and advise on all areas related to the rule of law. It will assist Kosovo in developing efficient, fair and representative police, judicial, customs, and penal institutions. A NATO-led International Military Presence will provide a 99

safe and secure environment throughout Kosovo, in conjunction with the ICR and in support of Kosovo’s institutions until those institutions are capable of assuming their full security responsibilities. The Plan also requests that the 56-nation Organization for Security and Cooperation in Europe (OSCE) assists in monitoring implementation of the Plan. Kosovo pledged to respect all principles of the Ahtisaari proposal, and incorporate them in it’s constitution unilaterally. The Serbian side rejected the Ahtisaari proposal and expressed willingness not to proceed with provisions, and possibly block the process organized by UN authorities. The Kosovo’s Constitutional Commission has created a list of issues that should be addressed in the document, examining constitutions, treaties and conventions from around the world. The ‘Ahtisaari Plan’ provides specific rights to minority groups and strengthens a safe environment for them and all other citizens Kosovo. The proposal was presented to the members of the Security Council of the United Nations by UN Secretary General on March 26, 2007. This proposal was developed by a team led by President Martti Ahtisaari (Special Envoy of the Secretary General) and is the result of negotiations that lasted more than a year, including direct meeting between Belgrade and Pristina. In the Declaration of Independence on 17 February 2008, Kosovo fully committed to the implementation of ‘Ahtisaari Plan’, and has invited international presences including the International Civilian Office (ICO) to oversee its implementation. Earlier on April 4, 2007 Kosovo’s Assembly had accepted the proposal stating that its implementation would be a legal obligation. Settlement provisions are now contained in the Constitution of Kosovo adopted on 9 April 2008 by the Assembly. This Constitution has been certified by the International Civilian Representative (ICR) on April 2, and entered into force on 15 June 2008(ICO). As we argued earlier, an important element of the agreement is the term given to a civilian and military international presence in Kosovo to supervise implementation of the agreement and to assist the Kosovo authorities in ensuring peace and stability throughout Kosovo. An International Civilian Representative (ICR), also known as the EU Special Representative, was appointed by International Steering Group (ISG), which includes major international actors. ICR will have the highest supervisory authority over the implementation of the agreement. ICR will vest special powers that will allow him to take necessary actions to oversee and ensure successful implementation of agreement. These include authority to annul decisions or laws adopted by Kosovo authorities, and sanction or remove public officials whose actions are determined by the ICR to be inconsistent with the spirit of the agreement. ICR will also be the 100

final authority in Kosovo regarding the civilian aspects of the agreement. During the transition period, the Kosovo Assembly, in consultation with the ICR, will be responsible for approving a Constitution and the legislation necessary to implement the agreement. The new Constitution and legislation will take effect immediately after the transition period. At the conclusion of the transition period, UNMIK's mandate was foreseen to expire and all legislative and executive authority that UNMIK enjoys to pass to the authorities of Kosovo, in accordance with the agreement (UNOSEK).Within nine months of the entry into force of the agreement, general and local elections should be held. The mandate of the ICR will continue until the ISG determines that Kosovo has implemented the terms of the agreement. The ICO-s mandate in Kosovo will depend on how the provisions of the above can be implemented by the Kosovo authorities, and how ICR respectively ICO is evaluating this accomplishments, therefore the completion of mission depends on the dynamics of fulfilling the provisions by Kosovo authorities. If we examine this paragraph above, we may say that Kosovo could be characterized as a country with a exceptional model of political organization; on one side there are state institutions mandated by peoples sovereignty (arising from the votes of the citizens of Kosovo in a free and democratic vote) and international institutions which are derived from peoples sovereignty but are constitutional component (Constitution). Kosovo’s legal - political model unites two different concepts of state building; classical one (president, constitution, government, territory, people) and modern one (delegation of part of sovereignty to external mechanisms, example the European Union)(Constitution).Kosovo’s state building model is unique and produces a new phenomenon in the practice of international relations and diplomacy; incorporating external political factors within the constitutional system. If we examine the U.S. Constitution, namely article 6, we see that the U.S. Constitution is the highest act of the country and supreme authority, meaning that all laws obey to the Constitution (United States). Similar is with the German Constitution, in Article 20, sections 2 and 3, is noted the authority that emanates from the people and is exercised by the German Constitution to determine the constitutional order. The Turkish Constitution in article 6 specifies the nation's sovereignty, and that Turkish nation should exercise sovereignty through the competent authorities described in constitutional principles. In all three cases above the constitution is final authority in country, and all laws are binding to it, while in case of Kosovo transitional provisions and international mechanisms (ICO) are over Kosovo's constitution itself! 101

According to this logic, Constitution of Kosovo is the highest act of the country, but after international mechanisms that have the highest authority in Kosovo!? The declaration of independence of 17 February 2008 expressly invites an international civil presence as envisaged in the Proposal for the Kosovo Status Versatile drafted by Ahtisaari. The moment passed Kosovo Constitution automatically bore the International Civilian Office (ICO) and Kosovo began to fulfill its commitment towards the provisions of the Ahtisaari Proposal, this enabled the incorporation of ICO to the Constitution and the beginning of implementation of mission it. ICO office provides international support for Kosovo’s European future; to guarantee full implementation of the proposal for resolving the status of Kosovo, support Kosovo's integration in Europe advising the Kosovo government and community leaders. International Civilian Office (ICO) assists the International Civilian Representative (ICR) in the fulfillment of its mandate. The International Civilian Representative (ICR) has been appointed by the International Steering Group (ISG), namely the International Steering Group on 28 February 2008 in Vienna, mandated Pieter Feith, a former senior official of the NATO and the Secretariat of the Council of the European Union as International Civilian Representative. After a 25 year career at Dutch diplomatic service, Feith served in a variety of tasks in NATO and the Secretariat of the EU Council. Most recently, he has been Deputy Director General of the Council for Political-Military Affairs. ICO office consists of: Office Reception, Office of Policy, Advisory Office for Security, Office of Community Affairs (including issues Decentralization and Religious Affairs and Cultural), the Office for Economic and Fiscal Law Office, Press Office and Public Information, the Office of Administration and Management of the General Office of Security Office in Mitrovica, Regional Offices (Peja, Pristina, Prizren).As a result of Kosovo's progress in implementing the provisions of Ahtisaari, the ICO office was closed in January 2011(ICO) The role of the International Steering Group (ISG) After the independence of Kosovo on 17 February 2008, and at the request of the leaders of Kosovo, on 28 February 2008 a group of countries that supported Kosovo's independence formed an International Steering Group (ISG) to support the full implementation of the ‘Versatile Proposal for Kosovo Status Settlement’ of the UN Special Envoy Martti Ahtisaari, adopted on March 2007. ISG then appointed Mr. Pieter Feith as the International Civilian Representative (ICR) for Kosovo. The ISG comprised of countries that support full implementation of the Comprehensive Proposal for the Kosovo Status Settlement, ISG charged 102

the ICR through ICO, with the specific task to ensure that the Government of Kosovo implements the Comprehensive Settlement Proposal Status. ISG helped in the direction of democratic development of Kosovo through its mission. Its primary task was to promote good governance, much ethnicity and the rule of law in Kosovo. The role of the EU Mission's The European Union Rule of Law Mission (EULEX) Currently EULEX is the largest civilian mission of EU so far, deriving from EU's Common Policy on Security and Defense Policy (CSDP). Its main aim is to assist and support the Kosovo authorities in the rule of law, especially in the police, judiciary and customs. The mission is not to govern or rule in Kosovo. This is a technical mission which will monitor, mentor and advise whilst retaining a number of limited executive powers. EULEX works under the general framework of UNSCR 1244 and has a unified chain of command in Brussels. General Staff in beginning was around 3,000 members (1,900 international, 1,100 local). Current Mission head is Bernd Borchardt, while the main headquarters are in Pristina, Kosovo. Mission contributing countries are all EU states as well as Norway, Switzerland, Turkey, Croatia, USA and Canada. The mission is open for cooperation and enables the attachment of other countries; making it kind of international mission. As mentioned earlier EULEX’s origin is from EU - CSDP mission to assist Kosovo’s judicial and law enforcement agencies in their progress towards sustainability and accountability in legal sector. Mission’s objective is to develop and strengthen weak justice system, police services and customs, ensuring multi ethnicity among institutions. Also ensuring Kosovo institutions are free from political interference and making shore that institutions adopt best European practices. The mission is in full cooperation with the programs of the European Commission assistance, and implements its mandate through monitoring, mentoring and advising, while retaining certain executive and several liabilities (EULEX). The legal basis of the EULEX mission is a document of the Council of the European Union “Council Joint Action 2008/124 / CFSP of 4 February 2008” on Mission to the European Rule of Law in Kosovo, announced in the Official Journal of the European Union on 16.02.2008. Powers of the mission’s staff are regulated by the Law on Jurisdiction, Case Selection and Allocation of judges and prosecutors of EULEX in Kosovo. The law was passed in the Assembly of Kosovo 3.13. 2008 and promulgated by Decree no DL-019-2008, dated 15.06.2008of the President of the Republic of Kosovo. 103

The EULEX is divided into three main components scope: Police Component, Customs and the Judiciary. Police Component is part of the overall support of EULEX to Kosovo authorities in the rule of law. EULEX helps Kosovo Police (KP) to work towards a multi - ethnic police that is free from political interference and serves the people of Kosovo. EULEX does this by monitoring, mentoring and advising the KP. EULEX mandate gives the opportunity to use corrective powers, and would intervene if Kosovo authorities fail to prevent violence against non-majority communities or in cases of political interference undermining the rule of law. The personnel are structured according to their respective tasks in three departments: Strengthening Department, Executive Police and Special Police Department. The other component of EULEX is Judiciary component, which aims sizing and strengthening of the judiciary in Kosovo, incorporating elements of multi-ethnicity in. This component is committed to providing a court without political influence which is capable of holding fair trials and with high international standards and European best practices. The Judges and EULEX prosecutors carry out their functions according to objective criteria established by law; they work closely with their local counterparts in good mutual relations. The Custom component of EULEX works closely with the Kosovo Customs (KC), which is a new and ambitious service. Like other Western Balkan customs, Kosovo Customs is prioritizing its European perspective for aligning with European standards. KC staff has a comprehensive knowledge of EU customs operations and customs component of EULEX will give an important contribution and help to ensure that Kosovo Customs can achieve its objectives to benefit of society and its people. EULEX is enforcing KC to combat the illegal trade in cooperation with other agencies for law enforcement contributes to fight against terrorism and organized crime and help to protect intellectual property rights. Currently EULEX is monitoring, mentoring and advising KC and when necessary, to exercise law executive responsibilities in mixed teams of international and staff Kosovo Customs. Conclusions If we briefly analyze foreign institutions that are part of Kosovo’s statehood, we see that new Republic is different compared to other countries in aspects as: constitutional form international political involvement, external relations, and inherited history. Kosovo has exceptional model of statehood since it blends conventional political system (institutions mandated from citizens vote), and international institutions which don’t derive from people’s sovereignty; but are/were part of constitution and other political processes. Currently, Kosovo 104

has done its homework to adopt highest standards required from international institutions that supervised newest state at periods of pre-independence, and afterwards. These institutions left with satisfactory recommendations that Kosovo has achieved their requirements, simultaneously they opened a path for newest state to strength its statehood in international level. But Kosovo must not stop, it needs to be a proactive partner to remaining international institutions that are still present on its territory; it has to acquire best military practices from KFOR (NATO’s mission in Kosovo) an incorporate them as benchmark for future army. Kosovo’s membership to NATO will depend on its ability to absorb and implement these standards, and cope with Euro-Atlantic agenda. As for the internal developments, Kosovo must close the process of fulfillment of all Ahtisaari principles, including ones that deal with Serbian minority’s administrative setup - meeting final obligations in accordance with proposal requirements. Kosovo was always reliable partner to international community, showing constructivism through period of pre-independence and after- independence. For lot of scholars Kosovo’s process of state building was considered as ‘coordinated independence’, meaning that Kosovo Government has cooperated with international community while trying to achieve its final objective of independence; if contrary happened, the independence will be hard to achieve. Through EU oriented policies and a professional administrative body who will implement them, Kosovo could achieve tangible results in EU integration progress and start working for membership. When it comes to EU standards, Kosovo must require additional presence of EULEX mission until the approximation date with EU comes closer, simultaneously must pressure EU to politically condition (currently only Germany does) Serbia’s membership to EU - meaning that Serbia must resolve border issues with Kosovo in order to proceed towards membership in EU. If Serbia agrees to legally settle border issue with Kosovo and remove Kosovo from its constitution, then there is a good opportunity for Kosovo, since 23out of the 27 EU states recognized Kosovo in its current borders. The direct talks between Serbia and Kosovo to resolve technical issues between two countries could expand on implementation of European agenda and mutual recognition, respecting the “Brussels agreement 2013” and “landmark agreement 2015” will facilitate reconciliation. This scenario will also reflect the facilitation of Kosovo's eventual admission to the UN, the Russian veto power will be politically ‘neutralized’, and for Kosovo it will remain only providing 2/3 of the member states of the General Assembly that will vote in favor of Kosovo's membership. This situation would 105

be difficult to achieve, but it wouldn’t be impossible, since the Republic of Kosovo has been recognized by 111 countries, and Russia has declared many times that they will accept any solution for Kosovo that Serbia accepts. In history questions of state recognition were bilateral issues; while current political and legal constellations require coordination in all aspects if one entity wants to become state. If coordinated, newly state will be recognized by international community and politically integrate in international institutions, if opposite, it will be impossible (case of Nagorni Karabah) to be recognized. Kosovo’s deficiency remains at the extension of sovereignty in the whole territory; it’s a major challenge, especially in northern Kosovo where authorities will need to find modalities to enforce the constitutional order. Capacity building and state administration reform such as judicial are desirable, but caution must be addressed on independence of this system, with particular emphasis on the Kosovo’s Constitutional Court that is contributing positively to modern state building process, and with its recent judgments (Presidents Sejdiu/Pacolli) forces the principles of separation of powers like in strong democratic systems. References kosovothanksyou.com: Retrieved October 14, 2015, from http://www.kosovothanksyou.com/ Charter of the United Nations. (n.d.). Retrieved October 14, 2015, from http://www.un.org/en/documents/charter/preamble Constitution, K. (n.d.). kushtetuta e Kosove. Retrieved 2015, from http://www.kushtetutakosoves.info/notify-non-categorynotify?aHR0cDovL3d3dy5rdXNodGV0dXRha29zb3Zlcy5pbmZvLw== Elena Andreewska; Azizi, Abdulla. (2008). Bazat e se Drejtes Nderkombetare Publike. Skopje: Jugoreklam. EULEX. (n.d.). Retrieved October 14, 2015, from www.eulex-kosovo.eu: http://www.eulexkosovo.eu/?page=2,2 Europe, C. o. (1950). Retrieved from http://conventions.coe.int/Treaty/en/Treaties/Html/005.htm General, U. S. (1999, July 12). Retrieved from http://www.unmikonline.org/Pages/Leader.aspx ICO. Retrieved from http://www.ico-kos.org/ico/?id=38 106

ICO. dgap.org. Retrieved October 14, 2015, from https://dgap.org/sites/default/files/article_downloads/state_building_and_exit__reducedfile.pdf ICRC. (1949, August 12). Treaties and States Parties to Such Treaties. Retrieved October 14, 2015, from International Committee of the Red Cross: https://www.icrc.org/ihl/385ec082b509e76c41256739003e636d/6756482d86146898c125641 e004aa3c5 Kosovo, D. o. (2008, February 17). Retrieved from kuvendikosoves.org: http://www.kuvendikosoves.org/common/docs/Dek_Pav_sh.pdf Kosovothanksyou.com. (2015, October 13). Retrieved from http://www.kosovothanksyou.com/statistics/ Renata, G. (2007, December 7). Kosovo to aim for 'coordinated' declaration of indipendence. Brussels: euobserver. Retrieved October 14, 2015, from https://euobserver.com/political/25298 Tribune, I. H. (2006, June 13). International Herald Tribune. Retrieved from http://www.iht.com/articles/ap/2008/06/12/europe/EU-GEN United States, C. Retrieved 2015, from http://www.usconstitution.net/const.html#Article6 UNOSEK. Retrieved October 14, 2015, from unosek.org: http://www.unosek.org/unosek/al/statusproposal.html UNSC. (2007, December 10). Retrieved from http://www.refworld.org/pdfid/4a54bc370.pdf UNSCR. (1999, June 10). http://daccess-dds-ny.un.org/. Retrieved from http://daccess-ddsny.un.org/doc/UNDOC/GEN/N99/172/89/PDF/N9917289.pdf?OpenElement Weller, M. (2009). Contested Statehhod: Kosovo's Struggle for Indipendence. Oxford University Press. Zejnullah, G. (2009). Edrejta Nderkombetare Publike. Skopje: Furkan-ISM.

107

Improving Territorial Governance and Speeding up the Integration Process into the European Union: Good Ways of Consolidating Democracy in Bosnia and Herzegovina? Dr. Tanja Cerruti Università degli Studi di Torino, Italy

Abstract Considering the eight territorial entities that made up the former Socialist Federalist Republic of Yugoslavia, Bosnia and Herzegovina is the one characterized by the most complex internal situation. What concerns the people is that this Country is composed by three different nations, believing in three religions, using two alphabets and speaking three similar but not identical languages; what concerns the organization of the State, is that it is constituted by two entities - one of which is a Federation - and a District which enjoys special conditions of administration. The multilevel composition of the Country reflects in the structure of the State constitutional Bodies which aims to grant an equal representation to all the nations living within its borders. These Bodies do not exercise their powers in a completely autonomous way but they still have to share them with an international Authority, the High Representative for Bosnia and Herzegovina. The Constitution itself does not derive from an autonomous constituent process. Although it has been declared a potential candidate for membership following the Thessaloniki European Council (2003) with the other Western Balkan Countries, Bosnia Herzegovina shares with Kosovo the last position in the development of its relations with the EU. The stalemate in the relations with Brussels is partially due to the lack of progress in both political and economic criteria. In light of the above, this paper would try to answer two questions. Among the sincere cooperation and territorial governance instruments, which ones could be better used to boost the stability of Institutions and to strengthen the democracy in the Country? Could the speeding up of the integration process into the EU lead to the same result? From a methodological point of view, the work will start analysing the main sincere cooperation and governance instruments (such as the establishment of collective bodies or the adoption of special decision making processes) already applied in national or supranational systems sharing similar problems as Bosnia and Herzegovina, in order to value their suitability to the Country. The work will then analyse the approach adopted by the EU during the fifth and the sixth enlargement for what concern political conditionality and the instruments used to help the Candidate Countries in 108

gaining the accession criteria. The expected results are on one side to suggest the instruments, inspired by the principle of sincere cooperation, that could better improve the governance and ensure a smoother functioning of the State Institutions. On the other side the paper aims to suggest a kind of approach and support that the EU could adopt through the Country in order to foster the ongoing democratic stabilization process. Keywords: European integration, Western Balkans, Bosnia and Herzegovina. 1.

The peculiarities of Bosnia and Herzegovina and the challenge of European

integration. Considering the eight territorial entities that made up the former Socialist Federalist Republic of Yugoslavia, Bosnia and Herzegovina (hereinafter, BiH) is the one characterized by the most complex internal situation. As regards its population, the Country is composed of three different national groups (Bosnians, Croats, Serbs), belonging to three religions (Catholic, Islamic, Orthodox), using two alphabets (Cyrillic and Latin) and speaking three similar but not identical languages (Bosnian, Croatian, Serbian)v. As regards the organization of the State, it is constituted by two entities one of which is a Federation - and a District which enjoys special conditions of administration. All these elements make BiH the only Balkan State from former Yugoslavia that can be considered a sort of “small Yugoslavia” (inter alia, Palermo, 2000). From the point of view of the Constitutional Law, the situation is quite unusual because of various peculiar elements. These include the fact that the Constitution itself does not issue from an autonomous constituent process and the State Institutions do not exercise their powers in a completely autonomous way, which they share with an international Authority, the High Representative for Bosnia and Herzegovina. In addition to being rather peculiar in its nature, the functioning of this system is also quite unsatisfactory: the State Institutions cannot work effectively and the economic situation is gradually but steadily worsening. Looking outside the national borders, BiH belongs to the so called Western B-alkan Countries. Although it has been declared a potential candidate for membership following the Thessaloniki European Council (2003) with the other Western Balkan Countries, BiH is improving very slowly in the development of its relations with the EU. The stalemate concerning the Country's relations with the EU is partially due to the lack of progress regarding both political and economic criteria, although the EU itself is engaged in 109

different ways in helping the Country. A step in the right direction was the recent entry into force of the Stabilization and Association Agreementvi. In light of the above, this paper will reflect on the internal situation of BiH and on its European prospects with the aim of understanding if the introduction of some relevant changes in the State organization, on one side, and a new approach to the European integration process, on the other, could improve the situation. Concerning the State organization, the main focus will be on which of the sincere cooperation and territorial governance instruments could be used to boost the stability of the national Institutions and to strengthen democracy in the Country and which of those identified as suitable would be most effective in this sense. As regards the involvement in the European Union enlargement process, the question will concern the opportunity of adopting a strategy for the Country, to foster the ongoing democratic stabilization process. 2. The Bosnian constitutional framework. As it is well known, the Constitution of Bosnia and Herzegovina has not been adopted by a democratically elected national Assembly. It constitutes the Annex IV of the Dayton Agreement, which formally put an end to the war that had ravaged the Country following its declaration of independence from the former Socialist Federative Republic of Yugoslaviavii. The constitutional text reflects very clearly its international origin and the need to tackle a very complex situation. Quite short, rather basic and concise, it guarantees the direct application of the European Convention on Human Rights and related Protocols and their priority over all other normative acts (art. II, par. 2) as well as the application of a list of additional Human Rights Agreements (Annex I to the Constitution)viii. As regards the State organization, BiH is constituted by two different Entities, the Federation of Bosnia and Herzegovina (hereinafter, “the Federation”) and the Republika Srpska (hereinafter, “the RS”), which autonomously exercise the majority of State powers, including the right of establishing “special parallel relationships with neighboring States”. BiH is the responsible of foreign relations, air traffic, monetary policy, financing of State Institutions, inter-Entities transportation, communication and the complex issue of immigrants, refugee and asylum seekers (art. III, par. 1), to whom the Constitution explicitly grants the right to return to their homes and to be restored or compensated for the properties lost during the war (art. II, par. 5 and Annex VII to the Dayton Agreement). Additional powers can be exercised by BiH if so agreed by the Entities, or stated in Annexes 5 through 8 of the Dayton Agreementix, or 110

necessary to preserve its “sovereignty, territorial integrity, political independence and international personality” (art. III, par. 5). The composition of the State Institutions reflects not only the multiethnic nature of the Country, but also the need to prevent new conflicts between the different groups. The Parliamentary Assembly is constituted by a House of Representatives, whose 42 members are directly elected from the citizens of the two Entities according to the BiH electoral law, and a House of Peoples, whose 15 members shall be appointed by the Parliamentary Assemblies of the Entities (10, of which 5 Croats and 5 Bosniacsx, by the House of Peoples of the Federation and 5 by the National Assembly of the RS). In the same way, the Presidency is made up of three members, one directly elected in the territory of the RS and the others (one Bosniac and one Croat) in the territory of the Federation. One of the members shall be appointed as the Chair. The Presidency names the Chair of the Council of Ministers who chooses the Ministers, respecting the proportionality principle between the Entities; after being appointed, they must obtain the approval of the first Chamber. During its term of office, the Council of Ministers can be subjected to a no-confidence vote by the Parliamentary Assembly. Besides the composition of the Institutions, other instruments contribute to protecting the interests of ethnic groups: in both Chambers of the Assembly decisions should be taken preferably with the votes of almost one third of the Members from the territory of each Entity or, at least, without the dissenting vote of two thirds of the Members of one Entity. Secondly, a majority of the Members of one ethnic group can declare a proposed decision of the Assembly to be “destructive of a vital interest” of their group; this declaration is followed by a specific process that can bring the matter before the Constitutional Court (art. IV, par. 3, e, f). The possibility to invoke the vital interest of one Entity is recognized also to the members of the Presidency. In this case, the issue is submitted to the National Assembly of the RS (if concerning the violation of the interest of the RS) or to the Bosniac or Croat Delegates of the House of Peoples of the Federation (if the declaration is issued by the Bosniac or Croat members). If two thirds of those delegates confirm the declaration of the Presidency member, the decision shall not take effect (art. V, par. 2, d). The BiH Constitution does not mention the Judiciary but provides for a Constitutional Court with a mixed composition: among its nine members, four must be selected by the House of Representatives of the Federation, two by the National Assembly of the RS, three by the President of the European Court of Human Rights (after consultation with the Presidency of 111

BiH). The judges from this last group shall not be citizens of BiH or of any neighboring State (art. VI). The way these latter judges are chosen, the fact that they must not be Bosnian and the rules provided for the functioning of the Court are all intended to prevent a stalemate in its activity and also to grant the International Community a partial influence on it. In many occasions, the Constitutional Court of BiH played an important role in defining the constitutional framework of the Country. One of the most significant steps was the Decision U-5/98xi which declared the unconstitutionality of some dispositions of the Constitutions of the RS and the Federation, thus confirming the exclusive domain of BiH in the exercise of a few State powers that the two Entities (or one of them) established as their own. This was, for instance, the case of border control, asylum and extradition, foreign relations and trade, ambassadors appointment and monetary policy (Bakšić Muftić, 2005). The Decision U-5/98 played an even greater role because it broke the bond between ethnicity and territorial representation, stating that the two Entities shall represent all the constituent groups (Palermo, 2000). Another important milestone was the Decision n. U-2/04. Providing a definition of the notion of “vital interest”, the Court established its own power in verifying not only the procedural aspects of that Declaration but also its contents, thus limiting the full discretion allowed by the Constitution to the Entities (Milano, 2006) and their faculty of blocking the activity of the State Bodies. However, the limited number of powers recognized to the State (which initially lacked its own defense and security bodies) and the will of the three ethnic groups to make their interests prevail over the State ones make BiH very weak and inefficient. This situation allowed the High Representative, instituted by Annex X with the main purpose of interpreting the Dayton Agreement, to assume a fundamental role in defining the constitutional system (Milano, 2006). In 1997 the sphere of competence of the High Representative was extended through the attribution, from the Peace Implementation Council, of the so called Bonn powers, which allowed him to counter anti-Dayton activities by removing obstructive politicians from office (Rhotert, 2005); in 2002 he also assumed the role of EU Special Representative. Through a wide interpretation of its powers, this Body adopted a considerable number of laws, administrative acts and decisions with the aim to pursue the integration in the Country and to ensure its proper functioning. He thus intervened in many areas, including the State's national symbols, citizenship (Cooley and Mujanović, 2015), the economy, the judiciary system, security forces, and on the internal division of the State, with the creation of the Brčko Distrikt, 112

a self-governing territory directly submitted to the sovereignty of BiH (2000). The institution of Brčko was transposed by the Parliament into the BiH Constitution, thus representing the only amendment to the same. The High Representative has also intervened on the texts of the Constitutions of the Entities, whose Parliaments have then approved some of his changes as amendments to the Charters (Banović and Gavrić, 2010). While the role of the High Representative has been of fundamental importance to allow the functioning of the Country, especially in the first decade after the Dayton Agreement, it has been criticized for having transformed BiH into a sort of international protectorate (Woelk, 2010). 3. The BiH main constitutional dilemmas and the need to introduce more sincere cooperation mechanisms in the framework of a constitutional reform. The constitutional framework briefly described above proved to be quite inefficient: the difficulty of achieving decisions at national level, partly supplied by the intense activity of the High Representative, is due to the fact that the politicians of the two Entities are not really engaged in building a common future but prefer instead to safeguard their own interests (Mujkić and Husley, 2010). Some representatives of the Croat and Serb national groups have maintained close ties with the political elites in Zagreb and Belgrade (Valvo, 2012; about Croatia, Petričušić, 2012; Banovac, 2014). The need to grant the interests of all the groups at the highest levels of government is at the origin of another element which contributes to the inefficiency of the system, namely the duplication of governing Institutions (Assembly, Presidency, Government). It has been noted that for a Country with a population of about 4500000 (smaller than that of several Italian Regions) the number of Presidents, Ministers and Parliamentarians is rather high, without considering that one of the Entities is itself a Federation, made up by 14 Cantons, each with its own Institutionsxii. As mentioned earlier, in BiH the main difficulties derive not only from the territorial division into different entities but also from the ethnic division, which is the hardest issue to be addressed. However, Bosnia is not the only Country where territorial and ethnic separations have to share the same “institutional ground”, as is the case, for instance, of Belgium. Founded on a delicate institutional balance, this Country shows a multilevel organization with different entities of either territorial or ethnic nature, each provided with a political identity and a specific area of 113

responsibility. Territorial and ethnic Entities may operate through the joint exercise of some of their powers. In that case, they can assign more powers either to the ethnic unit (as is the case with the Flemish Community and the Flanders Region), or to the territorial one (as is the case with the Walloon Region, which however maintains a lower level of integration with the French Community; Mastromarino, 2013) as needed. The Belgian solution, though set against a very different background from the Bosnian one from a historical, political and cultural point of viewxiii, could however offer some interesting suggestions to the State of Sarajevo concerning the opportunity of eventually splitting the territorial from the ethnic level in the framework of a broader constitutional reform. A useful instrument to overcome the obstacles that a multilevel system of government may encounter, could be found in the sincere cooperation principle, whose application may help the achievement of shared solutions among all the Entities and the Institutions acting in the Country. The sincere cooperation principle is usually implemented either through the establishment of special bodies, in which all the parts involved are represented, and/or through decision-making processes which require them to reach an agreement or, at least, a compromise. An example of such a special body - while not always successful! – is the Italian Conferenza Stato-Regioni, where the State and the Regions are represented through members of their executive organs (inter alia, Bertolino, 2007). Envisaged only by the law (but not contemplated in the Constitution), this Body has to submit its opinion (sometimes merely in consultative form, at other times of a binding nature) on matters of common interest, mainly during the legislative process. However, lacking a constitutional basis (which is recognized only to the sincere cooperation principle itself), it does not manage to counterbalance the prevailing role of the State. In the Constitution of BiH the principle of sincere cooperation seems to be recalled by some provisions. It is the case of art. III, par. 2, b, which requires each Entity to “provide all necessary assistance to the Government of BiH in order to enable it to honor the international obligations of BiH…”; of art. III, par. 4, which allows the Presidency to “facilitate inter-Entity coordination” on the matters for which they are competent, “unless an Entity objects in any particular case”; of art. III, par. 5, a, with the possibility, as noted, for the Entities to agree to assign to BiH some of their responsibilitiesxiv; of art. IV, par. 3, d, about the decision-making process of the Parliamentary Assemblyxv. While preserving the interests of ethnic groups - the aim pursued in the whole Constitution and prevailing also here - this last norm introduces a form of intra-institutional sincere cooperation, stating that all Members or Delegates “shall 114

make their best efforts” to ensure the participation of at least a minority of all groups, then demanding that the three-members Presidency of that Chamber (art. IV, par. 3, b) find a solution in case of disagreement and, lastly, allowing the decision-making process to go on, except in case of opposition by two-thirds of the representatives of one Entity. The BiH Constitution already provides some weak forms of sincere cooperation but they need to be strengthened. To this end, it is not useful to imagine the establishment of new bodies, since the Bosnian constitutional system is already burdened by too many governing Institutions, but rather the introduction of decision-making processes that, while reserving to the State level more responsibilities than the ones it exercises now, recognize a specific role for the Entities. The two options mentioned above for a possible evolution of the Bosnian constitutional system (i.e. to separate the territorial from the ethnic level of government and to strengthen the application of the sincere cooperation principle) both imply a deep reform of the Constitution, a solution that has been suggested for a long time outside the Country’s borders. In 2005, concluding its “Opinion on the Constitutional Situation in Bosnia and Herzegovina and the Powers of the High Representative”xvi, the Venice Commission stated that “Constitutional reform is indispensable since present arrangements are neither efficient nor rational and lack democratic consent”. The opinion identified as a central element of that constitutional reform is the splitting of responsibilities between BiH and the Entities, with a transfer from the former to the latter, underlining that “this is an indispensable step if any progress is to be achieved in the process of European integration of BiH”. An other “pressing issue” was the territorial organization, even if, in this regard, any solution not implying the existence of the two Entities was considered “unrealistic”. A third change should be introduced, even if only in the medium and long term, to replace the principle of “equality of three constituent people” with that of “equality of citizens”. In 2009 this issue was also examined by the European Court of Human Rights. Asked about the respect of equality among all citizens regarding the right to accede to State Institutions, the European Judge stated that this principle was not granted in the Countryxvii. Pursuant to the Constitution and electoral laws of BiH, only Serb citizens shall be elected or designated as members of the Presidency and of the House of Peoples for the RS and only Bosniac or Croat citizens for the Federation. This implies that a Croat or Bosniac citizen living in the RS, or a Serb living in the Federation and all citizens with nationalities different from the Bosniac, the Croat and the Serb ones do not basically enjoy the right to be admitted to those State Institutions (Dicosola, 2010). 115

Despite frequent exhortations from the European Union (see infra), this issue has not yet been addressed, bearing witness to the difficulties of the decision-making process at the State level. All the attempts to modify the Constitution undertaken repeatedly in the past have always been unsuccessful. Known as the “April package” (2006), the “Pruda Agreement” (2008) and the “Butmir process” (2009), the main constitutional reform bids formulated up to now have all been produced with the fundamental contribution of the international Community but have never achieved the goal of changing the Constitution because of the lack of agreement among Bosnian politicians. Their fil rouge was redefining the sharing of powers between the State and the Entities in order to strengthen the position of the former and reduce that of the latter. This would be an advisable aim to be pursued and would provide the starting point for any other constitutional change. All Bosnian citizens should thus continue to be protected not through the weakness of their State but through the role of a “true” State, which would assume upon itself the task of reconciling conflicts through dialogue, safeguarding the interests of the different groups but preventing any of them from being disruptive towards the general ones. In the end, if BiH intends to play a role on the international scene and to follow in earnest the path towards European integration, it needs to speak in a single voice. 4. The approximation process of the Balkan Countries to the EU. The (slow) European integration process of BiH started in the second half of the Nineties, when the European Union laid the groundwork for a new expansion of its borders towards the SouthEastern regions of the Old Continent. At the beginning, relations with the EU evolved according to the same timetable for each of the Western Balkans Countries. As is well known, all of them have been declared by the EU to have an European future and included in the programs and instruments that the Union set for that purpose subject to the respect of the conditionality principle (Blockmans, 2006; Zuokui, 2010). With the definition of the conditions that would allow those States to advance in their integration process, the EU set up a common ground that would apply to all of them, made up by the Copenhagen criteria and by some other criteria, but adding for each Country several “special requests” based on its own peculiarities. The Copenhagen criteria were enunciated by the Copenhagen European Council in 1993 - in view of the EU enlargement towards the Countries of Central and Eastern Europe – and were traditionally divided into political, economic and legal. Political criteria were identified with “stability of institutions guaranteeing democracy, the rule of law, human rights and respect for 116

and protection of minorities”; economic criteria with “the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union”; legal criteria with “the candidate's ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union”. A fourth criterion did not refer to the candidate Countries but to the EU, stating that “the Union's capacity to absorb new members, while maintaining the momentum of European integration, is also an important consideration in the general interest of both the Union and the candidate countries” (Smith, 2003; Hillion, 2004; Pinelli, 2004; Cerruti, 2010; De Ridder and Kochenov, 2011)xviii. The additional criteria established for the Balkans included: the Country’s commitment towards the return of refugees and displaced persons; compliance with the Peace Agreements; the commitment to engage in democratic reforms; the commitment to safeguard human and minority rights and to hold free and fair elections; the absence of discrimination against minorities and independent media; the implementation of economic reform measures; good neighbourly relations. As regards the criteria for each Balkan Country, the Council underlined the need to comply with obligations under Peace Agreements, “including those relating to cooperation with the International Tribunal in bringing war criminals to justice. Compliance includes an undertaking to make the Federation/Croatia as well as the RS/FRY agreements compatible with the General Framework Agreement for Peace (GFAP), under the guidance of Office of High Representative (OHR). It would also require respect for human and minority rights and the offer of real opportunities to displaced persons (including so called "internal migrants") and refugees to return to their place of origin”. The Council specifically asked BiH also to “establish functioning institutions as provided for in the constitution; to formulate a foreign trade and customs policy for Bosnia and Herzegovina; to begin a credible process towards free movement of persons, goods and capital within Bosnia and Herzegovina; to cooperate with the High Representative including on Brčko; the evidence of the implementation of a truly unified City Council in Mostar and of effective functioning of the United Police Force of Mostar (UPFM); to cooperate in the establishment and functioning of the Federation; to dismantle all structures which the OHR judges contrary to the spirit and letter of the GFAP; an evidence of cooperation with the International Tribunal, notably in bringing Bosnian war criminals to justice before the Tribunal”xix. The first group of criteria was established to provide the Countries with the assistance of the Phare Programme, the second was intended to lead to the opening of contractual relations. 117

The comparison between the criteria provided for all the Balkan Countries and those specific to BiH clearly shows that while the respect of the Peace Agreements, especially for what concerns the return of refugees and cooperation with the International Tribunal (Mäki, 2008) was imposed to all the Countries involved in the 1992-1995 Yugoslav war, the requirements about the need of State policies and a smoother functioning of the Institutions at State and Entities level represented a peculiarity of BiH. These issues can be considered the main causes of concern in its accession process even now. Regional cooperation is another criterion that has always been considered very important for the EU integration process of the Western Balkans (Vukadinović, 2000; Petričušić, 2005; Beširević, 2012)xx. The declarations of intent were soon followed by the set up of institutionalized relations between the EU and the Western Balkans, which always relied on the conditionality principle. BiH took part in that process, whose milestones were the definition of the Stabilization and Association Process (SAP, 1999), its launch by the Zagreb Summit (2000), the adoption, on the occasion of the Thessaloniki European Summit (2003), of a Declaration and an Agenda for the Western Balkans. Anticipated by several European Councils since the Cologne meeting of 1999, the Thessaloniki summit conclusively sanctioned the perspective of the EU integration of those Countries (Cerruti, 2014). The Stabilization and Association Process, which had to lead this “journey” from the operational point of view (in synergy with other initiatives that were already in place in the region), provided (and still provides) several instruments that would be required to gradually build closer links between the EU and the Western Balkan Countries (Grabar-Kitarović, 2007; Azizi, 2013; Beširević and Cujzek, 2012). These are mostly inspired to the experience of the previous enlargement. One of the main tools of the SAP is the signing of agreements, called Stabilization and Association Agreements, about which the text of the Program clarifies: “The conditions for the start of negotiations on such Agreements would remain those set out in the Council Conclusions of 29 April 1997 on the opening of negotiations for contractual relations. Obviously, to conclude such an enhanced relationship with the EU, a country would also have to have attained the high level of political and economic development required to meet the increased reciprocal and mutual obligations of the relevant acquis. In addition, taking into account the context of the Stabilization and Association process, the Stability Pact and the future EU Common Strategy, there would be increased emphasis on progress in developing regional cooperation”xxi. 118

Another important instrument (provided by the Thessaloniki meeting in 2003) is the European Partnership. Adopted by the Council on the basis of a Commission proposal and periodically reviewed, this document sets the priorities that the potential candidate State should reach and defines the financial assistance as well as the principles and conditions governing the implementation of the prioritiesxxii. To this end, the Government of the Country involved usually endorses a National Plan for the Adoption of the Acquis (NPAA). When a Country obtains the candidate status, the European Partnership evolves into an Accession Partnership. During the fifth enlargement the Partnerships were concluded only with Countries that had already acquired candidate status, thus these included only Accession Partnerships. The European Partnerships are therefore applicable only to the enlargement to the Western Balkans. Ultimately, the EU assists the South-Eastern European States with financial instruments aimed to support reforms. Their use relies on their compliance with certain requirements, including political onesxxiii. In 2007 almost all financial instruments were unified into one, known as IPA (Instrument for Pre-Accession Assistance), that was initially envisaged to span from 2007 to 2013 but later extended for seven more years. The IPA is based on five lines of action, the first two (Institution and Transition Building and Cross-Border Cooperation) concerning all the Countries involved, while the remaining three (Regional Development; Human Resources Development; Rural Development) pertain only to the candidate countries. The European Commission monitors the whole process, issuing annual reports for each Country which assesses the progress achieved in meeting the accession criteria and underlines any critical points. The practice of drafting progress reports on candidate Countries started during the preparation of the fifth enlargement. For the Western Balkans it is provided in the framework of the SAP even before the acquisition of the candidate status. 5. The BiH’s “journey” towards the EU. As regards the preparation of new entries into the Union, the enlargement to the Western Balkans seems quite similar to the previous one. The European Union provided a comprehensive set of instruments in order to help the journey towards the membership of all potential candidate States of the region. From the point of view of timing, the current enlargement is very different from the previous one. While the twelve new Member States from Central and Eastern Europe, with Malta and Cyprus, entered the EU in only two phases (2004 and 2007), the Western Balkan Countries are not advancing all at the same pace but each one is following its own path.

119

Furthermore, their approximation process seems quite longer and harder than that experienced by the Countries of the fifth enlargement. The reason is to be found not only in the peculiarities of the Countries involved, but also in the EU itself. As is well known, in 2006 Brussels started to change its attitude towards enlargement, stressing the need to respect the fourth Copenhagen criterion, the so-called “absorption” or “integration capacity” of the Union. In substance this criterion implies a greater caution in engaging in new enlargements (Phinnemore, 2006), that was further encouraged by the difficulties encountered in subsequent years in the adoption of the Lisbon Treaty and in light of the economic crisis. Another element that makes future EU entries more difficult than the previous ones is that while the twelve Countries of the fifth enlargement were judged together by fifteen Member States, the candidates from the Western Balkans are judged individually by twenty-seven, then twenty-eight, Members. In this very slow process, BiH is nearly the last one, followed only by Kosovo. It has not yet formally applied for EU membership, thus it is still considered as a potential candidate Country. The Stabilization and Association Agreement (SAA) was signed in 2008 and ratified in 2011. For its entry into force, the European Commission required the implementation of the SejdićFinci ruling (see above) but the Bosnian government did not manage to reach an agreement. Although no progress had been achieved on that issue, in 2014, following a proposal of the German and British Ministers, the Foreign Affairs Council decided to reconsider the entry into force of the Agreement if the Bosnian politicians and Institutions would commit to engage in socio-economic and administrative reforms. On February 2015 the Bosnian Parliament unanimously adopted a declaration that sanctioned the Country’s commitment to meeting EU requests and in June the SAA finally entered into forcexxiv. In July the Country adopted a Reform Agenda in order to address the socio-economic situation and to encourage the judicial and public administration reforms. Since this progress is rather limited, BiH’s prospects to enter the EU remain distant. What issues are affecting its approximation process? The information contained in the most recent progress reports offers a clear overview of the situation. Limiting the analysis to the political criteria, one of the first obstacles is the above-mentioned electoral issue, which entails the violation of the non-discrimination principle. Another critical point can be identified in the lack of coordination and cooperation between the various levels of government that hampers the regular functioning of the Country as well as its relations with the EU. In this regard, it is enough to consider that Bosnian politicians could not 120

reach an agreement on the establishment of the structure necessary for the indirect management of EU funds, thus losing the opportunity to fully benefit from them. Similarly, during the period covered by the second to last EU Commission Report (October 2013 - September 2014) some of the sub-committee meetings of the joint bodies established by the Interim Agreement could not take place because of internal disagreement among the Bosnian membersxxv. For what concerns “democracy and the rule of law” the Commission underlined considerable deficiencies but, especially during the last year (October 2014 - September 2015), also some little progress. The first “black point” is the Constitution itself, which remains inefficient and subject to different interpretations. A second cause of concern is the above-mentioned need for closer cooperation, which affects all the levels of government, as well as their relations with civil society. The lack of a shared vision and weak cooperation between the various levels of government makes the decisionmaking process quite complicated, thus delaying structural reforms. In 2014 the Commission stated that the agreement on the definition of an effective coordination mechanism between those levels for alignment with the acquis was not been reached yet, to the detriment of the path to integration. In June 2014 both Chambers of the State Parliament adopted new rules of procedures with a fast-track mechanism for EU related legislation. However these were not applied regularly because of political and inter-ethnic divergences. The general elections held in the Country in October were judged by OSCE as “efficiently administered and held in an orderly manner and competitive environment”. The inter-ethnic cohabitation of the different groups is more difficult in the Federation than in the RS, where most of the citizens are Serbian. In the former, the Legislative Assembly is not functioning smoothly and the City of Mostar has been governed only by the Mayor since 2012, when the Council ceased to function. In the latter the Institutions are more homogeneous and can work more actively. At the executive level, the previous State Council of Ministers could not reach the necessary “agreements to prepare countrywide strategies for key sectors of the economy” (2014). The disagreement among Ministers on the EU coordination mechanism led to a stall in the preparation of the NPAA and weakened the role of the Directorate for European Integration, which will now have to “cope with the challenges stemming from the entry into force of the Stabilization and Association Agreement”xxvi. On its side, the new Council of Ministers planned the adoption of 65 laws related to the EU integration agenda. 121

At the Entity level, while the RS was engaged in the approximation of draft legislation with the acquis, in the Federation the overall political turmoil at both federal and canton level inhibited the possibility to address urgent socio-economic issues. Analyzing the public administration reform, the Commission registered limited progress in terms of improving its capacity to fulfill the requirements of EU integration. In 2014, the budgetary process lacked democratic legitimacy because the documents were usually adopted through urgent procedures; in 2015 it still needs more transparency. Although benefitting from a structured dialogue with the EU, the issues about the judiciary still need to be addressed. One of the peculiarities of the Bosnian system is that the judicial power belongs almost entirely to the Entities, while the State level does not have at its disposal a Supreme Court (Dauster, 2010; Meškić, 2011; Pobrić, 2015). This split of powers, combined with the use of different criminal codes, is responsible for the lack of harmonization of caselaw. However, the recent adoption of a reform strategy for the 2014-2018 period has been considered by the European Commission as a good starting point. More progress must be made in fighting corruption, “which continues to affect the entire public sector and remains most acute in the areas of service delivery and access to employment” (2014); the legal framework is in place but its implementation remains weak and inconsistent though in 2015 the situation improved a bit. For what concerns human rights, while the “legal and institutional framework for their observance” is in place (and incorporates the main elements of human rights law), its implementation needs to be improved especially in some aspects. These are the need to abolish the provision of the death penalty from the RS Constitution; the need to decrease political and financial pressure on the media and intimidation and threats against journalists and editors, as well as to address the issue of media ownership. The school system must become more inclusive, especially in the Federation, where there are often “two schools under one roof” (2014). The anti-discrimination law needs to be amended in order to include additional categories against which there should be no discrimination. The reports mention some cases of discrimination against LGBTI and on religious grounds. As regards minorities, the situation is quite similar. The legal framework for their protection is in place but its implementation still needs to improve. However, the Commission registered very good progress as regards the Roma minority, especially their housing needs and civil registration (thus decreasing the number of stateless citizens). More progress needs to be made with regard to refugees although the competent State Commission has been in place since 2012. 122

Another crucial issue the reintegration of returnees. A strategy is in place but its implementation remains a challengexxvii. Better results have been achieved in the field of regional cooperation, where the Country participated actively, developing bilateral relations with other enlargement Countries and neighboring EU Member States. The doctrine has noted that the European Union should be more precise in the requests that it addresses to the Candidate Country, defining in greater detail the objectives that the Country is expected to achieve with regard to the various parameters required (Vlašić Feketija and Mujanović, 2014; Venneri, 2008)xxviii. 6. A glimmer of light for the Bosnian future? The key issue afflicting the constitutional system of BiH lies in the difficulties that hinder its proper functioning. The presence of different levels of government and the fact that they are not homogeneous (one of the two Entities has a centralized organization and an ethnic makeup that is fairly uniform, while the other is federal and populated mainly by two different groups) as well as a growing concern to guarantee to each of the three major constituent population groups both an equal and contextual representation in all political organisms and the power to significantly influence their activity, leads to an excessive proliferation of offices and figures and a consequent difficulty in assigning to each its specific functions and, in more general terms, to repeated stalemates. It is the division of competences between different levels of government, while leaving very few to the central authority, that prevents the State from exercising all those prerogatives that are generally associated with Entities that hold sovereignty. As a result its role is rather weak both inside and outside the national borders, generating in turn the overall inefficiency of the system and the consequent slowing down of the pace of the Country’s journey towards European integration. The constitutional reform is therefore an urgent necessity, while it is less clear which terms should dictate its structure. The ethnic composition of BiH and the delicate balances on which the coexistence of its peoples is hinged make it unthinkable, for the time being, to consider a unitary State option. It would be advisable to consider a solution that assigns greater powers to the State, while continuing to provide a representation to territorial and ethnic groups, possibly through a separation of the two levels based on the nature of the competences involved, as is the case in Belgium. The objective to be pursued would be the simplification of the structures of government, whose reduction and “streamlining” could be offset by the introduction of those instruments of sincere cooperation that, if binding, would easily contribute to safeguarding all the various interests involved. In this instance, it would also be essential to settle the question 123

of the electoral rights of those citizens who do not belong to any of the three constituent groups or residing in a part of the Country where their group is not the majority. The greater efficiency of the overall system would probably allow BiH to undertake the required reforms more readily and thus to progress on its path to European integration. At the same time, however, it may be useful for the European Union to step up the pace of this process, regardless of the rigorous compliance with the criteria imposed in that sense (as was the case, on various occasions, with the fifth enlargement). More concrete prospects of EU membership would certainly provide a powerful incentive for the Country to “become a single interlocutor” for both the other Member States and for the EU itself. An attitude to adopt unitary policies, possibly supported by a different State organization, would result in further progress on the path to European integration, but it would also entail the possibility of a more significant impact on the internal front on all those sectors, like the economy, in which the situation is particularly challenging. In the twenty years that have passed since the Dayton Agreements the situation has not registered any significant improvement. However, the recent entry into force of the Stabilization and Association Agreement, preceded by a commitment to engage in reforms on the part of the Bosnian Institutions and political forces, provide reasons to hope that there is now a willingness to undertake the required constitutional reforms and to achieve European integration in a speedier and more determined way. It would be encouraging if the events of the past few months represented a milestone on a path that will lead one of the Countries located in the “heart” of Europe as rapidly as possible to identify itself with a constitutional system of its own making - and, more significantly, one that is functional - and that will lead the Country to become a fully-fledged member of the European Union. References Azizi, A. (2013) EU enlargement: current EU candidates and prospects for future enlargement. In Social, economic and political transition in the Balkans, 4th International Conference on European Studies, Tirana: 63-71. Bakšić-Muftić, J. (2005) Razumijevanje Dejtonskog Ustava 10 godina kasnije. Zbornik Radova Pravnog Fakulteta u Splitu 42(1-2): 67-92. Banovac, B., Katunarić, V. and Mrakovčić, M. (2014) From war to tolerance? Bottom-up and top-down approaches to (re)bulding interethnic ties in the areas of the former Yugoslavia. Zbornik Pravnog fakulteta Sveučilišta u Rijeci 35(2): 455-483. Banović, D. and Gavrić, S. (2010) Ustavna reforma u Bosni i Hercegovini. Politička Misao 47(2): 159-180. 124

Basta, K. (2015) Bosna (ni)je poput Jugoslavije: struktura frustracija i dinamika samoodređenja u multinacionalnim državama. Politička Misao 52(1): 164-190. Bertolino, C. (2007) Il principio di leale collaborazione nel policentrismo del sistema costituzionale italiano, Torino: Giappichelli. Beširević, N. and Cujzek, I. (2013) Politička Misao 50(1): 155-179. Blockmans, S. (2006) Western Balkans (Albania, Bosnia-Herzegovina, Croatia, Macedonia and Serbia and Montenegro, including Kosovo). S. Blockmans and A. Lazowski (eds), The European Union and its Neighbours, Den Haag: TMC Asser Press: 357-389. Braniff, M. (2009) Transforming the Balkans? Lesson Learning and Institutional Reflexivity in the EU Enlargement Approach. European Foreign Affairs Review 14(4): 547-563. Caligiuri, A. (2010) La situazione in Bosnia-Erzegovina e il bilanciamento tra pace e diritti umani nella giurisprudenza della Corte di Strasburgo. Diritti umani e diritto internazionale 4(2): 429-434. Cerruti, T. (2010) L’Unione Europea alla ricerca dei propri confini. I criteri politici di adesione e il ruolo dei nuovi Stati Membri. Torino: Giappichelli. Cerruti, T. (2014) The Political Criteria for the Accession to the EU in the Experience of Croatia. European Public Law 20(4): 771-798. Cooley, L. and Mujanović, J. (2015) Changing the Rules of the Game: Comparing FIFA/UEFA and EU attempts to Promote Reform of Power-Sharing Institutions in Bosnia-Herzegovina. Global society 29(1): 42-63. Dauster, M. (2010) Ustav Bosne i Hecegovine: Nesavršena Država – diskurs. Sveske za javno pravo, 1(1-2): 1-17. De Ridder, E. and Kochenov, D. (2011) Democratic Conditionality in the Eastern Enlargement: Ambitious Windows Dressing. European Foreign Affairs Review 16(5): 589-605. Dicosola, M. (2010) La rappresentanza dei popoli in Bosnia ed Erzegovina tra identità nazionali e standard europei. Rassegna parlamentare (3): 727-745. Fabijanić Gagro, S. and Vukas, B. (2008) Pravna priroda i politička pozadina oružanih sukoba u Hrvatskoj I Bosni I Hercegovini. Zbornik Pravnog Fakulteta u Zagrebu 58(5): 1159-2000. Fakiolas, E.T. and Tzifakis, N. (2008) Transformation or Accession? Reflecting on the EU’s Strategy Towards the Western Balkans. European Foreign Affairs Review 13(3): 377-398. Grabar Kitarović, K. (2007) The Stabilization and Association Process: the EU’s Soft Power at Its Best. European Foreign Affairs Review 12(2): 121-125. Hillion, C. (2004) The Copenhagen criteria and their Progeny. In C. Hillion (ed) EU Enlargement: a Legal Approach. Oxford-Portland: Hart Publishing, pp. 1-23. 125

Jahja, V. (2006) L’Ombudsman nei Balcani: Albania, Bosnia-Erzegovina, Croazia. Rivista di Diritto pubblico comparato ed europeo (4): 1803-1807. Kazazić, V. (2005) Ostvarivanje i zaštita ljudskih prava u Bosni i Hercegovini kroz praksu prava ombudsmena i doma za ljudska prava. Zbornik Radova Pravnog Fakulteta u Splitu 42 (1-2): 43-53. Keil, S. (2008) Federalism and conditionality in Bosnia and Herzegovina. Rivista di Diritto pubblico comparato ed europeo (4): 1770-1779. Mäki, J.M. (2008) EU Enlargement Politics: Explaining the Development of Political Conditionality of ‘Full Cooperation with the ICTY’ towards Western Balkans, Politička Misao 45(5): 47-75. Mastromarino, A. (2013) Belgio. Bologna: Il Mulino. Meškić, Z. (2011) Osnivanje Vrhovnog Suda Bosne i Hercegovine kao uslov za članstvo u Evropskoj uniji. Sveske za javno pravo 4(2): 53-65 Milano, E. (2006) La Bosnia Erzegovina a dieci anni dagli Accordi di Dayton. La Comunità internazionale LXI(1): 347-375. Mujkić, A. and Husley, J. (2010) Explaining the Success of Nationalist Parties in Bosnia and Herzegovina. Politička Misao 47(2): 143-158. Palermo, F. (2000) Bosnia Erzegovina: la Corte costituzionale fissa i confini della (nuova) società multietnica. Rivista di Diritto pubblico comparato ed europeo: 1479-1489. Petričušić, A. (2012) Preporuke iz Bolzana/Bozena o nacionalnim manjinama u međudržavnim odnosima: značenje i implikacije za Hrvatsku i regiju. Politička Misao 49(2): 166-185. Petričušić, A. (2005) Regional Cooperation in the Western Balkans – a Key to Integration into the European Union. Croatian Yearbook of European Law and Policy 1: 216-221. Phinnemore, D. (2006) Beyond 25 – the Changing Face of EU Enlargement: Commitment, Conditionality and the Constitutional Treaty. Journal of Southern Europe and the Balkans 8(1): 7-26. Pinelli, C. (2004) Conditionality and Enlargement in Light of EU Constitutional Developments. European Law Journal 10(3): 354-362. Pippan, C. (2004) The Rocky Road to Europe: The EU’S Stabilization and Association Process for the Western Balkans and the Principle of Conditionality. European Foreign Affairs Review 9(2): 219-245. Piqani, D. (2008) Constitutional Issues of Pre-accession: from CEE to SEE. Rivista di Diritto Pubblico Comparato ed Europeo (4): 1677-1696. 126

Pobrić, N. (2015) Reformska agenda za BiH 2015-2018: nekoliko primjedaba I prijedloga. Sveske za javno pravo 21(6): 3-6. Rhotert, A. (2005) The work of the office of the High Representative in Bosnia and Herzegovina with a focus on the reunification of the City of Mostar. Zbornik Radova Pravnog Fakulteta u Splitu 42(1-2): 21-26. Smith, K.E. (2003) The Evolution and Application of EU Membership Conditionality. In: M. Cremona (ed) The Enlargement of the European Union. Oxford-New York: Oxford University Press, pp. 105-140. Šarčević, E. (2012) U susret popisu stanovništva BiH: disckriminacija popisnim obrascem?. Sveske za javno pravo 9(3): 122-125. Valvo, A. L. (2012) Bosnia Erzegovina: un’integrazione possibile. Rivista della Cooperazione giuridica internazionale 42: 132-141. Vehabović, F. (2010) Zašto neće doći do sistematskih ustavnih promjena. Sveske za javno pravo 1(1-2): 36-54. Venneri, G. (2008) Integrazione europea e riforma costituzionale in Bosnia-Erzegovina: oltre il “Paradosso della sovranità”. Rivista di Diritto pubblico comparato ed europeo (4): 17561769. Vlašić Feketija, M. and Łazowski, A. (2014) The seventh EU enlargement and beyond: PreAccession Policy vis-à-vis the Western Balkan revisited. Croatian Yearbook of European Law and Policy 10: 1-37. Vukadinović, R. (2000) Regionalna Suradnja na Jugoistoku Europe. Politička Misao 37(2): 6978. Woelk, J. (2010) La lunga transizione della Bosnia ed Erzegovina “da Dayton a Bruxelles”. Studi sull’integrazione europea (2): 508-528. Woelk, J. (2008) La transazione costituzionale della Bosnia ed Erzegovina. Dall'ordinamento imposto allo Stato multinazionale sostenibile. Padova: CEDAM. Zuokui, L. (2010) EU’s Conditionality and the Western Balkans’ Accession Roads. European Perspectives 2(1): 79-98. v

In 2013 a new law entered into force, requiring citizens to declare their nationality, religion and language. The

only binding question is that on nationality (Šarčević, 2012). vi

The ASA entered into force the 1st of June 2015.

vii

The Dayton Agreement was adopted in Dayton in November 1995 and then signed in Paris the 14th December

of the same year by the then Presidents of Bosnia Herzegovina (Izetbegović), Croatia (Tuđman) and the Federal

127

Republic of Yugoslavia (Milošević) as well as by the representatives of the United States, France, the United Kingdom, Germany, Russia and the European Union. It is made up of a General Framework Agreement for Peace and ten Annexes. On the evolution of the war see, inter alia, Fabijanić Gagro (2008). viii

To ensure the respect of the above-mentioned international documents and the constitutional provisions on

human rights (art. II, par. 3) the Constitution provides for the settlement of a Human Rights Commission for BiH (art. II, par. 1) constituted by a Human Rights Ombudsman and a Human Rights Chamber (Annex 6 to the General Framework Agreement). On this point see also Kazazić (2005); Jahja (2006). ix

Annexes 5 through 8 are about Arbitration, Human Rights, Refugees and Displaced Persons, the Commission

to Preserve National Monuments. x

The term “Bosniac” is used for citizens of BiH belonging to a specific nationality, the Bosniac one, who are

usually Muslim. The adjective “Bosnian” is used for the State of BiH; this distinction has been followed also in this work. xi

Decision U-5/98 is made up of four partial decisions adopted on 29 and 30 January, 18 and 19 February, 1 July,

19 August 2000. xii

The constitutional organization of the two Entities will not be examined in this essay but the rules on the

functioning and composition of their bodies substantially reflect the State’s ones, being inspired to the so-called “ethnic federalism”. See amplius Dicosola (2010); Woelk (2008). xiii

Actually, BiH could not be compared with the consociational model adopted in Belgium as well as in other

European Countries (Vehabović, 2010). According to Basta (2015) the ethnic groups are more unsatisfied in the current BiH than they were in the former Yugoslavia. xiv

Pursuant to art. III, par. 5, b within six months of the entry into force of the Constitution “the Entities shall

begin negotiations with a view to including in the responsibilities of the institutions of BiH other matters, including utilization of energy resources and cooperative economic projects”, but this never happened. The only transfers of powers to the State took place solely through acts of the High Representative. xv

Art. IV, par. 3, d, states: “All decisions in both chambers shall be by majority of those present and voting. The

Delegates and Members shall make their best efforts to see that the majority includes at least one-third of the votes of Delegates or Members from the territory of each Entity. If a majority vote does not include one-third of the votes of Delegates or Members from the territory of each Entity, the Chair and Deputy Chairs shall meet as a commission and attempt to obtain approval within three days of the vote. If those efforts fail, decisions shall be

128

taken by a majority of those present and voting, provided that the dissenting votes do not include two-thirds or more of the Delegates or Members elected from either Entity”. xvi

European

Commission

for

Democracy

through

law,

Venice,

11

March

2005,

http://www.venice.coe.int/webforms/documents/default.aspx?pdffile=CDL-AD(2005)004-e. xvii

Sejdić and Finci v. Bosnia and Herzegovina, Applications nos. 27996/06 and 34836/06, Grand Chambers of

the European Court of Human Rights, Strasbourg, 22 December 2009. On the use of the word “peace” in this Ruling see Caligiuri (2010). xviii

European Council Conclusions, Copenhagen, 21-22.6.1993, point 7. The Madrid European Council, 15-

16.12.1995, added to these criteria the so-called administrative capacity, id est “the adjustment of the administrative structures” of the Candidate States. xix

Council conclusions on the principle of conditionality governing the development of the European Union’s

relations with certain countries of South-East Europe, 29 Apr. 1997, EU Bull. 4/97, 158, which constitutes one of the most important document in the development of the first relations between the EU and the Region. See also the General Affairs Council of October 1995, February, May and October 1996, respectively in EU Bull. 10/95; EU Bull. 1-2/96; EU Bull. 5/96; EU Bull. 10/96; the European Council Conclusions, Florence (21–22 Jun. 1996, Declaration by the European Council on Former Yugoslavia) and the Report from the Commission to the Council and the European Parliament, Common principles for future contractual relations with certain countries in SouthEastern Europe, COM(96) 476 final, in EU Bull., 10/96. xx

A more recent tool aimed to foster the EU integration of the Western Balkans is the Berlin Process, whose last

annual meeting was held in Vienna, in August 2015. xxi

See also Piqani (2008); Braniff (2009).

xxii

See Council Regulation (EC) 533/2004 of 22 March 2004 on the establishment of partnerships in the framework

of the stabilisation and association process and subsequent amendments. For BiH, see Council Decision 2008/211/EC of 18 February 2008 on the principles, priorities and conditions contained in the European Partnership with Bosnia and Herzegovina and repealing Decision 2006/55/EC. xxiii

The PHARE (Poland and Hungary: Assistance for Restructuring their Economies), initially adopted for Poland

and Hungary has been progressively extended to other Central and Eastern European Countries and to the Balkan Countries; OBNOVA was the name of a 1996 regulation on which was based the EU aid to the Balkans. In 2001 they have been replaced both by CARDS (Community assistance for reconstruction, development and stabilization), whose objective was to enable the Countries of South-Eastern Europe to participate in the

129

Stabilization and Association Process. According to the regulation establishing the program, the respect of democratic principles, the rule of law, fundamental freedoms, human and minority rights were preconditions for receive the EU’s assistance (Regulation EC 2666/2000, point 7). On CARDS see also Pippan (2004). On financial instruments for the Balkan States see Fakiolas and Tzifakis (2008). xxiv

See the Council Conclusions on Bosnia and Herzegovina, Foreign Affairs Council meeting, Brussels, 15

December 2014 and the Written Commitment of Bosnia and Herzegovina, agreed by the BiH Presidency on 29 January 2015, signed by the leaders of the 14 parties represented in Parliament and endorsed by the Parliamentary Assembly

of

Bosnia

and

Herzegovina

on

23

February

2015,

in

http://europa.ba/wp-

content/uploads/2015/05/delegacijaEU_2015022513454549eng.pdf. xxv

The “Interim Agreement on trade and trade-related matters between the European Community, of the one part,

and Bosnia and Herzegovina, of the other part” has been in place since July 2008 with the aim to implement the provisions of the trade and trade related matters of the Stabilization and Association Agreement. The Bosnia and Herzegovina 2014 Progress Report, accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Enlargement Strategy and Main Challenges 2014-2015, COM(2014) 700 final, 8 October 2014 and the Bosnia and Herzegovina 2015 Report, accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, EU Enlargement Strategy, SWD(2015) 241 final, 10 November 2015, are available on the EU Commission website, as well as all previous reports. xxvi

The Directorate for European integration of Bosnia and Herzegovina has to coordinate the BiH process of

integration into the EU. Established by the Law on Council of Ministers of BiH (Official Gazette of BiH, No. 38/2002,

of

December

18,

2002),

it

overtook

the

place

of

the

Ministry

of

Integration;

http://www.vijeceministara.gov.ba/stalna_tijela/dei/default.aspx?id=1719&langTag=en-US. xxvii

This issue is addressed in the part of the report about the acquis criteria, in the chapter about “justice, freedom

and security”. xxviii

In this sense it was noted that the resolute attitude of Football Federations in requesting that BiH interacts

with them through a single interlocutor has proven more effective than the approach, at times rather distant, adopted by the EU (Cooley and Mujanović, 2015).

130

Crimes against Environment in Albania and the European Union's Approach to the Protection of Environment through Criminal Law Dr. Enkelejda Turkeshi Department of Criminal Law, University of Tirana, Albania

Abstract The protection of environment is of particular importance for Albania in its integration process to the European Union (EU), which considers it to be one of the “essential objectives of the Community” as highlighted in the case-law of the European Court of Justice. Taking into consideration the requirements of the specific EU directives on the protection of environment through criminal law, one of the expected legal reforms in the approximation process will be the adaption of the Albanian substantive environmental criminal law to the requirements of the Environmental Crime Directives. The need for aligning the Albanian criminal law with these directives has been highlighted by the Commission in the 2014 Progress Report on Albania. This paper examines the Albanian substantive environmental criminal law and its application in practice in the last ten years, aiming to identify the main challenges it faces in the context of the required transposition of EU Environmental Crime Directives, while also making suggestions on how to better respond to these issues. For this purpose, the paper will also refer to the experience of other countries with the implementation process in this field, highlighting the main problems encountered and the impacts of the Environmental Crime Directives transposition. Keywords: Crimes against the environment, Albania, Environmental Crime Directives, EU. 1. Introduction The EU is considered to be “a major global force in pushing for tighter environmental standards” (Environment and Climate Change, 2015), having the environmental protection as “one of its aims” since 1972 (Asser Dossiers). In forty years, it has adopted more than two hundred legislative measures which cover “all environmental sectors, including water, air, nature, waste, noise, and chemicals, and others which deal with cross-cutting issues such as environmental impact assessment, access to environmental information, public participation in environmental decision-making and liability for environmental damage” (European

131

Commission’s DG Environment website). The EU measures have influenced “almost all aspects of national environmental law” of the Member States (Asser Dossiers). In Albania, which has been granted the candidate status in June 2014, all Environmental Protection laws since 1993 have asserted the protection of environment from pollution and damage as a “national priority”. The legislative framework on environmental protection has developed into a wide legal framework with a variety of sources comprising: the Constitution, the Framework Law on environmental protection, sectorial laws, bylaws, the Criminal Code, and international environmental treaties in which Albania is a Party (Petrela, 2009: 135140).Basic principles in the field of environmental protection have been elevated to constitutional rank. Environmental protection provisions have not been codified or introduced as part of a single law, as besides the Framework Law on Environmental Protection, there are several laws which cover specific sectors or components of environmental protection such as air, water, forests, waste management, etc. Similar to other European countries, the new legislation that has been adopted in Albania since the early 1990s has also aimed at adapting the national legislation to the requirements of the various international treaties which the legislator has adhered to or ratified. In its efforts to align national legislation with the EU environmental acquis, Albania has constantly revised its environmental legislation. The new Framework Law adopted in 2011 has been part of a wide legal reform which was undertaken by the Ministry of Environment in June 2011 with the aim of providing the necessary legal basis for the transposition of all EU directives in the field of environmental protection (Parliamentary Document, 2011). Nevertheless, “lack of implementation of the environmental legislation” remains a “major problem” in Albania, as it has been continuously highlighted in the EU Progress Reports on Albania from 2012 to the latest report of 2014, in which the Commission has concluded that “significant further efforts are needed in all areas to strengthen administrative capacity and to ensure proper implementation and enforcement of legislation and its further alignment with the acquis.” This is of particular importance, taking into consideration that degradation of the environment from human activity is a phenomenon of “huge concern” in Albania and has been currently classified among the five “first level” risks in the latest National Security Strategy (2014), which are considered to have the highest priority due to the high probability of manifestation and serious consequences for the security of the Republic of Albania (National Security Strategy, 2014: Annex C). 132

The importance of an effective implementation of environmental law, especially when there have been “many cases of severe non-observance of Community environmental law” in the EU Member States, has led the EU to consider the adoption of new directives on the protection of the environment through criminal law, which would “support the implementation and enforcement of Community environmental legislation” (European Commission’s DG Environment). For the first time, these directives specifically address the issue of environmental crime at the EU level, following the example of the Council of Europe (CoE) Convention on the protection of the environment through criminal law of 1998(European Treaty Series, No. 172), which has been the first initiative at European level to “criminalize conduct that is harmful to the environment or human health” (Mullier, 2010:97). Taking into consideration the fact that the CoE Convention of 1998 has not yet entered into force, the relevant subsequent developments in the EU in this field represent a very important step toward developing the so-called “European environmental criminal law” (Faure, 2011:369). As highlighted by the Commission in the accompanying document to its proposal for a Directive on the protection of the environment through criminal law, there was a need for tackling environmental crime, which constituted “a major challenge” for the EU, taking into consideration the main characteristics and effects of environmental crime, such as the very broadness of the concept, the cross border effects and the global dimension of environmental crimes, etc. (Commission of the European Communities, 2007b: 4, 6-19). Albania has not yet transposed the Environmental Crime Directives into its legislation, although since 2010 the Commission has explicitly highlighted the need for a “more effective system for prosecuting breaches of environmental law [...], including new legislation targeting specific offences, proportionate and dissuasive sanctions, an effective enforcement system and proper prosecution.” (European Commission, 2010:106). While in the latest Progress Report of 2014, the Commission explicitly refers to the Environmental Crime Directives and the need for aligning the national legislation with this part of the acquis(European Commission, 2014:56). This paper examines the Albanian substantive environmental criminal law and its application in practice during 2004-2014, with the aim of identifying the main challenges it faces in the context of the required transposition of EU Environmental Crime Directives into the national law, while also making suggestions on how to better respond to these issues in the Albania’s efforts towards aligning its legislation to that of the EU. For this purpose, the paper will also 133

refer to the experience of other countries with the implementation process in this field, highlighting the main problems encountered and the impacts of the transposition of the Environmental Crime Directives into the national law. 2. Criminal offences against environment in Albania: legal framework and criminal sanctions in practice 2.1. Legal framework and main characteristics of environmental criminal offences As already mentioned above, one of the sources of the Albanian environmental law is the Criminal Code (CC). Criminal offences against environment in Albania can be found only in the CC. In addition, in the new CC, which was adopted in the early 1990s (Law no.7895/1995) in the context of the first Framework Law on environmental protection (1993), the legislator has introduced, for the first time, a separate chapter on the criminal offences against environment. Besides crucial changes to the offence of “environmental pollution”, which in the previous criminal code (1977) was classified as a misdemeanor against public health, the specific chapter in the Special Part of the CC of 1995 (Chapter IV) includes other offences which have previously been considered as economic offences, such as illegal fishing or the unlawful cutting of forests. However, there are a few offences which are often considered as environmental criminal offences, but are currently punishable under more general provisions in other chapters of the CC, such as the unlawful import and export of ozone-depleting substances which is covered by the more general crime of smuggling of prohibited goods (article 171) as their import and export has been explicitly prohibited (Council of Ministers Decision no. 453/2005), or the breach of rules on radioactive substances and trafficking of such substances (articles 282 and 282/a). The types of offences that are currently provided for in the specific chapter on the criminal offences against environment (articles 201-207) include the following: (1) air pollution (basic offence and an aggravated form); (2) transportation of toxic waste (basic offence and an aggravated form); (3) water pollution (basic offence and an aggravated form); (4) prohibited fishing (basic offence and an aggravated form); (5) unlawful cutting of forests; 134

(6) cutting decoration and fruit trees (basic offence and an aggravated form); (7) destruction of forests and forest environment by fire (basic offence and two aggravated forms); (8) destruction due to negligence of forests and forest environment by fire (basic offence and an aggravated form); (9) breach of quarantine for plants and animals. According to the International Association of Penal Law, which since its first specific resolutions on the protection of the environment through penal law in 1979 has highlighted the necessity to extend protection to other values, besides water, air and soil, the term “environment” means: “all components of the earth, both abiotic and biotic, and includes air and all layers of the atmosphere, water, land, including soil and mineral resources, flora and fauna, and all ecological inter-relations among these components” (De La Cuesta, 2009:150). In this regard, the scope of the special chapter in the CC is rather limited as it does not establish offences in relation to some of the aspects of environmental protection through criminal law, such as soil pollution, while it provides limited protection of fauna and flora. It is worth noting that in the CC of 1995, except for the offence of breach of quarantine for plants and animals, the result of serious danger or harm to human health and life is not required as a condition for punibility for the offences against environment. These consequences have been defined as aggravated circumstances in specific offences, such as air pollution, water pollution, transportation of toxic waste and forest fires. However, the CC is still limited in relation to the aggravating circumstances, which at the moment mainly relate to human life and health, except for the new additions on forest fires, which for the first time include elements that are directly related to the damage to the environment. Some of the environmental criminal offences include only actions, while others include both actions and omissions. In relation to the mental element, except for a few offences that can only be committed intentionally, the majority of the environmental criminal offences are punishable when committed intentionally or with negligence, therefore in this aspect the criminal provisions of Chapter IV have a wide scope,as it is not limited in relation to the category of fault.

135

In twenty years from its adoption, only a few substantial changes have been made to the CC in relation to environmental criminal offences, although the need for a reform in this field has been highlighted since 2001 in the National Action Plan on Environment, in which the CC was included in a list of laws that should have been amended in three years. As mentioned above, in the last four years, it has been the Commission who has explicitly mentioned this issue. In the meantime, since March 2014 there have been efforts to present a draft of amendments to the CC aiming to achieve the required alignment with the EU Directives (Gordiani and Bocari, 2014: Annex III), which is still a work in progress. However, in the latest Draft Strategy and the respective Action Plan on the reform in the Justice System of Albania, these amendments have been planned for 2016 as part of a review of the entire CC (Parliamentary Special Commission on the Reform in the Justice System, 2015a:25 and 2015b:40). Although in 2001, in the context of the adoption of the new Constitution, the legislator has added a new provision on the tasks of the criminal legislation in which the environment has been explicitly mentioned among other key legal interests or values to be protected, the only case when it has amended the special chapter on environmental offences has been in 2008, by adding new specific offences on the destruction of forests and forest environment by fire. However, it should be noted that the additions of 2008 represent important developments in this field, not only because they were aimed to tackle the problem of the increasing damage to the environment due to the widespread fires in forests, which had been caused intentionally or due to negligence (Explanatory Report to the Draft Law on amendments to the CC, 2008:14), but they have also introduced new concepts which focus directly on the environment, such as the aggravating circumstances of causing “serious damage over an extended period of time on the environment or protected areas”. In addition, the new crimes of 2008 have been the first environmental crimes to be punished by a cumulative sanction (imprisonment and fine), reaching a maximum of five to fifteen years of imprisonment and a fine of one to two million Lek (1 Euro~ 140 Lek) for the most aggravated form of crime which causes serious damage over an extended period of time on the environment or protected areas. The tendency to establish severe penalties for these specific crimes has been reinforced by the amendments of 2013, in the context of the adaption of the whole special part of the CC to the latest case law of the Constitutional Court, which had resulted in the repeal of the basic provision on cumulative sanctions (last paragraph of article 29 of the CC, repealed by Decision of the Constitutional Court no 47, of 26 July 2012). As a 136

consequence, intentional forest fire is the environmental crime with the highest penalty under the Albanian legislation in force, reaching a maximum of twenty years imprisonment for its most aggravated form. The new criminal provisions on forests protection have also introduced for the first time in chapter IV the idea of providing for different sanctions depending on the category of fault, i.e. intention and negligence. Therefore, forest fires are the only environmental crimes that have different levels of penalty for their intentional and negligent forms. This approach, which focuses on differentiating crimes according to the mental-state element, has been considered as a possible way towards establishing a more “graduated punishment system” for environmental offences (Mandiberg and Faure, 2008: 494). With the addition of the new crimes in 2008, most of the criminal provisions of Chapter IV provide for crimes. The specific offences that continue to be classified only as misdemeanors are prohibited fishing, unlawful cutting of forests, cutting decoration and fruit trees, and breach of quarantine for plants and animals. It is worth noting that the classification of an offence as a crime or a misdemeanor influences the application of several important institutes of the criminal law, e.g. the attempt is punishable only for crimes, the possibility of applying an additional fine is provided only for certain crimes, the period of limitation is shorter in the case of misdemeanors (maximum three years), etc. The principal penalties for environmental criminal offences include fines and imprisonment. For the majority of the offences, imprisonment is the only applicable penalty, including a case of misdemeanor (the aggravated form of cutting decoration and fruit trees). On the other hand, there are also cases of misdemeanors which are punishable only by a fine (the basic offence of cutting decoration and fruit trees, and the breach of quarantine for plants and animals). Fines are applicable only for offences that are classified as misdemeanors. Regarding the level of fines, they have not been specified for each offence, therefore the “general” minimum and maximum levels set forth in the General Part of the CC for misdemeanors (50.000 - 3.000.000 Lek) will also apply for each environmental offence. In case the punishment applied by the court is imprisonment, there is the option of applying one of the alternatives to imprisonment, but only if the specific requirements set forth in the General Part have been met in the given case.

137

In addition to the principal penalty, the court may decide to apply one or more of the supplementary penalties, in accordance with the requirements set forth in the General Part of the CC. These penalties include: the confiscation of the instrumentalities and proceeds of the criminal offence, which is a penalty that is mandatorily imposed by the court, the obligation to publish the court decision, and deprivation of certain rights, such as the right to perform public functions, the right to perform a certain profession or activity, the right to hold leading positions within the legal persons, etc. Some of these types of penalties have been explicitly recommended in relation to environmental crimes, based upon their “expected preventive effect”in this field (Council of Europe, Explanatory Report; International Meeting of Experts, 1994:24-25). Albania has also recognized the criminal liability of legal persons (article 45 of the CC) and has provided for the respective penalties in the specific law “On the criminal liability of legal persons” (Law No.9754/2007). According to this law, the criminal liability of legal persons is not restricted to certain types of criminal offences, and does not exclude the criminal liability of the natural persons who have been perpetrators or accomplices in the same criminal offence. Legal persons are criminally liable only for criminal offences which have been committed in their name or for their benefit by their organs and representatives, by a person who is under the authority of their organs and representatives, or due to lack of control or supervision by the organs and representatives of the legal person. The specific system of penalties established in Law No.9754/2007, which has been adapted to the specific nature of the legal person, consists of two main categories, similar to those provided for in the CC for natural persons: the principal and supplementary penalties. The principal penalties include fines and the compulsory dissolution of the legal person. Referring to the levels of fine set forth in article 11 of the Law, which are based upon the type of the committed criminal offence and on the limits of the respective imprisonment penalty provided for the crimesin the CC, the amount of fine range 300.000 - 1.000.000Lek for misdemeanors and 500.000- 50.000.000 Lek for crimes. Except for the maximum level of fine for misdemeanors, which rather surprisingly is three times lower than the maximum level of fine set forth in the CC for natural persons (3.000.000 Lek), all other amounts of fines have been set forth 5-6 times higher than fines for natural persons. For instance, referring to the respective penalty provided for in the CC for the basic offence of air pollution (a misdemeanor), the fine for a legal person ranges 300.000 - 1.000.000 Lek, while for the basic offence of water pollution (a crime) it ranges from 500.000 to 5.000.000 Lek. When the criminal offence has caused serious 138

consequences, the court imposes the most severe penalty (compulsory dissolution), which may even be imposed when the offence has been committed more than once or in other aggravating circumstances, as stipulated by article 12 ofLaw No.9754/2007. It should be noted that in respect of the aim of effective environmental protection and while considering it a priority, the legislator has provided for the possibility of imposing the supplementary penalty of “placing the legal person under monitored management” whenever the imposition of compulsory dissolution is considered to have serious consequences on the protection of environment, due to the economic and social circumstances related to the type, size and place the activity of the legal person is carried out. Other supplementary penalties that may be imposed by the court in addition to the principal penalty include: closing one or more activities/structures of the legal person, deprivation of the right to get or use licenses, authorizations, concessions or subsidies, denial of the right to exercise one or more activities/operations, the obligation to publish the court decision, etc. It is worth noting that the law on criminal liability of legal persons does not preclude the imposition and enforcement of administrative punitive measures by tax administration and other bodies of the public administration, in accordance with applicable legislation. 2.2 Criminal sanctions in practice (2004-2014) The statistics on sentenced criminal offences against the environment (Table 1) show that in the last ten years there has been mostly a downward trend in the number of environmental criminal offences. After an increase in the years 2008-2009, there has been again a downward trend, reaching the lowest number of cases per year in 2013 (less than 50 cases). Finally, for the third time in this ten-year period, there has been an upward trend in 2014, although at a slow rate. Table 1 Convictions for environmental criminal offences during 2004-2014 Criminal

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

offence against environment Air pollution

6

0

0

0

4

139

16

3

0

0

0

7

Transportation 0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2

1

14

5

6

7

20

14

13

8

14

8

6

307

173

141

56

111

116

117

101

73

26

39

4

0

0

0

2

3

0

5

2

1

3

Destruction of -

-

-

-

-

0

0

0

0

1

0

-

-

-

-

-

0

0

1

0

2

0

of 0

0

0

0

0

0

0

0

0

2

0

178

147

63

137

149

133

115

89

42

56

of toxic waste Water pollution Prohibited fishing Unlawful cutting

of

forests Cutting decoration and fruit trees

forests

and

forest environment by fire Destruction due

to

negligence of forests

and

forest environment by fire Breach

quarantine for plants

and

animals Total

331

140

Source: Statistical Yearbooks of the Ministry of Justice, 2004-2014. In relation to the specific types of environmental criminal offences, the statistical data show that in most of the court cases, the offence committed has been a misdemeanor, including mainly the unlawful cutting of forests, followed by the misdemeanors of prohibited fishing, air pollution (basic offence), and cutting of decoration and fruit trees. Regarding the category of crimes, in ten years there has been no court case concerning the crime of toxic waste transportation, and only a few cases in the last two years concerning the crimes of water pollution and air pollution (aggravated form). It should be noted the low number of court cases in relation to the new forest fire crimes, comprising only 4 cases in the last six years from the entry into force of the respective amendments to the CC, although there has been an increase of these crimes in practice and a high number of cases have been registered by the prosecutor office. According to the statistics of the General Prosecutor, only in 2011, which has been the year with the highest number of registered cases regarding forest fires (73 cases of intentional crimes and 14 cases of negligent crimes), in the majority of cases (65 cases regarding intentional crimes and 6 cases regarding negligent crimes) the investigation has been suspended due to the unknown identity of the offender. Only a few cases on the misdemeanor of unlawful cutting of forests have reached the Criminal Division of the Supreme Court. Regarding the type of punishment that has been applied by courts, fines are the most frequently used criminal sanction for environmental criminal offences (Table 2). Table 2 Types of penalties applied to convicted offenders during 2004-2014 Type of penalty Year

Fine

Imprisonment

2004

236

95

2005

140

38

141

2006

125

22

2007

54

9

2008

117

20

2009

145

4

2010

119

14

2011

100

15

2012

80

9

2013

32

10

2014

37

19

Total

1185

255

Source: Statistical Yearbooks of the Ministry of Justice, 2004-2014. The data in Table 2 show that in 82.3 % of the cases, the offender has been punished by a fine. This is also related to the type of committed offence, which as mentioned above, in most court cases has been a misdemeanor, although there are misdemeanors for which the legislator has also provided for the penalty of imprisonment, as a sentencing option, e.g. although the misdemeanor of unlawful cutting of forests is punishable by a fine or up to one year of imprisonment, only in 17% of the cases an imprisonment penalty has been applied. 3. The European Union’s approach to the protection of environment through criminal law A decade after the adoption of the CoE Convention on the Protection of the Environment through Criminal Law, the EU institutions have adopted the so-called Environmental Crime Directives, namely the Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law (PECL Directive), followed by Directive 2009/123/EC of the European Parliament and of the Council of 21 October 2009 amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements. Although the preparatory work, which was based upon the CoE Convention, had started in 2000, (European Commission’s DG Environment 142

website), it took a few years to have the Environmental Crime Directives due to an institutional conflict between the EU Commission and the Council on the “the appropriate legal instrument by which to require Member States to introduce sanctions of a criminal nature at national level in the case of offences detrimental to the Environment”, which was finally resolved with the help of the EU Court of Justice (ECJ) through its “landmark decisions” in two cases of 2005 and 2007 (Paragraph 15 of the Judgment in Case C-176/03; Faure, 2010:120). In the first case of 2005, the ECJ held: it is common ground that protection of the environment constitutes one of the essential objectives of the Community ... In that regard, Article 2 EC states that the Community has as its task to promote 'a high level of protection and improvement of the quality of the environment […] As a general rule, neither criminal law nor the rules of criminal procedure fall within the Community's competence […] However, the last-mentioned finding does not prevent the Community legislature, when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities is an essential measure for combating serious environmental offences, from taking measures which relate to the criminal law of the Member States which it considers necessary in order to ensure that the rules which it lays down on environmental protection are fully effective. (paragraphs 41, 47 and 48 of the Judgment in Case C-176/03) In this context, aiming at ensuring “a more effective protection of the environment”, the PECL Directive establishes criminal law measures, thus, for the first time, it obliges the Member States “to provide for criminal penalties in their national legislation in respect of serious infringements of provisions of Community law on the protection of the environment”. In the accompanying document to the proposal for the PECL Directive, the Commission had observed that at that time the Member States legislation on environmental crime differed “enormously”, thus giving rise to the risk of the so-called “safe-havens” for perpetrators who could “profit from the differences in national laws by committing offences in those Member States with the least efficient legislation and the lowest sanctions” (Commission of the European Communities, 2007b: 38).

143

It should be noted that PECL Directive provides only for “minimum rules” and the Member States “are free to adopt or maintain more stringent measures regarding the effective criminal law protection of the environment” which must be compatible with the Treaty establishing the European Community (recital 12 in the preamble). According to the Commission, the directive “is flexible enough that it can be adapted to the different legal systems and traditions in the Member States” (Commission of the European Communities, 2007b:39). Therefore, “a full harmonization” in this area cannot be expected due to this limitation to “minimum rules”, which in fact is a characteristic of all EU criminal law directives (European Commission, 2011: 5,7). The specific offences that should constitute criminal offences in all EU Member States are listed in article 3 of the PECL Directive, complemented by article 4 on the ancillary conduct of inciting, aiding and abetting the intentional conduct referred to in the previous article. Each definition of the nine offences set out in article 3 requires the unlawfulness of the act/omission and the mental element of intent or at least serious negligence. According to the definition set out in article 2(a) of the Directive, the term “unlawful” means infringing the European Community legislation listed in Annex A to the Directive, the legislation adopted pursuant to the Euratom Treaty listed in Annex B, or the Member States legislation giving effect to the Community legislation listed in the annexes. Unlike the CoE Convention (1998) and the Commission proposal for a Directive (2007), the PECL Directive does not provide for any “autonomous offence”. The scope of the criminal offences, which are defined in provisions (a) to (i) of article 3 of the PECL Directive, include specific unlawful conducts related to the pollution of air, soil or water, waste management, shipment of waste, the operation of a plant where a dangerous activity is carried out, the handling of nuclear materials or other hazardous radioactive substances, specimens of protected wild fauna or flora species, habitats within a protected site, and specific activities related to the ozone-depleting substances. Similar to the PECL Directive, Directive 2009/123/EC on ship-source pollution defines the infringements that should be regarded as criminal offences in all Member States, complemented by the ancillary acts of inciting, aiding and abetting such offences committed with intent. Based upon article 4 and 5a of the Directive, while also referring to the exceptions provided for in article 5, the infringements that should be regarded as criminal offences if committed with intent, recklessly or with serious negligence, include “ship-source discharges 144

of polluting substances, including minor cases of such discharges” and also the “[r]epeated minor cases that do not individually but in conjunction result in deterioration in the quality of water”. According to Mandiberg and Faure (2008:511) “it is desirable to provide a full spectrum of environmental crimes and to take a graduated approach to punishing the threat or reality of environmental harm”. In the context of an earlier article by Faure and Visser (1995), they have proposed a modified scheme of four models of environmental crimes “based on the extent to which a statute focuses on interests other than adherence to administrative authority”, which include the Abstract Endangerment, Concrete Endangerment, Concrete Harm, and Serious Environmental Pollution models (Mandiberg and Faure, 2008: 452, 469, 480). Referring to the serious environmental criminal offences that are defined in the Environmental Crime Directives, while the offence in the Directive 2009/123/EC is classified as a concrete endangerment crime, in its variation of “presumed endangerment” (Faure, 2011:365), the definitions in the PECL Directive include elements that pertain to different models of environmental crimes. According to Faure (2011), except for one of the offences which “seems to be relatively easy to classify” (the significant deterioration of a habitat within a protected site, which is a “concrete harm” crime), all other definitions are “rather difficult to classify”. Specifically, “[i]ncluding both phrases “likely to cause” and “causes” is about punishing not only concrete harm but also the risk of concrete harm”, therefore in many cases the requirements included in the formulation of the provision make the crime “either a concrete endangerment crime or a concrete harm crime depending on whether the endangerment (likely to cause) or concrete harm (causes) is required” (Faure, 2011:363-364). As mentioned above, the PECL Directive does not provide for any “autonomous” offence. In relation to the penalties for the environmental criminal offences, in accordance with the above mentioned case law of the ECJ, both Directives do not contain obligations on the type and level of penalties to be applied, but only require Member States to introduce penalties that are “effective, proportionate and dissuasive”. While both Directives define the conditions for liability of legal persons, neither of them requires penalties to be criminal in nature, as not all Member States recognize the criminal liability of legal persons in their national law (Commission of the European Communities, 2007a:8). In the Proposal for a Directive in 2007, the Commission had also included two specific articles on the sanctions to be applied to natural persons and legal persons, in which it had established a minimum level for the maximum 145

penalties to be applied for the offences referred to in article 3 (imprisonment for natural persons and fines for legal persons), and also specific proposals on the types of supplementary penalties or measures that could be applied. In relation to the requirement of the Directives for “effective, proportionate and dissuasive” penalties, which is a notion that derives from the case law of the ECJ (Faure, 2011:365), the Commission has given the following explanation in its Communication of 2011 on the EU Criminal Policy: “Effectiveness requires that the sanction is suitable to achieve the desired goal, i.e. observance of the rules; proportionality requires that the sanction must be commensurate with the gravity of the conduct and its effects and must not exceed what is necessary to achieve the aim; and dissuasiveness requires that the sanctions constitute an adequate deterrent for potential future perpetrators.” (European Commission, 2011:9) 4. National experiences with the implementation of the Environmental Crime Directives Although both Environmental Crime Directives should have been implemented in the Member States’ national legislation before the end of 2010, many Member States have failed to respect this deadline (European Commission-Press Release, 2011). According to Faure (2011:361), many Member States have been indeed “struggling with either the implementation itself, or with the reporting requirements to the EU Commission on the way the Directives have been implemented” in the national legislation. One of the aspects of the Environmental Crimes Directives that has been subject to “increasing attention during the implementation process” is the use of “vague notions” in both directives, such as “substantial damage”, “dangerous activities”, or “significant deterioration” (Faure, 2010:120-123).Nevertheless, according to Faure (2010:169) there a few other sources that could be called upon by Member States when implementing these vague notions, as this may be helpful in the endeavor to “on the one hand better satisfy the lex certa principle and on the other hand also provide the harmonising effect desired by the European Commission”. Depending on how elaborate their environmental criminal law was before the enactment of the Environmental Crime Directives, it was expected that Member States would have different experiences in implementing them: 146

“For some Member States which already had elaborate environmental criminal law provisions, the directives will probably not change a great deal and implementation should be relatively easy. However, for those Member States which did not have elaborate environmental criminal law provisions, the Directives may bring important changes. Those Member States will have substantial work implementing them.” (Faure, 2011:360-361) The differences in the implementation process are also influenced by the structure of the legal framework in the field of environmental crimes, which would require changes in several pieces of legislation in those countries where environmental criminal offences have not been sanctioned only in their CC. Referring to the communications of Member States on the national implementing measures concerning the Environmental Crime Directives (NIM by Member State, 2015), there have been cases in which these directives have been regarded as already implemented by preexisting legislation. France is the only Member State that has considered there was (then) no need for national execution measures. In France, almost all environmental criminal offences have been sanctioned outside the CC, while the majority of the environmental protection provisions has been codified in an “Environmental Code”, which has specific provisions on environmental criminal offences, such as air pollution, water pollution, waste-related offences, specific offences in the field of genetically modified organisms, and hunting offences. These offences are punishable by cumulative sanctions (imprisonment and fine), e.g. the pollution offences are punishable by two years imprisonment and a fine of 75.000 Euro. The Netherlands also has regarded PECL Directive as already implemented by pre-existing legislation, which mainly consists of the sectoral environmental laws in conjunction with the Act on Economic Offences, while also including the CC in the case of “common hazardous environmental infringements” (Overheid.nl, 2010a). Almost the same applied to Directive 2009/123/EC, as the offences were already sanctioned in the Act on Economic Offences and the CC (Overheid.nl, 2010b). In Italy, the implementation of the Environmental Crime Directives has required amendments in the pre-existing legislation, which includes the so-called “Environmental Code” (Testo Unico Ambientale), sectoral laws and the CC (Ramacci, 2009: 9,27). While failing to respect 147

the transposition deadline, the Italian legislator has enacted a single legislative decree for the implementation of both Directives (Decreto Legislativo 7 luglio 2011, n. 121). Additions to the CC include only misdemeanors concerning offences against the protected wild fauna or flora species and the habitats within a protected site. In Germany, which like Italy has failed to respect the transposition deadline, the legislator has introduced a few amendments in the environmental criminal law in December 2011 (Bundesanzeiger verlag,2011),as it had found that the German environmental criminal law “already corresponded substantially” to the requirements of the PECL Directive, and changes were required “only in some parts” of the legislation (BT-Drs17-5391, 2011:10). These amendments have been made to the CC and three specific federal environmental statutes on nature conservation, hunting, and waste shipment. Since the substantive reform of 1980, the German environmental criminal law consists mainly of a special chapter in the CC, while some criminal provisions are still part of various specific environmental laws (Schlemminger and Martens (eds.), 2004:205; Sina, 2014:34). Although requiring only “limited changes” in the national legislation, the transposition of the PECL Directive is considered to have had “some important general impacts”, which include “an increased dependency of environmental criminal law on administrative law, and an even larger criminalisation of environmentally harmful behavior” (Sina, 2014:34-35). Regarding the Directive 2009/123/EC, according to the German legislator there has been no need for changes in the German environmental criminal law as the relevant offences were already criminalized in the CC through the offence of “water pollution” (BT-Drs17-5391, 2011:15). In chapter 29 of the Special Part of the Criminal Code, the German legislator has provided for three specific pollution offences for water, soil and air, while also including other offences related to hazardous waste, causing of noise, vibrations and non-ionising radiation, the operation of certain facilities, the handling of radioactive substances, dangerous substances and goods, and certain offences that endanger protected areas. In addition to establishing different sanctions for each offence based upon the type of fault (intention or negligence), the special chapter on offences against the environment includes a specific provision on “aggravated cases of environmental offences” (Section 330), which provides for more severe penalties in cases when intentional offences have been committed in certain aggravated circumstances that include not only danger or harm to human health or life, but also damages to the environment, such as permanent or lasting damages to water, soil or a protected area, or permanent damage 148

to species of animals or plants that are under threat of extinction. These aggravated offences are punishable by imprisonment with a maximum of ten years. Although the German environmental criminal law is characterized by an “administrative accessoriness” of environmental offences, the CC comprises one exception to this administrative link (Schlemminger and Martens (eds.), 2004:206), which is related to seriously endangerment of human health or life by releasing poisons (section 330a). Except for the especially serious cases, which are sanctioned by imprisonment, all environmental offences are sanctioned by imprisonment or fine, and these penalties have not been changed in the context of the PECL Directive transposition. The newest EU Member State, Croatia, has transposed both Environmental Crime Directives through the enactment of its new Criminal Code in 2011, in force from 1 January 2013, thus respecting the transposition deadline (01.07.2013). Similar to Germany, the Croatian CC has had a specific chapter on criminal offences against the environment since the previous CC of 1997. On the other hand, the 2011 reform has led to “significant changes” in relation to environmental crimes, such as the introduction of several new offences, modernization of specific pre-existing offences, and more severe penalties for most offences (Carević, 2012:1115). In relation to almost all of the offences defined in the Environmental Crime Directives, the Croatian legislator has introduced new criminal offences (e.g. the emission of polluting substances from a sailable object, endangerment of the ozone layer, etc.), while the other provisions of the EU Directives have been implemented through the amended pre-existing offences, e.g. environmental pollution, endangerment of environment by waste disposal, endangerment of environment by a production facility,etc. (Carević, 2012:15). The Croatian CC provides for one pollution offence, the “environmental pollution” offence, which is punishable by imprisonment even in its form of abstract endangerment. The special chapter includes also the offences of poaching of animals and fish, torture or killing of animals, handling and trade of harmful animal drugs, veterinary malpractice, unlawful introduction of wild species or Genetically Modified Organisms into the environment, devastation of forests, change of the flow of water, unlawful exploitation of mineral resources, unlawful construction. Similar to the German CC, chapter XX of the Croatian CC has a specific provision on the most severe crimes against the environment, which provides for the most severe penalty for environmental crimes in Croatia reaching the maximum of fifteen years of imprisonment. In the new CC, all environmental criminal offences are punishable by imprisonment, while there has also been a tendency to increase the periods of imprisonment for many offences. In most 149

cases, the conduct is punishable even when committed with negligence, while different levels of penalties have been provided for each category of fault (intent and negligence) in specific provisions of the respective articles. In a general overview of the state of implementation of the PECL Directive throughout the EU, according to a recent study commissioned by the Commission “many Member States have not yet fully implemented the Directive, in particular due to the incomplete criminalisation of environmental crimes”, while there are still differences in “the severity of sanctions” throughout the EU. (Blomsma and Wagner, 2014:81) 5. Conclusions In its way to full EU membership, Albania has to adapt its legislation to the complex environmental acquis, including the Environmental Crime Directives. While taking into consideration the ultima ratio principle, the necessary reform in the field of environmental criminal law in Albania should be comprehensive in order to guarantee the effective enforcement of the new environmental protection legislation that has transposed several parts of the EU environmental acquis. In contrast to the administrative environmental legislation, the CC has mainly the same content since 20 years ago when the legislator introduced for the first time a special chapter on criminal offences against environment, which is limited to certain environmental crimes and misdemeanors that in most cases omit important fields of protection and specific elements that focus directly on the environment. As the relevant criminal provisions have not been scattered in different pieces of environmental legislation, at first sight the legal reform will be easier as it will concentrate in one single law (CC). On the other hand, it is important to note that there is a need for coordination between the CC and the relevant administrative environmental protection laws and bylaws which have been further aligned to the EU acquis during these years and have also provided for many new administrative contraventions that in part should be made criminal with the expected reform in the criminal legislation. Therefore, the transposition of the EU Directives into the Albanian legislation will require “substantial work”, as it does not simply mean “copy/pasting” their text, which is considered to be an inadequate method for “proper transposition” of a Directive (Capeta, 2010:10). One of the main challenges for the Albanian legislator will be the adoption of “effective, dissuasive and proportionate” penalties for the new and/or amended environmental criminal 150

offences, taking into account the problems associated with the adaption of the type and level of penalties for specific offences in the existing legislation. In this regard, another challenge will be the adoption of different models of environmental crimes and differentiation among them to reflect the different degrees of seriousness and also the category of fault element in the cases when the offence is punishable when committed with either intent or negligence. The penalties should also be adapted to both the latest changes in chapter IV of the Special Part concerning the new forest fires crimes, and the changes in the whole system of penalties in the General Part of the CC. It is also recommended that in establishing the level of penalties for each offence, the legislator takes in consideration the effect they would have in the respective levels of the penalties that may be applied to a legal person held responsible in accordance with the specific law of 2007, which does not limit the criminal liability of legal persons to specific offences, therefore allowing its application to all future new offences against the environment. Although the CoE Convention and the Proposal for the Directive on the protection of environment through criminal law are not legal binding instruments, they may well be used as a point of reference in relation to the type and level of penalties. The different experiences of a few Member States in the implementation of the Environmental Crimes Directives have shown that there have been difficulties in respecting the transposition deadline, even in those countries that had already an “elaborate” environmental criminal law. In Member States where amendments in law have been necessary, the transposition of Environmental Crime Directives has resulted in further enlargement of the criminalization of environmental offences and increased complexity of environmental criminal law, for example in the case of Germany and Croatia. In the latter case, there has also been a tendency to severe sanctions, providing for an imprisonment penalty only, while also increasing the periods of imprisonment for many offences. In addition to the legislative reform, its application into practice will be a challenge in Albania. With a few exceptions, during the last ten years there has been a downward trend in the number of court cases on environmental criminal offences, while their majority concern misdemeanors and the most frequently used criminal sanction is fine. Very few cases have reached the Supreme Court so far. The courts are expected to have an important role in the interpretation of the future new provisions, especially concerning the new “vague notions” of the EU Directives, although it is recommended that, whenever possible, the legislator itself provide in the law the definitions or 151

guiding criterion to interpret these notions, following the example of some EU Member States (see Faure 2010:166). In this context, the whole process of aligning the national legislation to that of the EU is expected to bring important novelties, the long-awaited modernization of environmental criminal law and an increased role of criminal law in the protection of the environment in Albania, which will then require also further efforts in training of prosecutors and judges and awareness raising, as it has already begun in recent years with the help of the EU and in the context of some useful professional networks (European Commission 2012:62; REC Albania).These developments will hopefully contribute in ensuring a more effective environmental protection in Albania. References ASSER Institute. Dossiers. European Environmental Law after Lisbon: an introduction. http://www.asser.nl/default.aspx?site_id=7&level1=12219&level2=14663. Accessed 10 July 2015. Blomsma, J., and Wagner, H. (2014). In: Strategic Project on Environmental Crime,Eurojust Report, pp.80-81. Available at http://www.eurojust.europa.eu/. Accessed on 15 June 2015. BT-Drs 17-5391 (2011). Deutscher Bundestag. Available at http://dipbt.bundestag.de/dip21/btd/ 17/053/1705391.pdfAccessed on 25 August 2015. Bundesanzeiger verlag (2011). http://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger _BGBl&jumpTo=bgbl111s2557.pdf. Accessed on 25 August 2015. Capeta, T. (2010). Harmonisation of national legislation with the acquis communautaire. Report presented in the UNIDEM CAMPUS Trieste Seminar “The quality of law”, 14-17 June 2010, Italy. Venice Commission. CDL-UDT(2010)017. Available at http://www.venice.coe.int/ webforms/documents/default.aspx?pdffile=CDL-UDT(2010)017eAccessed on 30 August 2015. Carević, M. (2012). Judicial Training and Research on EU crimes against environment and maritime pollution: Report for the Republic of Croatia. JUDT- Judicial Training. Available at http://www.judt.unisalento.it/wp-content/uploads/2012/03/REPORT-CROATIA.pdfAccessed on 26 August 2015. Commission of the European Communities (2007a). Proposal for a directive of the European Parliament and of the Council on the protection of the environment through criminal law. 2007/0022 (COD). Brussels, 9.2.2007. Commission of the European Communities (2007b). Commission Staff Working Document Accompanying the Proposal for a Directive of the European Parliament and of the Council on the protection of the environment through criminal law- Impact assessment. SEC (2007) 160. Brussels, 9 February 2007. Council of Europe Convention on the protection of the environment through criminal law of 1998. European Treaty Series, No. 172. 152

Council of Europe, Explanatory Report to the Convention on the protection of the environment through criminal Law. Available at http://conventions.coe.int/Treaty/EN/Reports/Html/172.htm Criminal Code of Albania (Law Nr.7895/1995, as amended). Criminal Code of Croatia (2011). Available at http://www.unodc.org/res/cld/document/hrv/2004/ croatia_criminal_code_html/Croatia_Criminal_Code_2011_CRO.pdf Criminal Code of Germany, as amended. Available at http://www.gesetze-im-internet.de/ englisch_stgb/german_criminal_code.pdf. Accessed on 15 August 2015. De La Cuesta, J.L. (ed.) (2009) Resolutions of the Congresses of the AIDP/IAPL (19262004).Toulouse: Éditions érès. Retrieved from http://www.penal.org/IMG/pdf/NEP21anglais.pdf. Accessed 23.05.2012. Decreto Legislativo 7 luglio 2011, n.121 “Attuazione della direttiva 2008/99/CE sulla tutela penale dell’ambiente, nonche’ della direttiva 2009/123/CE che modifica la direttiva 2005/35/CE relativa all’inquinamento provocato dalle navi e all’introduzione di sanzioni per violazioni.” GU n. 177 dell'1-8-2011. Available at http://www.altalex.com/documents/leggi/2011/08/22/tutela-penale-dell-ambiente-introdottinuovi-reati. Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law. OJL 328, 06.12.2008, p.28-37. Directive 2009/123/EC of the European Parliament and of the Council of 21 October 2009 amending Directive 2005/35/EC on ship-source pollution and on the introduction of penalties for infringements. OJL 280, 27.10.2009, p.52–55. ECJ. Judgment of 13 September 2005 in Case C-176/03, Commission v. Council, European Court Reports 2005, page I-07879 ECJ. Judgment of 23 October 2007 in Case C-440/05, Commission v. Council, European Court Reports 2007, page I-09097. Environment and Climate Change (2015). Summaries of EU legislation available at http://eurlex.europa.eu/%20summary/chapter/environment.html?root_default=SUM_1_CODED=20 European Commission (2010). Analytical Report accompanying the Communication from the Commission to the European Parliament and the Council ‘Commission Opinion on Albania’s application for membership of the European Union’, Brussels, 09/11/2010, SEC (2010) 1335. European Commission (2011). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Towards an EU Criminal Policy: Ensuring the effective implementation of EU policies through criminal law. Brussels, 20/09/2011. COM(2011) 573 final. European Commission (2012). Albania 2012 Progress Report accompanying the document Communication from the Commission to the European Parliament and the Council ‘Enlargement Strategy and Main Challenges 2012-2013’, Brussels,10/10/2012, SWD(2012) 334 final. European Commission (2014). Albania 2014 Progress Report accompanying the document Communication from the Commission to the European Parliament, the Council, the 153

European Economic and Social Committee and the Committee of the Regions ‘Enlargement Strategy and Main Challenges 2014-2015’, Brussels, 08/10/2014, SWD(2014) 304 final. European Commission- Press Release (2011). Environmental crimes: Commission asks 12 Member States to implement EU rules, 16 June. Available at http://europa.eu/rapid/pressrelease_IP-11-739_en.htm,Accessed 25.08.2015. European Commission’s DG Environment website: http://ec.europa.eu/environment/ Explanatory Report to the Draft Law (2008) “On some addendums and changes in Law No. 7895, of 27 January 1995 “Criminal Code of the Republic of Albania”, as amended”. Retrieved from www.justice.gov.al Accessed 01/11/2009. Faure, M.G. (2010). Vague notions in environmental criminal law. Environmental Liability 4, Lawtext Publishing Limited, pp. 119-133 (Part I) and pp. 163-170 (Part II). Available at http://ssrn.com/abstract=1988933 Faure, M.G. (2011). The implementation of the environmental crime directives in Europe. In: J.Gerardu et al (eds.) Proceedings of the Ninth International Conference on Environmental Compliance and Enforcement; 20-24 June, Whistler, British Columbia, Canada: INECE, pp.360-371. Available at http://inece.org/conference/9/proceedings/Proceedings9thINECEConference. pdf. Accessed 15/08/2015. French Environmental Code. Available at http://www.legifrance.gouv.fr/Traductions/enEnglish/Legifrance-translations General Prosecutor of Albania (2011). Report on the status of criminality. Gordiani, G., Bocari, B. (2014). Working paper: analysis and action plan for the implementation of the Albanian Criminal Code as compared to Directive 2008/99/EC on the protection of the environment through criminal law. Draft. SELEA Project Report. Retrieved from http://selea.al. Accessed on 23.04.2014. International Meeting of Experts (1994) on the use of criminal sanctions in the protection of the environment; internationally, domestically and regionally. Report. Portland, Oregon, USA, 19-23 March. Available athttp://www.icclr.law.ubc.ca/sites/icclr.law.ubc.ca/files/publications/ pdfs/Portland2.PDFAccessed 15.07.2015. Mandiberg, S.F., Faure, M.G. (2008). A graduated punishment approach to environmental crimes: Beyond vindication of administrative authority in the United States and Europe. Columbia Journal of Environmental Law, 34(2): 447-511. Ministry of Justice, Statistical Yearbooks of the years 2004-2014. Mullier, E. (2010). The emergence of criminal competence to enforce EC Environmental Law: Directive 2008/99 in the context of the case-Law of the European Court of Justice, Cambridge Student Law Review, 6(1): 94-116. National Security Strategy (2014), adopted by Law No. 103 of 31.7.2014, Official Journal of the Republic of Albania No.137 of 1 September 2014, p.6287. NIM by Member State (2015). Available at http://eur-lex.europa.eu/legalcontent/EN/TXT/?qid= 1443295740471&uri=CELEX:32008L0099 regarding PECL Directive and http://eur-lex.europa.eu/legalcontent/EN/TXT/?qid=1443295942089&uri=CELEX:32009L0123 regarding Directive 2009/123/EC. 154

Overheid.nl, 2010a.https://zoek.officielebekendmakingen.nl/stcrt-2010-19612.html Overheid.nl, 2010b.https://zoek.officielebekendmakingen.nl/stcrt-2010-17463.html Parliamentary Document (2011). Minutes of the meeting held on 6 June. Commission on European Integration. Parliament of Albania. Parliamentary Special Commission on the Reform in the Justice System (2015a). Draft Strategy on the reform in the Justice System of Albania. 24 July 2015. Parliamentary Special Commission on the Reform in the Justice System (2015b). Action Plan on the reform in the Justice System of Albania. Petrela, I. (2009) Tipare të përgjithshme dhe tendenca të së drejtës ndërkombëtare dhe asaj shqiptare për mjedisin. Studime Juridike 2: 122-147. Ramacci, L. (2009). Diritto penale dell’ambiente. Seconda edizione. CEDAM. Padova, Italia. REC (Regional Environmental Center), Country Office for Albania. http://albania.rec.org/lajme/ 49/krimi%20mjedisor. Accessed on 30 August 2015. Schlemminger, H. and Martens, C.-P. (eds.) (2004) German Environmental Law for Practitioners. 2nd Edition. Kluwer Law International. Sina, S. (2014). Fighting Environmental Crime in Germany: A Country Report. Study in the framework of the EFFACE research project, Berlin: Ecologic Institute. Available at http://efface.eu/sites/default/files/EFFACE_Fighting%20Environmental%20Crime%20in%20 Germany_0.pdf Accessed on 10 August 2015.

155

Central and Local Government Relations in Albania: Toward Decentralization MSc. Endri Pajollari & Assist. Prof. Dr. Salih Özcan Epoka University, Albania

Abstract Local governance and decentralization is an ever growing topic in politics and public administration studies. This is better achieved by a good relationship between the local and central governments. A coordinated relation between these two important institutions provides prosperity and stability for a country. This paper aims two describe the notion of central-local governments relations, based on decentralization. It will begin by briefly presenting the theoretical aspects of the abovementioned concepts of central-local relations and decentralization. The paper first gives an overview of these concepts in the Republic of Albania, by describing the situation in different periods and different regimes. The aim of this study is to show how the centrallocal relations have evolved during the years in Albania and how much this relation has been concerned with decentralization and local self-governance. This study provides different competencies and budget capacity of both levels of government and gives examples from different developed countries in order to show how the system works in reality in Albania and how they should function in order to be more effective and efficient. Finally, this study presents some of the problems that the local government institutions are facing in Albania, with the main issue being corruption in all levels of public administration and possible solutions for these problems will be suggested. Keywords: Albania, Central-local relations, Decentralization, Local government, Corruption Introduction Since its independence in 1912, Albania has found it very difficult to establish a well-constructed state with all the features and characteristics that it needs to be prosperous and developed. It has been partly because of external factors which have constantly affected negatively in the road of Albania towards becoming a fully functioning state. However it would be a justification to say that only because of these external factors Albania is nowadays one of the less developed countries in the continent of Europe. Internal factors have affected maybe even more the lack of development 156

of Albania. One of these factors is even the topic of this study. The bad central-local government relations which lead to lack of decentralization are one of the most important factors which have left Albania so behind the other European states. The focus is mainly on the post-communist period because before that we can barely find traces of local government and decentralization in Albania. The legislation adopted by the left and right governments in different periods demonstrates de jure the level of decentralization and relations between the central and local government. However, this legislation combined with the government programs and reports from the foreign partners will shed light on the true face of the two aforementioned concepts. Another part of this study focuses on the main problems that the central-local relations face here in Albania and how these problems interfere in the decentralization process. After pointing out these problems which impede the implementation of the proper legislation, we can give conclusions and recommendations on how to meliorate the central-local relations and with it the decentralization process in Albania. Concepts and Theoretical Approach Decentralization is a controversial concept. It may take a diverse meaning in political analysis. Public Choice theory is one of the theories which support decentralization. This theory emerged together with the critics against the welfare state in the 1970s and 1980s. People argued that the welfare state depleted the financial resources of the state therefore the government should disperse its authority in order to share the burden with other forms of governance. The central government should transfer some competences and responsibilities to the lower levels of government (MartinezVazquez, 2011). The Public Choice theory aimed to transform the public sector into a model similar to the public sector. This way the local government units would mostly sustain themselves and the central budget would be used for different purposes (Anderson, 2003). The issue of decentralization relies heavily on the domestic policies and situation of a country. In countries which have problems with ethnic minorities like the Kurdish case in Turkey, the government tries to keep a centralized power in order to prevent a possible separation of the region which contains the minority. Various examples may be given in this aspect. The United Kingdom gave Scotland the opportunity to hold a referendum in order to decide whether to remain under the United Kingdom of to obtain independence. It happened because of the greater degree of decentralization that is applied in that country, but when we come to Turkish case, the government here does not allow such opportunity to the Kurds because of the different approach to decentralization (Aktar, 2015). 157

Other countries like the USA and Germany have a more decentralized system due to federalism. The system itself gives these countries a larger scale of decentralization. Different regions may form some sort of regional governments which are obviously under the control of the central government, but the privileges and freedom that they possess are notably higher (Marshall, 2001). Albania is one of those cases which have all the premises to conduct an extraordinary decentralization process. The population is mainly homogenous, with small minorities, like the Greek minority in the south and some Slavic minority in the east and north east. There have been problems from time to time with the Greek minority claiming to be much larger than it is, but all their claims are overthrown by the historical facts and by the undeniable fact that the Greek government pays these people to claim that they are Greeks (Tzimas, 2013). What makes it even a more suitable environment for decentralization is the fact that people from almost all the cities of Albania like to promote their own values and characteristics, but when it is the case of an international issue, they all unite uniformly under the Albanian nationality. Regarding the central-local government relations the Corporatist theory presents a suitable explanation. This theory in itself emphasizes the socio-political organization of a society based on common interest and other social similarities, such as culture and ethnicity. This way the central authorities must recognize the right of the localities to organize themselves in order to better represent their own community. The central government assists the creation of institutions, which will function as local governments. These institutions are staffed with people who have the intellectual capacity to administer the transferred authority efficiently (Rhodes, 1986). The relation between the central and the local government is more one of interdependence rather than a relation of higher and a lower authority. Both these levels of government possess qualities which put them in the position advantage and disadvantage towards each other. The central-local government relation can be described as two different worlds which act almost independently from each other, but from time to time they interact for the greater good of the people. . The relation between the two levels of government is mainly a daily routine which is carried out within a certain legal framework and involves correspondence and communication between different departments of local and central authorities (Stewart, 2000). These departments commit themselves to the governing of a country. The central government has the exclusivity of formulating the legislation, financial capacity and regulation authority, while the local government has experience and knowledge regarding the local areas (Stewart, 2003).

158

Central-Local Relations in Albania Albanian governments right after the independence in 1912 have had many problems in establishing a relation between the central government and the local authorities. These problems had two key reasons which were the inexistent infrastructure to connect the centre with the regions and the local tribal, patriarchal authority rule. However, the government tried to implement an administrative division regardless the technical problems that it would encounter because of the issues that were mentioned before. This administrative division established eight prefectures, which were headed by the Prefect. Much changed with the establishment of the communist regime in 1944. The state became highly centralized. The communist regime introduced the term “local bodies of government” instead of the normally used “local government bodies”. This clearly showed that there was no local government. In its place there were some institutions which served merely as extensions of the central government (Artan Hoxha, Alma Gurraj, 2001). It was more a deconcentrated rather than a decentralized system. The central government simply appointed its own loyal people to the local units and gave them orders to follow without any power of decision making or self-governance. The first traces of Albanian decentralization are found following the fall of the communist regime. In 1992 the DP government formulated the Law no. 7570 on “The organization and functioning of Local Government” (Organizimi dhe Funksionimi i Pushtetit Lokal). Another development came with the SP government in 1998, which included the principle of local self-government in the new constitution, which is in power even nowadays (Mirela Bogdani, John Loughlin, 2007). In 1999 Albania signed and ratified the European Charter of Local Self-Government. The European Charter of Local Self-Government was adopted in 1985 by the Council of Europe (Pejanovic, 2010). In the year 2000 the government adopted a National Strategy for decentralization and local autonomy. The parliament passed the Law no. 8652 on the “Organization and Functioning of Local Government” (Mirela Bogdani, John Loughlin, 2007). Along with other laws, these completed the legislative process of establishing a democratic local authority in Albania. The newly elected government with the Prime Minister Sali Berisha had as a primary objective in its Government Program 2005-2009 the reforms in the area of decentralization, in accordance with the European Charter of Local Self-Government. The government promised to give an end to the discrimination of local authorities based on their political affiliation. The autonomous expenditure of the local authorities would increase twofold. The fiscal autonomy would be widened considerably 159

to the point that the municipalities and communes would set and collect their own taxes and local tariffs. Moreover, the transfers from the state budget towards the local authorities would increase 34 times more than the current level of that time (Albania G. o., 2005). The program included the end of the transfer process of the properties to the local authorities by giving priority to the water supply, roads and the socio-cultural objects. Another principal objective was to apply the concept of common functioning in education, health care, environment, sheltering, social services, public order and road traffic. The local government would take autonomous decisions within its area of jurisdiction and it would collaborate with the central government in accordance with the principle of autonomy and partnership in order to achieve the national goals in the fields mentioned above. Regarding the fiscal decentralization, the program offered great support for the creation and empowerment of the tax administration of the local authorities in the municipalities and communes. The central government strongly emphasized the collaboration with the tax administration in order to implement reforms for an improved fiscal discipline of the administration in the first place, and also the businesses and citizens. The program of the new government after the 2013 parliamentary elections led by Edi Rama considers the decentralization process as vital for the prosperity of the country. In its Government Program 2013-2017 it starts by granting more authority to the local governments in compliance with the European standards. The relations between the central and the local authorities need to be improved desperately. This will be realized through the Advisory Council of Central-Local relations. This council will serve as a mediator and it will form a bridge between local and central authorities. The greatest challenge of the Rama government was the territorial-administrative reform. This was one of the main requests made by the European Commission to Albania and the government was determined to complete it. The implementation of this program towards the end of the year 2014 was evaluated by a report delivered by the European Commission. The report mentions the appointment of a new Minister for Local Affairs in September 2013. The Minister drafted the Law on Territorial and Administrative reform, which was adopted in July 2014. This law reduced the number of local government units from 374 to 61. The aim of the new administrative division is to increase efficiency in the provision of services and allocation of taxes.

160

Administrative and Political Decentralization of Albania Albania was divided into 374 administrative units. From these 65 were municipalities, 309 were communes and all of them combined formed 12 regions. The regions formed the first tier of the local government. The municipalities and the communes formed the second tier of local government. The communes consisted of several villages and sometimes even small towns. The municipalities were formed by quarters in the urban areas and by villages in the rural areas. The mayors and chairmen of communes are elected by popular vote, while the chairman of the region is elected by the members of the regional council, which is composed of members from the councils of the municipalities and communes of that region. This administrative division was replaced by the new one after the adoption of the Law nr. 115 “On territorial-administrative reform”. This law contains under articles 1 and 2 the new shape of the administrative division of the Republic of Albania. Article 1 1. Local government units in the Republic of Albania are: a. municipalities

- 61

b. regions

- 12

2. Administrative-territorial divisions of the local government units, as written in point one of this article, are assigned by law. Article 2 The denomination, territory, boundaries, center, administrative units of every local government unit and their sub-divisions are defined in the maps attached to this law. The new territorial-administrative division favors the local government and grants it more autonomy and competences regarding its own governance. The Minister of State on Local Issues proposed this reform with the clear aim to increase the efficiency of the local government units and empower the local authorities. There was a detailed analysis of the situation before the reform which showed that the small government units were unable to sustain themselves because of the inability to enforce and collect taxes from the population. On the other hand, larger administrative units showed a better performance in the collection of taxes and expenditure of their budget (Issues, 2014). This brought to the idea that a new administrative division with larger units would increase efficiency, because they would be able to generate more financial resources, this way relieving the central government 161

budget from unnecessary expenses. The financial independence would consequently grant more autonomy to the local government units. This would give a great boost to the decentralization process of Albania, which is a point that the international community insists to be fulfilled. Fiscal Decentralization of Albania The legal framework of the Republic of Albania allows the local government bodies to determine local taxes and fees according to the law. All administrative units have their own budget. This budget is formed by locally derived sources and by funds from the national sources. The locally derived sources are the local taxes and the local fees. Local taxes consist of taxes on mobile and immobile property and the transactions performed on these properties. Economic activities such as small businesses, hotels, bars and restaurants are also subject to local taxes. Lastly personal income which may come as a result of a donation, a lottery or an inheritance from a relative has to pay a certain tax to the local authorities (Hoxha, 2002). On the other hand, local fees are imposed to the citizens as a result of different public services provided by the local authorities, the right to use local public properties and public spaces. Authorization, licenses and different permits are also subject to local fees (Hoxha, 2002). The funds which derive from the national budget are an important indicator to the central-local relations, because this relation has primarily a financial aspect and secondly an administrative and political aspect. These funds may be conditional and unconditional. The conditional funds are transferred to the local government units to fulfill a national objective at the local level. A large project which covers more than one administrative unit does not have to be financed by the local authorities themselves. Instead the central government gives the financial resources to the local units together with the project that needs to be implemented. The unconditional transfers on the other hand are financial resources transferred from the national budget to the local authorities without any specific request or project to fulfill (Hoxha, 2002). Politicization of C-L-R in Albania Unitary countries may have difficulties in finding a balance between the central and the local government bodies. There is always the dilemma whether the local government acts as a selfgoverning body with its own financial and administrative capacity or it simply follows the orders and directions that come from the central authority (Salih Özcan, Diana Shehu, 2013). The most common problem that is faced in central-local relations is when these government levels are governed by different political parties. Examples of small communes near Tirana show that those communes governed by DP during the Berisha government, received more grants and funds than 162

those communes which were governed by the SP. For instance, the DP communes of Baldushk and Berxulle have received several grants for road construction and maintenance. SP governed communes such as that of Peza have no available data at all when it comes to grants and funds from the central government (Salih Özcan, Diana Shehu, 2013). Heads of Communes have constantly complained about the fact that the central government has provided less financial support than requested. In fact, Berisha government has been criticized several times in the European Commission reports for not putting enough efforts in the decentralization process (Commission, 2012). Another example of politicization in the central-local government relations is the fact that the government supported the DP communes to receive funds from foreign foundations, while other SP communes were not offered such a facilitation and they could not attract these foundations by themselves because they needed to pay for 10% of any donor-funded project (Salih Özcan, Diana Shehu, 2013). The over staffed institutions of local units represent a big financial burden for them. The commune of Baldushk employs 40 people with the justification that those people are poor and it is the social policy of the commune to provide them a salary. The over employment in communes and municipalities comes as a result of the spoils system that has been established here in Albania. Heads of communes actually admit that although the local government units have their own independent budget, from time to time the national government dictates them how and where they should use their financial resources. This shows that the local government autonomy principle is only written in paper and is very rarely implemented. Conclusions Central-Local government relations have been one of the main topics of discussion of scholars in the last decades. When we take a look at the theoretical aspect of decentralization and central-local relations we understand that the more they are developed, the better a country performs politically and economically. Although there might be arguments even in favour of centralization, because of different national interests that a country might have, it is most commonly agreed and obvious in the developed countries, that decentralization goes hand in hand with the wellbeing of a state. Central-local relations have a considerable importance on their own because they make the decentralization process possible. In a country where the relations between the central and local 163

authorities are well balanced, decentralization process moves forward in a more confident manner. In countries where these relations are merely formal, decentralization process moves very slowly or does not progress at all. Albania is a country where central-local government relations experience obstacles of any kind. Among many problems, politicization and lack of reforms seem to damage these relations more than any other. As we mentioned before, a bad relation between the central and local authorities affects directly the decentralization process. Albania suffers immensely from the politicization issue. Politicization brings to the unequal treatment of different local units by the central government. Local government units which were governed by the same party as the central government received more grants and facilitations than those units which were governed by the opposition party. Over employment in the local units also led to the depleting of financial resources. This again affected the development of several local government units, which spent their budget on wages and had no resources left to finance development plans. Lastly another concern regarding the decentralization in Albania, is the fact that central government officials interfere in the local affairs by dictating how and where to use their financial resources. This clearly violates the self-governance and independence principles of the local authorities and shows that the decentralization process in Albania has yet much to achieve. References Aktar, C. (2015, January 07). "Decentralization in the region; centralization in Turkey". Retrieved June 20, 2015, from Today's Zaman: http://www.todayszaman.com/columnist/cengizaktar/decentralization-in-the-region-centralization-in-turkey_369158.html Anderson, J. (2003). Decentralization, Local Powers and Local Development. Gothenburg: United Nations Global Forum on Innovative Policies and Practices in Local Governance. Retrieved June 20, 2015 from http://hdrnet.org/487/1/Anderson.pdf. Bin, H. (2012). Distribution of Powers between Central Governments and Sub-national Governments. New York. Committee of Experts on Public Administration Bogdani, M., & Loughlin, J. (2007). Local Government and Decentralization. In Albania and the European Union (pp. 195-206). London: I.B Tauris. Bufi, Y. (2013, December 26). A Comprehensive Approach to the Territorial Reform. Tirana, Albania.

164

Democratic Party Parliamentary Group. (2014). Territorial-Administrative Reform. Tirana: Constitutional Court. European Commission (2012). Albania Progress Report 2012. Brussels: European Commission. European Commission (2013). Albania Progress Report 2013. Brussels: European Commission . European Commission (2014). Albania Progress Report 2014. Brussels: European Commission. Government of Albania (2005). Government Program: 2005-2009. Tirana: Council of Ministers. Government of Albania (2009). Government Program: 2009-2013. Tirana: Council of Ministers. Guney, A., & Celenk, A. Aslihan (2010). Europeanization and the dilemma of decentralization: centre–local relations in Turkey. Journal of Balkan and Near Eastern Studies , Volume 12 (3), pp.241-257. Heywood, A. (2013). Politics 4th Edition. Basingstoke: Palgrave Macmillan. Hodaj, F. (2001). Strengthening the European Tendencies of Development in Local SelfGovernment in South-Eastern Europe. Tirana: Albanian Association of Municipalities. Hoxha, A. (2002). Local self-government and decentralization: Case of Albania: History, Reforms and Challenges. Tirana: Institute for Contemporary Studies. Hoxha, A., & Gurraj, A. (2001). Local Self-Government and Decentralization: Case of Albania. History, Reformes and Challenges. Tirana. IDRA. (2005). State of the Art Decentralization in Albania. Tirana: Institute for Development Research and Alternatives. Ministry of State on Local Issues (2014, June 12). Reforma Administrative Territoriale. Retrieved August 15, 2015, from Reforma Administrative Territoriale Web Site: http://www.reformaterritoriale.al/en/ John, P. (2001). "From Local Government to Local Governance" in I. Holliday (Ed.), Local Governance in Western Europe (pp. 1-25). London: Sage Publications. Marshall, G. C. (2001). Federalism and Decentralization. Perspectives for the Transformation Process in Eastern and Central Europe . Verlag: European Center for Security Studies. Martinez-Vazquez, J. (2011). The Impact of Fiscal Decentralization: Issues in Theory and Challenges in Practice. Mandaluyong City: Asian Development Bank. Oates, W. E. (1999). An Essay on Fiscal Federalism. Journal of Economic Literature , Vol. XXXVII, 1120–1149. Oates, W. E. (2006). On the Theory and Practice of Fiscal Decentralization. Maryland: Institute for Federalism and Intergovernmental Relations. 165

Özcan, S., & Shehu, D. (2014). The Role of Political Party Identity in Central and Local Government Relations in Albania. European Journal of Social Sciences, Vol 41, No.2, pp.165174. Parliament of Albania (1992). Organization and Fuctioning of Local Authority. Tirana: Official Gazette . Pejanovic, M. (2010). Local Self-Government: A Must for Democracy, Civil Society and EU Integration. Berlin: Berghof Publications. Rhodes, R. A. (1986). 'Corporate Bias' in Central-Local Relations: A Case Study of the Consultative Council on Local Government Finance. Policy and Politics, pp. 221-245. Saito, F. (2008). "Decentralization and Local Governance" in F. Saito (Ed.) Foundations for Local Governance: Decentralization in Comparative Perspective. (pp. 1-24). Seta, Otsu: PhysicaVerlag. Shah, A., & Shah, S. (2006). The New Vision of Local Governance and the Evolving Roles of Local Governments. Washington D.C: The World Bank. Stewart, J. (2000). The Nature of British Local Government. Basingstoke & London: Macmillan Press Ltd. Stewart, J. (2003). Modernising British Local Government. Basingstoke & New York: Palgrave Macmillan. Tzimas, S. (2013, February 20). "State turns its back on ethnic Greeks in southern Albania", ekathimerini. Retrieved June 20, 2015, from ekathimerini Web site: http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_20/02/2013_483871 White, S. (2011). Government Decentralization in the 21st Century. Washington D.C: Center for Strategic and International Studies (CSIS).

166

Albanian Society in Post communism: “Fear society” or “Free society” Dr. Ina Zhupa Department of Political Science and International Relations European University of Tirana, Albania

Abstract In general, a free society is associated with the preservation of the liberties. In contrast, a fear society is a society that the liberties exist in paper, in which dissent is banned. In a free society we can find effective democracy, in a fear society we can’t find this. The concept of effective democracy is related to the possibility that within a country to really function and strengthen the rights of the ordinary citizen, his voice in decision, his role in governance and his treatment as an equal and important. But the simple fact that there are elections where citizens decide and choose their government with appropriate programs, does not achieve this goal. Also only the approval of laws that formally establish civil and political rights is not enough to empower citizens. Precisely this makes this study necessary to measure the level of effective democracy in a society, this mean to understand how much power people have and how democracy is fulfilling its mission as "the power of people". We will measure the level of Effective Democracy in Albania in the years 2002-2012. Secondary resources will help us to measure the Effective Democracy Index (EDI) which emerges as sum of Democratic Rights Index (DRI) and Rule of Law Index (RLI) (Alexander, Inglehart, Welzel, 2012). Then we will try to explain the situation of the Albanian society nowadays, is that a fear society or a free society. Analysis of these data will help us to understand better what kind of society we have, the problems that we can be face and some predictions for the future. Keywords: Liberties, Freedom, Albanian society, Effective democracy, Fear society, Free society Introduction Democracy is the refrain of the day of any country in the world, because by some people it is not accepted as the most successful system and they reject it with scorn, some because they believe that is the most successful system and defend it strongly, some who want to indeed implement it and they work hard, and some who want it only for appearance and work less. Political system that recognizes its establishment in ancient Athens as the temple of democracy, has taken on different forms how to apply and understand it. Theoretically, we know many concepts of democracy, as we see practically implemented it in many models of democracy. The advantage it has from the other political systems, regardless of its theoretical and practical forms, is the one who agree all: it gives the possibility to every citizen to be equal and to be heard in the political 167

system, i.e. self-determination for its interests. How much it gives and the manner it gives, here takes place the whole debate. In this paper we choose to treat one of the concepts of democracy, that of effective democracy. Everyone agrees it seems that it addresses better this advantage of democracy. The concept of effective democracy is related to the possibility within a country to really function and be strengthened the rights of the average citizen, his voice in decision-making, his role in government and his treatment as an equal and important citizen. But the simple fact that there are elections where citizens decide and choose their government with relevant program, does not reach this goal. Also only the approval of laws that formally establish the civil and political rights is not sufficient to empower citizens. That is what makes that be worth to study the level of effective democracy in a society, to understand if people have their force really and how democracy is fulfilling its mission as the “power of the people”. First we will get acquainted with the methodology of this study, seeing how through qualitative approach will be achieved in the measurement of EDI, which shows the level of effective democracy in a particular country. Then it will be treated what is democracy, why we believe that it is a successful and good political system and what represents really effective democracy. Then critics and responses that are made within those who accept and those who reject effective democracy as a concept and EDI as valid and accurate index. Thus it is understood even why it is for us a valid concept and it is selected to better understand Albania. The last part is dedicated to the measurement of Effective Democracy Index for 10 years in Albania, our analysis shall be supported on the measure we will make the findings of 2002-2012.

Methodology This paper is based on qualitative methods, working on documents, reports and data published during the period under study, i.e. 2002-2012. Institutions that have produced these data, which we will elaborate according to the method described below that is given to us by Alexander, Inglehart and Welzel are: Freedom House and the World Bank. Documents which are not charged to date for any bias or lack of methodological quality in their processing and preparation, are always accepted and there was no debate on them. This is the reason they reliable and admissible to work on their data. Their data that we have in the measurement part, are accessible by anyone in the two official Web sites of their own. 168

To measure the effective democracy by Alexander, Inglehart and Welzel it is necessary to understand the Index of Democratic Rights (DRI, will refer to preserving the international symbolism, as well as Democratic Rights Index) in a given country and Index of Law State (RLI, as Rule of Law Index). To understand the Effective Democracy Index (EDI as Effective Democracy Index) serves us the measure union of democratic rights and the rule of law, then EDI = DRI + RLI. (Alexander, Inglehart, Welzel, 2012). For this system there is no preference between democratic rights and the rule of law, both are treated as equal and equally affect the final sum and in the final classification of the level of effective democracy in a particular country taken into analysis. Effective Democracy Index can be at least 0 when are lacking totally democratic rights (i.e. DRI = 0) or when they exist, but there is a minimal rule of law (RLI = 0) which means that they become totally ineffective. And the opposite extreme is when EDI is 100 in maximum when they are both at 100, when democratic rights are fully present (DRI = 100) and a maximum of the rule of law (RLI = 1.0) which makes them totally effective. Operationalize of the effective democracy requires an indicator of democratic rights and the rule of law. To measure democratic rights, Alexander and Welzel use the classification of freedoms made by Freedom House (Alexander, Welzel, 2008, 2011). Although this classification has been criticized for lack of transparency in the rules of codification (Munck, Verkuilen, 2002) but this classification serves very well to measure the freedoms than the other indicators (Bollen, Paxton, 2000; Casper, Tufis, 2002). Classification of freedoms comes to us in two indicators by Freedom House. Ranking of “civil freedoms” shows mostly private freedoms that represent the rights of autonomy. Ranking of “political freedoms” shows public freedoms reflected in the participation rights. The table below shows the transformation of the ranking of Freedom House in the Index of Democratic Rights. (Alexander, etc 2012:)

169

Classification Freedom (CLR) Civil House Rights

(PRR) Political Rights

CLR Union PRR

+ zero-basing: Inversion

standardization Percent

and 14 – (CLR + PRR) (DRI): (14 –

+ PRR))/0.12

(CLR 1

1

2

12

100.00

1 (2)

2 (1)

3

11

91.66

2 2 (3)

2 3 (2)

4 5

10 9

83.33 75.00

3

3

6

8

66.66

3 (4) 4

4 (3) 4

7 8

7 6

58.33 50.00

4 (5) 5 Not free ( fear) 5 (6)

5 (4) 5 6 (5)

9 10 11

5 4 3

41.66 33.33 25.00

6

6

12

2

16.66

6 (7) 7

7 (6) 7

13 14

1 0

8.33 0.00

Free

Partly Free

Tab 1: Trasforming the rights of Freedom House in DRI

170

Based on this classification, they have developed the scheme of democracy as a percentage of the democratic rights guaranteed by the state (Alexander, etc, 2012: 8)

Hybrid Zone

More Completely

More Incompletely

More Incompletely

More Completely

Autocratic

Autocratic

Democratic

Democrati c

0

5

10

15 20

25 30 35

40

45

50 55 60

No Rights

65 70 75

80 85 90 95 Every Rights

Tab 2: Clasiffication of the States DEMOCRATIC RIGHTS The best measurement provided so far for the rule of law is the Rule of Law Index of World Bank. Using the judgments of experts and surveys of the population, they support that this index measures how strictly enforce and depart from laws the government agents in a country (Kaufmann, Kraay, Mastruzzi, 2007). Closely nested with the rule of law is another indicator of the World Bank, Corruption Control Index. Corruption is directly the opposite of the rule of law, divided these two indicators to show off what they call Rule of Law Index RLI. They transformed the measurement scale of the World Bank in a range from 0, for the lowest level of the rule of law, since 1996, when this index was established to 1.0 for the highest level of rule of law ever observed. Points between these two extremes can be any fraction of 1.0. To exhale RLI from the data of the World Bank between the minimum 0 and maximum 1.0 the following formula is used: RLI = (COS-LOS)/(HOS-LOS). Where COS are the country’s scores being observed, LOS are the weakest scores ever observed by the World Bank, and HOS are the strongest points ever observed by the World Bank.

171

100

Effective Democracy-free society a)

Democracy

and

effective

democracy The word democracy comes from the ancient Greek, where the word demos (ordinary people) joins the word kratien (to overrule). For the reason that these people form the majority of the population, democracy is equated with majority rule. (Ball, Dagger, 2000:20). From a normative perspective thinkers have argued that we need to support democracy because it produces desired consequences, such as respect for fundamental rights, selfdetermination, moral autonomy, human development and political equality (Dahl, 1998:45) There are many conceptions on democracy, on its forms, on the way of construction and its operation. But it seems that they unites the fact that: the collective wisdom of a wide body of well-informed people produces seriously a better decision. Therefore, a consensus to be reached from a large group of different people, should be trusted more than the conclusions or commands from a small group of homogeneous people or even by a single individual (Boyer, 1992: 1-11) Democracy is a political system in which all men (people) make or have the right to make decisions on important issues of public policy. (Holden, 1974: 8) Concept that we choose is that of effective democracy, which has the basic principle precisely to judge and measure the real ability of this system to empower ordinary citizens. So in the line we find to Holden when he says: definition of democracy as the power in the hands of the people, means that in the hands of every person is to be found equal power (at least the power of the vote); This means political equality of individuals. (Holden, 1974:19). But for the thinkers of effective democracy, the concept relates to the possibility within a country to strengthen and to effectively function the rights of the ordinary citizen, its voice in decision- making, its role in government and its treatment as an equal and important citizen. But the simple fact that there are elections where citizens decide and elect their government together with the relevant program, does not reach this goal. Also only the approval of laws that formally establish the civil and political rights is not sufficient to empower citizens. Exactly this is what makes worth to study the effective level of democracy in a society, to understand how they really force people and how democracy is fulfilling its mission as the "power of the people". Barney called democracy "where citizens are able to participate 172

as equals in the decision on the conditions, priorities, how the common good will be distributed and on the content and enforcement of public interest" (Barney, 2005: 152) All democracies assume that in the center are citizens, sovereign people, simple popular. Carold Gould says: "Governance in a democracy is actually self governenc through participation and representation in the decision making process" (Gould, 1996: 176) But the situation varies greatly when there are really analyzed the conditions of those who are called democracy and are they within the framework of effective democracy where the citizen is at the center. Today countries with democratic systems, especially new democracies are seen occupied as largely corruptied and not in a good functioning state of law, which are necessary conditions for effective democracy. Therefore we find literature to speak every time more for lack of electoral democracy, hybrid democracy or authoritarian democracy and other forms of false democracy.According to Welzel and Inglehart these forms of false cause the preferences of the measure ignored largely by the political elite in the country to have an influence on decision- making on governance, it assumes democratic theory is therefore necessary to be separated from the concept of effective democracy and extraction and measuring its parameters. (Welzel, Inglehart, 2008) According to Dahl the reason why democratic system performs better than other forms of government is that decisions are better for people and because they can be controlled by humans, they produce more desirable effects and less oppressive to their citizens. (Dahl 1998: 45) To Held democracy allows citizens a greater participation than just voting; it enables participation through membership in political parties, pressure groups, trade unions, protests, etc. (Held, 1993: 64) So when the citizen is actually in the middle of the system then we can talk about effective democracy. The measures that we presented above to the methodology, as defining the effective democracy have been made some criticism from Knutsen, researcher who gave his explanations about the problems that had this measure. Meanwhile, in a later article, explaining one more time the method of measurement, Alexander, Inglehart and Welzel have counter arguments for each of criticisms highlighted in the Knutsen. This will be done in part by saying the criticism of Knutsen (Knutsen, 2010) and then counter the three researchers (Alexander, etc, 2012) which for us is very accurate and meaningful and therefore we continue to choose the method of measurement 173

The first criticism from Knutsen is for the use of ordinal measurement for the calculation of EDI. His argument is that the two components: RLI and DRI are in an ordinal scale instead of interval scale and thus codes do not have a natural numerical sense. So multiplicative procedure that is used to build EDI is flawed because it presupposes the mathematical operation coding schemes with interpretable numerical coding. The three researchers have responded to this criticism by taking into consideration separately RLI and DRI are components to build EDI. Regarding the RLI, they say that the index is derived from dozens of sources of data collected in a factorial scale where within more than one hundred discrete values. For the construction of EDI data for the state of law are "normalized" with the factions from the strongest state of law, in this way the weekest stateto bemarkes with 0. The codified scheme there are clearly numerical meanings, by telling us the distance between the weekest state of law and the strongest. In over one hundred discrete values, RLI is very close to As for DRI, considering both rights, political rights as well as civil rights, provide an index built by 7 points. Taken together they produce an index of 13 points, as we can observe even to our table no.1. Knutsen idea that this is simply not given us the order and interval scale for interpretation is wrong. Freedom House uses a list of 25 questions, each of which is rated on a scale of 5 points. In combination, produce a scheme 25 questions scoring with 100 points. Index combined 13 points is just a processed version of the 100-point scheme. This means that the scheme is within the size of 13-point intervals for each category. Therefore, the index contains only ordinal and pullet information but also information in the interval form. Then processing that is done to draw DRI, as shown in Table 2, returns a rating from 1 to 100, which classifies the type of regime. For the above explanation the criticism of Knutsen, of the fact that EDI is ordinal scale, not give the possibility of numerical interpretation and construction of interval values, is rejected. Another criticism has been that according to Knutsen EDI was not built equally by both DRI and RLI components, but the calculation gave more weight to DRI then RLI linking with stipple that are made by the authors. The authors reply that this is empirically incorrect, suffice to understand the fact that any of the two components if at 0, makes however be the value of another not valid in the calculation of EDI, and state stand at 0 regarding Index Effective Democracy. The main criticism relates to what Knutsen calls double treatment, not directly related to multiplication of two components at the end but it containing within the component. 174

Knutsen specifically charges that the measurement of EDIits caulculated twice the legal state because within DRI also find the state of law. He leaves the plea that makes Freedom House about its intention not just to measure than formally guaranteed rights but also than those actually observed in practice. This implies that the purpose of its state of law and the functioning of the state of law are already absorbed within the DRI. Thus, according to the authors calculate its EDI adding the RLI DRI are doing double treatment of state of law. The authors before rejecting the idea of overlapping of two factors, first do an exercise to calculate superposition of the rule of law and bring the outcome of the same order of EDI before estimated DRI squared division 100 (which is a calculation done by had to remove overlapping rule of law to DRI) scores of countries do not differ from their classification because there is no difference between countries that have EDI 20.8 of those who have 20.3, so the change is not essential to understanding the level of effective real democracy in a country. This comes as a reason to actually talk about the overlap rule of law to the components that makes no logical sense. First, because the way that gets information and tabulates the results of Freedom House is not the same as that which uses the World Bank, we never had a statement or stance from Freedom House that gives us good information about the rule of law and the rule of law in a country. Second RLI issued Index itself as a combination of Rule of Law and Control of Corruption Index. Third wanting really to explain how can include rule of law, the classification of the Freedom House they explain that: the 25 questions raised by Freedom House, only 4 of them are related to the rule of law but these are not direct questions related to rule of law. These four questions are calculated with sixteen points in 100-point scheme that builds Freedom House. This tells us that the rule of law, estimated at less than one-sixth that of all raging that are done by Freedom House. This proportion is simply arbitrary and too small, but merely to an average within the totality of the scoring scheme. This makes a secondary aspect and additional calculation of democratic rights. Another criticism again from Knutsen is by selecting some countries and arguing that in terms of democracy, they should stay higher than rank which is calculated simply by EDI. Cases according to him are: Argentina, India, Benin and Singapore to its analysis they deserve to be considered more toward democracy. Three authors argue that cases seem correct if viewed only from the electoral point of view. The argument that Knutsen uses to point out 175

that the state should be rated as more democratic than it can emerge from EDI are all criteria regime election, such as the existence of fair elections, change of government, and the development of campaigns. In this way Knutsen has used the criteria of a kind of democracy as electoral democracy to judge scoring and ranking of EDI, where EDI actually rises out conception of merely democracy electoral. Which means that criticism does not apply because EDI is not judged on the premise of which rises as the index of the effective institutionalization of local people in a democratic country. The last criticism relates to the validity of EDI, Knutsen cast the idea that this system is designed to favour the rich, because the analysis does between the level of GDP of the states and their positioning in the Index of Democracy Effective looks a link between them, standing above the countries that have the highest level of GDP. But the authors reply that EDI is not designed to favour or not countries according to GDP because it takes all this in his indikators.If this happens again this confirms their theory, the economic growth of a country level lead in supporting and making them part of the self-affirmation of the values of the citizens and thus increases the level of effective democracy. Its hard to rise the level of effective democracy flourish in countries with economic difficulties, that even if we consider the pyramid of needs that builds Masllow, initially tend to meet their basic needs and then in a second stage to deal with the political system, with ideas, social justice etc. As above it is seen that despite criticism EDI is a very concrete and well built to measure what is the essence of this measurement, the real power of its citizens in the political system, social and economic. The thing that makes a democracy or not.

Albania and Effective Democracy Index (2002-2012) Considering the methodology presented above to calculate the effective level of democracy in the period 2002-2012 and then try to understand more about the results. First let's take DRI for each of the years based on the reports of Freedom House Albania 2002 (Freedom House, 2002)

Albania 2002 Civil Rights From the above information we4 can calculate DRI, for 2002: 176

Political Rights 3

DRI, 2002

Liritë Civile

Liritë Politike

Bashkimi

Albania

Inversion and

Percent

zero-basing:

standardizatio

14 4

3

7

– (CLR n (DRI): (14 –

+ PRR) 7

(CLR 58.33 + PRR))/0.12

Albania 2003 (Freedom House, 2003) Albania 2003

Civil Rights 3 From the above information we can calculate DRI, for 2003:

Political Rights 3

DRI, 2003

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14 3

3

6

– (CLR n (DRI): (14 –

+ PRR) 8

(CLR 66.66 + PRR))/0.12

Albania 2004 (Freedom House, 2004) Albania 2004

Civil Rights 3 From the above information we can calculate DRI, for 2004:

Political Rights 3

DRI, 2004

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14 3

3

6

– (CLR n (DRI): (14 –

+ PRR)

(CLR

8

66.66 + PRR))/0.12

Albania 2005 (Freedom House, 2005) Albania 2005

Civil Rights 3 From the above information we can calculate DRI, for 2005: 177

Political Rights 3

DRI, 2005

Civil Rights

Political Rights Union

Albania

Inversion and

Percent

zero-basing:

standardizatio

14

3

3

6

– (CLR n (DRI): (14 –

+ PRR)

(CLR

8

+ PRR))/0.12 66.66

Albania 2006 (Freedom House, 2006) Albania 2006

Civil Rights 3 From the above information we can calculate DRI, for 2006:

Political Rights 3

DRI, 2006

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14 3

3

6

– (CLR n (DRI): (14 –

+ PRR)

(CLR

8

66.66 + PRR))/0.12

Albania 2007 (Freedom House, 2007) Albania 2007

Civil Rights 3 From the above information we can calculate DRI, for 2007:

Political Rights 3

DRI, 2007

Inversion and

Percent

zero-basing:

standardization

Civil Rights

Political Rights Union

Albania

14 3

3

6

– (CLR (DRI): (14 –

+ PRR)

(CLR

8

66.66 + PRR))/0.12

Albania 2008 (Freedom House, 2008) Albania 2008

Civil Rights 3 From the above information we can calculate DRI, for 2008: 178

Political Rights 3

DRI, 2008

Civil Rights

Political Rights Union

Albania

Inversion and

Percent

zero-basing:

standardizatio

14 3

3

6

– (CLR n (DRI): (14 –

+ PRR)

(CLR

8

66.66 + PRR))/0.12

Albania 2009 (Freedom House, 2009) Albania 2009

Civil Rights 3 From the above information we can calculate DRI, for 2009:

Political Rights 3

DRI, 2009

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14 3

3

6

– (CLR n (DRI): (14 –

+ PRR) 8

(CLR 66.66 + PRR))/0.12

Albania 2010 (Freedom House, 2010) Albania 2010

Civil Rights 3 From the above information we can calculate DRI, for 2010:

Political Rights 3

DRI, 2010

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14

3 3 Albania 2011 (Freedom House, 2011)

6

Albania 2011

– (CLR n (DRI): (14 –

+ PRR)

(CLR

8

+ PRR))/0.12 66.66

Civil Rights 3 From the above information we can calculate DRI, for 2011:

Political Rights 3

DRI, 2011

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14

– (CLR n (DRI): (14 –

+ PRR) 179

(CLR + PRR))/0.12

3

3

6

8

66.66

Albania 2012 (Freedom House, 2012) Albania 2012

Civil Rights 3 From the above information we can calculate DRI, for 2012:

Political Rights 3

DRI, 2012

Inversion and

Percent

zero-basing:

standardizatio

Civil Rights

Political Rights Union

Albania

14

– (CLR n (DRI): (14 –

+ (CLR 3 3 6 8 PRR) 66.66 + PRR))/0.12 Now we can produce the final tab of Democratic Rights Index for Albania 2002-2012 Albania (year) DRI 2002 58.33 2003 66.66 2004 66.66 2005 66.66 2006 66.66 2007 66.66 2008 66.66 2009 66.66 2010 66.66 2011 66.66 2012 66.66 Tab 3: Democratic Rights Index, Albania 2002-2012 As we can see from the table above, Albania has maintained since 2002 a constant level of democratic rights, whether in the government have been left parties or right ones. Turning to Table No. 2 which classifies countries according to the level of democratic rights, Albania is in (More incompletely Democratic) that means the states are a democracy not so full that lean to more deficiencies guarantees of rights than by their full completion. So it has emerged from the first two parts of the scheme to classify the country as autocratic and was introduced at the start of what could become full democracy later. To calculate EDI now will calculate the RLI therefore Index State Law on those years. To calculate RLI will work out two indicators that can retrieve data from database that provides the World Bank, taking into consideration only two: Indicator of the Rule of Law and Control of Corruption indicator. After the process the two indicators by formula of

180

three authors, their averagewill show us RLI. The following data are taken from the official website of the World Bank and is available to everyone(World Bank, 2013). RLI begin to calculate, by years in the following table, recalling once again that COS has been observed, LOS are the lowest score observed, COS, the highest score observed. Viti CO LO HO RLI 2002 S 21.05 S 9.52 S 33.81 0.47 2003 21.53 11.90 34.29 0.43 2004 26.32 15.24 38.10 0.48 2005 25.84 14.29 36.67 0.51 2006 27.75 17.14 40.00 0.46 2007 27.75 18.10 41.43 0.41 2008 32.69 20.57 41.63 0.57 2009 36.49 25.47 45.75 0.54 2010 40.76 30.66 48.58 0.56 2011 38.97 29.91 47.66 0.51 2012 35 27 45 0.44 Tab 4: Rule of Law Index, Albania 2002-2012 Counting in the DRI ten years and RLI now can calculate the Effective Democracy Index for Albania 2002-2012. DRI R EDI 2002 66.66 LI 0.47 31.33 2003 66.66 0.43 28.66 2004 66.66 0.48 31.99 2005 66.66 0.51 33.99 2006 66.66 0.46 30.66 2007 66.66 0.41 27.33 2008 66.66 0.57 37.99 2009 66.66 0.54 35.99 2010 66.66 0.56 37.32 2011 66.66 0.51 33.99 2012 66.66 0.44 29.33 Tab 5: Effective Democracy Index, Albania 2002-2012 Theoretically EDI ranges from 100 points that speaks for effective democracy at the full level, the citizen is at the center of the political, social and economic to till 0 points where there is no effective democracy and its simply an autocratic system far from establishing citizen center system. Table 5 we see that the level of effective democracy in Albania 10 years of ranging from 27 to 37, averaged 35.8 points level it is to this decade. This speaks 181

to a democratic system not efficient in relation to the fulfillment of the rights and obligations of a citizen, a pseudo- democracy, or as the name for the latest report by Freedom House, a hybrid regime, transition democracy. There are two curious facts, in the Tab of the10 years Albanian EDI,: the first is a curious fact related to Table 4, the calculation of RLI, in 10 years the highest level of RLI and the lowest are found side by side, one year after another, the lowest level in 2007 and the highest level in 2008, moved many in just one year (normally distinguished even to EDI, Table 5). In government in both years and when we had the lowest and highest of the decade has been the Democratic Party and Prime Minister Sali Berisha, so there was any change in terms of governance. In this context I have to intimate for two events that can be associated with these numbers 2007 and 2008, not knowing how close or far we remain from the truth: the first event is that 2007 represents the year that will organize the first local elections organized by the Democratic Party to power and the first test of Rama as head of the Socialist Party, after receiving it in 2005 following the resignation of Nano. Tests was important for both parties and important in the country could have increased the level of patronage, favoritism, nepotizmave as central and local power. The second event is that in November 2007, replaced Chief Albania fled Theodore Sollaku unpopular and in a climate that is not good cooperation with the government of right it is caused and the top comes Ina Rama, making that 2008 be the year of her first job as chief prosecutor and commitment, the new face may have influenced the changes in terms of rule of law and control of corruption. This is also the fact that the most important work, the brunt when it comes to the rule of law has judicial powers the third, that can not be understood without the prosecuting authorities. Noting the table, we have only two points in time that the phenomenon could not judge, however, remains of interest to look at whether there are more moments of RLI corealition beginning and end of the tenure of a chief in Albania. The year 2007 is the last year of the mandate of Mr Sollaku and landing RLI, and 2012 is the end of the mandate of Ms. Rama and discounts RLI. It remains to be tried in subsequent works. The second and most fundamental is that the level of the Index of democratic rights remains unchanged in recent years, at 66.66, (expect for the 2002) showing at least that in this aspect there have been decline nor progress, but it does remain very good compared with the index the rule of law. As mentioned above, this index RLI, calculates the application of the rule of law and control of corruption as a country, to the point we have come to a very low level, and all the variations that arise in EDI are variations inflicted by RLI. This means that the biggest 182

problem of democracy in our country is not having democratic rights, political and civil rights, of course they are, and people know that according to law and have the right but the problem is that people do not can enjoy these rights, undermined the possibility that you may be full members of society with full rights, as long as the rule of law that guarantees the integrity and rights you no good function and function on the basis of corruption. So enjoy better rights of those citizens that can be part of the system of corruption and manipulation than any citizen in the Republic of Albania Conclusions We can say that the concept of effective democracy and effective democracy index provided by researchers Amy C. Alexander, Ronald Inglehart and Christian Welzel is extremely valuable and helps researchers to achieve to create a clear picture of the democracy for the country that are interested, to create a model of progress from time to time in this country toward democracy, and perhaps even a comparative approach between different countries to understand more about democracy in the world today. EDI derived from the processing of data coming for the whole world, from two highly reliable sources such as Freedom House and the World Bank, with a precise methodology, which responded reality and can be protected from any criticism of the baths. This index has faced criticism but none so far has been able to refute or at least to question the validity and reliability of the index. Measurements within 10 years of EDI for Albania we came to the conclusions that Albania in terms of the Index of Democratic Rights stands at constant that makes us be classed as a country with an incomplete democracy, at 66.66 points from 0 is totally autocratic to 10 that is fully democratic. It means that we still have work to do in the promotion of political freedoms and civil liberties of citizens but that level is not too problematic that can be oppressive to individuals. While the Index Rule of Law, is at very problematic, staying low and averaging 0:53 point in the 10 years taken into consideration, ie from 2002 to 2012, while the rate is 0 where there is no rule of law and control of corruption to 1.0 where we have the rule of law and control of corruption. Our figures remain around the average. This index affects the level of effective democracy that emerges in these 10 years is averaging 35.8, which fails even an average level of effective democracy, but classed so low level of effective democracy.

183

As above, we can say that much work still needs to put citizens in the center in our political system, social and economic development and the return to democracy effective. Especially the highest concentrations of the political elite, but not only is building a state of law, where the rights and freedoms of the press and sanctioned not remain on paper but be able to be used by citizens, far from it looks like wound remains of these 23 years, democracy, widespread corruption in every cell. References Alexander, A., R. Inglehart & C. Welzel (2012). Measuring Effective Democracy: A Defense. International Political Science Review 33(1): 41-62 Alexander, A. & C. Welzel (2011) Measuring Effective Democracy: The Human Empowerment Approach. Comparative Politics 43(3): 271-289 Alexander, A. & C. Welzel (2008) Measuring Effective Democracy: The Human Empowerment Approach. World Values Research 1(1): 1-34. Ball, T& Dagger, R. (2000) Political Ideologies and the Democratic Ideal. New York, etc.: Longman, 3rd edition Barney, D.D (2005) Communication Technology. Vancouver: UBC Press Bollen, K. & P. Paxton (2000) Subjective Measures of Liberal Democracy. Comparative Political Studies 33: 58-86. Boyer, J. P (1992) The People’s Mandate: Referendums and more democratic Canada. Toronto:Dundurn Press Casper, G. & C. Tufis (2002) Correlation versus Interchangeability. Political Analysis 11 (2): 1- 11. Dahl, R.A (1998) On democracy. New Haven:Yale University Press Gould, C. (1996) Equality, Difference, Public Representation.Democracy and Difference: Contesting the Boundaries of the Political Edited by Seyla Benhabib, Princeton University Press Held, D. (1993) Prospects for West.California:Stanford University Press

Democracy:

North,

South,

East,

Holden, B. (1974) The nature of democracy. London: Thomas Nelson & Sons Kaufmann, D., A. Kraay & M. Mastruzzi (2007) Governance Matters V. World Bank Policy Research Department Working Paper 3630, Washington, D.C.: World Bank. Knutsen, CH. (2010) Measuring effective democracy. International Political Science Review 31(2): 109–28. Munck, G.L. & J. Verkuilen (2002) Conceptualizing and Measuring Democracy. Comparative Political Studies 35 (1): 5-34. Warren, M.E. (2006) Political Corruption as Duplicitous Exclusion. PS Political Science and Politics 39:803-7. Welzel, C. & R. Inglehart (2008) Democratization as Human Empowerment.ǁ Journal of Democracy 19(1): 126-4. 184

185

Political Party and Party System Institutionalization in Albania Sara Cela1 & Assoc. Prof. Dr. Bekir Çınar2 2

Süleyman Şah Üniversitesi, Turkey

Abstract The drastic transition from the communist regime in a liberal democratic system in Albania has caused the process to be harsh and ambiguous, facing a lot of struggles in establishing a healthy democracy. Literature revealed that political parties have a crucial role in building a consolidated democratic system, since there is no modern democracy functioning without including the role of parties. The vitality of the political parties in the process of democratization should be characterized with strong and stable democratic values, with the scope of representing the citizens and providing policies which determine their willingness toward the public goods. This study examines the institutionalization of the political parties and the party system as a necessity for democracy; using the case of Albania it is analyzed the degree of institutionalization of the political parties in the country taking in regard external institutionalization including the electoral system, the electoral volatility, the electoral parties and their effectiveness, and internal institutionalization including intra-party democracy; measuring here the indicators of intra-party democracy, candidate selection, leadership selection, and policy setting. Results of the study emphasize the fragility of Albanian democracy, and the necessity to build solid, functioning and democratic institutionalization within political parties, as well as intra-party democracy which is a very important feature for the consolidation of democracy. Keywords: Party Institutionalization, Political Parties, External Party Democracy, Internal Party Democracy, Albania. Introduction After the collapse of the communist regime in the Eastern Europe, the process of establishing and consolidating democracy has been one of the most crucial issues in the region. The post communist period in these states has been characterized with a lot of difficulties and struggles, especially in the process of transition to consolidating democracy. The main reasons behind the hardship in establishing a healthy democracy in these countries depend on the degree of advancement and the stability of the political parties and the party system. In literature and also in practice the political parties are considered to be the most important agents of democracies 186

through which a direct link between the citizens and their representatives is established. Thus, political parties have a central role in making democracies work. In Albania, the swift change from communist system into democracy has begun in the beginning of 1990s, starting with the students’ demonstrations. As it has been seen in many of the Eastern Europe countries, in Albania the drastic change of the regime caused the process of transition to be harsh and ambiguous. Following the change in Albanian political system, the birth of the multi-party system was marked. The new system encouraged the expectations of the people believing that the objectives of the variety of political parties will be achievable and beneficial for their interests and for the general public good. However, in the case of this new-democracy with lack of experience and weak development and stability of the political parties the process happened to be not as expected; marking the Civil Unrest in 1997. This study is focused especially in the issue of the political party and party system institutionalization in Albania because; firstly, Albanian case barely has been studied like the other Eastern European’s countries. Secondly, party institutionalization is a very important area of study and not too much focus has been given for Albania political party and party system. Party and party system institutionalization are crucial dimensions for understanding the political system and are considered as essential condition in the well-functioning of democracy. In the case of Albania, this study examines the maturity of the political parties following the emergence of democracy. Specifically, it is measured the level of institutionalization of the political parties in two aspects: the stability of external party institutionalization, analyzing the electoral system, electoral volatility; and, the stability of internal institutionalization in terms of intra-party democracy, analyzing the developments within the parties itself. This study is composed with three main chapters. The first chapter consists of a theoretical framework providing a comprehensive understanding for the concept of political party and party system institutionalization. The second chapter of this study develops an extensive analysis of the political party and party system institutionalization in the case of Albania. This chapter consists of two main sections; in the first section it is analysed the external party and party system institutionalization. In this regard this section elaborates the Electoral System of the Republic of Albania providing an analysis of the rules and regulations which have defined the conditions during each parliamentary elections held in Albania following the emergence of democracy. Furthermore, this section analyzes the extent of electorate stability in terms of electoral volatility. Electoral volatility is calculated using the Pedersen index. The second section of the chapter elaborates the degree of institutionalization in regard with internal party 187

democracy. In this section is provided an analysis of the Statutes of the two main political parties in Albania, Socialist Party and Democratic Party. The analysis is based upon the indicators of internal party democracy. The third and the last chapter explicate the conclusion drawn from the analysis of this research. Methodology This section provides an explanation of the methodology used in this study; including an outline of the research purpose, research approach and strategy, data collection and analysis. Furthermore, it is discussed how the data has been processed and which tools are used in the analysis. The study is mainly based upon explanatory studies since it emphasis studying the situation in the Albanian Party System in order to explain the relationship of external and internal party system with the institutionalization process. The study is also explanatory to some extent because it portrays an accurate description of the party system institutionalization in Albania by providing a clear picture of the process since the establishment of the democracy in the country. In the study are used both qualitative and quantitative approaches. It seeks to provide a comprehensive understanding of the factors which have influenced the institutionalization of the party system in Albania. In this regard the research analyzes the party institutionalization in two extents: External Party Institutionalization including the analysis of electoral system and the electoral volatility and Internal Party Institutionalization including the analysis of intraparty democracy, the application of quotas, membership, candidate and leadership selection. In order to collect the data this study uses archives as a research strategy. In this regard archival records are used to provide an answer for the research question. The primary sources that are used include; the Constitution of the Republic of Albania, the Electoral Code of the Republic of Albania and the Statutes of the Political Parties, the Socialist Party statute and the Democratic Party Statute. Secondary sources that are used include; reports made by the Organization for Security and Operation/Office for Democratic Institutions and Human Rights and Albanian government archives. This study is based upon case study and the data analysis are made within-case analysis since it seeks to make an in-depth analysis of the political party and party system institutionalization specifically for the case of Albania.

188

Literature Review Most of the literature on political parties and party system in Albania brings to attention the ambiguity of the process of democratic consolidation, and shows the difficulties of the political parties to reflect the so called European institutionalization (Islami, 2013). Although scientific work on the issue of institutionalization in Albanian political parties and party system does not have a significant record, there exists a broad understanding of this connotation for which a lot of columnist have written and expressed their opinions. According to the columnist Luiza Hoxhaj in her statement in Tirana Observer, she argues that the establishment of the proportional regional law in 2008 for the Albanian electoral system does not bring any improvement to the party system and the quality of democracy, because it blocks the small parties to enter in the parliament and damages the principles of the competition which in the case of the non consolidated democracy as Albania has is very important issue in order to hamper the authoritarianism of the bigger political parties in the country (Hoxhaj, 2011). Bledar Kajsiu, expresses that Albanian political pluralism has lost its meaning as a result of conceptual monism, and the democratic value is not established (Kajsiu, 2009). On the other hand Zamira Cavo, states that the Albanian political parties provide a risk for the democracy in the country, since they are build and still maintain the centralized organization inherited from the communist regime, and the leaders consider the parties as their own properties, from which they are the only ones who are in the centre of the decision-making process for everything in concern of the party structure, organization, policies, setting agendas, selecting candidates, finances etc (Cavo, 2007). In regard with internal party democracy, Afrim Krasniqi and Ardian Hackaj argue in their work presented in the conference `Albanians and the Socio-European Model`, that the fragility of a traditional democracy and the misconceptions about a dominant political culture which considers the political parties as the root for power and privileges, increases the expectations of the people to parties, and transferring to the latter the monopoly of decision-making while excluding the participation of the citizens (Afrim Krasniqi and Ardian Hackaj, 2015). On a recent research made to provide an answer for the question `How Institutionalized are the Post-Communist Party Systems` (Fernando Casal Bertoa and Peter Mair , 2010), for the Albanian case it is determined that the frequency of patterns of alternation in regard with bringing new alternatives for the government formation, the scores for the Albanian political 189

parties are significantly low. In this regard the alternations in party composition are not frequent and emphasize that in Albania the party system does not provide a healthy competition. 1. Political Party and Party System Institutionalization Introduction In this chapter is provided a theoretical framework of the political party and party system institutionalization in order to bring a more comprehensive understanding for the development of the study. The theoretical framework brings in attention and elaborates the main arguments provided in the literature of the political party and party system institutionalization. Theoretical Framework In the broad and dynamic literature on democratic transition and the democratic consolidation process is agreed about the vital role of the political parties and their contribution in establishing a healthy democratic system. Although nowadays is argued that the importance of political parties is decreasing due to the declining number of membership, weak internal organization, low electoral performance, internal conflicts and also considering the increasing power of the groups of interest (Vachudova, 2011), political parties still remain a crucial attribute to democracy. A common definition for the party system institutionalization is provided by Mainwaring and Torcal, and according to them a party system becomes institutionalized when the `actors develop expectations and behaviours based on the premise that the fundamental contours and rules of party competition and behaviour prevail into the foreseeable future` (Scott Mainwaring and Mariano Torcal, 2006, p. 205). Discussions are evolving in regard with the identification of the main qualities that the political parties should have, and also in regard with what features of systems are more contributory to the democratic governing. In the contemporary literature the following conclusions are broadly agreed; firstly, the role of the political parties is critical in the establishment and consolidation of the democracy, and secondly, the institutionalization of political parties as well as of the party system is increasingly becoming more important (Markowski, 2000) (Sartori, 1976) (Vicky Randall and Lars Svasand, 2002) (Ware, 1996). According to Randall and Svasand party institutionalization is considered as one of the criterions which have encountered the most emphasis in the process of democratization.

190

The founding father of the concept of institutionalization is Samuel Huntington, whom discusses the term in his work Political Order in Changing Societies. Huntington defines institutionalization as `the process by which organization and procedures acquire value and stability` (Huntington, 1968 , p. 46). He extends the concept in four different dimensions: adaptability in order to survive, complexity while including the number of various units, autonomy in regard with originality, and coherence to form a unified whole (Huntington, 1968 ). However Huntington in his work is not focused particularly on political parties but rather in the broad political institutionalization. The subsequent explication for institutionalization is argued from Angelo Panebianco whose work is concentrated only in political parties and their organization. According to Panebianco, institutionalization is not in its nature a tool because it loses its character during the process and it becomes a value whose objectives are conjoined and indistinguishable (Panebianco, 1988). In the literature of the party institutionalization exists an inclination in confusing the party institutionalization with party system institutionalization. In this regard, it is crucial to define this two terms; party institutionalization is defined as `the process by which the party becomes established in terms both of integrated patterns of behaviour and of attitudes, or culture`, in the other hand party system institutionalization does not refer to a single agent as political party, it constitutes a system as a whole composed with various agents which function with principles and norms established and agreed by all (Vicky Randall and Lars Svasand, 2002, p. 11). Party system institutionalization is considered to be much stronger in advanced industrial democracies in contrast with the post-1978 established democracies which are considered to be weakly institutionalized (Richard Katz and William Crotty, 2006, p. 12). According to Mainwaring and Torcal a weak institutionalized political system is characterized with; firstly, weak programmatic and ideological linkage between the political parties and the voters, secondly, the voters tend to build stronger personal linkage with candidates, and last but not least weakly institutionalized party systems hinders electoral accountability (Richard Katz and William Crotty, 2006). Mainwaring, in his book Rethinking Party System in the Third Wave of Democratization argues about the what makes a party system institutionalized in four dimensions; (1) stability, in regard with the political parties’ stability and the regular structure of the competition; (2) parties should have strong roots in the society, party-people relationship should be established, and reflected in voting behaviors; (3) legitimacy, political parties should be supported by the political actors and should be encouraged to consider democracy as a

191

necessary pattern; (4) organization, parties should be well structured and widespread (Mainwaring, 1999). The degree of party institutionalization according to the literature is distinguished among external and internal facets of the process. In the external aspect it is referred to the relationship of the parties with the society and other institutions, and in the internal aspect it refers to the behaviours and the growth within the party. Internal institutionalization in democratic system is characterized with the intra-party democracy, which emphasizes the organization of the party in regard with implications of the intra party democracy in terms of inclusiveness, decentralization or centralization, and institutionalization, candidate selection, leader selection, and policy settings. Returning to external institutionalization, it emphasizes the relations of the party with the external features, in terms of electoral system, and electoral volatility (Panebianco, 1988). Conclusion This theoretical framework provided in this study aims to emphasize the crucial role of the political parties in the political system and that the institutionalization is considered as one of the criterions which have encountered the most emphasis in the process of democratization. The chapter shows the way on what makes a political system institutionalized and determines that the main important features which in this regard are the programmatic and ideological linkages between the parties and the voters, the encouragement of electoral accountability. It is also emphasized that the facets of the institutionalization such as external and internal party and party system institutionalization are necessary determinants of comprehending the degree of institutionalization in a country. This study agrees with the statements provided in this framework, because considering institutionalization as a practice and behaviour rather than a fiction `have to do approach` the political system would be much more advantageous and would improve the quality of democracy in the countries. Thus, the study is developed in regard with the importance of party and party system and their institutionalization features.

192

Party System Institutionalization in Albania Introduction This chapter provides an analysis of the party system institutionalization in Albania about the external political party and party system institutionalization and internal political party institutionalization. In regard with the external political party and party system institutionalization this chapter develops an analysis of the electoral system and the electoral volatility in Albania. On the other hand, regarding the internal party institutionalization the chapter comprises with the analysis of the application of quotas, party membership, selecting candidates, setting party leadership. External Political Party and Party System As revealed in the literature review, party systems are considered more institutionalized when political parties are stable over time, and their actions or inactions are more predictable. The ideologies which reflect their identities and policy settings should be generally stable, and their behaviours should express the consensus in accepting the ‘rule of the game’. In regard with Albanian party system institutionalization, this chapter is firstly focused on the Albanian electoral system; it analyzes the laws that adjust the party competition and examines the electoral systems` capability to produce the majority in parliament. Furthermore it is examined the extent of electoral volatility in the second section of this chapter. Electoral System Institutionalization in Albania Electoral systems are based in electoral regulations, and their consistency provides stable competition for the parties. Frequent changes in electoral system can produce unexpected consequences, and it can also provide uncertainty and weaken the strategies of the political actors. Albania is a Parliamentary Republic and have unicameral legislature. The parliamentary elections are held every four years, and since after the fall of communism in Albania are held eight national elections. This section analyzes the stability of Albanian electoral system in regard with these elections. Albania held the first multi-party elections on March 31, 1991 following the collapse of communism in 1990. Although the electoral system remained similar with what was used during the communist regime; if no simple majority was reached the first two candidates having more than 30 per cent of votes competed again in another round. The Albanian Labor Party 193

(Communist Party) won the first elections. Considered to be not legitimate and under the civil and international pressure, one year later on March 22, 1992 other parliamentarian elections were held, and marked the first elections won by the Democratic Party. During this period a new electoral law was approved which brought two significant changes; firstly, it established the mixed proportional representation system, and secondly, the number of seats in the Assembly changed into 140 from 250 (IRI, 1996). On May 22, 1996, the next parliamentarian elections were held in Albania. These elections were considered to not meet international standards as free and fair. The Democratic Party (PD) won 122 seats and the Socialist Party won 10 seats. In the OSCE report was stated that Albania should consider holding new elections due to the irregularities and manipulations that caused an unfavourable condition during 1996 elections (OSCE, 1996). Following elections were held on June 29, 1997. A new electoral law was approved by the parliament and was amended by the Constitutional Court. It lowered the electoral threshold from four percent to two percent, and with this change the number of the seats in the Assembly also increased from 140 to 155. This change comprised of 115 mandates with absolute majority from single member districts, and 40 mandates distributed for the proportional list consisting of those parties which in national level had gained not less than two percent of votes (OSCE, 1997). Before the next parliamentary elections Albania ratified in Article 64 of the new Constitution the mixed proportional system and the allocation of the seats in the Assembly for 140 deputies, divided into 100 seats for single member electoral zones and 40 seats for multi names list of parties or party coalitions in a nationwide constituency (Parliament, 1998). The electoral threshold also changed, parties should obtain 2.5 per cent, while the coalitions fours percent of the valid votes. The following parliamentary elections were held on June 24, 2001. According to international community it was considered that the country had achieved a steady stabilization but however there were certain areas of concern which included: irregularities during the voting process; the unnecessary interference of the police during the process; national media favouring the governing party; the relationship of political parties as enemies rather than legitimate opponents etc (OSCE, 2001). Regardless of these concerns, the Socialist Party of Albania won the elections undisputedly.

194

In 2005, the sixth round of elections since the establishment of democracy was held in Albania on 3rd of July. In this time two main political parties dominated the political system; the Socialist Party (SP), and the Democratic Party (DP). These elections were regulated under the framework of the new Electoral Code which was adopted in June 2003. The main changes in electoral code consisted of: the administration of elections, the formulation of voting list, the criteria for establishing the constituencies, the formula implemented for the allocation of seats in the parliament, the counting process and the coverage of grievances and claims (OSCE/ODIHR, 2005). The forthcoming elections were held on June 28, 2009 and were considered to mark a specific progress in regard with registration and the identification of the voters. A new Electoral Code was adopted in 2008 addressing substantial improvement in the system. According to this new code the electoral system changed to regional proportional representation, and the candidates were elected with closed lists (Electoral Code of the Republic of Albania, 2008). An electronic database for voter registration was adopted and priority was given to the ID card issue. The country constituencies changed according to the number of population corresponding to the twelve administrative regions of the country. Additionally, the threshold changed to three percent for parties to enter the parliament, and five percent for coalitions. The results of these elections marked an almost equal portrayal from the two major parties, Democratic Party and Socialist Party. The Democratic Party formed a coalition with the Socialist Movement for Integration led by Ilir Meta in order to form the government. Subsequently, in 2013 the parliamentary elections were held on 23rd of June. Again the Electoral Code was amended in July 2012 with the support of the main parties. The new amendments included the concerns in regard with the commissioners, the formulation of the voters’ lists, the process for the registration of the candidates, and more impartial media (OSCE/ODIHR, 2013). The threshold for entering the assembly became three percent for political parties and five percent for coalitions. Even though the electronic database was applied for the voters’ registration, Albania still has a passive registration system. In 2013 elections the application of the gender quotas was not effective since the majority of the parties included the women in the end of the candidates list, and this position was fictive just to meet the quotas because it was sure that they could not win.

195

Table 1: Showing the major changes in the Electoral System in Albania Year

System Applied

1991

Albanian Electoral System The size of the Allocation of Electoral Applicatio Assembly Seats Threshold (%) n of Quotas (%) 250

250

-

-

-

1992

Mixed

140

100-40

4

4

-

1996

Mixed

140

115-25

4

8

-

1997

Mixed

155

115-40

2

2

-

2001

Mixed

140

100-40

2.5

4

-

2005 2009

Mixed Proportion al Proportion al

140 140

100-40 140

2.5 3

4 5

30

140

140

3

5

30

2013

Having provided in this section, the electoral system in Albania has gone through many changes since the establishment of the multi-party system. Before each elections of the Assembly, the system has followed different implication and the Electoral Code has been repealed and amended repeatedly. The electoral system has changed from one single member from constituencies into mixed proportional, and after into regional proportional system with the application of the closed lists for candidates. The formulas for calculating the corresponding number of seats in the Assembly has also been applied differently in accordance with the interests of the major parties. The size of the Assembly has changed frequently, counting 250 seats for the deputies in 1991, after it changed into 140 seats in 1992 until 1997 when it changed into 155. With the establishment of the new constitution came also the stabilization of the allocation of seats in the Assembly counting 140 deputies. On the other hand, electoral threshold has also undergone through different changes, sometimes in favour of the small parties and sometimes of the major parties. In the last election the percentage for entering the parliament market three per cent for political parties and five per cent for coalitions. Electoral Volatility in Albania Electoral volatility is considered as a very important determinant which provides the fundamental answer about the party system stability (Eleanor Powell and Joshua Tucker, 2012). Specifically, literature provides that the degree of stability linked with the calculation of the electoral volatility in a party system refers to the institutional variables while explaining the factors of volatility (Ruth Dassonnville and Marc Hooghe , 2011). Volatility shows the 196

differences from one election to the other in terms of preferences of the electorate. It is considered to be an important determinant for the well functioning of democracy (Drummond, 2006). This research calculates the volatility in Albania using the Pedersen Index:

from which n stands for the number of the competing parties, and pi stands for the percentage that the parties have receive in t and t+1 period of time (Pedersen, 1979). The results of the volatility are drawn in percentages, the lower the percentage of volatility the greater results the stability of a political system, and higher percentage of volatility, an increase in electoral instability is resulted. In order to explain the electoral volatility in Albania this research calculates and analyses the volatility of the two major political parties in the country, Socialist Party and Democratic Party using the data recorded from the results of each parliamentary election. The results show that the highest degrees of volatility in Albanian are scored during the first decade of post-communism. Specifically, during the first multi-party elections, the electoral volatility in Albania reached a score of 31.16 per cent and during the elections held in 1997, volatility scored the peak of 32.92 per cent. In the first decade after the fall of communism the volatility in Albania have had ups and downs, shifting from 31,16 per cent in the elections of 1992 into 11.39 per cent in 1996, increasing again in the elections of 1997, and decreasing into 11.64 in 2001. During the second decade after communism the volatility results to lower passing 20 per cent. The lowest score of electoral volatility in Albania is calculated from the 2005 election, which results show that it is 7.6 per cent.

197

Table2: Electoral Volatility

Volatility 35 30 25 20 15

Volatility

10 5 0

Internal Party Institutionalization in Albania Internal party institutionalization referred as well as Intra-Party Democracy is considered to be a very important feature which broadly describes the process of the inclusion of the party members in the decision making and party deliberation. Considering that the parties themselves do practice internal democratic operations it would result in helping the process of the democratic consolidation, by strengthening also the democratic culture in the electorate (Scarrow, 2005). Literature on internal party democracy gives emphasis to certain indicators which accordingly include; the application of quotas, party membership, leadership and candidate selection, and the party policy setting (Kernell, 2008) (Scarrow, 2005). This chapter provides an explanation of the situation of Albanian political parties while analyzing the institutionalization of the two major political parties; the Socialist Party (SP) and the Democratic Party (DP). The analysis is based upon the indicators defined in the first paragraph of this chapter. Analyses of this chapter do provide also a comparison between the two major political parties of Albania in regard with the internal-democracy. The Application of Quotas In legal framework, the application of quotas is a very important attribute for the inclusion of the vulnerable groups in the elections of national and regional level, thus providing quotas for the representation in the parliamentary seats. Furthermore, quotas are applied also in the organizational structure of the political parties. In general quotas are applied for different 198

groups, including here the application of quotas on gender equality, for youth and also for minorities. In Albania, the quotas are regulated in the Statutes of the parties, in the Electoral Law and in Gender Equality Law. The statutes of each political party in Albania provide specific quotas for the women representation in the party organization, there are also parties which include quotas for youth representation. Socialist Movement for Integration applies quotas for youth, but however it is not included in the analysis of this research. The Electoral Code and Gender Equality Law set quotas for woman representation in national level, which includes the quotas for parliamentary candidacy. Application of Quotas in the Party Organizational Structure In Albania, political parties provide quotas in their Statutes for participation in the organizational structure and also for executive positions. According to the Statute of the Democratic Party of Albania, the quota for women to perform in presidency position is provided in Article 21. In the point c` of this Article is stated that: The number of winning ladies must not to be less than 25 % of the members of the Presidency that emerges from the vote. If this criterion is not met in the enumeration after the vote, then their order is separated from the general (The Statute of the Democratic Party, 2005). `

The quotas set for women as provided in this article are mainly for the presidency positions of the sub-branches of the party. Article 42 of the Statute determines the quota for the branches of the party presidency. The quota set in this article is again 25 % for women. The Socialist Party, on the other hand, determines in its Statute the criteria of composition of the party structure for the local level. Article 13 point c` of this Statute set the quota for women, in this regard the composition should be 20 % in rural areas and 30 % in urban areas. Article 15 of the Socialist Party Statute which defines the Socialist Assembly of municipalities, the municipality structure and its function, determines the representation of women must constitute 30 % of the member of Socialist Assembly for municipalities and 20 % of the members of the communes. These articles emphasize that the quotas set by the Socialist Party are higher in urban areas since the percentage of their inclusion is higher than in rural areas. Article 26 of the Statute which provides the competences of the party congress states that: ‘the voting process for the women nomination/candidacy is made with different lists. Women constitute not less than 50 % of the list of candidates for being a member of the National Assembly of the Socialist Party’ (The Statute of the Socialist Party, 2011).

199

As provided in this section, the main group which the two major parties indicate quotas is the women representation. Other groups which include youth and/or minorities are not included in the Statutes of the Socialist and Democratic Party. Table 3: Application of Quotas in the party organizational structure Application of Quotas

Albanian Political Parties Socialist Party

Democratic Party

No quotas

-

-

Women

20 % (rural areas); 30 % (urban areas)

25%

Man

-

-

Youth

-

-

Minorities

-

-

Application of Quotas for the National Assembly The Electoral Code of the Republic of Albania determines in the article 67 point 6: For each electoral zone, at least thirty percent of the multi-name list and one of the first three names on the multi-name list shall belong to each gender. The subject that submits the list declares the seats, according to the gender quota, in order to apply the exception… (The Electoral Code of the Republic of Albania , 2012).

Furthermore, point 7 of this article determines that in case the parties do not comply with the obligatory provisions provided above, the Central Election Commission has the right to impose sanctions to the parties. Sanctions related to the gender equality are provided in the Article 175 of the Electoral Code. According to this article, if the political parties fail to comply with the obligation regarding the formulation of the multi-name list, CEC has the right to impose a fine of 1,000,000 Albanian ALL in the case of Assembly elections, also 50,000 Albanian ALL in case of local government elections (The Electoral Code of the Republic of Albania , 2012). However, in Albanian Electoral Code there are no mandatory gender quotas for setting a percentage for the women representation in the number of seats in the Assembly. Quotas provided are for the candidacy, in other words defining the percentage of women required to be included in the multi-name lists. In regard with the Albanian political parties, only the Socialist Party applies the Statute quota for women representation in parliamentary candidacy. Article 36 of the Socialist Party Statute 200

determines that women must constitute not less than 30 % of the candidates for deputies in the multi-name list. Democratic Party does not apply quota in this regard. As provided in this section, Albanian political parties’ statutes and election legislations set quotas in order to ensure the inclusion of vulnerable groups in the organizational structure of the parties as well as in ensuring the representation of this group in the national assembly. The types of quota which is mainly applied in the parties that are used in this research are based upon gender equality. Quotas determined for the percentage of women representation in the organizational structure of the parties are subjects to the internal-party rules and regulations of the parties, in this regard the Statutes of the political parties. In the other hand, the quotas determined for the women representation in the multi-name candidacy list are subject to national legislation, in this regard the Electoral Code of the Republic of Albania. However, also the parties itself may provide regulations in order to apply quotas for women representation in the multi-name list. Quotas provided in the statutes of the political parties are very important indicators which demonstrate the internal-party democracy. Nevertheless, the Electoral law is the main legislation which regulates and imposes the application of quotas, and all political parties must comply. Electoral system as well is a major influencer which increases the chances for women representation in the National Assembly. Since 2008 Albania has applied the proportional electoral system. The proportional electoral system favours gender equality and encourages the women representation. These statements are reflected in the Electoral Code applied, which in this regard it sets the quota for women candidacy up to 30 %. Besides the legislation provided in the electoral law, also the party statutes may apply quotas for women representation in the assembly. In Albania, only the Socialist Party includes in its statute the standard for women candidacy, and applies the quota of 30 %. Comparing the statutes of the two major political parties in Albania with regard to quota application this analysis provides that there is no significant change between the Socialist Party and the Democratic Party in the quotas set for the organizational structure of the party. However, in regard with the application of quota for the women representation in the assembly there is a significant change, since only Socialist Party applies such quota. Still though, both parties include in their statute only quotas for women, excluding in this regard other vulnerable groups, such as youth and/or minorities.

201

Party Membership During recent years political parties across democratic states have given a great importance to the involvement of the individuals in political affairs, by providing different opportunities for them in order to participate and to be included in decision making as party members (Sandri, 2015). This emphasizes the importance of the party membership in the intra-party democracy. Being a member in a political party usually requires providing financial commitment (annual or monthly payments), and/or being actively involved in the party events. This section provides an explanation on how the two major political parties in Albania, Socialist Party and Democratic Party, provide in their Statutes the inclusiveness of the members in the political process. Firstly are analyzed the procedures of the acceptance as a member of the party. Secondly, this section shows the right of the members of the political parties. Thirdly, the duties of the members of the parties are provided. The procedure of the Acceptance as a Member of the Party According to the literature a highly institutionalized political party involves official bodies in the application procedure which might accept or reject applicants; expelling those applicants who are considered to be harmful for the party interests (Scarrow, 2005). Susan Scarrow provides in her writings that parties which have a high degree of inclusiveness try to build obstacles in the process of membership acceptance in order to undermine the possibility of certain individual whom might harm the party if he/she becomes a member of the party. Paradoxically, in this regard, parties which seek to increase the level of inclusiveness are becoming more centralized by tightening the procedure of acceptance. Provided in the Article 7 of the Socialist Party Statute eligible to become a party member are all citizens of the Republic of Albania and all Albanian citizens outside the country as well as foreign individuals residing, which have reached age 16 and accept the Program and the Statute of the Socialist Party. Membership is voluntary based and should be provided in a written form. The day which the individual submits the application, is the day of his/her acceptance in the party (The Statute of the Socialist Party, 2011). The Democratic Party provides in its Statute in the Article 12, that all the Albanian citizens which have reached the age 15, accepts the conditions of the membership and which is not enrolled as a member in another political party or organization which is not declared as a partner with DP, can become a member of the party. The membership in the Democratic Party as provided in the Article 12 (2) (b) is based upon annual fee, which if not paid for two years 202

in a row may cause the loss of the membership in the party. Article 13 of the statute determines that the membership application should be submitted in a written form in: a. the section of the Party near the residence of the applicant; b. in the branch or sub-branch of the Democratic Party; c. in the headquarters of the Democratic Party. The acceptance of the membership application is made by the branch of the PD or by the headquarters of the party (The Statute of the Democratic Party, 2005). The rights of the Member of the Party The rights provided for the members of the party determine the degree of inclusiveness that each party attempt to give to its members. In this regard, this section shows the main rights of the members included in the party statutes accordingly. The Statute of the Socialist Party determines the rights of the members of the party in the Article 8. According to this article the members of the party have the right to participate in the activities of the party. Article 8 (3) determines that the members of the party have the right to select and be selected in the governing bodies of the party. Point 4 provides the right to nominate and be nominated candidate of the party representation in the executive and legislative governing bodies. On the other hand, the Democratic Party provides the right of the member in the Article 14 of the Statute. This article gives the right to the members of the party to attend the meetings, elections and all activities of DP. Article 14 (1) (b) defines that only the member can elect and be elected in the organs of the party. Furthermore, it is provided that each member has the right to propose nomination for all legislative and executive bodies which represent the Democratic Party. The Duties of the Member of the Party The members of the Socialist Party have their duties provided in the Article 9 of the Statute. Each member is required to be part of one of the organizations of the SP. He/she must be provided with an annual membership card after the payment of the annual quota settled by the party. The member must respect the ethical code; they have the right express their opinions and provide concrete proposals in regard with the party program, statute as well as the electoral programs. The members should collect and submit to the party the opinions and the proposals of the community for the issues of common interest, starting from concrete problems of their everyday life up to legislative initiatives.

203

According to the Article 14 (2) of the Statute of the Democratic Party, the member has the following duties: he/she should be active participant in the political and electoral activity of the party; must pay the financial contribution to the party; must respect the discipline of the party as provided in the Statute. Party Membership: Conclusion The two major political parties in Albania consider the membership as a very important indicator of the internal-party democracy. This importance is reflected in different articles of their statutes. However, it is necessary to emphasize that both parties include the importance of the internal democracy in the party determining that it is a fundamental principle for the way the parties function; Socialist Party provides it in the first Article of the statute, while Democratic Party in the Article 8 of its statute. Both parties give priority to the membership in regard with internal party regulation, although they differ in certain degrees. According to the statutes, both parties use traditional acceptance procedures, which include the submission of the application in the written form and in person. However, the main point provided which lacks the democratic procedure are the membership fees applied for financial support. The two parties take the decisions about the fees from the presidency of the parties, showing in this regard centralization. In this analysis the Democratic Party results to be more institutionalized than the Socialist Party, but however the Socialist Party provides more inclusive policies for its member than the Democratic Party. Electoral Code of the Republic of Albania does not provide any rule or regulation with regard to party membership. This issue has been considered to be undermined by internal party procedures. Selecting Candidates Selecting candidates is a very crucial duty for all the political parties, because the candidates selected reflect the parties’ portrait during the elections and electoral campaigns and also while they are in office implementing the assignments in the name of the party. The candidates are those who determine the success of the parties. On the other hand, the process of selecting the party candidates is an important determinant of the internal party democracy. In order to provide the standard of internal party democracy in the two major parties in Albania, this research considers analyzing the provisions stated in the Statutes of these parties in regard with: member participation in decision-making; who has the right to nominate and be 204

nominated; who can veto candidates; who determines the eligibility criteria; how is made the voting process; whether the party leaders pre-select the nominees, and if the party leader must approve the choices. Article 41 of the Statute of the Socialist Party defines that all the members of the party have the right to nominate candidates or to reject the candidates proposed. In the Article 8 (3) of the Statute is provided the right of the party members to be nominated for candidacy. Article 40 provides that the decision-making system approved by the party leadership forums is necessarily applicable to all the levels of the party structure. The decision for the individual candidacy is made by free willing and in a closed voting process. The statute of the Socialist party does not specify whether the party leaders pre-select the nominees, nor if the party leader must approve the choices (The Statute of the Socialist Party, 2011). In the Statute of the Democratic Party, Article 34 defines that the candidacy for local elections must be discussed and consulted with all the member of the party. The presidency of the subbranches decides for the local candidacies. For municipalities of first category the list for the candidates for consultants must be approved by the Democratic Party Presidency. With the guidance of the party presidency may be decided about the candidacy for local majors with less than two thousand votes. According to the Article 14 (b) of the statute the members of the party have the right to nominate and to be nominated for candidacy. The Democratic Party Statute gives the right to the party presidency to veto the candidates which are nominated, provided in the Article 43 (2). In the same article it is determined that the presidency proposes to the council the candidatures for the representatives of the legislative and executive positions (The Statute of the Democratic Party, 2005). Considering the analysis provided for setting the candidates in the two major political parties in Albania, this section concludes that both political parties are characterized with a semiinstitutionalized degree, since both of them lack in providing high level of internal party democracy in the process of candidate selection. Although the two parties intend to provide inclusive policies for the nomination of the candidates, they don’t provide full right for the party members to select the candidates. However, the Democratic Party results to be more centralized in comparison with the Socialist Party. Both of the parties do not provide who is the responsible body which approves the setting of the party candidates.

205

Setting Party Leadership Similar with the process of selecting party candidates, also the process of setting party leadership has a great importance especially for the image and the credibility of the parties. As previously mentioned in the section Selecting Party Candidates, the inclusive policies and the decentralized structure provided in the party statutes define the progress of political party institutionalization. This section determines and analyses the party inclusiveness and centralization in the same method by using as a guideline the Statutes of the two major political parties in Albania. The procedures defined by the statutes of the political parties provide the functioning of internal democracy and the degree of party institutionalization. Literature in setting party leadership reveals that the most effective and democratic processes in choosing the leadership are the ones which include the party members, such as party conferences or the membership ballots (Scarrow, 2005). In this regard, this section considers analyzing who has the right to be selected in the leading organs of the parties; and who is the body which appoints the leaders according to the Statutes of the two major political parties in Albania. The Statute of the Socialist Party in Article 8, point 3 determines that the members have the right to select and to be selected in the leadership bodies of the party. On the other hand, the Statute of the Democratic Party defines in the Article 14(1) (b) that the members have the right to select and be selected in the organs of the party, but it is not specified whether there are included the leadership bodies. However, both parties provide in their statutes that the competence for appointing the leadership is a responsibility given to their respective National Assemblies. The National Assembly is the highest executive and legislative body of the parties. Socialist Party determines this statement in the Article 28 (4) of the Statute, while Democratic Party in the Article 39 (4). Considering the provision included in this section, conclusions drawn indicate that the process which two major political parties in Albania apply for selecting the party leadership do not comprise fully in reflecting the internal democracy of the parties. Thus, again this research concludes that the parties provide a semi-institutionalized degree. Both parties provide inclusive policies in regard with selecting or being selected in party organs; although the Socialist Party explicitly defines it for the party leadership, while Democratic Party does not; however on the other hand they provide centralized structure since the body responsible for

206

appointing the leadership belong to the highest executive and legislative level of the party, which limits the influence of the party membership. Conclusion This chapter concludes that the external political party and party system institutionalization in Albania is rather fragmentized. As the analysis of the electoral system determine frequent changes in the electoral law before each parliamentary elections, it shows that the party system in Albania to be characterized with instability. In the other hand, the high volatility among the political parties also does affect the stability of political system negatively. Concerning the internal party institutionalization, this study shows the lack of reliability of both major parties in Albania, the Socialist Party and Democratic Party. In regard with the application of quotas there is no significant change from the two parties, and however, even if the parties do not provide quotas in their statutes, both of them are obliged to apply the quotas since it is a requirement of gender equality in the Electoral Code. According to the statutes studied, the parties provide inclusive policies in regard with party membership, somehow also for the process of selecting candidates and setting the party leadership since member have the right to nominate and be nominated, but the process of decision-making is not a as inclusive because the responsibility in this regard is given to the highest executives of the parties, and limiting the influence of party member provides a centralized structure of the parties.

207

Conclusion This study analyzed the political party and party system in Albania, a young democracy with insufficiently institutionalized political parties. The party system in Albania results to be rather fragmentized. The analyses of the study designate the fragility of the degree of institutionalization of the Albanian political parties and party system. In regard with external party and party system institutionalization, this study examined the electoral system and the electoral volatility in Albania. Albania has undergone through too many electoral reforms before each parliamentary election, and these frequent changes in electoral laws determine the instability of the electoral system in the country. Another indicator of the instability in Albanian political system has been drawn by the results of the electoral volatility. Electoral volatility in the country scores high values, which means that the stability among the parties is low, however, reflecting in an unstable party system. Nevertheless, in the first decade of postcommunist period the results show that the degree of instability was higher than in the second decade of post-communism, from which the scores of volatility are lower, providing an appearance of stability in the country. In regard with internal party institutionalization this study examined the internal party democracy of the two major political parties in Albania, providing an analysis of the statutes of the parties in concern with the quotas that are applied for the vulnerable groups, the party membership, the selection of candidate and the process of setting the party leadership. The quotas for the gender equality in Albania are required specifically from the Electoral Law; hence the parties are obliged to comply with the rules. Nevertheless, they also do apply these quotas in their statutes. In practice the situation is not the same, it is worth mentioning that the application of gender quotas has been considered as not effective since the parties include the women in the end of the candidate list, and in this position their role is fictive just to meet the standards and it is for sure that they could not win. The party membership, the process of selecting candidates, the process of setting the party leadership are very important features determining the internal democracy of the parties. According to the statutes of the parties included in this study it is given importance to the party membership since the both statutes consider membership as a necessity for the parties. The parties do provide inclusive policies in terms of giving the right to party member to nominate and be nominated in executive and legislative position, but however, they do not provide full right for the party member to select the candidates. Furthermore, the inclusiveness of party membership is provided also in the rights to select and be selected in the party organs, but still their right are limited because the 208

body responsible for appointing the party leadership belongs to the highest executive and legislative level of the party restricting the influence of the party members. In this regard the study concludes that these parties do not function in a healthy internal party democracy and they result in operating as semi-institutionalized political parties, since both suffer in establishing fully inclusive and decentralized policies. The lack of implementing internal party democracy, in many aspects, impacts the quality of democracy in the political system. Therefore, this study concludes that the political party and party system in Albania experiences an ambiguity in the process of well establishing the democratic values and practices. The political parties in Albania must improve their institutional function in order to improve their role in the political life. The parties need to adopt relevant internal democracy standards that shape their pivotal role in the political system. These changes remain a condition without which there will not be any improvements in the degree of institutionalization and consequently Albania will suffer in consolidating democratic values and practices.

209

References Parliamentary Chamber, 1991. Results of the Elections Held in 1991. Tirane: Parliamentary Chamber. Parliamentary Chamber, 1992. Results of the Elections Held in 1992. Tirane: Parliamentary Chamber. Parliamentary Chamber, 1997. Result of the Elections Held in 1997. Tirane: Parliamentary Chamber. Afrim Krasniqi and Ardian Hackaj, 2015. Democracia e Brendshme e Partive Politike ne Shqiperi (Internal Democracy and Albanian Political Parties). Tirane, Fondacioni Friedrich Ebert. Albanian Government , 2009. Zgjedhjet per Kuvendin e Shqiperise 2009 (Results of the Election for the Albanian Parliament 2009). Tirana: shtetiweb.org. Berhami, I., 2012. The Influence of Electoral System on the Elections in Albania. European Scientific Journal, Volume 8, pp. 65-79. Cavo, Z., 2007. Iliriada Portal. [Online] Available at: http://iliriada.createmyboard.com/t6282-partite-ne-shqiperi-rrezik-i-madh-perdemokracine [Accessed 7 June 2015]. Central Election Commision, 2001. Perberja e Kuvendit te Shqiperise (The Composition of the Parliament). Tirane: CEC.org.al. Central Election Commission, 2005. Perberja e Kuvendit (The Composition of the Parliament). Tirana: CEC.org.al. Central Election Commission, 2013. Perberja e Kuvendit te Shqiperise. Tirana: CEC.org.al. Drummond, A., 2006. Electoral Volatility and Party Decline in Western Democracies: 19701995. Political Studies, Volume 54(10), pp. 628-647. Eleanor Powell and Joshua Tucker, 2012. Revisiting Electoral Volatility In Post-Communist Countries: New Data, New Results, New Approaches. Chicago, Midwest Political Science Association. Electoral Code of the Republic of Albania, 2008. Electoral Code of the Republic of Albania. Tirana: Electoral Code of the Republic of Albania. Fernando Casal Bertoa and Peter Mair , 2010. Two decades on: How Institutionalized are the Post-Communist Political Parties?. Florence : European University Institute. Fewsmith, J., 2006. Inner Party Democracy: Developments and Limitations. China Leadership Monitor , Volume 31, pp. 1-11. 210

Hoxhaj, L., 2011. Tirana Observer. [Online] Available at: http://www.tiranaobserver.al/v1/sistemi-partiak-ne-shqiperi-dicka-e-re-po-vjen/ [Accessed 8 June 2015]. Huntington, S., 1968 . Political Order in Changing Societies. New Haven and London: Yale University Press. IRI, 1996. Observation Report , United States: IRI org. IRI, 1996. Observation Report on the Albanian Parliamentary Elections of May 26, 1996, United States: International Republican Institute. Islami, E., 2013. The Necessary Return of Ideology: Political Parties and Ideological Profile in Albania. Tirane: The Balkan Trust for Democracy. Kajsiu, B., 2009. Peshku pa Uje. [Online] Available at: http://arkivi.peshkupauje.com/2009/09/ideologjia-nuk-eshte-tualet.html [Accessed 8 June 2015]. Kernell, G., 2008. Political Party Organizations, Civic Representation and Participation. In: J. N. a. R. Smith, ed. Representation Elections and Beyond . Colorado: Utah State University Press, pp. 114-136. KIPRED, 2015. Kosovar Institute for Policy Research and Development. [Online] Available at: http://www.kipred.org/ [Accessed 4 June 2015]. Lipset, S. M., 2000. The Indispensability of Political Parties. Journal of Democracy, Volume 11, pp. 48-55. Mainwaring, S., 1999. Rethinking Party System in the Third Wave of Democratization. Stanford: Stanford University Press. Markowski, R., 2000. Party System Institutionalization in New Democracies: Poland- a Trend-Setter with no Followers. Houston, University of Houston. Matthias Basedau and AlexanderStoh, 2008. Measuring Party Institutionalization in Developing Countries: A New Research Instrument Applied to 28 African Political Parties. Hamburg : GIGA. Michael Gallagher and Michael Marsh, 1989. Candidate Selection in a Comperative Perspective. The Secret Garden of Politics. The Journal of Politics, Volume 51, pp. 34-45. O`Dwer, C., 2006. Reforming Regional Governance in East Central Europe: Europeanization or Domestic Politics as Usual?. SAGE Publications, Volume 20, pp. 219-253. O`Dwyer, C., 2006. East European Politics and Societies. SAGE Publications, Volume 20, pp. 219-253.

211

OSCE/ODIHR, 2005. OSCE/ODIHR Election Observation Mission Report, Warsaw: OSCE. OSCE/ODIHR, 2011. Guideline on Political Parties Regulation, Warsaw: OSCE ODIHR. OSCE/ODIHR, 2013. OSCE/ODIHR Election Observation Mission Final Report, Warsaw: OSCE. OSCE, 1996. Observation of the Parliamentary Elections Held in the Republic of Albania, Warsaw: OSCE. OSCE, 1996. Post Election Statement, Albanian Parliamentary Elections 26 May 1996, Warsaw: OSCE. OSCE, 1997. Albania Parliamentary Elections, Warsaw: OSCE. OSCE, 2001. Republic of Albania Parliamentary Elections 2001, Warsaw: OSCE. Panebianco, A., 1988. Political Parties, Organization and Power. Cambridge: Press Syndicate of the University of Cambridge. Parliament, A., 1998. Constitution of the Republic of Albania. Tirana: OSCE-Albania. Parliamentary Chamber, 1996. Results of the Elections Held in 1996. Tirana: Parliamentary Chamber. Pedersen, M., 1979. Electoral Volatility in Western Europe, 1948.1977. European Journal of Political Research, Volume 7, pp. 1-26. Project, Q., 2014. Quota Project Global Database of Quotas for Women. [Online] Available at: http://www.quotaproject.org/uid/countryview.cfm?CountryCode=AL[Accessed 6 June 2015]. Richard Katz and William Crotty, 2006. Handbook of Party Politics. Richard Katz and William Crotty ed. London: SAGE Publication. Ruth Dassonnville and Marc Hooghe , 2011. Mapping Electoral Volatility in Europe, An Analysis of Trends in Electoral Volatility in European Democracies since 1945. Sofia, Bulgaria, University of National and World Economy . Sandri, G., 2015. Party Membership and Intra Party Democracy; How do members react to organizational change within political parties? The case of Belgium. The Open Journal of Socio-political Studies, Volume 8, pp. 190-214. Sartori, G., 1976. Parties and Party Systems. Alan Ware ed. Cambridge: Cambridge University Press. Scarrow, S., 2005. Political Parties and Democracy in Theoretical and Practical Perspective, Implementing Intra Party Democracy. The National Democratic Institute for International Affairs. 212

Scott Mainwaring and Mariano Torcal, 2006. Party System Institutionalization and Party System Theory After the Third Wave of Democratization. In: R. K. a. W. Crotty, ed. Handbook of Party Politics. London: SAGE Publication, pp. 204-242. Sebnem, 2011. The impact of Parties and Party Systems on Democratic Consolidation: Case of Turkey. Colchester: University of Essex. Stiftung, F. E., 2005. Organizational Structure and Internal Party Democracy in South Eastern Europe. Georgi Karasimeonov ed. Sofia: GorexPress Publishing House. The Electoral Code of the Republic of Albania (2012) Republic of Albania. The Statute of the Democratic Party (2005) Democratic Party of Albania. The Statute of the Socialist Party (2011) Socialist Party of Albania. Vachudova, M., 2011. Political Parties and Democratic Change in the Western Balkans: When do the External Actors Change Agends?. North Carolina, APSA 2011. Vicky Randall and Lars Svasand, 2002. Party Institutionalization in New Democracies. SAGE Publications, Volume 8, pp. 5-29. Ware, A., 1996. Political Parties and Party Systems. Oxford: Oxford University Press. Wilhem Hofmeister and Karsten Grabow, 2011. Political Parties and Organisation in Democratic States. Singapore: Konrad Adenauer Stiftung . Wuhs, S., 2006. Democratization and the Dynamics of Candidate Selection Rule Change in Mexico, 1993-2003. Mexican Studies, Volume 22, pp. 33-56.

Appendix: Electoral Volatility in Albania Table 1: Electoral Volatility 1992 Political Parties

1991 Elections Results (%)

1992 Elections Results (%)

Albanian Labour Party*

56,17

25

Democratic Party

38,72

62,3

Other

5,11

12,7

Total

100

100

213

Volatility Results (%)

31,16

*Albanian Labour Party later changed its name into Socialist Party Table 2: Electoral Volatility 1996 Political Parties

1992 Elections Results (%)

1996 Elections Results (%)

Socialist Party

25

20,37

Democratic Party

62,3

55,53

Other

12,7

24,1

Total

100

100

Volatility Results (%)

11,41

Table 3: Electoral Volatility 1997 Political Parties

1996 Elections Results (%)

1997 Elections Results (%)

Socialist Party

20,37

50,03

Democratic Party

55,53

25

Other

24,1

24,97

Total

100

100

Volatility Results (%)

32,92

Table 5: Electoral Volatility 2001 Political Parties

1997 Elections Results (%)

2001 Elections Results (%)

Socialist Party

50,03

41,4

Democratic Party

25

36,9

Other

24,97

22,5

Total

100

100 214

Volatility Results (%)

11,64

Table 6: Electoral Volatility 2005 Political Parties

2001 Elections Results (%)

2005 Elections Results (%)

Socialist Party + Alliance

41,4

39,4

Democratic Party +Alliance

36,9

44,1

Other

22,5

16,5

Total

100

100

7,6

Volatility Results (%)

Volatility Results (%)

Table 7: Electoral Volatility 2009 Political Parties

2005 Elections Results (%)

2009 Elections Results (%)

Socialist Party

39,4

45,34

Democratic Party

44,1

46,92

Other

16,5

7,74

Total

100

100

16,5

Table 8: Electoral Volatility 2009 Political Parties

2009 Elections Results (%)

2013 Elections Results (%)

Socialist Party

45,34

57,63

Democratic Party

46,92

39,46

Other

7,74

2,91

Total

100

100

215

Volatility Results (%)

12,28

216

Ways to Establish Self-Regulation on the Part of the Albanian Electronic Media in Coherence with European Union Prospects Dr. Belina Budini Department of Communication and Public Relations, European University of Tirana, Albania

Abstract The electronic media in Albania are among the most competitive and developed actors in society and the media performance in industrial and commercial terms, is greater than ever before. However, their role as dynamic social institutions is neglected and the understanding of their contribution to democratic values and principles through their professional approach is often limited. Due to such an important role to play in a democratic society, the bureaucratic regulation from outside is necessary, but not the only way to achieve democratic standards, in coherence with the European Union directives regarding electronic communications. This paper tries to argue that for this end, it is of great importance to look at the implementation aspects related to processes of self-regulation on the part of the electronic media operators as well as continual and functional dialogue with the public authorities of the electronic media from a public interest approach. For this purpose, the methodology used to conduct the research is basically the media agency analysis and textual analysis. First, this paper is going to identify the media instruments and media practices at work that inhibit self-regulation on the part of the media itself. Secondly, public discourses on the part of the public authorities of the electronic media shall be discussed. In theoretical terms, in the area of media studies, this stance is fueled by the phenomenological tradition and the socio-cultural tradition. From within these combined approaches it is of most importance to look at the way the information is produced in terms of codes of practices as well as the interpretations of the texts produced. This objectiveinterpretative stance with ethnographic traits in qualitative terms should enable this paper to retrieve results such as the negative correlation between a lack of a Journalistic Code of Practice and a possible self-regulation prospect in professional terms, but also flaws in institutional and democratic standards expected. The analyses at a theoretical level begin with Berger and Luckmann’s theory of the “Social Construction of Reality”, go on with the notions of the social production of news, tracing back from authors such as Herbert Gans on “Deciding what’s news” or Michael Schudson on “The Sociology of news”. Finally, the paper shall propose ways to establish a dialogue among the involved actors in order to raise the democratic standards and values in terms of social and public responsibility taking, through a professional approach to questions of ethics and quality of the media content. 217

Keywords: Albanian electronic media, European regulation of electronic communications, Media content, Ethics, Self-regulation of electronic media operators, Public responsibility Introduction The media in Albania, especially the electronic media, are among the most competitive and developed actors in society and the media performance in industrial and commercial terms, is greater than ever before. However, their role as dynamic social institutions is neglected and the understanding of their contribution to democratic values and principles through their professional approach is often limited. Due to such an important role to play in a democratic society, the bureaucratic regulation from outside is necessary, but not the only way to achieve democratic standards, in coherence with the European Union directives regarding especially electronic communications. This paper tries to argue that for this end, it is of great importance to look at the implementation aspects related to processes of self-regulation on the part of the media operators as well as continual and functional dialogue with the society actors and public authorities from a public interest approach. For this purpose, the methodology used to conduct the research is basically the analysis of the agency. Therefore, this paper is going to identify the media instruments and media practices at work that inhibit self-regulation on the part of the media itself. In the area of media studies, the self-regulation approach is fueled by the phenomenological tradition and the socio-cultural tradition as well as the normative theories of the media. From within these combined approaches it is of most importance to look at the way the information is produced in terms of codes of practices. This objective-interpretative stance with ethnographic traits in qualitative terms should enable this paper to retrieve results such as the negative correlation between a lack of a Journalistic Code of Practice and a possible selfregulation prospect in professional terms, but also flaws in institutional and democratic standards expected. Finally the paper shall propose ways to establish a dialogue among the involved actors in order to raise the democratic standards and values in terms of social and public responsibility taking, through a professional approach to questions of ethics and quality of the media content.

218

Key Words: Albanian media, European regulation of electronic communications, media content, ethics, self-regulation of media operators, public responsibility 1. The Albanian Media self-regulation prospects “Albania is adapting to enter the western European time”, - announces Ismail Kadare in the forward of the book “Three periods of Albania in Time Magazine” referring to the paradigm of time as central not only to poetics but also to the media scientific studies. This is to say, in his words, that “this is a time when the public opinion in Albania is growing more sensible and interested in the foreign public opinions towards Albania” (Kadare in Budini, 2014. p. XVI) . What is more, in this process of adaptation in order to enter the western European time, there is no other choice but to acknowledge its opinions not as mere curiosity but as part of the contemporary history making process. It is therefore necessary to know how to adapt to the European prospects not only in terms of bureaucratic regulations but also in qualitative terms so as to questions of content and professional approaches in the media sphere. Self-regulation of the media in Albania is a process that should enable better prospects of democratic and institutional standards in the country. 2.1 The methodology In this paper I have researched the media agencies in Albania in terms of the practical principles that underpin the professional work of Albanian journalists. Therefore, the methodology used to conduct the research is basically the media agency analysis. The main objective is to identify the media instruments and media practices at work that inhibit self-regulation on the part of the media itself. This should enable this paper to retrieve results such as the correlation between a lack of a Journalistic Code of Practice and the self-regulation prospect in professional journalism terms, but also in terms of institutional and democratic standards. 2.2 The theoretical approach It comes not only from the academic knowledge but also out of the practical knowledge that the media are social institutions apart from being an industry. Therefore, the understanding of the structuration principles and media dynamics requests as a must the consideration of sociocultural aspects, as well as economic, political and often technical-judicial ones (McQuail, 2005). In theoretical terms, in the area of media studies, the self-regulation approach is fueled by the phenomenological tradition and the socio-cultural tradition. From within these combined

219

approaches it is of most importance to look at the way the information is produced in terms of codes of practices. Social responsibility theory (found more in Europe and countries under European influence) is a modified version of free press theory placing greater emphasis upon the accountability of the media (especially broadcasting) to society. Media are free but they should accept obligations to serve the public good. The means of ensuring compliance with these obligations can either be through professional self-regulation or public intervention (or both) (ibid.) The self-regulation aspects are more closely related, at a theoretical base, to the media accountability discussions. Accountability can be defined as "all the voluntary or involuntary processes by which the media answer directly or indirectly to their society for the quality and/or consequences of publication" (McQuail, 2005, p.207). Accountability is therefore based on the existence of standards and responsibilities which the media either accept or which may be imposed on them. Where those standards and responsibilities are self-imposed, there we have to do with self-regulation. The basic accountality mechanisms for the media are the market itself in terms of the competition with other media agencies for audience and advertisers, the public opinion as pressure groups or other outside forms of evalutations, the juridical legislation in terms of legal pursuits, and the sphere of the industry or the professional self-regulation. In this context, accountability is usually voluntary but carried out according to set procedures. It does not usually lead to any material penalty Commercial media are free to choose their own objectives, in the sense of whichever consumer audience or advertising market they want to serve. They are primarily accountable to owners, investors and clients. However, quite often there are additional advisory or supervisory bodies that play a part in the regulatory framework with varying aims and degrees of competence (ibid). 2.3 Self-regulation, the concept In contrast to formal and bureaucratic regulation mainly by state and government, selfregulation refers to “responsibilities assigned to media operators to implement by themselves or that are voluntarily chosen by them. Such rules often have the character of desirable goals, guidelines or principles, rather than fixed or compulsory standards to be achieved. They are `policed' either within and by the media organization itself or by some intermediate body representing public and industry interests. The means of accountability are typically “voluntaristic” and non-punitive” (Haraszti, 2008. p. 34). Self-regulation in the press mainly takes the form of journalistic codes of practice for accuracy and fairness plus some procedures 220

for implementation. In broadcasting, it abounds in various forms such as guidelines for reporting on controversial issues such as terrorism or violence. Self-regulation also tends to deal with privacy issues, the protection of journalistic sources and standards in advertising (ibid.). 2. Self-regulation of the media in Albania, a perspective A code of ethics is at the core of the self-regulation processes. However, its existence does not imply its implementation, as it is precisely the case in Albania. The Code of ethics for the Albanian media, published since 1996 and reviewed in 2006, does not constitute an agreed and followed document on the part of the media professional bodies in the country, neither editors and journalists nor publishers and owners. It does exist, in paper, a Code of the investigative journalism as well, published and thoughtfully conceived by the Albanian Media Institute, but hardly any media institution follows from there. These papers are well conceived and revised, but poorly promoted. With few exceptions such as Shekulli Newspaper, between the period 2000 and 2005, no other media in Albania has ever tried to pro-actively engage in self-regulations processes. There was an office of the ethics opened at Shekulli newspaper, but as it turned out it did not properly serve the journalist or the public interest, because it didn’t have clear cut roles between the owner, the editors and the journalists (Zlatev O. (eds) 2011). However, experiences in Turkey, Bosnia and Herzegovina, and Kosovo, where press councils are functional, suggest that “self-regulation in the Balkans is not a mission impossible” (Lani (eds), 2011, p. 63) The lack of the interest of the media owners to be involved in self-regulation development is evident as well as a number of factors in the journalistic milieu such as the employment relations and the lack of proper labor contracts, as well as a lack of tradition in organization on the part of the media staffs by themselves. The media professional bodies in Albania do not adhere to syndicates or any other efficient professional organization and the competition between the media outlets is more important than their agreement upon the professional standards (Zlatev O. (eds) 2011). Overall, there is a lack of awareness so as to self-regulation principles and benefits. 3.1 The mechanisms for self-regulation In Albania there is a lack of public bodies to monitor standards of performance in specific areas (e.g. advertising, privacy); press subsidy systems; voluntary codes of practice and ethics for media organizations (self-regulation); outside pressure groups, etc. In the process of selfregulation, it is necessary to have such professional bodies observing and monitoring the code 221

of practice or the code of ethics, as well as press councils or kind of “ombudsman” for taking the media accountable. It is accepted that will always have media that don’t’ accept other responsibilities that those imposed and driven by the market forces, but the interactive approach, based on dialogue and public and institutional debates, should prevail. 3.1.1 The Press Council Establishing an active press council is proved necessary in order for the code of journalistic conduct to be implemented. It is suggested that if the code does not provide the establishment of a press council, it should be amended. In some countries, adoption of a new code has been the first step towards the creation of a press council, generating a consensus before its foundation (Hulin and Smith (eds) 2008) Such a council, according to the self-regulation guidebook should be made up predominantly of journalists, media owners and of publishers. They are professional rather than political bodies, therefore professional qualities of media representatives should prevail. Sound procedures for avoiding conflicts of interests should be established to secure political impartiality. Such procedures might include a rule that members of decision-making bodies of political parties cannot be board members of a press council, and a requirement that members sign a declaration to avoid conflict of interests. (ibid) The main duties of a press council are to accept complaints, verify the eligibility of the complaint for the process, review the complaint thoroughly from all angles, serve as a mediator between the plaintiff and the media, take decisions on complaints based on rules and regulations, identify breaches by the media of the code of ethics, secure the transparency of and publicity for all decisions taken, analyze and comment on trends in the media, and provide guidance regarding norms, set professional standards for journalists, suggest amendments to the code of ethics (if mandated to do so), defend press freedom (ibid.) 3.1.2 The News Ombudsman as the missing news authority Another mechanism proved successful as a means to achieve self-regulation in the media is the institution of the news ombudsman. This media actor is considered as “the conscience of the news reporting. There is no tradition of an institutionalized news ombudsman in Albania, but the role of the ombudsman is occasionally taken by academic personalities and senior journalists related to specific events when they chose to have their say. As a matter of fact, the concept of news ombudsman-ship has developed a new historical context, and has come to mean ‘the person representing the public’, ‘person with a delegation’ and the ‘citizens’ representative’ (Nauman cited in Baydar 2011). Ombudsman has become a 222

widely established international term used to define an office possessing genuine independence to scrutinize authority. The job of the journalist and that of the ombudsman can serve therefore as an engine for democracy as long as they are taken accountable by the public.”Ombudsmen play a key role for those news institutions that understand the value of transparency, accountability and ethical behavior. Ombudsmen build a bridge between the public and the newspaper or broadcaster. They help make news institutions more transparent to the audience so that they can see how the news institution operates internally. The ombudsmen become the critical voice of the public internally. By giving the audience a sense of belonging they promote a more trusting relationship between the audience and the news organization” (Baydar, 2001. p. 67) Here are a number of reasons why Ombudsmen are key players for self-regulation in the newsrooms: -

To improve the quality of news reporting by monitoring accuracy, fairness and balance;

-

To help his or her news provider to become more accessibleand accountable to readers or audience members and, thus, to become more credible;

-

To increase the awareness of its news professionals about the public’s concerns;

-

To save time for publishers and senior editors, or broadcasters and news directors, by channeling complaints and other inquiries to one responsible individual;

-

To resolve some complaints that might otherwise be sent to attorneys and become costly lawsuits.

-

To explain and clarify the rationale for the daily practices of news outlets and the mindset of journalists to the audience. (cited ibid. p. 76)

3. Conclusions This paper argued that the lack of accountability mechanisms by the Albanian media inhibits the processes of self-regulation. Therefore, the role of the media as social institutions with potential for contribution to democratic values through the professional approach is often limited. Looking at the implementation aspects related to processes of self-regulation on the part of the media operators, the paper identified the media instruments and media practices at work that inhibit self-regulation on the part of the media itself. There is a negative correlation between a lack of a Journalistic Code of Practice and a possible self-regulation prospect in professional terms, producing flaws in institutional and democratic standards expected.

223

Finally, the paper proposed a number of mechanisms in order for the media institutionalization of the media accountability. Therefore, the Press Council, the Code of Practice and the News Ombudsman are the most important mechanisms in order for the media to achieve higher standards of news content, greater public responsibility and contribute to a more democratic public sphere in Albania. References Baydar Y. (2011) “Lone Ranger’ as the missionary of conscience: the role of the news ombudsman” in Professional Journalism Self-Regulation. Paris, United Nations Educational, Scientific and Cultural Organization Haraszti M. (2008). The Media Self-Regulation Guidebook.Vjena, The OSCE Representative on Freedom of the Media Hulin, A. and Smith, S. (eds) 2008. The Media Self-Regulation Guidebook (The OSCE Representative on Freedom of the Media, Miklos Haraszti). Vienna, Organization for Security and Co-operation in Europe (OSCE). Kadare I. (2015) Parathenie (“Tri kohe te Shqiperine ne Time, 1923-2013. Belina Budini)”, Tirane, UET Press Lani R. (2011) “Balkan media: lost in transition?” in Professional Journalism Self-Regulation. Paris, United Nations Educational, Scientific and Cultural Organization. Lubonja, F. (2009).On the miserability of media.Gazeta Tema (Tirana). 17 October McQuail, D .(2005). McQuail’s Mass Communication Theory, 5th edn. Sage, London Zlatev O. (2011). “Media accountability systems (MAS) and their applications in South East Europe and Turkey” in Professional Journalism Self-Regulation. Paris, United Nations Educational, Scientific and Cultural Organization.

224

Marketing of Political Parties on Social Media Assist. Prof. Dr. Vusal Gambarov1, MSc. Besjon Zenelaj2, Geldi Belba3 1 2

International Marketing & Logistics Program, Epoka University, Albania International Marketing & Logistics Program, Epoka University, Albania 3 Epoka University, Albania

Abstract The aim of this research is to analyze how political parties use social networks for the political marketing of their respective parties. This phenomenon has been practiced specifically in United Stated of America for many years since 2008 when Barack Obama, the President Candidate of Democratic Party started using widely social media platforms. On the other hand, this phenomenon is new in Albania. This research paper will be focused mainly on the political marketing campaign on social media platforms of Albania Socialist Party of Albania in 2013. 2013 Campaign was a total success and Socialist Party came to power after eight years through a big victory. Case of RILINDJE.net revealed the power of social networks and their importance in communicating with audiences. This research is based on the case abovementioned and the methodology in conducting is based on analyzing this case and the data obtained from it. Afterward, based on analysis extracted from the collected data authors provide suggestions for further studies regarding this topic. Keywords: Political Marketing, Socialist Party, Social Network, Rilindje.net Introduction Nowadays the development of technology has become crucial in gaining competitive advantage. Especially changes that have occurred in the field of communication show us clearly the importance in adapting to new tools and software programs. The main catalyst of today`s change is without doubt internet. When compared to other means of communication internet is preferred mainly due to opportunities it offers such us; enabling the distribution of the message to a wide audience (Katz, 2003: 97) and providing interactive communication (Sterne, 2010). As a result of the prevalence of internet, it has become possible to create strong brands altogether with shaping the dimensions of customer relationship management (Dalton and Croft, 2003: 204). One of the most crucial parts of communication process is without doubt the channels and the means used to perform it. As a result of development and prospect there is a raising trend in using social media platforms as communication channel. 225

2. Usage of Social Media in Political Campaigns 2.1. Social Media Platforms Social media platforms shortly can be described as web sites that provide online interactive communication to people (O’Leary et al., 2011: 2; Orsburn, 2012: 3). Moreover, social media platforms are web sites and applications (Del Giudicevd., 2014: 4) which connect people (Scott and Jacka,2011: 5), are used to deliver information to wide audiences via internet (Reindersand Freijsen, 2012: 42), make possible the sharing of ideas (White,2012: 9), and which comprise virtual worlds, social news, social bookmarking, wikis, forums (Tuten, 2008: 19). People now have the possibility to connect, share their views with each other, and establish interactive communication thanks to social media platforms (Zhao et al., 2011: 1; Safko, 2012: 5; Sherman ve Smith, 2013:20). Social media platforms are an important communication and marketing channel (Funk, 2011: 18) that has affected communication strategies radically due to opportunity of spreading messages to big audiences (Scott and Jacka, 2011: 3). Botha et al., (2011) in their study found that social media platforms are an important communication channel, and it is very risky for companies (especially brands) not to be part of it. On the other hand, Laroche et al., (2013) found that usage of social media platforms results in the augmentation of loyal customer portfolio. Every organization must firstly identify the social media platforms their audience is using (Brito, 2012: 173). Table: 2.1.1. Social Media Platforms Social Media Platforms

Source

Blogs

Zarella, 2010: 3; O’leary, 2011; Sterne, 2010; Kaplan and Haenlein, 2010; Parker, 2010

Microblogs

Zarella, 2010: 3; Parker, 2010; O’leary, 2011; Sterne, 2010

Social Networks

Zarella, 2010: 3; O’leary, 2011; Sterne, 2010; Kaplan and Haenlein, 2010; Parker, 2010

Photo

and

Video

sharing Zarella, 2010: 3; O’leary, 2011; Sterne, 2010;

platforms

Parker, 2010

Sosyal bookmarking

Zarella, 2010: 3; Sterne, 2010; Parker, 2010 226

Virtual World

Zarella, 2010: 3; Kaplan and Haenlein, 2010

Social News

Zarella, 2010: 3; O’leary, 2011

Forums

O’leary, 2011; Sterne, 2010

Opinion sharing

Sterne, 2010; Parker, 2010

Collaborative projects (Wikis)

Kaplan and Haenlein, 2010; Parker, 2010

Virtual Games

Kaplan and Haenlein, 2010

While using social media organizations should consider some important guidelines in order to maintain a healthy communication with the audience. Some of these guidelines can be summarized as follows (Turner and Shah, 2011: 259-262; Reece, 2010: 238): •

Respecting people`s views and values

•

Being careful while using materials that belong to other individuals (or institutions) which are protected by copyright law

•

Being careful not to reflect on social media issues that should stay inside the company

•

Employees should be careful not to publish on social media information that put organization in an uncomfortable situation

•

Organizations should be transparent

•

Organizations should not create situations that can lead to debates with the audience

•

Shared information should be based on real sources

•

Shared information should contain the truth

2.2. Proper usage of Social Media Platforms Advantages and disadvantages of social media platforms are another important topic to be considered. Using social media properly is strongly related with the understanding of its strongest and weakest points. As stated below (Table 2.1.1.) social media platforms have many advantages and disadvantages. Organizations should benefit from their advantages but on the other hand they should be very careful and take seriously in consideration the disadvantages of social media platforms. Table: 2.1.1. Some advantages and disadvantages of social media

227

Advantages

Dizadvantages

The main advantage of social media platforms: Personal information can be viewed from Providing communication of individuals with other (De Jong, 2014:18) each other (Hansen et al., 2011: 12). For companies: Interactive, contemporary and The risk of stolen personal information (E. low cost communication with customers Brown, 2010: 102) (Funk, 2011: 4). Raising brand awareness and building positive Evaluating people according to Facebook perception on brand (Scott and Jacka,2011: 36) friend number, and Twitter follower numbers;

which

results

in

a

dual

personality (Lovink, 2011: 44) Social media helps find and recruiting skilled Time consuming and adictivity (Watkins, employee (Scott and Jacka,2011: 36)

2009: 136, 142; Funk, 2011: 193)

For instance, in France and countries in which French is spoken, the use of Skyrock is very common. While in Brasil and India Orkut is the most preferred social media platform, in Japan Mixi is on the top (R. Brown, 2009: 165). According to observations and researches made in Albania through television, social networks, and socialbakers.com data it can be said that Facebook, Twitter, YouTube have the highest usage rate compared to other social media platforms. Facebook: Founded by Mark Zuckerbergin 2004 with the aim of establishing connection among old friends (Weinberg, 2009:11; Del Giudicevd., 2014: 2; Tuten, 2008:37) Facebook is the worlds` biggest social network (Deckers and Lacy, 2010: 108) with around 1, 28billion users (Goelmay, 2014). Simply said; if Facebook would be a country, it would have the third biggest population number after China and India (Halloran andThies, 2012; Orsburn, 2012: 5). Albanian politicians and political parties use Facebook widely to communicate with their audiences. Table below shows the number of fans of biggest political parties in Albania and leaders.

228

Table: 2.1.2. Facebook usage statistics Facebook page

Total fan number Local fans

Edi Rama (Prime Minister)

874.501

487.546

Lulzim Basha (Oposition Leader)

547.533

313.996

Socialist Party

167.446

125.969

Democratic Party

303.010

184.614

Erjon Veliaj (Major of Tirana, SP)

242.919

181.719

Rilindje.net

71.926

53.528

Source: socialbakers.com Twitter: Founded by Jack Dorsey, Noah Glass, Evan Williams and Biz Stone in 2006 (Safko, 2012: 39), Twitter is a social media platform used to deliver short messages to followers (White, 2012: 98)and due to its characteristic of limiting the number of characters used in messages to 140 it is classified as microblog(Del Giudiceet al., 2014: 4). Table below shows some statistics of Twitter usage in Albania. Table: 2.1.2. Twitter usage statistics Twitter Profile

Followers

Following

Tweets

Edi Rama (Prime Minister)

181.777

284

4.594

Elvana Gjata (Singer)

129.682

53

3.528

18

1.957

230

1.015

Albanian

Football

Federation 12.065

(FSHF) Vodafone Albania

11.625

Source: socialbakers.com YouTube: You Tube is a video sharing platform (Safko, 2010: 532) founded in 2005 and bought in 2006 by Google (Parker, 2010: 232) for $1,65 billion (Tang et al., 2012: 45) and is among the most visited web sites in the world (Halligan and Shah, 2010: 116).You Tube has 229

shaped the communication of institutions. Nowadays many marketing activities are being placed on You Tube (Zarella, 2010: 83). For instance, there are many video published by companies in which can be found instructions regarding product usage (R. Brown, 2009: 164). Table below shows some statistics of You Tube usage in Albania. Table: 2.1.2. YouTube usage statistics YouTube Channel

Subscribers

Videos

Total views

RTV KLAN (Television)

74 300

12 234

98 694 239

TopChannelAlbania (Television)

131 093

22 290

88 071 332

Albeu.com (News Portal)

514

189

1 799 262

2.3. 2008 Presidential Canmpaign of Barac Obama Usage of social media in political campaigns from President Obama in 2008 is considered to be the breaking point of social media platforms usage in political campaigns (Towner and Dulio, 2012; Zavattaroa, 2010). Qualman (2009) in his book claims that television was the main communication channel that affected positively the presidential campaign of John F. Keneddy. On the other hand, for Barack Obama presidential campaign in 2008 the main communication medium which made the difference was social media (Qualman, 2009: 61). During the presidential campaign, Barack Obama was a senator. Compared to Hillary Clinton and her campaign based on direct marketing activities (e-mail lists, television, radio) with no concerns on budget, Barac Obama obviously was not the favorite candidate to become the US President. Obama team chooses a different path and decided to lean on social media platforms. They managed to engage many people in this campaign through e-mail, Facebook and MyBarackObama.com web site (Halligan and Shah, 2010: 7-8). Online donation was the most innovative step of this campaign. Some statistics regarding Obama 2008 Presidential campaign are as follows (Brito, 2012: 185-186): •

6, 5 million donations

•

More than $500 million gathered

•

6 million of dobations were higher than $ 100. 230

•

Online donation average was $80.

•

“Obama for America” internet campaign obtained 13 million e-mails

•

More than 400.000 blogs wrote on the topic (Obama Presidential campaign)

•

More than 200.000 events took place

•

More than 45.000 volunteers thanks to social media platforms

•

One day previous to elections, Obama supporters made more than 3 millio calls to the voters

•

3, 1 million contributors and 6 million volunteers (Cogburn and Vasquez, 2011)

Especially young voters were affected positively by usage of social media platforms such as Facebook, Twitter, YouTube (Qualman, 2009: 241; E. Brown, 2010: 9). President Obama currently is using social media very effectively, especially Facebook and Twitter. Campaign of President Obama in 2008 made Ad Age Magazine choose him as Marketer of The Year. This campaign was found to be very successful and passed other nominees such us Apple and Zappos (Kiley, 2008). 2. 4. Monitoring Social Media Scales are important in measuring the success of activities. In order to follow and monitor social media, there are many scales and applications. Scales such as hashtags (#), keywords, coding, bookmarks (Crowe, 2012: 105) and many web metrics developed to monitor web platforms have their importance in providing useful information (R. Jamison and S. Jamison, 2011: 137). Since social media metrics focus mainly on perceptions (Funk, 2011: 88) the question marks on return in investments remain still (R. Jamison ve S. Jamison, 2011: 145).Finding a direct relationship among investments on social media activities and their return on investment is the biggest challenge of companies (O’Leary et al., 2011: 134). Also companies not engaging properly on social media platforms risk of losing their loyal customers (R. Jamison and S. Jamison, 2011: 147).Table: 2.4.1. offers an overview of social media metrics used to monitor social media platforms. Also for further detailed information on social media metrics Scott and Jacka(2011: 139) can be checked.

231

Table: 2.4.1. Scales used inSocial media monitoring -Subscribers -RSS clicks Blogs

-Comments -Technoratti datas -Visitor number -Sharing on social bookmarking sites such us Digg, Stumbleupon -Registration number -New registration

Forums

-Daily sharing activities -Page views -Total members -Follower number

Twitter

-Talking trends -Retweet number

Virtual

-Users number

worlds -Page likes Facebook

-Comments and Like number -Monthly new friends / monthly deleted friends number -Sharing quality and interactive conversation -Views

YouTube

-Subscribers number -Comments

232

-Like number (for videos) Photo

-Comments

sharing

-Views

platfortms

LinkedIn

-Rating

-Connections -Activity range and participation

Website

-Visitors number -Time passed in the web site

Source: This table was prepared by the authors with sources obtained from: E. Brown, 2010: 21-22; Carter, 2012: 179-180; O’Leary vd., 2011: 137; Funk, 2011: 29; Brito, 2012: 113-119; Sweeney and Craig, 2011: 84. 3. Data Methodology and Analysis To conduct this study data obtained from Rilindje.net administrators was used. This study is based on the successful case of Rilindje.net, thus revealing the importance of social media platforms usage in political campaigns. Albanian Socialist Party 2013 General Elections Campaign and Social Media Considering the activities of political parties in Albania it can be said that the first political party which began using other sources than conventional ones was the Albanian Socialist Party and it s head, Edi Rama who at the same time was the mayor of Tirana. Edi Rama started using Twitter to share with the audience his opinion about the politics and applications implemented by Democratic Party, the leading political party between 2005 and 2013. After Twitter, Edi Rama started to use Facebook. The Facebook page went from 150,000 fans in November 2012 to 383,000 fans in the end of June 2013; every day by 3484 fans, every week by 14,635 fans, and every month by 40,800 fans (Bankers, 2013). Considering 2013 General Election Campaign of Albanian Socialist Party it can be said that usage of social media platform have been quite considerable. advertising data.

233

Figure 1 shows Google

Figure 1: Google Advertising Data

Google Advertising 94,062

20,699,465 Impressions (How many times the ads were displayed)

Clicks

10.8%

(How many times the users clicked on your ads)

Click Rate

Source: General Digital Campaign Report 201 Figure 2: Newsletters Data

Newsletters 283.459 E-mails sent

35.553 Unique opens

8.301 Clicks

Source: General Digital Campaign Report 2013 Together with Google ads and newsletters, Facebook advertising was another important tool used by Albanian Socialist Party (Fuga, 2015).

234

Figure 3: Facebook Advertising Facebook Advertising 1.876.328 Clicks (How many times the users clicked on your ads)

998.696.207 Impressions (How many times the ads were displayed

8.549.922 Actions (Number of actions made by the users clicked on the ads)

325.979 Page Likes (Number of likes gathered from the users)

Source: General Digital Campaign Report 2013 Figure 4: Other Social Media

YouTube

Twitter 545,226 views

65,724 followers

Source: General Digital Campaign Report 2013 3. 2. Rilindje.net Rilindje.net was launched on March, 15 2013. Rilindje.net consisted of many volunteers willing to engage on in the campaign of 2013 on behalf of Albanian Socialist Party. Rilidje.net, September 2013 had more than 10,000 users. The platform proved to be a solution for organizing volunteers online and getting them engaged in the political campaign. The platform’s main objectives were:

235

o Spread the Albanian Socialist Party’s messages via internet o Engage people in the activities undertaken by Albanian Socialist Party o Collect data about supporters This platform aimed to gathering the youth and volunteers supporting Socialist Party too. The working hours in this network functions with a system of points. The volunteers work was measured with points, the login in the website and the fulfillment of the registration part had 45 points. Every share of the posts had 8 points, each comment posted in the website got 2 points, and every postcard sent via e-mail got 2 points. Furthermore, Rilindje.net organized a contest among volunteers. Starting from June 1, until June 23, five contests in total were held. These were as follows: o Voters contest o Points for activities at 10 o’clock o Invitations contest o Post a 29 on a photo o My voting team Table below shows total registration of volunteers who used the network. Until June 23, 2013 there were registered more than 8180 volunteers who contributed in the elections campaign. Table 1: Users logging in to the network of Rilindje.net 4000

3546

3500 3000

2586

2500

1874

2000 1500 1000 500

174

0 march

april

may

june

Source: General Digital Campaign Report 2013 The total value of the log-in actions until June 23, 2013 was 20,114 and it represented the actions taken by users during their activity in the network.

236

Table 2: Log in actions 12000

10287

10000 7120

8000 6000 4000 2000 0

2707 0 march

april

may

june

Source: General Digital Campaign Report 2013 According to the chart below, the total number of reward actions made by the registered users until June 29, 2013 were 109,121. Table 3: Reward actions until June 2013. 120000

109121

100000 80000 56201

60000 40000 20000

19616 5230

0 march

april

may

june

Source: General Digital Campaign Report 2013 The total number of comments posted by registered users on news websites until June 2013 was 86,792.

237

Table 4: Total number of comments posted. 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

45007

28161

10570 3054 march

april

may

june

Source: General Digital Campaign Report 2013 The chart below shows the total number of shared articles from one section of the website and the share section which was 25,039 in total. Table 5: Total number of shared article from one section of the website 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

16095

7670

96 march

1178 april

may

june

Source: General Digital Campaign Report 2013 The chart below represents the total number of the sure votes recommended by the registered users until 24th of June 2013 and it was 4,650 in total.

238

Table 6: Total number of sure voters recommended by registered users until 24 June 2013 3000 2524 2500 2000 1500

1137

1000 500

612 377

0 march

april

may

june

Source: General Digital Campaign Report 2013

Conclusion Nowadays marketing field has become a vital factor in the decisions regarding society. It is a crucial factor in politics too and political marketing has been considered as a key part for the affecting elections and political campaigns. The politicians have begun to practice many approaches aiming to bring new perspective for the marketing of their respective parties. The political parties use innovative ideas to respond some of the challenges that may occur during campaigns. Moreover, the development of technology brought a new approach of communication and message sharing with public. Social media is involved deeply with everything and everyone. Even the political parties are using it to communicate and deliver their messages to the citizens. According to the data above, the Socialist Party of Albania has been empowered through the social media support because of its direct influence to the public. During the election campaign in June 2013 they introduced the network of Rilindje.net which was created to support and gather all the volunteers of Socialist Party. The platform proved to be a solution for organizing volunteers online and getting them involved in the elections campaign and it resulted to be a history of success, since the Socialist Party won the elections with the majority of votes. Beside the citizens’ support for the party, the network of young 239

volunteers who contributed for the campaign has been very valuable too. The marketing of the political parties is a comprehensive strategy to deliver the right messages in the right time in order to achive the desired goals. The most important key factors that make up a good strategy are the message, the messenger and the channel of message. Political marketing has now established itself as lively sub-discipline of marketing, producing considerable information for the next generations who will contribute for the country.

References Botha, E., Farshid, M. and Pitt, L. (2011). How sociable? An Exploratory Study of University Brand Visibility in Social Media.South African Journal of Business Management, 42, (2), 4351. Brito, Michael (2012). Smart business, Social Business: A Playbook for Social Media in Your Organization. Indiana: Que Publishing. Brown, Eileen (2010). Working The Crowd: Social Media Marketing For Business. Chippenham: British Informatics Society Limited. Brown, Rob (2009). The right of Rob BroPublic Relations and The Social Web: How to Use Social Media and Web 2.0 in Communications. Kogan Page. Crowe, Adam (2012). Disasters 2.0: The Application of Social Media Systems for Modern Emergency Management. CRC Press. Dalton, John and Croft, Susan (2003). Managing Corporate Reputation. London: Thorogood. Deckers, Eric and Lacy, Kyle. (2011). Branding Yourself: How to Use Social Media to Inventor Reinvent Yourself. Pearson Education. DeJong, Sandra M. (2014). Blogs and Tweets, Texting and Friending Social Media and Online Professionalism in Health Care. Academic Press. Del Giudice, Manlio, Della Peruta, Maria Rosaria and Carayannis, Elias G. (2014). Social Media and Emerging Economies: Technological, Cultural and Economic Implications. Springer. Fuga, E. (2015) Lecture by Endri Fuga at Epoka University. www. Retrieved: 01.08.2015. Funk, Tom (2011). Social Media Playbook for Business: Reaching Your Online Community with Twitter, Facebook, LinkedIn and More. Praeger. Goelmay, Vindu (2014). Some Privacy, Please? Facebook, Under Pressure, Gets the Message.http://www.nytimes.com/2014/05/23/technology/facebook-offers-privacy-checkupto-all-1-28-billion-users.html?_r=1, ErişimTarihi: 08-08-2014.

240

Halloran, Matthew and Thies, Crystal (2012). The Social Media Handbook For Financial Advisors: How to Use LinkedIn, Facebook, and Twitter to Build and Grow Your Business. Bloomberg Press. Hansen, Derek L., Shneiderman, Ben and Smith, Marc A. (2011). Analyzing Social Media Networks With NodeXL: Insights From a Connected World. Morgan Kaufmann. Jamison, Rick and Jamison, Schmidt (2011). Social Media Geek-to-Geek: Practical Insights for Technology Marketers. Synopsys Press. Katz, Helesternen (2008). The Media Handbook: A Complete Guide to Advertising Media Selection, Planning, Research, and Buying (2nd Edition). Lawrence Erlbaum Associates. Kaplan, Andreas M. and Haenlein, Michael (2010). Users of the world, unite! The Challenges and Opportunities of Social Media.Business Horizons, 53, 59-68. Laroche, Michael, Habibi, Mohammad Reza and Richard, Marie-Odile (2013). To be or Not to be in Social Media: How Brand Loyalty is Affected by Social Media? International Journal of Information Management, 33, 76-82. Lovink, Geert (2011). Networks Without a Cause: A Crıtique of Social Media. Cornwall: Polity Press. O’Leary, Steve, Sheehan, Kim and Lentz, Sterling (2011). Small Business Smarts: Building Buzz With Social Media. Praeger. Orsburn, Eve Mayer (2012). The Social Media Business Equation: Using Online Connections To Grow Your Bottom Line. Course Technology. Parker, Catherine (2010). 301 Ways To Use Social Media To Boost Your Marketing. McGrawHill. Qualman, Erik (2009). Socialnomics: How Social Media Transforms The Way We Live And Do Business. New Jersey: John Wiley & Sons. Reece, Monique (2010). Real-Time Marketing For Business Growth: How To Use Social Media, Measure Marketing, and Create a Culture of Execution. New Jersey: Pearson Education. Reinders, Adrie and Freijsen, Marion (2012). The e-Factor: Entrepreneurship in the Social Media Age. Dallas: BenBella Books. Safko, Lon (2010). The Social Media Bible: Tactics, Tools and Strategies for Business Success (2nd Edition). New Jersey: John Wiley & Sons. Safko, Lon (2012). The Social Media Bible: Tactics, Tools and Strategies for Business Success (3rd Edition). New Jersey: John Wiley & Sons. Scott, Peter R. and Jacka, J. Mike (2011). Auditing Social Media: A Governance and Risk Guide. New Jersey: John Wiley & Sons.

241

Sherman, Aliza and Smith, Danielle Elliott (2013). Social Media Engagement For Dummies. New Jersey: John Wiley & Sons. Sterne, Jim (2010). Social Media Metrics: How to Measure And Optimize Your Marketing Investment. New Jersey: John Wiley & Sons. Sweeney, Susan and Craig, Randall (2011). Social Media for Business: 101 Ways to Grow Your Business Without Wasting Your Time. Maximum Press. Tang ,Quan, Gu, Bin and Whinston, Andrew B. (2012). Content Contribution for Revenue Sharing and Reputation in Social Media: A Dynamic Structural Model. Journal of Management Information Systems, 29, (2), 41-75. Turner, Jamie and Shah, Reshma (2011). How to make money with social media: an insider’s guide on using new and emerging media to grow your business. New Jersey: Pearson Education. Tuten, Tracy L. (2008). Advertising 2.0 : Social Media Marketing in a Web 2.0 World. Connecticut: Praeger. Watkins, Craig S. (2009). The Young and the Digital: What the Migration to Social Network Sites, Games and Anytime, Anywhere Media Means for Our Future. Boston: Beacon Press. Weinberg, Tamar (2009). The New Community Rules: Marketing on The Social Web (1st Edition). O’Reilly Media, Inc. White, Connie M. (2012). Social Media, Crisis Communication, and Emergency Management Leveraging Web 2.0 Technologies. CRC Press. Zarrella, Dan (2010). The Social media Marketing Book. Sebastopol: O’Reilly. Zhao, H. Vicky, Sabrina W., Lin and Liu, K. J. Ray (2011). Behavior Dynamics in MediaSharing Social Networks. Cambridge: Cambridge University Press.

242

Integration of Bosniak Community in Albania PhD C. Eglantina Reka University of Tirana, Albania

Abstract The occupation of Bosnia by Austro-Hungarian forces in 1878, forced many Bosniaks to migrate to other countries and some families from Bosnia settled in Albania. For more than 100 years, in the territory between Tirana and Durres called Shijak, live in full harmony with the natives, the Bosniak community. Bosniaks who live in Albania have preserved their culture and language. This community is fully integrated. This integration has occurred as a result of the ability of Bosniaks to adapt and because of the hospitality of Albanians. In this article I will argue that in societies with cultural diversity the integration of ethnic groups is an easier process compared to societies without cultural diversity. The integration of Bosniaks in Albania is an example of integration in a society with a high level of religious, cultural and subcultural diversity. In heterogeneous societies the integration of ethnic groups is an easier process unlike in homogeneous societies where the integration is more difficult as Herbert Gans argues that ‘’homogeneous societies do not provide cultural diversity '' and this makes integration a difficult process. Due to its cultural peculiarities, the Bosniak community that lives in Albania has the characteristics of a subculture. Integration and peaceful coexistence distributed to Bosniaks and Albanians is associating with the occurrence of diffusion. In this article through interviews, observation and sociological theories I will argue that the integration of ethnic groups in the Balkans is possible as well as preservation of their language and culture of origin, and the coexistence between Albanians and Bosniaks is a good example for the Balkans. Keywords: Bosniaks, Albanians, Integration, Subculture, Cultural diversity, Ethnic

The history of emigration of Bosniaks in Albania '' According to Congress of Berlin, Austria had won the right '' to conquest and administrate '' Bosnia, and during this time, the Habsburg Empire had done a good job with civilization ''29. The Congress of Berlin that took place during the period of time 13 June 1878- July 13, 1878, 243

''Bosnia and Herzegovina, which had been in crises was entrusted to Austria for ‘occupation and administration’30. Although the rule of the sultan was saved and promised that occupation would be temporary, but no one had doubts that Austria would take these lands. Due to this occupation and the establishment of an Austrian-Hungary in Bosnia and Herzegovina was not easy for Bosniaks muslims, as Haki Baci express ''The arrival of the Austro-hungarian in Bosnia and Herzegovina, it means for bosniaks would shift from a civilizations to another, the extent strictly diverse in culture and livelihoods, which was not easy, not soon,not painless'31. In interviews with Bosniaks thay told that due to differences in religion that Austria-Hungary was trying to do, which was converting bosniaks from Islam to Catholic in the ways that conquest and occupation woul be more easy, made that Bosniaks receiving their road to migration tho Turkey. During the road to Turkey the ship breaks in the Adriatic Sea in Durres and they stop in Durres, when they noted along resemblance i the livelihoods they have in Bosnia with that in Albania , due to this resemblance on livelihood, in religion and culture they decides settling in the hills of Shijak where they still live today. Removal of Bosniaks from Bosnia-Herzegovina in the end of the century Chat XIX happened for reasons they did not want to convert in catholics, thay wanted to preserve muslim religous, the conversion within which had been voluntary, according to them, and not constrained by the Ottoman Empire. Except the main theory that Austro-Hungarian Empire did not reached never before convince Bosniaks to converted in Catholics and they emigrated for religious reasons and this is certificated this history in books,there is another theoty that bosniaks left their country in search of a better life.

Subculture '' Muhaxhire '' and the integration of the Bosniak community. Bosnian community that lives in Borak and Koxhasё of Shijak, territory between Durres and Tirana can be considered as a fully integrated community. From the reports that are done by the Council of Europe, in focus of the implementation of Framework Convention for the protection of National Minorities', it shows that the Bosniak community in Albania have no problems of integration, unlike some other national minorities communities in Albania. Bosniaks who live in Shijak have preserve their language and culture, although they are fully integrated, Bosniaks have the characteristics of a subculture. Community

and subcultures are similar concepts, can be treated as two concepts in

understanding the same, but sometimes differ in some special aspects. Subculture is more resistant to the cultural identity of society and against from general mainstream. The community has many differing cultural aspects of society, including language, traditions and 244

customs, livelihoods and material goods, but have to many in common with the general culture of society. In this article the community and subculture will be used in the same meaning. Bosnian community that lives in Shijak can be seen in terms of a subculture, because of resisting that they demonstrate from main culture, also can be treated in term of community because there are many cultural aspects differ from society, including language, traditions and customs , livelihoods and material goods. The resistance of bosniaks from the main culture is not in a negative sense, but bosniaks resist in preserving their language, livelihoods and traditions inherited from their grandfathers. The livelihood, traditions and customs of the Bosniaks who live in Shijak have many similiarity with shijaksit, but equally their livelihoods changes from traditions and customs of the inhabitants shijakas. Similarities with the locals, bosniaks have felt from the moment they decided to live in Shijak in 1878. These factors of similarities had been important of adapting or of their integration. While Bosniaks differences from shijakasit, their create a their own subculture,

wich

Bosniaks and shijakasit called 'muhaxhirё'. Before we expound

‘’muhaxhire’’ subculture lets explain ‘’What do we understand with subculture?’’ ‘’Subculture in term of sociological studies or nёnkulture in Albanian laguage term, wich replace it, refers to the cultural models specially designed tha differ some populations segments of a society’’32. Dick Hebdige in his book Subculture, a meaning of style, one of the books more elaborated in subculture studies, express that ‘’the word ˝subculture˝ is loaded down with mystery. It suggests secrecy, masonic oaths, an Unaderworld. It also invokes the larger an no less difficult concept ‘’culture’’. So it is with the idea of culture tha we should begin.’’33

What it is the concept of culture? The concept of culture is a set of rules or standarts shared by members of a society, wich when acted upon by the members produce behavior that falls within a range of variation the member consider proper and acceptable34. Culture is learned, culture is not biologically inherited. Culture is learned through communication . the members of a subculture are forst of all member of the larger culture of the society where they a re part of, instead subculture are ‘’groups of population who have shared with society all cultural symbols and the language, elements of material culture membership, values and cultural norms, and other models of the dominant culture in society, but differ in quite culturally specific aspects’’.35

245

J.Milton Yinger explains the proportion between subculture and culture with the concept of social role ‘’role is that part of a full culture that is assigned , as the appropriate rights and duties, to those accupying a given position’’36, this, according to Yinger, does not excludes the possibility that subcultures design roles within his own system. These roles and tasks interacts with the roles of other persons inside a system and recognized and accepted by all the members who share the same culture. ‘’But subculture is not tied in this way into the larger cultural complex : it refers to norms that set a group apart from, not those that integrate a group with, the total society’’37 The metaphor of comparing parent-child is very common on subcultures theories, Boisnier and Chatman suggested ‘’that subculture like a child, could never be entirely different from its ‘’parent’’, the larger culture. Instead, because subculture emerge from the dominant culture’s values, some subcultureral values may conflict with the dominant cultures’ while others may not’’38. Subculture is part of the larger cultural complex membership but differs from it, often being perceived as a countraculture. In early studies about subculture there was not a clear separation between subculture and contraculture , in many studies to subculture was given a negative connotation by equating with terms like delenquence and countraculture. William notes that a large part of the sesearch of american sociologists about of youth subcultures are generally concentrated on aspects of youth deviant behaviors. The Chicago school researchers emphased on ethnic groups, the youth, the criminals and cultural groups other peripheral subcultures, thus subculture was a concept valid for the explanation of social pathologies39. Boinier and Chatman40 distinguish between pertaining subculture term and contraculture ‘’subculture represent tolerated deviations that do not disrupt the normative solidarity af the larger culture’s values. In contrast, members of countracultures hold discordant values and, by virue of their membership, explicitly appose certain aspects of the larger culture. Countercultures are, therefore, unacceptable to members of the larger organization’’. Bosniaks never have behaved with features of countraculture but they have accepted the larger culture and preserving their language and special aspects of bosnian culture. Yinger J.Milton in 1960, in an attempt to understand better the term of subculture had read over 100 books and articles, and he noticed that the meaning of the term subculture was very wide than he had imagined. Yinger does a comparison with chemists, if chemists had only one word to refer to all colorless liquids and this led them to pay attention to only the two characteristics shared in common, their analysis would be exceedingly primitive. Such an analogy overstates the diversity of ideas covered by ‘subculture’’ , but the range is very wide. Neverless three distinct meanings can be described’’41. 246

Bosniaks can be seen in this perspective as subcultural group, as part of the larger culture thst differ only insome specific aspects. Bosniaks are not separated by natives in Shijak, they are considered shijakas to,but due to some changes cultural aspects they can be studied as a very interesting subculture. Bosniaks live in Albanian society, wich is society which cultural diversity an can be considered a heterogeneous society, or culturally pluralistic. Herbert Gans explains the concept of taste culture ˝taste culture as the culture wich result from choice, it has to do with those values and products about wich people have some choice’’42. Gans describes the taste cultures as subculturesa, considered as the most adequate for the term. The author explains tha provide homogeneous societies offer little cultural diversity; they generally develope only a single concept of beauty, one style of art (oftesn religious), and one way of home furnishing’’43. American society, with its pervasive division of labor and heterogeneity, ‘’America is culturally pluralist, made up of a number of subcultures wich coexist around a common core-‘’American culture’’44. The researcher Zyhdi Dervishi appoint Albanian society as a society with subcultural density , Albanian culture not only has a subcultur density , but also there are quite prominent distinctions from and with each other’’45. The fact that Albanian culture has a density of subculture is appointed also from albanian writer Faik konica, in his book he cited the french authors that vsites Albania during the end of the XVIII century, as they appointed that Albania as plural numbers of tiny republics and halffeudal units, sometimes connected in groups, sometimes all the aparted from each other, who knew Sultan as a distant ruler which does not interfere in their local governance46. So, Albanian culture is culturally pluralistic, a concept that Herbert Gans suggests to explain ‘’to provide cultural content to express and satisfy the specific standarts of every taste public’’47. Exactly this cultural diversity make possible and and esier the integration of individuals and social groups. Also, Gans explains what he calls subcultural programming, which gives to the public ehat they want and not what it is best for them, what do reformists believe is related and good for people and not what it is true and good for the people, because important is what is good for the reformists. In this way programin subcultures given by centralized states is a authoritarianism48. This is what happened in Albania during the diktatorship, where different communities wich lived ine Albania during the dictatorship of monist party, includen bosniak community, they all are committed in building socialism state, and they have no rights to practice aspects of their subculture because this was againts communist ideolody and if you act againts the rules you could be punished. During the years of diktatorship, bosniaks were not recognised as a minority group, they were officialy albanian with full rights and duties and 247

completely assimilated. For the Bosniak community in Albania during the years of the party system was then took over the measures of education and the complete integration for them. All Bosniaks children were not isolated from other children at school, but they were fully integrated other children in school49, but they learned only in Albanian language, and bosnian laguage was denied as a right of education in the language's parent. Thus over the years, ethnic subcultures and communities fall in a ‘’sleep’’ but were forgotten by their members, who have began their activity would immediately after the down- turns of party system. Albanian culture, as culture of fulldifferences within its rich subcultures and dialects is explained also by the sociologist Gani Bobi ''The map of Albanian culture is divided in cultural area, in subcultures, as differences vertical, perhaps could be based on linguistic differences, as a result of many factors. The map of Albanian culture generally dialectologicly albanian language. Linguistic differentiations are a guide, in our opinion, more accurately a roadmap track generally of cultural differentiations, who appear in a form that is expected on circles and create an area, which draw together with each-other’’50. In Albania, in addition to the main dialects toskё and gegё, there are a number of other dialects. As sociologist Gani Bobi explains linguistic differentiations are to accompany and cultural differences, to prove the thesis that Albanian culture is pluralistic, and that this leaves a space for other cultures and the integration of social groups such as the Bosniaks. Subcultura is part of the larger culture. Culture parent that is given to us when we were born is a set of rules and standards that members of a society share their members, while subcultures is a deviation from the larger culture. Factors that impact subculture are determining from style, age, class, religion, ethnicity, racial origin, language, place of residence, personality and individual desires, sexual orientation etc. Subculture '' Muhaxhir’' are called so due to their origins from Bosnia-Herzegovina, language and many different cultural aspects. Preserving their cultural from their country of origin, we can find explanation by the author Anthony Smith, who explains that under primordialist viewpoints, in nationalist theories is ‘’argued that regardless of where the individual chooses to live, within his country of birth, or to imigrate in a another state, he always will be a member of his community of origin and always will be the values of this community wich he will hol’’51. This occurred with the Bosniak community in Shijak, regardless that they are fully integrated they are not culturally disconnected from their country of origin. Coexistens of Albanians with Bosniaks are describes from english writer Edith Durham in her book concern the Balkans, published for the first time in 1905, she wrote '' We passed near a place with the name being mentioned as Shijak, who had some 50 houses. All residents were 248

Albanians, Muslims escape from Bosnia at the time from the Austrian occupation. From this time, in Albania have changed many opinions'’52, the author speaks of Borake where Bosniaks were placed when they came in Shijak. Bosniaks in Shijak are in villages Borake and Koxhase, and the city of Shijak. Bosnian family are also in Durres and in the whole country of Albania. Borak Village is Bosniaks fully populated, there are not other inhabitants. Observations on the ground and from and interviews with residents in Borak, was referred that Borake has only one family from Kukes but they did not live in Borak but had emigrated. Bosniaks are a social group as we have explained are called subculture. Subculture often is too confusing to be used but Yinger says ‘’ the term is often used to point to the normative systems of groups smaller than a society, to give emphasis to the ways this groups differ in such things as language, values, religion, diet, and style of life from the larger society of wich they are a part. Perhaps the most common referent in this usage is an ethnic enclave or a region but the distinctive norms of much smaller and more temporary groups may be described as a subculture’’53, Borak village can not be considered as ethnic territory but as a territory inhabited by an ethnic population of

Bosnia-Herzegovina. Borak village has a population of 847 inhabitants,

(information from Durres District Council) that its population Bosniaks as a subculture is called '' Muhaxhir ‘'. ‘’ All societies have differentiating roles, but only heterogeneus societies have subcultures. Role is that part of a full culture that is assigned, as the appropriate rights and duties, to those occupying a given position’’54, according to Yinger subcultures do not excludes membership roles within the system. These roles and tasks interacts with the roles of other persons inside a system, these are recognized and accepted by all the members who share their the same culture 55. But with the subculture happens otherwise, it is not connected in this ways with the larger culture of the society, subcultures refers to the norms that set a group a part from, not those who integrate a group with, the total society. Heterogeneous societies, or culturally pluralistic societies, as was explained in the above have density of subcultural, and subcultural density creates still room or spaces for the social group membership to adjust and integrate. But the space of cultural density is not or hospitality is not for the integration or the adjusment of a social groput but there are many other factors. Other factors influencing in integrating Bosniaks in Albanian society is the resemblance of livelihoods between albanians and bosniaks, religious, and major resembances in cultural aspects that Bosniaks have found in Albania. For more than four centuries countries of Balkanhad been accupied by the Ottoman Empire and ''the same political, economic, cultural, educational conditions, within time under foreigners ruler have affected that this people in the nineteenth century, not to discern so many from each other on many ways''56. Exaclty similar political, economic, cultural, educational 249

conditions, provided an easy way for bosniaks to adapt in Abania, unlike what coul be provided where the Austro-Hungarian occupation as Haki Baci express

''The arrival of the Austro-

hungarian in Bosnia and Herzegovina, it means for bosniaks would shift from a civilizations to another, the extent strictly diverse in culture and livelihoods, which was not easy, not soon,not painless’’57. With the similarities bosniaks found in Shijak, helped them to establis and integrated in Albania. Erzeni River, which it passes through Shijak resembled to Bosniak like Neretva River in Mostar. The mosques that saw Bosniaks in Durres and Shijak were crucial for their decision to live in Shijak because they are Muslims too. The similarities Shijak hills , which is now known as Koxhasё, is with the hills that Bosniaks left in Bosnia , so they were told by their grandfathers that when they saw this hill they express ‘’just like home’’. Bosniaks who live in Shijak have brought many customs and traditions with them, traditions and customs wich are embezzled from residents of Shijakut. To many ways of cooking as potato pie, Bosnian folk dance and songs that are sang in weddings party of Shijak , as Ken Gelder argued ... migration and immigration are often importants eventsof subcultural identity’’58, so Bosniaks have their own subcultural identities and have given many cultural aspects for shijakas habitants. Integration of Bosniaks in Shijak has been also influenced because during the period of dictatorship in Albania was then took measures for their education and their employment and many of were successful people in many areas such as in sports, education, art, farming etc. Bosniaks were not married with locals for nearly 60 years, because they thought he woud come one day tjat they will return to their own country of Bosnia and Herzegovina and the reason og their marriages were endogamy was because Bosniaks did not want to leave anyone behind. After 60 years, for the first time happened the first marriage between a bosiak and a shijaks, because in 1948 with the demolition of the relations of the People Republic of Albanian's and former FYROM, Bosniaks in Shijak by not having any alternative Other began to marry with natives (with Albanians, shijakas). From that time today between Bosniak and Albanians have happened many marriages, by facilitating their integration and diffusing cultures between Bosniaks and Shijaks. When you go to Bosniaks in Shijak as a bride, you must necessarily learn their language because in their families bosniaks speak their language of origin. Religion plays an important role in determining the subcultures. Albania has historically been the site of many religious one, where there are a number of religions. And this number of religious is an important factor for subculture density in Albania. Religion plays an important role in determining the identity of Albanians ˝..for albanians religious diversity is a factor from century ago that formats subcultures or reinforces existing ones’’59. Bosniaks found in Shijak 250

a Muslim population. Bosniaks in the end of the XIX century are known as Muslims ''at that time the word Muslims was acquire for the bosnian in Bosnia Herzegovina, in a widest sence than the followers of Islam . Thus, since the end of the last century, being strengthened in the period between the two world wars, all cultural, artistic and sports rganizations that were created in Bosnia are named muslim rather than islam''60. Bosniaks in Shijak are practicing Muslim religion as well as most of the inhabitants shijakas, and this made more easy the integration of Bosniaks during the period of 1-centurie. Although, the integration of Bosniaks in Shijak have been complete and smoothly, the features of their ethnocentric appeared after 90s, after the collapse of dictatorship Bosniaks traveled to the countr of their grandfathers but as express, that had changed many things, they already were adjusted in Albania and they continued to live in Albania. During visits in Bosnia Herzegovina, established the relations with the cousins who live in Bosnia-Herzegovina, which they visit constantly. Many Bosnian Albanian's family immigrated after 1990 to the west but some of them emigrated in Turkey where there are adjusted and fully integrated. ’The mobilization of ethnic minorities and immigrant community has often been described as diaspora nationalism, to the extent that is has as main point of reference the country of origin’’61. Bosniaks can be called as nacionalist of Diaspora, they do not hide their love for their country of origin, but Bosniaks love also Albania so they could be called them as '’ good Albanians' , easily we can prove that bosniaks tare not part of any crime or violations in society, rarely could be found a bosniak wich is par af a certen violation in Albania. However Bosniaks who live in Shijak, love Albania they do not have a sense of belonging Albanian nationality as far as the rest is Albanians, who often exceeding in extreme nationalism, this is seen for at better when the national team of Albania plays football. During the match between Albania and Serbia in November of the year 2014,qualification match for Euro 2016, where Serbs were huligane blanket and attacked Albanians football players. Albanian and Serbian society were involved by a surge of nationalism, but Bosniaks community in Shijak passed this event without any special interests and they were not involved from the wave of Albanian nationalism but was indifferent to that dhat happened in Belgrade and that topic was not part of their everyday conversations as what was happening in each albanian group, family, convesation in their everyday life. Also, indifferent to this event have been gay community ,Egyptian-rom communities. Although ‘’muhaxhiret’’were indifferent from the match on october 2014, a year later, in October 2015 Bosniaks in the bar-cafe and in their houses where they were watchin the match, they were the cheering for Albania and posting pictures of Albanians-flag in social

251

networks, when Albania was qulified in Euro 2016. Therefore I like to call them goog albanians because they have simple ways to love Albania. Gelder explain that ‘’ ‘’Forms of trasportation and mass communication, like the newspaper, can bring people together, but new immigrants into the city may well try to preserve their social and cultural autonomy’’62, Bosniaks have their cultural identity, of awareness of their identity has come as a result of many factors. Ties with their country of origin after down- turns of dictatorship in Albania and after the end of the war in Bosnia. Bosniaks have their own organisation callet '' Zambak'' which organizes many social and cultural events for Bosniaks. In the elementary school '' Adem Sabli '' for a period of time children have learned the bosnian language, and books were provided by the Ministry of Education in Bosnia. Bosniaks follow the TV channel 'TV Hayat' 'with cable system. In the village of Borak it is a bridge constructed as the old bridge over the Neretva River in Mostar. Bosniaks have their graves, where are clearly distinguished eculture symbols as part of Bosnian culture. Muggleton, researcher of subcultures, sees subculture issue as postmoder issue associated closely with individualism63 and this is what is going on post-communist country of Albania, in Albanians has emerging sense of individualism. Individuals already have their special styles and tastes, styles created from people or taken by the world-wide industry of fashion, not styles and flavors was offered by the party-state during dictatorship perios. Albanian society, despite social problems that characterize it, is part of the postmodern societies, as a result of the revolution of information had technology, free movement toward western countries and globalization. All these affect in on the development of the different subcultures. So, in Albania there is room for the development of subcultures and subcultural identities membership, '' muhaxhirёt '' of the Shijakut. Edith Durham describes Bosnia during Middle Ages as part of a new religion called Bogumil (beloved of God), the religion wich is not known to much but that was fought hard and disappeared over the centuries, 'being mentioned in Bosnia and Herzegovina found a great quantities of Monuments of bogumil. Stone box graves, often sculpted. The sun, the cross, the moon as symbols, while face of worrios with kilts and armed, with bows, arrows and protect iron, give an idea of bayraktar of Middle Ages. Kilts worn today by albanian. ''64. later 'Bogumil embraced Islam'’65 '. Albanians wor kilts shows the similarities of of the Balkan peoples. In Borak finds inscriptions in two languages English and the language Bosnian (SerboCroatian), roads and public places, making use of nouns, adjectives or other information and demonstrated freely and without interference. There are

to comprehension , peacfull

coexistence between Bosniak community and the inhabitants of Shijakas and ‘’and that respect 252

for diversety comes from something that also goes back to Diogenes : tolerance for other people’s choices of how to live and humility about what we ourselves know. Conversation across identities-across religion, races, ethnicities and nationalities- is worthwhile because through conversation you can learn from people with different, even incompatible ideas from your own. And it is worthwhile, too, because, if you accept that you live in a world with many different konds of people, and you’re going to try to live in respectful peace with them, then if you don’t agree’’66 Conclusions Integration and adaption of social groups happens naturally in society that welcomes you has a cultural diversity. Cultural diversity and density creates necessary spaces for the integration of social groups. Also, the similarities in religion, in cultural features, in the livelihood , it makes easier the integration of a social group in society. Bosniaks or 'muhaxhirёt' as subculture were integrated in Albania after they found the necessary space, hospitality, cultural resemblance and of course their desire to adapt. So, integration occurred naturally, without impositions and there has not been a tendency of assimilation, despite measures taken during the dictatorship years in Albania, Bosniaks were not culturarly assimilated, but they excist today with their special subcultural identity as part of Albanian culture. 29

.

Schevill, F Ballkani, Historia dhe Qytetwrimi. Shtwpia Botuese ‘’Uegen’’, Tirane 2002,pg.371-372

30

Po aty, pg.328 Shoqata Boshnjakwt e Shqipwrisw ‘’Zambak’’, Ardhja dhe Integrimi i Boshnjakwve nw Shqipwri . Botimet Toena, Tiranw 2001,Pg.12 31

32 33

Dervishi, Z Nёpёr degёzime tё Kulturёs Shqiptare. Botimet Emal, Tiranё 2013.pg.28 Hebdige,D Subculture The meaning of Style . Routledge, London 1979.pg.4

34

Haviland,A W Anthropology, Eighth Edition, New York 1996

35

Dervishi, Z Nёpёr degёzime tё Kulturёs Shqiptare. Botimet Emal, Tiranё 2013.pg.28

36

Yinger,M.J ‘Contaculture an Subculture’. American Sociological Association,Vol. 25, No.5.October 1960.pg 627-628 37

Po aty Boisnier,A ; Chatman J, A ‘The Role of Subculture in Agile Organization’Harvard Bussines School, vol. 02091, 2002.pg.9 38

39

Williams, P.J ‘Youth Subculture Studies :Sociological Traditions and Core Concepts’ Sociologji Compass. Vo.10. 2007.,Pg.572-593. 40

Po aty Po aty, Pg.626 42 Gans, H.J Popular Culture and High Culture. Basic Books, Inc.,Publishers, New York, 1974, pg.13 43 Po aty, pg.67 41

253

44

Po aty,pg 13

45

Dervishi, Z. Po aty,pg.32

46

Konica, Faik : Vepra 2,Botimet ‘’Dudaj’’Tiranё 2001, pg.232 Gans, H.Po aty,pg.132

47 48

Gans,H.Po aty, pg.136 Shoqata Boshnjakwt e Shqipwrisw ‘’Zambak’’, Ardhja dhe Integrimi i Boshnjakwve nw Shqipwri . Botimet Toena, Tiranw 2001,pg.29 49

50 50

Bobi,G Paradoks kulturor, Vepra 2, Botimet Dukagjin, Peje, 1997,pg.77

51

Smith, D.A National Identity (Ethnonationalism in comparative perspective), London New York, Penguin Books,1991, pg.71 52

Durham, E Brenga e Ballkanit e vepra tw tjera pwr Shqipwrinw dhe shqiptarwt, Shtwpia Botuese Naum Veqilharxhi, Tirane 1998, pg.92 53 54 55 56

Yinger , po aty, pg.626 Yinger, po aty, pg 627-628 Yinger , po aty, pg 628 Veliu,V Shqiptarwt sipas udhwpwrshkruesve frwng tw shekullit XIX, Botimet Dukagjini, Peje 1998, pg.227

57

Shoqata Boshnjakwt e Shqipwrisw ‘’Zambak’’, Ardhja dhe Integrimi i Boshnjakwve nw Shqipwri . Botimet Toena, Tiranw 2001,Pg.12 58

Gelder,K Subcultures (Cultural histories and Social Practice). Routledge, New York 2007

59

Dervishi , Z,po aty,pg.95 Shoqata Boshnjakwt e Shqipwrisw ‘’Zambak’’, Ardhja dhe Integrimi i Boshnjakwve nw Shqipwri . Botimet Toena, Tiranw 2001,pg.18-19 60

61

Triandafyllidou ‘Migrants and ethnic minorities in post-Communist Europe : Negotiating diasporic identity’ Ethnicities 2009,9,226 pg.230 62

Gelder, K. Po aty,pg.29

63

Muggleton, D Inside Subculture (The Postmodern Meaning of Style). Berg, Oxford 2000,pg.5

64

Durham, E 20 vjet ngatwrresa Ballkanike, Shtwpia Botuese Argeta-ZMG, Tirane 2001, pg147

65

Durham, E, po aty, pg:151 Appiah,A,K Kozmopolitizmi im, Botimet ISHM, Tiranw 2008, pg.17

66

254

EU’s Trade Policy with Western Balkans MSc. Griselda Lici Research Assitant, Political Science and International Relations Department, Epoka University, Tirana Albania

Abstract One of the many policies that EU has adopted is trade policy. This means that the European Union and its 28 Member States are acting as a single jurisdiction in every trade-related matters. Every international agreement that the EU concludes is binding the institutions of the EU and its Member. In trade relations with non EU countries, EU acts as a single one, meaning that the EU Member States share a single trade policy, a single market and a single external border. Europe is considered to be the world’s largest exporter of goods and services of the world. By speaking with one voice, the EU has the weight both to shape an open global trading system based on fair rules and to ensure that those rules are respected. Trade policy, as mentioned below, sets the rules and regulations for trade to take place. This paper analyzes the trade policy. What is trade policy, for what purpose is this policy implemented. After analyzing trade policy in overall this paper specifically focuses on the trade relation of European Union with the Western Balkans. Keywords: EU, Trade policy, Western Balkans. Introduction Trade is more than just the contents of shipping containers. I see it as creating the conditions by which investment, skills, experience and opportunity can spread around the world, and into the places where they are often needed most. The goal of trade policy is not trade for trade’s sake: it is a more prosperous, stable and equitable world. Catherine Ashton, European Commissioner for Trade Trade can be said to be the most important contact of Europe with the world beyond its borders. Day by day Europe imports goods worth hundreds of millions but also exports goods worthy the same amount of money. The motor for the prosperity of Europe is considered to be the trade. Europe is the largest exporter of the world of goods and services as well as more than one hundred countries largest export market because very efficient means of transport, new technologies and faster communications made it possible for Europe to produce, to buy and to sell goods all around the world thus establishing Europe’s place in the world. 255

European Union has 28 Member States and all of them share a single trade policy, a single external border and a single market. This means that there is only one negotiation and also only one negotiator which is the European Commission and in the end just one agreement sets the rules with the trading partners instead of 27 agreements. On the other hand the European Commission is also the representative of the EU Member States in the World Trade Organization (WTO). What is Trade Policy? The European trade policy arranges the directions for investments and trade in and out of the EU. For the development and implementation of EU trade and investment policy the DirectorateGeneral for Trade in the European Commission helps. Cecilia Malmstrom is the EU’s Trade Commissioner, and their aim is to shape a good investment environment and trade for business and people. In the Communication “Trade, Growth & World Affairs” are set out the overall directions for the EU trade policy with the aim to revitalize Europe’s economy. Playing an important role in keeping markets open worldwide and helping Europe to surpass the economic crisis is EU’s aim and objective. The EU trade policy is working to: 1. Create a fair and open trade global system The World Trade Organisation helps to shape a global trade rules system for the purpose of keeping the global economy open for trade and that respects and reflects the concerns and needs of developing countries. The agreements and obligations network is overseen by the World Trade Organisation and it helps in ensuring that the trade is open, fair and predictable. Maintaining the global trading system and ensuring it adapts to a fast-changing world is EU trade policy’s central priority and what it works for. 2. Opening of markets with key partner countries What EU trade policy seeks is to create jobs as well as investment opportunities and growth for European companies and also for wider economy, by maximizing their chances to trade with the rest of the world which is particularly important for the current economic conditions. Thanks to new transport and communications now even the smallest European companies have the chance to trade outside Europe. An important way to open the markets is through negotiations for better access and conditions for trade and investments through free trade agreements. A number of Free Trade Agreement has concluded and the EU is continuing negotiations with others. 256

3. Ensuring that the others play by the rules What EU trade policy aims is to open new markets for European exporters, investors and workers through lifting barriers to the markets of EU’s trading partners. The EU works with countries outside it in order to: -

Clear away persistent problems for exporters

-

Maximize opportunities for EU businesses to get equal access to procurement markets which are outside the EU

-

Lessen duplication/imitation and piracy of EU goods

-

Create new chances for European investments

The rules of international trade are ideated to make sure that trade among different countries, is fair, for that reason it is essential that those rules are respected. The EU trade policy defends and represents the European interests in the court system of the World Trade Organisation by making sure that the obligations of WTO are met. Also it is their duty to make sure that the imports entering the EU are traded with adequate or acceptable prices. Moreover the imports must not cause any unfair injury or damage to European companies and their workers. 4. Guaranteeing that trade is a force for sustainable development The European Union is devoted for creating new jobs in Europe as well as helping to boost the economic growth. Still the EU trade policy aims to help aid different people and different countries all over the world for using trade as a development tool but also to help the trade their way out of the poverty. Europe’s markets are fully opened to the world poorest countries and also actively working to help for the development of those countries gradually by building their capacity for taking advantage of trade. In the world scale the EU is the larger/biggest provider of “Aid for Trade” to the developing countries with a number of more than €7 billion a year. This assistance is intended to help the developing partners to advance the needed skills and infrastructure to successfully trade. Europe’s trade policy on the other hand is also used to promote: -

Support in the fight for the protection of our environment and reversing global warming

-

Actively working to improve the working conditions for the workers of the developing countries 257

- Assuring the highest standards of safety and health for the products that people buy and sell. EU relations and trade with Western Balkans EU-Western Balkans relations Western Balkans: Serbia,Bosnia-Herzegovina, Montenegro, Kosovo, Albania, the former Yugoslav Republic of Macedonia. The European Union has close connections with Western Balkans countries. The EU is striving to achieve and help fostering prosperous and well-functioning democratic societies for further steps toward the integration in the EU. The terms for establishing contractual relations with the countries of the Western Balkans were first laid down in the Council Conclusions of April 1997. The Council in 1999 established the Stabilisation and Association Process (SAP). It was concluded that if the countries of the Western Balkans met the criteria set up in the Copenhagen European Council in June 1993, they would be eligible for the EU membership. The Thessaloniki European Council of 19-20 June 2003 that endorsed the “Thessaloniki Declaration” and the “Thessaloniki Agenda for the Western Balkans: moving toward European integration” showed the determination of the European’s Council to support fully and effectively the path of the Western Balkans in the European integration. The documents of the above mentioned were adopted at the Summit of EU-Western Balkans which was held in Thessaloniki 21 June 2003. The need for fair and more accurate conditions was reaffirmed in the European Council 0f 14-15 December 2006, in line with the Copenhagen political criteria, stabilization and association process and the renewed consensus on admitting new countries to the EU. The EU’s approach is a form of a comprehensive set of policy instruments based on: -

The Stabilisation and Association Process

-

The Common Foreign and Security Policy (CFSP)

-

The Common Security and Defense Policy (CSPD)

The enlargement policy of the European Union can also include financial support or assistance conveyed through the Instrument for Pre-Accession Assistance (IPA). The annual Enlargement 258

Strategy is adopted by the European Commission each autumn and Progress Reports are written for each country. Albania and The Former Yugoslav Republic of Macedonia are granted the candidate country status, Serbia and Montenegro have started the talks for the membership while BosniaHerzegovina and Kosovo are potential candidates for the EU membership. With the Common Security and Defense Policy (CSDP), the EU holds a supporting key role in the stabilization the Bosnia-Herzegovina, through the military-led mission of EUFOR/Althea. Also the EU deployed a police mission (EUPM) in Bosnia-Herzegovina between 2003 and 2012. Common Security and Defense Policy missions have been deployed also in the former Yugoslav Republic of Macedonia. In Kosovo the EU has deployed a mission with the intent of supporting the Kosovo authorities to uphold the rule of law. Good neighbor relations and regional cooperation within the Stabilisation and Association Process, are crucial the region’s stability and ongoing reconciliation process. EU strives to promote stability, peace, economic prosperity and freedom in the Western Balkans, thus trade plays an important role in these efforts. Trade picture: Calculating for over two thirds of the region’s total trade, EU is the largest partner of the Western Balkans. The region in 2013 as a whole had a share of 1% of EU’s overall trade but still individual countries’ shares were even lower, Bosnia-Herzegovina 0.25%, Serbia 0.50%, Albania 0.10%, the former Yugoslav Republic of Macedonia 0.15%, Kosovo 0.0% and Montenegro 0.0%. The main imports of EU from the Western Balkans in 2013 were 24.1% transport and machinery equipment, 21.1% manufactured goods classified cheaply by materials and 20.3% miscellaneous manufactured articles. While the exports of EU to the Western Balkans were 26.9 % transport and machinery equipment, 22.3% manufactured goods classified chiefly by material, 15.2% chemicals and lastly 12.3% mineral fuels. EU and the Western Balkans -Accessing the EU market To all Western Balkans countries in 2000 was granted by the EU autonomous trade preferences, later in 2005 these preferences were renewed and afterwards in 2011 until 2015 by allowing 259

almost all exports entering the EU without limits on quantities and without custom duties. Still wine, certain fisheries and baby beef products enter the EU under preferential tariff quotas. Through this regime of preferences is seen a contribution in increasing exports of Western Balkans in the EU. The EU was the Western Balkans largest trading partner for exports with 81.8 % and imports with 72.7%. With a clear EU perspective the Western Balkans countries have all been offered the Stabilisation and Association Agreements (SAAs). Massive financial assistance is included in EU’s strategy thus becoming the largest donor so far in the region. The membership of the Western Balkans in the World Trade Organization (WTO) has strongly been supported by the EU. Albania became a member in 2000; the former Yugoslav Republic of Macedonia became a member in 2003; and Montenegro became a member in 2011. On the other hand negotiations for the WTO accession of Serbia and Bosnia-Herzegovina are ongoing. The Stabilisation and Association process governs the realtions between the EU and the Western Balkans. -There are in force three Stabilisation and Association Agreements (SAAs), with Albania (2009), Montenegro (2010) and with the former Yugoslav Republic of Macedonia. -Trough an Interim Agreement the trade part of the SAAs came into force, Serbia (2010) and Bosnia-Herzegovina (2008). - Establishing a free trade area between the Western Balkans and the EU is mainly what these agreements aim. - Where trade is concerned they focus on protecting intellectual rights, liberalizing trade in goods and aligning rules on EU practice. A system of diagonal cumulation of origin has been set up between Western Balkans participating to the Stabilisation and Association Process, the EU and Turkey with the intention of developing regional trade and offering new opportunities for economic operators. The system helps by allowing the partners which are participating to use the originated materials in other countries zone under conditions which are advantageous in the final goods manufacture that are exported to the Western Balkans, the European Union or Turkey. 260

-Trading with the Western Balkans The European Union in the Western Balkans is present in the ground. There are EU Delegations in Kosovo, Serbia, The Former Yugoslav Republic of Macedonia, Bosnia-Herzegovina, Albania and Montenegro. In the overall relations of political and economic matters of the EU with the Western Balkans, trade relations are considered to be part of. -Stabilisation and Association Agreement The Stabilisation and Association Agreement is the framework of relations between the Western Balkans and the EU for the implementing the Stabilisation and Association Process. The agreements made with each country are adapted to each country and their specific situation and while working for the establishment of a trade area between the European Union and the countries of the Western Balkans, common political and economic objective are identified by them with the intention of encouraging regional cooperation. These agreements serve as basis for implementation of the accession process toward the path of accession in the European Union. -Stabilisation and Association Process The Stabilisation and Association Process (SAP) is an adopted policy by the European Union forward the Western Balkans to help them to eventually become EU membership. The involvement of the Western Balkans refers to the aim of a stabilized region and an established free area trade. The Stabilisation and Association Process helps in setting common economic and political goals while the progress evaluation is actually based on the merits of the countries. In 1999 the Stabilisation and Association Process was launched but also enhanced in June 2003 in the Thessaloniki Summit. The SAP relies on: •

Contractual relationships (bilateral Stabilisation and Association agreements);

•

Relations for trade (autonomous trade measures);

•

Assistance in finances (the Instrument for Pre-accession Assistance – IPA);

•

Good neighbour relations and regional cooperation.

-Central European Free Trade Agreement (CEFTA) The CEFTA which originally got signed on December 21 1992 by the Visegrad group counties, like Hungary, the Slovak Republic and Czech Republic and it was effective since July 1994. The 261

CEFTA was then joined by Romania (1997), Croatia (2003), Bulgaria (1999) and Slovenia (1996) but subsequently they left the CEFTA once they joined the European Union. The CEFTA 2006 is the coming agreement replacing all the previous ones which until then had been in force between the signatory countries, Albania, Montenegro, Bosnia-Herzegovina, Croatia, Serbia, Moldova and United Nations Interim Administration Mission in Kosovo (UNMIK) on behalf of Kosovo. The provisions that the trade contains are related to trade in agricultural and industrial products, customs cooperation, investment, new trade issues, public procurement, technical barriers to trade, intellectual property rights, etc. European Union’s trade with Albania

In the above table we can see the total goods of European Union in trade relations with Albania. It is clearly understood that the European Union is exporting more in Albania than it is importing and the exports have increased from 2004 until 2013, even though the highest exports are shown to be in 2012. European Union’s imports from Albania on the other hand are lower nevertheless until 2008 these imports have been increasing but after 2008 they have been decreasing.

262

-Goods in total: Flows of EU Trade, annual data of 2013-SITC section

From the imports, the products that European Union imports most from Albania are: miscellaneous manufactured articles with a percentage of 40.2%; minerals fuels, lubricants and related materials with 34.3%; and manufactured goods classified chiefly by material with 11.3% so the above listed are the three main imported goods.

From the exports we can see that exports are much more than imports. The three highest exports are: manufactured goods classified chiefly by materials with a percentage of 21.6%; mineral fuels, lubricants and related materials with 21.1%; machinery and transport equipment with 17.5%.

263

-Albania’s trade relations with the world

European Union is Albania’s main (top) trading partner for both imports and exports. China is listed as the second trading partner for imports as well as for exports. In the imports chart the third main trading partner is listed Turkey while in the exports chart the third main trading partner is listed Kosovo.

264

European Union’s trade with Serbia

The chart shows the total amount of goods in the trade relation of EU with Serbia. Even here the exports rates are higher than the imports rates meaning that European Union in exporting more than it is importing. The exports have been increasing from 2004 until 2008 but then in 2009 they fall considerably but from then they have been increasing. The imports as well have been increasing from 2005 until 2009 after they fell in 2009 and 2010 after increased in 2012 and again fell in 2013.

-Goods in total: Flows of EU Trade, annual data of 2013-SITC section

265

Regarding trade relations of the European Union with Serbia, the most imported goods from Serbia are: machinery and transport equipment with a percentage of 35%; manufactured goods classified chiefly by material with 25%; and miscellaneous manufactured articles with 11.7%.

Continuing with the exports of the European Union to Serbia the three main exported goods are listed: machinery and transport equipment with a percentage of 34.8%; manufactured goods classified chiefly by material with 20.2%; and chemicals and related prod, n.e.s with 17.8%.

-Serbia in trade relations with the world 266

In 2013 Serbia most three important import partners are listed European Union as the first one, Russia the second one and China is listed as the third main partner for imports. For exports on the other hand the three main trade partners are listed European Union the first one again followed by Bosnia-Herzegovina in the second place and later Russia is listed as the third most important partner. European Union’s trade with Bosnia-Herzegovina

267

Following with Bosnia-Herzegovina, it is shown that exports of European Union to BosniaHerzegovina are much higher than the imports of European Union from Bosnia-Herzegovina. From 2004 until 2008 the export has been increasing also reaching the highest rate in 2008, after exports decreased in 2009, and after started increasing. The imports on the other hand haven’t been very stable, have been fluctuating by increasing and decreasing, the highest rate seems to have been in 2008.

-Goods in total: Flows of EU Trade, annual data of 2013-SITC section

As to trade relations of the European Union with Bosnia-Herzegovina, the most imported goods from Bosnia-Herzegovina are: miscellaneous manufactured articles with a percentage of 29.3%; manufactured goods classified chiefly by material with 25%; machinery and transport equipment with 16.5%.

268

Continuing with the exports of the European Union to Bosnia-Herzegovina the three main exported goods are listed: manufactured goods classified chiefly by material with a percentage of 22.8%; machinery and transport equipment with 21.5%; and chemicals and related prod, n.e.s with 14.3%.

-Bosnia-Herzegovina in trade relations with the world

In trade relations with Bosnia-Herzegovina the most important partners for imports and exports are: European Union is the main important partner for imports as well as for exports. Russia is the second partner in imports followed after by Turkey. While in exports the second partner is Turkey and the third one is Switzerland.

269

European Union’s trade with Macedonia

European Union trade relations charts with Macedonia show that exports are much higher than imports. The exports have been increasing but with a fall in 2009 and then again increasing, reaching the highest in 2012 and 2013. The imports have been fluctuating, they have been decreasing then seemed to be increasing and then again decreasing. - Goods in total: Flows of EU Trade, annual data of 2013-SITC section

From the imports the three main imported goods are: miscellaneous manufactured articles with a percentage of 24.1%; chemicals and related prod, n.e.s with 22.2%; and manufactured goods classified chiefly by material with 18.3%. 270

From exports the main exported goods are listed: manufactured goods classified chiefly by material with a percentage of 32.8%; mineral fuels, lubricants and related materials with 18.4%; and machinery and transport equipment with 17.8%.

-Macedonia in trade relations with the world

271

For the imports Macedonia’s main trading partners are European Union, which is the first for the exports as well, the second is Serbia and the third is Turkey. While for the exports the second is Kosovo and the third is Serbia.

European Union’s trade with Kosovo

Regarding Kosovo it is clearly shown that exports are considerably much higher than the imports which are very low compared to exports. The exports have been increasing, reaching the highest in 2011 following a small decrease. The imports on the other side are very low, but still they have been increasing little by little and the highest one is shown to be in 2010. -Goods in total: Flows of EU Trade, annual data of 2013-SITC section 272

From the imports the main imported products are: manufactured goods classified chiefly by material with a percentage of 59.6%; and crude materials, inedible, except fuels with 26%.

From the exports the main exported goods are: machinery and transport equipment with a percentage of 22%; manufactured goods classified chiefly by material with 16.5%; and food and live animals with 16.3%.

273

… There is not data regarding Kosovo’s world trading partners.

European Union’s trade with Montenegro

As to Montenegro, exports are as well much higher than the imports, reaching the highest exports rate in 2008. Imports have been increasing and after decreasing, the highest import rate was recorded in 2007.

274

-Goods in total: Flows of EU Trade, annual data of 2013-SITC section

The main imported goods are: manufactured goods classified chiefly by material with a percentage of 51.3%; machinery and transport equipment with 26.5%; and crude materials, inedible, except fuels with 14.4%.

The main exported goods include: machinery and transport equipments with a percentage of 30.3%; mineral fuels, lubricants and related materials with 21%; and food and live animals with 15%.

275

-Montenegro in trade relations with the world

As all the other countries listed above, Montenegro’s main trading partner for both imports and exports is European Union. For imports as well as for exports the second main trading partner is Serbia followed by the third one which is Bosnia-Herzegovina.

276

Conclusion Trade policy is a necessity for the countries of the Western Balkans; it helps them in trading their goods by importing and exporting. Trade policy also arranges the directions for investments and trade in and out of the EU. However in the recent years the Western Balkans countries have made considerable progress in order to bring their rules and standards closer European Union internal market requirements. Nevertheless, the road toward full integration in the European Union and its internal market is yet far from completed. The Western Balkans is in their first steps toward the process of integration in the European Union and in order for them to fully access the EU they have to meet the required standards and undertaking the needed reforms. Even in the trade area further changes and recommendations can take place in order further develop the trade of goods among these countries. References Commission, E. (2012, September 07). Enlargement-Stabilisation and Association Agreement. Retrieved February 06, 2015, from European Commission: http://ec.europa.eu/enlargement/policy/glossary/terms/saa_en.htm Commission, E. (2012, September 07). Enlargement-Stabilisation and Association Process. Retrieved February 10, 2015, from European Commission: http://ec.europa.eu/enlargement/policy/glossary/terms/sap_en.htm Commission, E. (2014). European Union, Trade in goods with Albania. European Commision. Commission, E. (2014). European Union, Trade in goods with Bosnia-Herz. European Commission. Commission, E. (2014). European Union, Trade in goods with For.JRep.Mac. European Commission. Commission, E. (2014). European Union, Trade in goods with Kosovo. European Commission. Commission, E. (2014). European Union, Trade in goods with Montenegro. European Commission. Commission, E. (2014). European Union, Trade in goods with Serbia. European Commission. Commission, E. (2014, December 03). Trade Policy. Retrieved February 04, 2015, from European Commission: http://ec.europa.eu/trade/policy/ Commission, E. (2014, September 09). Trade-Western Balkans. Retrieved January 20, 2015, from European Commission: http://ec.europa.eu/trade/policy/countries-andregions/regions/western-balkans/ Commission, E. (2009, April). What is Trade Policy? Belgium, Belgium. Retrieved January 20, 2015, from 277

http://avrupa.info.tr/fileadmin/Content/Downloads/DOC/EU_Trade_and_Economy_docs/en/Wh at_s_Trade_Policy.pdf

278

Religious Integration – Adopted Standards for Albania PhD C. Ahmed Kalaja European University of Tirana, Albania

Abstract The religious tolerance is one of the rarest values of the tradition of the Albanian people. It is widely accepted that Albanian people are well known about these values, about an excellent coexistence among the believers of different religious communities that are in Albania, mainly Muslims and Christians. Albania has long aspired being a full-fledged member of the European Union, while its main challenge has been meeting the required standards in several areas. As far as religion is concerned, as Albanians, we feel very proud of the met standards in this very field. If one were to screen the Albanian religious framework, relationships between the Albanian state and all the religious communities, as well as the interreligious relationship, one will conclude the issue of religious belief and its relationship with the state is fully compliant with EU acquis. This paper aims to emphasize and analyze one of the main issues pertaining to this unique situation in Albania; the interfaith tolerance in Albania, which serves as a unique example the whole world. The main issue treated in this paper is the historical religious tolerance and its relationship as regards to the national interests. “A nation cannot have a future without being completely recognizant of its past.” In this study we bring the essentials of this phenomenon, promotional roots of these values, while viewed from a previously untreated point of view, and in an attempt to answer the questions: Where does it stem from the religious coexistence in Albania? What are the main promoters of this phenomenon? What has been the attitude of the religious clergy in Albania? Have they been and are the imams and priests, the promotion of tolerance and religious coexistence in Albania? These are some of the questions answered in this modest study, focusing on how nice and with how much delicacy the lectures of the Clergy have addressed this issue to the faithful or to the world in general. Since they enjoyed undisputable reputation and influence in the majority of the population, in the most critical moments of national history, the leaders of Muslims believers, not only have promoted tolerance and religious coexistence, but they have considered the believers of other faiths as “brothers” preaching this conviction in front of their Muslim believers. These preaching’s

279

were firstly begun by Vehbi Dibra, who was the first Chairman of the Muslims and all clerics without exception to this day. Also unforgettable are the sermons of priests like: Fr. Gjergj Fishta, Fr. Shtjefën Gjeçovi, or Metropolitan Visarion Xhuvani to conclude with pearls of Orthodox priest, Fan S. Noli, who amazed the world with his three speeches in front of world leaders, the League of Nations, being representative of all Albanians, although Orthodox believers were only 20% of the population. Keywords: Tolerance, Coexistence, Clergy, Nationality, Albania.

Introduction Tolerance and religious coexistence reigns for centuries among the Albanians as a value of the tradition of our country, which has constantly amazed foreigners, because they see it as a unique case this relationship of religious coexistence. This tradition is not of present day, neither it is a tradition of the past 100 years, but it is a tradition of several centuries, after Ottoman dominion in the Albanian land at the beginning of XVI century (years1500).17 . For this tradition and value they own Albanians are proud because it is one of the exclusive moments in the history of our country, for which all of us feel proud. This fact has been proved even by foreign travellers who have visited our country at decisive moments, in moments when war was normality. One such case is offered by the British lady and admirer of Albanians Mrs. Edith Durham (at the beginning of XXth century), who says: “Wars we have heard of between Albanians have always been of discords between rival Beys. Christians in this case have fought against Christians and Muslims against Muslims – in addition she states that- Muslim and Christian Albanians are brought together before their common enemy.18 This fact was noted from Albanians autonomy movements, where most of the founders were religious intellectuals, and a considerable part of them were clergymen of different faiths who led Albanians towards autonomy. Above all, even in the Declaration of Independence of Albania, on 28 November 1912 in Vlora, leading signatories were potent clergymen of all faiths.

17

This is due to the fact that, during the medieval times, religious wars had ruling character of ‘religious kings’ andwere part and parcel of the whole history of humanity, including here even our country till theestablishment of Ottoman rule and the converting of the majority of the population in the Islamic religion. 18

Edith Durham; Balkans’ Concern, Tirana 1991.

280

But the coexistence among believers of different faiths culminated in the Assembly of Vlora when it was decided that the Interim Government would have in its cabinet, members of four religious beliefs, regardless of the percentage of believers who had a religious community. Even more the religious coexistence was very visible between Albanians in January 1920 when, in the Congress of Lushnja, Albania was declared a Constitutional Monarchy. The role of the Monarch had a High Council of Regency composed of four representatives of each faith. In this material will be treated the concrete practice of clerical work on voice in the country, and their leadership, their lectures directed to the believers or speeches in special ceremonies cases. I.

The Religion, Nationality and Nationalism

There is no doubt that the faith is born together with the man. This is the reason why since the ancient times the people were grouped in tribes, which in general had a common religious origin, a common faith. During the ancient times, especially during the medieval times, the religion was an undisputable entity governing every aspect of people’s lives, not only their spiritual life, but also material, political, economical and social life. Such a fact will be strongly opposed by the end of the Middle Ages and early modern times. Humanists and renaissance Greco-Roman traditions, would question undisputable 'authority' of the Church (in the west). Renaissance representatives’ words will necessarily reason the 'Holy Bible' words, they questioned, reasoned them before applying. For them it wasn’t true “what was descended by God”, but the truth was what the human logic could understand, otherwise it wasn’t valuable. They began to sanctify the life, the freedom of speech and the freedom of property. Indeed those were considered “sanctities” even before, but their sanctity was decided by God and not by the human reason. This “battle” was developed in Europe, because, in Islamic world, during the same period, a similar phenomenon couldn’texist, because in Islam, the political leader is necessarily and simultaneously responsible for the religion. It can’t be perceived in Islam that the religion would be separate from the rest of the life, that’s to say, the social, economical and political life of a country. To summon people towards an ideal that would substitute the position of religion, they found another common point of view, the nationality. By the term “nation” or “nationality” we understand a body of ethnic people which is

formed

historically

during

the

decay

of

the

tribe

relationship

sharing common language, territory and culture which is gradually developed and strengthened.19This phenomenon that is known in Europe as “nationalism” = nationality” has its roots in France during the end of the XVII-th century and was spread in all Europe during the

19

Group of authors; Dictionary of contemporary Albanian; first edition by the ACADEMY OF SCIENCE, Tirana 1984; TOENA, Tirana 2002, p. 594

281

consequent centuries.The identification of the people with their “nationality” became a predominant phenomenon during the period of XIX – XX centuries, but the word “nationality” from the word “nation”, have a very slight difference in meaning, but very essential one. We explained earlier the word “nationality” on what and how to understand, while with the word “nationalism” we understand: The ideology, or the point of view that a nation is superior to the other ones.20These two terms almost equal have their common aspects, but they have essential differences in the aim of the term usage. Apart from “joining” in their common positive aspects which caused the appearance of this new phenomenon, the “nationalism,” brought about an even more harmful aspect, the separation with “neighbors”, the separation with “others”, who didn’t have the same origin, language, culture, traditions as us, that’s to say with “co-nationalists”. So, this phenomenon, from a positive initiative, with the passing of time, turned into an initiative of problems in the following centuries in entire Europe. Some times apart from the appearance of these terms, in all the world, the “nationality-nation” it wasn’t seen as a common aspect between a certain group of people, but there were other aspects of life such as: the system of government, different interests, which were generally connected with the Religion or the Faith that each nation had. Whereas, after the period of Humanism and the Renaissance, this term was turned into a focal point for people of all Europe, used sometimes for good or for worse. The nationalism, with its negative connotation, more than everywhere it was felt in Balkan. Exactly with “nationalism”, but added to this the religion as a reinforcing factor, many nations were convinced to raise up against and not agree with the system of Great Empires, especially with Ottoman Empire. Joining these two elements, the peoples began the separation with “all” who were under the umbrella of the Empire and simultaneously were motivated to join around their “nationalism and religion”, different from the “nationality and religion” of the Empire. Especially this phenomenon was urged in Balkans in order to stand up against the ottoman dominion, bringing about great benefits for some countries until they reached their independence such as: the Greeks, the Slavs, the Bulgarians, the Romanians, etc. and for several countries, which didn’t have these common components, brought about grave problems which went far towards the risk of their complete disappearance. Concretely this happened to the Albanians, who were

20

Group of authors; Dictionary of contemporary Albanian ; first edition by the ACADEMY OF SCIENCE , Tirana 1984; TOENA, Tirana 2002, p. 824

282

gathered around the “nationality”, but they couldn’t be unified with the religion, with a common faith, because they were multi- religious and couldn’t change this reality. In this manner, nationalism caused multidimensional disability in entire Balkans, as a result of which were the beginnings of the two World Wars. Consequently, this made the Balkans a field of battle towards themselves having “nationalism” as a starting point intertwined with the religion. Since 1830, time when the Greeks and the Serbians were separated from Ottoman Empire, gaining their independence, till the year 1912, time when Albania was declared independent the last state in the Balkans. After that, it was in the Balkans where started the First World War, even the Second World War. So, the Balkans, since the distant year 1821, till in the year 1999,only had simmered from many political, economical, and social wars, which were motivated by leaders nationally and religionly. We will focus more on the last point of these Independence “battles”. "National-religious" wars, done against the Ottoman Empire, which had a different faith from the traditional faith of people of the Balkans, were not considered sufficient, but religious 'wars' continued even within nation-states. These new battles were organized mainly against the Muslims, who were part of newly formed national states, due to the fact that from them was removed the age long Ottoman ruling. In this manner, as a sign of revenge, only about the fact that those people had the same faith as their “ottoman conqueror”, they were discriminated, maltreated,21 were exiled from their land,22 and in some cases the war was used against them, even the genocide.23 II.

The Clergy and the Declaration of Indipendence in Albania

The declaration of Independence of our country is the greatest initiative of patriots and religious intellectuals, also one of the concrete deeds of the clergy towards the tolerance and religious coexistence settled as necessary criteria for the existence of this nation. We will mention here only 21

To be mentioned here almost similar situations with Muslims in Bulgaria, Montenegro, and even worse was their

condition in Greece or Serbia. This phenomenon is widely known but is considered as a “national” problem, because the Muslims in these countries were called as “Turk’s” in general, or Albanians in the case of Çamëria and so it was legalized the war against them.In some cases exchanges of the population were made, and in other cases the Muslims were exiled themselves in Ottoman Empire or new Turkey, whose foundations were laid after the First World War. For more information see: Alexandër POPOVIÇ “The Islamization of the Balkans”, Dituria publishing, Tirana 2006. 22

Refer here especially the genocide against çameria population, as well as some Albanian towns in former

Joguslavia. 23

Elbasani Telegram 25/26 November 1912, FEVZIU, Blendi; 100 years in the politics of Albanian state from

1912-2012; UET-PRESS, Tirana 2012, p. 21

283

some of the towns where the clergy were the initiator and signer of the Independence Act of their town. The clergy were present there and raised the flag of Independence of Albania. To begin with town of Elbasan, which, in 25 November 1912, preceded the independence of other towns towards raising the Red and Black flag with the eagle. This act they would transfer to Vlora in the first hours of date 26, about 2 after midnight, in a telegram, where among others they announced that: “All our nation, Muslims and Christians, together with a voice have accepted the Independence of Albania…”24One of the first signatories’ of the Independence Act in Elbasan to be mentioned here: “Haxhi Hafiz Sulejman Kungulli, the vice of Mitrop. Pope Dhimitër Dhimitraku, Aqif Pashë Biçakçiu, Shefqet bej Vërlaci, Abdullah bej Tirana, the Mayor Alush Saraçi, Sheikh Mahmut Guma, Sheikh Xhafer Pasmaqja, Bishop Beniamin Deliana, Serafin Jorgaqi, Beniamin Nosi, Taq Buda, imam Hysein efendi Dorazi etc.”25 The same thing happened in Tirana and in Durrës, where the intellectuals and patriots led by the most important leaders of the city, in 26 November 1912, declared the Independence. Some of the first signatories of the Independence in the town of Durrës were: Myderiz (teacher) Abdylqerim Kurti, myderiz (teacher) Hysein Mulla-Alushi, myderiz Ali Kuli, myderiz (teacher) Hafidh Jusuf Gjoni, Ismail Benja, Mahmut Benja, Hysein Dakoli, HasanTartari, Ismail Usta Sula, Rexhep Abdurrahman Berberi, HyseinPeni, Filip Sereqi the leader of the Christian Catholics, Aqif Çelkupa, Aleks Duka, Kristaq Rama, Sotir Veveçka, Hamza Tahir Himi, Muhamet Qepaxhiu, Ymer Lutfi Mallkuçi, Musa Milaqi etc.”26 While some of the signatories of Indipendence of Tirana were: Fuad bej Toptani, myderiz (teacher) Sulejmani, myderiz Hyseini, Xhelal bej Toptani, myderiz Ismail Ndroqi, Refik bej Toptani, Abdullah Gjinali, sheih Ahmet Pazari, Isuf Aqif Banka, Selim Petrela, Ali Shyqyri, Nikollë Nishku, Pope Nikollë Papajani…etc”27 The same thing happened in Kavaja, Peqin, Lushnja, where the Indipendence was declared the consequent day in 27 November 1912. In Kavaja signatories of Independence were: Qazim Fortuzi, Sheih Hamid Kraja, Mustë Cara, Andrea Ekonomi, Haxhi Isuf Kazazi, Pal Xhumari, Besim Sinella, Haxhi Xhoi, Zenel Biturku, Kostandin Qosja, Sali Kullolli, Hasan Nexha etc.28

24

KOTHERJA, Hyqmet; Elbasani Indipendence1912; DyLindjeDyPerëndime publishing, Tiranë 2012, p. 7-9, also

inNOSI, Lef; Doc. Nr. 2, HistoricalDocuments 1912-1920; Tirana 2007, p. 83 9NOSI, Lef; Dok.HistoricalDocuments 1912-1920 Tirana 2007 p.83 26

NOSI, Lef; Dok.HistoricalDocuments Nr.13300; 1912-1920; Tirana 2007, p. 81

27

NOSI, Lef; Dok. Nr.2103 dhe 7098; HistoricalDocuments 1912-1920; Tirana 2007, p. 82-83

28

SHQARRI, Muharrem; The patriot, Shekh Hamid Kraja; OMBRA GVG, Tirana 2014, p. 85

284

In Peqin signatories of Indipendence were: Kadri beu, son of Demir Pasha, Mufti Abdylbaki Biça, Sheikh Tahsin Gjinishi, Myderiz (Teacher) Sulejman Kuçi, The mayor Ahmet Kaziu, and Asllan Ballhysa.29The Christian element is missing in Peqin, because there were not Chritians in this town. In Lushnja the signatories were: Mufti sheikh Ibrahim Karbunara, myderiz (teacher) Sulejman Arapi, Kadri bej Karbunara, Emin bej Vokopola, Halid effendi Gramshi, Shaqir bej Lushja, Bishop Jovani, Sulejman Korreshi, Llambi Xoxi, Haxhi bej Imshta, Fejzullah bej Imshta, Thanas Paftali.30 To continue with the capital town of the Independence, in Vlora, where were gathered the most potent patriots and intellectuals and at the same time the leaders of clergy of this country.

Some

of the signatories of Independence in 28 November, 1912 in Vlora were: For Berat: Sami Vrioni, Ilias Vrioni, Taq Tutulani, Babë Dud Karbunara; For Skrapari: Xhelal Koprencka; Hajredin Cakrani; for Lushnja: Qemal Mullai, Ferit bej Vokopola, Nebi effendi Sefa; for Dibra: Myfti Vehbi Agolli-Dibra, Hafidh Sherif Lëngu (both of them were leaders of Albanian Muslim Community 1912-29 and 1942-45); for Mat: Ahmet Zogu, Riza bej Zogolli, Kurt Kadiu; for Ohri and Struga: Zyhdi Ohri, Dr. H. Myrtezai, Nuri Sojlli, Hamdi Ohri, Mustafa Baruti, Dervish Hima; for Durrës: Abaz effendi Çelkupa, Mustafa Agë Hanxhiu, Jahja Ballhysa, Dom Nikoll Kaçorri; for Tirana: Abdi Toptani, Murat Toptani; for Shijak: Xhelal Deliallisi, Ymer Deliallisi, Ibrahim Efendiu; for Kruja: Mustafa Merlika-Kruja; for Elbasan: Lef Nosi, Shefqet Daiu, Qemal Karaosmani, Dervish Biçaku; for Peqin: Mahmud effendi Kaziu; for Gramsh and Tomorrica: Ismail Qemal Gramshi; for Gjirokastra: Azis effendi Gjirokastra, Elmaz Boçe, Veli Harxhi, Myfid Libohova, Petro Poga, Jani Papadhopulli; for Përmet: Veli Këlcyra, Syrja Vlora; for Tepelena: Feim Mezhgorani; for Janina: Kristo Meksi, Aristidh Ruci; for Çamëria: Veli Gërra, Jakup Veseli, Rexhep Demi, Aziz Tahir Ajdonati; for Delvina: Avni Delvina; for Korça: Pandeli Cale, Thanas Floqi, Spiro Ilo; for Pogradec: Hajdar Blloshmi; for Kosovo, Gjakova, Plava-Gucia: Rexhep Mitrovica, Bedri Ipeku, Salih Gjuka, Mit’hat Frashëri, Mehmet Pashë Deralla, Isa Boletini, Riza Gjakova, Hajdin Draga, Dervish Ipeku, Zenel Begolli, Qerim Begolli; for Shkodra: Luigj Gurakuqi; and representatives for Vlora were: Ismail Qemali, Zihni Abaz Kanina, Aristidh Ruci, Qazim Kokoshi, Jani Minga, Eqrem Bej Vlora; and abroad: Dhimitër Zografi, Dhimitër Mborja, Dhimitër Berati, Dhimitër Ilo etc.31

29

NOSI, Lef; Dok. Nr. 1146; HistoricalDocuments 1912-1920; Tirana 2007, p. 89

30

GRIPSHI, Genc; The History of Peqin; Reklama, Tirana, 2014, p. 141

31

FRASHËRI, Kristo; The Declaration of Independence of Albania 28 November 1912; The Academy of Sciences,

Tirana 2008, p. 91-94

285

Almost all these personalities, signatories of the Act of Independence, were believers, for the simple reason that they had minimally the primary and higher education about religion. Some of them had their degrees in theology, and also were clerics of their respective towns and had undisputable reputation in Albanian population during the years 1912-1920. Some of them were myderiz =religion teachers, some others imams, priests or dervishs, who led their cult institutions of their towns. While others were in the role of Mufti, Metropolitan or vice Metropolitan, some were bishops and so on, but some of the clergy were mayors of their respective municipalities, which meant a greater risk for them. So, in conlusion, we can say that the representatives of the population in Assembly of Vlora in 1912 were Muslims and Christians, and a considerable number of them were Clergy, some of them we can mention here: Mufti Vehbi Efendi Agolli, Hafidh Sherif Langu, Babë Dud (Jorgji) Karbunara, Taq (Dhimitër) Tutulani, Father Nikoll Kaçorri etc. Ismail (Qemal) Vlora in his “Memories” describes as historical and very important the Act of Indipendence. He writes: National Assembly, composed of delegates from all the regions of Albania, regardless of religion gathered here in Independence of Albania…’

(28.11.1912) in Vlora, declared the political

32

The coexistence between clergy and the believers of different faiths, culminated in the Assembly of Vlora, where it was decided that the Government of Ismail Qemali will have in its cabinet representatives of the four faiths, regardless of the percentage of each community of believers. It must be poitned out that Ismail Qemali in choosing members of the Government from his part had included 8 personalities with reputation, who were seen as more effective for longevity of the Government, until the situation would be normalized. This cabinet proposed by Ismail Vlora did not found the approval of the audience because it comprised members from the Muslim community (Sunni and bektashi sect) and none from the Chritians. Bab Dud Karbunara was the first to refuse this choice proposing that the Government should have Muslims and Christians in its composition and to protect the integrity of each one, the proposed members should be chosen with vote by the participants.33 In order to realize this, the Parliament had a very important duty to accomplish: voting the Cabinet of the Provisional Government, showing by this act an excellent tolerance and simultaneously a democratic act, because in each ministerial post was elected the person who gained more votes regardless of his faith.In this way, the Provisional Government of Vlora was formed based on the religious affiliation of the country, with the proposal of Bab Dud Karbunara. Muslims and 32

QEMALI, Ismail; Memories; Toena, Tirana 2009, p. 418

33

For more information: The Renaissance of Albania, 1913 – 1914, Official newspaper Government of Vlora

286

Christians should participate in it, and each minister would be elected after he would take the majority of the votes of present participants.Vlora Government eventually had the following composition:Prime minister of the Government and Minister of Foreign Affairs, Ismail Qemal Vlora; Vice Prime minister of the Government, Dom Nikollë Kacorri; (12/25/1912) Preng Bibë Doda; Minister of Education, Luigj Gurakuqi; Minister of Interior, Myfit Libohova; Finance Minister, Abdi Toptani; Minister of War, Mehmet Pashë Dëralla (Tetova); Minister of Justice Petro Poga; Minister of public works, Mit’hat Frashëri; Agriculture Minister Pandeli Cale; Minister of Posts and Telegraph, LefNosi. Afterthis the Parliament had another duty, the selection of the Elderly Commission, comprised of 18 persons. On the proposal of Ismail (Qemal) Vlora was decided that the Elderly Commission would be the “vicegerent” of the Parliament, would have the role of advisor, auditorial and collaborator with the Government, but in no way to ever throw it.34With the e proposal of Luigj Gurakuqi, Vehbi Dibra was elected the Head of the Elderly Commission (the Senate) and vice president was elected Lef Nosi, a representative of another religious origin.35Simultaneously, Vehbi Dibra exerted the duty of substitute/vice for Ismail Qemali when he was abroad. The Elderly Commission under the direction of honored Mufti Vehbi Dibra took many important decisions, being a perfect example of democracy, and religious tolerance. The initiative of “tolerance and religious coexistence” was firstly taken by the Leader of the Muslim Community, HaxhiVehbiDibra, who gave the Fatwa (religiously legalized), of the Independence of Albania. In fact, his fatwa was about legitimizing the Flag with its eagle as a symbol, because that was no accepted by some muftis in the country and even it was not accepted by the people in general. It was not easy for a people who coexisted with ottomans under the great umbrella of the Empire, that in such a delicate moment to accept the division from the Empire. To reason this, HaxhiVehbiDibra, in the role of Headmufti of our country, gave the fatwa, where among others he stated: “…in order to preserve the unity of people and to banish the disputes and the anger, and in order to ensure a general peace, the symbol of eagle must be protected. This fetwa is based on Shariah and on the need of the time and place…”36Vehbi Dibra did not confine himself with the fetwa to consider this problem solved, but Ismail Qemali left him full

34

XHELILI, Qazim; VehbiDibra – personality and wellknown activist of the national movement; Albin, Tirana, 1998,

p. 96 35

XHELILI, Qazim; VehbiDibra – personality and wellknown activist of the national movement ; Albin, Tirana,

1998, p. 96 36

A.Q.SH. Fund The Caretaker Government of Vlora, Folder III, 5/2, page 632

287

competences to solve this problem as he thought it reasonable, on its roots.

So Haxhi Vehbi

Dibra travelled in some towns of the country talking with the muftis and with the believers, which comprised the majority of the population, and in this way the situation was tranquilized.37 With his acts and wise words, Haxhi Vehbi Dibra, in a certain way addressed the Muslim Albanians that their fate was not any more under the Empire, which seemed to dawn, but, on the other hand, they would be united towards the “nationality”, despite the religious origin. The goal of this outstanding patriot was unity and brotherhood. He said that: “Our coutry needs the national unity and brotherhood despite the religious origin.”38 References Archive sources A.Q.SH. Fund 482, Folder, 14, year 1925, p. 191 A.Q.SH. Fund Qeverisësë Përkohshme e Vlorës, Folder III, 5/2, p 632 Studies & Books DERVISHI, Kastriot; The History of Albanian State 1912-2005; Publishing House 55, Tirana 2006 DIBRA, Haxhi Vehbi; What Koran orders; Albanian Muslim Community, Tirana 2014 DUKA, Ferit; “The Historical background of religious tolerance in Albania”, International Symposium: “Perspectives of religious, cultural and social diversity, in Balkans seen from a Global Perspective”, 25-26 March 2011 organised in Tirana; PRIZMI publications, Tirana 2012 Edith Durham; Balkan’s Concerns; Tirana 1991. FEVZIU, Blendi; 100 years – An excursion in politics of Albanian state from 1912-2012; UETPRESS, Tirana 2012 FISHTA, Gjergj; Lahuta e Malcis; Uegen, Tirana 2010 FRASHËRI, Kristo; The declaration of Indipendence of Albania 28 nëntor 1912; Science Academy, Tirana 2008 Group of authors; ENCYCLOPAEDIA – 100 Albanian Personalities from Islamic Culture during cent. XIX – XX; KMSH, Tirana 2012 Group of authors ; Dictionary of Contemporary Albanian; first edition by Science Academy, Tirana 1984; second edition by Toena, Tirana 2002

37

XHELILI, Qazim; VehbiDibra – personality and wellknown activist of the national movement; Albin, Tirana; 1998,

p. 106 38

A.Q.SH. Fund 482, Folder, 14, year 1925, p. 191

288

Group of authors ; The History of Albanian People III (Renaissance Period 1912-1939); Toena, Tirana 2007 GRIPSHI, Genc; History of Peqin; Reklama, Tirana, 2014, KRAJA, Hafiz Ali; Religion - Is it necessary, Does it hampers national unity?; first edition in 1934; Albanian Muslim Comm , Tirana 2010 KOTHERJA, Hyqmet; The Renaissance of Elbasan 1912; DyLindjeDyPerëndime, Tirana 2012 MATA, Ruxhdi; Father Shtjefën Gjeçovi, His Life and Deeds; SHBLSH, Tirana 1982 MERDANI; Arlinda; Interreligious relationships in Albania, New Prespectives for the Europian Union; ONUFRI, Tirana 2014 NOLI, Fan S.; Speeches (1906 - 1964); prepared by NashoJorgaqi; DUDAJ, Tirana 2002 NOSI, Lef; Doc. Nr. 2, Historical Documents 1912-1920; Tirana 2007 POPOVIÇ, Alexandër; Balkans Islamization; Dituria, Tirana 2006 QEMALI, Ismail; Memorie; Toena, Tirana 2009 SHQARRI, Muharrem; The Patriot Sheh Hamid Kraja; OMBRA GVG, Tirana 2014, p. 85 XHELILI, Qazim; VehbiDibra – personality and wellknown activist of national movement; Albin, Tirana, 1998 Newspapers and Magazines Kultura Islame; year 1944, “Tirana”, Tirana 1942 Kultura Islame; year 1942, “Tirana”, Tirana 1944 Përlindja e Shqipëniës; Vlora 1913 Përlindja e Shqipëniës; Vlora 1914 Udha e s’Vërtetës; vitiparë, nr. 2, “Ora” Shkodra, October 1923 Zani i Naltë; year 1923, “Mbrothwsia”, Tiranw 1923 Zani i Naltë; year 1927, “Ora”, Shkodra 1927 Zani i Naltë; year 1928, “Ora”, Shkodra 1928 Zani i Naltë; year 1932, “Ora”, Shkodra 1932 Zani i Naltë; year 1935, “Ora”, Shkodra 1935 Zani i Naltë; year 1936, “Ora”, Shkodra 1936 Zani i Naltë; year 1938, “Ora”, Shkodra 1938

289

Regional Integration and Fiscal Harmonization in Southeast Europe Dr. Georgi Ranchev University of National and World Economy, Bulgaria

Abstract The establishment of free trade area in Southeast Europe on the basis of CEFTA 2006 as an isolated event is not likely to have a substantial positive effect on the economic development of the region. Recent strategic theoretical and empirical studies show that short-term economic implications of regional integration between developing countries in terms of growth and foreign direct investment are ambiguous. Macroeconomic and fiscal stabilization through coordinated efforts with respect to tax and customs harmonization can play more significant role in the economic stabilization in the SEE region than regional trade integration alone. The paper contains an analysis of the changes in trade between the SEE -6 countries and Bulgaria (current EU member state, former member of CEFTA and part of a free trade zone in SEE until the end of 2006) for the period 2006 till 2014. One of the main conclusions of the paper is that a roadmap of the SEE countries for achieving sustainable growth is needed. The roadmap for sustainable growth can be the next step after the liberalization of trade towards achieving genuine regional economic integration in the Western Balkans in parallel with the process of EU accession. Keywords: SEE, CEFTA 2006, Regional integration, Tax and customs harmonization.

Introduction On 27 June 2001 seven countries in Southeast Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania and FR Yugoslavia signed in Brussels a Memorandum of Understanding on the establishment of a Free Trade Zone in the region by the end of 2002 on the basis of bilateral free trade agreements. In addition, the Memorandum expressed the intention of the signatory countries to harmonize their legislation with that of the European Union including the harmonization of tax and customs legislation. 14 years have passed after the signing of the Memorandum of Understanding and we have a significantly different situation:

•

Bulgaria, Croatia and Romania joined Slovenia and Greece in the European 290

Union and in 2014 Albania has finally received EU candidate status and lined up with Turkey, Macedonia, Montenegro and Serbia; •

FR Yugoslavia no longer exists and we have now Serbia, Montenegro and UNMIK (hereinafter “Kosovo”) separated.

•

CEFTA is again completely reshaped as a multilateral trade liberalization vehicle and the current members are Albania, Bosnia and Herzegovina, Macedonia, Moldova, Montenegro, Serbia and Kosovo. The existing network of free trade agreements was cancelled and replaced by CEFTA 2006 agreement.

In 2015 six of the countries in Southeast Europe - Albania, Bosnia and Herzegovina, Macedonia, Montenegro, Serbia and Kosovo (SEE - 6 or Western Balkans) are still rather small and relatively isolated from an economic point of view. At the same time stabilization in general in Southeast Europe is possible only if a more advanced level of economic development and trade integration is achieved. Thus the economic isolation of the countries can be considered one of the main barriers towards sustainable economic growth in the region. On the other hand with the removal of the trade barriers, the differences in the tax and customs legislation are apparent. What would be the practical impact of trade integration of the countries in Southeast Europe and the economic outcomes in the region? Is there a relationship between regional trade liberalization and direct and indirect taxation? What could be the future of trade liberalization and fiscal harmonization processes in Southeast Europe? The author of the research paper believes that a roadmap of the SEE countries for achieving sustainable growth is needed. The roadmap for sustainable growth can be the next step after the liberalization of trade towards achieving genuine regional economic integration. The proposed research paper will add value to the current debate on the impact of deeper regional integration in Southeast Europe.

Regional Integration Agreements: A Theoretical Approach Mr. Masood Ahmed, a Director of the International Economics Department of the World Bank, quite successfully expressed in the foreword of series of World Bank policy research working papers (i.e. 1750, 1782 of 1997) the complexities of regional integration: “As regional trading arrangements (RTAs) have spread, enlarged and deepened over the last decade, they have posed challenges to economists on both intellectual 291

and policy levels. On the former, do RTAs stimulate growth and investment, facilitate technology transfer, shift comparative advantage towards high valueadded activities, provide credibility to reform programs, or induce political stability and cooperation? Or do they, on the other hand, divert trade in inefficient directions and undermine the multilateral trading system? The answer is probably “all of these things, in different proportions according to the particular circumstances of each RTA.” This then poses the policy challenge of how best to manage RTAs in order to get the best balance of benefits and costs. For example, should technical standards be harmonized and, if so, how; do direct or indirect taxes need to be equalized; how should RTAs manage their international trade policies in an outward-looking fashion?” For the purposes of the current paper, a brief summary of the research findings both theoretical and empirical of various scholars will be given in outline. This summary will be further used in the analysis of the potential effects of having regional integration in Southeast Europe like CEFTA 2006 and its likely implications on the economies of the six countries and on society’s perceptions in the region. In general, the specialized literature (see Schiff and Winters, 2003, p. 66) identifies three main types of trade integration: 1. “North – North” integration between developed countries (EEC, Canada joining CUSFTA);

2. “North – South” integration between developed and developing countries (Mexico joining NAFTA); 3. “South

–

South”

integration

between

developing

countries

(ASEAN, MERCOSUR, CEFTA). This division is quite important as the economic implications of the various regional integration agreements may vary substantially depending on the type of economic integration perceived. In the subsequent analysis the focus will be mainly on the “North – South” and “South – South” models as obviously CEFTA 2006 or Southeast Europe consists of developing countries. Regional Integration and Foreign Direct Investment 292

Undoubtedly there is some correlation between the levels of foreign direct investment (FDI) and the degree of trade integration. However, depending on the economic status of the countries (North or South) involved in the trade integration processes, the impact of trade integration on the inflows or outflows of FDI may differentiate a lot. A number of additional factors such as political, trade protection or administrative developments, geographical location and infrastructure are relevant to FDI allocation as well. At the same time, additional determinants of such processes are the character of the already existing FDI and the time dimension (detailed analysis by Blomstrom and Kokko, 1997). The most immediate result of a trade integration process is the elimination or reduction of tariff barriers between the countries part of the Regional Integration Agreements (see also Bhagwati, 1988). In its turn, the reduced tariff barriers may lead to a decrease in intra-regional FDI, as a substitute for the increased trade between the countries. Thus, since there is a common market, there is no point of further investments in the region made by local companies – i.e. the comparative benefits of moving or spreading production to the other target country are less since the customs duties were reduced.

At the same time, the outside FDI is likely to be increased and focused on the country having the most attractive locational advantages. This type of concentration is justified by the economies of scale, achieved on a regional basis by the Multinational Companies (MNC). The type of such concentrations will depend to a great extent of the type of structures used for outside investments and already existing in the region – i.e. horizontal or vertical; import-substituting or export-oriented. As short-term effects of trade integration can be pointed out the effects of trade creation, trade diversion, and trade expansion (more detailed analysis by Molle, 1994). Additional changes may be expected in the utilization of various intangible assets (trademarks, know-how, etc.) usually addressed as technological spillovers, the elimination of the replication of research and development (R&D) in different countries and least but not last the implementation of neutral legislation towards foreign and domestic investors (discussed also by Blomstrom and Kokko, 2003). One of the most important dynamic effects is the “reallocation of production resources to more closely reflect of regional comparative advantages” (Blomstrom and Kokko, 1997, p.11). This could be illustrated in the following example. Countries “A” and “B” form a RIA, and a 293

single MNC controls enterprises in both countries, which are operating below production limits. Thus, if tariff and non-tariff barriers are reduced, it is likely that the MNC will finally decide to close one of the factories in one of the countries and will shift the production to the other. The benefiting country in this case will be the one having the better locational advantages as a combination between macroeconomic and political stability, transparent legislation and procedures, infrastructure and higher level of public services. This “investment package” will usually include various tax benefits, clear intellectual property rights enforcement rules, high quality and low cost of the labor force. Such allocation of investment centers may have different directions in the case of various industries. Thus, the “investment package” of country “A” in the vegetable oil industry for example may be better than the one of country “B”, and the production of the MNC in the region will be concentrated in country “A”. However, country “B” may possess more comparative advantages in the textile sector than country “A”, and the textile production will be shifted in the opposite direction. Thus, although outside FDI is likely to increase, the precise effects for each country within the RIA cannot be easily identified. Various empirical studies were focused on different types of regional integration. A brief summary of the most important findings of Blomstrom and Kokko in their paper “Regional Integration and Foreign Direct Investment” produced in 1997 within the World Bank, with regard to “North – South” and “South – South” type of integrations is given below. According to the paper, the example of Mexico joining NAFTA is quite positive. The empirical evidence shows that Mexico benefited largely in terms of FDI by joining NAFTA. This could be explained partly by the liberalization of the institutional framework of the country and the strong locational advantages of Mexico compared to the conditions in the Northern partners – USA and Canada. As such locational advantages can be pointed out the increasingly market oriented polices, geographical proximity and cheap labour. In practice, much of the newly attracted FDI in Mexico is due to substantial investments originating outside the NAFTA countries namely: the USA and Canada (see also Echeveri-Carroll, 1995). MERCOSUR is a typical example of South – South integration between the countries of Argentina, Brazil, Paraguay and Uruguay. The initial empirical studies on the impact of the establishment of MERCOSUR on FDI suggest that macroeconomic stability is a more important determinant of FDI than is regional trade integration itself. As a result the outward FDI has increased substantially. However, it can be noticed that FDI flows are not distributed 294

equally among the MERCOSUR countries. As far as Brazil and Argentina possess more locational advantages than Uruguay and Paraguay, the bulk of FDI is likely to be focused there in the short and medium term1. Regional Integration and Growth Recent studies have explored whether the trade openness of the economies, their market size and the relevant economic development of countries that are close geographically have any positive impact on growth in the home country. In 1998, Athanasios Vamvakidis (Vamvakidis, 1998, p. 251) published a report on the correlation between regional integration and economic growth. Based on the analysis and the empirical evidence gathered, the author concludes that “countries with open, large, and more developed neighboring economies grow faster than those with closed, smaller, and less developed neighboring economies”. The study concludes that based on the empirical models, the small countries participating in North – South integration will face faster growth. However, the tests performed with regard to the correlation between growth and regional integration under 4 distinct RIAs shows negative results. Thus, in the case of the following RIAs there is no empirical evidence that during the 1970s and 1980s regional trade integration has led to higher growth: •

Association of South East Asian Nations (ASEAN);

•

Andean Common Market (ANCON);

•

Central American Common Market (CACM);

•

Union Douaniere et Economique de l’Afrique Centrale (UDEAC).

The author explains these results with the fact that the members were “small, highly protected and similar in their economic endowments”2. On the other hand, the results of the same test for the European Union are positive for the same period and these results confirm that actually EU regional integration had positive impact on growth. Regional Integration and Harmonization of Taxes How does regional trade integration affect corporate tax rates in the partner countries? This is one of the questions that have to be addressed prior to entering in a RIA. In summary, the removal of barriers to movement of goods and services across borders will lead to changes in the allocation of resources (see de Bonis, 1997a). Thus, partner countries will face the necessity of establishment of a certain level of income tax uniformity. Such uniformity could be achieved through tax harmonization or through competition. 295

1

Schiff and Winters, argue that South-South RIAs are unlikely to add credibility and

may even hinder FDI if not accompanied by liberalization with the rest of the world (Schiff and Winters, 2003, p.17).

However, in the case of competition, the income tax rates are likely to fall below their optimum limits, which will lead in its turn to losses in budget revenues. More recent research on the effects of income tax harmonization in the context of regional integration (see de Bonis, 2002, p.1) suggests that „international tax uniformity does not appear to be the preferable solution“. Harmonization of income taxes is far from being accomplished even in the European Union. The harmonization of income taxes does not simply mean harmonization of tax rates. In order, to achieve considerable level of harmonization, the countries should implement similar if not the same basis for corporate taxation. For various reasons: historical, political, social and economic, this is almost impossible in the near future. On the other hand, competition among the states will lead to constant downsizing of the rates and/or introduction of tax incentives. What can be the solution in such case? One useful suggestion is that some sort of international tax coordination is needed (see also de Bonis, 1997a) in order to limit the undesirable effects of revenue losses in the partner countries. Another, important issue in this respect is the elimination of double taxation of income by way of Double Tax Treaties (DTT). The differences in the treatment of certain types of income such as dividends, interest and royalties can partly be eliminated between each pair of partner countries in the form of a DTT. Thus, the network of the existing DTT should be considered, prior to entering in the RIA. It can be presumed that DTTs usually encourage cross border trade and investment, and it is advisable that the countries in the RIA enter into DTTs with each other as well. The correlation between RIA and personal income taxation is not of such importance. This can be partly explained by the fact that additional contributions (social, health, unemployment, etc.) affect the amount of take-in-home money of the employees.

2

Subsequent research showed mixed results as “the net impact on a country’s growth of 296

trading with relatively less developed countries is an empirical question: it is negative if the relative income effect dominates and positive if the relative growth effect dominates” (Arora and Vamvakidis, 2004, p. 4)

297

Substantial distortions in the allocation of labor resources among the countries in the region can only be expected if there is a considerable difference in the living standards and real wages of the countries in the region (see also in Bhagwati and Hudec, 1996). Additional restrictions on the movement of people (visas, work permits, etc.) can also prevent such reallocation. A certain degree of harmonization of indirect taxes is important for the success of each RIA (see also de Bonis, 1997b). One of the main concerns is relevant to the level of cross-border shopping. Once, the tariff barriers are removed, the residents of the bordering territories are more likely to shop across the borders. If there are considerable differences in the rates of the indirect taxes applied by countries in the RIA, the residents of the “higher” rate country are more likely to shop in the “lower” rate country. Such problems are still acute in the European Union. The difference is even sharper in the case of exemption from indirect taxes of specific groups of goods. However, harmonization of tax rates only is not the perfect solution. Harmonization of the overall legislation and basis for taxation together with the tax rates may prove far more efficient (Ranchev, 2001). This reallocation of consumption will lead to losses in budget revenues of the “higher” income country. As far as the mechanisms for compensation of such “foregone” budget revenues are practically impossible, harmonization is the only possible solution for avoiding most of the undesirable effects. Summary Based on the analysis presented above, we can summarize the following conclusions with regard to the implications of regional integration agreements: 1. RIA between developing countries is likely to have a positive effect on FDI for the region as a whole while the bulk of FDI inflows would be attracted by the countries in the region having the best locational advantages. 2. There is no strong empirical evidence that RIA between developing countries will stimulate growth, as opposed to the benefits in terms of growth rates enjoyed by a developing country integrating with a developed one. 3. Corporate income tax competition between members of a RIA should be avoided, as it could lead to substantial losses of budget revenues. As direct tax harmonization is practically impossible, countries may coordinate appropriate corporate tax levels and conclude DTTs. Harmonization in the field of indirect taxes will lead to limitation of budget revenue losses within the countries forming 298

a RIA.

Regional integration in Southeast Europe As of the moment Slovenia, Croatia, Bulgaria, Romania and Greece are members of the European Union. Currently Albania, Macedonia, Montenegro, Serbia and Turkey are officially recognized as candidates for EU membership. Bosnia and Herzegovina and Kosovo are considered "potential candidate countries". Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia have Stabilization and Association Agreements (SAA) in place, while Kosovo whose limited recognition has complicated its relationship with the EU, has only initialled a SAA. On the 19th of December 2006, Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia and Kosovo signed an Agreement to amend and enlarge the Central European Free Trade – usually now referred as CEFTA 2006. CEFTA 2006 agreement actually replaced the network of bilateral free trade agreements based on the Memorandum of Understanding from 2001 and which until then were existing between Albania, Bosnia and Herzegovina, Montenegro, Croatia, Macedonia, Moldova, Serbia and Kosovo. The agreement contains special provisions regarding liberalization of trade in industrial and agricultural products, technical barriers to trade, rules of origin and customs cooperation and the new trade issues such as strengthening cooperation in trade in services, investment, public procurement and intellectual property rights. The main objective of CEFTA 2006 is to facilitate the expansion of trade in goods and services and foster investment by means of fair, stable and predictable rules. An important aim of the agreement is also the elimination of barriers to trade and appropriate protection of intellectual property rights in accordance with international standards. The harmonization of trade policy issues such as competition rules and state aid is also part of the agenda the members agreed to follow. The Agreement is generally in compliance with WTO rules and procedures and the relevant EU regulations. It is expected that the Agreement will provide the necessary conditions for the members of CEFTA 2006 to prepare for EU accession, which was the agenda successfully achieved by the previous and founding members of CEFTA.

299

Selected SEE-6 country indicators In order the discuss the potential effects of CEFTA 2006 on the economies of the six Southeast Europe countries namely Albania, Bosnia and Herzegovina, Macedonia, Montenegro, Serbia and Kosovo (referred in this paper as the SEE -6) we need to have a closer look on the basic economic indicators for the SEE-6 countries, which are given in outline below: Table 1: Selected SEE 6 country indicators Indicator

ALB

B&H

KO

MAC

MON

SER

TOTAL

Area in sq. km

28,748

51,197

S 10,87 25,713 13,812 77,474

207,821

Population, 1000 pers.

3,029

3,867

71,87

2,096

647

7,177

18,687

(2015) GDP at ER, USD billion

13.4

19.6

1 6.

10.9

4.7

42.7

97.3

GDP/capita (USD at ER)

11,100

9,800

GDP, real growth, in %

1.9

1.1

0 3.

3.7

2.3

-1.8

Unemployment rate, in %

18.0

43.6

0 30.

28.0

18.5

17.6

Trade balance, USD billion

-2.8

-5.1

-9

0 13,200 15,200 12,500 8,00

-2.3

-1.6

-5.8 -19.9

2. Source: CIA World Factbook data estimated for 2014/2015 and author’s calculations 3 Given the above data, SEE -6 has a territory of 207,821 square kilometres and population of more than 18 million people. The economies although having positive growth rates with the exception of Serbia are relatively small in terms of GDP and GDP/capita. The unemployment rates in SEE-6 are very high which could also be a sign for sign for significant grey economy. The trade balances for all the countries are negative. According to CEFTA statistics for the first half of 20143 the share of the countries in imports of CEFTA is around 9%, while the share of countries in export of CEFTA is around 17%. Compared to other South-South RIA’s CEFTA is within the group of relatively strong trade blocks like ASEAN and MERCOSUR (Schiff and Winters, 2003, p. 66).

300

The structure of the SEE -6 economies is given in Table 2 below: Table 2: Structure of the SEE -6 Economies for 2014 as % of GDP Sector

ALB

B&H

KOS

MAC

MON

Agriculture

22.6

8.0

12.9

8.8

Industry

15.1

26,3

22.6

21.3

21.2

36.9

Services

62.4

65.7

64.5

69.9

70.5

54.9

8.3 8.2

Source: CIA World Factbook data estimated for 2014 Looking at the data from all SEE-6 countries only Serbia has a significant share of production in the country GDP – 36.9%. Albania has the largest share of agriculture – 22.6% of GDP compared to the other countries. For all the countries the share of services are the predominant part of the GDP as there is a clear shift from previous years from agriculture to services. Trade relations of Bulgaria with the CEFTA-6 countries: a case study The anticipated effects of trade liberalization among the six CEFTA countries representing substantial part of the territory of Southeast Europe can be considered as rather diverse. Trade liberalization means not only changes in the business environment, which leads either to new export opportunities or to increased external competition for a number of industry sectors. It could mean also changes in social and cultural attitudes. Trade liberalization has many faces and by looking at the region as a whole some specifics of trade relations may be omitted or underestimated in the analysis of the anticipated effects. Back in 2006, Bulgaria was still a member of CEFTA and had bilateral free trade agreements with the SEE-6 countries in place. In this part a detailed analysis of the trade between Bulgaria and six out of seven countries participating in CEFTA is analyzed. Moldova is excluded for the purposes of the present analysis as the main focus of the paper is on Southeast Europe. The case study is based on up-to-date trade information regarding the SEE-6 countries members of CEFTA 2006 – referring the following aspects: •

Analysis of bilateral trade flows for 2006, 2007, 2012,2013 and 2014;

•

Major commodities traded and share of total import/export;

•

Outlining the tendencies in trade flows.

301

SER

On the basis of this analysis conclusions are drawn with regard to the specific effects of SEE – 6 countries on the Bulgarian economy. In order to follow the trends, the research is focused on: •

2006 – the year in which Bulgaria was part of the network of the bilateral free trade agreements with SEE-6;

•

2007 – the year in which Bulgaria joined the EU and left CEFTA and the bilateral free trade agreements with SEE -6 were canceled;

•

2012, 2013 and 2014 – to analyze recent trade information and to identify the trends as compared to the previous periods.

• Trade Relations between Bulgaria and Albania The trade flows between both countries for the period 2006, 2007 and 2012 until 2014 are shown in Table 3. Table 3: Bulgarian Trade with Albania in EUR million 2006

2007

2012

2013

2014

Export

82.1

51.2

50.1

62.1

60.8

Import

3.1

8.2

19.0

17.1

18.9

Turnover

85.2

59.4

69.1

79.2

79.7

Balance

79.0

43.0

31.1

45.0

41.9

Source: Ministry of Economy of Bulgaria and author’s calculations The major groups of commodities traded currently between both countries are: •

Foodstuffs;

•

Vegetable oils;

•

Metal scra

•

Medicines;

•

Finished goods;

According to the Bulgarian Ministry of Economy, in the past Bulgaria was one of the major foreign trade partners of Albania and at some point back in 2001 ranked fourth in the foreign trade of the country after Italy, Greece and Germany. After the entry of Bulgaria into the European Union, the turnover between Albania and countries like Macedonia, 302

Turkey, Serbia and Kosovo has increased due to the imposed customs duties by Bulgaria (EU) as opposed to the more preferential treatment of the referred above countries. Although significant fluctuations in the turnover between Bulgaria and Albania have not been observed, the balance of trade was always positive for Bulgaria. The governments of both countries have set up a number of joint commissions aiming at intensification of the trade relations. The investments of Bulgarian businesses although at very low nominal value exceed significantly Albanian investments in Bulgaria. It can be anticipated that with the development of railroad transport within transport corridor VIII and the finalization of railroad: Sofia – Skopie - Tirana – Duras, the potential for intensification of trade flows between Bulgaria and Albania will be increased due to reduced transportation costs. Trade Relations between Bulgaria and Bosnia and Herzegovina The trade flows between both countries for the period 2006, 2007 and 2012 until 2014 are shown in Table 4. Table 4: Bulgarian Trade with B&H in EUR Million 2006

2007

2012

2013

2014

Export

101.5

27.1

35.1

39.2

42.2

Import

17.8

23.5

15.9

25.5

42.7

119.3

50.6

51.0

64.7

84.9

19.2

13.7

-0.5

Turnover Balance

83.7 3.6

Source: Ministry of Economy of Bulgaria and author’s calculations The major groups of commodities traded currently between both countries are: •

Metals and ores;

•

Chemical products;

•

Finished goods;

Official statistics for the trade flows between Bulgaria and B&H exists since 1996 as the trade with B&H is in compliance with the Dayton agreement. Currently the trade relationships between Bulgaria and B&H are regulated by the Temporary Agreement for 303

trade between B&H and the EU. With the accession of Bulgaria into the European Union the export from Bulgaria to B&H has sharply decreased. Since 2012 the export of B&H to Bulgaria is increasing as in 2014 the trade balance becomes negative for Bulgaria. The structure of import from B&H includes mainly raw materials – i.e. lead and ferrous ores as the total value of import is still rather low. As a major obstacle to further intensification of trade flows between both countries can be pointed out the complex political and economic situation in Bosnia & Herzegovina. Trade Relations between Bulgaria and Kosovo Bulgaria has separate statistics for the trade with Kosovo since 2006. The trade flows between both countries for the period 2006, 2007 and 2012 until 2014 are shown in Table 5. Table 5: Bulgarian Trade with Kosovo in EUR million 2006

2007

2012

2013

2014

34.0

38.9

41.0

47.0

Export

0

Import

0

Turnover

0

36.4

39.3

42.2

51.9

Balance

0

31.6

38.5

39.8

42.1

2.4

0.4

1.2

4.9

Source: Ministry of Economy of Bulgaria and author’s calculation. The major groups of commodities traded currently between both countries are: •

Mineral oils and oil products;

•

Cigars and cigarettes

•

Vegetable oil;

•

Foodstuffs;

The geographic proximity of Kosovo could presume a higher level of trade between both countries. It should be pointed that the main trade flows pass through the territory of Serbia. The structure of Bulgarian export to Kosovo remains almost unchanged during the years as significant share of the export is related to oil, oil products and tobacco products. The predominant share of Kosovo’s export to Bulgaria is Zink ores and concentrates. The balance of trade was always positive for Bulgaria. 304

Trade Relations between Bulgaria and Macedonia The trade flows between both countries for the period 2006, 2007 and 2012 until 2014 are shown in Table 6. 2006

2007

2012

2013 2014

Export

263.9

284.0

392.7

351.4 358.8

Import

139.2

275.0

252.3

276.0 272.5

Turnover

403.1

559.0

645.0

627.4 631.3

Balance

124.7 9.0

140.4

75.4 86.3

The major groups of commodities traded currently between both countries are: •

Mineral oils and similar products;

•

Electricity;

•

Vegetable oils;

•

Metal ores.

The structure of Bulgarian export to Macedonia is pretty much unchanged for the last couple of years as the share of oil and oil products, electricity and sunflower oil is predominant. The main part of the Macedonian export to Bulgaria is related to metal ores and concentrates. Table 6: Bulgarian Trade with Macedonia in EUR million Source: Ministry of Economy of Bulgaria and author’s calculations Trade Relations between Bulgaria and Montenegro The trade flows between both countries for the period 2007 and 2012 until 2014 are shown in Table 7. Due to the breakup of Montenegro from the FR Yugoslavia in 2006, trade information for this period is not available. Table 7: Bulgarian Trade with Montenegro in EUR million 2006 Export

n.a.

2007 4.7

305

2012

2013

2014

14.3

16.9

13.1

Import

n.a.

0.4

0.6

1.1

2.3

Turnover

n.a.

5.1

14.9

18.0

15.4

Balance

n.a.

4.3

13.7

15.9

10.8

Source: Ministry of Economy of Bulgaria and author’s calculations The major groups of commodities traded currently between both countries are: •

Medicines;

•

Foodstuffs;

•

Cigars and cigarettes;

•

Railway wagons;

•

Copper scrap, iron and steel products.

The trade turnover between Bulgaria and Montenegro is very low and the trade relationships are underdeveloped. The trade balance is strongly positive for Bulgaria as there is no significant dynamic observed for the last three years. Trade Relations between Bulgaria and Serbia The trade flows between Bulgaria and Serbia are shown in Table 8. Table 8: Bulgarian Trade with Serbia in EUR million 2006

2007

2012

2013

2014

Export

454.2

595.8

442.4

373.7

363.7

Import

168.0

174.5

253.0

263.1

301.2

Turnover

622.2

770.2

695.4

636.8

664.9

Balance

286.2

421.3

189.4

110.7

62.5

Source: Ministry of Economy of Bulgaria, National Statistical Institute of Bulgaria for 2006 and author’s calculations The major groups of commodities traded currently between both countries are: •

Mineral oils, shale oil and similar products

•

Electricity;

•

Medicines; 306

•

Foodstuffs;

•

Metals and metal ores.

Although significant fluctuations of trade turnover between Bulgaria Serbia can be observed within the reviewed period the balance of trade has been always positive for Bulgaria. In the last years there is clear trend that the positive balance for Bulgaria is decreasing due to the decrease in Bulgarian export to Serbia and increase in the import. Serbia is one of the important trade partners of Bulgaria. Serbia ranks 16th in the export partner list countries of Bulgaria for and Serbia are regulated by the Temporary Trade Agreement between the EU and Republic of Serbia from 29.04.2008. Most important trade partners in CEFTA – 6: a Bulgarian perspective If the trade partners of Bulgaria within the SEE region are to be ranked on the basis of trade turnover, the following results can be observed for the year 2014: Table 9: Most important trade partners on the basis of turnover (EUR million) for 2014 Countries

Balance

Turnover Rank

Serbia

62.5

664.9

1

Macedonia

86.3

631.3

2

B&H

-0.5

84.9

3

Albania

41.9

79.7

4

Kosovo

42.1

51.9

5

Montenegro

10.8

15.4

6

Total

243.1

1528.1

Source: Ministry of Economy of Bulgaria and author’s analysis As it can be seen from the data in Table 9, the most important trading partners of Bulgaria within the region are Serbia and Macedonia. Trade turnover with B&H, Albania, Kosovo and Montenegro is still insignificant and trade opportunities are to be further explored. Looking back to the data analyzed the accession of Bulgaria to the EU had initial negative impact on Bulgarian export only with respect to Albania and B&H for the year 2006 as compared to 2007, while for the other countries of SEE-6 the trend was the opposite. 307

Summary Future trade liberalization of the relationship of Bulgaria as member of the EU with Southeast Europe will be largely to the benefit of SEE-6 export to Bulgaria. The trade statistic information for the analyzed period shows a clear trend for increase of the Bulgarian import from SEE -6 countries as the sharp decrease in 2009 is explained by the drop in international trade due to the global financial crisis. In Graph 1 below are shown the trends in trade turnover and trade balances for the period 2006 until 2014 between Bulgaria and the Western Balkan countries. Graph 1: Bulgarian trade with SEE -6 countries for the period 2006 -2014 (EUR million) TRADE OF BULGARIA WITH SEE -6 COUNTRIES Trade Turnover

Trade Balances

1800 1600 1400 1200 1000 800 600 400 200 0 2006

2007

2008

2009

2010

2011

2012

2013

2014

Source: Ministry of Economy of Bulgaria and author’s analysis Although trade balances continue to be negative for SEE–6 countries it is clear that the Bulgarian positive trade balance in nominal value is decreasing. The further reduction or eliminations of trade barriers will provide for more opportunities for SEE-6 companies looking for expansion in the EU. As remaining obstacles to trade can be pointed out: lack of sufficient infrastructure, low purchasing power of end consumers in the region, general political and economic instability present in some of the SEE partner countries. 308

The impact of CEFTA 2006 for the countries in Southeast Europe In this section of the report, the possible economic implications of CEFTA 2006 for the SEE -6 countries on FDI, growth and taxation will be addressed. The following analysis is based to a greatest extent on the conclusions of various theoretical and empirical studies relevant to similar type of regional trade integration discussed in the present paper. It should be noted that some of the implications are contradictory or overlapping based on the fact that two parallel processes of trade integration are taking place in the region: on one hand it is the free trade between the SEE - 6 countries and the process of further trade liberalization and accession to the European Union. Furthermore, the various implications of regional trade integration are intra- related – i.e. as the case of FDI and taxation. CEFTA 2006: FDI, growth and taxation On the theoretical level one of the most likely results of the operation of CEFTA 2006 will be the decrease in intra-regional FDI as a substitute for increased regional trade. However, this negative effect will of minor importance, since intra-regional FDI is not substantial by the moment. On the other hand, it could be anticipated that outside FDI will be increased with deepening of the regional integration processes. The countries having the best locational advantages will attract the most of FDI inflows. Recent empirical studies suggest that in the case of South-South integration like CEFTA 2006 for the countries in Southeast Europe, macroeconomic stability will be a more important factor than regional integration itself. As it seems that the political and economic situation in the region will continue to be volatile FDI inflows are not likely to change significantly in the short and medium term. The above ambiguous effects on FDI take into account the establishment of RIA like CEFTA 2006 as a single factor. However, all the countries in the region have engaged in liberalization of trade with the European Union – their largest trade partner. This type of integration (North-South) leads in general to positive FDI inflows in the Southern economies. In this way, these slightly negative implications on FDI for SEE-6 countries may be partially or fully compensated. However, the presence of macroeconomic stability will be once again an important factor. The analyzed empirical studies on the correlation between growth and regional integration of the same type as CEFTA 2006 in Southeast Europe show that no such direct correlation can be found based on the empirical evidence or the effects are rather ambiguous. Once 309

again, the process of increasing trade liberalization between the SEE – 6 countries and the European Union as a separate process should lead to more positive effects in terms of economic growth as compared to the process of regional trade integration by itself. In the countries in Southeast Europe, as well as on world scale, there is a common tendency of the decrease of the corporate tax rates. The corporate tax and VAT rates for 2014 for SEE-6 countries are shown in Table 10. Table 10: SEE-6 Tax Systems in 2014 Corporate Tax Rate

Standard VAT Rate

ALB

15

20

B&H

10

17

KOS

10

16

MAC

10

18

MON

9

19

SER

15

20

Source: KPMG Global, 2015. As it can be seen from the table, the levels of the corporate tax rates for the year 2014 are rather low. This tendency can be explained partly with the growing globalization of the business and implementation of new technologies, the increased exposures, relevant to the investments in the countries of Southeast Europe. As far as the business and the capital are becoming more mobile and the political and economic risk is substantial, the countries in the region are facing a significant pressure to provide competitive corporate tax rates (Ranchev, 2001), which resulted in a minimization of corporate tax rates to historically low levels. The harmonization or coordination of the tax and customs legislation is of specific importance for the operation of CEFTA 2006. The creation of clear rules, in line with the European requirements in this field is of substantial importance for securing long-term fiscal stability in the region. On the other hand, there is a significant risk for the SEE-6 countries if a compatible tax and customs legislation is not present. With the removal of the trade barriers, the differences between the tax legislation become apparent - especially with regard 310

to the VAT and the excise duties. In this way, if there would be significant discrepancies in the applicable VAT and excise duty rates, an unexpected growth of the cross-border trade could be observed, which under equal conditions would lead to a decrease of the budget revenues in the countries, which apply higher rates of indirect taxes. At the same time bigger differences in the corporate rates might have a substantial impact on the decision of the potential investors to prefer a specific country for investment among all other countries in the region. Harmonization and FDI in the Region The problems, related to the re-distribution of the investment flows, from the so-called tax competition perspective, are a painful topic from a long time even for the countries within the European Union4. In practice the amount of potential foreign investments from an international perspective and particularly in the SEE region is a rather limited, for the attraction and taxation of which a fierce struggle between the governments of the countries in Southeast Europe is in place. Recent research suggests that “the use of investment incentives focusing on foreign firms, although motivated in some cases from a theoretical point of view, is generally not an efficient way to raise national welfare” (see Blomstrom and Kokko, 2003, p.1). Regarding the relationship between FDI and corporate tax incentives empirical analysis supports the concept that taxes are important factor if the SEE countries become “close substitutes concerning the location of investment” (Blazic and Vlahinic, 2006, p. 23). Further to the above analysis, it is of primary importance that the countries in the region coordinate properly their tax policies and investment tax incentives. Engagement in tax competition and further downsizing of tax rates and/or tax incentives will lead to substantial budget losses. Roadmap for sustainable growth One possible solution for the common problems of the SEE-6 countries could be the establishment of a roadmap for sustainable growth. This roadmap for sustainable growth could the next step for achieving deeper regional integration before the countries join the European Union. The roadmap could encompass the following measures for achieving sustainable growth in the region: •

Active support from the international institutions of the aspirations for EU membership of the SEE-6 countries with accession in the next 5 - 10 years; 311

•

Setting up targets and constant monitoring the levels of budget deficits as well as maintaining macroeconomic stability;

•

Coordination of the efforts and identifying ways to increase FDI through improved infrastructure and legal environment;

•

Coordination of the reforms in the tax and customs legislation oriented at further harmonization with EU legislation;

•

Commitment of the governments to further fiscal consolidation with active measures to limit corruption and bureaucracy;

•

Focus of the governments on educational, health and social security reforms focused on integration of minorities and reduction of youth unemployment;

•

Strengthening the role of the Regional Cooperation Council and active participations of experts in the working groups monitoring progress and setting the agenda.

Such an ambitious program could be achieved only through the coordinated efforts of the governments of the SEE-6 countries with the support of the EU and international financial institutions5. Summary It seems that the establishment of free trade area in Southeast Europe on the basis of CEFTA 2006 as an isolated event is not likely to have a substantial positive effect on the economic development of the region. Recent strategic theoretical and empirical studies show that the short-term economic implications are ambiguous. It is also clear that the economic effects of macroeconomic and fiscal stabilization through tax and customs harmonization can play more significant role in the economic stabilization in the region than regional trade integration alone. However, it should be noted that the outcome of CEFTA 2006 should not be measured by economic indicators only. There are a number of non-economic implications that are important as well and could not be verified by amounts in foreign currency, shares, ratios and percentages. Based on the above analysis it can be argued that deeper regional integration in Southeast Europe may have significant non-economic implications, which are positive for the longterm development of the region as a whole (Ranchev, 2002, p.50). It seems that the main argument in favour of the existing RIA between SEE -6 countries will be the increased security through cooperation. The countries in Southeast Europe “will have to prove their 312

readiness to overcome their mutual turbulent past and to leave it to historians” (Kostovska, 2009, p. 95). While the economic implications of CEFTA 2006 itself may prove ambiguous especially when compared with the effects of trade liberalization with the European Union, it can be anticipated that the RIA will decrease the level of bureaucracy, smuggling and corruption. At the same time trade liberalization in the region could have a positive impact on institution building, environment and health and protection of intellectual property rights. A roadmap for sustainable growth supported by the governments of the SEE-6 countries, the EU and the international financial institutions could be a useful tool for deeper regional economic integration in parallel to the process of accession in the EU.

Conclusion This paper argues that deeper regional integration for the countries in the SEE region and relevant tax and customs harmonization can be the considered an appropriate scenario especially for the economies of the Western Balkan countries. In this way the requirements of the European Union in the field of taxation and customs reform can turn out to be a common starting point in the direction of more active economic integration of the region and future accession of the Balkan (SEE) countries in the European Union. Trade liberalization and fiscal stability through harmonization of tax and customs legislation should go hand in hand for the six countries in Southeast Europe, in order to secure a long-term vision for the undergoing processes of transformation. The common goal of achieving European Union membership for the countries in the region makes the transformation processes rather unique. It can be argued that harmonization of tax and customs legislation in combination with regional trade liberalization is a phenomenon that can be observed currently only in Europe. The European Union in its turn should provide more clear messages regarding

3

European Commission, Brussels, 17.6.2015 COM (2015) 302 final, “A Fair and Efficient

Corporate Tax System in the European Union: 5 Key Areas for Action”. 4

A good example of such structured approach is the Final Declaration by the Chair of the

Vienna Western Balkans Summit 27 August 2015. 313

the timing of accession of each of the SEE-6 countries as to accelerate the processes of transformation and modernization in the region via the Regional Cooperation Council. The objective of the present research has been to identify some of the most significant implications of deeper regional integration of the economies of the six SEE countries. The findings of this research show that although short-term economic effects would be ambiguous for the region as a whole, the process of trade liberalization will bring more security, which in its turn will assist the economic reforms and will probably lead to a greater degree of harmony and stability in these countries in the long run. References Arora, Vivek and Vamvakidis, Athanasios (2004), “How Much Do Trading Partners Matter for Economic Growth?”, IMF Working Paper, WP/04/26, February. Bhagwati, Jagdish (1988), “Protectionism”, The MIT Press. Bhagwati, Jagdish and Hudec, Robert E. (Editors), (1996) “Fair Trade and Harmonization: Prerequisites for Free Trade”, Volume 2, The MIT Press. Blazic, Helena and Vlahinic, Nela, (2006), “FDI Determinants in Southeast European Countries with Special Reference to Tax Incentives”, January. Blomstrom, Magnus and Kokko, Ari, (1997) “Regional Integration and Foreign Direct Investment: A Conceptual Framework and Three Cases”, Policy Research Working Pape No. 1750, The World Bank. Blomstrom, Magnus and Kokko, Ari, (2003) “The Economics of Foreign Direct Investment Incentives”, NBER Working Paper Series No. 9489, National Bureau of Econmic Research, February. CEFTA: Contains information of the relevant CEFTA agreement in force and trade information available at http://www.cefta.int De Bonis, Valeria (1997a) “Regional Integration and Factor Income Taxation”, Policy Research Working Paper No. 1849, The World Bank, De Bonis, Valeria (1997b). “Regional Integration and Commodity Tax harmonization”, Policy Research Working Paper No. 1848, The World Bank. De Bonis, Valeria (2002) “Regional Integration and the Co-ordination of Capital Income Taxation”, Economic Notes, 31:79-108. Echeveri-Carroll, Elsie (editor) (1995), “NAFTA and Trade Liberalization in the Americas”, Bureau of Business Research. 314

European Commission, Brussels, 17.6.2015 COM (2015) 302 final, “A Fair and Efficient Corporate Tax System in the European Union: 5 Key Areas for Action”. http://ec.europa.eu/taxation_customs/resources/documents/taxation/company_tax/fairer_corp orat e_taxation/com_2015_302_en.pdf European Commission, Enlargement: contains information of the processes of the EU accession of SEE countries available at: http://ec.europa.eu/enlargement/policy/regionalcooperation/index_en.htm Final Declaration by the Chair of the Vienna Western Balkans Summit 27 August 2015 at: http://www.bmeia.gv.at/fileadmin/user_upload/Zentrale/Aussenpolitik/Chairman_s_Conclusi ons_Western_Balkans_Summit.pdf Kostovska, Ljubica (2009), “CEFTA-2006 Trade Cooperation”, Proceedings from the Third International Conference REGIONAL COOPERATION AND ECONOMIC INTEGRATION Challenges and Opportunities, Skopje, p. 91-100. KPMG Global: is a menu driven database, containing of current tax information on various countries, maintained by KPMG available at: http://www.kpmg.com/Global/en/services/Tax/tax- tools-and-resources/ Molle, Willem (1994) “The Economics of European Integration. Theory, Practice, Policy”, Dartmouth. Ranchev, Georgi (2001). “The combination of services - infrastructure - taxes is a struggle for foreign investments “, PARI Daily, August, available at: http://www.policy.hu/~ranchev/article3.html Ranchev, Georgi (2002). “Balkanite – Zona za svobodna targovia. Harmonizacia na danachanoto i na mitnicheskoto zakonodatelstvo”, Delova Sedmica Konsult, Sofia. Regional Cooperation Council Website: http://www.rcc.int/ Schiff, Maurice and Winters, L. Alan (1998). “Regional Integration as Diplomacy”, The World Bank Economic Review, Vol. 12, No. 2, May. Schiff, Maurice and Winters, L. Alan (2003). “Regional Integration and Development”, IBRD/The World Bank. Vamvakidis, Athanasios (1998). “Regional Integration and Economic Growth”, The World Bank Economic Review, Vol. 12, No. 2, The World Factbook – CIA: https://www.cia.gov/library/publications/the-world-factbook

315

The Framework of Economic Factors in Albania Dr. Albana Demi1 & PhD C. Eglantina Farruku2 1

2

Canadian Institute of Technology, Tirana Albania Department of Banking and Finance, Epoka University, Albania

Abstract Considering social and economic factors and their effects on the global economy this study has singled to present one of the most important macroeconomic factors such as unemployment. Unemployment is a disturbing factor of society. The purpose of this research is the study of unemployment in the macroeconomic framework, particularly in nowadays where feel the signs the economic crisis, in the social and economic perspective. To reduce unemployment, the economic policy responsible persons often seek to give an impulse in the social economic system to approach full use of the abilities and the labor market starts to be exhausted. Unemployment includes the percentage of unemployed from the entire workforce capable of working, in the economy of a country. Also, based on the impact of the global crisis, this study aimed to highlight the impact of the crisis on the level of unemployment. Recently in our country is working to improve the legal framework which aims to activating the population capable of working, both in the private system as well as in the public system. According to the studies conducted economic losses caused by unemployment are greater than the losses expected by the company from the non-functioning of monopolies. Keywords: Unemployment, Employment, Economic recession, The global crisis, The economy, Economic factors. Introduction The start point of the study of the phenomenon of unemployment is submitted by the concept of labor force. From an economic point of view, a higher unemployment perspective means actual GDP decline. In different studies made for economic losses caused by the unemployment estimated to be greater than the losses experienced by the company from the inefficiency of monopolies or losses caused by tariffs and quotas. The economic cost is expressed as the difference between actual and potential product. So in an unemployment situation this value is negative. The full working occupancy and the price stability are the two central macroeconomic goals of the government. A large number of enterprises has trouble to find qualified workers and in the conditions of a high competition, the salary started to increase. Thus, a low unemployment 316

levels leads to increase the wage which through inflationary spiral generates an increase in the prices themselves. Any financial system is sensitive in terms of age composition of its active members. If age ratio is high, then the number of them that you are eligible for benefits will be great. The existing tax burden compared to other countries is judged high. In our opinion it is considered as one of the serious cause’s large-scale evasion in the collection of contributions in favor of Social Insurance System. This system has been completely mandatory and state based on redistribution. It was developed in two parallel schemes one for public sector employees and on the other one for the private sector employees. Precisely when unemployment began to threaten the stability of society or the state, various activities were organized with assistance character. The intervention of state in economic flow through economic policies is justified by the adjustments made in terms of eliminating the phenomena that become an obstacle to maintaining the general welfare of society. These occurrences are associated with imperfect market operation in shielding the poorest layers of society, creating jobs, elimination of monopolies and the growth of genuine competition. 2. Research method The economic interpretation of unemployment represents the sharpest issue and the contradictory macroeconomic theory. Generally, is recognized that in the conduct of working factor, a determining role have wages. Economic cost is expressed as a difference between the current product and potential product. Periodic financial crises motivate each question to the rationality of markets and seek to know how it is possible that rational actors and occasionally gripped by greed or modes of mania for large amounts of investment, when almost anytime finish in panic situations about the financial crisis. Or, if the question is made differently if economic actors are reasonable, as economists assume that they are, then how can explain here after early outbreak of irrational financial markets? According Charles Kindleberger during the last few centuries the world economy has undergone a series of collapses of finance that have shaken international capitalism. Also, there are some other ideas that have even argued that the economic and institutional changes have made the impossible repetition of serious financial crisis and that if the crisis will occur; they will be caused by specific historical circumstances and will not be the result of internal factors action and functioning of the capitalist system itself. For the long term periods, if we take into consideration the inflationist forecasts there is no relationship to be able to guide the level of unemployment below the natural norm. Every individual which is not included in the working scheme and unemployed is considered outside the labour force that includes retirees, students and children. 317

The unemployed considered the person who is not at work but actively seeking employment. the employed and the unemployed constitute the labor force. Employed can consider each individual who takes salary. Because of its special the problem of unemployment and efficient choice of economic policy, the accuracy of estimating unemployment takes a special importance. Thus, changes in unemployment are measured by the unemployment rate, which represents the percentage ratio of the number of unemployed and the labor force represented below by the graphs. Table1. Labour force participation rate – 2007 – 2014 (INSTAT A. , 2015)

Age group

2007

2008

2009

2010

2011

2012

2013

2014

15-29

50.1

41.6

45.6

44.3

54.8

46.6

38.7

41.9

30-64

75.6

71.8

73.2

74.4

76.7

73.8

71.1

72.3

15-64

65.4

62.1

62.1

62.3

68.5

64.9

59.6

61.5

15+

58.0

53.3

55.1

55.2

60.3

57.3

52.4

53.7

Graph.1 Labour force participation rate – 2007 – 2014 (INSTAT A. , 2015)

15-29 30-64 15-64 15+

2006

2007

2008

2009

2010

2011

318

2012

2013

2014

2015

Table 2: Unemployment rate 200-2014 (INSTAT, 2015)

Age group

2007

2008

2009

2010

2011

2012

2013

2014

15-29

19.8

24.7

21.9

22.5

21.9

26.0

27.2

32.5

30-64

10.7

10.0

10.4

10.8

11.1

10.0

13.1

13.3

15-64

13.5

13.2

13.8

14.2

14.3

13.8

16.4

17.9

15+

13.4

13.1

13.8

14.0

14.0

13.4

15.9

17.5

Graph.2 Unemployment rate – 2007 – 2014 (INSTAT A., 2015)

15+ 15-64 30-64 15-29 Age group

1

2

3

4

5

6

7

8

3. Results The globalization of finance remains a reality and it has a profound influence on the international economy. Financial crises are a periodic feature of International Economics. To maximize absolute profits at the financial markets has been increased significantly fragility of emerging the international financial system and the world economy in general. Different economic experts define the various forms of unemployment, on the basis of which also recommend the appropriate tools. 319

In another point of view the wages are flexible and unemployment in these conditions cannot be considered binding, but it is a non voluntary unemployment. Graph.3 Average monthly wage in public sector and official minimum wage, (ALBANIA I. , 2015)

Average monthly wage in public sector and official minimum wage, 60000 50000 40000 30000

Average monthly wage

20000 10000

Official minimum wage

0

Focusing on the graph above is noted that administrative reforms are required to support the government on the employment strategy. Starting from 2000 the initial strategic objectives aimed to analysis of the consequences of the socio-political changes and adverse effects and to choosing an efficient employment system that will withstand not only the urgent problems of the period, but would resist time's serve future generations. An important role has played even the experience obtained from various countries adopting these experiences with economic and political conditions in which our country has passed. The development of the Society, the civilization of Individuals, the ratio between youth and old age, can change the 'economic balance, influenced directly in any state institution, play an important role in their formation and development. The form of economic activity, not only stipulates the lifestyle of members employed in the company, but also to those who are unemployed. 4. Conclusions One of the fundamental laws of capitalism is the free competition, where different companies achieve through competition to produce goods more and better in quality but cheaper that the people can choose these companies and to prolong life. It must be properly enforced the legislation on free competition as one of the strongest instruments not supposed to be allowed businesses or individuals who have sufficient income to cooperate among themselves and to maintain high prices in the market if there is overproduction and minimizing the consumption 320

of their goods. According the conclusion achieved by this study a labor market characterized by a completely flexible wage cannot obtain an unemployment forced. Full Employment and price stability are two of the central macroeconomic objectives of each government. To fight unemployment person’s responsible economic policy often requires providing economic impetus. With this reduction of unemployment, economic system approaching full use of his skills and the labor market begins to have problems. A large number of enterprises have trouble finding qualified workers and the conditions of high competition, the starting salaries rise. The enterprises administer their salaries for the employees by fixed tariffs, generally for one year (labor contracts), which even if modified, regulation becomes more or less proportional to all kinds of wages. International capital flows increases the instability of the international economy, international financial system itself by its intrinsic nature, is unsustainable and subject to serious crisis. Despite its importance, the nature and size of the global integration of financial relations are very little understood by communities that do not belong to the economic and financial sciences. Even though internationalization of finance has become an important feature of the global economy, international financial system continues to be in a great measure on a national basis and consists of separate national financial systems, closely interconnected between them. However, it should be noted that the trend of so-called "home bias" has been reduced, even though the world is still characterized by the presence of national financial markets. 5. References A. Mancellari, S. Qirici, S. Haderi, Dh. Kule, “Hyrja ne ekonomi” Shtepia Botuese “PEGI” 2007 Robert Gilpin “Ekonomia Politke Globale” John Maynard Keynes “ Teoria e Pergjithshme e Punesimit, Intresit dhe Parase” INSTAT Albania - Average monthly wage in public sector and official minimum wage. INSTAT Albania - Source of information: Labour Force Surveys 2007-2014. Albanian World Bank Conference on Development Economics “Creating a Competitive Labor Force in Albania”.

.

321

Returns to Education in the Albanian Labor Market Dr. Juna Miluka Department of Economics and Finance, University of New York Tirana, Albania

Abstract The issue of private returns to education has received much attention in the literature and there are many studies for various countries on the issue. Nonetheless, less is known of the issue in developing countries and these studies are missing for Albania where little is known regarding private returns to education. A major characteristic of labor market in Albania is the disparity between males and females. It is well documented that women in the labor market lag behind in terms of employment and wages; they have higher unemployment rates, higher inactivity rates which translate into lower labor force participation rates, mainly due to household responsibilities. Understanding returns to education by sex, region and sector in Albania would help answer questions regarding parent’s decisions on children’s education as well as the allocation of the workforce in different sectors of the economy by sex and regionally. Higher returns to education are associated with higher investment of parents in children’s education. This is especially important for females and females in rural areas where culture and societal norms do not always envision females as participants in the labor market. In fact, the vast majority of females in the rural areas are in unpaid family labor. Greater human capital accumulation, employment and wages improve individual’s outcome and have a greater impact for female’s outcomes. Better position of females in the labor market and higher earnings also mean a better position and higher bargaining power of females within the household. This paper estimates returns to education by sex, region, and sector in Albania using the 2012 Living Standard Measurement Survey Data. The econometric model used in this paper to estimate private returns to education is based on Mincer’s (1974) human capital earning function. To correct for self-selection, bias a two-step estimation following Casero and Seshan (2006) is estimated for each sector. The study shows that there are clear pay offs to female education. Estimation results show that females have higher returns to education overall and across regions and sectors. Returns to education for females are higher in the private sector compared to the public sector. The highest returns to education for females are in the service sector. Higher returns to education for women may improve their position in the labor market and should serve as incentives for increased labor force participation and paid employment especially for women 322

in the rural areas. On the other hand, it also shows that investing in education by the government is a worthy investment that brings back rewards and consequently investment in women’s education should continue and it should be increased providing more and better quality education. Promoting women’s entry into the private sector is important given women’s already high participation in the public sector, and the generally limited capacity of the sector to absorb a large number of workers. The higher returns of education for women in the private sector should also serve as a policy incentive to direct women’s participation in the private sector as to reap the rewards to education that this sector offers. Keywords: Returns to education, Gender, Albania, Labor market.

Introduction Private returns to education is an area that has received much attention in the literature and there are many studies for various countries on the issue. Psacharopoulos (1994) has given a global update regarding private return to education. Nonetheless, less is known of the issue in developing countries. Human capital theory, which links human capital returns and outcomes, is not straight forward in developing countries, where cultural practices and norms also come into play (Jensen, 2010). In Albania little is known regarding private returns to education. Labor market studies have generally been missing for Albania, although they have been growing in the later years measuring impact of return migrants (Azzari and Carletto, 2009), Miluka (2012, 2013) measuring the gender wage gap and its sources, and measuring determinants of female labor force participation (Miluka and Tsushima, forthcoming), etc. However, much remains to be studied and understood about labor market dynamics in Albania. A major characteristic of labor market in Albania is the disparity between males and females. It is well documented that women in the labor market lag behind in terms of employment and wages; they have higher unemployment rates, higher inactivity rates which translate into lower labor force participation rates, mainly due to household responsibilities. On the other hand, females are having high educational attainment, especially those who participate in the labor market, and there is a continuous increase of female enrollment in universities and women graduating universities. Studies show that education is key in reducing the gender wage gap (Miluka 2012, 2013) even though it is not enough to eliminate it. As a result, there is a need to understand returns to education by sex, region, and sector in Albania. 323

Understanding returns to education by sex, region and sector in Albania would help to answer questions regarding parent’s decisions on children’s education as well as the allocation of the workforce in different sectors of the economy by sex and regionally. Higher returns to education are associated with higher investment of parents in children’s education. This is especially important for females and females in rural areas where culture and societal norms do not always envision females as participants in the labor market (Jensen, 2010). In fact, the vast majority of females in the rural areas are in unpaid family labor. Greater human capital accumulation, employment and wages improve individual’s outcome and have a greater impact for female’s outcomes (Schultz, 2001). Better position of females in the labor market and higher earnings also mean a better position and higher bargaining power of females within the household (Thomas, 1990; Schultz, 1990). Human capital theory suggests a direct link between the levels of education and returns to individual investment in education (Becker, 1993; Mincer, 1974). As in other redistributive economies, Albania has gone from the mainly bureaucratic allocation of resources to distribution based on economic productivity. The transition to the market economy should be associated with higher returns to education (Nee, 1989). Evidence from other countries, like China, shows that there are increasing returns to education, which are attributed to the emerging labor markets that better realize the values of human capital than before (Zhou, 2000; Wu and Zie, 2003). The market economy has provided higher returns to human capital than the centrally planned economy (Cao and Nee, 2000). Likewise, empirical evidence in other countries like rural India shows that returns to education in wage employment sectors are higher and mostly increasing, following patterns found in other studies (Duraisany, 2002; Subbaraman and Witzke, 2006). Other studies have shown gender asymmetry in returns to education, where women usually have higher returns than men. Gender estimates, however, have received less attention in the literature since the differences for many countries have not been very large (Monazza, 2005). The evidence on developing counties is mixed. Some studies find that returns to schooling do not significantly differ by gender (Behrman and Wolfe, 1984; Schultz, 1993).

Other studies find lower returns to women’s schooling

(Kingdon, 1998), and others yet, show increasing returns to women’s schooling (Behrman and Deolalikar, 1995; Asadullah, 2006). In this respect, this study contributes to the literature by documenting and empirically testing the private returns to education, where evidence is missing as is the case of Albania.

324

The purpose of this paper is to estimate returns to education by sex, region and sector in Albania. The remainder of the paper includes the following sectors: sector II presents data and descriptive statistics, sector III explains the econometric model, sector IV presents estimation results, and sector V concludes and provides policy recommendations. I. Data and Descriptive Statistics The data used in this paper is the 2012 Living Standard Measurement Survey (LSMS) conducted every three years by the Albanian Institute of Statistics. The first round of the Albanian LSMS started in 2002. The Albanian LSMS provides a wide range of information on household and individual characteristics. It is a stratified nationally representative survey for a total sample of 6,671 households. The analysis in this paper is based on wage earning individuals for a total sample of 5,151 individuals. Descriptive statistics precede regression analysis and provide information on differences between men and women in terms of individual characteristics, education, wage, work experience, sector of employment, occupation. As figure 1 shows, on average, females currently present in the labor market have higher education levels than man. This positive difference in terms of education is maintained almost throughout the wage distribution peaking around age thirty. The gap starts to close after its peak at 30. This difference may be a result of the trends after the fall of communism, showing higher rates of university degree acquisition for females. Whereas during communism access to higher education was quite restricted and admission to university as well as field of study was determined by the state, after communism university enrollments increased substantially. The spurge of private universities further increased enrollment in universities, and females have higher participation in higher education and university degrees. Consequently, those factors may be resulting in the larger positive education gap for younger females as illustrated in figure 1.

325

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

Age (years)

mean male education

mean female education

Figure 1. Education by age and sex

Regardless of the education level, females have on average lower wages than men (Figure 2). As previous studies have shown (Miluka 2012; Miluka 2013) higher levels of education for women help reduce the gender wage gap, however education alone is not enough. These studies show that factors such as lower work experience due to child caring and rearing responsibilities, occupational segregation into lower paying activities and lack of social support in child-care account for the majority of the gender wage gap. The persistent gender wage gap also present in the 2012 data may continue to exist as a result of the continuous presence of the above mentioned factors.

In fact descriptive statistics in Tables 1-3

highlighting differences between males and females in terms of wages, education, experience, occupations, economic sectors, etc. show much of the problematic highlighted in the previous mentioned studies.

326

Kernel density estimate

8

10

12

14

16

Lnwage Men Women kernel = epanechnikov, bandwidth = 0.0900

Figure 2. Wages by sex

Descriptive statistics of individual characteristics by sex in Table 1 show that on average women have lower wages of about 57,000 old ALL1. Women have lower wages across education levels. As education levels increase the difference in wages decreases starting at the lower secondary education level, where the difference in wage between men and women is the widest. The difference in wages between male and female between primary education level and lower secondary education level increases from about 62,000 old ALL to about 104,000 old ALL for lower secondary education. This may indicate that for very low levels of education (primary level), which correspond to very low skill jobs, wage differences are low, as are returns to education. The difference of 104,000 old ALL is the highest difference in wages between men and women. The difference is reduced to about 95,000 old ALL for upper secondary education and about 67,000 old ALL for university and above. As figure 1 also showed, women in the labor market have higher education than men. On average, women have over one year of education more than men. Average education for women in the labor market is 12.28 years versus 10.92 for men. There are fewer women than men with primary, lower secondary and upper secondary education. Over 35% of women have university and above compared to 17% for men. The large participation of women with higher education may also reveal something beyond higher levels of education in the labor market. It may show a less favorable position and lack of employment opportunities for women of lower education compared to men with that same education level. Women with 327

lower education have less paying and narrower-array of jobs options than men. They mainly end us as seamstress, sale workers, cashiers, and the like. Consequently, women may need the extra education to secure a position in the labor market, and higher education serves as a mechanism to push women into the labor market and give them higher rewards. Women have about 4 years of experience less than men. This is partly due to longer years in school as well as a result of discontinued work experience due to child rearing and caring responsibilities. A lower percentage of women in the labor market is married compared to men, which may capture fewer family responsibilities for unmarried women and therefore more participation in the labor market. Married men do not have the same household responsibilities as married women therefore marriage is not impeding for them. Furthermore, 26% of women in the labor market have children between the ages of 0 and 5 compared to 40% of men. Besides the fact that less married women than married men are present, we are bound to see more women with small children outside of the labor market. This shows that women in the labor market are more likely to have older children. They return to the labor market after they have raised their children. The larger percentage of men with smaller children also shows that it is their wives who raise the children and are not present in the labor market. Differences in occupations by sex presented in table 2 show that women work mainly as professionals and service workers. As discussed above, women have a narrower specter of occupations where they are mainly concentrated. Consequently, there are two implications. First, a narrower array of occupations shows fewer opportunities in the labor market to accommodate women, and second it shows evidence of occupational segregation. This on the other hand may also influence education decisions and choice of fields of study.

1

1 dollar is about 1000.4 old AL

328

Table 1: Descriptive statistics by sex Variables

Male

Female

Total

lnwage monthly wage

12.57 343415.50

12.40 286350.50

12.52 326560.20

0.000 0.000

age

42.73

40.24

42.00

0.000

experience

25.81

21.96

24.67

0.000

education

10.92

12.28

11.32

0.000

primary

3.67%

1.32%

2.97%

0.000

wage primary

220066.40

157600.70

211875.40

0.000

lower secondary

37.63%

28.01%

34.79%

0.000

wage lower sec.

289869.20

185828.50

265129.10

0.000

upper secondary

41.52%

35.19%

39.65%

0.001

wage upper sec.

352717.30

257847.00

327847.30

0.000

university

17.10%

35.48%

22.53%

0.000

wage university

465542.20

398757.40

434476.80

0.000

children 0 to 5

0.40

0.26

0.35

0.000

married full-time

83.61% 89.55%

78.92% 90.62%

82.22% 89.87%

0.002

Total Observations 3,580 1,571 Note: P-Values in bold show statistically significant differences.

P-Value

0.363

5,151

If women are mainly concentrated in certain occupations, more women may continue to get education for those occupations, thus increasing occupational segregation as well as over saturating those areas of education and employment. Concentration of women in particular occupations puts downward pressure of wages in those occupations and may also have consequences on returns to education in those occupations. Men on the other hand have higher participation in occupations such as legislators, managers, senior officials, craft and trade workers, plant and machinery operators, elementary occupations and armed forces.

In addition men also have higher participation in paid

agriculture. This result confirms the overwhelming participation of women in unpaid agriculture, which reaches about 43% (2012 Labor Force Survey). High participation of women in unpaid agriculture may also have consequences on returns to education especially in rural areas.

329

Table 2. Occupation and wages by sex Variables

Male

Female

Total

P-Value

legislators/managers/senior officials professionals technicians

3.02% 8.42% 6.94%

1.66% 29.90% 6.81%

2.62% 14.77% 6.90%

0.012 0.000

clerks

2.17%

2.75%

2.34%

0.331

service workers

16.78%

20.13%

17.77%

0.034

agriculture

19.28%

13.67%

17.63%

0.000

craft/trade workers

20.84%

10.91%

17.91%

0.000

plant/machinery operators

10.67%

6.01%

9.29%

0.000

elementary occupations

10.11%

7.58%

9.37%

0.021

1.61%

0.31%

1.22%

0.000

armed forces

Total Observations 3,580 1,571 Note: P-Values in bold show statistically significant differences.

0.901

5,151

Economic activity and wages by sex presented in table 3 show that women are mainly concentrated in the public sector and service private sector. Women’s participation in the public sector is over twice that of men. The public sector accommodates about 34% of women and 17% of men. Participation in the private sector is larger for men than women. About 64% of men are in the private sector compared to about 51% of women. Division by sectors of the economy shows that women dominate services with a participation of about 66% compared to about 46% for men. In services, women have the largest participation in education and health. Men on the other hand are mainly concentrated in industry. About 34% of men are in industry compared to 20% of women. The vast majority of women in industry are in manufacturing, whereas men are in construction.Wages are consistently lower for women within and across sectors. Agriculture is the lowest paying sector for both sectors and especially for women. Average public sector wages are higher for men and women compared to the private sector. Wage differentials between men and women are larger in the private sector. The lower difference in the public sector may in part be as a result of Albanian legislature regarding wages in this sector. Women’s wages are higher in services than industry, whereas for men it is the opposite. Wage differentials for women between services and industry are larger than those for men. Within services women’s highest wages are in transport and communications followed by education and health. The former two are as a result of the continuous increases of wages in these two sectors. Higher public sector wages part of which due to the continuous increases of wages in health and education are expected to have an impact on returns to education by sector.

330

Variables

Male

Female

Total

Public sector wage Agriculture private wage Private sector wage Industry wage mining wage manufacturing wage electricity wage construction wage Services wage trade wage hotels/restaurants wage transport/communications wage education wage health wage Total Observations

16.54% 381782.70 18.80% 205695.70 63.71% 375426.20 33.60% 379671.90 1.99% 458174.50 8.41% 389219.20 2.51% 313840.40 20.68% 376219.30 46.28% 374935.90 13.42% 368287.80 5.81% 352036.50 7.28% 373879.90 2.71% 389740.10 1.93% 380225.80 3,573

34.08% 350194.30 13.76% 134108.40 51.48% 285650.10 19.95% 217708.70 0.10% 433751.10 18.20% 207896.70 0.70% 241756.90 0.95% 366230.60 65.57% 339907.70 12.77% 291535.80 6.16% 306741.20 2.33% 407937.00 17.16% 359213.10 8.26% 321834.00 1,536

21.72% 367142.30 17.31% 188885.00 60.10% 352712.40 29.56% 347391.60 1.43% 457695.50 11.30% 302974.40 1.98% 306277.90 14.85% 376030.50 51.98% 361883.40 13.23% 346400.80 5.91% 338104.20 5.82% 377915.00 6.98% 367560.30 3.80% 342744.00 5,109

Note: P-Values in bold show statistically significant differences.

331

P-Value 0.000 0.003 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.727 0.000 0.000 0.000 0.016 0.000 0.861 0.000 0.000 0.644 0.001 0.708 0.262 0.000 0.553 0.000 0.062 0.000 0.001

Furthermore, tables 4 and 5 show differences between public and private sector and other sectors of the economy. Females in the private sector have lower wages and education compared to the public sector. Average education of females in the private sector is about 11.55 years compared to 14.75 years in the public sector. Females in the private sector have higher levels of lower (33% in private sector vs. 9% in private sector) and upper secondary education (42% in private sector vs. 25% in public sector) and lower levels of university (22% in private sector vs. 65% in public sector) compared to females in the public sector. Descriptive statistics by sector show that private agriculture sector has the lowest wages and education level for females. Education for females is highest in services. On average females in services have about 13 years of education compared to about 11 years in industry. Services also have the highest difference in university level between males (17%) and females (42%). University level for females in private agriculture is the lowest of about 0.31% versus 11% in industry and 42% in services. Table 4. Descriptive Statistics; public-private sectors Public Variables lnwage monthly wage age experience education primary wage primary lower secondary wage lower sec. upper secondary wage upper sec. university wage university children 0 to 5 married full-time Total Observations

Private

Male 12.77 384202.40 46.17 26.29 13.88 0.42% 218707.2 11.94% 294306.10 39.45% 341256.80 48.18% 442868.40 0.26 88.81% 94.20%

Female 12.71 353125.40 41.81 21.06 14.75 0.49% 205152.8 8.81% 239889.10 25.31% 296257.50 65.38% 391748.50 0.26 83.50% 91.27%

Total 12.74 369839.20 44.17 23.89 14.28 0.46% 211973.1 10.51% 273354.00 32.96% 325113.60 56.07% 415430.50 0.26 86.38% 92.86%

692

608

1,300

332

PValue 0.019 0.003 0.000 0.000 0.000 0.848 0.609 0.149 0.016 0.000 0.002 0.000 0.001 0.994 0.018 0.102

Male 12.6915 367569.2 40.98906 24.19 10.79 4.65% 270090.3 40.45% 337335.1 42.67% 369169.9 12.23% 493292.2 0.424806 81.91% 89.79%

Female 12.42 291027.2 39.168 21.62 11.55 3.03% 171079.4 33.21% 237527.9 42.16% 260655.9 21.60% 443986.9 0.24193 76.90% 90.82%

Total 12.62 348349 40.50 23.51 11.00 4.22% 252616.5 38.52% 316036.9 42.53% 342072.1 14.73% 474945.1 0.376025 80.57% 90.07%

2,130

759

2889

PValue 0.000 0.000 0.001 0.000 0.000 0.105 0.000 0.006 0.000 0.851 0.000 0.000 0.106 0.000 0.026 0.533

Variables

Male

Agriculture Female Total

lnwage monthly wage age experience education primary wage primary lower secondary wage lower sec. upper secondary wage upper sec. university wage university children 0 to 5 married full-time Total Observations

12.03 224282.70 42.02 27.23 8.78 5.99% 184016.10 71.75% 229149.60 21.82% 215807.20 0.44%

11.62 174982.70 40.99 26.42 8.57 4.32% 146235.60 79.61% 169847.70 15.76% 203144.00 0.31%

11.93 211554.70 41.66 26.95 8.71 5.41% 179139.70 74.48% 212781.30 19.72% 212830.90 0.39%

0.42 80.19% 78.79% 1,074

0.38 86.69% 71.37% 572

0.41 82.45% 76.21% 1,646

Industry Female Total

P-Value Male 0.000 0.000 0.184 0.304 0.065 0.201 0.388 0.003 0.000 0.011 0.568 0.715 0.000 0.467 0.006 0.008

12.70 12.22 12.61 367843.40 221502.20 338971.80 41.09 39.13 40.70 24.71 22.54 24.28 10.38 10.59 10.42 4.52% 5.63% 4.75% 298825.40 171538.20 267700.70 45.34% 41.31% 44.53% 341136.80 200443.10 315090.20 41.50% 41.96% 41.59% 373764.40 210974.70 340874.40 8.63% 11.10% 9.13% 509099.80 386560.70 482989.60 0.45 0.24 0.41 83.25% 78.42% 82.28% 89.07% 96.08% 90.48% 1,156 267 1423

P-Value Male 0.000 0.000 0.020 0.014 0.414 0.561 0.000 0.352 0.000 0.916 0.000 0.354 0.014 0.000 0.183 0.000

Services Female Total

P-Value

12.70 12.61 12.67 366382.10 331896.20 353047.00 41.92 41.22 41.64 24.45 22.09 23.50 11.47 13.13 12.14 3.51% 0.99% 2.50% 264076.90 184908.60 255875.10 34.14% 20.95% 28.85% 336576.60 266935.80 318502.90 35.96% 35.96% 41.67% 368617.90 291910.00 343571.20 16.85% 42.11% 26.98% 436724.80 391567.30 408592.40 0.40 0.24 0.34 83.24% 80.53% 82.15% 90.83% 87.22% 89.38% 1081 830 1911

0.002 0.001 0.270 0.000 0.000 0.006 0.028 0.000 0.001 0.002 0.000 0.000 0.021 0.000 0.241 0.065

II. Econometric Model The econometric model used in this paper to estimate private returns to education is based on Mincer (1974) human capital earning function. Wages are a function of years of schooling, and experience. The wage equation is measured as follows: , (1) where W is hourly wage, c is a constant, S is years of schooling, E is years of experience in the labor market, and e is the error term. More specifically in this paper we also control for additional variables dimmed to have an impact on wages. The wage equation used in this paper is as follows:

, (2) where Wij is monthly wages in old ALL for individual j in sector i, EDU is individual’s years of completed education, EXP is work experience calculated as age-education-6, EXP2is years 333

of experience squared to capture non-linearity of experience on wages, CHILD0to5 is the number of children between the ages of 0 and 5, MARRIED is a dummy variable equal to 1 if the person is married, 0 otherwise, FULLTIME is a dummy variable equal to 1 if the person works 40 hours or more per week, 0 otherwise, REGION is a set of four dummy variables controlling for regions: Central, Coastal, Mountain, Tirana, the latter one is set as default. Besides the usual education and experience variables, we also control for number of children under the age of six since they require child care and this is mainly a woman’s responsibility in the Albania context. As a result the number of children reflects the cost of lost experience for women (Grimshaw and Rubery, 2002). Marital status is also included since a married women with children might be viewed from the employer as less productive, since she may need more time off work and be considered less dedicated to work due to her family responsibilities. This can result in lower wages offered by employers. On the other hand, a married man may be regarded as more dedicated to work given the expectation that wives will take care of the household. Married men may also just receive preferential treatment (Weichselbaumer and Winter-Ebmer, 2005). The inclusion of dummy variables for regions is to control for social and economic regional differences. Separate Ordinary Least Square (OLS) regressions based on the above model are run to estimate the private returns for men and women, men and women in urban and rural areas, men and women in public sector, private sector, agricultural private sector, industry and services. The model is also run using education categories as dummy variables for primary education, low secondary education, upper secondary education, and university and above instead of individual’s completed years of education to estimate private returns to education by education level. Comparisons of OLS estimates by sector may be inconsistent (Casero and Seshan, 2006) due to selectivity bias in sector selection. The selection process into a sector is not random, rather unobservable characteristics that determine wages might also determine sector selection, in which case OLS estimates may be biased. Workers may prefer one sector versus another, therefore sector selection is an endogenous process (Stelckner, 1989). There is a need to correct for self-selection bias as presented by Heckman (1979). To correct for self-selection bias a two- step estimation following Casero and Seshan (2006) is estimated for each sector. Sector selection follows the following equation:

334

(4)

where I *is a partially observed index describing the selection process and the outcome is observed depending on whether I* is positive or negative. If I* is positive the person is observed selecting one of the five sectors of interest. Z is a vector of variables that determine wages and other personal characteristics, which determine the selection process. The first stage estimating sector selection is estimated through probit equations determining variables that affect the probability of working in a particular sector. Vector Z includes parent’s education and number of children between the ages of 6 and 14 as exclusion restrictions in addition to variables that determine wages.

Parent’s education is a good predictor of

individual’s education and it is the closest variable we can get to parent’s occupation choice, which may predict individual’s occupation choice. The number of children between the ages of 6 and 14 in addition to number of children between the ages of 0 and 5, which is present in the wage regression, may influence choice of sector especially for women. Women with more children may be more likely to join the public sector due to job security and working hours. A selection term λi (inverse mills ratio IMR) is constructed and added to the wage regression in the second stage.

335

For robustness check regression results using OLS and two-step model correcting for selection bias are presented in sector analysis.

(5) III. Estimation Results Private returns to education in Albania are higher for females as presented in Table 6. On average, an additional year of education increases wages by 7.7% for females, whereas an additional year of education increases wages by about 5.5% for male. Urban-rural differences show that returns to education for male and female are lower in urban areas. On average, an additional year of education increases wages by almost 10.7% for females in rural areas compared to about 6.9% in urban areas. Within each area, females have higher returns to education. In the urban areas, private returns to education for males are 4.4%, whereas in rural areas they are 4.9%. Although trends remain the same, OLS coefficients are higher than the two- step model. Higher returns to education for females are not symptomatic of Albania. Higher returns to education for females are well documented in the literature (Monazza, 2005). There are a few explanations also encountered elsewhere in the literature that may explain higher returns to education for females. In the Albanian context, higher private returns to education for females may be as a result of wage differences favoring males in the labor market. Given male’s already higher wages, an additional year of education for females has higher returns. On the other hand, as is the case between urban and rural areas, higher returns to education for females may also be as a result of scarcity premium (Monazza, 2005). Education differences between male and female are less in rural areas and education is lower in these areas compared to urban areas. As a result there could be a scarcity premium of education in these areas, which may be greater for females in rural areas. An additional year of education for females in rural areas may have a higher value in an area where education is lower and the gender wage gap is higher. Lastly, females may have higher returns to education because they are concentrated in sectors of the economy where education is relatively highly valued, especially given women’s concentration in the public sector and education and health within the public sector.

336

Variables

All Urban OLS Two-Step OLS Two-Step Male Female Male Female Male Female Male Female

Rural OLS Two-Step Male Female Male Female

edu

0.059 (0.003)*** exp 0.026 (0.004)*** exp2 0.000 (0.000)*** children_0to5 0.042 (0.018)** married 0.042 (0.038) Coastal -0.197 (0.034)*** Central -0.193 (0.033)*** Mountains -0.118 (0.040)*** fulltime 0.397 (0.031)*** IMR

0.102 0.055 0.077 0.048 0.084 0.044 0.069 0.054 0.108 0.049 0.107 (0.004)** (0.004)*** (0.008)*** (0.004)*** (0.004)** (0.004)*** (0.006)*** (0.006)*** (0.010)** (0.008)*** (0.024)*** 0.007 0.023 -0.003 0.024 0.005 0.018 -0.002 0.024 0.004 0.02 0.004 (0.005) (0.004)*** (0.005) (0.005)*** (0.005) (0.005)*** (0.005) (0.006)*** (0.010) (0.008)** (0.013) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 (0.000) (0.000)*** (0.000) (0.000)*** (0.000) (0.000)*** (0.000) (0.000)*** (0.000) (0.000)*** (0.000) 0.041 0.042 0.046 0.028 0.017 0.032 0.026 0.044 0.094 0.043 0.094 (0.026) (0.018)** (0.026)* (0.022) (0.027) (0.022) (0.027) (0.028) (0.056) (0.028) (0.056)* -0.053 0.024 -0.02 0.039 -0.003 0.02 0.015 0.065 -0.144 0.046 -0.143 (0.035) (0.039) (0.036) (0.045) (0.035) (0.046) (0.035) (0.062) (0.078) (0.066) (0.087) -0.269 -0.202 -0.296 -0.08 -0.164 -0.101 -0.192 0.000 0.000 0.000 0.000 (0.038)** (0.034)*** (0.039)*** (0.033)** (0.035)** (0.034)*** (0.036)*** (0.000) (0.000) (0.000) (0.000) -0.152 -0.189 -0.165 -0.111 -0.136 -0.117 -0.164 0.126 0.317 0.131 0.318 (0.037)** (0.033)*** (0.037)*** (0.033)*** (0.034)** (0.033)*** (0.035)*** (0.035)*** (0.058)** (0.035)*** (0.063)*** -0.122 -0.088 -0.076 -0.121 -0.132 -0.11 -0.148 0.267 0.413 0.31 0.416 (0.049)* (0.044)** (0.050) (0.043)*** (0.046)** (0.043)** (0.046)*** (0.050)*** (0.110)** (0.071)*** (0.156)*** 0.24 0.078 -0.449 0.536 0.114 -0.339 -0.63 0.269 0.355 0.029 0.343 (0.042)** (0.192) (0.187)** (0.041)*** (0.047)* (0.321) (0.218)*** (0.047)*** (0.079)** (0.277) (0.437) -0.217 -0.393 -0.542 -0.415 -0.183 -0.007 (0.129)* (0.104)*** (0.198)*** (0.119)*** (0.208) (0.262) Constant 11.377 11.026 11.833 12.2 11.42 11.4 12.45 12.426 11.18 10.403 11.579 10.426 (0.071)*** (0.096)** (0.280)*** (0.325)*** (0.084)*** (0.100)** (0.385)*** (0.310)*** (0.100)*** (0.192)** (0.464)*** (0.862)*** Observations 3481 1528 3481 1528 1873 1084 1873 1084 1608 444 1608 444 R-squared 0.19 0.39 0.19 0.4 0.19 0.32 0.19 0.33 0.13 0.37 0.13 0.37 Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%

Table 7 shows private returns to education by sex for public and private sector. Regressions corrected for selectivity show that male and female have similar returns to education in the public sector. The difference of about 1.2% is quite small. On average an additional year of education in the public sector increases wages by about 5.3% for both males and 6.5% for female in the public sector. OLS results are quite similar maintain the same trends of higher return to education for females. OLS results show a difference of about 0.9% favoring women in the public sector. Selectivity corrected regressions show females have higher returns to education in the private sector that are almost twice as much as those of males in this sector. On average an additional year of education increases wages by about 7% for females in the private sector versus about 4.6% for men. Hence returns to education for females are higher in the private sector than the public sector. OLS results also show higher returns to education for females in the private sector. Public-private differences in returns to education for females show that females have higher private returns to education in the private sector, however these differences, at 0.5 %, are 337

not very large. Compared to men, the private sector may award higher returns to education for females not only by placing higher value to education, but also due to higher wage differentials between men and women in this sector. For the public sector, difference in returns to education between men and women may not be as large due to a concentration of higher educated females in the public sector as well as continuous increases of wages by the government in this sector especially heath and education, where females in the public sector are mainly concentrated. On the other hand, equal reward between males and females in the public sector may be due to similar education levels in this sector as well as less wage differentials compared to the private sector. Public Variables edu exp exp2 children_0to5 married Coastal Central Mountain fulltime IMR Constant Observations R-squared

Male

OLS Female

0.064 (0.005)*** 0.020 (0.006)*** 0.000 (0.000)*** -0.001 (0.029) -0.033 (0.055) -0.039 (0.043) -0.12 (0.041)*** -0.117 (0.045)** 0.134 (0.051)***

Private

Two-Step Male Female

0.073 (0.005)** 0.002 (0.004) 0.000 (0.000) 0.041 (0.025) -0.01 (0.030) -0.160 (0.035)** -0.122 (0.033)** -0.168 (0.038)** -0.020 (0.038)

0.053 (0.030)* 0.020 (0.006)*** 0.000 (0.000)*** 0.001 (0.029) -0.036 (0.055) -0.044 (0.045) -0.126 (0.044)*** -0.138 (0.072)* 0.126 (0.055)** -0.064 (0.174) 11.655 11.723 11.918 (0.118)*** (0.105)** (0.721)*** 686 607 686 0.28 0.36 0.28

0.065 (0.018)** 0.002 (0.005) 0.000 (0.000) 0.037 (0.027) -0.007 (0.031) -0.169 (0.040)** -0.135 (0.044)** -0.196 (0.071)** -0.022 (0.038) -0.049 (0.107) 11.909 (0.419)** 607 0.36

Male

OLS Female

0.041 (0.004)*** 0.023 (0.005)*** 0.000 (0.000)*** 0.031 (0.021) 0.033 (0.044) -0.114 (0.038)*** -0.117 (0.036)*** -0.121 (0.046)*** 0.441 (0.039)***

Two-Step Male Female

0.073 (0.006)** 0.004 (0.007) 0.000 (0.000) -0.003 (0.040) 0.018 (0.053) -0.182 (0.052)** -0.18 (0.051)** -0.079 (0.085) 0.165 (0.070)*

0.046 (0.008)*** 0.022 (0.005)*** 0.000 (0.000)*** 0.032 (0.021) 0.032 (0.044) -0.081 (0.058) -0.068 (0.076) -0.079 (0.074) 0.428 (0.043)*** -0.172 (0.236) 11.613 11.506 11.616 (0.084)*** (0.146)** (0.084)*** 2055 689 2055 0.14 0.25 0.14

0.070 (0.013)** 0.004 (0.007) 0.000 (0.000) -0.009 (0.046) 0.018 (0.053) -0.197 (0.080)* -0.196 (0.084)* -0.105 (0.135) 0.172 (0.076)* 0.046 (0.190) 11.521 (0.157)** 689 0.25

Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

Results by sex for private agriculture, industry and service sector are presented in Table 8. Across models there are no significant results for private returns to education in the private agriculture sector. Females have higher returns to education in industry and service sectors. The highest returns to education for females are in the service sector. The OLS coefficient 338

on private returns to education for females in services is lower than the corrected coefficient. However the trend remains the same. On average, an additional year of education for females in industry increases wages by about 6.4%, whereas it is about 4.2% for men. In the service sector, on average an additional year of education for female increases wages by almost 9% compared to 5.5% for men. The service sector provides higher returns to education for females and males alike compared to industry sector. Females in industry are mainly concentrated in manufacturing industry, where wages and education levels are lower than those in service sector. Females in manufacturing mainly work as seamstress in manufacturing of shoes and garments. On the other hand, in services they are mainly concentrated in education, trade and health. These sectors within the service sector offer higher wages and require higher education levels. Consequently, this may help explain the higher rewards of females in the service sector. Table 8. Private returns to education by sector Agriculture Variables edu

Male

OLS Female

Industry

Two-Step OLS Male Female Male Female

0.013 (0.013) 0.026 (0.012)** 0.000 (0.000)** 0.086 (0.044)* 0.073 (0.113) -0.706 (0.389)* -0.454 (0.388) -0.194 (0.400) 0.348 (0.071)***

Two-Step Male Female

Service Male

OLS Female

Two-Step Male Female

0.037 0.025 0.036 0.031 0.058 0.042 0.064 0.057 0.067 0.055 0.087 (0.027) (0.029) (0.032) (0.006)*** (0.008)** (0.011)*** (0.013)** (0.005)*** (0.005)** (0.012)*** (0.021)** exp 0.004 0.03 0.004 0.004 0.001 -0.008 -0.005 0.035 0.009 0.036 0.013 (0.018) (0.014)** (0.019) (0.007) (0.010) (0.012) (0.013) (0.006)*** (0.005) (0.006)*** (0.006)* exp2 0.000 0.000 0.000 0.000 0.000 0.000 0.000 -0.001 0.000 -0.001 0.000 (0.000) (0.000)** (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)*** (0.000) (0.000)*** (0.000) children_0to5 0.047 0.086 0.044 0.031 -0.014 0.035 -0.002 0.029 0.029 0.029 0.035 (0.079) (0.044)* (0.098) (0.028) (0.054) (0.029) (0.058) (0.027) (0.029) (0.027) (0.030) married -0.255 0.074 -0.256 0.025 -0.148 0.01 -0.129 0.059 0.023 0.059 0.02 (0.129)* (0.113) (0.131) (0.059) (0.062)* (0.060) (0.070) (0.058) (0.039) (0.058) (0.039) Coastal -0.759 -0.81 -0.743 -0.079 -0.131 -0.105 -0.127 -0.114 -0.162 -0.109 -0.148 (0.451) (0.450)* (0.557) (0.058) (0.071) (0.062)* (0.072) (0.046)** (0.042)** (0.056)* (0.045)** Central -0.346 -0.577 -0.332 -0.089 -0.06 -0.085 -0.057 -0.158 -0.174 -0.151 -0.148 (0.451) (0.470) (0.533) (0.057) (0.067) (0.057) (0.067) (0.044)*** (0.040)** (0.060)** (0.049)** Mountain 0.000 -0.314 0.000 0.034 0.23 0.053 0.298 -0.244 -0.184 -0.238 -0.112 0.000 (0.477) 0.000 (0.066) (0.139) (0.068) (0.180) (0.055)*** (0.049)** (0.062)*** (0.092) fulltime 0.55 0.378 0.561 0.532 0.183 0.196 -0.024 0.21 -0.008 0.215 -0.035 (0.117)** (0.096)*** (0.253)* (0.054)*** (0.117) (0.291) (0.369) (0.046)*** (0.044) (0.052)*** (0.053) IMR -0.101 0.025 -0.31 -0.129 -0.045 0.208 (0.218) (0.519) (0.264) (0.218) (0.250) (0.224) Constant 11.681 11.403 11.737 11.367 11.855 11.565 12.532 11.901 11.447 11.72 11.508 11.257 (0.431)*** (0.606)** (0.448)*** (0.962)** (0.116)*** (0.180)** (0.588)*** (0.596)** (0.105)*** (0.114)** (0.355)*** (0.513)** Observations 706 226 706 226 1126 255 1126 255 1040 774 1040 774 R-squared 0.11 0.2 0.11 0.2 0.13 0.25 0.13 0.25 0.2 0.25 0.2 0.25 Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

339

Regression results where education is in categories as shown in tables 9-11 reinforce the idea that private investment in university pays off for females. Individual and family investment in female education pays off and it also shows that this investment is a rational response in the actual and expected returns to education. On the other hand, the following results also reinforce the idea that university education for females does make a difference when compared to other levels of education. Returns to education for lower secondary education compared to primary education are insignificant for male and female alike in urban areas. They are insignificant for lower and upper secondary education for females in rural areas and industry. This means that females need higher levels of education in the labor market, since returns to education of lower and upper secondary education are sometime insignificant compared to primary education. This may also reinforce the idea that females have fewer opportunities in the labor market and the only way to make a difference is through higher education. Table 9. Returns to education by education categories

Variables Lower secondary Upper secondary University exp exp2 children_0to5 married fulltime Coastal Central Mountains IMR Constant Observations R-squared

All OLS Two-Step Male Female Male Female 0.126 (0.053)** 0.308 (0.054)*** 0.628 (0.058)*** 0.027 (0.004)*** -0.001 (0.000)*** 0.035 (0.018)* 0.047 (0.038) 0.397 (0.032)*** -0.206 (0.034)*** -0.209 (0.033)*** -0.135 (0.040)***

Urban OLS Two-Step Male Female Male Female

0.061 (0.099) 0.398 (0.100)** 0.876 (0.101)** 0.007 (0.005) 0.000 (0.000) 0.037 (0.027) -0.052 (0.035) 0.242 (0.043)** -0.284 (0.039)** -0.18 (0.037)** -0.12 (0.050)*

0.12 0.009 0.087 (0.053)** (0.099) (0.075) 0.295 0.266 0.175 (0.054)*** (0.103)** (0.074)** 0.552 0.602 0.479 (0.063)*** (0.116)*** (0.077)*** 0.021 -0.004 0.024 (0.004)*** (0.005) (0.005)*** 0.000 0.000 0.000 (0.000)*** (0.000) (0.000)*** 0.035 0.044 0.021 (0.018)* (0.027)* (0.022) 0.018 -0.015 0.05 (0.039) (0.036) (0.045) -0.215 -0.311 0.541 (0.034)*** (0.039)*** (0.041)*** -0.203 -0.187 -0.087 (0.033)*** (0.037)*** (0.033)*** -0.083 -0.065 -0.123 (0.043)* (0.051) (0.033)*** -0.12 -0.499 -0.133 (0.175) (0.162)*** (0.043)*** -0.357 -0.442 (0.119)*** (0.093)*** 11.767 11.859 12.453 12.945 11.779 (0.075)*** (0.118)** (0.240)*** (0.258)*** (0.097)*** 3481 1528 3481 1528 1873 0.19 0.38 0.19 0.39 0.19

0.111 (0.113) 0.298 (0.112)** 0.748 (0.112)** 0.003 (0.005) 0.000 (0.000) 0.018 (0.027) 0.003 (0.035) 0.115 (0.047)* -0.171 (0.035)** -0.156 (0.034)** -0.129 (0.046)**

Rural OLS Two-Step Male Female Male Female

0.055 0.102 0.17 (0.075) (0.112) (0.074)** 0.175 0.272 0.34 (0.074)** (0.111)** (0.078)*** 0.413 0.654 0.65 (0.078)*** (0.115)*** (0.090)*** 0.016 -0.003 0.025 (0.005)*** (0.005) (0.006)*** 0.000 0.000 0.000 (0.000)*** (0.000) (0.000)*** 0.028 0.03 0.039 (0.022) (0.027) (0.028) 0.027 0.019 0.062 (0.045) (0.035) (0.062) -0.114 -0.194 0.27 (0.034)*** (0.035)*** (0.047)*** -0.131 -0.179 0.000 (0.033)*** (0.034)*** 0.000 -0.118 -0.145 0.122 (0.043)*** (0.046)*** (0.035)*** -0.506 -0.515 0.257 (0.259)* (0.180)*** (0.051)*** -0.661 -0.368 (0.161)*** (0.102)*** 12.069 12.991 12.83 11.462 (0.131)** (0.311)*** (0.248)*** (0.103)*** 1084 1873 1084 1608 0.33 0.2 0.34 0.13

0.003 (0.182) 0.352 (0.191) 0.906 (0.199)** 0.009 (0.010) 0.000 0.000 0.069 (0.056) -0.147 (0.079) 0.364 (0.080)** 0.000 0.000 0.318 (0.059)** 0.416 (0.111)**

0.17 -0.041 (0.074)** (0.187) 0.325 0.269 (0.079)*** (0.207) 0.561 0.693 (0.111)*** (0.287)** 0.019 0.002 (0.008)** (0.012) 0.000 0.000 (0.000)*** (0.000) 0.037 0.069 (0.028) (0.056) 0.039 -0.118 (0.065) (0.083) 0.000 0.000 (0.000) (0.000) 0.128 0.336 (0.035)*** (0.062)*** 0.315 0.503 (0.066)*** (0.139)*** -0.045 0.032 (0.231) (0.331) -0.245 -0.212 (0.175) (0.205) 11.258 11.941 11.827 (0.222)** (0.358)*** (0.592)*** 444 1608 444 0.37 0.13 0.37

Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

340

Table 10. Returns to education public-private by education categories Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

Variables Lower secondary

Agriculture OLS Two-Step Male Female Male Female

0.073 (0.115) Upper secondary 0.104 (0.128) University 0.49 (0.278)* exp 0.026 (0.012)** exp2 0.000 (0.000)** children_0to5 0.087 (0.044)** married 0.068 (0.113) fulltime -0.707 (0.389)* Coastal -0.46 (0.388) Central -0.199 (0.400) Mountains 0.344 (0.071)*** IMR Constant Observations R-squared

-0.2 0.004 (0.267) (0.135) -0.03 0.187 (0.292) (0.154) 0.000 0.828 (0.000) (0.448)* 0.007 0.032 (0.019) (0.013)** 0.000 -0.001 (0.000) (0.000)** 0.032 0.082 (0.079) (0.045)* -0.26 0.078 (0.129)* (0.114) -0.753 -1.02 (0.452) (0.508)** -0.336 -0.825 (0.451) (0.542) 0.000 -0.437 (0.000) (0.470) 0.559 0.387 (0.118)** (0.084)*** -0.289 (0.301) 11.722 11.858 12.362 (0.426)*** (0.571)** (0.789)*** 706 226 706 0.11 0.21 0.11

Industry OLS Two-Step Male Female Male Female

-0.115 0.133 (0.285) (0.074)* -0.106 0.21 (0.306) (0.075)*** 0.000 0.431 (0.000) (0.089)*** 0.008 0.004 (0.019) (0.007) 0.000 0.000 (0.000) (0.000) 0.071 0.028 (0.092) (0.028) -0.221 0.026 (0.137) (0.058) -0.576 -0.078 (0.497) (0.058) -0.164 -0.09 (0.494) (0.057) 0.000 0.038 (0.000) (0.067) 0.479 0.530 (0.150)** (0.054)*** 0.238 (0.278) 11.368 11.991 (0.809)** (0.117)*** 226 1126 0.21 0.13

0.134 0.292 (0.108) (0.146)** 0.197 0.38 (0.107) (0.155)** 0.787 0.927 (0.121)** (0.405)** 0.004 -0.013 (0.009) (0.015) 0.000 0.000 (0.000) (0.000) -0.029 0.032 (0.052) (0.029) -0.119 0.017 (0.060)* (0.059) -0.096 -0.164 (0.069) (0.090)* -0.045 -0.115 (0.064) (0.060)* 0.310 -0.041 (0.133)* (0.092) 0.153 0.446 (0.111) (0.086)*** -0.696 (0.554) 11.898 12.781 (0.170)** (0.639)*** 255 1126 0.33 0.13

Service OLS Two-Step Male Female Male Female

0.25 0.373 (0.175) (0.102)*** 0.326 0.496 (0.188) (0.102)*** 1.058 0.791 (0.345)** (0.106)*** -0.003 0.034 (0.012) (0.006)*** 0.000 -0.001 (0.000) (0.000)*** -0.013 0.028 (0.055) (0.027) -0.096 0.055 (0.066) (0.058) -0.09 -0.13 (0.069) (0.046)*** -0.05 -0.183 (0.065) (0.044)*** 0.404 -0.272 (0.174)* (0.055)*** 0.069 0.208 (0.150) (0.047)*** -0.194 (0.232) 12.106 11.66 (0.300)** (0.125)*** 255 1040 0.33 0.19

0.87 0.246 (0.220)** (0.114)** 0.98 0.116 (0.220)** (0.182) 1.313 0.409 (0.220)** (0.185)** 0.008 0.043 (0.005) (0.007)*** 0.000 -0.001 (0.000) (0.000)*** 0.027 0.026 (0.029) (0.027) 0.026 0.035 (0.039) (0.058) -0.176 0.015 (0.042)** (0.074) -0.197 -0.002 (0.040)** (0.084) -0.196 -0.151 (0.049)** (0.073)** -0.001 0.308 (0.044) (0.061)*** -0.974 (0.386)** 11.556 12.719 (0.231)** (0.439)*** 774 1040 0.25 0.2

Table 11. Returns to education by sector and education categories Note: Standard errors in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

341

0.898 (0.261)** 1.029 (0.331)** 1.374 (0.376)** 0.008 (0.006) 0.000 (0.000) 0.028 (0.030) 0.025 (0.039) -0.174 (0.044)** -0.193 (0.046)** -0.179 (0.097) -0.008 (0.056) 0.048 (0.239) 11.462 (0.517)** 774 0.25

IV. Conclusions and Policy Recommendations This study uses 2012 Living Standard Measurement survey data to estimate private returns to education in Albania. Estimation results show that females have higher returns to education overall and across regions and sectors. Returns to education for females are higher in the private sector compared to the public sector. The highest returns to education for females are in the service sector. The study shows that there are clear pay offs to female education. As a result government effort in increasing educations should continue especially for rural areas given lower levels of education in these areas and high returns to education especially for women. Higher returns to education for women may improve their position in the labor market and should serve as incentives for increased labor force participation and paid employment especially for women in the rural areas. On the other hand, it also shows that investing in education by the government is a worthy investment that brings back rewards and consequently investment in women’s education should continue and it should be increased providing more and better quality education. The continuous investment of parent’s or individuals in their education shows that their decisions are right and their investment brings back returns. This is especially true for women, which also reinforces the high participation of women in higher education. The same should be done for rural areas bringing them closer to the education of urban areas. This study shows that there are high returns to women’s education in the rural areas and more women should be educated and join the labor market moving away from unpaid labor. Given the higher returns to education for women, there should be increased effort to increasing employment for women and decrease inactivity rates. There are rewards to be made in the labor market especially for educated women.

Consequently, increased

education and participation of women in the labor market would positively impact their livelihoods and economic independence and as a result increase economic empowerment. Promoting women’s entry into the private sector is important given women’s already high participation in the public sector, and the generally limited capacity of the sector to absorb a large number of workers. The higher returns of education for women in the private sector should also serve as a policy incentive to direct women’s participation in the private sector as 342

to reap the rewards to education in the private sector and those sectors within the private sector that offer highest rewards to education. Introducing measures that exist in the public sectors, such as job security, better working hours, more flexibility especially for working mothers may increase women’s participation in the private sector. Increased effort may also be undertaken in enforcing legislature against wage discrimination in the private sector. Furthermore, given women’s higher returns to education they should also be encouraged to participate in sectors which have traditionally been dominated by men as well as be in occupations where their education matches their job position. This would ensure women higher wages and also have a positive impact in reducing the gender wage gap. Efforts should also be undertaken in increasing vocational education and training into those fields and sectors that offer employment and are high paying. The relatively small differences in returns to education for women between public and private sector warns regarding continuous wage increases in the public sector especially education and health. Among other things one of the main factors in increasing wages should be as a result of increased productivity. Wage increase initiatives in the public sector should take into account public-private differences and be cautious not to create imbalances and labor market distortions between the two sectors. Lastly, insignificant results for the private agriculture sector may indicate low wages and low education of the workforce in this sector. As a result increased efforts are needed to better educate the workforce in this sector and provide them with more education and specific education required for this sector. This is return will also serve to make this sector more competitive. References Asadullah, M.N (2006). “Returns to Education in Bangladesh.” Education Economics (forthcoming), also as QEH Working Paper 130, University of Oxford. Azzari, C., and Carletto, C. (2009). Modelling Migration Dynamics in Albania: A Hazard Function Approach. Journal of Southeast European and Black Sea Studies 9.4: 407-434. Becker, G. (1993). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. 3d ed. Chicago, IL: University of Chicago Press. Behrman, J.R. and A. Deolalikar (1995). “Are there Differential Returns to Schooling by Gender? The Case of Indonesian Labour Markets.” Oxford Bulletin of Economics and Statistics 57.1: 97-117.

343

Behrman, J.R. and B. Wolfe (1984). “The Socio-economic Impact of Schooling in a Developing Country.” Review of Economics and Statistics 66.2: 296-303. Cao, Y. and V. Nee. (2000”. “Comment: Controversies and Evidence in the Market Transition Debate.” American Journal of Sociology 105:1175-89. Casero, P.A., and G. Seshan (2006). “Public-Private Sector Wage Differentials and Returns to Education in Djibouti.” World Bank Policy Research Working Paper 3923. Duraisamy, P. (2002). “Changes in Returns to Education in India, 1983-94: by Gender Age Cohort and Location.” Economics of Education Review 21: 609-622. Grimshaw, Damian, and Jill Rubery (2002). “The Adjusted Gender Pay Gap: A Critical Appraisal of Standard Decomposition Techniques.” Prepared as part of the work by the coordinating team of the Group of Experts on Gender and Employment Commissioned by the Equal Opportunities Unit in the European Commission. Heckman, J. (1979), “Sample selection bias as a specification error”, Econometrica 47: 53- 161. Kingdon, G.G. (1998). “Does the Labour Market Explain Lower Female Schooling in India?” Journal of Development Studies 35.1: 39-65. Mincer, Jacob (1974). “Schooling, Experience, and Earnings.” NBER. Changes in Wage Inequality, 1970-1990, Research in Labor Economics 16 (1997): 1-18. Miluka, J. (2013). Not Just Education: Gender Wage Gap in the Albanian Labor Markets through Occupational Segregation, Work Experience, and Child Care. In J. Silber (Ed.), Poverty and Exclusion in the Western Balkans: New directions in measurement and policy (pp.155-176). New York: Springer. Monazza, A. (2005). “Rates of Return to Education by Gender in Pakistan.”Global Poverty Research Group Working Paper GPRG-WPS-064. Nee, V. (1989). "A Theory of Market Transition: From Redistribution to Markets in State Socialism." American Sociological Review 54:663-81. Psacharopoulos, George (1994) "Returns to Investment in Education: A Global Update." World Development 22.9: 1325-1343. Thomas, Duncan (1990). “Intra-household Resource Allocation: An Inferential Approach,” Journal of Human Resources 25.4: 635-64. Schultz, T. P. (1990). “Testing the Neoclassical Model of Family Labor Supply and Fertility.” Journal of Human Resources 25.4: 599-634. Schultz, T.P. (1993). “Returns to Women’s Education.” in Elizabeth M. King and M. Anne Hill (eds.), Women’s Education in Developing Countries: Barriers, Benefits, and Policies. Baltimore, MD: Johns Hopkins University Press, Chapter 2. Schultz, T. P. (2001). “Women’s Roles in the Agricultural Household: Bargaining and Human Capital Investments.” in Agricultural and Resource Economics Handbook, B. Gardner and G. Rausser, Amsterdam: Elsevier Publishing. Stelcner, M., van der Gaag, J. and Vijverberg, W. (1989), “A Switching Regression Model of Public-Private Sector Wage Differentials in Peru: 1985-1986”, Journal of Human Resources 24.3: 545-559. 344

Subbaraman, S., and Witzke, H. (2006). “Determinants of Wages and Returns to Education in Rural India.” Poster paper prepared for presentation at the International Association of Agricultural Economists Conference, Gold Coast, Australia. Weichselbaumer, Doris, and Rudolf Winter-Ebmer (2005). “A Meta-Analysis of the International Gender Wage Gap.” Journal of Economic Survey 19.3: 479-511. Wu, X., and Y Xie (2003). “Does the Market Pay Off? Earning Returns to Education in Urban China. American Sociological Review 68.3: 425:442. Zhou, X. (2000). "Economic Transformation and Income Inequality in Urban China." American Journal of Sociology 105:1135-74.

345

Comparative Perspective of Financial Sector Development of Two EU Candidate Countries in Transition: Albania and Macedonia PhD C. Erinda Imeraj Department of Banking and Finance, Epoka University, Albania

Abstract Albania and Macedonia in a difference of two years met the important criteria of the accession imposed from European Union and now they are candidate countries. These two countries are transition economies of the Western Balkan or known as South- East European countries and regarding the latest international official reports they have been progressing through the financial sector reform and economic growth. This study aims to investigate on the progress of the financial sector of two neighborhood economies and specify the characteristics and commonalities this sector share. Based on statistic data of World Bank (WB) and European Bank for Reconstruction and Development (EBRD) this study will firstly cover an overview of the macroeconomic situation of Albania and Macedonia. The transition situation and the neighborhood of these economies impose the idea of a lot of commonalities but specifically the study will effort the specification of the differences between them. The Financial sector reform and development covers most of the study through the compare of main financial indicators of Albania and Macedonia and their relation to the economic growth. In specific the focus is on the banking sector indicators through the evidences on the ownership of the capital of the banks, their ratio on the state capital or foreign one, privatization method of the banking public sector, difference in the lending and borrowing rates etc. These two economies are as near as far from each other despite similar rules and regulations especially on the financial sector. Keywords: Financial Development, Transition, Financial Indicators, Banking Sector. Introduction Western Balkan countries known as East European Countries are countries with economies in transition. This fact, but not only, brought together countries like Albania and Macedonia. These countries are also candidate countries of the European Union from 2014 and 2005 respectively for Albania and Macedonia. According to the latest report of the European Bank for Reconstruction and Development (EBRD, 2014) these countries are part of the countries with faster economic growth compared with other countries part of the report on the transition. 346

In the following section will be presented in more details the rapid pace of economic development of selected economies, including the basic indicators. This study aims to investigate on the progress of the financial sector of two neighbor hood economies and specify the characteristics and commonalities this sector share. The first part of the study is based entirely on financial sector reform that Albania and Macedonia have implemented in the first years of transition. These countries are supervised by the EBRD and the reforms undertaken by it. Financial sector reform is not the main purpose, or financial development, but economic development is the main purpose of these economies, so this study will bring the development of the financial sector as a function of economic development faced by the selected economies as a comperative prespective. According to the official reports and statistics of World the study will present a macroeconomic overview of the two economies selected by specifying the mos important macroeconomic indicators and the report conclustions of the international researches. Among the objectives of this study is also the presentation of commonalities and features that the EU accession process of these candidate countries face. In specific the focus is on the banking sector indicators through the evidences on the ownership of the capital of the banks, their ratio on the state capital or foreign one, privatization method of the banking public sector, difference in the lending and borrowing rates etc. In support of the fact that these economies are in transition as well as part of the same process, the study will conclude that these countries go through a similar trajectory of development, regardless of economic or financial crisis, their recoveries continue at the same pace. 2 Literature Review Financial sector and the reforms undertaken in this sector are part of numerous studies of different countries. In particular focus of these studies is frequently on transition economies. There is always has a special attention for scholars and policy makers to economic development and financial sector development as a function of the first. Financial development can be achieved as part of the reforms undertaken to decentralize the system as a process of transition. The starting point of the financial sector development for the countries of Central and Eastern Europe are generally the same. Similarly are also the main objectives of economic development reforms undertaken by these countries. This makes it possible also the formulation of the same strategies for the development of these economies. The overall strategy for the management of the financial system in transition countries consists of two components. The first component 347

sums building a financial infrastructure for these countries and the second component follows the privatization of the remaining banks in the state ownership. (Verbeek, 1996) Among the studies on the reforms of the financial system a valuable conclusion was reached from the study of authors Golubovic (2005) on the reform of the financial sector in transition countries in the Balkans. According to the study in financial sector reform for these countries firstly should be reviewed the role of the financial sector, which should focus on the adequate mobilization and allocation of scarce financial resources of the economies. It is important to use a gradual methodology for passing the economic transition period. The change of political systems is not in favor of changes to the structure of economic sectors. According to the study it is necessary the synchronization of recovery of the banking system, the social security system, financial instruments and the positioning of institutional investors. Synchronization of these processes would enable the recovery of the entire financial system as function of the economic development. (Golubovic & Golubovic, 2005) During the last 25 years various reforms have been implemented in transition countries based on the objectives of global market development. In all these economies the implemented reforms have lodged economic and political challenges, but what stands out most strongly is prioritizing the firms and large enterprises. In most studies it is focused the segmentation of the financial sector reforms implemented by giving priority to "the greatest". Yet in small countries in transition population of low and middle income level do not use most of the banking services. (Torre, Gozzi, & Schmukler, 2007) Part of the numerous studies and analysis of financial development and growth have been also transition countries of Central Asia. The study under revision presents the differences between these countries and countries in transition in Central and Eastern Europe. Results of the study have proven the fact that all transition economies have reached a point in their development where the financial sector has become an important determinant of economic growth. But again the impact of various financial institutions, including banks and capital markets, environment and framework, is very different and of major changes and effects. These changes began in the early stages of the transition has shown a difference in the developing of not the Asian countries and Europe but also within the countries of Asia. (Djalilov & Piesse, 2011)

348

3 Macroeconomic Overview Two selected economies in this study are part of the transition countries that undertake reforms of the European Bank for Reconstruction and Development. According to the latest annual report of the EBRD the average growth in transition countries is falling and among the various causes related to the policy of neighboring countries, important cause is expected to be the impact of monetary tightening in the United States and other developed countries that are associated with these economies. The region had an annual growth of 2.3 percent in 2013 and 2.6 percent in 2012. The highest growth among countries in transition was observed in countries of South-Eastern Europe (SEE). The average annual growth is declining since 2011 and continued to stay below 3 per cent also in 2014, expecting the same trend and for 2015. External conditions have been a key factor of the improvement of the financial situation after the crisis. SEE countries have been ahead, where in most of these countries growth in exports is the support of the recovery of the crisis. The graph below is detached from the EBRD report and indicates precisely the contribution of export growth in various countries in transition where is easily observed the supremacy of the SEE countries. (EBRD, 2014) Graph 1. Contribution of Exports in the Economic Recovery.

Source: (EBRD, 2014) Macroeconomic policies of the EBRD region countries are generally characterized by a fiscal tightening combined with appropriate monetary policy. Among the countries of South-Eastern Europe Albania has implemented even more cuts on the interest rate to stimulate aggregate demand. These cuts have been facilitated by low levels of inflation and tempered expectations. (EBRD, 2014) 349

According to the Albanian and Macedonian annual report of EBRD for 2014 there is a difference of the economic performance of these two countries. While economic performance of Albania remains still fragile, the Macedonian economic performance has recovered well after 2012 recession. Table 1 shows the macroeconomic indicators for these two countries in a period of 5 years which covers the most delicate years. Table 1. Macroeconomic Indicators 2010 Macroeconomic Indicators

2011

2012

2013

2014

Alb Mac Alb Mac Alb Mac Alb Mac Alb Mac .

.

.

.

.

.

.

.

.

.

GDP growth

3.5

2.9

2.3

2.8

1.1

-0.4

0.4

2.9

1.7

3

Inflation (average)

3.5

1.5

3.4

3.9

2

3.3

1.9

2.8

2

1.5

-4.1 -6.7

-3.5

Government balance/GDP

Current account

-4.3

-2.4 -3.6

-2.5 -3.5

-3.9 -5.2

-

-

-

11.

13.

10.

balance/GDP

2

-2

3

-2.5

-10

-3

4

-1.9

-11

-4.6

Net FDI/GDP

8.7

2.2

6.4

4.5

6.7

1

9

3.3

9.4

3.8

33. External debt/GDP

9

33. 58

9

36. 65.1

21. Gross reserves/GDP Credit to private sector/GDP

6

70.8

3

75.4 n.a.

n.a.

29.4

21

25.9 n.a.

n.a.

49.1 n.a.

n.a.

20. 24.3

38. 2

5

36.

21

27.7

40. 44.5

1

9 39.

45.3

6

38. 47.7

2

Source: (EBRD, 2014) In Albania growth in the past two years has slowed greatly, which reflect domestic problems and as well as a falling in the remittances and difficulties through the problems in the international trade area. GDP growth from 2012 to 2014 passed from 1.1 percent to 0.4 percent in 2013 and 1.7 percent in 2014. While in Macedonia there exists a strong progress from 0.4 350

percent on the back in 2012 to about 3 percent in 2014. Weak aggregate demand and low imported inflation kept in Albania the rate of inflation below the targeting of the Central Bank from 2-4 percent over a year. In motion of the decreasing trend of the inflation the central bank implemented and expansionary monetary policy by cutting the base interest rate down to an historic low of 2.5 percent. The unemployment rate has increased to 17.7 percent during 2014. While in Macedonia the active economy is not followed in the labor market as the unemployment rate remained high, nearly 30 percent. (EBRD, 2014) The budget deficit stands at 6.7 percent in Albania for 2014, which result to be more than 5 percent of the 2013 year that firstly was considered to stand at 3.5 percent from the 2013 budget law. This difference is considered to have a positive relation with the year of elections for Albania and the problems derived in the revenue collection. While public debt reached around 70 percent of GDP at the end of 2013. Meanwhile, in Macedonia budget deficit rose at about 4.1 percent in 2013 and about 3.5 percent in 2014. Totally in contrast of Albania the public debt remains moderate for Macedonia at a percentage of 46.8 of GDP in 2014. (EBRD, 2014) 4 Financial Sector Reform In the former socialist economies including two selcted economies in this study financial sector was completely adapted to the requirements of centralized economic management. Socialist economies are characterized by strong state intervention in the economy as the inclusion in controlling prices, subsidizing etc. Management and allocation of scarce financial resources was carried out through the monobank system and any other financial institution was owned by the state. The financial sector had a passive role as any transaction or financial operation was planned and carried out by the country's central bank. Financial institutions as mentioned above were dependent by the state power through the Central Bank which had the responsibility to confirm their economic activities as a central authority. The loss was covered by the state using later this deficit by the Central Bank monetary emission. (Golubovic & Golubovic, 2005) In the beginning of the transition all Balkan countries had a common characteristic of avoiding any radical reform in the financial sector. They took some partial changes ranging from the banking system transformation from the monobank system to two-level banking system where the central bank had its traditional functions and while commercial banks took responsibility for transactions with citizens and economic entities. Simultaneously with the transformation of

351

the banking system, these countries liberalized the establishment of new banks and decentralized the decisions regarding the volume and price level of financial services. There exist an exception regarding the banking system structure and is Yugoslavia, part of which has been Macedonia. It did not have a monobank system but had a considerable number of banks operating during the socialist era but the banks conducted to the planning immunity of the central authorities. This made Yugoslavia not much different from the other centrally planned economies. (Sherif, Borish, & Gross, 2003) The 90’s brought the first changes in the financial sector of these economies. They applied a series of provisions affecting the functioning and the structure of the financial sector. A successful provision to these first steps of financial sector restructuring means also the creation of the appropriate legal conditions. Legislature of early 90’s presented many obstacles to the smooth functioning of the financial sector. For this reason all Balkan countries, including two selected countries in this study by the end of the 90’s adopted completely new laws in line with European Union standards, especially regarding the independence of the Central Bank from the executive power, the regulation of the banking system, the financial market functions etc. Adopted laws are mostly in agreement with European rules and regulations for determining the main tasks of CB, giving priority to price stability in the country and maintain its independence from the executive power. At the same time they applied some changes to the positioning of the banks, nonbank financial institutions and the functioning of financial markets. In the banking area and the financial intermediation, the European standards are not well defined as in the case of the adjustment of the Central Bank position as there were limited functions in financial intermediation and for years these countries lacked the interest of opening other foreign banks. Capital market was another aspect which stood on the goals of any transition economy, and here lies a feature of the two selected countries, where Macedonia since 1995 had a capital market despite the previous attempts in years. Unfortunately Albania is the country that still has attemptes on such a step. But it should be understood that the functioning of the financial system in accordance with the European regulation also depends on the countries level of development and the ability to stand in open market competition. (Cani & Haderi, 2002) However, analysis of the legislation shows that the best standards are met in relation with the approval of the license, the definition of minimum capital requirements needed for the establishment of banks, the determination of the scope of banking activities, the responsibility 352

of the owner, etc. The same goes for the legislation whith regulats the financial market, agents, the definition of instruments, the rights and obligations arising from these instruments. 5 Banking Sectors of Albania and Macedonia The privatization of state-owned banks is a very important element of the adequate transition of the SEE countries banking system. In all SEE countries there have been delays in the privatization process mainly due to government policy reluctance. The privatization of the SEE countries the banking system was defined by the entry of foreign banks in the market. Foreign banks usually enter the market either by acquiring local banks (state-owned or private) or by establishing subsidiaries and branches. The entry of foreign banks was very important, since they introduced modern risk management techniques. This way of foreign ownership noted to be very important condition for the efficient transition of the banking sector. (Stubos & Tsikripis, 2004) An important part of this comparative research is the study of the main indicators of the banking system of the selected economies. Therefore there are selected the most important indicators that will be presented in tables or graphs to show the compliance of the banking system in Albania and Macedonia. Meanwhile in Albania operate 16 commercial banks and in Macedonia 17 of them so the first indicator that is studied despite the territorial area and the population number is the number of bank branches operating in every 100 000 of adults. Graph 2 shows the levels of this indicator for both countries from 2006 to 2011. All the statistical data are sourced from the International Monetary Fund (IMF). Graph 2. Number of Bank Branches per 100 000 adults. 30.00 25.00 20.00 15.00

Shqiperi

10.00

Maqedoni

5.00 0.00 2006

2007

2008

2009

2010

Source: (IMF, 2013) 353

2011

Furthermore Albania and Macedonia have a small difference in this indicator, which is decreased from year to year. From the graph and their difference it can be said that both countries commercial banks operate in the same inclusiveness strategy. Graph 3 presents data on the level of the Bank Return on Equity for the years 2006 to 2011, it is noted that in Albania, though there are fewer bank branches than in Macedonia, return is higher. Year 2007 is the one that represents the highest profitability for the two economies 21.82 percent and 16.53 percent for Albania and Macedonia respectively and the decline due to the financial crisis is evident starting from 2009 onwards. Graph 4 shows another important bank indicator for Albania and Macedonia for years from 2006 to 2011. Bank Net Interest Margin is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders. Comparing Albania and Macedonia regarding the graph below and the percentages for every year it can be noticed the approximate levels of the interest rate margin. Even though different banks use different strategies basically there are similarities of the banks operating in Albania and Macedonia.

Graph 3. Bank Return on Equity (ROE). 25.00 20.00

21.82 18.59

15.00 10.00

17.40

16.53 13.22

10.58

9.40

11.57

8.96

8.25

5.00

6.37 3.31

0.00 2006

2007

2008

2009

2010

Source: (IMF, 2013)

354

2011

Albania Macedonia

Graph 4. Bank Net Interest Margin. 7.00 5.89

6.00 5.00

4.73

4.00

4.69

5.30

5.19 4.52

5.64 4.74 4.32

4.44

4.46

4.30

3.00

Albania Macedonia

2.00 1.00 0.00 2006

2007

2008

2009

2010

2011

Source: (IMF, 2013) Table 2 below shows three more banking indicators for Albania and Macedonia for the rage of years from 2006 to 2013. The first indicator is the ratio of bank capital together with the reserves against its total assets. This ratio is important to understand whether or not the bank has sufficient capital relative to the minimum rate defined. As noted, Albania has the lowest levels compare to Macedonia, although highlighted a slight increase over the years. Ratio rates of capital to total assets are more stable for Macedonia through the years. The second indicator presented below shows the ratio between the amounts of liquid assets (reserves) to total assets of the banks. For Albania 2006 indicates the highest level and for Macedonia 2011 shows the highest level. For 2013 this ratio is 13.89 percent and 22.58 percent for Albania and Macedonia respectively. Last indicator of the nonperforming loans remains high for Albania and addresess problems. While for Macedonia this level is moderated and lower, but according to the annual report of Albania and Macedonia from the EBRD this ratio has been decreasing since mid-2013 to 10.6 percent as of March 2014. Meanwhile according to the same report the level of NPLs fo Albania stand in high levels to 24.1 percent as of mid 2014.

355

Table 2. Banking System Indicators Treguesit Bank capital to total assets (%)

Shtetet

2006

2007

2008

2009

2010

2011

2012

2013

Albania

6.80

7.60

8.60

9.60

9.40

8.70

8.60

9.30

Macedoni

13.3

11.4

11.5

11.4

10.6

11.0

11.2

11.3

0

0

0

0

0

0

0

0

21.1

18.2

15.8

14.3

14.5

13.4

13.4

13.8

5

4

8

9

7

8

1

9

18.6

24.3

21.2

21.6

25.2

26.9

25.1

22.5

0

8

7

3

8

5

2

8

10.5

14.0

18.8

22.5

23.5

0

0

0

0

0

10.1

10.9

1

4

a

Bank liquid reserves to bank assets ratio (%)

Albania Macedoni a

Bank Nonperformin

Albania

3.10

Macedoni

11.2

3.40

6.60

g loans to gross loans (%)

a

1

7.51

6.71

8.94

9.04

9.52

Source: (IMF, 2013) 6 Conclusions According to this study, we can say that economies selected Albania and Macedonia have much in common as well as features as economies of the same region. It is important to note that both economies undertake financial sector reforms monitored from EBRD and both are candidates of EU. Therefore, having the same goal these economies can be perceived that go parallel. Despite to the geographical position and the previous political regime these economies continue to walk in similar paths also in the economic growth, where we can mention 1) legislation of the financial system reforming towards the goal of EU accession, 2) two-level banking system, 3) achievement of Central Bank independence from Executive power, 4) privatization of the banking system characterized by the entry of foreign banks 5) price level stabilization, 6) low credit in the early years of transition and low interest rates, 7) positive report of transition in recent years by prominent increase in exports. As it is mentioned above these economies have been through the same political regime but they are liberated from this regime and have opened the trade in different years and the regimes pressure has not been the same where can be pointed the high pressure for Albania, necessarily 356

these economies have particular features during their transition. While the study is based on the financial sector and it reforms then we can distinguish different developments of these countries on 1) the functioning of financial intermediaries in years, 2) insurance market with a slower development as regards Albania compared with other countries of the region, 3) while Albania was transforming the monobank system, Macedonia already had many banks operating 4) non-performing loans stand way to higher in Albania 5)economic growth of recent years in different trends despite the same financial crises that the economies suffered 6) the lack of a capital market for Albania as a country that has performed very well in the implementation of the same financial reforms. References Cani, S., & Haderi, S. (2002). SISTEMI FINANCIAR SHQIPTAR NË TRANZICION:. Banka e Shqipërisë në dekadën e dytë të tranzicionit . Djalilov, K., & Piesse, J. (2011). Financial Development and Growth in Transition Countries: A Study of Central Asia. Emerging Markets Finance & Trade , 4-23. EBRD. (2014). Albanian Annual Report. European Bank for Reconstruction and Development. EBRD. (2014). Innovation in Transition. Transition Report. European Bank for Reconstruction and Development. EBRD. (2014). Macedonian Annual Report. European Bank for Reconstruction and Development. Golubovic, S., & Golubovic, N. (2005). Financial Sector Reform in the Balkan Countries in Transition. Economics and Organization. , 229-236. IMF. (2013). Global Financial Development. International Monetary Fund. Sherif, K., Borish, M., & Gross, A. (2003). State-owned banks in the transition : origins, evolution, and policy responses. Wolrd Bank. Stubos, G., & Tsikripis, I. (2004). Banking Sector Developments. Global Development Network Southeast Europe. Torre, A. T., Gozzi, J. C., & Schmukler, S. L. (2007). Financial Development: Maturing and Emerging Policy Issue. The World Bank Research Observer , 67-102. Verbeek, G. A. (1996). Financial Sector Reform in Central and Eastern Europe. Society and Economy in Central and Eastern Europe , 113-141.

357

The Impact of Greek Crisis on the Western Balkan Countries Adela Laci1 & PhD C. Erda Cani2 1

2

Epoka University, Albania Department of Banking and Finance, Epoka University, Albania

Abstract Greece is experiencing one of the deepest economic and financial crises in history and its tremendous impact is not affecting only the Eurozone countries but also the economies of all South and Eastern European countries. The crisis is especially visible in countries influenced by the movements and deviations of Greek economy like the main regional trade partners or the ones that have a relatively high percentage of foreign direct investments. Among these countries the most affected are Albania, Macedonia, Montenegro, Bosnia and Herzegovina, Bulgaria and Croatia. The main aim of this research paper is to investigate and identify the impact and spillover effect of Greek crisis on the main Western Balkan countries. The chances of a rapid improvement of Greek economy seem to be diminishing and the tremendous impact on these countries are resulting in currency devaluation, increase of unemployment rate, decrease of real GDP and decrease of remittances. The purpose of this study is to analyze the effects of the crisis based on the main macroeconomic variables such as real GDP, inflation and unemployment rate. By using E-views program, a regression model will be built to help understand which of these macroeconomic variables was mostly affected and what will be the short term and long term effect of the crisis on the whole region. Keywords: Greek crisis, Western Balkan countries, Spillover effect.

Introduction The Greek financial crisis issue is still the main concern for Western Balkan countries and not only. It was a difficult period for all these countries, because before threatened by this debt crisis, they were affected by the global financial crisis. For sure, the effects of both crises were tremendous and very difficult to be recovered. The economies of Balkan countries such as Albania, Serbia, Montenegro, FYROM, Croatia, and Bosnia and Herzegovina have experienced a continuous growth until the Greek crisis occurred at the end of 2009. In 2009, all these Western Balkan countries, excluding Albania, passed through a recession period (see fig.1). The influence of Greek crisis on the Balkan countries was considerably high due to the fact of trade relation and financial integration between these countries and Greece. A moderate 358

percentage of foreign banks is owned by Greek banks in Balkan countries and concretely 18% of banking system in Albania is Greek banks owned. For sure, banking sector was one of the main sectors affected by the crisis. This study will identify the Greek crisis and its effects on the economies of Western Balkan countries. The first section mentions some studies related to the influence of Greek crisis. The countries which are considered in their studies are Albania, FYROM, Montenegro, Bulgaria, Croatia, Serbia and Bosnia and Herzegovina. Generally from the analysis of their study, the authors have concluded that Albania is the country more affected by the spillovers of the Greek crisis compared to other countries. This has happened due to the fact that there is a relatively high percentage of Albanian migrants in Greece and Greece is the most important country for the Albanian remittances. While, the effects on FYR Macedonia and Bulgaria are more limited because the trade linkages of these two countries with Greece are weaker. The following section explains the data used for this study. The three factors considered as the most important factors of the crisis are real GDP growth, unemployment rate and remittances. The crisis has decelerated the economy by decreasing the real GDP growth, increasing unemployment rate and decreasing remittances. Then, the study comes with the effects of the Greek crisis on the Balkan countries economies. For sure, the effects of this crisis influenced negatively their economies, especially the countries which were more tied up with Greece. Finally, it comes with some conclusions. Literature Review The economy of Western Balkan countries has shown a good performance before affected by the Greek crisis. The crisis has encouraged the deceleration of their economy by decreasing the Balkan countries GDP, increasing unemployment rate, decreasing remittances etc. According to (Backé & Gardó, 2012), the Greek crisis effects on South-Eastern Europe countries have been limited. From the analysis of the study, it seems that Albania is the country more affected by the spillovers of the Greek crisis compared to other SEE countries. This has happened due to the fact that there is a relatively high percentage of Albanian migrants in Greece and Greece is the most important country for the Albanian remittances. While the effects on FYR Macedonia and Bulgaria are more limited because the trade linkages of these two countries with Greece are weaker. The authors determined that the Greek crisis affected more the banking and financial sector rather than real economy, especially the countries with a strong presence of Greek crisis such as Albania, Serbia, FYROM etc. 359

In her study, (Panagiotou, 2012) strengthens more the fact that Western Balkan countries are experiencing a difficult period because of the economic Greek crisis. The effects of the crisis were characterized by the decrease of GDP, decrease of remittances, increase of unemployment etc. The Western Balkan countries GDP-s in 2009 were decelerated to negative values such as Serbia -3.1%, Croatia -7.4%, Montenegro -5.7%, Bosnia and Herzegovina -0.9% and FYROM -0.9%. Also Albania has shown a decrease in GDP growth from 7.5% in 2008 to 3.4% in 2009. Unemployment rate was another indicator of the Greek crisis which for sure increased almost in all Western Balkan countries. The highest unemployment rate was signed in FYROM with 32.2% and the lowest value was in Croatia 9.1%. The unemployment rate increased even more in 2010 because the crisis widened and its effects were more evident during this year. The transfer of migrants’ money to their home country is one of the most important positive influences on the economy. The decline of remittances was another impact of the crisis. The main origin of Albania remittances is Greece, FYROM, UK, Italy and Germany. The remittances are decreased from 1,495 million dollar in 2008 to 1,317 million dollar in 2009. The same effect is seen also in the other Western countries, where the lowest value of remittances is pointed in Montenegro 302 million dollar. The impact of Greek financial crisis on the Western Balkan countries is further discussed by (Sadiku, Sadiku, & Berisha, 2014). The main objective of their paper was to identify the spillover effect of Greek crisis on these countries by using a binary logit model. From the analysis of the model, it was found that the variables such as the ratio of current account deficit and domestic bank loans give a sense of a strong impact in predicting the incidence of a financial crisis in the Western Balkan countries. The probability that banking and financial sector will be more affected by the Greek crisis is higher compared to that of real economy. In this case, the countries such as Albania, Serbia and FYROM are more affected by the crisis because they have the strongest presence of Greek banks. The authors concluded that their logit model performed well in the prediction of financial crisis occurrence in the Western Balkan countries. However, they mentioned that it would be better if the model contains more variables such as exports, portfolio investment variables etc in order to give more concrete results. In the analysis done by (Daborowski & Szpala, 2010), it was found that Croatia was the only country which has experienced the major depreciation of the national currency and it can be compared to the devaluation of euro against dollar. This effect has happened because Croatia has the best-developed financial sector and it is stronger linked with European market. Even there is a slight growth in the GDP of these countries, the authors determined that the Greek debt crisis may put at risk this low growth. This impact may be seen in the countries which 360

have stronger linkages with Greece like Albania, FYROM and Montenegro. The least affected by the debt crisis in Greece is Bosnia and Herzegovina and Croatia because they have weaker trade links with Greece. This crisis will reduce the Greek investments in other countries and the demand for goods and services from Western Balkan countries. The decrease of loan levels given by Greek banks will be one of the negative impacts of debt crisis. Also, the decrease of remittances is another negative consequence which for sure affects more Albania because more than 600,000 people work in Greece.

Data Description The data are derived from World Bank and cover the period from 2005 to 2013. In this study, the countries considered are Albania, Serbia, FYROM, Montenegro, Croatia and Bosnia and Herzegovina. Kosovo is excluded from the analysis because there was not enough information and the needed data. While the data for the regression analysis for Albanian case are taken from 1999 to 2014. The three variables considered as most affected by the Greek crisis are real GDP growth, unemployment rate and remittances expressed in percentage of GDP. Generally, the consequences of this crisis are the decrease of real GDP growth, the decrease of remittances and the increase of unemployment rate. In the figure 1, it is shown the real GDP growth for all the mentioned Western Balkan countries. In 2005 the lowest level of real GDP growth is signed in Montenegro and Croatia where the value is 4.2% for each country. While, Albania and Serbia pointed the highest value of GDP growth which is 5.5%. The debt crisis effect is seen at the end of year 2009 when all countries GDP, excluding Albania, have reached negative scales. The deepest impact is shown in the case of Croatia, where the value of GDP growth is -7.4%. This happened because Croatia has a strong economic and trade linkage with Greece and it has a considerable strong financial sector. After year 2009, the values of GDP growth have been increased in positive scales until year 2012 where their values reach again negative values. In 2013, generally they show a positive performance of their economy, except Croatia which signed negative value of -0.9%.

361

Figure 1: Real GDP growth (in %) 15 Albania

10

Serbia

5

FYROM

0

Montenegro 2005

2006

2007

2008

2009

2010

-5

2011

2012

2013

Croatia Bosnia

-10

Source: World Bank, data processed by the authors. Another indicator of the debt crisis is also unemployment rate. As it is seen from the graph, FYROM has the highest unemployment rate during all the period from 2005 to 2013. Whereas, Croatia generally shows the lowest unemployment rate. The Greek crisis has increased the unemployment rate for all countries, except FYROM where the value of unemployment rate has decreased from 33.8% in 2008 to 32.2% in 2009. The high percentage of unemployment in FYROM and Bosnia and Herzegovina in 2013, 29% and 28.4% respectively, is very problematic for their economy. However, all these countries should work more in order to decrease this rate and to stimulate their economies. The following indicator is remittances expressed in percentage of GDP. There is an excess of data for Montenegro and Serbia for year 2005 and 2006. The highest remittances from 2005 to 2013 are signed in Bosnia and Herzegovina. The highest value is seen in 2005 and after this year there is a decreasing trend of this variable. Croatia has the lowest values of remittances and this may be because of less migrants moving to other foreign countries. Albania has been the second country among the countries with highest value of remittances. It has passed through a decreasing trend from 2005 to 2013 and the cause of this may be the return of the migrants in their home country by investing their savings.

362

Figure 2: Unemployment rate (in %) 40

Albania

30

Serbia

20

FYROM Montenegro

10

Croatia

0 2005

2006

2007

2008

2009

2010

2011

2012

2013

Bosnia

Source: World Bank, data processed by the authors. Figure 3: Remittances (in % of GDP) 20

Albania

15

Serbia

10

FYROM Montenegro

5

Croatia

0 2005

2006

2007

2008

2009

2010

2011

2012

2013

Bosnia

Source: World Bank, data processed by the authors.

The Effect of Greek Crisis on Balkan Countries Economies The debt Greek crisis turbulence has affected all the Balkan countries which were strongly tied up with Greece. Greece has been and still is the main trade partner and the main country for foreign investments for almost all the Balkan countries. Thus, these countries’ economies will be influenced by this crisis by slowing down their economic development. The effects of this crisis were also seen by the figures above. In figure 1, according to the data given by World Bank, the real GDP has experienced a sharp decline during 2009. Except Albania, all other Balkan countries (Serbia, FYROM, Montenegro, Croatia and Bosnia and Herzegovina) have shown a negative real GDP growth. For sure, this decline has a negative effect of the FDI by decreasing them.

363

Remittances are considered as the main factor influenced by the crisis. Migrant remittances have always been the most important indicator of a well-developed economy. From figure 3 it is seen that remittances generally are decreased from 2005 to 2013. This is related also with the unemployment level which has been a very problematic issue for the Balkan Countries. According to (Koleka, 2015), many of the migrants have confirmed that they have not been paid even they have worked for a long time. Due to this fact, almost 16,000 Albanians have moved for asylum in Germany. The other effect is related to the currency devaluation. According to (Golemis & Papadopoulou, 2009), the currency devaluation will increase the difficulty of households and businesses to serve their loans taken in Euros or another currency (with the argument of taking advantage of lower interest rates) and increase default. In this case, the level of non-performing loans may be increase by affecting negatively the economic performance. The following effect of the crisis is the decline of exports. The EU countries demand will decrease by leading in a decrease of goods and services exported by Balkan countries. The main sector influenced by the Greek crisis seems to be banking sector. Referring to the report of (Correspondent, 2015), the banking system in the Balkan countries is unprotected at all from the crisis. Albania and Bulgaria’s banking system, which are owned by Greek banks by 18% and 23% respectively, possess a very serious threat of the Greek financial crisis. According to the head of the Financial Stability Department at the Bank of Albania, Klodian Shehu, the debt crisis can not affect the Albanian sector because they do not borrow from Greek banks and they are not funding the Greek debt. He confirms that crisis will discourage the Albanian economy, especially the investment and trade sector.

Regression Analysis This section will introduce the relationship and the effect of remittances and unemployment on the real GDP for Albania case. Remittances and unemployment rate have been two of the main factors of the Greek crisis which directly affect the performance of the economy. So, in this case the dependent variable is real GDP and the independent variables are remittance and unemployment rate. Through the E-Views program, it will be identified the effect of each factor on the real GDP growth. The regression equation is as below: GDP = β0 + β1*Unemp + β2*Rem

364

For each variable, it will be tested if they are stationary at level or not. If the variables are stationary at level, the regression of the variables will be analyzed. Otherwise, if the variables are stationary at 1st difference the Johansen Co-integration test will be analyzed. In this case, the 10% significance level will be considered. Table 1: Stationary test of GDP variable Null Hypothesis: GDP has a unit root Exogenous: None Lag Length: 0 (Automatic - based on SIC, maxlag=3)

t-Statistic

Prob.*

Augmented Dickey-Fuller test statistic

-2.835968

0.0079

Test critical values:

1% level

-2.728252

5% level

-1.966270

10% level

-1.605026

The first variable which will be tested is the dependent variable, GDP. The ADF P-value is 0.007 which is lower than 10% significance level (0.007 < 0.1). At the same time, the t-statistic is lower than any critical value. Thus, the GDP variable is stationary at level. Table 2: Stationary test of REM variable Null Hypothesis: REM has a unit root Exogenous: None Lag Length: 1 (Automatic - based on SIC, maxlag=3)

t-Statistic

Prob.*

Augmented Dickey-Fuller test statistic

-3.423538

0.0023

Test critical values:

1% level

-2.740613

5% level

-1.968430

10% level

-1.604392

The second variable considered is remittance. It is known that remittances play a crucial role in the economy of each country. The P-value is lower than 10% significance level (0.002 < 0.1). Also, the t-statistic is lower than any critical value which means that Rem variable is stationary at level. 365

Table 3: Stationary test of Unemp variable Null Hypothesis: UNEMP has a unit root Exogenous: None Lag Length: 0 (Automatic - based on SIC, maxlag=3)

t-Statistic

Prob.*

Augmented Dickey-Fuller test statistic

-2.721449

0.0101

Test critical values:

1% level

-2.728252

5% level

-1.966270

10% level

-1.605026

The ADF P-value of Unemp variable is 0.01 which is lower than 0.1. The t-statistic value is lower than 5% and 10% significance level. Thus, in this case the variable is stationary at level. Since all the variables are stationary at level, the regression will be used. The table above gives the results of the regression analysis. Table 4: Regression analysis Dependent Variable: GDP Method: Least Squares Date: 11/05/15 Time: 10:57 Sample: 1999 2014 Included observations: 16 Variable

Coefficient

Std. Error

t-Statistic

Prob.

REM

0.390519

0.198074

1.971583

0.0703

UNEMP

1.284807

0.648420

1.981442

0.0691

C

0.180347

2.589648

0.069642

0.9455

R-squared

0.415952

Mean dependent var

5.137500

Adjusted R-squared

0.326098

S.D. dependent var

3.021672

S.E. of regression

2.480536

Akaike info criterion

4.822187

Sum squared resid

79.98976

Schwarz criterion

4.967047

Hannan-Quinn criter.

4.829605

Durbin-Watson stat

1.349908

Log likelihood

-35.57750

F-statistic

4.629222

Prob(F-statistic)

0.030333

The regression line in this case will be: GDP = 0.18 + 1.28*Unemp + 0.39*Rem. 366

In order for a variable to be significant, the P-value of the variable should be between + and – 0.1 interval. Thus, -0.1 < P-value < 0.1 shows the significance of the variable. From the table it is seen that both variables are significant. GDP tends to change by 1.28 percent for a one percent change in Unemp variable. From the other side, GDP tends to change by 0.39 for a one percent change in Rem variable. The R2 in the table is 0.41 which means that 41 percent of the variation in the GDP growth is explained by the variation of the two independent variables unemployment rate and remittances. Conclusions Greek debt crisis has been widespread all over the world, especially it has affected the Western Balkan countries. The countries considered in this study are Albania, FYROM, Montenegro, Croatia, Bosnia and Herzegovina and Serbia. It was concluded that Albania was the country more influenced by the Greek crisis because of stronger trade relations with Greece. Also, a moderate number of Albanians are migrants in Greece which means that for sure this crisis will affect them by decreasing their remittances. At the beginning of the Greek crisis in 2009, there was a slowdown in the Western Balkan countries economies. All these countries real GDP were signed in negative scales, excluding Albania. The other effect of the crisis is related to the currency devaluation. This devaluation will affect a lot the loan borrowers who will be unable to pay back the loan. Thus, in this case the level of non-performing loans will be increased. The other effect of the Greek debt crisis is the decline of exports. So, the EU countries demand will decrease by leading in a decrease of goods and services exported by Balkan countries. It has been concluded that banking sector is the one more influenced by the crisis. Albanian banking sector is very threatened by the Greek crisis because 18% of it is owned by Greek banks. However, the government is taking actions to not influence and to avoid the decline of the economy. From the analysis, it was found that both unemployment rate and remittances are significant in this case. GDP tends to change by 1.28 percent for a one percent change in Unemp variable and it changes by 0.39 for a one percent change in Rem variable. The R2 is 0.41 which is considerably high value. References Backé, P., & Gardó, S. (2012). Spillovers of the Greek Crisis to Southeastern Europe: Manageable or a Cause for Concern? Focus on european economic integration, (p. 47). Correspondent, A. (2015). World Bank concerned over the impact of the Greek crisis on the economy of Albania and Balkan region. Tirana: Independent Balkan News Agency. 367

Daborowski, T., & Szpala, M. (2010, May 12). The impact of the Greek crisis on the Western Balkans. Retrieved September 23, 2015, from OSW: http://www.osw.waw.pl/en/publikacje/analyses/2010-05-12/impact-greek-crisis-westernbalkans Golemis, H., & Papadopoulou, E. (2009, May). Greek banks in the Balkans. Effects of the crisis and the internationalist deficit. Retrieved September 29, 2015, from Transform european network for alternative thinking and political dialogue: http://www.transformnetwork.net/en/yearbook/journal-052009/news/detail/Journal/greek-banks-in-the-balkanseffects-of-the-crisis-and-the-internationalist-deficit.html Koleka, B. (2015, July 8). Greek crisis hurts poorest in its Balkan neighbours. Retrieved September 29, 2015, from Reuters: http://www.reuters.com/article/2015/07/08/eurozonegreece-albania-idUSL8N0ZO1HI20150708 Panagiotou, R. (2012). The impact of the economic crisis on the Western Balkans and their EU accession prospects. Florence: European University Working Papers. Sadiku, M., Sadiku, L., & Berisha, N. (2014). The Financial Crisis in Greece and Its Impacts on Western Balkan Countries. Switzerland: Springer International Publishing .

368

Statistical Analysis of the Relation between Inflation and Unemployment in Democratic States using Spearman’s ƍ Correlation Coefficient with Application in Albania Prof. Dr. Fejzi Kolaneci1 & Brunilda Hoxhalli2 1 2

University of New York Tirana, Albania University of New York Tirana, Albania

Abstract The main purpose of the present study is to investigate relation between inflation rate and unemployment rate in contemporary democratic states, using Spearman’s ƍ correlation coefficient. We apply this method in Albania during the period January 2005-December 2014. Some results of the study include: §

The Central Limit Theorem is not applicable for the quarterly inflation rate as well as for quarterly unemployment rate in Albania during the period January 2005-December 2014 at the confidence level 99.99%. The official data for inflation and unemployment contradict the CLT at very high confidence level 99.99%.

§

The inflation process in Albania during the period January 2005-December 2014 is an unfair game at the confidence level 99.2%.

§

The unemployment process in Albania during the period January 2005-December 2014 is an unfair game at the confidence level 99.99%.

§

The inflation and unemployment in Albania during the period January 2005-December 2014 are statistically dependent at the 96% confidence level.

§

Spearman’s correlation coefficient ƍ= 0.387 indicates a weak positive correlation between inflation and unemployment in Albania during the specified period.

§

The official data for inflation and unemployment in Albania during the period January 2005- December 2014 are consistent with Friedman’s hypothesis.

Keywords: Inflation, Unemployment, Relation, Spearman’s ƍ, Friedman’s hypothesis, Albania. Introduction Inflation and unemployment are a major focus on economic policy worldwide. Inflation is the process of a raise in the general level of prices of goods and services in an economy over a specified period of time. Most frequently, the term “inflation” refers to a rise in the Consumer 369

Price Index (CPI), which measures prices of a representative fixed basket of goods and services purchased by a typical consumer. The formula for calculating the quarterly inflation rate is:

Inflation rate =

P0 − P−1 100% , where P0 denotes the current average price level and P-1 P−1

denotes the average price level a quarter ago. During periods of inflation not all prices and wages rise proportionately. Because they don’t, inflation affects income distribution. For example, retirees lose in relation with other groups when inflation is high. Variations in relative prices lead to more uncertainty, making it harder for firms and companies to make investment decisions about the future. Taxation interacts with inflation to create more distortions. If the tax brackets are not adjusted correctly for inflation, people move into higher and higher tax brackets as their nominal income increases, even if their real income remains the same. Economists generally agree that high rates of inflation are caused by an excessive growth of the money supply. Today, most economists favor a low and stable rate of inflation, because low inflation may reduce the severity of economic recession and the risk of destabilizing the economy, see Sargent (2005), Taylor (2008), Mankiw (2010) and Giannellis (2011). Unemployment, as defined by the International Labor Organization (November 26, 2007 ), is the state in which the people are without jobs, they have actively looked for work within the past four weeks, and ready to start work within two weeks. The unemployment rate is the percentage of total labor force unemployed: unemployment rate =

unemployed workers . total labour force

Economists and mathematicians care about unemployment for two main reasons: Firstly, unemployment is still often associated with financial and psychological suffering, especially (particularly) when people remaining unemployed for long periods of time. Secondly, unemployment rate provides a signal that the national economy may not be using some of it resources efficiently. If many workers who want to work do not find jobs, then the economy is not efficiently utilizing its human resources. According to Marx (1863), “It is in very nature of the capitalist mode of production to overwork some workers, while keeping the rest as a reserve army of unemployment paupers”. One of the fundamental problems in Macroeconomics is the study of relation between inflation 370

and unemployment. We will analyze this relation, over the period January 2005– December 2014, in Albania. The sources of the official data are INSTAT and Bank of Albania. The Central Limit Theorem (CLT) If all random samples ( x1 , x2 ......xn )of a reasonably large size n>30 are selected from any random variable X with finite expectation µ and variance σ 2 , then the probability distribution of the sample mean x is approximately normal with expectation µ and variance

σ2 n

. The speed of the convergence to normal distribution is on the order

n-0.5. This approximation improves with larger samples, as n → ∞ .The convergence to normal distribution is uniform for all real numbers, see Kolmogorov (2002). CLT explains why many probability distributions tend to be very close to the normal distribution. The amazing thing about CLT is that no matter what the probability distribution of the parent population X, the probability distribution of the sample mean approaches a normal curve. The remainder of this paper is organized as follows: Section 2 presents the investigation of quarterly inflation rate dynamics; Section 3 presents the investigation of quarterly unemployment rate dynamics; Section 4 provides the analysis of relation between inflation and employment; and Section 5 presents the conclusion. 1. Dynamics of the Quarterly Inflation Rate The data set in the quarterly inflation rate over the period January 2005- December 2014 in Albania, see Table 1.We calculate the statistical parameters for the data:

Sample size

40

Sample mean

1.285

95% confidence interval for mean .8625 ; 1.7175

371

Median

1.80

Variance

1.829

Standard deviation

1.3524

Coefficient of variation Maximum

3.30

Minimum

- 1.40

Range

4.70

Interquartile range

2.40

Skewness

-.742

Kurtosis

-.848

In this study, using Kolmogorov-Smirnov-Lilliefors test as well as Shapiro-Wilk test for normality, we test the following hypothesis

H 0 : The quarterly inflation rates for Albanian over the period January 2005 – December 2014 follow a normal distribution.

H 1 : The quarterly inflation rates for Albania over this specified period follow a non-normal distribution. Using SPSS (version 2013) we find the computed value of Kolmogorov-SmirnovLilliefors test=.213 and the corresponding significance level .000. Now we apply the ShapiroWilk test for normality. The computed value of the statistics is W = .870 and the associated significance is .000. Decision Rule: Reject the null hypothesis H0 at the confidence level 99.99%. In other words, the Central Limit Theorem is not valid for quarterly inflation rates over the specified period in Albania, at the confidence level 99.99%. Definition(according to J.L.Stein and N.N.Vorobiev, 1974) The inflation process is said to be 372

a fair game if the successive differences of inflation rates follow a normal distribution with mean equal to zero. This important definition has found several applications in economic sciences, see Stein (1974), Lucas (2000), Sargent, Williams and Zha (2006), Stock and Watson (2007). The successive differences of quarterly inflation rate, over the period January 2005 – December 2014, in Albania are given in Table 1. We present the statistical parameters related to this data set.

Sample size

40

Sample mean

-.0175

95% confidence interval for mean -.5465; .5165 Median

.10

Variance

2.736

Standard deviation

1.854

Coefficient of variation Maximum

3.30

Minimum

-4.30

Range

7.60

Interquartile range

1.17

Skewness

-.503

Kurtosis

1.078

373

We test the hypothesis

H 0 : The successive difference of the quarterly inflation rates for Albania, over the period January 2005 – December 2014, follow a normal distribution.

H 1 : The successive difference of the quarterly inflation rates for Albania over this period follow a non-normal distribution. We apply the Kolmogorov-Smirnov-Lilliefors test as well as the Shapiro-Wilk test for normality. The computed value of the KSL test is = .165, and the computed value of SW test is W = .937. Decision Rule: Reject the null hypothesis H 0 at the confidence level .992. In other words, at the confidence level 99.2%, the inflation process, over the period January 2005 – December 2014, in Albania, related to the quarterly inflation rates, is an unfair game. During periods of recession, the capitalist economy usually experiences a high unemployment rate. There remain a strong (considerable) theoretical debate regarding to the causes, consequences, and optimal solutions for the unemployment. Scientists distinguish between various types and theories of unemployment in capitalist countries: voluntary unemployment versus involuntary unemployment, classical (or real-wage) unemployment, Keynesian unemployment, Marxian unemployment, structural unemployment, frictional unemployment, hidden (or covered) unemployment, and long-term unemployment, see Blanchard (2011), Mankiw (2010), Anderton (2006), Keynes (2007), Harris (2005), and Marx ( 2009).

2. Dynamics of the Quarterly Unemployment Rate The data set is quarterly unemployment rates, over the period January 2005 – December 2014, in Albania, see Table 1. We compute the statistical parameters for the data

Sample size

40

Sample mean

14.2025

95% confidence interval for mean 13.6770; 14.7280 Median

13.8000

Variance

2.700 374

Standard deviation

1.64809

Coefficient of variation Maximum

18.60

Minimum

12.5

Range

6.10

Interquartile range

.97

Skewness

1.472

Kurtosis

1.113

Using Kolmogorov-Smirnov-Lilliefors test as well as Shapiro-Wilk test for normality, we test the following hypothesis

H 0 : The quarterly unemployment rates over the period January 2005 – December 2014 follow a normal distribution.

H 1 : The quarterly unemployment rates over this specified period follow a non-normal distribution. Using SPSS (version 2013) we find the computed value of KSL statistics .301 and the associated significance is .000. The computed value of SW test is W = .776 and the corresponding significance is .000. Decision Rule: Reject the null hypothesis H 0 at the confidence level 99.99%. In other words, the Central Limit Theorem is not valid for quarterly unemployment rates, over the specified period January 2005 – December 2014, in Albania, at the confidence level 99.99%. The successive differences of quarterly unemployment rates over the period January 2005 – December 2014 in Albania are given in Table 1. We present the statistical parameters related to the data set

375

Sample size

40

Sample mean

.0850

95% confidence interval for mean -.1056; .2756 Median

-0.5

Variance

.355

Standard deviation

.596

Coefficient of variation Maximum

1.60

Minimum

-1.50

Range

3.10

Interquartile range

.40

Skewness

.715

Kurtosis

2.204

Test the hypothesis

H 0 : The successive differences of quarterly unemployment rates for Albania over the period January 2005 – December 2014 follow a normal distribution.

H 1 : The successive differences of quarterly unemployment rates for Albania over this period follow a non-normal distribution. We apply the Kolmogorov-Smirnov-:Iilliefors test as the Shapiro-Wilk test for normality. Using SPSS (version 2013), we find for both statistical test the significance .000. The computed value of KSL test is .198 and the computed value of SW test is W = .875. Decision Rule: Reject the null hypothesis H 0 at the confidence level .9999. In other words, at 376

the confidence level 99.99%, the unemployment process, over the period January 2005 – December 2014, in Albania, related to the quarterly unemployment rates, is an unfair game. 3. Relation Between Inflation and Unemployment Scientific analysis of the relation between inflation and unemployment has gone through three stages. The first stage was the acceptance of a hypothesis associated with the name of British economist A. W. Phillips, who published a study in 1958 showing a stable negative relation between inflation and unemployment in the United Kingdom by using the data set from 1862 to 1957, see Philips (1958). In this study was constructed a smooth curve which is known as “Phillips curve”: faster inflation is associated with lower unemployment. This relation was widely interpreted as a causal relation that offered a stable trade – off to policy makers. They could choose a low unemployment target. In that case they would have to accept a high inflation rate. Alternatively, the policy makers could choose a low inflation rate as their target. In that case they would have to reconcile themselves to higher unemployment rate. Unfortunately for this hypothesis, additional data set from USA, UK, Germany, France, Italy, Japan, Canada, etc failed to confirm with it. Statistical estimates of the Phillips curve hypothesis has been the subject of an intensive debate. Generally, empirical findings have produced the mixed results. Some scientists found the significant trade – off relation between inflation rates and unemployment rates, and other scientists does not, see Berentsen. Menzio and Wright ( 2011 ), Mulligan ( 2011 ), Zaman, Khan, Ahmad, and Beram ( 2011 ), Karanassou, Sala, and Snower ( 2010 ), Herman ( 2010 ), Lacker and Weinberg ( 2007 ), etc. On the theoretical side, the attack counter Phillips curve took the form of the natural rate hypothesis of Phelps (1967) and Friedman (1968). The natural rate hypothesis of Friedman and Phelp’s (1967) states that there is some “natural rate of unemployment”, and that monetary policy cannot keep unemployment below this level indefinitely. “The natural rate of unemployment”, a term introduced by M. Friedman 377

(1968)

to parallel Knut Wickell’s “ natural rate of interest ” is not a constant real number, but depends on random variables such as effectiveness of the labor market, the extent of competition of monopoly, the barriers of encouragements to working in various occupations, and so on. The natural rate hypothesis represents the second stage of the relation between inflation and unemployment. This hypothesis contains the Phillips curve as a special case. The natural rate hypothesis implicitly assumes that the relation between inflation and unemployment is weakly stationary process in the Doob – Rozanov sense. In recent years, in USA, UK, Germany, France, Italy, Japan, Canada, etc, higher inflation rate has often accompanied by higher unemployment rate, not lower unemployment rate as the Phillips curve would suggest, nor approximately the same unemployment rate as the natural rate hypothesis would suggest. This is the third stage of the relation between inflation and unemployment. According to the Friedman’s Hypothesis, there is a positive association between inflation and unemployment, see Friedman (1976). In the contemporary literature, Friedman’s Hypothesis states that “ If there are disturbances to aggregate supply rather than aggregate demand, then high inflation and high unemployment can occur together ”, see Mankiw (2010), Karanassou, Sala, and Snower ( 2010 ). At the confidence level 99.99%, quarterly inflation rate and quarterly unemployment rate in Albania during the period January 2005- December 2014 follow non-normal distribution. Therefore, we cannot use Pearson’s correlation coefficient to investigate (for Albania’s case) the relation between inflation and unemployment. However, we can use Spearman’s ƍ correlation coefficient between quarterly inflation rate (denoted by Y) and quarterly unemployment rate (denoted by X), as it does not rely on any assumptions on the probability distributions of random variables X or Y or the joint distribution of the vector random variable (X, Y), see Hollander and Wolfe (1973), Myers and Well (2003), Corder and Foreman (2014).

378

Spearman’s ƍ rank correlation coefficient is a nonparametric measure of statistical dependence between two random variables X and Y. Spearman’s ƍ assesses how well the relation between X and Y can be described using a monotonic function. Spearman’s ƍ correlation coefficient is appropriate for both continuous and discrete random variables. By definition, Spearman’s ƍ= ƍ (X, Y) is calculated as the Pearson’s correlation coefficient between ranked variables, see Corder and Forman (2014), Myers and Well (2003). For an arbitrary random sample (x1, y1), (x2, y2), …,(xn,yn)selectedfrom the random vector (X,Y), the n raw scores (xi, yi) are converted to ranks (Xi, Yi), and Spearman’s ƍ correlation coefficient is computed by the formula: !(# )*$ # ))$ ⋯ $# ())

ƍ= 1-

+,- +(+$-)

, where di= Xi – Yi denotes the difference between ranks.

If Y tends to increase when X increases, then ƍ > 0 If Y tends to decrease when X increases, then ƍ <0 If no tendency for Y to either increase or decrease when X increases, then ƍ=0. The sign of ƍ indicates the direction of association between random variable X and Y. In applications, r denotes the observed value of ƍ. That means: r denotes random sample Spearman’s correlation coefficient and ƍ denotes population Spearman’s correlation coefficient. Under the null hypothesis H0: ƍ=0 (statistical independence between X and Y), H1: ƍ≠0 (statistical dependence between X and Y). The appropriate test statistics is “Student’s t distribution” t= r

+,. -,/ )

with (n-2) degrees of freedom, see Kendall and Stuart (1973).

The data set consist of quarterly inflation rate and quarterly unemployment rate in Albania during the period January 2005-December 2014, see Table 1. The sample size is n=40. Using SPSS (version 21, 2013) compute the sample Spearman’s correlation coefficient r = 0.387 379

Test the hypothesis H0: ƍ=0, H1: ƍ≠0

(two-tailed test)

Given the significance level α=0.04 The appropriate test statistics is t distribution t= r

+,. -,/ )

with df = n-2

The observed value of test statistics is t = 0.387

01 -,2.014)

= 2.587

The critical value of t distribution is tc= tα/2 (df) = t0.02 (38) = 2.4286 Decision rule |t|= 2.587 >tc= 2.4286 Reject the null hypothesis H0: ƍ=0 at the confidence level γ=1-α=96%. In other words, the quarterly inflation rates and unemployment rates in Albania during the period January 2005- December 2014 are statistically dependent random variables at the confidence level 96%. Spearman’s correlation coefficient r=0.387 indicates a weak positive correlation between quarterly inflation rate and quarterly unemployment rate in Albania during the period January2005-December2014. Therefore, the Friedman’s hypothesis holds (accepted) for the relation between inflation and unemployment. Myers, J.L. and Well, A.D (2003) Research Design and Statistical Analysis (2nd edition), Lawrence Erlbaum Corder, G.W. and Foreman, D.I (2014) Nonparametric Statistics: A Step-by-Step Approach, Wiley. Hollander, M. and Wolfe, D.A (1973) Nonparametric Statistical Methods, New York: Wiley 380

4. Conclusion This study is concerned with three types of dynamic macro models over the period January 2005 – December 2014 in Albania: i.

Monetary macroeconomic models that focus on inflation dynamics,

ii.

Labor macroeconomic models that focus on unemployment dynamics,

iii.

Correlative models that seek to explain the relation between quarterly inflation rates and quarterly unemployment rates.

At the very high confidence level 99.99% the Kolmogorov’s Central Limit Theorem is not valid for quarterly inflation rates. At the confidence level 99.2 % the inflation process, related to the quarterly inflation rates, is an unfair game. At the very high confidence level 99.99% the Kolmogorov’s Central Limit Theorem is not valid for quarterly unemployment rates. At the same confidence level 99.99% the unemployment process, related to the quarterly unemployment rates, is an unfair game. The contradiction between quarterly inflation rates or quarterly unemployment rates and the Central Limit Theorem is very serious, as this theorem is a fundamental statement of modern Probability Theory. This contradiction (with CLT) implies that we cannot use Pearson’s correlation coefficient to investigate the relation between inflation and unemployment in Albania during the specified period. However, we can use Spearman’s ƍ correlation coefficient. The Ministry of Finance and Bank of Albania have the responsibility for “unfair game” inflation process in Albania over the period January 2005 – December 2014. In order to successfully fight the inflation process or unemployment process as an “unfair game”, some concrete actions must be suggested to the Albanian Government and Bank of Albania. The main reasons for the departure of quarterly inflation rates and quarterly unemployment rates from normal distribution as well as the “unfair game” inflation process and unemployment process in Albania’s market during the period January 2005 – December 2014, are: •

Excess demand for several sectors of the economy (goods, services, money, financial assets, labor force, etc).

•

National debt and government expenditure.

•

Monetary policy. 381

•

Unemployment rate dynamics for labor costs.

•

Level of corruption: Detection and penalty of corrupted activities.

•

Money laundering process.

•

How conflicting interests are solved.

•

Legislative changes.

•

Imported inflation, economic recession, financial crisis.

The “unfair game” inflation process and “unfair game” unemployment process in Albania during the period January 2005 – December 2014 implies economic loss for Albanian families: the mean value of this loss during the specified period is approximately estimated 25000 Albanian Lekë per family/per month. An obvious feature of our study is the severity of rejecting the fair game hypothesis in Albania’s market during ten years (January 2005 – December 2014). Therefore, there is a suspect for the presence of excessive speculation in Albania’s market, associated with excessive speculators. Excessive speculation causes sudden or unreasonable fluctuations or unwarranted changes in the price of commodity. Excessive speculation drives prices away from the competitive price consistent with available information. It is found, for Albanian economy during the period January 2000- December 2012 that an increase of 1% in annual unemployment rate, on average, leads an increase of 2.3% in the annual inflation rate; see Kolaneci and Sota (2013). The inflation and unemployment in Albania during the period January2005-December2014 are statistically dependent, at the 96% confidence level. Spearman’s correlation coefficient r=0.387 indicates a weak positive correlation between quarterly inflation rate and unemployment rate in Albania during the specified period. The data set, presented in Table1, is consistent with famous Friedman’s hypothesis: If there are disturbances to aggregate supply rather than aggregate demand, then high inflation and high unemployment can occur together. This situation includes a plethora of economicsocial-technological conditions such that: economic crisis, privatization process, company bankruptcy, industrial decline, real-wage unemployment (classical unemployment), Marxian unemployment, seasonal unemployment, frictional unemployment, hidden (or covered) unemployment, technological unemployment, political corruption, and excessive speculation.

382

The “unfair game” inflation process and “unfair game” unemployment process for Albania’s case are transitory or persistent? The answer to this question is crucial for Albanian people. References Anderton, Alain (2006). Economies (fourth edition), Ormskrik: Causeway Keynes, John Maynard (2007). The General Theory of Employment, Interest and Money. Basingstone, Hampshire: Palgrave Macmillan. Harris, S.F (2005). The New Economies: Keynes’ Influence on Theory and Public Policy. Kessinger Publishing. Marx, Karl (2009). Theory of Surplus Value, (1863), p 478. Capital, edited by David McLellan, Oxford Paberback, Oxford, UK. Kendall, M.G and Stuart, A. (1973). The Advanced Theory of Statistics, Volume 2, Griffin Kolaneci, F. and Sota, Ll. (2013). Investigation of the Lucas loss functions in Albania during the period 2000-2012. Berentsen, A., Menzio, G., & Wright, R. (2011). Inflation and unemployment in the long run. American Economic Review , 101,371-398. Cogley, T., & Sargent, T. J. (2005). The concept of US inflation, Review of Economic Dynamics 8 (2) ,528-563. Field, A. (2009). Discovering Statitics Using SPSS (3 ed.). London: Sage. Friedman, M. (1968). The role of monetary policy. American Economic Review , 58 (1),1-17. Friedman, M. (1976). Inflation and unemployment. Nobel Memorial Lecture, December 13, 1976. Giannellis, N. (2011). Nonlinearity and inflation rate differential persistence: Evidence from the Eurozone. University of Ionnina. Herman, E. (2010). Inflation and unemployment in the Romanian economy. Annals of University of Petrosani, Economics , 157-170. Hogg, R. V. (2009). Probability and Statistical Inference 8 ed. Prentice Hall. Honohan, P., & Lane, P. R. (2004). Divergent inflation rates in European Monetary Union. Dublin: World Bank: CEPR & Trinity College. International Labour Organization. (2007, 11 26). Resolution concerning statistics of the economically active population, employment, unemployment, and underemployment. Retrieved from: http://www.ilo.org/public/english/bureau/stat.pdf Karanossou, M., Sala, H., & Snower, D. J. (2010). Phillips curve and unemployment dynamics: A critique and a hobistic perspective.Journal of Economic Surveys,24( 1), 1-51. Kolmogorov, A. N. (2002). Probability Theory. Moscow: Nauka. Lacker, J. M., & Weinberg, J. A. (2007). Inflation and unemployment: a Laypersons's guide to the Phillips curve. Economic Quarterly, 93, 201-227. Lim, G. C., Dixon, R., & Tsiaplias, S. (2009). Phillips curve and the equilibrium unemployment rate. The Economic Record, 83, 371-382. 383

Lucas, R. E. (2000). Inflation and Welfare. Econometrica , 68(2), 247-274. Mankiw, N. G. (2010). Macroeconomics, seventh edition. Worth. Mulligan, R. F. (2011). An Austrian rehalibization of the Phillips curve. Cato Journal , 31(1), 87-98. Phelps, E. S. (1967). Phillips curve, expectations of inflation and optimal employment over time. Economica , 34(3), 254-281. Phillips, A. W. (1958). The relation between unemployment and the rate of change of money wage rates in the UK, 1861-1957. Economica ,25(1), 283-299. Sargent, T., Williams, J., & Tao Zha. (2006). Shocks and Governement Beliefs: The rise and fall of American inflation. American Economics Review ,94(3), 1193-1224. Stein, J. L. (1974). Unemployment, Inflation and Monetarism. American Economic Review , 92(5), 721-756. Stock, J. H., & Watson, M. W. (2007). Why has US inflation become harder to dorecast? Journal Of Moent, Credit, and Banking ,39(s1), 3-33. Taylor, T. (2008). Principles of Economics. U.S.A.: Freeload Press. Zaman, K., Khan, M. M., Ahman, M., & Beram, W. (2011). Inflation, unemployment and the NAIRU in Pakistan (1975-2009). Internation Journal of Economics and Finance, 3(2), 245254.

384

Table1. Quarterly inflation rate, successive differences of quarterly inflation rate, quarterly unemployment rate, and successive differences of quarterly unemployment rate in Albania.

Succ. Diff. Inflation Year

Quarter

Rates(%)

Infl. Rates(%)

2005

Q1

3.3

Q2

2006

2007

2008

2009

Unemploy .

Succ. Diff.

Rates(%)

Une. Rates(%)

1.3

13.1

-1.5

-1

-4.3

12.7

-0.4

Q3

-1.4

-0.4

12.6

-0.1

Q4

1.9

3.3

14.2

1.6

Q1

2

0.1

14

-0.2

Q2

0.2

-1.8

13.9

-0.1

Q3

-1.2

-1.4

13.8

-0.1

Q4

1.8

3

13.7

-0.1

Q1

2.2

0.4

13.7

0

Q2

-0.8

-3

13.5

-0.2

Q3

0.4

1.2

13.2

-0.3

Q4

1.7

1.3

13.4

0.2

Q1

2.4

0.7

13.1

-0.3

Q2

-0.3

-2.7

12.7

-0.4

Q3

-0.8

-0.5

12.6

-0.1

Q4

1.2

2

12.5

-0.1

Q1

1.8

0.6

12.7

0.2

Q2

-0.1

-1.9

12.7

0

Q3

-0.7

-0.6

12.8

0.1

385

2010

2011

2012

2013

2014

Q4

2.2

2.9

13.7

0.9

Q1

3

0.8

13.9

0.2

Q2

-1

-4

13.8

-0.1

Q3

-0.6

0.4

13.5

-0.3

Q4

1.8

2.4

13.5

0

Q1

2

0.2

14

0.5

Q2

2.5

0.5

13.8

-0.2

Q3

2.3

-0.2

13.9

0.1

Q4

2.4

0.1

13.9

0

Q1

2.4

0

14

0.1

Q2

2.4

0

13.8

-0.2

Q3

2.7

0.3

14.1

0.3

Q4

2.4

-0.3

14.1

0

Q1

2.5

0.1

14.8

0.7

Q2

2.2

-0.3

16.4

1.6

Q3

1.5

-0.7

17.2

0.8

Q4

1.5

0

17.1

-0.1

Q1

1.9

0.4

18.6

1.5

Q2

1.6

-0.3

17.7

-0.9

Q3

1.8

0.2

17.4

-0.3

Q4

1.3

-0.5

18

0.6

386

The Performance of Mortgage Loans in Albania in Recent Years, Elements of the Process of Mortgage Lending in the Banking System and its Risks MSc. Armanda Tola (Keqi) Department of Banking and Finance, Epoka University, Albania

Abstract Buying a home is one of the most important decisions and sometimes the biggest financial transaction that can be done in life. Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential and commercial property. That in itself is a big deal since the interest that you pay is going to be a percentage of the amount that you borrow, so it is important to make sure that you are getting the best deal possible, since you are going to have it for a long time. At the same time as Richardson cited it’s important that mortgage lenders have an incentive to internalize the deadweight costs associated with defaults and foreclosures. The development and expansion of the Albanian banking market in the recent years has created significant conditions to make a rational choice with the additions of new products and programs. This research will discuss the main steps of the procedure for obtaining a mortgage loan, the advantages and disadvantages of mortgages, the documentation required for obtaining mortgage loans, the credit risks and generally the performance of mortgage lending in Albania in the last 10 years, the prospect of mortgage loans and other main issues based on the appropriate literature review and secondary sources. Also as part of the topic is included a statistical study which analyzes the relationship between the performance of mortgage loans in Albania and other macroeconomic indicators as employment, inflation and the interest rate. The data was accessed from the official database system of INSTAT in the last 7 years and the elaborated results showed an explanation of the econometric model created. The conclusions provided in this case signified a strong relationship between the factors, indicating that the increase of the employment rate and of the deposit interest rate, as the decrease of the interest rate for loans and of the general level of prices are major factors that constrain the mortgage loans in Albania. Keywords: Mortgage loans, Banking system, Risk, Albania, Employment, Interest rate.

387

What is mortgage? The word mortgage is thought to have its origin from the old French mort-that means death and gage-which means pledge. If the borrower failed to pay the debt on the loan, the lender take the pledged property, turning it as a "dead" for the borrower. If the borrower pay the debt then the pledge would be considered dead for the lender. The Civil Code of the Republic of Albania has this definition for the mortgages: "Mortgage is a real right that is putted on the property of the debtor or a third party, in favor of the creditor, to ensure the fulfillment of an obligation." This Code also defines , that mortgaged items are real assets, such as land, buildings and anything that is embodied steadily and continuously with the land or a building. When seeking mortgage loans for home purchases, apartments, offices, a shop, the customer can pledge his land, houses, apartment buildings, which we generally call real estates. In terms of the law the owner is the person whose name is listed as the owner of the real estate. As for the origin of title acquisition for a real estate are recognized all property transfer contracts, court decisions, mortgages, deeds of inheritance, other legal documents that have effect on the rights to immovable property. If we take a loan for the purchase of a house or apartment, the property is registered in the name of the buyer, who also has to sign a mortgage contract, which is also registered in the relevant section of the real estate card used as collateral for the fulfillment of the obligation contractor, which is called mortgage burden. The mortgagor / owner of the collateral in any case can not transfer the title of the ownership to a third person until the time that the borrower has fully repaid the loan to the Lender / Bank, which through a notarized declaration states agreed to the deletion of the mortgage or gives approval for the transfer of the title of the property, while maintaining "the mortgage burden". The mortgage market is the market for financing real estate assets (Femi, 2013). It has been observed by Levine (1997) that provision of housing cannot be successful if a nation does not have a well developed mortgage market. Green and Wachter (2007) emphasize on the availability and of mortgages as crucial determinants in the functioning housing markets countries. Huybens and Smith (1998) argue that an increase in the rate of inflation could have at first negative consequences on financial sector performance through credit market frictions which entail the rationing of credit leading to reduction in intermediary activity as well as capital formation. Arcelus and Meltzer (1973) state that when markets rates of interest rise, and when expectations of higher inflation in the long run keep interest rates at the higher levels, it would not reduce housing demand permanently because after a time lag, wages and house 388

prices would adjust to the higher anticipated inflation. Using regression analysis, Walley et al., (2013) found that inflation is negatively and significantly associated with mortgage market development. Warnock and Warnock (2008) among others have also measured the growth of the mortgage market in terms of the ratio of outstanding residential mortgage debt to GDP. They and Boleat, (2003) also argue that deeper mortgage markets are associated with a stable macroeconomic climate. Boleat (2003) argues that long term loans are not possible when inflation and interest rates are high and volatile and there must also be general economic stability. He argues that the optimal interest rate of borrowing would be at an interest rate of three to four percent above the cost of funds, but in most emerging markets the actual spread is five to eight percent and in developed countries it is under two percent. The mortgage loan constituent elements A mortgage loan consists of several elements, without which the loan would not be applicable. Each element must have a value, otherwise the loan can not be calculated. These elements are: • The loan amount • The interest rate • Term loan • The structure of depreciation • The relevant dates of the loan payments • Coins Credit The loan amount only refers to the nominal value; in other words, the amount of money desired to be credited (the loan taken). Funding is the amount of money that can be taken from the property value. Usually banks put a minimum purchase price for the property. It often happens that the property valuations vary from 5% to 10% of the purchase price. Therefore, may be needed to deposit more money. Usually only the purchased property is offered as collateral. The interest rate is the regular cost that the lender decides on the borrowed funds. This is usually expressed as a percentage of the loan amount, and calculated on an annual basis. It has an inevitable impact on the amount of the monthly installments. The deadline of the mortgage means the time it takes to repay the loan. This can be expressed in months or years. The term of the loan depends on age standard period is usually 20 years, but even though that is flexible and should fit solvency.

389

Advantages and disadvantages of mortgage The main advantages of mortgage loans are as follows: §

By getting a mortgage loan, the borrower practices one of the basic principles of real estate acquisition: the purchase with the money of others. This eliminates the need to use money (cash) or stocks (deposits), which are so valuable in an emergency, or for other investment opportunities. Equally important is the fact that you can not possess the money to execute this transaction.

§

With the purchase of a property can be avoided the rental costs. Also, the real estate can be used as a collateral for a second loan in the future.

§

Mortgage Loan can serve to achieve different goals: building a summer house, renovating home, etc.

§

The real estate can be used as a second residency or can give the rental income those which can repay the loan installments. However, in obtaining a mortgage loan there are also disadvantages and risks:

§

There is a risk of default over time as a result of unemployment, illness, or any unpredictable event which is not covered by insurance policies consequently, the price of the home can result in less than the debt.

§

The interest rate can fluctuate because the loans are granted with variable interest rates.

§

The costs of a home loan usually vary depending on the bank, but obviously that costs are one of the issues that the customer should look carefully in order to make the right choice in a loan application for home. These costs include: ü Administrative Expense ü Notary costs ü The life insurance policy ü The property insurance policy by the earthquake and fire ü The payment of evaluation of the real estate ü The mortgage expenses for the blocking of the property ü The monthly expense for the account maintenance ü The penalty fee

Among the other disadvantages are that the payment of property assessment of the guarantee of the object is always paid by the customer. Also if the interest grows, the monthly payment 390

of the loan will increase. Banks in order to fulfill their criteria for security, will try to know everything about you. Risks of credit and how to protect Risk is the event that can lead to unexpected losses. Some of the main risks which may be covered by the loan are the risk of damage of property purchased with mortgage loans and the risk of default as a result of loss of life. In order to reduce uncertainty, the banks cooperate with the insurance companies, the insurance policies required by banks that are operating in Albania are as follows: 1. Property insurance Property insurance is a product that protects lenders against loss or damage of property offered as collateral. Property insurance is compulsory under the mortgage contract. Property insurance required by some banks will cover at any time at least the outstanding balance and the accrued interest. This means that while the loan is amortized the sum that is insured will be reduced. Therefore, it is recommended to purchase insurance policies that at least cover the replacement value of the object insured. While property insurance needs to provide assurance to lenders and they are the first to benefit from property insurance. Currently, property insurance covers two basic groups of accident risks. These are the risks associated with fire (fire, gas explosion, lightning) and earthquakes. 2. Life insurance Life insurance for the protection of the mortgage is simply a loan that pays the mortgage if the mortgage loan is not fully repaid in case of death. The insurance if the mortgage it’s not only provided for the benefit of the bank. Even though is a way to protect them from financial difficulties since it is not possible to predict what will happen to the borrower in 10 to 20 years (mortgages usually deal for long terms). If the borrower dies before repaying the mortgage loan, the lender must give to the borrower the right of property, to exclude his offspring, to sell the property etc. During the period of repayment of the loan the lender may face difficult situations, such as the acquisition of untimely salary, termination of employment, divorce or any unfavorable event, which would become an obstacle to fulfill the obligations to the lenders. In such situations, it is best to apply immediately to restructure the loan (generally this action is free of charges).

391

The main steps of the procedure for obtaining a mortgage loan 1. Pre-Application – The loan officer assists the applicant with the original terms of the loan for the house, explaining also all the costs for home loans. He provides the applicant with the set of documents and prepare the applicant with an amortization table loan example. 2. Application of the loan - the loan applicant fills out the form and submit the documents required by the loan officer (giving the consent to the loan officer to have the possibility of verifying the documents submitted). 3. Verification of documents – the loan officer, after receiving all the documents submitted, is responsible for carrying out the verification of incomes and the employment history, collateral, the credit history (if any) and the legal control of property documents. It will be used as a security for this loan. Then he finishes the financial analysis and prepare recommendations to the Credit Committee. 4. The decision of the credit committee - the loan officer sends the file of credit in the Bank Credit Committee for consideration. The committee after reviewing the recommendations made by the loan officer makes a decision to approve or not the loan as well as indicates the respective conditions. 5. Notification of the decision of the loan applicant -If the loan is approved, the loan officer informs the applicant about the approval of the loan, the conditions of the approval and informs him about the necessary documentation to be submitted for the second phase. 6. The opening of a bank account – This account shall serve for loan payments. 7. The registration contract - filed by the Office of Registration of Immovable Property serves for setting the property on behalf of the bank. When all the necessary documents are prepared, the bank is ready to disburse the loan in the account of the seller or the customer's account in case of loan for reconstruction or refurbishment. 8. The disbursement and the documents – After the disbursement of the loan, the client receives the original copies of contracts (loan contract, the contract of mortgage guarantee etc.), the original copies of insurance policies (life and property), copy credit costs and the detailed depreciation final table. The performance of mortgage lending in recent years Albania In the year 2007 the loans to individuals (In million EURO) reached the amount of 513.3852.5. The loan as the most important indicator of the economy, reached a record level of EUR 2.4 billion, thus reaching 30 percent of GDP. Within this indicator was recorded a significant increase of foreign individuals’ loans, which were raised by 66 percent, compared with the year 392

2006. The total achievement was more than 35 percent of the total loan portfolio of the banking system itself. In 2008 the most important indicator of the economy, the loan, failed again to a record level, exceeding the limit of 3 billion EURO, by exactly 3.2 billion EURO, or 37 percent of GDP. An important development in this regard was to increase the balance of loans to the businesses and those for individuals, which rose by more than 32 percent each. The year 2008 was the first full year of operations of the Loans Registry, helping banks in making more objective decisions, avoiding problematic customers. In 2009 the lending activity was about 51 percent of the system assets in December of 2009. Despite the significant slowdown during the year 2009, especially during the second quarter, the loans provided by the banking system rose by 13.4 percent compared with those in 2008, reaching the amount of 39.3 percent of GDP. Also, banks have increased continued lending in local currency. In 2010 the lending reached about 49 percent of system assets in December 2010, an increase of 9 percent over the previous year. The moderate increase was due to the low demand for credit by economic agents, but also to prudent lending policies of the banks, which paid more attention to the quality of their loan portfolio. The lending mainly supported investments in the services and industry sectors, while the growth of consumer lending had an average growth. The new loans granted by banks in 2010 reached about 19 percent more than the loans issued during 2009. The maturity structure of the new loans indicated that banks are too more focused on short-term lending. In fact, short-term loans accounted for about 60 percent of new loans in 2010, reflecting the need of the economy for liquidity after the global financial crisis. Nonperforming loans continued to rise during 2010, culminating in November 2010 to 14.4 percent of total loans, and decreased by the end of December to 14 percent. In fact, the loan quality indicators declined compared with a year ago as a result of a higher rate of growth of total loans. However, the credit risk remains the main risk for the banking system, reflected in large reserve funds created to cover potential losses. At the end of the year 2010 the provisions for the risk in lending were about 33 percent higher that at the end of 2009. In 2011 Albanian economy was one of the few economies in southeastern Europe which experienced no decline despite the global crisis and its spread to Europe. In fact, the crisis proved that the banking system in Albania, as in some other countries of Central and Eastern Europe, has had a stabilizing character and not that of an accelerator, as was expected at the 393

initial stages of the crisis. However, weak domestic demand and a slowdown in the external situation failed its growth prospects. The loan portfolio of banks in 2011 rose by 15.3 per cent, with an upward trend during the quarter. The level of non-performing loans amounted to 18.8 percent in December 2011, influenced not only by the difficulties in some sectors of the economy, but also by the slower credit growth rates in the last 2-3 years. As a result of the increased non-performing loans, and in accordance with the regulatory requirements of the Bank of Albania, banks increased their provisioning, which significantly affected the net result of the banking activity and the profitability indicators of the system. The lending slowed in 2012, particularly in the second half of the year. At the end of the year, the annual growth was 2%, it decreased by 15.3% from the previous year, 2011. This performance reflects the slowdown in the overall lending growth and the low lending demand as a result of a high perceived uncertainty and a low business confidence in the future macroeconomic developments. Nonperforming loans have risen significantly over the past two years and reached a peak of 22.5% at the end of December 2012, from 18.8% in 2011. The main reasons for this increase were: the economic slowdown and the lack of the efficient execution procedures of collateral which hamper the recovery of assets pledged as collateral. In the year 2014 the Bank of Albania has confirmed that the added value in the construction sector has been able to record an annual growth of 16% in the second quarter. But surveyed data signaled a slowdown for the sector's performance potential of construction activity in the third quarter. Yet by the entering of new taxes on housing, the housing price index recorded a negative annual change in the third quarter of 2013, for the fifth consecutive quarter. The decline in real terms by 1.2% can be considered low compared with double-digit decline recorded since the third quarter of 2012. Bank of Albania has confirmed that the added value in the construction sector has been able to record an annual growth of 16% but surveyed data signaled a slowdown for the sector's performance potential of construction activity in the third quarter. The construction contribution to the annual growth of GDP is estimated at 1.4 percentage points and the realization of housing construction is estimated low, influenced by the low level of domestic demand, as well as the conditions of tight funding. As confirmed by the builders, new investments are diminishing, at a time when many companies suffer from uncollected payments and large debts. Loans from banks to purchase real estates to individuals amounted to 101.8 million in the end of October 2013. Mortgages have significantly reduced pace since 2008, when the economic and financial crisis began with its effects in the economy.

394

Methodology The methodology adapted is the multiple regression analysis from secondary data obtained mainly from the Bank of Albania and the Institute of Statistics in Albania from the year 2007, subdivided into three-monthly periods. The data was subjected to a normality test before correlation and regression analysis is based on the assumption that the data is normally distributed. Correlation analysis was carried out to determine if there’s any association between the various independent variables and the dependent variable and if this relationship is significant. The Pearson Moment correlation was used for conducting the correlation analysis since the data was parametric data. The ranking varies between 0 and 1, where 0 denotes no relatedness between variables and 1 denotes a perfect relationship. If the score is less than 0.3 that it would mean that there exists a weak relationship between the variables, if there is between 0.3 and 0.7 that indicates a medium correlation between them, and above 0.7 means that the variables are strongly correlated. The multicollinearity test was necessary to ensure that the independent variables are not exhibited strong multicollinearity so that the regression model could be reliable. According to Belsley, a condition index less than 15 indicates no problem of multicollinearity. Model Specification The general regression equation when dealing with more than one independent variable can be expressed as follows: Y=A+ B1X1+B2X2+B3X3+B4X4+e Where by: Y=the mortgage loans A=Autonomous Variable X1= Average Inflation Rate X2=Average GDP Growth Rate X3=Index of construction cost X4= Unemployment Rate e= stochastic variables 395

B1= Coefficient of X1 B2= Coefficient of X2 B3= Coefficient of X3 B4= Coefficient of X4 Note: the mortgage loans indicate the total volume of the mortgage loans every year, the inflation and the GDP per capita are reported by the Institute of Statistics, and so is the unemployment rate which is the proportion of the population that is not working in the formal sector. Findings Pearson correlation test was used to test any kind of correlation between mortgage loans and the other independent variables such as those mentioned before: the average inflation rate; the average GDP growth rate; the index of construction cost; the unemployment rate. The results are shown below in the table for the various economic variables and the total mortgage loans. Table 1 Pearson Correlation for macroeconomic variables Mortgage Inflation

GDP per capita Index

Loans

of Unemployment

construction cost

Mortgage Loans

1

-0.211

0.839

0.512

-0.322

Inflation

-0.211

1

-0.254

-0.151

-0.237

GDP growth rate

0.839

-0.254

1

0.656

0.701

Index of construction cost

0.512

-0.151

0.656

1

-0.723

Unemployment

-0.322

-0.237

0.701

-0.723

1

As shown in the table there is a week relationship between inflation and mortgage loans, the relationship between unemployment and index of construction cost and mortgage loans is medium. Even though the relationship between GDP growth rate and mortgage loans seems to be strong, therefore they seem to be having the greatest association. After the collinearity diagnostics for the macroeconomic variables, the variable GDP rate exhibited multicollinearity. The other objective of the study was to establish the influence of 396

the multiple regression model created. The table below shows the summary of the total explanatory variables in the model and its fitness. Table 2 Model Fitness for the various macroeconomics variables SUMMARY OUTPUT Regression Statistics Multiple R

0.89

R Square

0.895

Adjusted

R

Square

0.886

Standard Error

0.020749

This indicates that the variation in mortgage loans around its mean can be explained by the regress variables in a large extent, more precisely about 88,6% of the variation in mortgage loans can be explained by the independent variables. Conclusion This study found that the relationship between GDP growth rate and mortgage loans seems to be the most influential, therefore to be having the greatest correlation. Various cross sectional such as Boamah (2009), Bryx (2006), Chiquier et al. (2004), Jaffe and Renaud (1996), Butler et.al (2009), Warnock & Warnock (2008) and Boleat (2003), Huybens and Smith (1998) and IDB (2011) among others in their cross-sectional studies argue that the mortgage market grows in a stable macroeconomic environment. Also as Chiquer and Lea (2009), Merril (2006), Boamah (2009) and Warnock and Warnock (2012) claimed that an unstable macroeconomic environment poses a high risk to the lender. In the Albanian situation seems to be an increase of mortgage loans during the recent years, followed by a contraction in this process from the effects of the financial crisis. That brought that, partly under the influence of the strengthening of the regulatory framework in Europe and also impacted by the deterioration of credit quality and risk perceptions, banks have become more conservative in their lending policies. There has been a change in the currency of the loan, denominated in foreign currency to local currency. Banks, however, continue granting loans despite the fact that asset quality has deteriorated significantly. According to the bankers among the factors with the greatest impact on the downward side of household demand for loans were: the decline in the consumer confidence and the use of alternative sources of financing. Precisely are the individuals who are addressing 397

less to the banks, because of the uncertainty of the economic crisis. Immigrants also have invested less than in previous years in the housing market. Bibliography Dissertation/thesis Femi, P. (2013). Developing the Mortgage Sector in Nigeria through the provision of Longterm Finance: An efficency perspective. Cranfield University, DBA Thesis . Article in newspaper Boleat, M. (2003). Regulation of Mortgage Lending Institutions. Housing and Finance International, 18 (1), 3. Article in journal Green, R. K. and Watcher, S. M. (2005). The American Mortgage in Historical and International Context. The Journal of Economic Perspectives, 19(4): 93-114 Huybens, E. and Smith, B. (1998) Financial markets frictions, monetary policy and capital accumulation in a small open economy, Journal of Economic Theory, 81, pp. 353-400. Levine, R. (1997). Financial development and economic growth. Views and agenda of Economic Literature, 35 (2), 688-726. Warnock, V.C & Warnock F.E. (2008). Markets and Housing Finance. Journal of Housing Economics, Vol. 17, No. 3, pp.239-251. Washington, D.C Other online resource Walley, S., Badev, A., Beck, A., Beck, T., and Vado, L. (2013) Housing Finance across Countries: New Data and Analysis http://ssrn.com/abstract=2336126.accessed on 20th September 2015. Bank of Albania, http://www.bankofalbania.org. accessed on 17th August 2015 Albanian Banks Association, http://www.aab.al/al. accessed on 2th July 2015 The institute for banks and finance, http://institute-bf.com. accessed on 13 August 2015 Ministry of Finance, http://www.minfin.gov.al. accessed on 1 September 2015 Institute of Statistics of Albania, http://www.instat.gov.al. accessed on 7 September 2015

Annex

Periods

T2’08

T3’08

T4’08

T1’09

T2’09

T3’09

T4’09

T1’10

T2’10

T3’10

T4’10

Mortgage loans

7.1

25,3

-29.3

-53.1

-35.9

-26,5

-26.9

1.2

-17.8

-15,6

0.6

Unemployment rate

13

13

13

13.8

13.8

13.8

13.8

14.2

14.2

14.2

14.2

398

GDP change rate

2.5

5.4

1.05

1.89

3.07

-1.76

-3.15

6.82

3.5

1.42

1.37

Index of construction cost

0.8

0.4

0.1

-0.4

-0.1

-0.1

0.1

0.2

0.2

0.2

0,1

Inflation

3.1

2.45

4.5

1.4

2.7

1.8

2.4

4.36

3.4

3.43

3.06

Periods

T1’11

T2’11

T3’11

T4’11

T1’12

T2’12

T3’12

T4’12

Mortgage Loans

7.3

11.8

-4.1

-15.2

-30

-6.1

-14

-9

Unemployment rate

13.9

13.9

13.9

13.9

13.4

13.7

14.1

14.1

GDP change rate

2.65

-5.06

4.97

3.16

-1.9

0.15

1.54

1,13

Index of construction cost

0.2

-0.2

0.4

0.3

-0.2

0.4

0.4

-0.1

Inflation

3.86

4.06

3.16

2.53

1.06

1.9

2.7

2.43

Periods

T1’13

T2’13 T3’13 T4’13 T1’14 T2’14 T3’14 T4’14 T1’15

Mortgage Loans

-10.8

6,9

-11,7

-2.2

-8.7

1.2

-10

2.1

15.1

Unemployment Rate

14.8

16.4

17.2

17.1

18.6

17.7

17.4

18

17.3

GDP change rate

0.34

0.13

-3

3.7

-0.08

1.6

1.26

-0.63

0.15

Index of construction

0.4

0.2

-0.1

0.6

-0.5

0.3

0.1

0.2

0.4

2.5

2.23

1.5

1.26

1.93

1.83

1.8

0.6

1.93

cost Inflation

Notes: 1.

The periods given in the tables are the quarter periods of the year, for example T1’11 represents the first period of the year 2011 (from January to April).

2.

In the absence of the statistical data of the unemployment rate during the quarters of 2011, it was assumed the o annual rate of unemployment of 2011(published by INSTAT Albania), that was 13,9%.

399

Albania: The Path to Nominal (Economic) Convergence Dr. Merita Boka Toska1 , Assoc. Prof. Guiseppe Torluccio2 , Godiva Rembeci 3 1

2

Polis University, Albania University of Bologna & CEFIN – University of Modena and Reggio-Emilia, Italy 3 Polis University, Albania

Abstract The European integration process has, for more than two decades, represented an important issue for Albania. This process has been evolving gradually and Albania received the “candidate country” status in June 2014. The next step involves the EU membership, subject to the Copenhagen criteria fulfillment: economic, political and acquis communautaire. Upon fulfillment and granting the “member state” status, the following step would encompass the Economic and Monetary Union (EMU) and introduction of the euro. The latter is related to the Maastricht criteria fulfillment or nominal convergence criteria. Thus, the main objective of this paper is to assess the nominal (economic) convergence of Albania in terms of price stability, exchange rate stability, fiscal criteria and long term interest rate criteria. We will assess how macroeconomic indicators comply with Maastricht criteria requirements as by the end of 2014. Simultaneously, we explore the methodological harmonization degree of the macroeconomic indicators and thus their effective comparability to those of EU. Although Albania is not required to make nominal convergence assessments, this analysis turns to be useful in order to understand the starting position of the Albanian economy, identify areas where progress is still needed and the pursuit of necessary macroeconomic policies aiming to attain a favorable starting position for EMU and ERM II participation. Our main finding is that despite not meeting the Maastricht criteria for 2014, Albania is following the right path toward full effective European integration. Keywords: Albania, Maastricht criteria, integration, nominal convergence. Introduction The European integration process represented a strategic objective for Albania since the beginning of the ‘90s. Integration process evolved gradually and on June 27th 2014, Albania received the ‘candidate country’ status. EU membership is subject to the fulfillment of the Copenhagen criterialxvii as stated by the European Council in 1993: “Membership requires that the candidate country has achieved stability of institutions guaranteeing democracy, rule of 400

law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union. Membership presupposes the candidate’s ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union.” Once formally member of the European Union, Economic and Monetary Union and the single currency introduction would follow. This second stage is subject to the Maastricht criteria fulfillment (convergence criteria): price stability, exchange rate stability, fiscal criteria and long-term interest rate criteria. It should be noted, however, that a unilateral introduction of the common currency would not suffice: the euro can be introduced only in agreement with EU member countries and only after the EU accession. Such an agreement requires a two-year ERM II successful participation and the convergence criteria fulfillment. Given the current dynamics and national aspirations, compliance of Albanian macroeconomic indicators with the Maastricht criteria gains significant research importance. Equally important is the matter of comparability: assessing whether these indicators are methodologically harmonized and thus comparable to those of the EU member states. Building on these two main aspects, this research paper will first assess the degree of Maastricht criteria fulfillment and progress conducted in achieving the preconditions for adoption of the euro. Following this, the paper will highlight the areas of intervention necessary on a macroeconomic and methodological level in order to ensure the comparability of domestic indicators with those of the EU. The study will be structured in four sections. After a short introduction, the second section will explore the Albania milestones in the integration process; in the third section Copenhagen and Maastricht criteria will be explored. In the fourth section we assess compliance to nominal convergence criteria and degree of methodological harmonization. At the end conclusions and recommendation for future research. Albania: the path toward EU integration Since the early ‘90s, Albania moved its first steps towards democracy, rule of law and an open market economy. Albanian transition process from an almost autarchic-communist system to an open-emerging market economy marked important milestones. Following the establishment of the Parliamentary Republic in March 1991, two months later, the European Community established official relations with Albania (see Table 1). In 1992, a Trade and Co-operation Agreement between Albania and the EU was signed and entered in force. Economic cooperation was intensified in 1999 when Albania benefited from the Autonomous Trade 401

Preferences for the EU. Albanian exports obtained duty-free access to the EU markets. Following the European Council meeting in Thessaloniki on 19-20 June 2003lxviii, Western Balkan countries were identified as potential candidates for EU membership, subject to their progress in delivering necessary reforms: “…we in the European commission will do all we can to help you succeed. But, membership must be earned. It will take the sheer hard work and applied political will of those in power in the region. How far you proceed along the road towards European Integration, and how fast, will be up to you”. An important milestone represented the signature (12 June 2006) and entry into force (April 1st 2009) of the Stabilization and Association Agreement (SAA)lxix between European Communities and their Member States, of the one part, and the Republic of Albania, of the other part. As by the agreement, EU offered the prospect of integration, all the necessary technical assistance and financial support in return to a fully participation and serious engagement in the stabilization process. On 28th of April 2009, Albania formally submitted its application for EU membership. In the November 2010 Opinion, the European Commission assessed that Albania had not achieved the necessary degree of compliance with the membership criteria. In the Albania Progress Report (2012), the EC recommended that Albania be granted the EU candidate status subject to the completion of the key measures identified as: rule of law juridical reform, public administration reform and parliamentary procedures revision. After failing in the first round, the EC recommended Albania to be granted the candidate country status along the identification of the key priorities for opening the accession negotiations (Albania Progress Report, 2013). Following a positive assessment of the EC regarding implementation and consolidation of the key priorities as summarized in the Albania Progress Report (2014), the European Council granted the candidate country status for Albania on June 27th 2014. Table 1.

Timeline of EU - Albania relations

1992 January 1997 January 1999 1999 2000 June 2000 November 2000 2001 2001

Trade and Co-operation Agreement EU and Albania. The EU Council of Ministers establishes political and economic conditionality for the development of bilateral relations. The EU proposes a new Stabilization and Association Process (SAP) for five countries of South-Eastern Europe, including Albania. Albania benefits from Autonomous Trade Preferences with the EU. Extension of duty-free access to EU market for products from Albania. Feira European Council states that all the countries under the SAP are "potential candidates" for EU membership. Zagreb Summit SAP for five countries of South-Eastern Europe, including Albania. First year of the Community Assistance for Reconstruction, Development and Stabilization (CARDS) programme designed for SAP countries. The Commission recommends the undertaking of negotiations on SAA with Albania.

402

October 2002 January 2003 June 2003 01 June 2004 June 2006 01 May 2006 June 2006 December 2006 01 January 2007 May 2007 September 2007 18 October 2007 01 January 2008 22 January 2008 18 February 2008 March 2008 June 2008

Negotiating Directives for the negotiation of a SAA with Albania are adopted. Commission President Prodi officially launches the negotiations for SAA At Thessaloniki European Council, SAP is confirmed as the EU policy for the Western Balkans. The EU perspective for these countries is confirmed. Council decision on a first European Partnership for Albania. Council decision on a revised European Partnership for Albania. Entry into force of the EC-Albania readmission agreement. Signature of SAA at the General Affairs and External Relations Council in Luxembourg. Entry into force of the Interim Agreement. Entry into force of the new instrument for Pre-Accession Assistance (IPA). Adoption of the Multi-Annual Indicative Planning Document (MIPD) 2007-2009 for Albania under the IPA. Signature of a visa facilitation agreement between Albania and the EU. Albania signs the IPA Framework Agreement. The visa facilitation agreement enters into force. Albania and the EC sign the Financing Agreement for the instrument for PreAccession Assistance (IPA). Council decision on a revised European partnership for Albania. Visa liberalization dialogue launched. The European Commission presents a road map identifying specific requirements for visa liberalization with Albania. Entry into force of SAA. Albania submits its application for EU membership. Council approves Albania's application for EU membership and invites the European Commission to submit an opinion.

1 April 2009 28 April 2009 16 November 2009 09 November The Commission issues its Opinion on Albania's membership request. 2010 15 December Visa Liberalization with Albania enters into force. 2010 01 February An action plan addressing the 12 key priorities identified in the EC's Opinion is 2011 adopted by Albania. 10 October 2012 EC recommends that Albania be granted EU candidate status. 12 November EU and Albania hold the first meeting of the High Level Dialogue on Key Priorities 2013 27 June 2014 EU candidate status Source:http://ec.europa.eu/enlargement/countries/detailed-country-information/albania/index_en.htm

From Copenhagen to Maastricht criteria In the European integration process there are two important sets of criteria to consider: (i) criteria that a potential new member state must fulfill in order to become a member country of the European Union – Copenhagen criteria fulfillment; and (ii) criteria that the member country must fulfill to obtain full membership in Economic and Monetary Union (EMU) and adopt the single common currency (euro) – Maastricht criteria fulfillment.

403

III.1 Copenhagen Criteria After the fall of the Berlin Wall, Central and Eastern European countries showed their interest in joining the European Union. The European Council meeting in Copenhagen in June 1993 made an important decision in regard, concluding that the “…the associated countries in Central and Eastern Europe that so desire shall become members of the European Union. Accession will take place as soon as an associated country is able to assume the obligations of membership by satisfying the economic and political conditions required” lxx. The Copenhagen criteria were augmented by the Madrid European Council lxxi, stating that a candidate country must create the conditions for its integration through the adjustments of its administrative structures. According to the Copenhagen criteria, qualification for membership includes: •

Stability of institutions, guaranteeing democracy, the rule of law, human rights and the respect for and protection of minorities;

•

Existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the Union;

•

Ability to take on the obligations of membership (acquis), including adherence to the aims of political, economic and monetary union.

•

The Union’s capacity to absorb new members, while maintaining the momentum of European integration – principle EU self-imposed.

The accession for a new member state is not automatic, it is a step-by-step process. Any wishing country, shall formally apply to the Council, which, subject to positive recommendation of the Commission and a favorable opinion by an absolute majority of the members of the European Parliament, makes its decision unanimously. Negotiations are not opened automatically, thus the aspirant member state should formally request it. For the Western Balkan countries, the roadmap proposed by the EC and adopted by the Council in 2006, requires the satisfactory performance in meeting all obligations stemming from the countries SAA. Subject to the satisfaction of these obligations, and upon formal request of the aspiring country, accession negotiations are ready to begin. Table 2. Current status of selected countries. Candidate countries: Albania The former Yugoslav Republic of Macedonia Montenegro Serbia Turkey

Membership negotiations started?

November 2014 June 2010

404

Source: http://ec.europa.eu/enlargement/countries/check-current-status/index_en.htm

III.2 Maastricht Criteria The Werner Reportlxxii represents the first official step towards the Economic and Monetary Union proposing a three-step strategy within 10 years. This included stabilization and narrowing of the fluctuation margins between currencies of the member states, complete freedom of capital movements, and an irrevocable fixing of the exchange rates between the participating national currencies (Faulend et al 2005). In 1979, a European Monetary System was built on the concept of a stable but adjustable exchange rate defined in relation to the newly-created European Currency Unit (ECU). An exchange rate mechanism (ERM) was created which allowed fluctuations around central rates. Formally, the implementation of EMU dates 1988 as stated in the Delors Reportlxxiii, requiring for amendments to the Treaty. This led to the Treaty on European Union, formally adopted by the Heads of State and Government at the Maastricht European Council in December 1991. The Treaty of Maastricht provided three stages for EMU: •

Stage 1 (from 1 July 1990 to 31 December 1993) – free movement of capital between member states;

•

Stage 2 (from 1 January 1994 to 31 December 1998) – economic policies co-ordination and stronger central bank co-operation;

•

Stage 3 (underway since 1 January 1999) – gradual introduction of the eurolxxiv as the single European currency for the member states, and implementation of the common monetary policy by the European Central Bank. Participation in the third stage of EMU and the adoption of Euro as a single currency requires the fulfillment of the convergence criteria as provided in the Art. 140 of the Treaty of Maastricht.

Price stability criteria. The first indent of Article 140 of the Treaty requires “the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performinglxxv Member States in terms of price stability”. Article 1 of the Protocol No 13 on the convergence criteria stipulates that “the criterion on price stability referred to in the first indent of Article 140(1) of the Treaty on the Functioning of the European Union shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1½ percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a 405

comparable basis taking into account differences in national definitions”. The average inflation rate is measured by the percentage change in the un-weighted arithmetic average of the last 12 months’ indices relative to the un-weighted arithmetic average of the 12 monthly indices of the previous period, rounded to one decimal place. Considering an average value of the three best performing states allows consideration of the effects on inflation rates across member states of common shocks. EC practice suggests that countries which inflation rates are significantly below/over comparable rates in other member states and those strongly affected by exceptional factors will be considered outlierslxxvi. Public finances criteria: public debt and fiscal balance. Under EMU, there’s no room for intervention in terms of monetary and exchange rate policy to smooth internal or external macroeconomic shocks. Thus, fiscal policy remains the only tool under a country’s control to implement and maintain macroeconomic equilibrium. The EU convergence criteria related to the government budgetary position are defined in the second indent of Article 140 of the Treaty, which requires “the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 126(6)”. Article 2 of the Protocol stipulates that this criterion shall mean that “at the time of the examination the Member State is not the subject of a Council decision under Article 126(6) of the said Treaty that an excessive deficit exists”. To assess whether a member state has an excessive deficit two criteria for budgetary discipline are considered as set in Article 126: (a) Whether the ratio of the planned or actual government deficit to GDP exceeds a reference value (specified in the Protocol as 3% of GDP), unless: •

either the ratio has declined substantially and continuously and reached a level that comes close to the reference value; or, alternatively,

•

the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;

(b) Whether the ratio of government debt to GDP exceeds a reference value (defined in the Protocol on the excessive deficit procedure as 60% of GDP), unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace. As shown in Szapáry and Orbán (2004), and Faulend et al (2005), a country with 3% to GDP government deficit and 5% to GDP nominal growth rate, in the long run the public debt will stabilize at the level of 60% of GDP. It is interesting to note that at the time the Maastricht criteria were designed, the average public debt to GDP of the member states was approximately 406

60%, and the potential growth rate was estimated at 5%. Nowdays, the discussion on the public finances criteria is still open since economic conditions have changed over time. In fact, older member states have lower potential economic growth rates, and new member states and future potential member states actually have higher potential economic growth rates. The latter must simultaneusly pursue low budget deficits (3% of GDP), raising questions on the long-term 60% of GDP debt sustainability (Szapáry and Orbán, 2004). New member states and future member states with higher economic growth rates, in order to converge to “old member” standards, need to borrow more, and thus these criteria may sound somewhat inflexible. Exchange rate criterion. Participation in EMU, like any other monetary union, entails technicalities such as the irrevocable fixing of member countries’ exchange rates and elimination of cross-country exchange rates between member states. Thus, its long-term stability concerns the attained nominal and real convergence levellxxvii, commitment and efforts of member states in adjusting economic policies into harmonization with those of the EU. Although not required, the catching-up process represents an important step towards EMU facilitating the adherence to the Maastricht criteria (De Grauwe and Schnabl, 2004). In order to avoid exchange rate manipulations and unfair competitive positions, nominal exchange rate convergence is required under the Maastricht criteria. The third indent of Article 140 of the Treaty requires “the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the euro”. Article 3 of the Protocol on the convergence criteria referred to in Article 140 of the Treaty stipulates: “The criterion on participation in the exchange-rate mechanism of the European Monetary System referred to in the third indent of Article 140(1) of the said Treaty shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency’s bilateral central rate against the euro on its own initiative for the same period.” After accession to the EU, membership to the ERM II can take place at any time and is voluntary for member states outside the euro zone. Also, an entering country, the euro area countries, and the ECB must agree on the central ratelxxviii and fluctuating bandlxxix around it. The reference value for the ER is not coincident with the conversion rate (the rate at which the national currency will be converted to the euro).

407

Long-term interest rate criteria. The alignment of long-term interest rates between member countries represents the fourth economic convergence criterion. According to De Grauwe (2012) this criteria aims the prevention of capital gains on bonds issued by countries that paid a high premium due to exchange rate risks. If it is known that the exchange rate will be fixed, investors will sell low premium bonds (lowering their price and increasing interest rates on them) and will buy high premium bonds (increasing their price and decreasing interest paid on them). In countries with initial low interest rates, they will grow and holders of bonds will experience a capital loss; in a country with initial high interest rates, interest rates will fall and bond holders will have a capital gain. To avoid unfair capital gains/losses the fourth indent of Article 140 of the Treaty requires “the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism being reflected in the long-term interestrate levels”. To monitor the fulfillment of this criterion, article 4 of the Protocol on the convergence criteria referred to in Article 140 of the Treaty stipulates: “The criterion on the convergence of interest rates referred to in the fourth indent of Article 140 of the said Treaty shall mean that, observed over a period of one year before the examination, a Member State has had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. Interest rates shall be measured on the basis of long-term (10 years) government bonds or comparable securities, taking into account differences in national definitions”. If a country does not have long-term government bonds or those present have no benchmark characteristics as required (ECB, 2003; Convergence Report 2012), it is possible to consider comparable financial instruments, as in the case of Estonialxxx (Faulend et al, 2005), Luxembourglxxxi (Convergence Report, 2010) and Greecelxxxii.

Macroeconomic Convergence: Where is Albania? Albania’s convergence to Maastricht criteria will be carried out using the same framework as in EC official convergence reports. The common framework consistently used to examine the state of economic nominal convergence, is based on the Treaty of Maastricht provisions and relative Protocols. Some important principles are followed when applying the convergence criterialxxxiii: (i) the individual criteria are applied in a strict manner; (ii) the convergence criteria constitute a coherent and integrated package, and they must all be satisfied; (iii) the criteria have to be met on the basis of actual data; (iv) the application of the convergence 408

criteria should be consistent, transparent and simple. When assessing compliance to the convergence criteria, sustainability should be considered over a lasting basis and not at a given point in time. That’s why, both a backward and forward looking perspective over a 10 years’ period will be considered. This approach would enable understanding on whether current achievements are the outcome of a genuine structural adjustment and not the result of short term maneuvers. The cut-off date for the statistics considered in this study will be the end of June 2015. …on price stability criterion As stated on the convergence criteria, the average rate of inflation, observed over a period of one year before the examination should not exceed by more than 1½ percentage points that of, at most, the three best performing Member States in terms of price stability. In absence of a harmonized CPI comparable to that published by Eurostat, CPI released by Instat will be considered. The Consumer Price Index for Albania was first measured in 1958-1960, when the Statistics Directorate of the Republic of Albania ruled that a general indicator for prices was necessary for the domestic economy. However, the methodology tried to catch seasonal changes on prices for new food and non-food products entering and exiting the markets. Changes in the CPI of those years usually resulted in a decline, and hence the term “inflation” remained outside the economics dictionary of that time. CPI continued to be measured over the next few years and later political constraints imposed the suspension of work measuring the consumer price index in the country for about 33 yearslxxxiv. A second attempt to calculate the CPI for Albania took place in December 1991, using December 1990 as a base year. In 1991, the General Directorate of Statistics also calculated the CPI for December 1989 and 1990. From 1992, the CPI has been released monthly. For the first time in 1993, the National Institute of Statistics (Instat) introduced the Households Budget Survey (HBS), and the results were used to update the CPI basket and the weights of each of its entries. December 1993 was used as a base period for the next CPI calculations. The first CPI basket contained 221 articles and all expenses were divided into 8 main groups. In 2000, INSTAT updated the CPI basket and a new CPI index was calculated, using December 2001 as a base period, given the expected changes due to 10 years of economic, political and social transition in Albania. The 2001 basket contained 262 articles and for the first time they were classified into 12 main groupslxxxv, compatible with the COICOPlxxxvi classification, broadly compatible with Eurostat expenditure structure. The last update of the CPI basket was carried out in 2007, based on COICOP classificationlxxxvii. The CPI is calculated for 12 categories compatible with those used for the harmonized ICP of EU 409

countries. HICP is calculated and released by Eurostat and is the one used to assess compliance with the convergence criteria. Given differences in national methodologies applied to CPI calculation at a national level, HICP ensures a better comparability of the data. Currently, Instat is working on building a harmonized index in compliance with Eurostat standards. Actually, there are some important differences in the composition of the consumer basket of CPI and HICP. HICP includes revenues from foreigners’ purchases in the country but do not include the imputed rent. CPI includes the imputed rent (weight 10.2%) but does not include the other. Inflation rate in Albania over July 2014 – June 2015 resulted 1.7%, about 0.7 percentage points below the reference value. At first sight, it would be concluded that Albania fulfills the price stability criteria as specified by the Maastricht Treaty and following protocols. However, we should bear in mind that the convergence of national average prices to EU average prices is a long-term process not only in transition countries but even in established member countries. Table 3. Price stability criterion assessments HCPI

1

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2.7

2.7

2.9

4.7

3.5

1.2

2.9

3.0

2.3

0.7

0.1

0.7 1.6

0.0 1.7 2.4

2

Euroarea 2.2 2.3 2.0 2.8 2.3 0.9 2.2 3.4 2.3 Inflation Albania3 2.2 2.3 2.5 3.8 2.3 3.2 3.7 2.1 2.5 4 Reference value Source: Eurostat, Instat. 1 EU15 - 1995, EU25-2004, EU27-2007, EU28-2013. 2 EA11-2000, EA12-2006, EA13-2007, EA15-2008, EA16-2010, EA17-2013, EA18 3 Inflation rate for Albania is calculated as the annual changes of un-weighted average of CPI over the past 12 months to the cut-off date (end of June 2015). Reasoning is the same for all previous periods. 4 For the period July 2014 - June 2015 the three best performing countries resulted to be Estonia +1.09%, Austria +0.97% and Lithuania +0.79. The simple average of the three best performing members was 0.95%. Reference value is calculated as the sum of the average of the three best performing countries plus 1.5 percentage points.

The first decade of post – communist era was characterized by strong structural imbalances causing high fluctuations in the consumer prices inflation rate (alongside other macroeconomic indicators). Average inflation rate stabilized around 3% over 2001 – 2014, on the back of a successful disinflationary process (Muço, Sanfey and Taci 2003). However, annual inflation dynamics have been subject to high sensitivity of the domestic economy to shocks in prices in foreign markets, changes in administered prices and volatility in food prices (representing about 39% of the basket) and other country specific factors. Average annual inflation rate jumped from 3.1% in 2001 to 5.2% in 2002 due to electricity energy crisis, political uncertainty following June 2001 elections, higher administered prices of energy and water, turmoil in Macedonia, introduction in circulation of the euro. From 2003, the annual inflation rate 410

stabilized within the Bank of Albania tolerance band, sometimes slightly overshooting or undershooting the point target of 3%lxxxviii. In a context of structural reforms ongoing, high informal economy (Boka and Torluccio, 2013a), privatizations ongoing, external shocks from international trade channels, inflation was assessed as low, stable and within the objective tolerance band of BoA. Financial markets turmoil in 2008, coupled with the sovereign debt crisis in some EU countries – Albania main trading partners – intensified uncertainties in the real sector of the economy. Absence of changes in the administered prices and higher prices the previous year, determined a lower average inflation rate of 2.3% in 2009. Monetary policy conducted by BoAlxxxix was forward-looking and timely decisions were very important in order to attain and maintain price stability in this period. Alongside the Bank of Albania decisions, depreciation of the national currency, rising prices of commodities and administered ones materialized in an annual inflation rate of 3.6% and 3.5% in 2010 and 2011 respectively. The downward trend in international prices, relative stability of the exchange rate towards main currencies, weak internal and external demand exerted low inflation pressures on the demand and supply side. Average inflation rate fell from 2% in 2012, to 1.9% in 2013 and 1.6% in 2014. Developments in annual inflation rates over the first six months of 2015 reflect the downward inflationary pressures from international markets and weak internal demand. It seems that the current price stability level pursued is safe from threats. Albania is a small opened economy to international developments, and it is almost impossible to account for all the external shocks that may occur and could affect the domestic inflation rate. Another very important point is that the price stability criterion represents a moving target; the reference value is not fixed (Boka and Torluccio, 2013b). Therefore, attaining and maintaining price stability requires strong efforts and commitment of the central bank. International institutions forecastsxc project inflation rate to remain below the Bank of Albania target until the end of 2015 and pick up the next year. Inflation in expected to be 1.8% during 2015 and to pick up to 2.5% over 2016. According to BoA’s forecasts average inflation rate for 2015 is expected to be 1.8% due to persistence of the negative output gap till the end of the year. Bank of Albania expects average inflation rate to hit the targeted objective of 3% in 2017. Higher inflationary pressures are expected to be triggered by a stronger internal demand in the next two years. Capacity utilization rate is expected to grow enabling for a higher expected GDP growth rate and monetary policy to remain on the easing side. External demand is expected to remain weak, since the slowdown in the second biggest economy (China). Recent developments in China are triggering low prices in international markets exposing the world to a potential disinflationary wave. 411

…on fiscal criteria The sustainability of the governmental financial position requires the ratio of government deficit to GDP below the reference value of 3% and the ratio of public debt to GDP not to exceed the reference value of 60%. In Albania, the compilation methodology underlying the data for the consolidated budget is broadly consistent with the analytical framework set out in the IMF’s “Manual on Government Finance Statistics, 1986 (GFSM)”xci. Presentation and classification are not in the GFSM format. Future plans concern the adoption of the methodology of the IMF’s “Government Finance Statistics Manual, 2001” (GFSM 2001). To assess fiscal criteria convergence, consolidated budget statistics should be compiled in accordance with Eurostat ESA 95 methodology. EU 28 member states have almost completed the harmonization of their methodologies to ESA 95 and data are reported according to ESA 95. The classification debt data in Albania mostly comply with the international standards indicated in the IMF’s “Public sector debt Statistics-Guide for compilers and users 2011”. From the methodological point of view, the data on the public debt cover the internationally recognized definitions of central, local and general government. The general government in Albania consists of two levels, central and local government. According to the Organic Budget Lawxcii, government guarantees are included. These are not in line with GFS 2001 and ESA 95 methodology. Despite all methodological differences in compiling and reporting consolidated fiscal indicators, Albania does not fulfill the fiscal deficit to GDP ratio criteria of 3%. Table 4.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017*

Fiscal criteria assessments GDP (ALL mill)

Fiscal Balance (ALL mill)

Fiscal Balance /GDP (%)

583369 622711 694097 751022 814797 882209 967670 1089293 1143936 1239645 1300624 1335488 1364782 1413932 1441644 1525360 1626287

-40409.9 -37921.5 -33928.3 -38083.3 -28176.7 -29371.7 -34118.6 -60254.2 -80882.7 -38031.0 -45877.0 -45857.0 -70413.0 -70634.0 -58228.0 -41974.0 -31859.0

-6.9 -6.1 -4.9 -5.1 -3.5 -3.3 -3.5 -5.5 -7.1 -3.1 -3.5 -3.4 -5.2 -5.0 -4.0 -2.8 -2.0

Reference Value UE (%)

3

Public Debt (ALL mill) 339640 391314 408290 423965 468087 494584 516923 595882 682546 715521 772735 828268 956583 1015502 1040693 1086957 1124933

412

Public debt less guaranties (ALL mill) 341521 391309 408300 423909 467838 495463 489521 559335 636772 670096 724419 774815 905259 960961 975160 1017134 1078993

Public debt/GDP (%) 58.2 62.8 58.8 56.5 57.4 56.1 53.4 54.7 59.7 57.7 59.4 62.0 70.1 71.8 72.2 71.3 69.2

Public debt less guaranties/GDP (%) 58.5 62.8 58.8 56.4 57.4 56.2 50.6 51.3 55.7 54.1 55.7 58.0 66.3 68.0 67.6 66.7 66.3

Reference value UE (%)

60

2018*

1740809

-20856.0

-1.2

1145788

1069848

65.8

61.5

Source: Ministry of Finance, Instat. *Data for 2015-2018 are projections of the Minsitry of Finance available at: http://www.financa.gov.al/files/userfiles/Programimi_EkonomikoFiskal/Programi_Ekonomik_e_Fiskal/NERPN ational_Economic_Reform_Program/Albania_NERP_2015.pdf

Fiscal data show a progressive reduction of budget deficit till 2006, mainly on the back of a better performance in the revenue side. The expansionary fiscal policy followed over 2008 2009 was reflected in higher public expenditures and consequently a higher budget deficit, (about -7.1% of GDP in 2009). Higher public investments (especially Durrës Kukës highway) determined a wider deficit over this period. Fiscal policy over 2010 was oriented towards fiscal consolidation through lower expenditure and higher revenues. With regard to the convergence criteria, Albania set close to the reference value only in 2010 when fiscal deficit recorded 3.1% of GDP. From 2010, fiscal deficit widened progressively accounting for about 5.0% of GDP in 2014. Despite aiming to assure public finances sustainability, during 2011 it was necessary to pursue a prudent fiscal policy (which could be considered slightly stimulating). Fiscal policy is expected be strictly oriented towards consolidation in the medium termxciii. The baseline fiscal scenario targets a fiscal deficit at the level of 4.0% of GDP in 2015, down by the level of 5.0% in 2014. Fiscal consolidation is expected to continue in the 2016 and 2017 targeting a fiscal deficit of respectively 2.8% and 2.0% of nominal GDPxciv. Public debt data show a progressive reduction till 2008. Despite picking up in the following years, public debt figures stood below the EU reference value of 60%. Public debt registered its lowest level in 2007, accounting for about 53.4% of GDP. In 2008, mainly due to capital expenditure financing needs, public debt stock increased, reaching 54.7% of GDP in 2008 and 59.7% of GDP in 2009. Given the 2008 financial crises and the debt crisis in Greece, and as part of the National Strategy for Development and Integration, a more prudent and better administration of the public debt strategy was adoptedxcv. This strategy comprised two main elements: domestic debt maturity extension and, from the technical point of view, the improvement of the securities market infrastructure (Bank of Albania, 2008). From 2012, public debt to GDP ratio increased steadily, reaching the highest level of 71.8% in 2014. The increasing trend of public debt to GDP ratio is expected to continue all over 2015. Public debt less guaranties, during 2008-2012, stood below the 60% threshold. Since 2013 public debt less guarantees to GDP ratio followed and upward trajectory, lying above the threshold level indicated by the EU convergence criteria. 413

In the medium term, the consolidation path is expected to bring down public debt to GDP ratio. Public debt is expected to mark 72.2% of GDP at the end of 2015, 71.3% in 2016 and 69.2% at the end of 2017. Debt contraction is expected to be achieved despite significant energy related guaranties taken into account in the medium term. …exchange rate stability criterion The exchange rate stability criterion requires a successful participation in the ERM II, a multilateral agreement, for at least two years after the EU accession of the country (stability of the exchange rate against Euro and no unilateral devaluation). Thus, assessment for exchange rate stability criteria might be carried out only when Albania will participate in ERM II. For the purposes of this study, we can only analyze ER fluctuations against Euro since its introduction. Of course, whether the exchange rate shows relative stability or not, we cannot conclude that Albania formally fulfills or not the exchange rate criteria. An analytical assessment in relation to the exchange rate stability criteria requires the determination of a (hypothetical) central parity of ALL/Euro exchange rate. If we suppose that Albania would have participated in ERMII in July 2013, the central parity might be assumed as equal the average exchange rate over the 12 month period comprised from July 2012 to June 2013. Under this assumption we can make assessments on the stability of the ALL/Euro exchange rate over the last two years. Chart 1.

Nominal ER Eur/All Nominal Euro/All ER Central parity

170

+15%

160 150

+2.5%

140

-2.5%

130 120

-15%

110

07 '15

01 '15

07 '14

01 '14

07 '13

01 '13

07 '12

01 '12

07 '11

414

01 '11

Source: Bank of Albania

07 '10

01 '10

07 '09

01 '09

07 '08

01 '08

07 '07

01 '07

07 '06

01 '06

07 '05

01 '05

100

The Bank of Albania (BoA) formulates and implements the monetary policy under a freefloating exchange rate regimexcvi. The value of the national currency Lek (ALL) against foreign currencies is freely determined in the foreign exchange market by the interaction of supply and demand. Nevertheless, the Bank of Albania reserves the right to intervene in the foreign exchange market in presence of severe shocks aiming to safeguard stability and development of the domestic financial markets. At the beginning of 1999, the Eur/ALL exchange rate was set at 162.2 Lek per Euro (simple average for January 1999). After appreciating till 2001 (+11.8%), the national currency depreciated over 2002-2003 on the back of both appreciation of Euro against USD in international markets and confidence crisis in national currency during the first months of 2003xcvii. From 2004 to 2008 a progressive appreciation of the national currency may be noticed, reflecting domestic macroeconomic stability, high inflow of remittances and foreign direct investments. The peak was reached in the aftermath of the global financial crisis of 2008 (122.8 Lek per Euro). Since then, Eur/ALL followed a depreciating trajectory over the next couple of years. From 2012, apart from seasonal factors, Lek/Eur exchange rate fluctuated between narrow limits of 139 – 140 on average, showing a relative stability.

…long-term interest rates convergence criteria Long term interest rates indicate markets agent’s inflation expectations and financial markets integration level. Low interest rates, suggesting for low inflation expectations and low risk premium, signal for potential stable and sustainable future economic growth. Long term interest rates convergence criteria assessment requires using long term government bonds (with 10 years’ residual maturity) issued in national currency. As by the first half of 2015, the instruments issued by the Albanian governmentxcviii, include treasury bills (3, 6 and 12 months’ maturity); bonds (2, 3, 5, 7 and 10 years’ maturity). From the methodological point of view, none of the instruments issued by the Albanian government is comparable those required to assess for nominal convergence of interest rates. Skipping the methodological aspects, as by the sample approach, 10 year bonds might be used to some extent. The 10-year maturity bonds were firstly issued in October 2013 and have regular quarterly frequency. Although not meeting the requirements of the Treaty and the availability of a short time series we try to make some compliance assessments using it as a benchmark interest ratexcix. Table 5. Long term interest rate assessments

415

Best performing countries in terms of price stability Bulgaria Lithuania Austria* Average Reference rate Albania

Interest rate for EMU convergence criteria (%) 2.9 2.4 0.9 2.0 4.0

10Y (%)

9.2

Bonds

5Y (%)

Bonds

6.6

12Y (%)

T-Bills

3.4

Source: Bank of Albania *Best performing countries in terms of price stability as by June 2015 are Austria, Lithuania, and Estonia. Since there are no data on interest rates for Estonia we consider the fourth best performing country in terms of price stability, Bulgaria.

The Albanian government demand for financial resources is oriented to domestic markets, issuing treasury bills (1Y TBills) as the main instrument. Recently, bonds with longer maturities were issued but, none of them meet the Treaty requirements and neither exist other comparable instruments to be considered. Thus, if we account for 10Y bonds, interest rates are significantly above the reference rate. The same stands for 5Y bonds.

Conclusions The main objective of this paper was to present Albania’s current stage of compliance to Maastricht (nominal) convergence criteria. All the indicators considered are not methodologically harmonized with those of EU member countries, and thus are not fully comparable with them. CPI is the only one methodologically comparable to Eurostat HICP. Bearing in mind the methodological differences we conclude that: (i) Albania fulfills the price stability criteria at the cut-off date. Furthermore, monetary authority in Albania is strictly committed to attaining and maintaining price stability. Experience has shown that BoA has been relatively successful in achieving its primary objective; (ii) Albania does not fulfill the fiscal criteria on fiscal deficit and public debt at the cut-off date. Also, there’s a weak methodological alignment to the international standards for fiscal accounts; (iii) Eur/ALL has been relatively stable but not assessment can be done prior fixing a central rate; (iv) long term interest rate criteria assessment could not be carried out as required since no benchmark data could be found. Given the above considerations, strong efforts should be directed towards methodological harmonization with those used by Eurostat and further research conducted on Albania real convergence. lxvii

European Council in Copenhagen, 21-22 June 1993, Conclusions of the Presidency

416

http://aei.pitt.edu/1443/1/Copenhagen_june_1993.pdf Available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/76279.pdf lxix Available at: http://ec.europa.eu/enlargement/pdf/albania/st08164.06_en.pdf lxx Available at: http://europa.eu/legislation_summaries/enlargement/ongoing_enlargement/l14536_en.htm lxxi Available at: http://www.europarl.europa.eu/summits/mad1_en.htm lxxii The Werner Report (1970) took for granted fixed exchange rates to the US dollar. After the US dollar effectively floated, efforts to tie communities’ currencies more closely resulted in the “snake in the tunnel” mechanism for managing fluctuations of member currencies (the snake) inside narrow limits against the US dollar (the tunnel). lxxiii Available at: http://ec.europa.eu/economy_finance/euro/emu/road/delors_report_en.htm lxxiv The 1995 Madrid European Council agreed on the name for the new currency – the euro – and set out the scenario for the transition to the single currency that would start on 1 January 1999. lxxv Countries experiencing deflation are not considered as failing to meet the price stability criterion (Lithuania ECB Convergence Report, 2004). Also, best performer will be considering even a state with a negative inflation rate. lxxvi Lithuania in Convergence Report (2004); Ireland was in Convergence Report (2010); Greece, Bulgaria and Cyprus in Convergence Report (2014). lxxvii Nominal convergence refers to Maastricht criteria fulfillment, and real convergence (or catching-up process) refers to the attainment of other member states’ average income per capita, implementation of necessary structural reforms and the creation of the institutional structures close to those of EU. Nominal convergence represents a precondition for the adoption of the euro, while real convergence does not. lxxviii Used as reference value to observe exchange rate fluctuations. lxxix The standard fluctuating band is +/-15%. Countries may agree for narrower fluctuation band (+/-2.5%) and subject to multilateral agreement. lxxx Indicator for long-term interest rates is considered bank’s interest rate applied to long-term loans (in national currency) to households and businesses (non-financial corporation’s) over 5 years’ maturity. lxxxi Indicator based on a basket of securities (issued by a bank with solid rating) with common residual maturity of 10 years. lxxxii Interest rates on 5-year bonds. lxxxiii Convergence Report 2014, 2012 https://www.ecb.europa.eu/pub/convergence/html/index.en.html lxxxiv Since almost impossible to find documentation related to the CPI methodology and its calculation in 19581960, the source of information for this section is Mrs. Liri (Xhepa) Josa, the first female statistician in Albania, who carried out this project. lxxxv Alcohol and tobacco; clothing; housing; household equipment; health; transport; communication; recreation and culture; education; hotels and restaurants; miscellaneous articles. lxxxvi COICOP stands for Classification of Individual Consumption by Purposes. lxxxvii A new basket for CPI purposes in expected to be introduced soon. lxxxviii From the beginning of 2006, the Bank of Albania adopted a point objective of 3% for the annual inflation rate instead of the previous interval tolerance band of 2% – 4%. For more information see Monetary Policy Document 2009-2011. lxxxix The Bank of Albania “is granted the exclusive right to independently implement the monetary policy (Art. 161, Constitution of the Republic of Albania)”, it has as its main task “to independently formulate, adopt and implement the monetary policy of the Republic of Albania, consistent with its main objective (Art. 3, paragraph 4a, Law No.8269, dated 23 December 1997, “On the Bank of Albania”), and the primary objective of the Bank of Albania is to “achieve and maintain the price stability (Art. 3, paragraph 1, Law No.8269, dated 23 December 1997, “On the Bank of Albania”. xc Eastern Europe Consensus Forecasts, August 17, 2015 xci Source: www.dsbb.imf.org/Pages/GDDS/DQAFViewPage.aspx?ctycode=ALB&catcode=CGO00&Type=CF xcii Units of the central government are: President, the Parliament, the Council of Ministers, 14 ministries, 8 nonministerial departments, and various central institutions; Social Security Institute; Health Care Insurance Institute. The local governments cover 36 districts and 43 municipalities (including Tirana, which is both a district and municipality). There are no extra-budgetary operations at either central or local government level. Source: http://www.dsbb.imf.org/Pages/GDDS/DQAFViewPage.aspx?ctycode=ALB&catcode=CGO00&Type=CF xcii Law No. 8379, dated 29.07.1998 on the “Preparation and execution of the state budget of the Republic of Albania”. xciii Albanian National Economic Reform Programme (NERP), 2015. Ministry of Economic Development, Trade and Entrepreneurship. xciv Macroeconomic and Fiscal Programme – revised for 2016-2018, CMD No 6395, date 31.07.2015, available at: http://www.financa.gov.al/files/userfiles/Programimi_EkonomikoFiskal/Kuadri_Makroekonomik_dhe_Fiskal/K lxviii

417

uadri+Makroekonomik+e+Fiskal+per+Periudhen+2016018+i+Rishikuar+%28VKM+Nr+695+dt+31+07+2015%29.pdf xcv Annual Report (2008), Bank of Albania. xcvi Monetary Policy Document for 2012 -2014, Bank of Albania. xcvii The adoption of the law on deposit and the beginning of the privatization process of the largest saving bank in Albania caused a sort of confidence crisis. The Bank of Albania intervened in the foreign exchange market to smooth fluctuations and speculations on the exchange rate. xcviii Source: Ministry of Finance, Albania. xcix Protocol No 13 on the convergence criteria suggests that in the case no comparable benchmark is found for long term interest rate assessments, alternative comparable instruments might be used. That’s the case of Estonia where the long-term interest rate on loans has been used as a benchmark rate (Faulend et al, 2005). In the case of Albania neither alternative instruments are suitable. The greatest proportion of long-term loans is mainly in foreign currency, often indexed to Euribor, as a result of the considerable rate of euroisation of the economy. It is doubtful whether these interest rates on long-term loans can be used as a suitable reference value.

418

4 1



Sustainability Reporting Initiative in Balkans’ Higher Education Institutions: The Case of ECOSSS Assist. Prof. Dr. Xhimi Hysa1, Assist. Prof. Dr. Mustafa Üç2, PhD C. Sonila Gruda3, Artir Maliqi4 1

Department of Business Administration, Epoka University, Albania Department of Business Administration, Epoka University, Albania 3 Albanian Business Transparency, Albania 4 Department of Business Administration, Epoka University, Albania 2

Abstract The aim of this study is to define the content and the importance of the Sustainability Reporting, which is a non-financial reporting procedure, prepared by organizations in order to be more transparent and accountable by giving the necessary and reliable information for the decision making processes. It describes also the interdependency between non-financial and financial issues in today’s global environment. The research context is that of higher education. The method is based on a pilot case study for creating the Epoka Center of Service Systems Sustainability (ECOSSS). Because this is a pilot study, there are not actual results but only expected ones. The expected results of the center are: a) to provide the annual sustainability report of Epoka University that would affect directly the ranking, creditability and reporting experience of the University as a whole; b) to offer research, consultation, workshops and training programs. The engagement in these programs and activities will indicate seriousness and influence on the rating decision of customers and investors by increasing the recognition, trust and creditability, efficiency of risk management, and value creation. Keywords: Sustainability Reporting, Global Reporting Initiative, Epoka Center on Service, Systems Sustainability Introduction The globalization process has taken place in each and every corner of the world, but managing economic systems efficiently and effectively is becoming an enormous challenge for corporations to handle and analyze where they are headed and how they are going to reach the intended performance. Therefore the corporations in the last times have the tendency to remain sustainable on their current operating business or enlarge their business activity by firstly taking into consideration the basic factors like survival and well-being. In order to ensure value and coherence they should pay attention to the natural environment and society by establishing circumstances under which organizations, society, and environment can exist in ideal synchronization. 419

Since many organizations today are facing problems of accountability and difficulties in dealing with complex decision-making processes, then reporting is becoming a new way of increasing the effectiveness in organizing and rational decision-making. Managers face many decisions, but they often make unsustainable choices (Arvai, Campbell, and Steel, 2012). The emerging trend of sustainability reporting is embracing not only great corporations for which it is now mandatory to report (at least in EU), but also other institution of every type and size of industry. In the higher education context sustainability reporting is still in its early stages (both in numbers of institutions reporting and in level of reporting) when compared to sustainability reporting in corporations (Lozano, 2011). However, the recent Higher Education Sustainability Initiative (HESI), created as a partnership of UN entities (UNESCO, UN-DESA, UNEP, Global Compact, and UNU) in the run-up to the United Nations Conference on Sustainable Development (Rio+20), has reinforced the focus of sustainability in higher education (https://sustainabledevelopment.un.org). On the other hand, the UN Global Compact Program has created also the Principles for Responsible Management Education (www.unprme.org). Given the trend, our research aim is to create a sustainability center in order to make academic research and projects research. In addition, the center will take care about the whole process of preparing Epoka’s University Sustainability Annual Report which will help the center to gain the necessary experience needed (which is a must) to become a certified training partner of the Global Reporting Initiative (GRI) in the near future. This stage would expand the opportunities to offer consultations, workshops and different training programs for interested local and regional entities. By providing these services the center will focus on defining the content and the importance of Sustainability Reporting, which is a non-financial reporting procedure, prepared by any organization in order to be more transparent and accountable by giving the necessary and reliable information for the decision making processes, and effecting the judgments of customers, investors, and generally of all the stakeholders. Different data sources show that sustainability reporting is crucial not only for organizations and industry sectors, but for the overall regional development. They show also that in the Balkan region the sustainability movement has began, but it is still at embryonic level and furthermore is not significantly diffused among organizations. This movement is less accented in Albania, and still it is less accented in the higher education sector referring to the overall region. As a consequence, this is an opportunity for Epoka University that, by creating the ECOSSS, it becomes the first higher education institution in Albania and Balkans regarding sustainable development and reporting.

2. Literature review and theoretical framework

420

4 2

“A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities” (www.globalreporting.org). It is a key tool to help corporations set goals, measure progress and manage sustainability. The organization that has pioneered and developed wide-range of sustainability reporting framework is the Global Reporting Initiative (GRI), which provides the sustainability standards for the corporations; it is a non-profit organization and aims to attract as much corporations as possible on the sustainability reporting framework. It is intended to be applied in every corporation, no matter the type, size or sector in which it operates. Reporting may contribute to corporations to evade natural and societal risks that can cause different negative impacts on the monetary related issues on them. In the preparation of this report attention must be focused on the triple bottom line approach which includes economical, social and environmental indicators on the development of corporations in a long term perspective (Elkington, 1997). In economical indicators can be included factors related to the creation of long term fruitfulness and establishment of an ethical corporate working environment, such as economic performance, market presence, etc. Social indicators are based on the internal aspects including the labor force, corporate responsibility and subordinates’ responsibility and also external aspects that are related directly to the stakeholders. The growth rate of the world population tends to increase day by day while in some countries like Italy it has come to a standstill. In the industrialized countries, better saying in most industrialized countries constantly reduce resources that seems to be crucial like water and energy. While economy needs a highly increase growth, the environment needs a sustainable development and this can be reached through anthropoid process. Thus, relevant environmental factors can include water, energy, emissions, etc. Table 1 is a summary.

Nevertheless, the influence of classical economic thought, based on profit maximization, is still relevant today. It is relevant because the managerial activity is thought to be an exclusive activity of businesses, forgetting the role of non-profit organizations like there are also universities. According to what said above, the non-profit has been, is and it will be one of the most important megatrends (by purpose, or by organizational type) of higher education industry.

Table 1. Sustainability reporting variables 421

4 2

4 2



Source: www.globalreporting.org The nonprofit is not so much “naive” as it seems. “Many non-profits operate just like for-profit businesses. They make huge profits, pay handsome salaries, build office towers, invest billions of dollars in stocks and bonds, employ lobbyists and use political action committees to influence legislation” (Gaul, Borowski 1993, pp. 4). Given the importance, the non-profit sector has too much to explain to the business sector in terms of mission, environment, community, gratification of human resources, etc. (Drucker 1989, 2001). This is to say that every kind of organization, profit or not-for-profit, should see beyond the financial boundaries in order to be responsible and to show sensitiveness toward society and environment. On the other side, the profit is not an end itself, but it is a test of the overall organizational performance that today is not based simply on the financial indicators, but also in social and environmental ones. Looking through an historical viewpoint, most of the organizations started to integrate the social responsibilities on their annual reports, and by a survey conducted by Ernst & Young in mid1970s, it was founded that only 1 per cent of Fortune 500 companies provided separate social responsibility booklets along with annual reports (Buhr, 2007). However important initiatives and developments on the field increased the attention and awareness of being responsible organizations. The responsibility (sustainability) movement started in 1972 with the Stockholm Conference on Environment Deterioration. After that, followed: Brundtland Commission Reporting – Our Common Future (United Nations), 1987; UN Conference on Environment, Social, and Economic Development, Rio de Janeiro, 1992; Global Reporting Initiative (GRI) for 422

Environmental Protection, 1997; United Nations Global Compact, 2000 (e.g. Circles of Sustainability); World Summit on Sustainable Development, Johannesburg, 2002; Global Reporting Initiative (GRI), 2002: Sustainability Principles, Guidelines, and Reporting; etc. Also in Albania, under the initiative of UNDP, it was created in 2012 the Albanian CSR Network for promoting Corporate Social Responsibility. Because of this tendency, it becomes “mandatory” to create activities within every institution related with Corporate Sustainability. The current study focuses the attention on the creation of a fertile center within Epoka University that promotes sustainable development. As it is seen from the center’s name (i.e. Epoka Center on Service Systems Sustainability), the project is based conceptually on three pillars: Corporate Sustainability, Service Science and Service- Dominant Logic, and Systems Theory based on the recent trend of the Viable Systems Approach (VSA) of Sapienza University of Rome. Regarding the Corporate Sustainability, this is an evolutionary concept that covers better many open questions and scientific confusion (in terms of definition) of Corporate Social Responsibility (Frankental, 2001; Frederick, 1994; Welford, 2005). While CSR has not well-defined the concept of environment, or failed in trying to do so (Fukukawa and Moon, 2004; Willard, 2002), the CS has recovered this gap. In the academic setting the most famous approach of Corporate Sustainability is the Triple Bottom Line (TBL) approach (Elkington, 1997, 2008). It is focused on the economic, social, and environmental performance of the organization, respecting the slogan: “people-planet-profit”. Long term factors like resource scarcity, climate changes, and demographic shifts can redefine societal expectations and regulatory framework in business environments and investment outcomes. Corporation must foresee and manage current and future economic to report in the proper level. Different businesses all over the world now use several standards to improve the quality and performance of their products, with the main aim to reduce risk and support reputations. Standards which can be defined as “agreed ways of doing things” have provided firms with the main guidance to help them create effective procedures to minimize risks and operate more efficiently. Particularly in the corporations of developed countries, what matters most in the guidance of success are standards that have been key agents in preventing pollution, supporting good stakeholder solutions and meeting regulatory compliances including quality and safety. The headlines of sustainability contain facts of risk management, environmental and stakeholder management, and consequently the main question is: how are businesses using standards to support sustainability? In the past two decades, developed countries’ entrepreneurs have build sustainability programs to manage the Triple Bottom Line strategy. The main issue is that different corporations have different strategies and different perception of the sustainability reputational issues. According to 423

4 2

a study of Verdantix (2012), in UK and EU level, businesses describe the sustainability in four different perspectives: §

For 70 % of the corporations, sustainability is well established and recognized by top executives as a driver for innovation and growth.

§

For 25% of the corporations, sustainability is seen as a growth driver by only a limited number of executives and is not integrated within the overall business strategy.

§

For 5% of the corporations, sustainability is considered as a minor reputational issue and receives little executive attention.

§

For 1% of the corporations, sustainability is a new concept for their business.

However, even if in its embryonic stage, the sustainability awareness and importance is increasing. For example, nearly all of the 150 largest corporations in the world had a Chief Sustainability Officer (CSO) with the rank of vice president or higher, and numerous MBA programs had incorporated sustainability training (www.extension.harvard.edu; Willard, 2005). The second pillar of the theoretical framework is the Service Science, which is the practical perspective of the science of the service born within the laboratories of IBM (Maglio et al, 2012). The actual IBM’s smarter planet philosophy is the derivate of service research (www.ibm.com). On the other hand, the practical perspective of the service science is completed with the theoretical foundations of the service concept that come from the so-called Service-Dominant Logic (Vargo and Lusch, 2008). The S-D Logic is relevant especially for the concept of “value”. For service scholars, value is a relational concept developed through a network of many-to-may relationships (Gummesson, 2008) and can only be proposed via dialogue and co-created via participation (Lusch et al, 2008). The effectiveness of value co-creation is tested by its use in a defined context (i.e. value in context) (Vargo et al, 2008). Since different authors sustain that corporate citizenship and sustainability depends on the effective allocation of values and resources (Crane, Matten, and Moon, 2008; Waddock and Rasche, 2012; Golinelli and Volpe, 2012), and because the effective allocation of value is measured in context (i.e. value in context), it means that corporate sustainability is context-specific. Therefore, the governing bodies of every organization must take into consideration the entities that populate the context. They should measure the organizational performance referring also on how their organizations impact on community and environment. A third view coming from the Department of Management of Sapienza University of Rome, that is the Viable Systems Approach (Golinelli, 2010; Barile et al., 2011), when considers the Corporate Sustainability does not refer to the corporation per se, limited to autopoietic properties (Maturana and Varela, 1980), but to the corporation as a structure in movement (i.e. dynamic viable system) pushed forward by its Governing Body (GB). Therefore, the sustainability of the organization is the mirror of decisions, choices, and actions of its GB with butterfly effects on 424

4 2

the context. Here, the context has a constructivist meaning (Piaget, 1954; Vygotsky, 1962; Bateson, 1972; Bandler and Grinder, 1982; Watzlawick, 1984; Foerster, 2003); it is the opera of GB that extracts it as a portion from the general environment with the intention of future interactions with relevant suprasystems (stakeholders), by him identified and selected, once the conditions of consonance (empathy) between GB and suprasystems are established. In this decisional act the CGB is influenced by the components of his information variety: information units, interpretations schemes, and categorical values (Barile, 2009). Since “emotions can express meanings and understanding because strong judgments and values are anchored in emotions and struggling” (Härtel et al, 2005, pp. 29), then, the decision making of GB (influenced by personal values), is as well affected by the bounded rationality (Simon, 1947). In synthesis: corporate sustainability is context-specific because the organization interacts with a sort of environment (i.e. context); context is subjectively designed by the GB, influenced both by emotional elements (e.g. categorical values) and rational ones (e.g. information units).

3. Epoka Center on Service Systems Sustainability (ECOSSS): a pilot case study 3.1. About Epoka University Epoka is an International University in the Balkan Region and it has about 1300 students. It is located in Tirana, Albanian capital city. Epoka University was established in 2007 and is owned by the “Turgut Özal” Education Institution, which has also established and operated the well recognized system of Turkish primary and high schools in Albania since 1992. Epoka University is the leading national private research university and in the mid-term aims to become one of the top universities in the region. CSIC (Consejo Superior de Investigaciones Cientificas), the largest group of public research in Spain, published in the official website webometrics.info the ranking of the best universities in the world for the last six months of 2014. In this ranking, as in previous years, are included Albanian universities as well. One of the main drivers of the classification is the sustainable development of academic work. In accordance with the statistics, Epoka continues to lead Albanian Higher Education System as the best university for teaching, research, infrastructure, and innovation. The university is composed by two faculties: Faculty of Economics and Administrative Sciences that includes 4 departments (Banking and Finance, Business Administration, Economics, Political Science and International Relations), and Faculty of Architecture and Engineering that includes 3 departments (Architecture, Civil Engineering, Computer Engineering). Also, the university provides 3 research centers (Center for European Studies, Continuing Education Center, Center of Research and Design in Architecture – CoRDA). Epoka University is also strong in international relations and partnerships. Among the several partners are University of Texas at Austin, Istanbul University, Illinois Institute of Technology, 425

4 2

Leeds Becket University, Hochschule Mainz University of Applied Sciences, American University in the Emirates, and EADA Business School with which there is a joint program for professional master in business administration and an executive master in management.

3.2. Epoka University as a sustainable institution Actually Epoka University is making efforts for creating a sustainability center, because the university has incorporated since the beginning the philosophy of sustainable development in its mission. Basically the focus is that of the Triple Bottom Line approach (Elkington, 1997). In other words, being economically, socially, and environmentally sustainable. Regarding the economic sustainability, Epoka University is making a good economic performance, both internally and externally. Internally, the institution has increased sufficiently the profits to be reinvested in different forms and to sustain the structure, the staff, and the long term strategy of the organization. An important issue is the fact that Epoka rewards the best students by giving different scholarships. Bonuses go also for the staff when their performance goes beyond expectations. Therefore, the main stakeholders that are students and staff are highly satisfied. Externally, the institution impacts indirectly at the macroeconomic level. Impacts can be measured by the amount of investments on structure and technology, and on the general level of employment as component of the gross domestic product (GDP). Referring to the social sustainability, the university is engaged in different initiatives related with labor practices, human rights, society, and service responsibility. For example, through the Continuing Education Center, Epoka is offering training programs in order to increase employee engagement, commitment, and satisfaction. Recently, the university participated in the National Competition on Copyright and other related Rights in order to promote human rights in society. Also it organized recently the 2nd Career Fair on April 21, 2015, an activity which offered employment opportunities to last-year students, orienting and supporting these students in their first steps for a successful career. More than 50 companies from Albania and the regional marketplace supported the Second Career Fair. Other fairs and forums are organized in these months for promoting cultural heritage, community engagement, and woman’s rights. Finally, the ecological sustainability of the university is another strength point. The biodiversity of the large campus is huge. It can be found different kind of birds and domestic animals, different flowers and trees, and a small lake. In order to be environmentally sustainable and to reduce carbon emissions, Epoka University possesses different eco-buses for student and staff transport. This gives the opportunity to let the cars at home and come in destination by a common transport mean. Lately, Epoka University in collaboration with “Green Line Albania” is engaged 426

4 2

in sustainable environmental activities such as cleaning the Albanian Riviera, cleaning the Albanian territory in general, creating for the local communities’ parks and recreation areas, etc.

3.3. Objectives and project timeline of ECOSSS ECOSSS is projected to be a sustainability center for handling academic research, project management, consulting, and training about sustainable development and reporting. One of the aims is to increase the awareness of organizational governing bodies that sustainability reporting affects judgments, decisions, and choices of top managers, customers, investors, and generally that of all stakeholders. In order to offer the necessary services, the center will be committed to produce interdisciplinary research in the field of sustainability science for qualifying better the academic staff of University, and as a consequence to increase their international recognition. ECOSSS will be engaged on preparing the annual sustainability report of Epoka University in accordance with GRI-G4 guidelines. Since more than 22218 reports are published recently (from which, 17538 are GRI Reports) and more than 7010 organizations are part of the reporting initiatives of GRI, which is the leading organization on the sustainability field, Epoka will prepare its own report in order to be in the trend of the global initiatives of the world’s well known organizations, institutions, and universities (e.g. 155 universities reports worldwide) that have already prepared and published their sustainability reporting. Sustainability orientation and reporting are very beneficial activities for every organization. “Sustainability is a source of innovation and profitability” (KPMG, 2011). On the other side, according to Ernst & Young (2013), “reports, in addition to creating greater transparency about firm performance, can provide firms with knowledge necessary to reduce their use of natural resources, increase efficiency and improve their operational performance”. In 2013 a survey of Global Corporate Sustainability was conducted by United Nations. About 1700 organizations from more than 100 countries (largest survey on this field) participated. 65% of CEO’s of these firms have already prepared their strategies in accordance to sustainability principles. Research findings of the survey showed that sustainability reporting impacts performance and long-term financial success. Also, findings show that 95 % of the world’s largest corporations now publish online their sustainability reports. (www.unglobalcompact.org). According to e-Marketer, the internet will hit 3 billion users this year, and by 2018 nearly half of the world’s population will have regular access to the web, that is another reason why the organizations should make the sustainability report and then publish it online, in order to make it accessible to the public. Considering the benefits, Epoka Center on Service Systems Sustainability, will create a project timeline in order to fulfill the predefined objectives. Steps are as follows: a. becoming an Organizational Stakeholder (OS) of the Global Reporting Initiative (GRI); 427

4 2



4 2 b. consulting the “how to” handbook for G4 reporting, other books, articles, and other’s reports; c. analyze the guidelines and start preparing Epoka’s University sustainability report; d. after concluding and revising the report, making the self-declaration of reporting at GRI’s website. Before the declaration some sub-steps are required: Prepare (Plan your GRI sustainability reporting process), Connect (Dialogue with stakeholders), Define (Focus your efforts), Monitor (Build your report), Report (Check and communicate); e. make necessary academic research, project participation, and offer consulting services to the interested entities on preparing their own sustainability reports (in order to increase the experience on this field); f. applying and starting the process for becoming a “Certified Training Partner” (CTP) of GRI; g. make the necessary changes and add the necessary information requested by the training program undertaken; h. after being a Certified Training Partner (CTP) of GRI, engaging in giving sustainability reporting consultations, workshops, and implementation of training programs for locals and region.

3.4. Market analysis, market potential, and strategy Since the network with the “Turgut Ozal Education” is already established, and remembering that Epoka University is a strategic business unit (SBU) within Turgut Ozal Education Company, therefore the first market target is going to be this network to which we are going offer the services provided by our research center. It means that the first services are going to be offered to the nonprofit organizations including Universities. Then the market segmentation will be focused toward other industries, especially to large and well-known national & international institutions, corporations, companies etc. Actually, there are no other competitors in the field referring not only to Albanian country, but also Kosovo and Macedonia. Therefore, this is a great opportunity for Epoka to create the supposed sustainability center (ECOSSS). In relation to the market potential, since April 1/2015, GRI has opened a new call for application regarding certified training partners (in accordance with CTP program) including a new list of countries that were not involved before. After our intense communication with GRI’s members, fortunately Albania is part of this list and GRI is waiting applications from Albanian organizations. Thus, Epoka University with the potential center of sustainability (i.e. ECOSSS) can be a potential candidate. On the other hand, the demand for our services in the region is not satisfactory, and this is noticeable based on the number of reports prepared by the organizations of the region. The market 428

share is also important factor to us; therefore, being aware of the reality that in the near future the application of these kinds of services is going to increase intensively, we hope that by then the market share that our company will cover will be between the ranges of 10 % - 20 % of the market. Regarding the market strategy, our services will be positioned very carefully for the organizations that express their interests and efforts on being part of the sustainability reporting network. Our centre will provide the services only to the serious organizations since they integrate the most sensitive factors of humanity like: society, environment and economy. Our marketing strategy is based mainly on making the right information available to the right target customer. We can’t afford to sell our services to each organization’s asking for it, if they do not have the necessary qualifications to obtain these services. The marketing has to convey the sense of quality in every picture, every promotion, and every publication. Therefore, we are going to be a partner of the most serious marketing offering agencies in the region. Finally in order to make a rational analysis, the Porter’s model of five competitive forces is used (Porter, 1980, 2008). The model is represented graphically in figure 1. The first element, which is the rivalry among existing competitors, is simple to be analyzed in the case of ECOSSS, since there are no other competitors in the field referring to Albania and Balkans in the higher education context. It means there are no other university centers occupied with sustainable development and reporting. Therefore, ECOSSS will be a pioneer in the field. Regarding the threats of new entrants, these are not so much relevant for the moment since there is not a deep awareness about sustainability in the country and region. After that, when ECOSSS will be created, it will acquire experience and it will expand the service portfolio, economies of scale, product differentiation, distribution channels and so on. In other words, natural barriers of entry will rise up because of the monopolist advantage that will characterize the ECOSSS. Now, before introducing the bargaining power of suppliers first of all suppliers must be identified. In this context we have data suppliers and service suppliers. For example, the Global Reporting Initiative is a supplier both of data (considering its disclosure database from the website) and services (workshops, training, etc). Other service suppliers in terms of training and workshops are all the certified training partners of GRI. Their bargaining power is strong because they are already consolidated in this sector. However, the level of awareness related with sustainability is low in Albania and region, and as a consequence this affects also the bargaining power of suppliers, reducing it. On the other hand, since this industry is embryonic, suppliers seek targets for offering information, training and workshops. In this sense, the bargaining power of buyers is also strong in a certain sense but not so much. The buyers of the sector are individuals, groups, or organizations that want to be informed and trained on sustainable development principles and reporting procedures. Hence, at the moment, 429

4 2

ECOSSS can be classified on the side of buyers. After some experience, it will offer its own services and can be classified as a supplier for other organizations. The bargaining power of buyers in Albania and region is strong, but not enough because the level of competition among suppliers is low.

Figure 1. Porter’s 5 forces model of competition

Source: Porter (2008, pp. 4)

4. Discussion Ethics and responsibility must be embedded in business models, organizational strategy and decision making process. Strong ethical policies that go beyond upholding the law can add great value to a brand whereas a failure to do the right thing can cause social, economic and environmental damage that can damage the goodwill of a company. Once the entities have adopted the sustainability perspective they will often find that there are bottom lines benefits from demonstrating high ethical standards. Majority of the problems related with ethical issues caused in entities tend to be systemic issue since the ethical tone comes from the top of the management system. Once the top management line sets some rules to be followed, in this case related with sustainability reporting, the ethical tone comes from the top. High quality management information on social, environmental and ethical performance is vital for monitoring the environmental and social impact of a company and for compiling connected reports showing how effective its governance arrangements are. Corporate communications and reporting sustainability need to do more than just pay service to green agenda. They need to provide hard evidence of the positive impact on society, the environment and the strategic returns for the business and the way that negative effects are 430

4 3

addressed. An important point is the role of the management accountants on ethical responsibility to promote an ethics based culture that doesn’t permit practices such as bribery. 4.1. Implications Through our research center initiative and support, a sustainability reporting is going to be conducted for Epoka University in order to be in the trend of the global initiatives of the world’s well known organizations, institutions and to be the first in Albania and in the Balkan region that prepares a sustainability report since there are only 155 universities worldwide that have already prepared and published their sustainability reports. As follows, are briefly described the principal implications, and the derived benefits for the institution (i.e. Epoka University). a. Epoka University will pioneer the sustainability movement in Albania, and at university level in the whole Balkan. For Albania, Kosovo, and Macedonia, there are no certifying practitioners for sustainability reporting. b. The creation of the center will reinforce Epoka’s orientation toward research, remembering that the global trend is that of research universities (e.g. research improves teaching quality). This will influence also the university ranking. c. Because the Albanian government with the latest Higher Education Reform has decided to finance the Universities in accordance to their level of innovation, research, and teaching, and because “sustainability is a source of innovation and profitability” (KPMG, 2011), then being a sustainable institution will be advantageous for increasing profits and obtaining government funds. d. Adhering to sustainability principles and reporting, means that you are internationally protected by UN, GRI, OECD, etc. e. Being a sustainable institution is easier to enlarge the international partnership network (considering the trend). It helps also being a strong candidate for European Projects because sustainability is the actual focus of European Projects. f. ECOSSS will increase Epoka’s credibility and image toward stakeholders (students, staff, government, community, partners, etc). Supporting institutions regarding consulting and partnership for Epoka’s Sustainability Center: Ø Sapienza University of Rome – Centro Interuniversitario di Ricerca Per lo Sviluppo sostenibile (CIRPS); Ø EADA Business School – Center for Corporate Sustainability Impact; Ø Italian Association for Sustainability Science (IASS).

4.2. Recommendations 431

4 3



4 3 i. Senior managers and business leaders must demonstrate accountability and responsibility by example. This will show that middle and junior managers will be rewarded for taking an ethical stand and create the appropriate organizational culture. ii. Governance structures should include people with appropriate skills to scrutinize performance and strategy across social, economical and environmental issues. iii. Managers must come to problems with ‘prepared minds’, looking at ways in which an organization can benefit from a sustainability approach rather than one that relies narrowly on cost cutting or compliance. iv. Finance professionals must play an active role as ethical champions by challenging the assumptions upon which business decisions are made. But they must do so while upholding their valued reputation for impartiality and independence. v. Management accountants are encouraged to help ensure that their businesses are measuring performance on an appropriate time scale that will deliver sustained and sustainable success. vi. Business leaders should use the skills of the finance team to evaluate and quantify reputational and other ethical risks. vii. Finance professionals need to take social, environmental and economical factors into account when allocating capital, therefore that sustainable innovation is encouraged.

References Arvai, J., Campbell, A. V., & Steel, P. (2012). “Decision-making for sustainability. A Systematic Review of the Body of Knowledge”. Network for Business Sustainability (NBS). Bandler, R., Grinder, J. (1982). Reframing: Neuro-Linguistic Programming and the Transformation of Meaning. Boulder, CO: Real People Press. Barile, S. (2009). Management Sistemico Vitale: Decidere in contesti complessi. Torino: Giappichelli. Barile, S., Bassano, C., Calabrese, M., Confetto, M., Di Nauta, P., Piciocchi, P., Polese, F., Saviano, M., Siano, A., Siglioccolo, M., & Vollero, A. (2011). Contributions to Theoretical and Practical Advances in Management: A Viable Systems Approach (VSA). Avellino: International Printing Editore.Barile, 2009 Barile, S., Calabrese, M., & Iandolo, F. (2013). “Sostenibilità e paradigmi service-based: possibilità e criticità in economia d’impresa”. Sviluppo & Organizzazione, 252, pp. 46-60. Bateson, G. (1972). Steps to an Ecology of Mind: Collected Essays in Anthropology, Psychiatry, Evolution, and Epistemology. Chicago, IL: University Of Chicago Press. Buhr, N. 2007. In Sustainability Accounting and Accountability, Unerman, E, Bebbington, J & O’Dwyer, B (eds) pp. 57-69. Crane, A., Matten, D., & Moon, J. (2008). Corporations and Citizenship. Cambridge: Cambridge University Press. Drucker P. F. (1989). “What Business Can Learn from Nonprofits?”, Harvard Business Review, pp.88-93. Drucker P. F. (2001). The Essential Drucker. New York: Harper Business. 432

Elkington, J (2008). “Forward”. In: M.J. Epstein, Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social, Environmental and Economic Impacts, pp. 11-12. UK: Greenleaf Publishing. Elkington, J., “Cannibals with Forks: the Triple Bottom Line of 21st Century Business”, Capstone, 1997 Ernst & Young (2013). The Value of Sustainability Reporting. EY LLP & Boston College Center for Corporate Citizenship Frankental, P. (2001). “Corporate social responsibility - a PR invention?”. Corporate Communications: An International Journal, 6 (1), pp. 18-23. Frederick, W. C. (1994). “From CSR1 to CSR2”. Business and Society, 33 (2), pp. 150-164. Fukukawa, K., Moon, J. (2004). “A Japanese model of Corporate Social Responsibility?” Journal of Corporate Citizenship, 16, pp. 45-59. Gaul G. M., Borowski N. A. (1993). Free Ride: The Tax-Exempt Economy. Kansas City, MO: Andrews and McMeel, Golinelli, G.M. (2010). Viable Systems Approach (VSA): Governing Business Dynamics. Padova: Kluwer (Cedam). Golinelli, G.M., Volpe, L. (2012). Consonanza, Valore, Sostenibilità: Verso l’Impresa Sostenibile. Padova: Cedam. Gummesson, E. (2008). Total Relationship Marketing, 3rd Ed. UK: Elsevier. Härtel, Ch.E.J., Zerbe, W.J., & Ashkanasy, N.M. (Eds.). (2005). Emotions in Organizational Behavior. Mahwah, NJ: Lawrence Erlbaum Associates. KPMG. (2011). Corporate Sustainability: A progress report. www.kpmg.com Lozano, R. (2011). “The state of sustainability reporting in universities”, International Journal of Sustainability in Higher Education, Vol. 12 Iss: 1, pp.67 – 78 Lusch R.F., Vargo S. L., & Wessels G. (2008), “Toward a conceptual foundation for service science: Contributions from Service-Dominant Logic”. IBM Systems Journal. 47 (1), pp. 5 – 14. Maglio, P.P. Kieliszewski, C.A. Spohrer, J.C. (2012). Handbook of Service Science. NY: Springer. Maturana, H.R., Varela, F.J (1980). Autopoiesis and Cognition: The Realization of the Living. Dordrecht: Reidel Publishing Company. Piaget, J. (1954). The Construction of Reality in the Child. New York: Basic Books. Porter, M.E. (1980). Competitive Strategy. Free Press, New York, 1980. Porter, M.E. (2008). “The Five Competitive Forces That Shape Strategy”, Harvard business Review, pp. 86-104. Rasche, A., Kell, G. (Eds.) (2010). The United Nations Global Compact: Achievements, Trends and Challenges. Cambridge: Cambridge University Press. Simon, H.A. (1947). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations. NY: McMillan. Vargo S., Maglio P.P., & Akaka M. A. (2008), “On Value and Value Co-creation: A Service Systems and Service Logic Perspective”. European Management Journal, 26, pp.145-152. von Foerster, H. (2003). Understanding Understanding: Essays on Cybernetics and Cognition. NY: Springer Vygotsky, L.S. (1962). Thought and Language. MA: The M.I.T. Press. 433

4 3

Waddock, S., Rasche, A. (2012). Building the Responsible Enterprise: Where Vision and Values Add Value. Stanford: Stanford University Press. Watzlawick, P. (Ed.). (1984). The Invented Reality: How Do We Know What We Believe We Know? (Contributions to Constructivism). New York: Norton & Company. Welford, R. (2005). “Corporate Social Responsibility in Europe, North America and Asia. 2004 Survey Results”. Journal of Corporate Citizenship, 17, pp. 33-52. Willard, B. (2002). The Sustainability Advantage. Gabriola Island, Canada: New Society Publishers. Willard, B. (2005). The Next Sustainability Wave: Building Boardroom Buy-In. New Society Publishers. http://www.extension.harvard.edu/professional-certificates/corporate-sustainability-innovationcertificate http://www.unprme.org. http://www.verdantix.com/index.cfm/papers/Products.Details/product_id/322/uk sustainablebusiness-spending-2010-2015/-/ https://sustainabledevelopment.un.org/sdinaction/hesi www.globalreporting.org www.ibm.com www.unglobalcompact.org

434

4 3



4 3

The Effect of Gross Domestic Product and Money Supply on Inflation, Albanian Case Emanuela Buci1, Bora Kokalari2, Jonada Tafa3 1

Epoka University, Albania Epoka University, Albania 3 Department of Banking and Finance, Epoka University, Albania 2

Abstract One of the biggest macroeconomic issues is the correlation between economic growth, inflation and the total amount of money in circulation or in existence in a country. Case of Albania is quite sensitive since it has been under the communism for a long time. Only after the fall of communism which started deteriorating in 1990, Albanian economy started having a good performance on fighting the post-communism. Economic growth is the best indicator to measure the performance of a country in a year. Thus, it has to do directly, positively or negatively to other indicators. The methodology used to understand the relationship (effect) of GDP and money supply on inflation, is multiple regression analysis. In this case we examine a sample made of 14 years from 1994 up to 2008. The independent variables are GDP and money supply since both have a crucial effect on the increase in prices and fall in the purchasing value of money. Keywords: Communism, Inflation, GDP, Money supply, Indicators, Regression, Sample.

Methodology The research for this study will consist of a literature analysis and comparison of the claims made by different authors around the world and international researchers concerning the nature of economic growth on behalf of money supply and inflation since they are two of the biggest macroeconomic factors in an economy. The study does not include an experiment, but it includes an analysis supported by Microsoft Office Excel. This analysis is broadly known in the field of quantitative subjects. We provide the data from 1994 up to 2008 and look at the behavior of the macroeconomic factors between each other to determine the leak between them.

Introduction Republic of Albania is one of poorest countries in the Southeastern Europe. The difficult decades that are known widely by the history of Albania, were passed in a successful way regarding economics. Among other countries which were in the same political conditions, Albania seemed to be facing the changes in economy and politics quite well after 90’s. This is shown by the values of macroeconomic indicators for the time. Enver Hoxha, was the leader of Labour Party in Albania. He made a huge change in the social and political areas leading to isolation from the 435

other countries of the world. People were not allowed to e/immigrate nor to accomplish personal duties that were not ruled by the Labor Party. This led the country into a difficult era. The death of Enver Hoxha was soon followed by the fall of communism period in Albania. People started to raise their voices for democracy. These movements started in the north of Albania, Shkoder. Soon the Socialist Republic was demolished; instead Republic of Albania took place in 1991. The country started to face every single change regarding the economic transformation. Isolation to free market economy was largely successful even though it was followed by the pyramid schemes in 19971. There have been ups and downs for Albania until today. The paper aims to discover the importance of the period 1994-2008 for Albania since it covers the postcommunism period and the global economic crisis. Specifically, we will be covering the relationship between three very important macroeconomic indicators such are: GDP, Inflation and Money Supply. Although GDP is the best indicator to show us the economic growth, seems that still there are debates occurring between authors on deciding the correlation of economic growth negatively on other indicators. GDP is the value of all final goods and services, the amount of total expenditures in a country in a period of time. Money Supply is the total amount of money circulating in a country while inflation is the rise in prices from different factors affecting a country, both for a specific period of time. The government changes the rule for the banking system if the country is in debts or any other financial problem. It takes the central bank (Bank of Albania) rise the money supply by printing more and more money. Thus, the velocity of money decreases. From macroeconomics we know that when money supply increases in a certain percentage, in the same amount will increase the Aggregate Demand (AG). In this case inflation would occur. The only case when inflation is not involved is when Aggregate Demand and Aggregate Supply are held constant for the same amount of money supply. For the period 1994-2008, in Albania there have been a lot of researches about the topic since it was the most delicate period of our country. Soon after there have been some sub periods such as 1997 and 2002 where the banking systems and pyramid schemes made the economic indicators vary in big amounts2. The factors of economic growth are the main reason why different authors get different correlation between these specific indicators in different period of times.

1 2

See Section III The informal credit market during Pyramid Schemes Period was registered half of countries GDP

436

4 3

4 3

Recently, intensive research has focused on the nonlinear relationship between inflation and economic growth. That is, at lower rates of inflation, the relationship is positive or not significant, but at higher rates, inflation has a significantly negative effect on growth. Also the money supply affecting both has the same impact. A high amount of money supply leads to a higher inflation rate, thus a negative correlation between economic growth and inflation. However, there is much less agreement about the precise relationship between inflation and economic performance, and the mechanism by which inflation affects economic activity. Still, as some other authors mention during their research papers, there is still much discussion about the three chosen variables Literature review The concept of the quantity theory of money (QTM) began in the 16th century. As gold and silver inflows from the Americas into Europe were being minted into coins, there was a resulting rise in inflation. This led economist Henry Thornton in 1802 to assume that more money equals more inflation and that an increase in money supply does not necessarily mean an increase in economic output. Here we look at the assumptions and calculations underlying the QTM, as well as its relationship to monetarism and ways the theory has been challenged. Fisher Model (1993) was another author who has studied about the relationship between inflation and economic growth entitled “role of macroeconomic factor in growth”. First, as Friedman (1977) argues, higher inflation rates may cause the reallocation of sacre resources to unproductive activities and thus reduce output growth. Furthermore, according to Friedman (1977) and Ball (1992), inflation rate increases inflation uncertainty and distorts economic efficiency, and thus increases unemployment. Second, inflation may increase interest rates and thus reduce investment (Chun, 1994). Third, if cash is required to purchase capital goods, inflation may reduce steady-state capital stock (Stockman, 1981). Fourth, inflation may adversely affect bank lending and financial activity, as Huybens and Smmith (1999) argue, which, in turn, is positively correlated with real economic activity. Fifth, inflation may increase user cost of capital and reduce investment (Feldstein, 1983). Robert J. Barro (1997) also studied the relationship between inflation and economic growth. He used 30 years data from 1960 to 1990 of 100 countries. He included other determinants of economic growth additional to inflation. To analyze the data, systems of regression equation were used. The regression results indicated that an increase in average inflation by 10% per year leads to a reduction of the growth rate of real per capita GDP by 0.2% -0.3% per year and a decrease in the ratio of investment to GDP by 0.4%-0.6%. But the result is 437

becoming statistically significant only when high inflation experiences are included in the sample. Moltey (1994) includes inflation in his model to examine the effect of inflation on the growth rate of real GDP. He extend the model of Mankiw, Romer and Weil (1992) which was based on Solow growth model by allowing for the possibility that inflation tends to reduce the rate of technical change. The result indicates a negative relationship between inflation and the growth rate of real GDP. There are empirical evidences that support the findings of Mundell (1963) and Tobin (1965) of a positive relationship between economic growth and inflation. Mallik and Chowdhury (2001) are among the supporters of positive relationships between the two variables. To reach this conclusion they used co-integration and error correction model to analyze data collected from four south Asian countries (Bangladesh, India, Pakistan and Sirlank) and found a long run positive relationship between inflation and economic growth. They concluded that moderate inflation is helpful to faster the economic growth. 1996-97 and 2002 After the fall of communism, Albania had to handle a lot of democratic and economic changes. The country became a democratic one and the economy an open one. Soon enough there started to appear some problems related to the economic situation as a whole. Up the point of communism fall, the output had fallen into half and inflation rates were in triple digits. The country became the poorest country in Europe, also the least known country. Even though Albania was isolated from 1945-19853, GDP growth after communism fall, was positive in some kind of way. Also, inflation rates went to single digits. Country seemed to be facing the situation quite well but the financial system was extremely inadequate4. This was the main reason why pyramid schemes appeared in Albania in late 1996 and 1997. They didn’t offer a safe medium where people could invest their money on. Also the interest rates were low. This kind of problems led to informal credit market. The vast majority of those operating were not licensed. They offered a high rate per month, starting by 10% to 4-6%. People would rather invest their money on pyramid schemes (which were unrecognizable from informal credit market) than in the three state banks, the situation of which was deteriorating day by day. Most companies and family savings went into pyramid schemes with the hope to get “more” from “few”. At their most successful time, the nominal value of the liabilities owned by pyramid schemes was almost half of GDP of the Albanian country. After the collapse, which took approximately four months, the country was in serious problems because most of the companies had no money to liquid the payments. Government tried to act against the companies even through violence. Some of the companies got closed but leading the country into a pure chaos, especially in the south of it

438

4 3

where the investments had been highest. The collapse of pyramid schemes led to an anarchy where 2’000 people got killed.

Nominal Interest rates and Inflation rate 1993-96 The new elected Socialist Party, with prime-Minister Fatos Nano, made a Recovery Program in order to stabilize the situation. In this recovery some proceedings were mandatory such as: 1. Every credit market should have an administrator whose profession is of the field. 2. Every administrator should report regularly to the government about the credit market. 3. The administrator would have a lot of duties; most of them would require its wide powers to carry on the company’s business. This Recovery Program was operating on its best from 1998 up to 2002. The period recorded a high economic growth and price stability. Even though many developments took place, some reasonable causes established by Bank of Albania stated that economic growth was being slowed down such are: low foreign investment rates5, inadequate structural reforms, soothing of economic activity.

3 4

The period when Enver Hoxha isolated the country from any economic export and import. Chris Jarvis, The Rise and the Fall of Pyramid Schemes in Albania 1999

439

4 3

11



In 2002, there was a shrink on the public sector and the economy was based mostly on private sectors such as transport and constructions. In order to stabilize the economy, in 2002 the imports did exceed exports, leading to a trade deficit as 24, 6% of countries GDP. The trade deficit escalation6, in year-beginning 2002 made Albanian currency depreciate, which is considered as an important factor also in the price destabilization in year-end 2002 and inflation growth. Some other factors influencing the demand and offer directions are: -

Money supply growth over forecasts

-

Currency depreciation

-

Increase of prices in the countries where Albania used to export

-

Energy crisis

-

Agriculture sector was left behind since the privet sector started developing

Inflation mostly is influenced by the growth of money supply, especially M1 which is the most liquid asset, cash. It is considered also as a permanent factor of inflation. The highest money supply growth in Albania in 2002 was in February-April reaching almost 29% by the end of April. The situation got stabilized in May because of the problematic situations of the banks. That would reduce also the impact on the current inflation. In this case, 1997 and 2002 are clear evidences of the relationship that exists between economic growth, inflation and money supply growth out of forecasts. It is completely wrong to conclude that a factor is determined by another factor only on behalf of digits. We must examine every situation, up and downs of a country in order to clearly visualize which of the factors is partially involved. The two periods are sufficient to prove (without doing the multiple regression analysis at all) that there exists a logical relationship between the chosen variables. The comparison between post-communist economy in Albania and Poland Communism is widely known as a terroristic way of leading a country. This comes because of many famous events that have influenced mostly peoples’ lives. It has various effects on different sectors of administration since only a hand controls them and that is the person who leads the country who usually is transformed into an icon for the country. In the case of Albania, Enver Hoxha was the leading role of everything that would happen. Communism gets away with a high price in the most delicate sector of a country and that is economy and countries administration. The isolation of the country for 50 years, the disability to recover from the wars damages as all the other countries of the world, the prohibition of foreign investments, the prohibition of people not to leave the country were official evidences of a country that 440

would suffer a lot from economic development. The same would happen in some other countries of Europe and beyond such are: Germany, Poland, China, Russia etc. The reform movement that ended communism in east central Europe began in Poland. Poland was the first country to embrace the democratic governance followed shortly by Germany. The fall of Berlin wall in 1989 was the event that openly declared the fall of communist regime in Europe. In this section we will make a comparison between Poland, the first country to end communist legacy, and Albania, the last one. During communism these two countries didn’t have much differences. In this period, the same cycle of errors occurred in Poland and Albania as in the other state-planned economies. The political and economic system banned planners from selecting any rate of accumulation and investment. Since there were no direct warning signals from the system, accumulation often exceeded the optimum rate. Investment often covered an excessively broad front and had an over-extended gestation period; disappointingly low growth rates resulted from diminishing capital returns and from the lowering of worker incentives by excessive regulation of wages and constriction of consumption. Planners reacted to these conditions by further increasing the rate of accumulation and the volume of investment. The institutional framework of the centrally planned economy was able to insulate it to some extent from the impact of world economic trends. As a result, domestic industry was not exposed to foreign competition that would force improvements in efficiency or to foreign innovations that would make such improvements possible. Above all, the isolation of the system kept domestic prices totally unrelated to world prices. On January 1, 1990, the Polish post communist government introduced one of the most radical reforms programs ever undertaken in any country during this century. Their aim was to transform the communist economy based on state planning and ownership into an open economy with market allocation of resources and private ownership. The Finance Minister at that time, Leszek Balcerowicz reduced the level of inflation (which peaked at 50% per month), ceased the subsidization of state enterprises, made the currency exchangeable and removed almost all restrictions on foreign trade.

5 6

Speech by Mr. Shkelqim Cani, Governor at the Bank of Albania Escalation according to the Bank of Albania in 2002

441

11

The government’s actions were intended to stabilize the macroeconomy and to create the conditions necessary for privatization, enterprise restructuring, and the development of an institutional system compatible with a market economy. Because of the speed and scope of the reforms, the impact on Polish markets and enterprises was immediate and profound. Remarkably, the main goals of the program, widely known as “shock therapy,” were achieved within a few months. Some critics say that this plan was too aggressive. They believe that the best option would be to gradually bring down inflation and force microeconomic changes. However, this method turned out to be the appropriate economic policy because its stabilization and liberalization measures created conditions that proved extremely favorable to private business development throughout the Polish economy. Meanwhile the communist regime had a much worse and powerful impact in Albania. We are still in transitioning economy and still haven’t recovered fully. One of the main reasons is that Albania chose the extreme position of self-isolation. After the collapse of communism in the other Eastern European countries events pushed very quickly for Albania leading to a difficult path of transition. The difficulties were firstly in the economic, political and social area just like other Eastern European countries, and secondly Albania suffered from diverse internal and external shock. The new democratic government tried to undertake some macroeconomic interventions but the figured showed that the situation was just getting worse. Albania tried to exchange the currency but there was an immediate devaluation, vis-à-vis USD, firstly by 250% and later by another 100%. Unlike Poland, Albania encouraged the privatization of small retail shops and other commercial services but the process was disorganized and some cases of haste and dishonesty occurred. The most important achievement of that time was land privatization by breaking up the cooperatives, a process that had started since late 1990. By 1992 almost 75% of land was distributed to private owners. There was a constant confusion about property rights, so the land remained non-sewn. This led to an extreme food shortage. The liberalization of the decisions, under the conditions of price restrictions and losses, still covered by the state budget subsidies, influenced negatively the financial flows from state enterprises to the budget. Under these circumstances the financial situation deteriorated sharply and the attempts to prevent this remained uncoordinated half measures. As a result the macroeconomic situation of the country was worsened. By this comparison we can see that the process of “de-communism” went completely in different directions. This came because of the lack of integrity and honesty by Albanian leaders, lack of experts and because Albania chose the most extreme way of communism regime. 442

Correlation between variables In this paper of study we are considering the GDP and Money Supply independent while Inflation as a dependent variable. Since the aim of our paper is to show the crucial relationship between these macroeconomic factors, we must state clearly for everybody who reads it the meanings of the terms used. First of all, what is the meaning of dependent and independent variables? Dependent variables are related in some kind of way with other factors, for example in our case Inflation gets higher with higher amount of GDP and money circulation. Independent variables such as GDP are untouched from the amount of inflation, in our case. In other cases, when studying the GDP influenced by inflation, we have GDP as dependent and the other one dependent. In Albania, since the fall of communism, GDP has had a slight increase over years. This might be explained by the influence of many other factors such are remittances, income, and reduction of poverty, import and export. As GDP increases, it will bring an economic up-turn, greater consumption and a greater velocity of money. Thus, getting banks print more and more money. The greater amount of money the greater the inflation will be. This is the case we are studying, how everything is string-related into a daily basis life. Money Supply is made of the most liquid components of the money supply (M1 - cash); it includes assets that are highly liquid but not cash (M2) and long-term deposits (M3). The period chosen for the multiple regression analysis is 1994 – 2008 (sample made of 15 years). The main reason why we chose this period is that it has been more like the most difficult political and economical period of Albania to handle. The following will show the results of the analysis in Excel. First, there is a significant or moderate negative linear relationship between GDP and Inflation (- 0.6489693). As mentioned in the introduction section, we are proving once more that high rates of inflation have a negative effect on economic growth. Also as stated in the literature review section, other authors have concluded that in some cases inflation in high rates alone can affect the down-turning of the economy. Also, this is the case of Albania after the communist regime. Secondly, there is a significant negative linear relationship between Money Supply and Inflation. (-0.5579637), meaning that as much as the amount of money is increasing the inflation will rise. But in economical context, this affect is quite sensitive for the country growth. Thirdly, there is a strong positive linear relationship between Money Supply and GDP (0.983683). This result comes from the direct usage of money on expenditure and as we know GDP is known also as the total amount of expenditures in a country. As Money Supply increases, every other macroeconomic and microeconomic factor will be influenced. Thus, leading to a 443

change in GDP, the most important factor on deciding if an economy is in positive growth rate or not. Summary Output The summary output is taken in three cases with different values of confidence level in order to test the hypotheses for the correlation coefficient whether is significant or not (α = 0.05, α= 0.1, α=0.01) Ø Regression Statistics for In the regression statistics we have Multiple R, R Square, Adjusted R Square, Standard Error and number of observations. Multiple R shows us how strong the relationship between the variables is. The value is 0.788009 wich means that there is a strong linear positive relationship between them. R squared shows how much variation of the dependent variable is explained by the regression line and independent variables. In this case we have a R Square of 0.62, meaning 62% of inflation is explained by GDP and money supply. The most accurate value is adjusted R Square, which eliminates the spurious fitting problem. It has been adjusted for the number of predictors in the model. In this case adjusted R Square shows that actually 56% of depended variable is explained by independent ones. Standard error is the same as standard deviation of theoretical distribution of a large population of such estimates. It measures the accuracy with which a sample represents the population. In this study we have a 6.5 standard error. Ø ANOVA (analysis of variance) In the table of ANOVA we have the sum of squares SS, means squares MS, F: Overall F test for the null hypothesis and Significance F which is the associated P-value. SS=

837.91

MS=418.95 F= 9.82, significance F = 0.0029 Ø Regression equation From the third table in the summary output we find the equation of regression. The regression equation is the same for all the values of α; The population regression model is: Y = β1 + β2 x2 + β3 x3 + e (It is assumed that the error u is independent with constant variance), so we wish to estimate the equation of the form: Y= β1 + β2 x2 + β3 x3; 444

Where: Y: Inflation β1: intercept β2: Slope of regression line with respect to x2 (it shows how much Y will change with one unit change of x2) x2: GDP, first independent variable β3: Slope of regression line with respect to x3 (it shows how much Y will change with one unit change of x3) x3: Money supply, second independent variable E: error From the summary output, the last table shows us the intercept and each variables coefficient. We find our equation to be: Y(hat)= 81.13 -0.28x2 + 0.1x3 This equation shows that if money supply and GDP are 0 than Inflation would still change with 81.13. This means that there are other factors indicating inflation (especially in our postcommunism period up to 2008). With one unit increase in GDP inflation will decrease by 0.28 and with one unit increase in money supply it will increase by 0.1. Testing the significance of correlation coefficient (r) The correlation coefficient computed from sample data measures the strength and direction of a linear relationship between two variables. After we have found the correlation coefficient using Excel Data Analysis we have to test is it is significant or not. Since r is used for single correlation we firstly take into consideration the dependent variable which is Inflation and first independent variable GDP. Stating the hypothesis we have: H0: ρ=0, there is no relationship between inflation and GDP H1: ρ≠0, There is a relationship We have to test this for all three confidence intervals (Alpha 0.01, 0.05 and 0.1) Degrees of freedom are: n-2= 15-2 = 13 445

With this information we can find the critical values and compute the t test. When alpha= 0.1 Critical value= ±1.771 (using table F) Then we find the t-test. r= -0.65 (taken from Excel) Using the formula 𝑡= 𝑟√ : 𝑛−2 we find that t= -3.08 1−𝑟2 Lastly we compare the t value and critical value. Since t value is greater that critical value it means that It falls in the critical region. We reject H0 because there is not enought evidence to support it, meaning that there is a relationship between variables. When alfa=0.05 Critical Value= ±2.160 T test = -3.08 Albanian economy after 2008, an overall look In 2008, in the financial market occurred the most dangerous crisis since the Great Depression in 1930. This great crisis started in United States of America when all the home prices had a really quick downturn leading some big companies and financial institutions bankrupt. The worlds financial crises in 2008 left some marked wounds in different countries economies. We, as developing countries, having a high percentage of our GDP provided by the remittances and migration level, had a sharp fall in the economic growth. It has been one of the most difficult situations to overcome since the fall of communism leaded by Enver Hoxha. As any other financial crisis there are a lot of literature reviews and researches about the causes and results in the everyday life of every country especially in the economic market. Although Albanian economy seemed to be facing this wave of financial problems very well since the inflation level had stayed in the target level from the Bank of Albania as 2-4% and the economic growth (GDP) 8%. The problem would come after 2008 where all the GDP helpers coming from abroad reduced sharply. Remittances fell in considerable amounts. The graph in the end of the section shows the amounts for five years: 2006-2010.

446

Remittances helped the economic stability in our country in the period of transition more than any other macroeconomic factor. Migrants mainly relied at the working sector of Italy and Greece, mostly Greece. This country seemed to be facing the financial crisis in the worst way possible, not like any other country. Greece was forced to sell some of its most touristic islands in order to cover the debt and the pressure pursued by the European Union. The global economic crisis that made Greece behave in this way, made Albania deal with some very difficult issues such were the income entering our country. They kept increasing in the period of 1991-2002 but had the sharp fall in the period of global economic crisis. The fall in the remittances amount in the period of global financial crisis didn’t lead to a sharp fall in the GDP. This happened because the gap created by the missing remittances was filled by saving the trade balance with renewable sources and chromium which in fact is founded in high amounts in some particular cities of Albania. Also the increase in the FDI (Foreign Direct Investment) helped the governance to deal with all that the fallen income from migrant workers. Increase of Foreign Direct Investment wasn’t made by big dealers investing in our country but by a large number of small investors, usually Albanians coming to their home country and trying to help our economy through investment. They believed in their self employment and they reached it. It was like a big investment but only separated in many pieces. In this case people helped the economy just by themselves. The problem consisting in the case is that the self-employment is just temporary. No one could promise a continuing process. Another problem was the trade balance. Even though the government was trying to balance it anyhow with all the alternative choices there was still an existing gap between the remittances and the trade balance. The trade balance seemed to go deep in debt as presented by the annual reports of National Bnk of Albania. Up to now, 2015, Albania is doing the best to overcome what was left by the most dangerous financial after the 2nd World War. The greatest efforts are being applied by Albanian citizens who are working on different sectors of economy. Some of them with agriculture and farming, some others with renewable sources and different natural resources. One thing is sure; there is a long way for us to recover from the wounds of communist regime and different financial fluctuations since we are not a great power in the world market. We are just a small country desiring to live in the standards of the European Union citizens.

447

Source: Annual reports of the National Bank of Albania, 2012 Conclusion Among many other indicators, from the regression model we applied we understand that there is a moderate relationship between GDP, money supply and Inflation in Albania during 19942008. In other perspectives and political conditions inflation and GDP are positively correlated and Money Supply is the main factor that causes Inflation to rise. In Albania is not the same case because of high inflation values. The negative moderate linear relationship is due to the size of values and factors affecting the economy of a country. Just like the authors that have previously stated that high inflation leads to a decrease of economic growth, we also provide the appropriate evidence on the Albanian case after the communist regime. Even though we conducted so many statistical test and almost all of them show that there is a relationship between these variables, there is still a chance that this entire relationship is due to chance and that is the beauty of statistics. References Ceca, K., & Rexha, K., & Orhan,E. (2008). Banking and Finance in South-Eastern Europe: the Albanian Case. Athens, Greece: Bank of Greece. It was held the annual conference to spread 448

knowledge on the economic history of the region in the context of European experience. Retrieved from: http://www.bankofgreece.gr/BogEkdoseis/Paper200884.pdf Bank of Albania (2013). Money Supply in Albania 1994-2008. Tirana, Albania. Retrieved from: http://www.bankofalbania.org/web/Statistika_230_1.php?evn=agregate_detaje&evb=agregate &cregtab_id=270&periudha_id=5 Bank of Albania (2013). Economic Growth (PBB) 1994-2008. Tirana, Albania. Retrieved from: https://www.google.al/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim =country:ALB:KSV:MKD&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny _gdp_ mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:ALB:KSV:MKD&ifdim=regi on&ts tart=454284000000&tend=1369432800000&hl=en_US&dl=en&ind=false World Economic Outlook (2011). Inflation rate in Albania 1994-2008. Annual percentages of inflation. Retrieved from: http://www.indexmundi.com/albania/inflation_rate_%28consumer_prices%29.html Bocconi (2012). International Economics and Business Dynamics. Retrieved from: http://www.fperri.net/TEACHING/bocconi/20205/LEC12.pdf Appendixes Year Inflation GDP

Money Year

Inflatio GDP n

Supply

Money Supply

1994 22.565

265.027 97.397

2002

5.218

423.557 446.119

1995

7.793

288.614 113.31

2003

2.344

448.011 474.238

1996

12.734

314.878 175.401 2004

2.869

473.59

1997

33.166

282.76

2.363

500.865 605.032

1998

20.646

318.671 279.26

2006

2.371

528.067 704.126

1999

0.39

350.857 326.017 2007

2.937

559.223 828.271

2000

0.039

376.469 377.18

3.359

601.368 907.11

2001

3.121

406.362 412.867

241.769 2005

2008

449

532.106

Table1: Data

450



451

Explaining Total Revenue in terms of CapEx, Current Expenditure and VAT; Albanian Case Ditmir Sufaj Department of Banking and Finance, Epoka University, Albania

Abstract Total Revenue is an important indicator of the economic well being of a particular country. As it is known government has revenue either by the taxes it collects from society or by the investments it undertakes. This paper is interested in studying the total revenue component for government and some of the factors that affect it. The factors chosen in this paper are capital expenditure, current expenditure and VAT (value added tax). The factors chosen here are a combination of investment from government (including capital and current expenditure) and tax collection (including VAT), which as stated before are the most important components for a governments total revenue. This paper is especially interested in the Albanian case and the interrelation among the total revenue and the other three factors based on time series econometric model. As a consequence, it will be based more on econometrics, but without leaving behind the economic interpretation of the results. It will be important to measure whether these factors have a positive or negative impact in the total revenue; whether their impact is statistically significant or not and whether they are sufficient indicators to determine the actual values of total revenue. After taking into consideration all these econometric factors, an economic analysis will be applied; by comparing the expectation the economic theory has and the actual results of the econometric model, and by this way will be determined the validity of the model. Keywords: Total Revenue, CAPEX, Current Expenditure, VAT, Econometric model, Albania.

Introduction In this paper we will analyze an econometric model, which consists of the total revenue component explained by capital expenditure, current expenditure and VAT. First of all here we aim to give a term explanation for all variables included in the estimation and make predictions of how do we expect them to affect the dependent variable, total revenue in our case. Then we will test for the significance of all the variables both individually and in group, 452

to see whether their effect on total revenue is significant and whether there exists multicollinearity problem between the variables. After testing for, it is known that econometric models suffer too much from trend and seasonality. Therefore, in this context we test also, for them; check whether they are significant and that being the case we try to remove them. After removing trend and seasonality, we check for the serial correlation, which is also a problem seen in time series data. Again we see for its significance and remove it if necessary. The next test is about the heteroskedasticity of the model, which again is tested for its significance by White Test and that being the case we again try to remove it. Next we test for the functional form misspecification and again look for its significance. That being the case, again we remove it. From the above tests, conclusions are given on the model so that we compare them with our predictions before constructing the model, state whether they explain enough of total revenue etc. 1. Literature Review In this section we try to emphasize some of the most important opinions regarding the topic taken into consideration by some of the most well known scholars and economists. Mahdavi and Westerlund (2008) have shown that regarding the rising fiscal imbalance issue is complicated by at least two issues. Firstly, the division of the burden between the expenditure and revenue parts of the total budget during periods of fiscal problems requires an evaluation of initial levels of both taxes and expenditures, in order to determine if it will be worth changing them in the desired direction. Secondly, as for determining to which variable to give the temporal priority, one has to determine whether the changes that will be made in spending will occur, independently or simultaneously with the changes in taxes. According to Adesola (2000) value added tax is a consumer tax that is charged before selling the good. From his study, VAT is often defined as the sum of profit and wages. Gendron (2005) would define VAT as a consumption tax, taken as a tax base over income. Friedman (1978), one of the first scholars dealing with this issue, suggested that while an increase in taxes leads always to an increase in government expenditures, reduction in revenue would consequently lead to government expenditure reduction. According to the study of 453

Wagner (1976) and Buchanan and Wagner (1978), they argued that due to fiscal corruption, an increase in revenue would lead to a lowering in expenditures. They further concluded that expenditures funded by other things than direct taxation leads the general public to believe that the value of government expenditures is lower than what it would be under direct taxation. In the study of (Eita & Mbazima, 2008), they said that the causal relationship between government revenue and expenditure has remained an empirically debatable issue in the field of public finance. Over the past three decades, many studies have tried to investigate the relationship between expenditure and total revenue; the most important ones are shown below. According to the empirical study of Barro and Grilli (1994), government spending (or government expenditure) includes every kind of government consumption and investment; expect the transfer payments made by a state. Government expenditure can be split into the acquisition of goods and services for current use to directly yield profit or satisfy individual and collective necessities of the society; and the acquisition of goods and services for the purpose of creating future benefits such as infrastructure investment. Therefore, Government expenditure is categorized into either current expenditure or capital expenditure. Current expenditure is short- term spending or, differently stated, spending on items that are consumed and only last a limited period of time. They are items that are consumed in the process of providing a good or service. Contrary to current expenditure, capital expenditure is spending on long-term assets. It is the acquisition of items that will last and will be used time and time again so that they will provide good and services in the long term future. The best example of government expenditure would be the building of a new hospital, the purchase of new computer equipment or networks, building new roads and so on. The splitting point between these two types of spending is very important. While capital expenditure has a lasting impact on the economy and helps provide a more efficient and productive economy, current expenditure, on the other hand, doesn't have such a long-term impact. At the time money is spent, it is gone and the effect on the economic growth is simply a short-term one. The impact of the government expenditure is not yet conclusive and while some authors indicated that the impact of government expenditure on economic growth is negative or non significant (Akpan, 2005), others believed that the impact is positive and significant (Korman and Brahmasrene, 2007).

454

According to Barro (1990), it was indicated that expenditure on investment and productive activities is expected to have a positive contribution to economic growth, while government consumption spending is expected to have a long term growth. Other empirical studies have shown the interrelationship between the VAT revenue of a country and its level of economic growth. The revenue received from VAT is likely to be higher in an economy with higher level of individual income (Ebrill, et al. 2001). The primary expectation is that value added tax will impact positively on economic growth of a particular country. His study found that a positive and significant relationship exist between VAT and government revenue. The results of the finding showed that; the past values of value added tax could be used to predict the future behavior of the revenue. Empirical studies show that there are mixed findings on the nature of the relationship or direction of movement between government expenditure and government revenue. Granger (1969) concluded the revenues may be explained by past revenues and expenditures. Given that the past values of expenditure explain current revenues, then there exists causality of expenditure to revenue. The opposite being the case, then the flow of causation is from revenue to expenditure. 2. Model Specification and Estimation Model Specification Our data were taken from the Ministry of Finance. The data included are: Ø Total Revenue Ø Capital Expenditure Ø Current Expenditure Ø VAT Total Revenue: In business, revenue is the income that any company or government unit receives from its normal business activities, either from the expenditure the government undertakes or from the sale of goods and services to customers. Companies and government units receive revenue also from interest, taxes or other fees. 455

Capital Expenditure: Capital expenditures (CAPEX) are expenditures that are made to create long term future benefits. A capital expenditure is undertaken when a business or government unit spends money either to buy fixed assets or to add to the value of an existing fixed asset, which will provide long term future profits. Current Expenditure: Current expenditure, different from CAPEX, is expenditure on goods and services consumed within the current year, which needs to be made on a frequent basis to maintain the short term activities of the government. Current expenditure includes final consumption expenditure, property income paid, subsidies etc. VAT: A value-added tax (VAT) is a kind of consumption tax. Considering it from the perspective of the buyer, it is a tax on the price purchased. From the perspective of the seller, it is a tax on the value added to a product. The main purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax. Data were taken for the Albanian country from January 1999 to January 2014 on monthly basis, on Ministry of Finance website. Ø Dependent Variable: Total Revenue Ø Independent Variables: Capital Expenditure, Current Expenditure & VAT The aim of this project is to show how the Total Revenue is explained by the Capital Expenditure, Current Expenditure & VAT on time series data. Model Estimation The general Equation: TotRevt = β0 + β1 * Capexpt + β2* Currexpt + β3* VATt + ut What we have to estimate here is the intercept (β0) and the slope coefficients (β1, β2, β3) of the respective variables. From the above equation we expect all of the variables to have a positive impact on Total Revenue, expect Capital Expenditure, which will yield profit on long run terms and not at the same time as the revenue increases. Therefore, in this case we could suffer from time trend problems, since the effect of the capital expenditure is not given immediately, but rather after a long time. Below we show the E-views estimation

456

From the table we can construct the following equation with real numbers. TotRevt = 2746.9 -0.022 * Capexpt + 0.265* Currexpt + 1.82* VATt + ut As expected both Current Expenditure and VAT have a positive impact on Total Revenue, since they yield profit in the short run, while the Capital Expenditure as was expected has a negative impact on Total Revenue, as it yields profit on long run, and time trends problem occur here. The intercept explains that if all the independent variables are 0, total revenue would be equal to 2746.9 The coefficient of Capital Expenditure explains that if the capital expenditure rises by 100 % with time the total revenue falls by 2.2 %. The same logic is also applied also for the two other slope coefficients. Ø Individual Hypothesis:

From the E-views table we can see that the intercept, current expenditure and VAT are significant because their p-values are equal to 0, while the capital expenditure is not significant since its p-value is very big (=0.6188). Ø Group Hypothesis:

H 0: β0 = β1 = β2 = β3 =0 H 1: H 0 is not true We use F-statistics in this case and from the Eviews table we can see that the p-value of the Fstatistics which is equal to 0 therefore the variables are significant collectively. 457

LRP of Capital Expenditure Since the Capital Expenditure is not significant we want to check for time lags of it, so that we can include also other values in other years of that variable and observe if it changes its significance. By this way we can find its LRP (Long Run Propensity).

As observed by the table even when adding lags, they are not significant, including the lag 0 and lag 1, while only lag 2 of Capital Expenditure is significant. We check again for their group significance by the Wald coefficient Restrictions.

As seen from the Wald Coefficient restriction test, it is observed that the variables are significant in group, so that the method of including time lags for the Capital Expenditure will make it significant and what is more important is that it changes also its sign in some cases. The LRP = -0.019 + 0.029 – 0.097 = -0.087

458

Still the LRP keeps being negative, which might lead us to the conclusion that the time trend is the main problem for this case with capital expenditure. 3. Multicollinearity Since we know that one of the main problems that a regression faces is multicollinearity, we need to test for it before passing to the other tests. If there is a high correlation between the variables, then the results we might get will be misleading and we cannot proceed with our model without correcting for multicollinearity. We provide the correlation of each variable relative to the others in the following table.

As seen from the table, there is no high correlation between the variables, which indicates that this model is not problematic with regard to multicollinearity and therefore we can proceed with the other tests. 4. Time Trend and Detrending Defining and estimating trend problems Trend Analysis is the practice of gathering information and trying to generate a pattern, or trend, in that information. Mainly trend analysis is used to predict future events, but it could also be used to estimate uncertain events in the past. Statistically speaking, trend analysis refers to methods for finding an underlying pattern of movements in a time series which would normally be partly or nearly completely hidden by the model. A simple description of these techniques is trend estimation, which can be undertaken within a formal regression analysis. In order to check for the trend, we include a new variable @trend in the equation and check for its significance.

459

To test for the significance of the new term we can see that it is significant in all significance levels and therefore it shows that in this case trend is problematic. We have to detrend the equation. Detrending the equation We generate a new variable t = @trend (1999:01). The logic underlying for this new variable is that it gives incremental values from the beginning date to the ending date. We regress each of the variables on c and t and we save the residuals The new variables are: Ø dtTotrev – residuals saved from the regression of total revenue with c and t Ø dtCapexp– residuals saved from the regression of capital expenditure with c and t Ø dtCurrexp– residuals saved from the regression of current expenditure with c and t Ø dtVAT– residuals saved from the regression of VAT with c and t Now that we created the new detrended variables we can estimate them again to check whether the trend has been removed. Intercept is not included since it will be not significant.

460

Here we see that the coefficients of all the terms changed after detrending, and also that capital expenditure is now positive due to the removal of trend and therefore more significant. Still in order to be sure that the trend was removed we add again the variable @trend to the new equation and observe its significance. If it’s not significant then trend is successfully removed, if it is significant trend was not removed.

As it can clearly be seen from the regression the p-value of the @trend variable is 1 meaning that it is not significant anymore. So the trend was successfully removed. Now that we have removed trend, we want to check also for seasonality, see if it’s significant and that being the case, and remove also it. We will cover it in the next section.

5. Seasonality Definition and Estimation of Seasonality Seasonality is a special characteristic of time series data, in which the data experiences regular and predictable changes which recur every calendar year.

Seasonality is seen in many time series data, and it's more present than one might think. For example, if you live in a climate with cold winters and warm summers, your home's heating costs probably rise in the winter and fall in the summer. Due to this reason, one would expect the seasonality of the heating costs to recur every year.

461

In order to check for seasonality problems, we include 11 new variables, known as @SEAS 2 up to @SEAS12 each representing a month. January is left as base year therefore it is not included. The following table gives the estimation:

To check if the seasonality is significant we test the seasonality coefficients with a Wald Coefficient Restriction test.

462

Since the p-value is 0 we fail to reject H0 therefore the seasonality is significant and problematic in this case. Seasonal Adjustment In order to remove the seasonality, we have to create new adjusted variables for both the dependent and independent variables. The new generated values after the seasonal adjustment are: Ø TOTREVSA – the adjusted total revenue Ø CAPEXPSA – the adjusted capital expenditure Ø CURREXPSA – the adjusted current expenditure Ø VATSA – the adjusted VAT We regress again all these new variables in order to check whether their coefficients have changed and whether seasonality has been removed. When we regress them, we get the following E-views estimation:

Looking to the table, we see that coefficients have changed (Capital Expenditure is positive) and other variables have changes slightly. Still we want to prove that we have removed seasonality, therefore we add again all the 11 dummy variables to check if they are significant and to check if we removed seasonality.

463

From the above table all of them look not significant individually, but we use again Wald Test to check for their group significance.

Seen from the table the probability of them being equal to 0 is = 97%. Therefore, this is a strong evidence to accept the null hypothesis that the coefficients of all the seasonal dummy variables are equal to 0 6. Autocorrelation Defining Autocorrelation Autocorrelation, known also as serial correlation, is the cross-correlation of a particular variable with itself. Informally speaking, it is the similarity between observations as a function of the time lag between them. It is a mathematical tool for finding repeating patterns, such as the presence of a periodic signal obscured by noise, or identifying the missing fundamental frequency in a signal implied by its harmonic frequencies.

464

Testing for Autocorrelation Before checking for Heteroskedasticity we have to check for the serial correlation and if necessary correct for it, since if serial correlation exists, then heteroskedasticity test will be invalid ut = α0 + α1 * ut-1 + α2 * ut-2 + vt

We include two lags in the regression to see whether the error terms are correlated within two time lags. We use LM serial correlation test Our hypothesis is: H0: α1 = α2 =0

H1: H0 is not true

From the table received by including two time lags of the serial correlation, we can see that their F-statistics p-value=0.415 is very high and therefore we fail to reject H0 It concludes that there is no serial correlation between the error terms in different time intervals and therefore we can easily test for heteroskedasticity now. 7. Heteroskedasticity Definition of Heteroskedasticity In statistics, any random variable is heteroskedastic if there are samples that have different or non-constant variances from others. Thus heteroskedasticity is the absence of homoskedasticity. 465

The possible existence of heteroskedasticity complicates the application of regression analysis, mainly the analysis of variance, because the presence of heteroskedasticity can invalidate statistical tests of significance that assume that the modeling errors are uncorrelated and normally distributed and that their variances do not vary with the effects being modeled. Testing for Heteroskedasticity We use the white test to check whether heteroskedasticity is present, which adds 6 new variables to the equation, with interaction terms and squares. We get the residuals from the estimated equation We have Ût = totrevt - totrevt Ût2 = θ0 + θ1 * Capexpt + θ2* Currexpt + θ3* VATt + θ4 * Capexpt ^2 + θ5 * Currexpt ^2 + θ6 * VATt ^2 + θ7 * Capexpt * Currexpt + θ8 * Capexpt * VATt + θ9 * Currexpt * VATt + ε We want to test for: H0: θ1 = θ2 = θ3 = θ4 = θ5 = θ6 = θ7 = θ8 = θ9 = 0 H1:

H0

is

not

true

Significance level = 5% From the following E-views table, we can see the results of heteroskedasticity.

From the eviews result we can see that the p-value of the F-statistics is 0.092 and therefore we fail to reject it at 5% significance level, but not at 10% significance level. Therefore, heteroskedasticity is not problematic at 5 % significance level (the level at which we are interested).

466

8. Functional Form Misspecification Definition of functional form Misspecification In regression, functional form specification is the process of developing a regression model. This process consists of selecting an appropriate functional form for the model and choosing which variables to include. As a first step of regression analysis, a person specifies the model. If an estimated model is mispecified, it will be biased and inconsistent. Specification error occurs when an independent variable is correlated with the error term. Testing for functional form misspecification To test for functional form misspecification, we transform the equation as follows: TotRevt = β0 + β1 * Capexpt + β2* Currexpt + β3* VATt + θ0TotRev t2 + θ1TotRevt3 We have included two fitted variables We want to test for:

H0: θ0 = θ1 = 0 H1: H0 is not true Significance level =5% From the e-views table we can observe the new estimated equation. The F- statistics and its pvalue is given in order to test for the fitted values. Since the p-value is very large, it shows that the null hypothesis will not be rejected at any significance level. Therefore, our model doesn’t suffer from functional form misspecification.

467

The test used in this case is the Ramsey Reset Test and will be shown in the following table:

9. Conclusion This paper was based on the estimation of econometric equation including the variables: total revenue, capital expenditure, current expenditure and VAT. The primary reason of undertaking this study was to see how total revenue was affected by these variables. By considering also the economic theory, this would generate a kind of comparison between the econometric model, and the theory of economists. The main conclusion that we found on VAT and Current Expenditure, which is also reinforced by the economic theory, is that they positively affect the Total Revenue of the government, and furthermore they are significant. Economically speaking, as shown in the literature review, these two factors are expected to have a positive impact in the total revenue of any government. The next conclusion, that was found out is that CAPEX has a negative impact in the Total Revenue of the government, which is misleading since the variable is not significant. The economic interpretation of this issue is that CAPEX is a long term investment, which will yield profits in the distant future, and therefore it doesn’t follow the same trend with the total revenue. This was further proved by the LRP of CAPEX, which changed the sign of the variable and reduced its nonsignificance. Furthermore, the positive effect of CAPEX on Total Revenue was proved by Trend and Seasonality test, which in both cases they showed that there exists trend and seasonality, and after removing them it could be observed that the CAPEX would become positive and significant. Furthermore, it was checked for heteroskedasticity, which was not present and therefore it wouldn’t give any problem in applying the test in our model. All the other tests performed, in order to indicate whether this model was being used properly, showed that there was no problems in the model expect, the trend and seasonality issue; which were fixed by the help of E-views. As a general conclusion, it can be stated that the 468

economic theory, which is important to state that it was taken from the foreign literature, was moving in the same direction, with the model that was built for the Albanian case; meaning that the same findings on literature were further reinforced by the model taken into consideration. References Afonso, A. and Rault, C. (2009). “Bootstrap panel Granger-causality between government spending and revenue in the EU”, The William Davidson Institute Working Paper No. 944, January. Bohn, H. (1991). “Budget balance through revenue or spending adjustments? Journal of Monetary Economics, 27, 333-359. Chang, T.; Liu, W., Caudill, S. (2002). “Tax-and-Spend, Spend-and-Tax, or Fiscal Synchronization: New Evidence for Ten Countries,” Applied Economics, 34(12), 1553-1561 Ewing, B., Payne, J., Thompson, M., Al-Zoubi, O. (2006) “Government expenditures and revenues: evidence from asymmetric modeling”, Southern Economic Journal, 73(1), 190-200. Fasano, U., Wang, Q. (2002). “Testing the relationship between government spending and revenue: Evidence from GCC countries”, IMF Working Paper WP/02/201. Von Furstenberg, G.M.R., Green, J., and J.H. Jeong (1986) “Tax and Spend, or Spend and Tax?” Review of Economics and Statistics, 68, 179-188. Kollias, C., Paleologou, S.M. (2006). “Fiscal policy in the European Union: Tax and spend, spend and tax, fiscal synchronization or institutional separation?” Journal of Economic Studies, 33(2), 108-120. Merrifield, J. (2000). “State government expenditures determinants and tax revenue determinants revisited”, Public Choice, 102, 25-50. Miller, S. and S. Frank (1990) “Co-integration and Error-Correction Models: The Temporal Causality between Government Taxes and Spending,” Southern Economic Journal, 57(1), 221- 229. Payne, J. (1998). “The tax-spend debate: Time series evidence from state budgets”, Public Choice, 95(3-4), 307-320. Ram, R. (1988) “Additional Evidence on Causality between Government Revenue and Government Expenditures,” Southern Economic Journal, 54(3), 763-769. Chang, Tsangyao and Chiang, Gengnan (2009) “Revisiting the Government RevenueExpenditure Nexus: Evidence from 15 OECD Countries Based On the Panel Data Approach.” Czech Journal of Economics and Finance, 59(2): 165-172.

469

Im, K.S., Pesaran, M.H., Shin, Y. (2003) “Testing For Unit Roots in Heterogeneous Panels.” Journal of Econometrics 115(1): 53–74. Whenkrofff, G.S. (2003). Value Added Tax in the Enlarge Command Market. 1st edition, Association Business Programme, London. Folster S and M. Henrekso (1999), “Growth Effects of Government Expenditure and Taxation in Rich Countries”, European Economic Review, 45: pp1501-1520.

470

Empirical Evidence of Elasticity of Export and Import Towards the Change of Prices and Income - The case of Republic of Macedonia Merale Fetahi-Vehapi & Liridona Lutfiu State University of Tetovo, Macedonia

Abstract The imbalance of balance of payments and the presence of continued growing current account deficit are significant value for the stability of external equilibrium for different time prospects especially for long-term periods. A growth of global prices reflects immediately at the imbalance of the external equilibrium, reflecting as a value for having a balanced stability. The purpose of this paper is to analyze the sensitivity and the changes of trade, export and import from one side and the change of prices and income on the other side. The aim of this paper is to use the Thirlwall and ARDL model as most used models for quantifying the elasticity of these categories. The results for the case of Macedonia show that there is a significant elasticity of imports from the change of domestic income, and relative elasticity of exports from the change of global income. Variables that are used in this paper are: export, import, GDP, price ratio, ratio of domestic export prices to world prices, and ratio of foreign prices of imported goods and domestic prices for the period of 1990-2012. Keywords: Prices, Income, Export and import, Thirlwal model, Republic of Macedonia.

Introduction The relationship between elasticity of Income, price and economic growth has been extensively discussed in economic literature. Most studies show a strong correlation between such variables. Developments of financial and economic integrations in recent years have escalated larger pushing the process of trade cooperation towards liberalization which in some cases results in the deterioration of the deficits as high in countries insufficiently developed. The developments in foreign trade flows could have large implications for small open economies. The prediction of income and price elasticity are useful for policy makers who need to advance the position of foreign trade with the rest of the world.

471

The conventional economic theory on international trade links the long run quantity demand for imports or exports to domestic (foreign) income growth, developments of domestic and foreign prices and changes of local currency39. Houthakker and Magee (1969)c estimate empirical evidence for income and price elasticity for a number of developed countries, so they conclude that if their production and prices increased at the same rate the trade balance improvement or deterioration in some countries was influenced by disparities in income elasticity of their demand for imports. Also Abdelhak, Senhadji and Claudio (1999) ci mentioned that higher the income elasticity of the export demand, the more powerful exports will be as an engine of growth. By Nilsson (2005)cii, countries that try to improve competitiveness of non-price characteristics of export40 create an environment for higher economic growth. Thus, as higher income elasticity of exports is it will have as greater role in achieving economic growth. According to everything mentioned above, it is important to conclude that the estimation of the export and import sensitivity to the price and income changes is an important feature for macroeconomic policy to limiting the country's trade deficits and to advance the position of foreign trade. Republic of Macedonia is characterized as a small country with an open economy and dependent on the global market, which is characterized with concentrated exports in a few countries in the region and within the European Union. The balance of payments and trade balance permanently аre showing deficit from year to year. Therefore, the motivation for the reduction of this deficit in most cases requires structural improvement and changes in the export sector and changes to the country's macroeconomic policies. Thus, beside the primary goal of this analysis – the estimation of prices and income elasticities of the Macedonian export and import, the estimated elasticities will be used in Thirlwall’s model by using Error Correction Model technique. Thus, the economic growth of the Republic of Macedonia will be estimated through the export growth rate and the income elasticity of the import.

39

The success of devaluation depends of the fulfillment of Marshall-Lerner condition, which can be expressed as (M/X) |em| + |ex| >1, where M and X are the values for the import and export, and em and ex are the price elasticity of the import and of the export 40

captured through the income elasticity of the export demand 472

The structure of this analysis is the following: the second section gives a literature review on the Thirlwall’s law and ECM technique. Section three lay out the method applied in this study. In section four the results of the study are presented and analysed followed by the conclusions. 2. Model for Economic Growth - Thirlwall Model Thirlwall model is detected since 1979 and is one of the most important models that explains the difference between the developed countries and countries on development. A relationship between growth rate and balance of payments of a country is as an economic rule for economic development. Therefore, for long term periods growth is assumed that a balanced trade balance is important for economic growth in an economy. Thirlwal model is based on sustainable capital, nominal flows, fixed deficit and debt levels expressed as a percentage of GDP. The rule of Thirlwall model is based on the trade multiplier founded by Harrodi 1993 and focuses aggregate demand. According to this model the driving force of economic growth is the rate of growth of effective demand when in the other side we have an offer that reacts passively. Thirlwall model for economic growth states that in long term growth of national income is determined by the ratio of export and import elasticity. (π, y = x / π). This model can also be expressed as: In the long term periods any country can’t grow faster than the rate of compliance with the balance of the balance of payments, only if they found the deficit, that grows continuously. Also by this economic model is stated that different countries have different growth level due to various aggregate demand growth. Due to this if demand grows faster than the growth of local capacity that leads up to disoriented balance of payments (an increase of imports), and the offer is not fully used, local investments will decline, technological development will come down, which will cause a decline in competitiveness and domestic export. In opposite if demand grows up to the level of local capacity, without causing problems in the balance of payments then demand will determine the increase of capacity which means that we will have new investment in stock market and technology development. Thirlwall’s model is based on the fact that economic growth is based on the assumption that the expansion of exports stimulates the economic growth of the state without affecting the balance of payments. But the same export levels in different countries do not produce the same levels of economic growth due to the existence of different elasticity of import (Moudud, 2000). Thirlwall's model consists of two basic equations such as:

473

X = (Pd / Pf) ηZξ and M = (Pd / Pf) φYπ where if the parameters ξ, π, φ> 0 and η <0 then X, M, Y, Z are imports, exports, domestic income, respectively ratio (Pd / Pf) presents the local prices to foreign prices measured in a common currency, η and φ are price elasticities and ξ, π are income elasticities for imports and exports. If we take natural logarithm equations we have: x = η (pd-pf) + ξz and m = φ (pd-pf) + πy If we have an import-export balance then η (pd-pf) + ξz = η (pd-pf) + ξz Then we can calculate the growth of the country's balance of payments and y * = [(η - φ) / π] (pd-pf) + (ξ / π) z Combining the above equations y * = - (φ / π) (pd-pf) + (1 / π) x Based on Thirlwall model is assumed that relative prices measured in a common currency are constant (pd-pf) = 0 And then the growth rate will be y = y * = (ξ / π) z = (1 / π) x Based on the equation above results that the growth rate is determined by economic multiplier (1 / π) and the growth rate of exports based x. Due to this, the income elasticity reflects the competitive aspects that do not depend on prices, and thus states that are more competitive in foreign trade will have a ξ with a higher value and π with lower value. 3. Methodology, model specification and data The empirical analysis of this study was done through the error correction method (ECM). It is very crucial for times series to select the right estimation methodology (Harris, 1995). The most disturbing fact is non stationarity of the data as it may cause a spurious regression. To avoid this, it is necessary to be used the co integration methodology. For this reason, the stationarity of series was first tested and after the regression equations are estimated by the Engel- Granger procedure in two steps (Engel and Granger, 1987). The first step is to estimate a long run relationship equation using ordinary least squares (OLS) with variables which are integrated of order I(1). In order to avoid spurious regression, residual based co integration test can be used, where the stationarity of the residual implies a cointegrating relationship among the variables in the long run equation. The second step of the E-G procedure is to estimate the corresponding error correction model based on the long run cointegrating relationship to observe the short run dynamics (Engel and Granger, 1987). One can estimate an ECM using the residual from the long run equation. The ECM is based on stationary data as all the I(1) regressors are in first difference form and includes the lagged residuals of the long run equation, which is also I(0) when the variables have cointegrating relationship. 474

The specification of both the export and import models, respectively, using the ECM methodolgy can be shown as in the following: ∆𝐸𝑋𝑃A = 𝜃2 + 𝜃- 𝜇A,- + 𝛿- ∆𝑊𝐺𝐷𝑃A + 𝛿. ∆𝐷𝐸𝑃A + 𝜀A … . . … . . . (1) where: 𝜇A,- = 𝐸𝑋𝑃A,- − 𝜂2 − 𝜂- 𝑊𝐺𝐷𝑃A,- − 𝜂. 𝐷𝐸𝑃A,- − 𝜂0 𝑇 ∆𝐼𝑀𝑃A = 𝜃′2 + 𝜃′- 𝜇A,- + 𝛿′- ∆𝐺𝐷𝑃A + 𝛿′. ∆𝐷𝐼𝑃A + 𝜀′A … … … . . . (2) where:

𝜇A,- = 𝐼𝑀𝑃A,- − 𝜂′2 − 𝜂′- 𝐺𝐷𝑃A,- − 𝜂′. 𝐷𝐼𝑃A,- − 𝜂′0 𝑇

In the first equation, 𝐸𝑋𝑃A,- , 𝑊𝐺𝐷𝑃A,- and 𝐷𝐸𝑃A,- are regressors with one period lagged for EXP, WGDP and DEP, respectively. T is the trend variable, whereas 𝜇A,- is the one period lagged value of the error from the cointegration equation. The above model states that ∆𝐸𝑋𝑃A depends upon both 𝜇A,- and regressors ∆𝐺𝐷𝑃A and ∆𝐷𝐸𝑃A . If 𝜇A,- is different from zero then there will be disequlibrium. The same logic is also for the second model, 𝐼𝑀𝑃A,- , 𝐺𝐷𝑃A,- and 𝐷𝐼𝑃A,- are regressors with one period lagged for IMP, GDP and DIP, respectively. T is the trend variable, whereas 𝜇A,is the one period lagged value of the error from the co integration equation. The above model states that ∆𝐼𝑀𝑃A depends upon 𝜇A,- and ∆𝐺𝐷𝑃A and ∆𝐷𝐼𝑃A . We equalize the price elasticity and income to the function based on the demand for export and import: 𝑙𝑛𝑋𝑡 = 𝛼0 + 𝛼1𝑙𝑛𝑊𝐺𝐷𝑃𝑡 + 𝛼2𝑙𝑛𝑅𝑃𝑋𝑡 + 𝜇𝑡 𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑦 𝑓𝑜𝑟 𝑒𝑥𝑝𝑜𝑟𝑡 𝑙𝑛𝑀𝑡 = 𝛽0 + 𝛽1𝑙𝑛𝐷𝐺𝐷𝑃𝑡 + 𝛽2𝑙𝑛𝑅𝑃𝑀𝑡 + 𝑉𝑡 𝑖𝑚𝑝𝑜𝑟𝑡 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛 The model includes the following variables: X and M are exports and imports, real goods and services of the Republic of Macedonia, DGDP and GDP are Real GDP national GDP real world in dollars (as a proxy for national income and world) , RPX and RPM are the relative prices of exports and imports (RPX is the ratio of domestic export prices to world prices, while RPM is the ratio of foreign prices of imported goods to domestic prices). All variables are in logarithmic form and on quarterly basis, while the remains of the demand for export and import, respectively. α1 and β1 are the income elasticity of exports and imports, while the α2 and β2 are the price elasticity of exports and imports.

475

Exports and real imports are calculated by the reduction of export and import values (in millions of dollars) prices of export and import. Domestic GDP are calculated as the ratio of nominal GDP to the GDP deflator (2005 = 100), using the same deflator of GDP for all four quarters of last year. Source of data for export and import data (values), the domestic export and import prices, CPI, GDP (in pence) and the deflator of GDP is the State Statistical Office of the Republic of Macedonia, world prices export is calculated in the Research Department in NBRM, GDP and GDP deflator trade partner countries involved in the global calculation of income are taken from World Bank Reports. The description of the data is given in the following table: Table 1. Description of the data Variable

Abbreviation Description

Source

Economic growth

GDPG

Level of growth of real GDP

SSO

Real GDP

RGDP

GDP

with

constant

prices SSO

2005=100 Domestic Export Prices DEP

The difference of logarithm of NBRM export relative prices with one quarter time lag)

Domestic

Import DIP

Prices

The difference of logarithm of NBRM, SSO import relative prices with one quarter time lag)

Consumer Price Index

CPI

Consumer price index 2005=100

SSO, NBRM

Exports

EXP

Real export of goods and services SSO, NBRM of Macedonia on dollars

Imports

IMP

Real import of goods and services SSO, NBRM of Macedonia

In accordance with available data, the model is based on 31 observations for the period from Q1.2003 up Q1.2014. 476

The calculation of GDP based on the amount of the arithmetic average of the seven most important trade partners with the Republic of Macedonia (countries in which the Republic of Macedonia exports more), expressed by the following formula: +g4

𝑊𝐺𝐷𝑃 =

𝑎ef 𝑌fA fg-

Where a_ij is part j normalized trade partner in export country, namely the Republic of Macedonia, Y_jt is real GDP of country j. Weight structure is based on the average share in the export trade partners of Macedonia in the period 2003-2014, and as the most important partners of trade were selected: Germany, Serbia and Montenegro41 Greece, Italy, USA, Netherlands, and Croatia, of which common share are about 75% of total exports. World real GDP (WGDP) calculated based on the data of the GDP of each country (at constant prices expressed in respect of the national currency). Resources for GDP data of countries are International Financial Statistics (IFS) and national statistics and values of GDP in national converted to dollars and the deflator of GDP (2005 = 100) for each country respectively, and used the same deflator GDP for all quartiles of the respective year. Relative export prices are calculated as a ratio of the country's export prices to world prices. World prices are calculated in the NBRM, WXPI Republic of Macedonia Index weighted price that includes world prices Stock Exchange (transformed into indicator) of raw materials and products with the largest share structure in Macedonian export: cotton, tobacco, lamb, iron ore, nickel, steel products and zinc. Normalized weight structure is arranged for the entire period and it is derived from the portion of these raw materials and export of Macedonian products in 2005. Both series of price (domestic and foreign) are re-based to the base year 2005 = 100, and quarterly data are calculated as an average of the months in the corresponding quarter. Relative prices of imports are the ratio of import prices to domestic prices, Index of Consumer Prices (CPI through which domestic inflation is measured), while indexes chained CPI are based on 2005 = 100, and Quarterly data are calculated as an average of the months in the corresponding quarter, while import price series is re-based with base year 2005 = 100.

41

Serbia and Montenegro are taken together because we didn’t have separated data for all the period of time just from 2007.

477

Besides the fact that the procedure does not require testing ECM prior to stationary time series, Dickey Fuller test (ADF test) was conducted to determine the order of integration of variables (variables). ADF test was applied to all time series included in the level and change their first or trend continued, with interruptions, and disruption and trend. Tests show that many of the series are on non stationary level, and change the first stationary or except for the series of export earnings and domestic. 4.Empirical estimation Table 2 ADF Test first difference Variables

T-Statistic

Level

of

Order

significance LX

-3.005

5%

integration No const and I(1) trend

LM

-2.971

5%

No const and I(0) trend

LGDP

-2.418

5%

No const with I(0) trend

CPI

-2.426

5%

No const with I(1) trend

NGDP

-5.126

5%

No const with I(0) trend

LSUMWGDP

-5.876

5%

No const and I(0) trend

DEP

-5.281

5%

No

const

no I(1)

trend

no I(1)

trend DIP

-6.653

5%

No const

478

of

The method in analyzing the long run equilibrium relationship between Macedonian’s exports and imports, requires the determination of the integration order of each variable. This shall be accomplished by unit root testing of the macro time series variables. The unit root test provides the information about the presence/absence of stationarity of the time series variables in levels or first difference If the time series variables, exports and imports, are not stationary in levels, then the series contain unit root. The estimates of economic relationships based on OLS method in the presence of unit root in the levels. The non stationary time series data on exports and imports require to be differenced until stationarity has emerged. The popular methods to detect the presence/absence of unit root and for determining the order of integration of each variable, exports and imports are the Augmented Dicky Fuller test and Phillips-Perron test. The order of integration of each time series variable needs to be established first. With a view to find the degree of integration of the residuals from the cointegration regression of exports on imports and imports on exports, ADF and PP test statistics have once again been estimated for residuals. Table-3 reports the calculated ADF and PP test statistics for the level of the residuals. The calculated ADF and PP test statistics are higher than the MacKinnon critical values showing that the residuals in level form are on a stationary process i.e., they are U~ I(0). The exports and imports series have unit root in levels while the residuals from cointegrated regression have no unit root in levels. Therefore, though the exports and imports series are non stationary in log level form, their linear is stationary in level form evincing the fact that Macedonia’s exports and imports are co integrated in the long run. This empirical content [through the Engel - Granger Representation] leads to conclude that there is a long run equilibrium relationship between exports and imports in Macedonia during the period under consideration.Further, the regression coefficients on log imports and log exports in two cointegration regressions, constant elasticities, are close to unity with trifling difference, which can be expected in the long run, indicating that in the long run one percent of Macedonian’s imports is synchronized by one percent of Macedonian’s exports and vice-versa resulting long run trade balance in Macedonia. There is the ECM model where is shown the effectiveness of trade policies in correcting the disequilibrium has been scanned on the basis of ECM. The effective trade policies in correcting the disequilibrium reflects the responsiveness of the changes in exports or imports to previous deviations of actual exports or imports from long run equilibrium. In other words, the equilibrium term that entered the ECM as explanatory variable allows to examine the effectiveness of the trade policies to move toward a new equilibrium. With a view to provide 479

an empirical content to this an error correction modeling [ECM] which combines a long run co integration relationship and short run corrections/adjustments of cointegrated variables toward the long run equilibrium has also been attempted to first differenced variables and error correction variable, which are stationary. An interaction variable is also inducted in the model to scan whether the economic reforms helped in reducing the disequilibrium between short run dynamics and long run values.

.4 .2 -.4

-.4

-.2

0

dlog_imp

0 -.2

dlog_exp

.2

.4

Graphs

2004q1

2006q3

2009q1 t

2011q3

2014q1

2004q1

2006q3

2009q1 t

2011q3

2014q1

-2

-.2

-1

0

dlog_sumwgdp

0 -.1

dlog_gdp

1

.1

2

.2

Graph of domestic exports in first difference Graph of domestic imports in first difference

2004q1

2006q3

2009q1 t

2011q3

2014q1

2004q1

2006q3

2011q3

2014q1

Graph of World Gdp

.1 0 -.1

dlog_RPM1

0

-.2

-.2

-.3

-.4

dlog_RPX

.2

.2

.4

Graph of Domestic GDP

2009q1 t

2004q1

2006q3

2009q1 t

2011q3

2014q1

2004q1

480

2006q3

2009q1 t

2011q3

2014q1

Graph of foreign exports

Graph of foreign imports

Table 3. Results of co integration test H0 : λ1= λ2= λ3=0 Statistics

probability

F(3,14)=5.57244

0.001

CHSQ(3)=21.63616

0.000

Pesaran critical values Intercept and no trend k=2 Level of significance 0,05 I(0)

I(1)

3.97

4.78

From the table we see that there is a normal distribution of the trend and no autocorrelation. Table 4 Long run coefficients based on model for import demand Depended variable DLRM (difference of logarithm of import Regressor

Coefficients

Standard Error

Tstatistic

LGDP

3.5674

0.6907

4.9789

LM

-1.6148

0.3895

-4.1464

con

-17.5905

4.5787

-3.0606

Ø The results show that the import income and price elasticities are 3.57 and -1.62, tha they are statistical significant (at 1%) and have the right signs of the coefficients. Ø It means that in the long run, if domestic income (GDP) rises by 1%, then the import demand will increase for 3.57%, while if relative import prices rises for 1%, than the import will decrease for 1.62% (higher foreign prices than domestic prices determine import fall, or lower domestic than foreign prices lead to import decrease). 481

Ø Namely, the results illustrate that the Macedonian import is highly sensitive to the domestic income changes, which means that if the domestic income grows, than the domestic economic subjects increase their demand, which determine import growth. Table5. Long run coefficients based on export supply Depended variable LX(logarithm of export) Regressor

Coefficients

Standard Error

Tstatistic

LSUMWGDP

1.5232

0.3565

4.1235

LX

-0.8172

0.3103

-2.3156

con

-14.3533

4.8389

-2.9412

} The results show that income and price elasticity of the export are 1.52 and -0.82, respectively, they are statistical significant (at 1% and 5% level of significance, respectively) and have the expected signs. That means that on long term, if the world income rises 1%, than the Macedonian export demand will increase 1.52%, while if relative export prices rise 1%, the export will decrease 0.82% (higher domestic prices than foreign prices determine export fall). } This points out that the Macedonian export is more sensitive to the world income changes than to the relative prices changes. It indicates that price characteristics of the Macedonian export are not the main determinant of the foreign demand, which depends more on non-price (qualitative) aspects of the export. Thus, in order for the domestic exporters to increase their export to world markets, it is necessary for them to improve the non-price aspects of the export (quality, distribution, marketing etc.) for which it was determined that there is a sensitive international capital. Table 6. Short run dynamic and ECM Difference of logarithm of import Regressor

Coefficients

Standard Error

Tstatistic

dLDGDP

2.4012

0.3265

7.1235

dLM

-1.4021

0.3213

-4.3012

dLM1

0.5493

0.3413

1.6017

con

-12.1023

2.3324

-5.1902

ECM(-1)

-0.6902

0.1042

-6.5102

482

Rsquared 0.85351 } The results show that only the variable dLM1 (the difference of logarithm of import relative prices with one quarter time lag) is not statistical significant (at 10% level of significance). On the other hand, short run changes in domestic income (dLDGDP) and in the relative import prices (dLM) are statistical significant (at 1% level of significance), which points out that they significantly influence the short run import change. } That means that import reacts immediately to changes in domestic GDP and to the changes of relative prices. The coefficient in front of the error correction term (ECM), which is speed of adjustment, is significant and shows fast adjustment to the long run equilibrium. Namely, around 69% of the disequilibrium in the previous period (quarter) is adjusted back to the long run equilibrium in the current period. In other words, in absence of changes in other variables, the high coefficient indicates fast adjustment to the long run equilibrium between the variables. Table 7. Short run dynamic and ECM Depended variable DLX(Difference of export logarithm) Regressor

Coefficients

Standard Error

Tstatistic

dLX1

0.3012

0.2014

0.1601

dLSUMWGDP

2.6132

0.6691

3.9313

dLSUMWGDP1

0.5595

0.7692

0.7301

dLSUMWGDP2

1.5794

0.8541

1.8703

dLRPX

-0.1234

0.3203

-0.3904

dLRPX1

0.1382

0.2910

0.4732

dLRPX2

-0.0299

0.2734

-0.1101

dLRPX3

0.7403

0.2534

2.9202

DCon

-9.7002

4.7710

-2.0330

Ecm(-1)

-0.6702

0.1911

-3.4903

Rsquared 0.75012

} The results show that only short run change in world income (dLSUMWGDP) has an influence on the short run dynamics of the export at the 1% level of significance. The other short run changes (including those with time lags) do not have effects to the 483

export on short term. } The error term coefficient is significant and shows fast adjustment back to the long run equilibrium. Thus, almost 67% of the disequilibrium in the previous period, derive d by the short run changes, adjusts back to the long run equilibrium in the actual quarter. } This empirical content [through the Engel - Granger Representation] leads to conclude that there is a long run equilibrium relationship between exports and imports in Macedonia during the period under consideration. } Further, the regression coefficients on log imports and log exports in two cointegration regressions, constant elasticities, are close to unity with trifling difference, which can be expected in the long run, indicating that in the long run one percent of Macedonian’s imports is synchronized by one percent of Macedonian’s exports and vice-versa resulting long run trade balance in Macedonia. 5. Conclusion The main purpose of this paper is in detail to clarify the influence of elasticity of import and export elasticities on economic growth. The practical application of elasticity highlights the determinats of economic growth of Republic of Macedonia. Therefore we used Thirwal model here as a suggested model and with more accurate determinations. The results showed a sensitivity of imports to the changes of income in Macedonia, but a lower sensitivity to changes of relative prices. The elasticity of exports also represents sensitivity to the changes of income but no sensitivity of changes in relative prices. These results indicate that the country's economic entities are more sensitive to changing economic price than non-resident entities (foreign). The analysis shows that the elasticity of import is higher than export elasticity (π> ξ) which brings to imbalance of trade balance. Most of domestic products determined for export from Macedonia are represented by agricultural products. Macedonian export products must compete with the world products in the quality of the products based on world standards with successful promotion and good distribution. Just in this way can be contributed to increase exports and decrease imports.

484

References: The Review of Economics and Statistics: Income and Price Elasticitis in World Trade, 1969. Time Series Analysis of Export Demand Equations: A Cross-Country Analysis Abdelhak S. Senhadji and Claudio E. Montenegro, IMF Staff Papers Vol. 46, No. 3 (September/December 1999) © 1999 International Monetary Fund Economic Composicion and Econimic Growth, 2005 Posner, Richard. 2010. “Double Exports in Five Years?” The Becker-Posner Blog, February 21. http://uchicagolaw.typepad.com/beckerposner/2010/02/double-exports-in-five-yearsposner.html Bairam, I. E. (1993) Income elasticities of exports and imports: A re-examination of the empirical evidence. Applied Economics, Vol. 25, pp. 71-74. Bairam, I. E. and Lawrence, N. G. (2001) Thirlwall’s Law and the Stability of Export and Import Income Elasticities. International Revieë of Applied Economics, Vol. 15, No. 3, pp. 287-303 Gafar, J. (1995) Some estimates of the price and income elasticities of import demand for three Caribbean countries. Applied Economics, Vol. 27, pp. 1045-1048. State Statistical Office of the Republic of Macedonia. www.stat.gov.mk www.imf.org www.oecd.org www.worldbank.org

Appendix varsoc dlog_imp dlog_gdp dlog_dip

485

Selection-order criteria

Sample:

2004q2 - 2014q1

Number of obs

=

40

+---------------------------------------------------------------------------+

|lag |

LL

LR

df

p

FPE

AIC

HQIC

SBIC

|

|----+----------------------------------------------------------------------|

|

0 |

21.0352

.021502* -1.00176* -.986493* -.959537* |

|

1 |

21.0662

.06209

1

0.803

.022571

-.953311

-.922779

-.868867

|

|

2 |

22.7455

3.3586

1

0.067

.021821

-.987277

-.941478

-.860611

|

|

3 |

23.2423

.99348

1

0.319

.022386

-.962114

-.901049

-.793226

|

486

|

4 |

24.7373

2.9901

1

0.084

.021853

-.986866

-.910535

-.775756

|

+---------------------------------------------------------------------------+

Endogenous:

dlog_exp

Exogenous:

_cons

. varsoc log_exp

Selection-order criteria

Sample:

2004q1 - 2014q1

Number of obs

=

41

+---------------------------------------------------------------------------+

|lag |

LL

LR

df

p

FPE

AIC

HQIC

SBIC

|

|----+----------------------------------------------------------------------|

|

0 | -14.1066

|

1 |

23.7437

|

2 |

|

|

.122339

.736908

.752127

.778703

|

75.701*

1

0.000

.020273* -1.06067* -1.03023* -.977081* |

23.834

.18057

1

0.671

.021197

-1.01629

-.970635

-.89091

|

3 |

25.163

2.658

1

0.103

.020867

-1.03234

-.971465

-.865164

|

4 |

25.8467

1.3674

1

0.242

.021204

-1.01691

-.940816

-.80794

|

+---------------------------------------------------------------------------+

Endogenous:

Exogenous:

log_exp

_cons

Based on this we order the optimal level of exports and we see that the optimal level is the first level.

varsoc

log_imp

dfuller r

487

Dickey-Fuller test for unit root

Number of obs = 43

---------- Interpolated Dickey-Fuller ---------

Test

1% Critical

Statistic

5% Critical

Value

10% Critical

Value

Value

------------------------------------------------------------------------------

Z(t)

-8.046

-3.628

-2.950

-2.608

------------------------------------------------------------------------------

MacKinnon approximate p-value for Z(t) = 0.0000

. reg

dlog_exp dlog_dep log_sumwgdp

Source |

SS

df

MS

Number of obs =

-------------+------------------------------

F(

2,

34

31) =

10.41

Model |

.209233316

2

.104616658

Prob > F

=

0.0003

Residual |

.311599372

31

.010051593

R-squared

=

0.4017

Adj R-squared =

0.3631

Root MSE

.10026

-------------+------------------------------

Total |

.520832687

33

.015782809

=

------------------------------------------------------------------------------

dlog_exp |

Coef.

Std. Err.

t

P>|t|

[95% Conf. Interval]

-------------+----------------------------------------------------------------

dlog_dep |

1.820087

.4001312

4.55

0.000

488

1.004014

2.63616

log_sumwgdp |

-.0054654

.0069798

-0.78

0.440

-.0197009

.00877

_cons |

.0870585

.0865397

1.01

0.322

-.0894404

.2635575

reg

dlog_exp dlog_dep dlog_sumwgdp

Source |

SS

df

MS

Number of obs =

-------------+------------------------------

F(

2,

32

29) =

9.00

Model |

.191911743

2

.095955872

Prob > F

=

0.0009

Residual |

.309215148

29

.010662591

R-squared

=

0.3830

Adj R-squared =

0.3404

Root MSE

.10326

-------------+------------------------------

Total |

.501126891

31

.016165384

=

------------------------------------------------------------------------------

dlog_exp |

Coef.

Std. Err.

t

P>|t|

[95% Conf. Interval]

-------------+----------------------------------------------------------------

dlog_dep |

1.734321

.4088455

4.24

0.000

.8981385

2.570504

dlog_sumwgdp |

-.0025883

.0048837

-0.53

0.600

-.0125766

.0073999

_cons |

.0222217

.0192016

1.16

0.257

-.01705

.0614933

reg

dlog_exp dlog_dep

489

Source |

SS

df

MS

Number of obs =

-------------+------------------------------

F(

1,

44

42) =

28.15

Model |

.345184034

1

.345184034

Prob > F

=

0.0000

Residual |

.515043683

42

.012262945

R-squared

=

0.4013

Adj R-squared =

0.3870

Root MSE

.11074

-------------+------------------------------

Total |

.860227718

43

.020005296

=

------------------------------------------------------------------------------

dlog_exp |

Coef.

Std. Err.

t

P>|t|

[95% Conf. Interval]

-------------+----------------------------------------------------------------

dlog_dep |

1.960578

_cons |

vec

.3695355

.0111014

5.31

.0170809

0.000

0.65

1.214825

0.519

2.706331

-.0233693

.045572

dlog_imp dlog_gdp dlog_dip, lags(3)

Vector error-correction model

Sample:

2004q1 - 2014q1

No. of obs

=

41

AIC

= -9.205531

Log likelihood =

214.7134

HQIC

= -8.809831

Det(Sigma_ml)

5.67e-09

SBIC

= -8.118875

Equation

=

Parms

RMSE

R-sq

490

chi2

P>chi2

----------------------------------------------------------------

D_dlog_imp

8

.117826

0.8390

171.9269

0.0000

D_dlog_gdp

8

.023123

0.9909

3591.208

0.0000

D_dlog_dip

8

.064265

0.3173

15.33507

0.0529

----------------------------------------------------------------

------------------------------------------------------------------------------

|

Coef.

Std. Err.

z

P>|z|

[95% Conf. Interval]

-------------+----------------------------------------------------------------

D_dlog_imp

|

_ce1 |

L1. |

.3720895

.0745603

4.99

0.000

.2259539

.5182251

LD. |

-1.000411

.2028384

-4.93

0.000

-1.397967

-.6028552

L2D. |

-.4385567

.2104022

-2.08

0.037

-.8509374

-.0261761

LD. |

1.857992

.4069419

4.57

0.000

1.0604

2.655583

L2D. |

1.118463

.2987899

3.74

0.000

.5328458

1.704081

LD. |

.6606132

.347693

1.90

0.057

-.0208526

1.342079

L2D. |

.5440858

.3452564

1.58

0.115

-.1326044

1.220776

_cons |

.0007556

.0184175

0.04

0.967

-.0353419

.0368532

dlog_imp |

dlog_gdp |

dlog_dip |

-------------+----------------------------------------------------------------

491

D_dlog_gdp

|

_ce1 |

L1. |

.5388981

.0146319

36.83

0.000

.51022

.5675761

LD. |

-.3590226

.0398056

-9.02

0.000

-.4370401

-.281005

L2D. |

-.1684689

.0412899

-4.08

0.000

-.2493957

-.0875422

LD. |

2.239057

.0798594

28.04

0.000

2.082536

2.395579

L2D. |

1.142497

.0586354

19.48

0.000

1.027574

1.25742

LD. |

.2253227

.0682323

3.30

0.001

.0915899

.3590555

L2D. |

.1008947

.0677541

1.49

0.136

-.0319009

.2336903

_cons |

-.0003988

.0036143

-0.11

0.912

-.0074827

.006685

dlog_imp |

dlog_gdp |

dlog_dip |

-------------+----------------------------------------------------------------

D_dlog_dip

|

_ce1 |

492

Corporate Social Responsibility (CSR); Attitudes of Foreign Enterprises in Post-Communism Society: Case of Albania Prof. Dr. Güngör Turan1 & MSc Jona Hoxhaj2 1

Department of Economics, Epoka University, Albania 2 Epoka University

Abstract Albania is a post communism country; openness of the market has increased Foreign Direct Investments (FDI) and firms are competing to build an image for themselves as most reliable, effective and honest actors of sustainability and wellbeing. These companies have adopted new customer centered models which automatically made them better off compared to approaches of communism marketers. This study will specifically provide information about the enhancement which occurred after the political changes of 90s in Albanian Marketplace. Based on the survey conducted with banks and telecommunication companies operating in Albania research will estimate the importance of CSR in Albanian Marketplace and the value customers give to sustainability. Keywords: CSR, Albania, Social responsible, Ethics, Banking sector, Telecommunication sector, Customers. Introduction

Based on the study of Apostol and Nasi (2013) liberalism and “father” of economic liberalism, Smith (1776) in his famous work “The Wealth of Nations” is presenting the model of distinct roles of economic, social and political actors, which indicated that liberalism perspective is not promoting corporate social responsibility. This view points out that firms are not responsible to go out of their main task of doing business and being responsible to legal issues. On the other side Marxism has put the employees on their focus but not social responsibility outside their operating environment. One of the most important approaches of our century related to Capitalism, Socialism & Democracy is Schumpeter (1942), who predicts that capitalism will be diminished through years, introducing us with the new concept “creative destruction”, which is the free market’s messy way of delivering progress. According to this theory, capitalism is not for the overall higher welfare, as it leads economy toward loss of jobs, ruins companies and causes vanishing industries by the economic growth that happens in capitalism. Schumpeter 493

term indicates that in every gain there is pain; creating new industries from innovation and entrepreneurship which are the main pillars of capitalism cause some preexisting orders to be destroyed. This can be related with CSR as the Schumpeter critics the capitalism for “creative destruction” it seems like they are doing some advantageousness to the population while working with ethics but on the other side capitalism is destroying preexisting conditions of life. CSR from numerous researchers is considered as relatively new issue emerged in 20th century and flourished in the nineties. Williams (2003) considers the main implication of the enhanced social responsibility the enormous improvement in technology, rapid industrial growth which were effecting environment negatively. Environmental issues from local problems were becoming more and more global issues of healthy life which could not be ignored and caused need for protection with sustainable strategies of operating. Apostal and Nasi (2013) consider that commercial companies took this as an opportunity to change the perception toward customer centered strategy and found a very positively related relationship of CSR with stakeholder’s satisfaction. Stakeholders both external and internal are the main reason of increased impact of CSR at a highly considerable level. CSR has become as a main obligation that businesses in today’s world have toward the effected actors in the environment that they operate. The changing world because of globalization, enhanced technology and increased needs of society have stimulated response from informed customers who demand transparency, more information about the products, conditions of the labor in the enterprise and push companies slightly toward CSR. Colle, Henriques and Sarasvathy (2014) have defined CSR as the main driver of having a better social, ethical and environmental conditions based on the standards accepted by the majority in international society and which help to build and design sustainable future in the world. (Cheung, Tan, Ahn and Zhang (2010) have considered CSR as the management of potential conflicts of interest between different stakeholders with respect to economic, environmental, social and ethical issues. For the firm, CSR is about its relationship with relevant stakeholders. Based on the information gathered from different authors who have worked and have made research on this issue, this paper will evaluate the significance of CSR in a country like Albania which is a Post Communism country and have lived a transmission from a closed economy to open market. Study is conducted based on interviews with all banks and telecommunication companies that operate in Albania in order to reach the aim of understanding the foreign firm attitudes toward 494

customers, who have been in a system of closed economy before less than 20 years and have the roots of communism ideas still in their perceptions. Sectors chosen are banking and telecommunication as the majority of these industries is composed of non Albanian investments, which are performing CSR in accordance with worldwide standards of being socially, environmentally and legally responsible. Albanian society is widely reflecting that “West” is the best example that we have to go through. The main reason that people have acquired and demanded indirectly firms operating in Albania to be socially responsible and sustainable is because of the informed customers from their “best” example of West have become the main critics of the companies. And companies to retain the relationship with the main stakeholder, customers, are more and more trying to focus to behave and operate with respect to economic, environmental, ethical and social issues. 1. Literature Review

In a range of studies done for CSR across world, majority of them are considering as a very important issue and highly reliable and valuable for sustainable continuation of functioning in respective sectors that organizations operate. In the globalized and fast changing environment that businesses are operating nowadays, image and word of mouth is very significant in order to increase the value toward the brand in the conception of targeted people of the company. So enterprises are working very carefully to win the loyalty of customers and make them feel that “they care” about the environment and social issues related to them. Hanke and Stark (2009) in their paper have argued about the conceptual framework of CSR comparing it with business strategies and considering its unique important in image building. Conceptual framework is differently interpreted in accordance with the operating system of the companies but based on social rules and legislation. CSR has become one of the most important strategies for building the best possible perception in customer’s mind, by following needs and demands from potential of actual customers. Authors consider the conceptual framework as a very significant issue to be interrelated in strategy building and for arrangement of organizational behavior while constructing CSR strategies. The contradiction of Marxism theory and business ethics was the root of the paper that Shaw (2009) have written. Marxism theories are against business ethics presented two cases that 495

support the theory: first business cannot be ethical as their behaviors are considered greedy and unethical and secondly ethics is destructive and irrelevant for systematic vices of capitalism. But Shaw (2009) argues that contrary to that Marxism theories could be very good related to business ethics as Marx’s theories are hopes toward a better society and author considers CSR as the best choice. Author considers that managers should have far more beyond aims than increasing their profits; moral and social obligations are necessities for well functioning. Businesses should fulfill three main aims; fiduciary duty, responsibilities for shareholders and maximize their profit. The relation between three aims makes the business to work better and Marxism should not have objection and business ethics cannot be considered as irrelevant or impossible. A similar study to this research work was done by Scholtens (2009), who has investigated a group of 32 large international banks from North America, the Pacific and Europe and have compared and analyzed their CSR, based the analyze on the performance of those international bank with regard to reporting processes, adapting international codes and the usage of certified management system and other factors which effect the sustainable development and social responsibility. The banks were assessed based on the information available publicly, taking into consideration the transparency and CSR of these banks in the same time as being opened to public is important part of these issues. After scoring 32 banks authors report that Netherlands, Germany, France and UK banks are highly more Corporate responsible than others. In contrast Sweden, Italy and Japan had the lowest coefficient of responsibility toward their stakeholders. Another important finding from this paper is that Dutch Rabobank has the highest CSR score and the lowest are 2 banks from Scandinavia. Significance in relation of financial quality and size with CSR was observed. Furthermore, paper emphases the importance that CSR has in international banking sector and the effect on better image of the company in the public. Paper also indicates that further studies should be done for emerging markets banking sector in order to find out the real drivers of CSR performance. Campbell (2007) indicates that economic conditions are significant factor to affect the probability that corporate act socially responsible. Enterprises are considered more socially responsible if they are more faced with state regulations and other industry rules. Also important factor that increases CSR are membership in independent NGO’s and other associations that support employees and environmental rules. Based on the research of Campbell (2014), three main concluding remarks were discussed: firstly globalization and fast moving enhancement toward neo liberalism approaches of business management have made companies to shift toward strategies of being socially responsible and take into consideration not only shareholders and 496

profits but also all stakeholders of the company, secondly paper gives special emphases to the fact that being socially responsible is not a must because of the globalization pressure but it is a advantage toward higher economic performance of company. And the last remark is related to convincing of managers to behave socially responsible because is the right thing to be done and is in their interest. A study done in Kenya for CSR perception and development was made by Muthuri and Gilbert (2010) emphasizing that in this country CSR is part of hierarchical pyramid of priorities in companies. CSR is highly valued as philanthropic responsibilities as second most important after profit maximizing aim. Author in the paper indicates that CSR in this culture is affected by cultural pressure of the country. African societies are considered as strong community mentality so the CSR is installed in the strategies of companies as cultural and normative indirect pressure is manifested toward companies. Majority of the firms that are having strong CSR policies are international firms that are in continual boosting from civil society organization and governmental bodies of Kenya. In conclusion the paper claims that the main reason of CSR existence in Kenya is the driven force form social and cultural normal of philanthropist. Still CSR is in process of establishing a significant theory which would be widely accepted, now companies are trying to collaborate and learn from each other in order to find the best practice. Lack of a uniform pattern for CSR in Kenya raises the need to strengthen and develop new strategies for reaching mutual benefit for both societies and businesses. Cheunge at al. (2009) in his paper, which is considered as a very significant paper has researched the CSR inquiry in Asian Emerging Countries which have made a very huge transmission in all industries and are highly valued for their immediate development. Research is done from, indicating that CSR performance have had impressive progress in all Asian Emerging Countries except of Malaysia. CSR and market enhancement show a positive result based this study. CSR has had a slow start in this part of the world and is still not percept right from investors. Still shareholders of the main companies in these countries do not consider social responsibility as one of their main objectives toward improvement and enhancement. Majority of businesses make their strategies based on short term plans of profit maximizing and are not educated to have sustainable growth and commitment to society. Results of the paper show optimistic view as they indicate that the awareness of the firms in last year for the importance of CSR has had an increasing trend. So there is room for development in the perception of whole population and businesses about significance of being social responsible in accordance with profit maximization. 497

2. Conceptual Framework of CSR

Albania as many of the countries in the world has passed through drastic political and economic changes. In 1990s the whole system of communism collapsed and from closed economy Albania was intending to open the market toward changes. From those years till now significant changes are observed not only in the economy but in all areas of social and political. Another important change in Albanian marketplace is occurring in last year’s; globalization is happening very fast and social changes are impressively changing economic, social and political perception of population in every corner of the globe. One of the major shifts that is happening, is the change of working manner from national toward international point of view. All these have also their consequences and obstacles that should be overcome, most challenged groups are government, civil society and businesses that require changing attitudes. The Concept of CSR

Giddens (1990) considers that corporate social responsibility (CSR) a new concept of social responsibility by which companies should consider themselves as part of the community and act like citizens. Waddock (2004) argues that CSR drivers can vary, being based on narrow or broad margin. Meaning that companies are relating their operations based on responsibility toward their narrow community or the community as a whole. The development of CSR has underpinned development and has been divided in some components, the main components considered based on the study of Windsor (2006) are: ethical responsibility theory, economic responsibility theory and corporate citizenship conceptions. From which approach it could be concluded that enterprises are considering social responsibility as ethical as they are responding to society as it is their ethical responsibility, also important assumption is economic responsibility toward stakeholders in order to continue being profitable and as they are considered as judicial people in state law they should act as citizens of the countries where they operate and should be responsible to advantages that they are using from the environment. Another important implication in determining the main role and concept of CSR is expressed from Cheung at al. (2009) in its work related to CSR in Asian Emerging Markets, who indicates that CSR is the main issue attracting attention in the whole business world, considering CSR 498

as the key point in management of the relationship of firm with stakeholders, with respect to economic interests, environmental, social and ethical issues. CSR is the new emerging concept of the last centuries which is closely related with the decentralized management and open economies. As in the history is was not a notion used and behavior that firms were considering. Because of continues globalization and change of the focus from profit maximization toward best image in customers mind and customer satisfaction, firms have started to change their strategies by including social responsibility in all organizational strategies and they have increased acting with responsibility toward main actors of society and environment of operating, which are also the most important actors of progress in the profits. As consequence it can be mentioned that even though their operations and performances include social responsibility they do it in order to be more profitable and increase their brands image. Margolis and Walsh (2001) in their study indicate that there are two viewpoints toward CSR; it can be the main potential of increasing the profitability by strengthening the firms brand name which leads to enhance of financial performance and on the other hand it can decrease the profitability as the environmental social standards can have high costs that translates in lower profitability. Hanke and Stark (2009) consider that CSR is as important as the organizations strategy and it should be part of it. The uniqueness of companies is closely related to the organizational strategy and their approaches to the customers which indicate that developing a unique strategy for being social responsible is integral part of the overall strategy.

CSR Perception in Capitalist Society

Last decades, after the World War II, fall of communism in some countries and the end of the command economy the focus switched to some different areas which made the capitalist market more attractive in the eye of customer. Social Responsibility of Businesses have become as a new science which is continually evolving and is being subject of discussions, theories and researches. The concept of CSR has become popular in Albanian society; academicians are continually researching for theoretical foundations and also managers and businessman’ are working to put the ideas in reality. CSR perception from companies’ view has been a subject of discussion in many debates. Every day we observe in newspapers, magazines, TV news that businesses support sport events, donate money, care about environmental causes, 499

trainings for entrepreneurship, sponsorships for different event which are not related to the operation area of the firms. In fact, all these represent the efforts of businesses to the environment that they operate and are closely related to presentation of their image. Conrad (2009) considers environmental protection comes from businesses because of their continual grow in importance in the global changes and their potential to effect individuals and environments where they operate. Carroll and Shabana (2010) consider CSR as a product of 1960s after World War II period when the huge change of the market happened. In their research they have indentified 37 different definitions and still consider the number underestimated as they consider that CSR is defined and interpreted from the practitioners in many different ways. Maignan and Ferrell (2003) have put the light on the Caroll (1979) integrated conceptualization from many definitions in order to classify the types of responsibilities; economic responsibility related to offering to society the desired products, legal responsibilities related to being within the framework of countries laws, ethical responsibilities related to conducting activities that are morally right, and last but not least philanthropic responsibilities which related to being beyond economic, legal and ethical responsibilities, companies should be involved in enhancement of the overall society. CSR is a concept that has been formulated and is best implemented in the countries that have achieved the maturity in economic, social and political aspects. The model of CSR has passed to developing countries like Albania from developed countries which can cause a problem for implementation of these procedures. This phenomenon was studied by Szczerski (2003) naming it as asymmetry of rationality, which means rational procedures and institutions that were developed for markets of different scale and different historical circumstances are imposed on the post-communist countries. This phenomenon according to the author can cause increase in poverty and even irregularities in the social aspects. Contrary to some other programs that have caused this kind of problems in post communism societies, CSR is more promoted by European Union but companies operating in Albania should consider the economic and social differences of Albania with Western countries before applying CSR, a model based on economic, social, historical and cultural factors should be implemented in order to be efficient. The focus on CSR by European Commission has started in July 2001 as from the publication of the Green Paper “Promoting a European Framework for the Corporate Social Responsibility”. Eberhard-Harribey (2006) in the research for the CSR issue has questioned 500

the emergence of CSR as a paradigm of the European referential in term of public policy. Concluding that theoritical founders of CSR seem to be inspired by North American school of business ethics. Also another important implication is that CSR not only is a specific policy for community but is an element of transversal policy of three important point “CSR-sustainable development- governance” which are the main pillers of regulations that European Comission promotes. CSR Perception in Post Communist Society

The main purpose of this paper is to find out the formulation and implementation of CSR policies in countries that have passed communism and are still in the phase of economic, political and social transformation and development. Albania is a post communism country, for 45 years is was under command economy and economic operations and business ethics were conceptualized differently than now that it is a democratic republic. As no citizen had the privilege to have private property and all the rules and regulation were driven from the state corporate social responsibility and business ethics were not the main concerns. After World War II Albania became a communism country part of communist bloc, countries which were highly influenced by Soviet Union especially in the period after WWII and 1990’s. During 45 years of communism Albania was a closed economy totally controlled by government. In early 1990’s the regime broke down and Albania had the first steps toward open economy, till now Albania has had continual slow growth but still remains one of the poorest countries in Europe. CSR is product of European Commission in order to promote sustainability and responsibility toward interest groups, which has become an essential part of businesses after they have achieved a certain stage of consolidation in development of their profits and it was firstly implemented by Western developed countries. As any other policy also CSR should be adopted and implemented in accordance with the economic, social and cultural factor of respective countries. The conditions of Albania will be presented below, which indicate that even though the political and economical transformations of Albania, foreign firms and foreign direct investments (FDI) in Albania have changed the climate of doing business and the way of doing business. CSR in majority of the cases in Albanian market is considered as an important issue in order to be competitive in the market. Based on the research of Lewicka-Strzalecka (2006) for the Polish case, which similarly to Albania has passed through the stage of communism, 501

the obstacles for CSR to be considered in post-communism society are; image of business, rule of law, corruption, job market situation, socialist associations and the CSR rhetoric, blurred boundaries of CSR, under development of civic society and economic reality and ethical standards. Based on Transition Report (2014) published by European Bank for Reconstruction and Development (EBRD), the above mentioned obstacles can be related to Albanian case. In Albania all the private owned enterprises are highly valuing the profit maximization which raises the problem of operating ethically. This also affects the trustfulness of Albanians toward private enterprises. Lleshaj & Cela (2015) by a survey conducted with 1200 Albanians have founded that the trust on private and public enterprises is very low in our country, and still people have not been totally free from communist perception, that state should provide services to citizens, more than 60% think that justice, education, health care, infrastructure, electricity, water supply, post offices, housing, jobs should be provided by state and not by private enterprises. Also in their study they have founded that 73% of the respondents think that judicial institutions do not deliver justice which means that they do not believe that rule of law works properly which directly is related to other questioned of high corruption as more than 60% believe that political ties and bribes are the only way to get justice in Albania. Related to unemployment recently INSTAT (2015) have published the results for the fourth quarter of 2014, unemployment rate for age group 15-64 is 18% which is increased from the last year which was at 17.7%. These difficulties that Albanian economy is passing through does not sent us to the conclusion that CSR is not applicable in the country, in Transition Report (2014) is indicated that government is pushing business environment reforms, in order to increase the FDI’s as they are the major player of CSR implementations. Government has established a National Economic Council, in order to promote investment and growth. In Doing Business 2015 report, Albania climbed 40 positions, ranked as 68th from 189 countries. Strategic Approaches of CSR in Multinational Enterprises

Even though the economic and social limitations mentioned above, the idea of implementing CSR in Albania has been gaining importance and is promoted more and more. Albanian businesses are aware of external forces that should be taken into consideration in order to be efficient. Ethical standards and responsibility toward all interest groups are integral part of doing business in competitive world market. CSR is mainly promoted by foreign companies, 502

which implement the practices that they mother companies have proved to be efficient in different countries that they operate. In March 2013, The Albanian CSR Network was founded. It is a nonprofit organization leaded by businesses; Antea, AMC, Bankers, BKT, Boga & Associates, INTRACOM, Kalo & Associates, ProCredit Bank and Vodafone. The main focus of the organization is on CSR and peer-to-peer learning of businesses. Similar networks exist in many countries in EU; it was founded as a response to the need for companies to integrate CSR into their practices and to promote CSR in Albania. The main mission is promoting the importance of CSR to business community and social environment with the future view of having sustainable practices of businesses. In the Albanian CSR Network (2013) it was indicated that the future growth is likely to be focused on exports and foreign investments, both of these are closely related to CSR, which is a component of sustainable competitiveness. Taking into consideration also the Albanian vision of being European Union member state, promotion and implementation of CSR standards is important. As being part of the union means the liberalization of market and higher competition sustainable way of doing business becomes an integral part of operating. Government of Albania leaded by Ministry of Economy, Trade and Entrepreneurship and continual support of UNDP, have formulated a plan for CSR 2011-2014. (National Action Plan on CSR 2011-2013). The main focuses of this plan are; promoting sustainable competitiveness, creating social value for long term prosperity and welfare of Albanian citizens and protecting the environment for future generations. “The mission of the government of Albania, through an ongoing open and inclusive dialogue with all stakeholders, is to create the best possible enabling environment for the adoption of CSR practices in companies operating in Albania” (ACSRN, 2013). In Albanian market the sectors that are mostly owned by foreign enterprises are telecommunication companies and banks, which are considered the main actors implementing CSR for the first time in Albania. Vodafone, Albtelecom and Eagle Mobile, AMC, Intesa San Paolo Bank, ProCredit Bank, Raiffeisen Bank, BKT etc. are some of major implementers of CSR in Albanian marketplace.

503

3. Data Analysis

Data for the paper were collected with questioner filled by the companies itself. One of the main limitations of the whole paper working process was collection of data from the telecommunication and banking companies. In Albania the culture of fulfilling questioners is still not adapted properly, maybe the responsible people for CSR (in this case) are afraid to give information as they may be judged by their managers, as in majority of cases they are keeping information to confidential and the transparency to public is very low. In Albanian market in Telecommunication and Banking sector in total operate 20 companies. All the companies were contacted by email several times and only 12 responses were received. The main limitations which may cause bias in the overall results of the study are the other 8 companies, who may have different perceptions, actions and policies for CSR implementation in their companies. From 12 respondents’, 3 are telecommunication companies which means that only one telecommunication company did not give response and 9 are from banking sector, which means that 7 other banks operating in Albania did not give response to the questionnaire. Reliability of the data is based on the truthfulness of the people that have filled in the questionnaire. People that have filled in are employees of the institutions that work in the Departments responsible to conduct CSR activities or part of Marketing and Public Relations Departments, if the companies did not have a specific department responsible for CSR. Survey Modeling

Survey consists of 20 questions relating all segments of the company; management, strategic viewpoint and promotion of CSR culture to employees. The answers of the question will the main points to present in the best way the culture and implementation of CSR in the companies. Particular information that the answers will highlight are supported in the literature as the focuses toward giving the picture of CSR in these companies. The main points are;

504

Ø Board Committee existence, its role, Ø existence of ethics in the company, Ø money they use for performing CSR actions, Ø companies’ way of promoting CSR as a pillar in the culture of the organization, Ø what these organization value as CSR actions and how to they conduct these actions, Ø are they transparent toward the public for all the events that they organize or take place in support to society Ø are the standards of CSR based on International Standards. CSR in banking sector and telecommunication, Results of the Survey The results of the survey showed that all respondents had more than 100 employees, which are considered big companies in Albanian marketplace. Boards of Committees’ are mandated to carry out specific functions, projects or programs assigned by the main board of the organizations. From the sample chosen in the above mentioned sectors 75% of the companies operating in Albania have a Board of Committee, in function of CSR, sustainable development and corporate citizenship.

505

A very important issue to place when discussing for CSR, is Code of Ethics existence in a company. Code of Ethics places interest of customers and the integrity in the professionalism above company’s interests. Acting with integrity, competence and respect are the main pillars of being integrated company. In the questioner companies were asked to place the main issues that Code of Ethics in their institution have. The most frequently answered issue are; confidentiality of information being the base toward building a relation with customers, it was answer of all the respondents (12/12), and also corporate governance and human rights answered from (11/12). According to the results it can be observed that mainly companies are very careful in having a Code of Ethics which is in line with international standards and focuses on customer relations, human rights and good governance.

Confidentiality of information

12

100%

Money-laundering and/or insider trading/dealing Corporate governance Responsibility of your products or services Corruption and bribery Whistle-blowing Human rights None / Don’t know

9 11 9 9 7 11 0

75% 91.70% 75% 75% 58.30% 91.70% 0%

Figure 2: Code of Ethics

Code of Ethics existence is not the main important point to be in line with international standards of operating, the implementation and monitoring of the actions of people in the company is more delicate issue. Companies in international level have specific monitoring bodies for Code of Ethics implementation in practice. Also from the respondents the majority of companies say that the monitoring bodies exist and are active in their auditing.

506

Companies should be careful in the relation with their employees as they are the main advocates of the institution and the first contact of customers with them. Training of the employees and implementation of those actions by them related to dishonesty, corruption and unethical behavior put the institutions image one step further in the eye of the customer. Results of the survey explain that majority (7/12) respondent have these practice in their company, also having honest, not corrupted employees who act ethically will for sure affect on the performance of the company. Profit maximization is not the only aim of the companies in globalized world, as the competition gets higher the companies that remain in the marketplace are the ones that succeed to present a brand image in the public. Globalization has wiped out the boards between nation countries. All the trends and organization managing, operating styles are interrelated and exchanged between companies all over the world. That’s why agreements and organization concerning environmental and social issues are international and the participation is from institutions from the entire world.

507

From the respondents 8 of 12 have answered that their institutions are part of Global Impact, Global Reporting Initiatives, Equator Principles etc. which are voluntary initiatives for being social responsible to earth.

Transparency is one of crucial points in having a brand image in public, to customers and society. Legal and Ethical obligation of the companies is to have annual reports for their governance, operations, financial position but lastly CSR is being a component of these annual reports. Some of the companies publish special reports related to CSR and sustainable development and some other incorporate it in their annual reports. In the survey 10 of 12 companies have reports on CSR annually. And only 1 of them is confessing that they do not do any reports related to CSR. CSR report includes, Sustainability Report, Corporate Citizenship Report, Triple Bottom Line Report, Stakeholder Engagement Report, or any other similar type of reporting (See Figure 6).

508

Another point asked in the survey was the if risk assessment exercises are undertaken from the companies with respect to country’s labor, human rights violations and environmental concerns. 9 out of 12 companies said that they have undertaken these exercises (See Figure 7).

Companies operating in telecommunication and banking sector in Albania in majority are foreign firms. From telecommunication 3 of 4 companies in the marketplace are in majority owned by foreigners and in banking sector from 16 banks operating in the marketplace 14 are whole owned by foreigners. This means that their regulations and operations are based on mother companies’ way of operating. But very important point in operating in a country is to be in coherence with rules, regulations and laws of the government. The survey tried to answer whether these institutions have a tracking system to identify and implement the labor, ethical, health and safety and environmental laws and regulations of Albania. 10 of 12 respondents have said that they are basing their operations on laws and regulations of Albania. (See Figure 8) Within the company employees are given the responsibility to manage many CSR activities according to the answers of the respondents. The responsibility for social and community uses in 509

all companies that have given response is given to employees. Also health and safety issues and employee welfare and development issues are managed by employees themselves in 11 of 12 companies. The least of the list only 6 of 12 companies is giving the responsibility to manage to employees the supply chain practices (See Figure 9).

The graph below shows the contribution of the firm in raising the awareness within the company related to training and awareness of programs, internal communication, managing briefings etc. In general, 50% of the companies are considering the awareness as scale of 4 out of 5.

510

1-No raise in awareness 2-Low raise in awareness 3-Middle raise in awareness 4-Relatively high raise in awareness 5- High raise in awareness

0 0 1 6 5

0% 0% 8.3% 50% 41.7%

Figure 10: Scaling of raising awareness within the companies

Issues like Training and awareness programs within the company in relation to CSR, 83% of the respondents consider that companies raise awareness for it. 100% of the respondents answered that company raises awareness for internal communication. And 91.7% consider that company raises awareness for management briefings. Part of being socially responsible in organizations of this globalized marketplace, is considering interests, opinions and including in decision making all stakeholders. Based on our survery companies have answered as being highly cooperative with their stakeholders as 11 of 12 companies are taking into consideration of customers and shareholders or investors for corporate strategy. 7 of 12 companies are also considering opinions of national and local governments and civil society groups. 6 of 12 are taking into consideration also opinions of environmentalists and media and some are considering even opinions of trade associations or international nonprofit organizations (See Figure 11).

Consumers Shareholders or investors Local government National government

11 11 7 7 511

91.70% 91.70% 58.30% 58.30%

Competitors Trade associations Environmentalists Media Local charity /nonprofit/ civil society groups International charities / nonprofit/ civil society groups Other

512

7 4 6 6 7 3 0

58.30% 33.30% 50% 50% 58.30% 25% 0%

Companies should be careful for health and safety of their employees. In the survey except of 1 answer that they do not have any system in place, 11 other respondents said that they have a health and safety management system (See Figure 12). Companies to have a well managed CSR should also provide trainings, counseling or prevention programs for education and health their employees, families and community members. Respondents have answered in majority positively to the question whether their company practices these trainings. 9 of 12 have responded positively and 3 of these companies do not provide education and health trainings (See Figure 13).

513

Sustainable development can be seen as one of the main issues in globalization and economic, social and political development in the world. In order to have a sustained world, we should care about our resources so next generations will be able to have enough sources for living. Environmental issues and management of environmental protection has been part of Millennium Development Goals (MDG’s). Nowadays the main system management of environment is ISO 14001, but there are also other independent management systems that companies use in different countries and regions. In Albania the sectors included in this study answered to this question, expressing that the majority of them have their own internally designed environmental management system (7 of 12), 2 of them use ISO 14001 (See Figure 14). Another contribution to protection of environment that companies do is providing business services or goods that do not effect negatively environment. Example providing new products with lower emissions and energy usage, adapting services related to climate change mitigation etc. 9 out of 12 firms responded this question positively, saying that they provide business services to achieve better environmental outcomes (See Figure 15)

From respondents it can be understood that companies that have filled this survey are aligned in business services related to better environmental outcomes but are not aligned in community investment initiatives to National Development Goals of Internationally recognized goals or initiatives like UN Millennium Development Goals. 10 of 12 companies have answered negatively to the question whether they take place in these initiatives (See Figure 16).

514

Local heritage Infrastructural support/services to local communities Youth development Education Underprivileged Poverty alleviation Disability Conservation Sports Culture No community investment initiatives No Other

4 7 11 10 2 3 7 0 10 11 0 0 0

33.30% 58.30% 91.70% 83.30% 16.70% 25% 58.30% 0% 83.30% 91.70% 0% 0% 0%

Figure 17: Company investments for society development

In order to be socially responsible to the whole society companies have to invest in different areas in the country for development of well being. Our sample companies have responded to 515

the survey very positively toward this issue, as they consider to have been investing in Albania from the beginning of their operating in the country. 11 of 12 companies say that they have invested in youth development and culture ranking it the first in the list of areas of community investment by companies. 10 of 12 companies have invested also in sports and education, these areas are followed with infrastructure support and disability with 7 of 12 responded saying that they have invested in this areas, under the division of activities for being socially responsible to the environment that they operate (See Figure 17). Philanthropic investments that companies allocate during their operating years in majority are financed from Foundations or Trusts. But in the sample of companies in our example, philanthropic investments are done in majority through revenue budget. 8 of 12 companies are saying that the whole philanthropic investments are done with their budget, 2 of them are saying that they use both foundations and revenue budget (See Figure 18).

All socially responsible activities and practices are voluntarily engagements with non financial profits. Companies sometimes let their employees to engage in voluntarily work even during the working hours, considering it as CSR practices. In our sample only 4 of 12 companies give permeation to their employees to work as volunteer during working hours (See Figure 19, first Graph). On the other side 8 of 12 companies engage as institution in volunteering practices and programs in support to their CSR programs. 4 other companies have never been involved in volunteering programs in place (See Figure 19, second graph).

516

In the section of additional comments, the only company that has added a very important point for their CSR achievements was Credins Bank. This Bank is 85% owned by Albanians and in 2014 won the price for Philanthropy in national level for the continual support for Environmental Development and Sustainability. This fact puts the bank one step forward in compression with other banks in Albania, as being more socially responsible to the society of Albania. 5. Conclusion Based on the sample chosen for this study and their responses, it can be concluded that in Albania telecommunication and banking sector is relatively working for better environment, for society and is careful for the employees. CSR is “de juro” good managed as Code of Ethics, Board of Committee, rules, regulations, laws and CSR programs, practices and trainings are part of strategies of the majority of companies operating in this sector. “De facto” based on truthfulness of respondents it can be concluded that these practices are being implemented but the sustainable development based on operations by being socially responsible will have the outcomes in the future. All this achievement of having companies that care for being socially responsible after less than 20 years after communism collapse is very significant for Albania. As the whole society has passed through transition, Albanian private sector and foreign companies have managed to 517

bring a new perception in Albanian society. Companies now except of offering qualitative products that are demanded by customers they should be also be careful on being socially responsible for their actions. A good example of changed perception on CSR after communism is Credins Bank. As one of 2 Albanian banks operating in Albania has achieved to take the price of Most Philanthropic institution caring for Sustainability and Environmental issues. CSR has become as one of the main competitive advantages that companies try to win in order to sustain in the marketplace. References ACSRN, A. C. (2013). National CSR Report Albania. Tirane: Ministry of Economic Development, Trade and Entrepreneurship. Albanian CSR Network. (2013). National CSR report Albania. Tirane: Albanian CSR Network. Apostol, O., & Nasi, S. (2013). Firm-Employee Relationships from a Social Responsibility Prespective: Developments from Communist Thinking to Market Idealogy in Romania. A Mass Media Story. Journal of Business Ethics, 301-315. Campbell, J. L. (2007). Why would corporations behave in socially Responsible ways? An institutional theory of CSR. The Academy of Management Review, Vol. 32, No. 3 , 946-967. Carroll, A. B., & Shabana, K. M. (2010). The Business Case for CSR: A review of concepts, research and practice. International Journal of Management Reviews, Vol.12, No. 1 , 85-105. Cheung, Y. L., Tan, W., Ahn, H.-J., & Zhang, Z. (2010). Does Corporate Social Responsibility Matter in Asian Emerging Markets? Journal of Business Ethics, Vol.92, No. 3 , 401-413. Colle, S. D., Henriques, A., & Sarasvathy, S. (2014). The Paradow of Corporate Social Responsibility Standards. Journal of Business Ethics, Vol. 125, Nr.2 , 177-191 Eberhard-Harribey, L. (2006). Corporate oscial responsibility as a new paradigm in the European policy: how CSR comes to legitimate the European regulation process. The international journal of business in society, Vol.6 Iss 4 , pp. 358-368 . Eberhard-Harribey, L. (2006). Corporate social responsibility as a new paradigm in the European policy: how CSR comes to legitimate the European regulation process. Corporate Governance: The International journal of business in societr, Vol.5, No.4 , 358-368 . EBRD. (2014). Transition Report. EBRD. Hanke, T., & Stark, W. (2009). Conceptual Framework on Corporate Social Responsibility. 518

Journal of Business Ethics, Vol. 85, 507-516. Hanke, T., & Stark, W. (2009). Strategy Development: Conceptual Framework on Corporate Social Responsibility. Journal of Business Ethics, Vol.85, No.3, 507-516. Lewicka-Strzalecka, A. (2006). Opportunities and limitations of CSR in the postcommunist countries: Polish case. Corporate Governance: The international journal of business in society, Vol.6, No.4 , 440-448. Lleshaj, S., & Cela, A. (2015). Toward redefinition of the social contract. Tirane: Friedrich Ebert Stiftung (FES) . Maignan, I., & Ferrell, O. (2003). Nature of corporate responsibilities Prespectives from American, French and German consumers. Journal of Business Research, Vol. 56 , 55-67. Margolis, J., & Walsh, J. (2001). People and Profits: The search for a Link between a company's Social and financial performance. Lawrence Erlbaum Associates . Muthuri, J. N., & Gilbert, V. (2010). An Institutional Analysis of Corporate Social Responsibility in Kenya. Journal of Business Ethics , 467-483. Scholtens, B. (2009). Corporate Social Reponsibility in the International Banking Industry. Journal of Business Ethics, Vol. 86, No. 2 , 159-175. Schumpeter, J. (1942). Capitalism, Socialism and Democarcy. Shaw, W. H. (2009). Marxism, Business Ethics, and Corporate Social Responsibility. Journal of Business Ethics, Vol. 84 , 565-576. Smith, A. (1776). Wealth of Nation . Szczerski, K. (2003). The EU Multi-level governance in Post-Communist conditionsInstitutional challanges. Nowy Sacz, Poland: Working Papers of National Louis University.

519

Annex: Survey

Note*: Survey was filled online with Google forms Corporate Social Responsibility (CSR) Questionnaire (for banks and telecommunication companies operating in Albania) This research is done for Master level related CSR behavior of firms operating in Albanian marketplace. This questionnaire is sent to 20 companies operating in Albania. Companies consist of banking and telecommunication sector and the main aim of this survey is to get a clear picture of how foreign companies perform CSR in Albania, which is a post communist country. The findings will help us conduct the study and understand the state of CSR amongst companies in this sectors and to rate their CSR operations. Each company will receive the findings and the finished research paper. Please note that CSR of your company will be analyzed in the research according to the information you provide us. So please fill in the survey and provide us with the right information related to CSR operations. If you have any further questions or technical difficulties in completing the questionnaire please contact: Jona Hoxhaj, email: [email protected] or phone number: 0695776817 * Required Company Details

Industry/Sector type:

Number of Employees: 1. Do you have a board of Committee? If Yes, Does the board committee exist for the function of corporate social responsibility/ sustainable development/corporate citizenship * •

Yes

•

No

• Not Applicable 2. Does the company have a code of ethics/ code of conduct in relation to the following issues?

520

•

Confidentiality of information

•

Money-laundering and/or insider trading/dealing

•

Corporate governance

•

Responsibility of your products or services

•

Corruption and bribery

•

Whistle-blowing

•

Human rights

•

None / Don’t know

3. Does your company have a monitoring mechanism for implementation of a code of ethics /code of conduct?

•

Yes

•

No

•

Other:

4. Does the company provide training to employees on dishonesty, corruption or unethical behavior? •

Yes

•

No

•

Other:

5. Has your company joined or publicly supported CSR voluntary initiatives and/or groups such as the Global Compact, Global Reporting Initiative, and Equator Principles, Ethical Trading Initiative or other national/international agreements related to environmental or social responsibility?

521

•

Yes

•

No

•

Other:

6. Does your company PUBLICLY report on CSR/sustainability performance? •

Yes

•

No

•

Other:

7. Before entering a new market does the company undertake a risk assessment exercise with respect to the country’s labor, human rights violations and environmental concerns? •

Yes

•

No

•

Other:

8. Has the company established a tracking system to identify and monitor labor, ethics, health and safety and environmental laws and regulations of Albania? •

Yes

•

No

•

Other:

9. Are there employees within the business given responsibility for managing: •

Environmental issues

•

Health and safety issues

•

Employee welfare and development

•

Social and community issues

•

Conduct within supply chains/ procurement practices 522

•

Product responsibility

•

None of the above

•

Other:

10. Does the company raise awareness within the company in relation to the above CSR issues through: *Rate of raising awareness in scale 1-5 Questions 10a, 10b, 10c, 10d will be evaluated based on the scale rating of raising of awareness 1

2

3

4

5

10a. Training and awareness programs: •

Yes

No 10b. Internal communications (e.g. bulletin boards, intranet, etc.): •

•

Yes

•

No

10c. Management briefings: •

Yes

•

No

•

Yes

•

No

•

Other:

10d. Other

11. When designing corporate strategy, which of the following stakeholder groups does the company consider the opinions of? 523

•

Consumers

•

Shareholders or investors

•

Local government

•

National government

•

Competitors

•

Trade associations

•

Environmentalists

•

Media

•

Local charity /nonprofit/ civil society groups

•

International charities / nonprofit/ civil society groups

•

Other:

12. Does the company have a health and safety management system in place? If yes, what system (e.g., ISO 18001)? •

Yes

•

No

•

Other:

13. Has the company introduced any health education, training, counseling or prevention program to assist employees, their families or community members? •

Yes

•

No

•

Other:

14. Has the company implemented any of the following environmental management systems? •

Green Globe 524

ISO 14001 •

Company’s own internally designed environmental management system

•

No systems implemented

•

Don’t Know

•

Other:

15. Has the company aligned any of its business services to achieving better environmental outcomes? e.g. provided new products with lower emissions and energy usage, adapting services related to climate change mitigation etc. •

Yes

•

No

•

Other:

16. Does the company align any of its community investment initiatives to National Development Goals or internationally recognized goals or initiatives such as the UN Millennium Development Goals? •

Yes

•

No

•

Other:

17. Has the company invested in any of the following areas as part of its community investment initiatives? •

Local heritage

•

Infrastructural support/services to local communities

•

Youth development

•

Education

•

Underprivileged 525

•

Poverty alleviation

•

Disability

•

Conservation

•

Sports

•

Culture

•

No community investment initiatives

•

No

•

Other:

18. Are philanthropic investments allocated through a revenue budget or through a Foundation/Trust? •

Revenue budget

•

Foundation/Trust

•

Both

•

Other:

19. Does the company allow employees to volunteer during working hours? •

Yes

•

No

•

Other:

20. In the last financial year, did your company have any volunteering programs in place? •

Yes

•

No

•

Other:

526

If applicable, add any further comments on community investment policies or practices in your company:

527

Relationship between Albania and Turkey after Free Trade Agreement Xhensila Beka & Assoc. Prof. Dr. Eglantina Hysa Department of Economics, Epoka University, Albania

Abstract The purpose of this paper is to analyze the trade of Albania toward a larger country such as Turkey and to observe how the trade volume has changed after the Free Trade Agreement. A multiple regression model is used to calculate the overall impact of trade. The dependent variable is GDP and the independent variables are total imports and exports in Albania. Data are obtained mostly from the Institute of Statistics (INSTAT) and Turkish Statistical Institute (TÜİK). The Albanian GDP has been derived from yearly data in order to match the model, during the period of 1990 to 2013. To have a closer view on the significance of trade and compare the periods before and after Free Trade agreement, the data are obtained monthly from 1996M1 to 2015M3. Imports and Exports resulted to have a strong relationship with GDP, therefore proving the economic theory that trade has a direct impact over the economy of the country. Regarding the trade volume between Albania and Turkey, there seemed to be more imports entering in Albania, rather than exports. As expected, the results show once more that after 2006 the overall trade in Albania has increased and along with it the trade between Albania and Turkey has increased too. Keywords: Free Trade Agreement, Gross Domestic Product, Trade Volume, Albania, Turkey. I.

Introduction

Albania and Turkey are two countries which share a lot of similarities concerning their culture and history. They have created a relationship which goes back many centuries ago. Their relationship consists of economic, social and political cooperation which have a long history dating back in the Ottoman Empire until nowadays. The Republic of Turkey is located in the South-Eastern Europe and South-Western Asia with Ankara as its capital city. Turkey is a part of the G-20, The Council of Europe, OSCE, OECD and NATO (UNDP, 2014). It is ranked among the largest economies, with almost $1.5 trillion, therefore positioned as the 18th (WB, 2013). Its economy has increased the income per capita in a short time through a decade and although the global crisis slowed a bit the economic growth, it did not affect the country. Turkey is a free large market economy and it

528

is highly represented by its modern industry and service sector which get along with the traditional sector of agriculture. Import and Exports of this country rely a lot on its most powerful partners which are Russia, Germany and Iran. European countries are on the center of Turkey’s objectives to exchange goods and services since it covered 48% of the total exports and 53% of the total imports during 2012 (MoE, 2013). In exports it is listed in the 27th position and imports in the 22nd comparing to the world. It generally exports textiles, food products, manufacturing metals and equipments regarding transport; whereas it imports equipments regarding machinery or transport and types of chemicals (CIA, 2014). The Republic of Albania is found on the southern east part of Europe and Tirana is the capital city. Its GDP is amounted of around $32 billion, placed as the 109th in the world (WB, 2014). Albania has faced a sustainable growth rate and stability in financial records over the past years, even though the crisis was present; it was not really affected directly by it. The country is going toward a positive progress toward the integration in European Union, meaning that it is successfully managing and meeting the criteria needed for it to be a part of this union. Albanian’s market is a strategic point to the economy due to its agreements with the European countries, the Balkan countries and others; which make an attractive destination to be invested into. (UNDP, 2014) The agreements helped a lot the country with the exchange of goods and services whereas it exports mostly textiles, asphalt, metals, agricultural products, tobacco and crude oil; while on the other hand imports food products, chemicals, textiles and machinery. Albania is ranked on the 121th place for export and 120th for imports due to the volume in comparison to the other part of the world. The country’s most important partners can be mentioning Italy, Greece, Turkey, and China. (CIA, 2012) A report conducted lately with the topic “Doing Business 2015”, from the World Bank Group, reports that Albania has made a lot of progress, increasing its position from 108 that it was a year ago to 68. It also improved reforms in some business areas such as starting a business, construction permits and registering the property. (World Bank Group, 2014) In the first chapter of this paper the case is related with is the relationship between Albania and Turkey and how their cooperation has been improved over time. The most significant event was the signing of the Free Trade Agreement in 2006. The second chapter analyses the 529

effects and outcomes of the Agreement between the parties and what benefits can it bring for both of them. The last chapter is about the significance of the trade volume between Albania and Turkey. This was found to be significant and tend to prove the strong relationship between the nations. II.

Literature Review

According to European Commission (European Commision), Free Trade Agreements are subject to create opportunities for the market such as bringing new goods and service and thus offering different choices to consumers. This relationship brings an expansion of investments from the country which it has an agreement. Another reason is to make the trading process cheaper, faster and giving priority to sanitary standards. These are achieved by breaking down barriers, by eliminating custom duties, taking into consideration the protection of the environment, intellectual properties, competition rules and protecting the origin of the goods. Lately, it was published a report by European Commission (EC, 2012) which raised the question of how trade benefited the developing countries, especially those ones with low life standards. Firstly, it was mentioned that trade helped the GDP of a developing country, by increasing its growth rate and foreign direct investments. Secondly, it was a way of promoting competiveness and to bring the country closer to the international market. Another fact is the diversification of products offered in the domestic market, with lower prices and more innovative. These kinds of situations lead to reduction of trade barriers and bring the countries closer to other areas, such collaborating and exchanging knowledge. There are more job opportunities, it is paid more attention to special sectors and the environment gets better treatment. Lastly, it is seen as a positive factor in economic development of the developing country, since it learns from a more experienced country and adapts to the new development easily. The authors, Armstrong and Read (Armstrong & Read, 1998) deal with the trade between a small economy country and a larger one. It is normally difficult to begin the diversification process and adapting to a larger market. The small countries are found mostly to have a relatively small size of domestic market, a limited number of natural resources and other problems regarding public administration. As small countries are more open to free trade with other countries they tend to benefit from it. Some difficulties that face small countries come from the fact that they take time to adapt to the internationalized culture and enter to the market as competitors. Their economy benefits from the free trade by expanding their market 530

values and offer diversity to it, by taking into the consideration the risk coming from the power of foreign products. Trade Theory deals with the effects that international trade brings to the well-being of the countries and how it works with restrictions at the same time. The author, S.Nasar (Nasar, 1993) brings to conclusion that if there is present the two countries model, and both parties cooperate and work on what they can do best, then comparative advantage can derive from this relationship. All of the idea is not to get more jobs, but rather to have one job and increase the capacity of productivity and income. Economist, in order to predict and make more accurate studies, they gather data from other examples and comparing different events in early times, and see what results as outcome in the long run. The study conducted by B. Balassa (Balassa, 1984) emphasizes the importance of the liberalization of trade between two countries, especially the ones currently developing. Developing countries need to rely on international organizations such as WTO to implement policies which favor them and do not harm their internal economy. There must be noted also the difference between a developing country and a developed one, since the one currently industrializing have a different account balance as they tend to spend a lot toward the value of imports. Therefore, the liberalization of trade would be much more efficient for small economies. On the other hand, developing countries will feel the need to find a market, a competitive advantage to which they can export their goods and services. As a matter of fact, the responsibility falls to developed countries, which need to take into consideration the state of the developing country and imply policies of trade, and later to be beneficial for both, not only one way. III.

Relationship of Albania and Turkey during Ottoman Empire until Nowadays

Albania was part of Ottoman Empire1 by 1388 until it gained its independence on 1912 and it was mentioned that it was the last nation to claim the independence from this great Empire in the region of south-eastern Europe. The Ottoman Empire organized the system in a way that Albanians were given important leadership roles and also send in Turkey to give their contribution there (Biberaj, 2013). Even more, some of the influences that remained in Albania after the fall of the Ottoman Empire were numerous, such as the Turkish letters and some similar words, the religion, and also there were investment and trade between the two countries. During the 16th century, the country had a fast recovery in economy development, even though the wars that went on 531

before had destroyed it. There was paid close attention to the agriculture and farming and it faced an increase in the trade volume between not only Turkey, but also other neighbor countries (Derguti, Dushku, Duka, & Boci, 2011). After 1990s, Albanian’s communism regime fell and it went toward an open democratic market system; Turkey showed once more its support and offered its help toward Albania. Albanian’s trade movement was freer and it was even more significant after 2000s when it became a member of WTO. The Turkish President Halil Turgut Özal paid close attention to the poor economy of Albania at that time and in 1991 contributed by loaning to Albanian government an amount that was numbered around 13.87 Mln USD. Therefore, this is said to be the first loan which was ever given to Albania as a democratic country. In 1992, the Prime Minister of Turkey in that time, Süleyman Demirel, visited Tirana and signed an Agreement on Cooperation and Friendship to assure that Turkey was supportive toward Albania and was willing to grand almost $50 million in logistical and humanitarian assistance. By the end of 1993, Minister Berisha visited Turkey where he signed three different bilateral agreements concerning the economy, trade sector and military. President Demirel in a meeting in the city of Tirana in 1998, showed once more his beliefs that this kind of relations that existed between the parties would be reflected really soon followed by expansion of investments and trade between both countries (Tase, 2014). According to World Trade Indicators (WTI, 2009/10), Albania is described as more restrictive when it comes to trade barriers in comparison to European or Asian countries, but also on the other hand as more open than other lower and middle income countries. In the Stabilization and Association Agreement with the European Union countries, it is mentioned the beginning of the negotiations between Albania and Turkey (CEU, 2009). According to an annual report by United Nations (UN, 2012), Foreign Direct Investments from Turkey have increased since 2005, in a value from 6% to 11% in 2010.

1

Ottoman Empire was established in the beginning of 1300 in the city of Anatolia. It happened to become a powerful state by invading a lot of countries around them and ruling for more than 600 years (Dewald, 2004).

532

In comparison to other potential investitures Italy, Greece, Austria and Canada, it seems that in 2009, Turkey’s FDI has increased by 1% (records show that it was 10% in 2009 and grew to 11% in 2010), whereas the mentioned states have decreased by 1%. This might be seen as a positive feedback from the improvement of relationships between Albania and Turkey. Recently by December of 2014, there was a visit in Tirana by the Turkish Minister of Economy Nihat Zeybekci, where he stated that the Free Trade Agreement between the parties will be taken into another level by extending this agreement even in the sectors of investments and services. According to the publication in the Ministry of Economy of Turkey, there can be seen a lot of positive outlooks on the cooperation between Albania and Turkey where there are reported to be 19 ongoing projects with a huge amount of money waiting to be invested. Between 2002 and 2012 the foreign direct investments from Turkey counted about 45 million $, which is a huge value for only one country. Some successful examples that can be taken into consideration are: Turkey’s Calik Group presented through the telecommunication industry Albtelecom, commercial bank as Banka Kombetare Tregtare (BKT), Kurum Steel industry, and regarding the educational field there are Turgut Ozal colleges and Epoka University (Tirana Times, 2014). Free Trade Agreement Free Trade Agreement was an agreement signed by representatives of Albania and Turkey on the 22nd of December in 2006. This Agreement is documented in three different languages (English, Turkish, and Albanian) in case to avoid any clash while executing the laws. It entered in force by the 1st of May in 2008 and has no limited period. In the Preamble, it is stated the purpose of this agreement which is to strengthen the relations in the areas of economy and trade and also to give their contribution to the development of the cooperation between the parties. Another point mentioned is the mutual interest on increasing the volume of trade exchanges. Since the two Parties are part of WTO and other trade agreement, the process of trade gets easier to take place. When first entered in force, it was agreed upon a 5 year period on the process, so this agreement would start taking place gradually. Among other regulatory rules concerning sanitary measures, technical barriers, the rule of origin, taxation inside the country, safety of the products, intellectual property, it was given a different attention to the agricultural products being imported or exported inside a party’s territory. Agriculture covers a huge percentage of economic activity in Albania and thus affecting the overall wellness of the country. Dealing with agricultural products there were 533

imposed some slight restrictions such as tariff quotas on specific products, listed in Annex I to Protocol I. If the quantities exceed the agreed quota then they are subject to a custom fee upon that product. The Effects of Free Trade Agreement in Albania Of course, after having an idea of the Agreement it can be concluded that there are a lot of advantages for both countries in their domestic market. There can be listed some positive outlooks such as fulfilling market needs with qualified products that do not have the right environment to be produced. Also it influences in the price market by increasing competitiveness and reducing prices. Another pro is boosting local production and stimulate them to be more competitive and improve their technological usage. As mentioned in the beginning of the agreement, they agree to promote a trade which will be harmonious in terms of developing further their trade and offer diversity in the sectors where mutual areas of interest occur. There is agreed to not have any negative behavior toward the goods being imported in one of the countries, meaning that there will be equality, nondiscrimination and fulfilling their obligations properly. Specifically, objectives in the agreement provide the reader with a clear vision of what benefits brings this trade in each country. So it gains importance by increasing economic cooperation and living standards for both countries, eliminating restrictions and barriers on trade goods, promote harmonious development of economic relations between parties through the reciprocal exchange of goods and services and also by promoting trade in a third party market and cooperation between them. Most importantly, it promotes fairness in the competition between parties and expands the volume trade. This movement encourages the joint investments for Turkey and Albania. IV.

Methodology and Data

The main focus of this thesis is to examine data regarding two important variables for Albania: imports and exports. The data are derived from World Bank, INSTAT, Bank of Albania and TURKSTAT. Data Analysis The variables are going to be analyzed from two different perspectives as firstly, the data consist of total imports and exports in Albania and how much significant are they regarding the GDP of the country. These data are expressed in $ value and in a period time of 1990534

2013. A regression analysis is conducted to prove and see the value of impact that imports and exports have in Albania. The model is expected to be significant since it is known from the formula of GDP that one of its components is the value of trade. As we can see from the Figure 1, there seems to be a strong relationship between variables, since when imports and exports increase, GDP also increases in the same trend. Figure 1- GDP, IMPORT, EXPORT of Albania (1990-2013)

Source 1- World Bank Secondly, there are data regarding specifically the trade between Albania and Turkey, where they will be compared with the total imports and exports of Albania. The data are taken in a monthly period to have a closer view of the changes happening in a 20 years period of time. Therefore, considering the availability of data in the official websites, the data involved are from 1996M1-2015M3. It is expected to see a growth after 2006, which is the year of the Free Trade Agreement between the two parties. Gross Domestic Product The GDP of Albania currently accounts around 12 Billion $. In Appendix I, figure 1, there is seen an increase of GDP until 1997, where it is a sharp decrease in value. The reason behind this deceleration, stand the historical fact of the collapse of several firms (25 firms), which declared bankruptcy in that year, which in other word were directed as the fall of pyramid schemes (Jarvis, 2000). After this year, Albania has faced a positive recovery, which increased its value a lot until 2008. The decline in 2008 is said to be a consequence of the global crisis in 2007. Albania is said to not have suffered a lot, in comparison to other countries in the region. This does not mean that there were some negative effects on the balance of GDP, whereas the public debt reached around 60% of GDP in 2009 (World Bank Group Partnership, 2010). In general, during the last years there has been a slow growth, but 535

positive which is a good sign of recovery and it is expected to continue to increase in the coming years. Total Imports vs. Imports from Turkey According to Ministry of Economy of Turkey, in 2012 they exported, therefore the products that entered in Albania and held a Turkish origin were mostly fabrics, cereals, textiles, clothing accessories, iron and steel (MoE, 2013). Due to the estimations, as it can also be seen from the figure below, it was calculated that in 2014 the imports coming from turkey covered about 7.1% of the total exports that enter in Albania. This percentage shows a lot about the trading potential between two parties, since the according to the official data it was a lower percentage by 5%, whereas here we see that the original value is more than that. If we compare the general percentage that exports have covered since 1996, the highest value was counted in 2007 and after that it continues in a more stable rate around 6%-7%.

Source 2- Elaborated by author Total Exports vs. Exports to Turkey Albania exports in turkey were divided into top 5 categories, which were mostly skin and fur skins, metallic, raw, transport equipments, plastics in primary forms and iron or steel. Exports to Turkey are relatively lower in value, in comparison to imports. Albania is known for its negative trade balance in general; therefore it is seen as a normal phenomenon for the country. The exports toward Turkey are seen to significantly increase after 2010 and reach a peak of 6.32% in 2012. In Free Trade Agreement, there was mentioned a total implementation of agreement, in a 5 year time; therefore, from 2007 this was the year that the barriers were totally broken down and the movements of good were done more

536

easily. This might be the reason why the highest percentage is seen during this year. Currently it accounts around 4% of total exports toward the country of Turkey.

Source 3- Elaborated by author Regression Analysis and Results The Data used in the model are: GDP as dependent variable, Import and Export of Albania as independent variables. The Data are obtained yearly from INSTAT, TURKSTAT and World Bank in a period of time from 1990-2013. The results are derived from a sample size of 24 data regarding the variables. In order to prove that the imports and exports are important for the economy of a country, a multiple regression model is build and therefore there is proved that the public can trust the above results regarding trade between the two countries. Regression Analysis Dependent Variable: GDPAL Method:

Least

Squares

Sample: 1990 2013 Included observations: 24

537

Variable

Coefficient

Std. Error

t-Statistic

Prob.

C

1.266854

0.220491

5.745601

0.0000

IMPORT

1.077843

0.283602

3.800544

0.0010

EXPORT

1.012477

0.449908

2.250411

0.0353

R-squared

0.986179

Mean dependent var

6.275000

Adjusted R-squared

0.984862

S.D. dependent var

4.367294

S.E. of regression

0.537332

Akaike info criterion

1.712066

Sum squared resid

6.063229

Schwarz criterion

1.859322

Log likelihood

-17.54479

Hannan-Quinn criter.

1.751133

F-statistic

749.1930

Durbin-Watson stat

0.728957

Prob(F-statistic)

0.000000

The regression model contains one dependent variable which is GDP of Albania and two independent variables which are total Imports and Exports flows in our country. According to the results obtained using E-views there can be said that the model can be explained by 98%, which is a really strong result and thus, our model is significant. Our variables, import and export, can be said that they express significant values, by comparing their probabilities which fall under the 5% level, which means that the independent variables, jointly can influence the dependent variable and making our model right. Hypotheses: Ho: Variables are not significant H1: Variables are significant

538

The t-values express significance for both variables which means that they are under the value of 5% (0.05). The model can be concluded as:

These findings can be translated as: For every change that happens in imports, there is a change of 1.07 units in GDP, while export values are assumed constant. On the other hand, for every change in exports there is an increase of nearly 1 unit in GDP. If the variables in general are said to be 0, then there will always be 1.26 units change in GDP of Albania. Results There are conducted some tests regarding the relationship between the independent variables alone, and two others for the dependent variable and one of the independent variables. GDP and Exports have a correlation coefficient of 0.988267 and r2 of 97% confidence level. Thus, this relationship can be trusted since it is expressed a strong relation between the two variables. The relationship is a positive, which means that the growth will be positive if one variable increases.

Source 4- Elaborated by author GDP and Imports have similar results of coefficient by 0.991386 and with r2 value of 98%, which suggest a really strong relationship between variables. Furthermore, this relationship is positive which means that Imports affect GDP if its value increases.

539

Source 5- Elaborated by author Even between the independent variables, Import and Exports, there exists a correlation coefficient of 0.987777. It can be concluded that correlation coefficients are really strong and express a strong relationship in general. So if one variable increases the other follow too. V.

Conclusions and Recommendations

The purpose of this Paper was to examine the importance of trade between two countries, one who is potentially small and the other is a large economy. Albania and Turkey, despite the long history together, have maintain to keep good relationships with each other and paying close attention to develop it further. Such trade removes unnecessary barriers, gives the countries the opportunity to know its real potential and brings it closer to big international markets all around the globe. Albania is still a developing country, there are yet recoveries to take place after communist era and as a consequence the industry in general is facing difficulties and it is weak to face any shock. There are arguments as it was mentioned in the literature review chapter that Free Trade Agreements can bring disadvantages to countries, especially to domestic labor and production, but there are still no significant facts to prove that statement. Some obstacles that this thesis faced, was the fact that the data were difficult to be found, especially in the same currency or in monthly basis. The informality remains a problem in Albania, whereas the TURKSTAT was a great help to get data from and it was a well organized website too. This should be a serious issue, since the lack of data can 540

seriously damage the figure of our country by pushing prospective investitures or researchers away. The credibility of the interested party is weakened by these kinds of situations. Regarding this topic, there is also a lack of information toward the exchange of Turkish Lira in the official websites in Albania, even though the trade taking place between two parties has been present for a long time now. It can be concluded that trade with Turkey has brought new perceptions in the inner market, by presenting innovative products, being leaders in important industries, having a large boundaries and therefore increasing economic growth of a small country as Albania. APPENDIX I- Percentage of Imports and Exports coming from Turkey (1996-2014) Table 1- Percentage of Imports and Exports coming from Turkey (1996-2014)

Year Exp

Imp

Exp to TR Imp from TR % of Exp % of Imp

1996

22,001

98,060

684

4,119

3.11%

4.20%

1997

21,044

95,022

195

4,157

0.92%

4.38%

1998

31,104

126,271 170

4,152

0.55%

3.29%

1999

48,430

159,465 152

8,179

0.31%

5.13%

2000

37,037

157,109 245

8,401

0.66%

5.35%

2001

44,096

190,155 444

11,590

1.01%

6.10%

2002

47,490

210,368 477

12,796

1.00%

6.08%

2003

54,487

225,983 451

14,830

0.83%

6.56%

2004

62,121

236,072 1,178

16,764

1.90%

7.10%

2005

65,818

262,191 1,133

19,624

1.72%

7.48%

2006

77,405

299,147 1,014

22,793

1.31%

7.62%

2007

97,171

376,194 2,192

27,454

2.26%

7.30%

2008

112,572 439,894 2,164

26,245

1.92%

5.97%

2009

104,515 428,839 570

27,709

0.55%

6.46%

2010

161,548 477,768 9,573

27,046

5.93%

5.66%

2011

196,897 544,004 14,484

30,200

7.36%

5.55%

541

2012

213,030 528,490 13,464

30,379

6.32%

5.75%

2013

246,391 517,378 9,223

32,889

3.74%

6.36%

2014

255,759 552,264 10,094

39,011

3.95%

7.06%

Appendix 2- Growth of Imports and Exports of Albania (1993-2014)

Year Exports

Imports

Year Exports

Imports

2004

161.10%

13.04%

2005

-3.78%

17.06%

1995 714.03% 3.58%

2006

-10.54%

16.15%

1996 -41.07%

47.84%

2007

116.16%

20.45%

1997 -71.55%

0.93%

2008

-1.26%

-4.40%

1998 -12.80%

-0.12%

2009

-73.67%

5.58%

1999 -10.72%

96.98%

2010

1579.85% -2.39%

2000 61.97%

2.71%

2011

51.30%

11.66%

2001 80.92%

37.97%

2012

-7.04%

0.59%

2002 7.37%

10.40%

2013

-31.50%

8.26%

2003 -5.35%

15.89%

2014

9.44%

18.62%

1993 1994 -16.02%

52.84%

542

References Armstrong, H., & Read, R. (1998). Trade, competition and market structures in small states: The role of contestability. Bank of Valetta Review. Balassa, B. (1984). Trade between developed and developing countries': The decade ahead. OECD. Biberaj, E. (2013). Retrieved from Encyclopedia Britanica: http://www.britannica.com/EBchecked/topic/12472/Albania/42646/The-decline-ofByzantium CEU. (2009). STABILISATION AND ASSOCIATION AGREEMENT. Brussels: The Council of Eurpean Union. CIA.

(2012). The World Factbook. Retrieved from Central Intelligence

Agency: https://www.cia.gov/library/publications/the-world-factbook/geos/al.html CIA.

(2014). Middle East: Turkey. Retrieved from Central Intelligence

Agency: https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html Derguti, M., Dushku, L., Duka, F., & Boci, S. (2011). Historia e Shqiptareve. Albas. Dewald, J. (2004). Europe, 1450 to 1789: Encyclopedia of the Early Modern World. Charles Scribner’s Sons. EC. (2012). 10 Benefits of Trade for Developing Countries. European Commission. European Commision. (n.d.). Agreements. Retrieved from European Commision: http://ec.europa.eu/trade/policy/countries-and-regions/agreements/ Jarvis, C. (2000). The Rise and Fall of Albania's Pyramid Schemes. International Monetary Fund. MoE. (2013). Countries & Regions - Balkans - Albania. Retrieved from Minister of Economy: http://economy.gov.tr/index.cfm?sayfa=countriesandregions&country=AL®ion=9 MoE. (2013, July). Countries and Regions-Balkans- Albania. Retrieved from Ministry of Economy: http://www.economy.gov.tr/index.cfm?sayfa=countriesandregions&country=AL® ion=9

543

Nasar, S. (1993). A Primer: Why Economists Favor Free-Trade Agreement. The New York Times. Tase, P.(2014, January 25). Retrieved from Foreign Policy News: http://foreignpolicynews.org/2014/01/25/albania-turkey-two-nations-common-visionstrengthen-bilateral-cooperation-1990-2000/ Tirana Times. (2014, December 29). Albania, Turkey to extend free trade agreement. Retrieved from Tirana Times: http://tiranatimes.com/?p=416 UN. (2012). Foreign Direct Investment Report- Albania 2011. United Nations Albania. UNDP.(2014). UNDP

Albania.

Retrieved

from

UNDP

Albania:

http://www.al.undp.org/content/albania/en/home/countryinfo/ UNDP. (2014). UNDP Turkey. Retrieved from UNDP: http://www.tr.undp.org/ WB. (2013). Turkey. Retrieved from World Bank: http://www.worldbank.org/en/country/turkey WB. (2014). Albania. Retrieved from World Bank: http://data.worldbank.org/country/albania World Bank Group. (2014). Doing Business 2015: Albania makes significant improvements in three areas of Business Regulatory Reform. Tirana: World Bank. World Bank Group Partnership. (2010). Albania. World Bank. WTI. (2009/10). Albania Trade Brief. World Trade Indicators.

544

The Stability of Money Supply in the View of Monetary Unification Phd C. Altin Zefi1 & PhD C. Elona Shehu2 1 2

Department of Finance, European University of Tirana, Albania Department of Finance, European University of Tirana, Albania

Abstract This study is focused on the effect of the money unification process of Albania and mainly in the effect of this process into the money supply. During the recent discussions about integrating our country into the European Monetary Union, a money illusion was conceived without taking into the consideration the rational effects of this process into the savers of the economy. Beyond this illusion— after analyzing the advantages and disadvantages of the unification process— this paper aims to look up into the main obstacles this process bears; for instance this article carefully observes the misalignment issue of inflation and exchange rate after the possible currency conversion in Albania. The main indicators on which our analysis is based are: money supply, interest rates, targeted inflation, GDP and velocity of money velocity. Further this paper aims to examine the relationship between money supply, GDP and targeted inflation. Based on this study we drive these following issues to a solution on the reference of Fisher’s Quantitative Theory of Money. Based on an empirical analysis, we expect to find a controversial behavior of money supply after the currency substitution. This research paper opens a new lieu of discussion in terms of academic and decision making debates. Keywords: Euroization, Money supply, GDP growth, Targeted inflation, Albania, Financial system 1.

Introduction

During the last decade, Albania has exposed itself to euro, apart of its local currency Albanian Lek (ALL). Many transactions are done in euro. Therefore, Albania can be considered as a dual currency countries. This paper is focused on the effects that dual currency countries have on the macroeconomic factors such as real GDP Growth, inflation and monetary base growth. This study is organized as follows: in the second section there is literature review part where the relation and effects of euroization on the macroeconomic factors are shown; third section shows a macroeconomic perspective for Albania; the forth section shows an empirical evidence about the relationship between euroization and monetary base growth and inflation.; the fifth section is a result analysis; the study ends with the conclusion section.

545

This study aims to give a clear overview of the effects of using dual currency. Firstly, the study aims to give a clear frame on the theoretical effects of euroization in the Albanian economy; secondly the study aims to empirically analyze the effect of euroization into the macroeconomic factors such as inflation, exchange rate and real GDP growth; thirdly the study aims to give some recommendation regarding euroization level in Albania. What is the impact of a dual currency country on the monetary policy? Data and Methodology This study covers a twenty-one-year time frame of yearly data from Albania. The variables taken into analysis are euroization of deposits, euroization of credit, inflation level and economic growth. The analysis is computed using a multiple regression analysis, where the level of GDP and inflation is the dependent variable and the M2 growht andeuorization of deposits and credit is the independent variable. 2.

Literature Review

We want to study the effects of partial euroization on GDP growth and inflation in Albania. Eearly literature considered “euroization” or “dollarization” as e phenomena in terms of “currency substitution” (Quispe, Agnoli, 2002). There are two methods of euroization, or dollarization, partial and full. Full euroization exists when the Central Bank of a country adopts a foreign currency and eliminates their national currency. This phenomena is more widely spread in Latin Amerika countries. (Quispe, Agnoli, 2002). In our region Kosovo has adopted full euroization as well. Partial euroization exist when individuals in a country take rational measures to protect their purchasing power of their money and exchange them for a foreign currency. Partial eu oization is observed more in countries where there is macroeconomic de-stability and high inflation. Although euroization in Albania has increased in spite a period of normal inflation and macroeconomic stability after 2000. (The reasons for increased level of euroization are studied more in-depth by Manjani, 2014). The effect of euroization onEconomic Growth We are very interested to know the effects of euroization on our economic development, the transmittal mechanisms of these effects and how policy makers can respond. In her study on the issue Eduards and Magendzo (2001) states that “We also find that dollarized nations have had a lower rate of economic growth than non-dollarized ones”.

546

Different conclusion is reached by Castillo (2006) where their findings suggest that “…increased dollarization is positively associated with economic growth. Dollarization has a stronger impact on inflation. Data suggests that dollarization significantly reduces inflation.” We are interested in knowing how euroization impacts Albanian’s economic development and inflation and what should be the policy responses. Measuring partial euroization Going back to our topic, how much is Albanian economy “euroised” and according to Bank of Albania, we have three kinds of Euroisation: Firstly, it is the assets’ euroisation, which is measured as the ratio of deposits in foreign currency total deposits. Typically, deposits in foreign currency stand at 48% of total deposits in Albania. Secondly, it is the liabilities’ euroisation, which is measured as the ratio of loans in foreign currency with total loans in Albania. This indicator speaks for a high level of euroization, as it currently stands at 67.5% of total loans. Thirdly, it is the euroization of transactions, which is measured as the total number of transactions in foreign currency, out of total transactions in the economy. This is the hardest to measure because it’s not possible to measure all transactions by all individuals and the currency they use thus there are only estimates. 2.1 Advantages of adopting Euro, as a single currency The prevailing opinion in both academic and political area, is that the advantages of euroisation for a short term period are profoundly evidenced, especially in developing countries, where the aspiration to join the European Union is greater. Upon joining the monetary union through the use of the single currency, the exchange and interest rate shocks will be eliminated. 2.1.1 Reducing transaction costs These kind of costs, even though presenting a loss to the banking balance sheet, do practically affect countries with an import-oriented economy. The implementation of a single currency reduces transaction costs that materialize in the form of appreciation or depreciation of the currency. 2.1.2 Reducing the interest rate Application of such a stable currency would bring lower interest rates. The rapid and significant reduction of interest rate would encourage investment growth, and as a consequence, it would bring a positive impact on fiscal policies and towards reducing the cost of public debt. Naturally, the effect would be more sensitive in countries where the central bank pursues a policy of real interest rates.

547

2.1.3 Reducing the exchange rate fluctuations Monetary unification would eliminate possible pressures on exchange rates and, consequently, prices (inflation) would be more stable. Given that a currency operating in a wide market would be adopted, its exchange rate would not be affected by the domestic market parameters. 2.1.4 Effects on inflation There appears to be a consensus on the effects of euroization on inflation. Most studies conclude that partial dollarization, which is similar to erotization, significantly reduces inflation(Castilo, 2006). Similar conclusions are reached by Eduardo and Magendzo (2001) stating that: “Our findings suggest that inflation has been significantly lower in dollarized nations than in non- dollarized ones”. However partial euroization can be a risky position for a country. Countries like Russia and Turkey say a drastic devaluation of their currency together with inflation. This devaluation of their local currency was due to the flight of the capital and dumping of the national currency as well as rational expectations for higher inflation. Expectations for higher inflation have contributed to increased euroization or dollarization adding to the effects of exchange rate volatility and more inflation. 2.2. Disadvantages of adopting euro, as a single currency When analyzing “euroisation” as a phenomenon, we need to examine the costs it bears to the economic and monetary system of our country. In all economic literature and discussion papers on possible disadvantages of applying a single currency, the Central Bank takes the central role at the stage. 2.2.1 Money Supply Shock A very strong negative impact is considered the insufficiency of foreign exchange reserves in euro. Euroisation as a process charges a high cost bill to our economy, which does not seem to generate the amount of necessary money reserves to implement euroisation. 2.2.2 “Elimination” of the Central Bank’s role If we consider applying a single currency, euro, most of the basic and substantial functions of the Central Bank of Albania would “disappear”. Through euroisation, countries accept losing the independence of the monetary policy, by removing Cetral Bank’s instruments for implementing monetary policy. 2.2.3 “Seigniorage” Cost Since the feudalism times, it was the ruler’s right named “seigneur” to issue coins; therefore this process is called seigniorage. It is defined as the difference between the nominal value of each currency issued and its printed value. The cost of printing money is insignificant compared to it’s nominal value. Consequently, incomes generated from seigniorage are considerable. But, 548

as a result of euroisation Albania would issue less local currency (ALL) if not at all, thus reducing this source of incomes, which is estimated to be up to 5 per cent of Albanian state budget. Therefore, rejecting the Albanian Lek means no more rights to benefit from this source. Duraj (2008) has concluded that its cost, referring to the period from 2002-2008, is on average 1.73 per cent of the GDP. Duraj observed a downward trend of its weight in government budget revenues through years. In fiscal terms, this income for Albania, during the period 2000-2008 was only 0.44 per cent of the GDP and actually stands at 1.92 per cent of fiscal revenues. In terms of opportunity cost, the seigniorage income was at about 1.85 per cent of GDP. Therefore, euroisation would be, and has been, so an expensive process for Albania. 2.2.4 Lender-of-last-resort Central bank acts as lender of last resort for commercial banks. In terms of euroisation of Albania, the Bank of Albania will lose the possibility to act as a lender of last resort. 2.2.5 Structural Costs An important cost to be considered is the process of adapting the appropriate structures and mechanisms established for managing the euroisation regime, which is an unfamiliar process for our country. 2.2.6 Negative Effects of partial euroization on banks and bussneses. There are negative effects on banks because the asset and liabilities euroization exposes them to the exchange rate risks. (Kokenyne, 2009).Businesses face the same problem, and in addition their transactions, at least a good part of them, are in a foreign currency but their taxes and balance sheet must be prepared in ALL. 2.3 Brief Analyses of anti-deflationary policies According to the World Bank the Central Banks have injected $8 trillion in the world economy since the start of the last financial crises. The purpose of this massive growth of mony supply is to escape the vortex of deflation, grow consumption and reach the targeted inflation of 2 – 4 %. Reaching this target seems harder in some periods of history and difficult in some others. During the 1970 inflation in USA reached double digit figures but after the 2008 Great Recession maintaining inflation target seems a difficult task. There may be different reason but mainly they have to do with the “liquidity trap” (Hicks, 1937 and Krugman, 1998) as interpreted by the Keynesian model of money markets.Krugman, a Nobel Price Laurate in 2008, explains the liquidity trap as “that awkward condition in which monetary policy loses its grip because the nominal interest rate is essentially zero, in which the quantity of money becomes irrelevant…” (Krugman, 98).Despite the massive growth of money supply deflation vortex continues to be a danger for the European and American 549

economies.Reported data on Eurozone inflation for August 2015 were at 0.1%, practically a flattening which means that prices were not changed. Similar trend appears to happen in Albania. The 2014 inflation recorded historical lows (except for 2001) of 1.63% with downward trends. The same trend has been observed through 2015 recording figures well below that of the targets of BoA. Table 1: Inflation Trend in Albania during the period 200-2014 9 8 7 6 5 4 3 2 1 0 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Source: Authors In the Bank of Albania yearly report it was argued that mid-term inflation was within the BoA’s objectives.”Average yearly inflation for the period 2007 – 2011 was 3.1%, very close to the midterm objective of the BoA. This level of inflation has supported the dynamic, positive economic growth, which in yearly average for the mid-term was at 4.7%. In the meantime the average interest rate for ALL was at 5.6% (Raporti Vjetor BSH, 2011). This analysis doesn’t mention the fact that these results were achieved thanks to expansionary budget deficit. This assessment is supported by the IMF in the yearly conclusions in 2012. The IMF concluding statement, issued on October 2012, says that “since the onset of the global crisis in 2008, Albania has avoided a sharp fall in output and maintained banking system stability, thanks to a fiscal stimulus,…” (IMF, 2012) .

550

Table 2

Average inflation for the period 2010 – 2014 was 2.5% me with a downward trend. The goal of this study is analyze the effects of euroization on the monetary base, inflation and economic growth. Albanian is one of the countries with higher levels of euroization compared to other countries in Eastern Europe (Dvorsky et al, 2007, Brown et al, 2014) and euroization continues to grow. In his study Brown (2014), reports a 20% increase in the level of euroizatoin of family and NGO deposits compared to 2007. This development is accompanied with lower levels of inflation, well below the targeted level of 3% (+-1%) (Bank of Albania). As shown in the graph below there is an overall decrease in the consumer price index (CPI) in Albania. There has been a stable trend from the year 2003 to year 2014. While the monetary base has faced a more stable increase during the period from 1995 until 2014.

551

Table 3Consumer Price Index and % and monetary base expansion 60 50 40 30 20 10 0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Shtimi Vjetor i baze Monetare te gjere %

Indeksi i Cmimeve te Konsumit %

Source: Authors Experience from the History of the Great Depression. Monetarists Theorists maintain that reasons of the prolonged crises in the US, and the world, are due to the sharp decline in the monetary supply. Monetary Supply declined by as much as 30 percent. It practically put the brakes on the economy. The real economy contracted by as much as 40%, deflation was 25% and unemployment rose to 24.5%. Another fundamental was affected greatly. Money supply, M1 and M2, fell by about 30%. Table 4: Money Supply Trend in Albania 80 70 60 50 40 30

26.2

26.1

26.4

26.6

25.8

24.1 21.1

43.7

44.7

46.4

46.6

45.7

42.7

19.9

21.9

36.1

32.2

34.4

25.9 39.1

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

M1

26.2

26.1

26.4

26.6

25.8

24.1

21.1

19.9

21.9

25.9

M2

43.7

44.7

46.4

46.6

45.7

42.7

36.1

32.2

34.4

39.1

M2

M1

Source: Historical Statistics of United States Milton Friedman says: “The contraction is - a tragic testimonial to the importance of monetary forces… Different and feasible actions by the monetary authorities could have prevented the decline in the stock of money…[This] would have reduced the contraction’s severity and almost as certainly its duration (Friedman, Schwartz 1963, pp. 300-01).

552

Money Supply exercises its pressure on the real economy through deflation. The Monetarist believes that in the short run prices fall but not as fast as the money supply effectively reducing money supply. The American FED learned its valuable lesson. Ben Bernanke would say on Milton Friedman’s 90th birthday “I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.” (Bernanke, 2002). Thus the FED monetary policy in response the last Great Recession was “great” as can be seen from the chart below: Table 5: Adjusted Monetary Base 2002-2014

Source: Federal Reserve A brief history of economic policy One can say that the 40’, 50 and 60’ were the Keynesian years. It went so far that Nixon declared with confidence that “we are all Keynesians” (Friedman, 1965). ‘70s and ‘80s were a resurgence of neoclassical school of thought spearheaded by Milton Friedman with his Quantitative Theory of Money. An important role was played by George Lucas with his Nobel Prize paper on Rational Expectations. Philips curve brings more employment only when inflation is not expected. If rational agents of the economy expect inflation they will adjust the prices (wages) and higher money supply, in the long run, leads only to inflation and sometimes can even lead to higher unemployment. Friedman suggested that growth of the monetary base should be done at a fixed rate every year. His famous saying that “inflation is always a monetary problem” and that “We don’t need a Fed, I have, for many years, been in favor of replacing the Fed with a computer, would print out a specified number of paper dollars” to augment the money supply. “Same number, month after month, week after week, year after year.” (Murdock, 1999).’90s and ’00s softened the Monetarist dominance because velocity of money, V, was unstable and raising questions about 553

the relationship of inflation with money supply. (it is outside the scope of this study to consider the merits of criticisms and the responses). As we will see below this relationship between money supply and Albania holds true for Albania but because of the erotization money supply has not had its full effect on inflation. This summery serves as a prologue to the next point as we discuss the case of Albania. Theory and Model Quantitative Theory of Money for a dual currency country like Albania QTM states that: “… if a change in the quantity of (nominal) money were exogenously engineered by the monetary authority, then the long-run effect would be a change in the price level (and other nominal variables) of the same proportion as the money stock, with no change resulting in the value of any real variable.” (McCallum, Nelson. 2010) The QTM is expressed as a mathematical identity in the form of: M*V = P*Q.

(1)

In other words: GDP of Albania = M*V. So according to this identity, by taking V as stable BoA needs to print money at the speed the GDP grows plus the targeted inflation. If GDP grows at 3% a year and the targeted inflation is 3 percent a year than BoA needs to print 6 % more money, increasing the monetary base by 6%. This theory does not predict a state of being like Albania’s where about 50% the economy is based on FC. If euroization, or dollarization, was 100% than BoA would have no leverage on the money supply. On the other had if euroization was 0% the money supply would be under BoA’s control. (There are other factors that influence money supply besides the ability to print money but this analyses is beyond the scope of this study.). The research questions of this study is if the increase of the euroization has any effect at all in the economic growth and inflation. If euroization does affect these indicators than we ask how? Does money supply serve as a transition mechanism for the effects of euroization onto GDP growth and inflation? First let’s look at Albania’s euroization of credit. Our time series shows a staggering levels of partial eruoizatoin of credit and deposits as seen in the table below:

554

Table 6: Euroization of Credit Deposits 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Euroization of Credit

Euroization of Deposits

Source: Bank of Albania There’s no official data on the euroization of currency holding by the consumers but some studies have suggested that the figures are above 50% (Narazani, 2013). These data suggest that in excess of 50% of the money supply used to fuel the economy is already in FC. The adjusted Phisher’s identity for such country would be: (DMB + FMB)*V = GDP of Albania

(2)

Where: DMB = Domestic Monetary Base, FMB = Foreign Monetary Base, V = velocity, times money changes hands in a year. The relationship between DMB and FMB is such that foreign currency monetary base is a percentage of the domestic monetary base. FMB = x*DMB

(3)

Where x = a quotient that express the relationship between FMB and DMB. In this case we can change in Phisher’s identity as: (DMB + x*DMB)*V = GDP of Albania

(4)

This identity can be simplified to take the form as below: DMB*(1+x)*V = GDP of Albania.

(5)

This conclusion is very important for monetary policy. It states that if the GDP grows at 3% and BoA’s goal is to have 3% inflation than: Monetary Base increase = 6% (1 + x).

555

This formula (5) implies that if money supply in Albanian Lek is equal to Foreign Currency, or x = 1, GDP growth is predicted to be 3% and targeted inflation is 3% then than BoA needs to increase monetary base by: Monetary Base increase = 6% (1 + 1) = 12%. This is a very important conclusion and we are going to test it using the long term relationship between M2 and Inflation as well as a bivariate function of the influence of credit and deposit euroization on inflation and GDP growth. As suggested and supported by many studies, we expect to find a strong positive relationship between inflation and M2 and a negative relationship between euroization (of deposits and credit) and inflation. The data on the relationship of these variables in the case of Albania, supports those studies that conclude with a negative relationship. Monetary Base and Inflation– An Econometric Model A simple linear regression model is used. First we want to discuss the relationship between Money Supply, euroization of deposits and credit. GDP growth = β0 + β1*M2%Growth + β2*%CreditEuroization + β3*%DepositEuroization + ε Results of the analysis with OLS model GDPgrowth = 0.277 + 0.31*M2%Growth - 0.14*%Cr. Euroization 0.33*%Dep.Euroization Box 1: Regression Output Model 1: OLS, using observations 1998-2014 (T = 17) Dependent variable: GDPGrowthPerc

const PercDepozitavene FC M2growthyear PercKrediseneFC R-squared

Coefficient 0.277*** −0.327***

Std. Error 0.0706899 0.108008

t-ratio 3.9207 −3.0344

p-value 0.0018 0.0096

0.306 −0.144**

0.174523 0.0611528

1.7579 −2.3604

0.1023 0.0345

0.789059

556

Adjusted R-squared

0.740380

Both the percentage growth of deposit euroization and credit euroization are statistically important. While the effect of M2 growth in this model is not statistically important if M2 effect on GDP growth is studied alone it will affect GDP growth with a coefficientβ1 of 0.69 *M2growth and R2 of 0.56 and statistically important even at 1%. These results differ somewhat from the QTM which predicts that changes in the monetary base in the long run increase inflation be the same percentage. This difference is explained by our model of adjusted QTM for dual currency country. Our model explains that the mechanism as summed below: -

A country has a shock on Money Supply

-

Euroization of the economy grows

-

The economy and money supply finds a new equilibrium

-

Monetary base should grow taking into account the new equilibrium

It is also important to notice is the negative effects of euroization on GDP growth. Our study suggests that because policy makers have failed to take into account the negative effects of euroization on money supply the monetary policy has been tighter than suggested by QTM. This tight monetary policy has exerted deflationary pressures and has negatively influence GDP growth. Euroization and Inflation The second econometric model we want to look at is the relationship between euroization of deposits and credit, M2 growth and inflation. We use a similar model with multiple regression analyses using the OLS. Now we want to study inflation as dependent variable and keep euroization of deposits and credi as well as M2 growth, “ceteris paribus”. Inflation = β0 +β1*%CreditEuroization + β2*%DepositEuroization + ε Our model shows that euroization of credit is negatively related to inflation. Asix percent increase of credit in FC lowers inflation by 1%, with n = 17 and R2 = 0.35.

557

Box 2: Regression Output Model 10: OLS, using observations 1998-2014 (T = 17) Dependent variable: Inflationconsumerpricesann

const PercDepozitavene FC PercKrediseneFC

Coefficient 0.199*** −0.122

Std. Error 0.0612014 0.108604

t-ratio 3.2629 −1.1269

p-value 0.0057 0.2787

−0.176**

0.0798073

−2.2157

0.0438

The study shows that this is important at 5%. While the percentage growth of deposit euroization has negative effects on inflation it is not statistically important. This was predicted by the mathematical identity of Fisher adjusted for dual currency country. Why would these phenomena appear? After some shocks in the economy, and economic shocks happen for different reasons, the structure of monetary base is changed and the economy creates a new equilibrium. The Central Bank must take into account the new reality where the economy has cleared, a reality in which the local currency fuels only a percentage of the transactions in the economy. The increase ofFC that funds the rest of the transactions is out of control of the Central Bank, it can only control the base of local currency. In the short run an increase of 6% of monetary base of ALL does not respond to aneconomic growth of 3% plus targeted inflation of 3%, this pushes toward a strong local currency and deflationary pressures. Thus euroisation creates deflationary pressures. Moron and Winkelried (2005), for example, find same conclusion that “inflation targeting policies are compromised in highly dollarized economies”. Euro to ALL Exchange rate One final indicator to look for evidence for our theory is Euro exchange rate. Despite the staggering reduction of the remittances for immigrants, a reduction of 43%, Euro has been relatively week vs. ALL. There are other factors that theoretically would suggest a stronger Euro vs ALL.

558

Table 7: Foreign Reserve Holding By the Bank of Albania

Source: Shijaku, Genti (2012) Fist a worsening of the Balance of Payments would reduce the amount of Euros in the country needed to fund imports and thus pressure Euro exchange rate upward. Second BoA increased its Euro holdings, as shown below, primarily to accommodate for the fluctuations of remittances (Shijaku, 2012). Third, Reserve Holdings of BoA were accompanied by a decrease in remittances as shown in the chart. Table 8: Remittances in Albania 2004-2013

1000 900 800 700 600 500 400 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Bank of Albania

Why did the Euro not appreciate against the ALL? The answer seems to point to the same conclusion reached above regarding the inflation and euroization effects on money supply; Euroization has contributed to lower inflation in Albania, and thus a stronger ALL. Despite the decrease of the supply of Euros, because of the fluctuations of remittances and increased foreign currency reserves by the bank of Albania, ALL exchange rate to Euro currency has 559

remained strong and steady. This indicates that the Bank of Albania has maintained a tight monetary policy which has contributed to deflationary pressures and lower GDP in the short run. Concluding Remarks In the aftermath of the Great Recession central bankers have pulled out of their toolbox unusual tools to tackle fears of a second Great Depression. After this crises Albania economy finds itself with a different structure of monetary base. Euroization has increased both in household liabilities and bank deposits. All studies suggest the same is true of currency holdings by the public. The purpose of this paper has been to study the effects of euroization on our economic activity and inflation and suggest policies to respond. We have used time series data from the Bank of Albania and analyzed these data using econometric model of OLS in multiple regression model. We found that euroization has a negative effect on our GDP. A 7% increase on the level of euroization tends to negatively impact GDP growth by 1%. Deposits euroization has an even stronger effect. Also we found that credit euroization has a strong influence on inflation but deposit euroization has no statistical influence on inflation. These indicators were substantiated by strong ALL toward major currencies, primarily Euro. Fall of remittances, growth of foreign currency reserves by the Bank of Albania and worsening of trade deficit and balance of payments have not led to stronger euro and weaker Albanian Lek. The response from BoA has not been adequate and proportionate compared to that of other countries. Base interest rate has been lowered but other tools in central bank’s arsenal have not been used. In order to adequately respond to the current crises, the BoA and the new reality should change its monetary policy. As suggested by the Phisher mathematical identity, the monetary base increase should be adjusted to take into account the current structure of Albania’s money supply. What would be the effect of a more expansionist monetary policy to compensate for the euroization? -

Fist growing money supply would result in higher inflation that would move closer to the 3% targeted inflation of the Central Bank.

-

A monetary expansion, beyond current levels, would weaken ALL toward other major currencies, USD and EURO. Kadareja (2014) explains what would happen with a weaker ALL:

560

“A depreciation of local currency against other currencies would temporarily increase the competitiveness of our goods and services. On the other side it results with higher inflation because imported goods and services become more expensive.” Both of the above results are desirable in the current state of our economy. The correction of this asphyxiating monetary policy brings the desired results of better competitiveness of Albania goods and services. Secondly it results with higher inflation and better chances of escaping the dangers of deflation. References Andrew Berg, Eduardo Borensztein. 2000. Full Dollarization the Pros and Cons Annamaria Kokenyne, Jeremy Ley, and Romain Veyrune. 2010. Dedollarization Bernanke.B.S. 2002.On Milton Friedman's Ninetieth Birthday November 8, 2002 Calvo. 1999. On Dollarisation. NBER WORKING PAPERS . Cuko/Duraj. 2006. “Eurozimi I njeanshem ne Shqiperi; Nje kosto per tu marre parasysh?” ACER 2006 Erjon Luçi, Marta Muço and Elvira Sojli. 2006. Euroisation in Albania: From Spontaneous to Consensual François R. Velde. 2006. “Chronicles of a Deflation Unforetold,” Federal Reserve Bank of Chicago, November 2006. Kadareja, Arjan. 2014. Leksion per Politiken Monetare Klaudeta Merollari, Aida Mosko. 2015. The Level of Euroization of Albanian Economy Masson, P. 1997. The scope for inflation targeting in developing countries.IMF WP 97/130. McCallum, B.T., Nelson. E. 2010. Money and Inflation: Some Critical Issues Milton Friedman. December 31, 1965. Time Magazine. Mishkin, F. S. 2000. Inflation Targeting in Emerging Market Countries, in NBER Working Paper No. 7618 Myriam Quispe-Agnoli. 2002. Costs and Benefits of Dollarization NUTI, M. 200. Costs and benefits of unilateral euroisation in Central Eastern Europe. Working paper series: Russian-European Centre for Economic policy. Olta Manjani. 2014. Estimating the Determinants of Financial Euroization in Albania Rostowski, J. 2001. “The Eastern Enlargement of the EU and the Case for Unilateral Euroization” in Financial Vulnerability and Exchange Rate Regimes. Emerging Markets Experience. Cambrigde: Mit Press. Rostowski, J. 2001. “The Eastern Enlargement of the EU and the Case for Unilateral Euroization” in Financial Vulnerability and Exchange Rate Regimes. Emerging Markets Experience. Cambrigde: Mit Press. Sebastian Eduards and I. Igal Magendzi. 2001. DOLLARIZATION, INFLATION AND GROWTH

561

Shijaku, G. 2012. OPTIMAL LEVEL OF RESERVE HOLDINGS: AN EMPIRICAL INVESTIGATION IN THE CASE OF ALBANIA Sofia Castillo. 2013. Dollarization and Macroeconomic Stability in Latin America Wojcik, C. 2002. Alternative options for the monetary integration of central and eastern european Eu accession countries. Occasional paper No.3 . Wooldrige.L.M. 2013. Econometrics – A modern Approach. South-Western, Cengage Learning Xhepa, S. 2002. Eurizimi i ekonomise Shqiptare nje alternative per tu konsideruar.Tirane: Banka e Shqiperise.

562

Teenagers` Problems Related with Social-Networking Albi Dode 1, Genta Rexha2, Lediona Nishani3 1

2

Department of Computer Science, University of New York Tirana, Albania; Department of Economics, University of Elbasan ‘Aleksander Xhuvani’, Albania 3 Department of Computer Science, University of New York Tirana, Albania

Abstract People have always wondered how to simplify their life by new inventions. In the 21-th century, people are being transformed socially by the computer technology and Internet. Being easy to use, even teenagers are getting addicted after it. Being just a parent nowadays is not an easy occupation. Just giving an advice to your child is not a well-done occupation. Finding the balance between using computer and hanging out in real socio-physical activities with friends is a big concern for parents and educators. Hence, teenagers are experiencing increased loneliness. Minors may encounter even cyber-bullying. However, the real interaction between young users and social networks has not gained the right attention from the researchers. In this research paper, we aim to explore some crucial issues of teenager’s virtual social life. We have decided to select this target of population because they are the most vulnerable part of the society, which is very linked and connected to social media. Furthermore, we present some case studies of the terrible affect that cyber bulling can cause to teenagers by making sense of the socio-physiological damage that websites and internet as a medium induce to the youth generation. Moreover, we even take into consideration the data mining for social networks and how marketing specialists use it. Finally, in concluding of the paper we provide some insights how these issues of paramount importance can be mitigated and diminished from teenagers’ real life. Keywords: Websites, Social networks, Teenagers, Cyber-bulling, Data mining. Introduction People have always wondered how to simplify their life by new inventions. Since the early 1600`s people invented machines to automate their calculations. Later in the 20-th century, they developed computers, which gained the commercial and industrial scope and now in the 21-th century, people are being transformed socially by the computer technology and Internet. For its vast beneficial usages, 70% of U.S families had a computer and 52% of them had Internet connection (Margie & Richard, 2000). Being easy to use, even teenagers are getting addicted after it. People have the need to express their thoughts and 563

their feelings to other people they know. Taking into consideration this simple fact, the virtual world of wide web has the so called social web sites. Once the virtual profile is created, the addiction to perfection begins, the same way as being in touch and gossiping are a trend now days. Furthermore, data show that the 35 minutes spent by children in front of the personal profile increases with passing of the years (Margie & Richard, 2000). These numbers have made parents and specialists of the field to get concerned about the fact how to change a children life with a social network. However, there are pros and cons in this topic; they want to get informed about how to reduce the time spent only in front of a computer screen and how to guide children towards good usage of social sites. The inventors have never thought that ethical causes would have been a problem for some of the computer usages. Computer and Internet for children is like playing a minefield game. You need to put red flags in some spots, and get only the best from the game. Teenagers use these sites to keep in contact, to be updated with the latest from their friends and relatives, as the time in which we are living imposes us to be coherent. It is supposed to give a promotion to the creative expression and discussion and many features like meeting new people, having a public profile, sharing personal media, playing on-line community games was the hook to attract youngsters. Nevertheless, the real interaction between young users and social networks has not gained the right attention from the researchers. Finding the balance between using computer and hanging out in real social-physical activities with friends is a big concern for parents and educators. This does not only mean health problems like eyes problems, but a risk for obesity as their body stays in a static position for a long time, which have made 25% of U.S children tale (Rong & Suzanne, 2005). As their construct is very rigid, seizures coming from quick flashing images, hand injuries, are in great number among children who use computer as their primary source for playing games or reading eBooks and documents for school purpose. Parents tend to impose some rules within their teenager children. Beside that, it depends from the family incomes and its knowledge for Internet, as “richer have more contact with technology” (Rong & Suzanne, 2005). There are problems and rules that each family member should respect. It is though in common, that giving access to social sites may in a way or other; improve the user's social life. As we, all know, as numbers taken from the many studies, show that these kinds of sites are mostly used by teenagers, so they are the first to feel the impacts. Therefore, imposed 564

rules are simple, such as the amount of time to be spent in front of PC, etc. However, another study (Karen & Katinka, 2006) shows that there is “62% of the children” that agree that they in secret do not respect imposed rules and continue being on-line in the social games. Parents have to deal with the time boys spent on hard battle social games and poker compared to less harmful games played by girls. In addition, social websites do not even provide rating system for their on-line social games, making the job for parents even harder. The concerns raised by web technology were so inevitable that even the American Congress had to pass some laws according to them. Sites were ordered by Children’s On-line Privacy Protection Act to” post their policy” and give material about the data collected (Baase, 2008). The data should be encrypted and not to be given to third parties. They take for granted the opt- in option, which means if some teenager wants to use apps (as mostly do), they gave the right to third parties to send bulk email to them and make use of their info. In the virtual world, the data that teenagers’ profiles hold are like a treasure for the predators. Cyber-Bulling as a phenomenon Being just a parent nowadays is not an easy occupation. Just giving an advice to your child is not a well-done occupation. It was stated by Kaveri (Kaveri, 2000), that teenagers “have experienced increased loneliness”. Minors may encounter cyber bullying. Even in social networks, this form of bullying is gaining path, causing strong emotional fears and psychological traumas or even worse, the cyber bullying may end up in real life bullying and physical injuries. However, even the bravest children may end up becoming bullies themselves without knowing it. One negative aspect that we deemed appropriate to highlight herein is the harsh language that some adults write in these sites while posting notes that are shared or language spoken in groups created within the social site. Due to this kind of verbal communication, children end up to discriminate ethnic groups, different races, with the same language used in uncontrolled pages. Many initiatives, even within the social networks, are growing the concern to spread the word about this inappropriate usage of social network. Their physical and psychological issues related with the ethic topic itself, have given start to some initiatives like “Safer internet” to make parents and children aware of this risks. Some gathered log files are indicated from two school labs, and showed that even when security policies were active, still unreliable content

565

was gathered from web. The protection is offered by the Children`s Online Protection Act (Karen & Katinka, 2006). Furthermore, parents have to install effective firewalls and filters. Nevertheless, blocking certain pages of a social network is tricky, as some links direct to other pages. The surfing minefield game of internet needs the help of parents to place some safety flags on the way on. A large part of this generation social and emotional development is occurring while being on the network surfing social pages. For any teenager prone to depression, a large number of friends sometimes can make things worse. Parents have to focus equally as much on technology so they “understand the idiosyncrasies” of using a social website. It is really important for parents to kind of tune in to their child`s emotions (Steven & Edward, 2001). Off-line from Real World As we mentioned in the beginning, teenagers to keep in contact and to socialize with new friends use social web sites. This new kind of “off-line from real world” socializing has brought into concern some other issues, for instance fake relationships. As stated by Kaveri (Kaveri S. , 2008), the number of cyber bullying cases is increasing, even teens know the bully. Both genders received harassments. The missed feelings from the losses of contact with real world persons have leaded to the creation of cyber bullies and exporting those feelings to be converted into negative ones in the electronic stage. Thanks to social websites, cyber-bulling is expressed through posting abusive messages on profile wall; add inappropriate comments (an act to amend Section 32261 of the Education Code, relating to pupils, Government Document). The concern has grown even further in the higher law institutions. They are trying to do something about the good needs of virtual social life. If this law will pass, it would be a good victory for the defenders of good socializing and a big loss for the fake contacts that benefit from the innocence of teenagers. One thing is for sure true, on-line teenagers are exposed to risks that are even more dangerous. The rapid time that information travels and the content within it makes it nearly impossible for the laws to be coherent. This “bug” has lead to equal access for all to cyberpornography. Laws and policies of sites may be prohibiting viewing of “no-good” material, but check and verifications are of low level (Daphyne, 1997). Administrators of such social websites should be more concerned of the impact. In social websites, there is no specific policy, prohibiting the content of material a fan page o group page can show. Businesses profit from this fact to attract the target group they want. As stated by Daphyne (Daphyne, 566

1997), those kinds of materials should be prohibited only if show prurient images and do not have artistic nature. Nevertheless, are teenagers able to spot these differences? Girls benefit from social websites to reinforce, whereas boys to flirt. This true statement is proved in the research done by Peggy (Peggy, 2003) the wide network of peers someone have in its social profile, and it is sometimes as good as “relations become progressively significant during adolescence”. Teenagers, better known as the state of time when children want to be free from the rules, with the online chatting, they find themselves in a virtual talk with a person, known or unknown. As “friends” are less concerned about life then parents, they find in them support. Studies generally tell a linear intensification with age in levels of friendship intimacy, and girls' affairs are almost always found to be "closer" than those of boys. Commenting in social websites for adolescents it is not just a game. Even though augmented attention in the opposite gender is considered an important feature of the adolescent period, “we observed marked differences between boys' discourse directed toward friends and that directed toward romantic partners. Studies in this area recognized that dating is related with “earlier exposure to sexual experiences” (Kaveri S., 2008). Cyber Bulling Effects in Real Life The risks that teenagers encounter in the social websites have real life effects too. There is cases worth to be analyzed and which have opened the way to more severe laws and policies on those websites. For some people, virtual and real life was the same. Trolling, bullying, fake profiles have had unexpected consequences to teenage users, pushing them over the edge. There are real people like Steven Duffy who created fake profiles and used them to make fun of tragedies of passed away teenagers. He got pictures from their profiles and added malicious comments on them. Some advocate that is what freedom of speech is, however the supporters of the ethical and moral point of view ask for more severe punishments for this kind of not allowed jokes. Adolescents tend to be emotionally touched by the situations of everyday life and comments in social websites when been humiliated, and the easy remedy they came across is suicide. The public opinion has to be concerned that suicides from teenagers are related and substantially associated with websites and social networks (Morris, 2011).

567

As we have stated above, teenagers live the early relationships very intensively and emotionally. Megan Mayer took her life away as her “virtual boyfriend” insulted her. Even though it is a sad story, the person who was behind the fake profile was an adult. This case serves as an example to show the misusage from adults of social web sites in their favor. The consequences of using a fake profile made the authorities pass a law to impose new restrictions known as an act to amend Section 32261 of the Education Code. Social Media Networks All these social web sites for teenagers started, as tracking college student has been an old idea of The Department of Education. They wanted to store teenage students’ information with passing of the year and they decided, “the data would be kept indefinitely” (Baase, 2008). According to our perspective, this raises many questions regarding the privacy, as using social websites to store data of teenage students via secondary data usage with social websites is not as fair as it seems. Teenagers unaware of this fact share ideas of their schools, grades, etc., to the whole world unaware of the sensitivity of the shared information. A better collector of information shared on-line would be a popular social web site. Existing educational programs discourage children from sharing or posting personal information online, warn about deceptive online messages, and urge parents to monitor children's Internet use. It is recommended that prevention efforts also teach teens how adults can seduce them into sexual relationships and how to recognize appropriate and inappropriate types of communication from adults. In order to raise the awareness and reach the targeted group, in this case teenagers, entertainment media is being used. This is getting known as entertainment education and puts educational messages into entertaining formats to increase knowledge and create favorable attitudes. In USA embedding messages for teens in media is discussed in the so called Soap Summits, which provide to writers and other executives the place to discuss about the problems that teens face now a days. The statistics published by Harvard School of Public Health show that the most watched TV shows have done their job. The insertion of socially responsible messages in entertainment media is a potentially powerful way of affecting teens.

568

Adolescents' online self-disclosure resulted in higher-quality friendships and that the direct relationship between online communication and the quality of friendships disappeared when online self-disclosure was added to the analysis. The disappearance of this direct effect implies that online self-disclosure mediates the relationship between online communication and the quality of friendships. It also means that it is not just online communication (or mere exposure to IM) that leads to higher-quality friendships; Internetenhanced self-disclosure accounts for the positive effect of online communication on the quality of friendships. There exists the problem that inaccurate information may circulate within the net. To be added here, it is the fact that the so called “Cyber Patrol” apps may not do their work in an appropriate way. Still, what matters here is the fact there are remote areas which do not have access to internet. Only in this way, teens can have access to the right information (Keller & Brown, 2002). Data mining for social networks Data mining is also an excellent case in point for the main focus of our Perspective in relation to the interdisciplinary nature of the emerging science of the Web. Analytic modeling techniques will be needed to understand where Web data reside and how they can best be accessed and integrated. Engineering and language development are needed if we are to be able to perform data mining without having to pull all the information into centralized data servers of a scale that only the few largest search companies can currently afford. In addition, data mining provides not just opportunities for better search, but also real policy issues with respect to information access and user privacy, especially where multiple data sources are aggregated into searchable forms. Data mining, another form of information collection, has found wide usage even in the social websites. Marketers see teenagers as a good group of customers. Various ads are shown depending on the interests saved on the profile, so no spam is done. Teen as social website users tend to treat privacy as unimportant. As new features are added day after day in the websites, they do not mind sharing even the most confidential information about their life, leading so an open way to abusive users for stalking, fishing or even trolling and bullying. “Others argue that youngsters do not realize the risks”. In this case, parent’s supervision is needed during the web surfing. Freedom of speech tends to take the negative part. Within social web sites, teenagers are in the dilemma: To share or not to share. 569

Conclusions and Open Issues In conclusion, social web sites are transforming the youths. They pass their free time differently from the teenagers of three years ago. Life for them now is virtual and not real. There is the risk of losing connection with the reality; even the time spent on-line may be well spent for someone else. The mine field game may reserve bad surprises if some measures are not taken toward the many social sites operating on-line. References Baase, S. (2008). Gift of Fire: Social, legal, and ethical issues for computers and the Internet. Pearson Education. Daphyne, T. (1997). Cyberspace pornography: problems with enforcement. Internet Research: Electronic Networking Applications and Policy, 201-207. Karen, S., & Katinka, v. S. (2006). Children`s experience on the internet. Institute for Media and Information Management, 1-6. Kaveri, S. (2000). The Impact of Home Computer Use on Children`s Activities and Development. The Future of Children, 10(2), 123-144. Kaveri, S. (2008). Online Communication and Adolescent Relationships. The Future of Children, 119- 146. Margie, S., & Richard, B. (2000). Children and Computer Technology: Analysis and Recomandation. The Future of Children, 10(2), 4-30. Morris, S. (2011, September 13). Retrieved September 15, 2011, from http://www.guardian.co.uk/uk/2011/sep/13/internet-troll-jailed-mocking-teenagers Peggy, G. (2003). Relationships in Adolescence. Annual Review of Socilogy, 257-281. Rong, W., & Suzanne, B. (2005). Teenagers` Internet Use and Family Rules: A research Note. Journal of Marriage and Family, 67(5), 1249-1258. Steven, H., & Edward, H. (2001). Children`s Rights and the Internet. Annals of the American Academy of Political and Social Science.

570

My Neighbors Children: Reflections on Possible Curriculum Design for Mutual Care Slobodan Dan Paich Director & Principal Researcher, Artship Foundation, USA

Abstract This work is a critical evaluation of learning potential for regional and global integration and co-existence processes. Considered are cultural and psychological elements and obstacles. The paper's starting points are three current cognitive researches that may aid thinking for Mutual Care curriculum design. Also as antecedents and anchoring the discourse are five community engagement projects with discreet or stated learning intentions aimed at integration, enrichment and mutual care. These projects lead to forming of or were carried out by Artship Foundation over last 40 years. The paper’s main interest is to evaluate conditions and articulate metaquestions that may point to a curriculum design that is not only intended for Balkan Counties but also as Pan-European and Global Learning project. The paper reflects on occurrences that help recognize inter-connectedness and mutual responsibility beyond specific geographies or peoples. With universality of issues understood, the study dedicates itself to Balkan and South East European conditions and needs. The paper concludes with seven topics summarizing the issues of possible Mutual Care curriculum. Three cognitive researches 1. Empathy A. N. Meltzoff, J. Decety from the Center for Mind, Brain & Learning, University of Washington, articulate this innate human characteristic: "Our ability to imitate others’ actions holds the key to our understanding what it is for others to be like us and for us to be like them". 2. Cognition though Cultural expressions The University of Oregon paperexplores the evidence that arts training influences cognition. The authors state that the intricate brain network aiding attention and perseverance practices are directly related to motivation to express oneself. The tangible, visceral qualities of expression may shed light on issues too complex for verbal theory only. 3. Conditioning

571

Dr. M. Y. Brave Heart’s influential study, Wakiksuuyapi (Memorial People):Heart Carrying the Historical Trauma of the Lakota published by Tulane Studies In Social Welfare influenced Stanford University's Research Group on Collective Trauma and Healing. These interdisciplinary projects are studying the multigenerational legacies of trauma. The Stanford Group brings together scholars from the humanities and sciences, to provide crucial insights into the effects of trauma on bodies, minds, and communities in order to propose new possibilities for healing. Topics and community engagement projects as Antecedents 1. Curriculum for extra curricula, life long learning Project - The reclaiming of public space at Arroyo Viejo Park in Oakland 2. Youth and Crisis of Perseverance Project - Redefining a historic 1940 passenger-cargo/military ship for public peacetime use and a cultural space, 1999 – 2004. 3. Heritage, conditioning and Oral Histories Project - Tarantella Pizzica as community healing process Fifteen years comparative cultures research inspiring contemporary play 4. Managing Tangible and Intangible Surplus Project - Community Poles Project 1986-1991 5. Mutual grieving and understanding ancestors Project - Imaginary Film Workshops- 1997 and 1998 6. Structured learning and nature of continuity Projects - Educational village 1975 - 1980 and Children and architecture 1989 -1995 In closing the reality, legislative difficulty, conditioning and resistance to change are acknowledged but also similar needs, potential of sharing or bartering material surplus, wisdom, stories and songs may pave a way for a curriculum of Mutual Care. Keywords: Mutual Care, Cognitive Development, Solidarity Culture 572

Section 1. Cognitive Researches and Mutual Care Curriculum Cultural sensitivities, diversity of views and historic and global complexity raised by the issues of this conference are approached in this paper from an inter-cultural and curriculum development angle. Important aspect of intentionality of this paper is to critically reflect on the issues raised, not as local but as international and global phenomenon and responsibility. The paper opens with examples of cognitive research that have been studied and reflected upon in a number of Artship Foundation's and the author of this paper’s previously presented and published work. In entering into non- sectarian discourse, this paper looks at inborn and developmental traits that belong to all humans, all children, such as inborn reflexes babies bring with them when they are born regardless of geography, time in history or social structure. The author of this discourse, S. D. Paich in his 2011paperLearning Body–Feeling Mind Cultural context and the role of dolls, puppets and models in child development for the Romanian conference Parents’ Bodies, Children’s Bodies - From Conception to Education42 offered this paragraph: There are reflexes that a baby manifests from the first moment of being born that appear miraculous to the experienced or inexperienced parents. In child development theory and observation, they are referred to as Infant Reflexes. The involuntary readiness and consistency of these reflexes makes one of the first relational parent–child interplays. It is like a set of non-verbal vocabulary–reactions, each with it own characteristic. These involuntary reflexes originate in the central nervous system and are part of normal infants' responses to specific stimuli. Through typical child development the frontal lobes inhibit these reflexes so they do not manifest as a child grows. Relinquishing Infant Reflexes opens the way to other inborn responses that help a child grow and respond to its environment, its caretakers and kin.

42

Luca, G. M., Thomas, J.(edit),Parents’ Bodies, Children’s Bodies - From Conception to Education,

CORPUS - International Group for the Cultural Studies of the Body,Victor Babes University of Medicine and Pharmacy,Conference Volume, pub. Victor Babes, Timisoara 2013, p. 298

573

Roots of Mutuality To help contextualize reflections on possible curriculum design for Mutual Care, a brief overview is offered here of the human’s inborn ability to imitate and mirror. There has been a lot of work done in the recent past on mirroring and imitation by cognitive psychology and neuro science. A. N. Meltzoff and J. Decety from the University of Washington's Center for Mind, Brain & Learning wrote in the paper What imitation tells us about social cognition: a rapprochement between developmental psychology and cognitive neuroscience, (Meltzoff 2013:491-500): Our ability to imitate others’ actions holds the key to our understanding what it is for others to be like us and for us to be like them. The past two decades of research have significantly expanded our knowledge about imitation at the cognitive and neurological levels. One goal of this article is to discuss striking convergences between the cognitive and neuro-scientific findings. A. N. Meltzoff and J. Decetymake a three-point theoretical proposal: Imitation is innate in humans; imitation precedes mentalizing and theory of mind (in development and evolution); and behavioral imitation and its neural substrate provide the mechanism by which theory of mind and empathy develops in humans. A. N. Meltzoff and J. Decety tell us that the uses of the terms ‘theory of mind’ and ‘mentalizing’ are interchangeable in their paper. Their view of Developmental Science presents the concept that infant imitation is the seed and the adult mentalizing, theory-making capacity is the fruit. A. N. Meltzoff and J. Decety are proposing a ‘linking argument’: Through imitating others, the human young come to understand that others not only share behavioral states, but are ‘like me’ in deeper ways as well. This propels the human young on the developmental trajectory of developing an understanding of other mind. The study byA. N. Meltzoff and J. Decetybrings the articulations of the humanimitative function to the root of empathy and mutual understanding and helps us appreciate portrayals of human condition either as cultural expression or scientific exposition. Keith Oatley in his article Does Art Imitate Life? Fictional characters seem real, but they are of the mind (Oatley 2011:1), states the idea that art may imitate life is at least as old as 574

Aristotle's Poetics. The book, according to K. Oatley is the most widely recommended text on how to write fiction in the west. K. Oatley comments: The idea of imitation comes from the central concept of Poetics: mimesis, which is about the relation of a piece of fiction to the world. In English, it is almost always translated as imitation, mirroring, copying. K. Oatley continues by pointing to S. Halliwell’s interpretation that meanings of mimesis have another parallel reading, as simulation or world-making. In his essay The aesthetics of mimesisAncient texts and modern problems (Halliwell, 2002:22), S. Halliwell articulates the difference between observing, knowing and naming of everyday perception from simulating, creating and evoking of artistic representation. This innate mimetic characteristic of cognition is not only a necessary aspect of growing and learning, but also a daily occurrence that helps hold communal bond. Mutual Care and Burden of inhered history The second central aspect of this reflection and curriculum design possibility is approaching carefully the burden of history. The burden, often involving whole clans, carrying unknowingly for centuries the brand of divisive polices affecting their region through history, the politics of divide and rule (divide et impera) as exemplified in the institution of Pox Romana of Ancient Roman and Byzantine civilization practiced thousand years ago that is still echoing in the region of south east Europefor example. Trauma Resolution The Balkan burden, as a phenomenon is not dissimilar to many other places and peoples across the globe. The historic burden is both a source of identity and pride but also of isolation, oppression andeven ridicule.Blood feuds, nationalism, the glorification of war and conquest, and the subjugation of peoples, all have obscured the many instances of benevolent and farreaching interactions in certain long standing inter-cultural settings and between settled cultures and itinerants and strangers. The further study of diachronic and cross-cultural collection of samples of spontaneous solidarity may help the understanding of moments that transcend the group identity solely based on the antagonistic memories. The small example from Artship Initiatives of reclaiming public space for and with community, that this paper will

575

discuss later, may be a placeholder for looking into solidarity as a bridge that extends beyond group identity established on inherited patterns of difficult history. There are many projects globally that in various ways approach inherited trauma work and possible resolutions. In this paper to focus and contextualize the learning potential, a few examples are cited. November 2014 issue New Republic Magazine published Judith Shulevitz article The Science of Suffering - Kids are inheriting their parents' trauma. Can science stop it?43In the article J. Shulevitz Writes: Parents may tell children that their problems amount to nothing compared with what they went through, which has a certain truth to it, but is crushing nonetheless. “Transgenerational transmission is when an older person unconsciously externalizes his traumatized self onto a developing child’s personality,” in the words of psychiatrist and psychohistorian Vamik Volkan. “A child then becomes a reservoir for the unwanted, troublesome parts of an older generation.” This, for decades, was the classic psychoanalytic formulation of the child-of-survivor’s syndrome. Stanford University's Research Group on Collective Trauma and Healing is described as an interdisciplinary project that is studying the multigenerational legacies of trauma. By bringing together scholars from the humanities and sciences, the group works to provide crucial insights into the effects of trauma on bodies, minds, and communities in order to propose new possibilities for healing. Their recent conference in June 2015 Soul Wounds - Trauma and Healing across Generations echoes strongly the work of Dr. Maria Yellow Horse Brave Heart a Native American Social Worker, mental health expert and associate professor at a number of premier universities in United States.Dr. M. Y. Brave Heart coined the term Soul Wounds. Her contribution to the field of inherited traits and behaviors is given with the model of historical trauma resolution for the Lakota people. Since its first publication, this work is internationally known and respected and forms the basis of post-colonial re-orientation of indigenous populations the world over.

43

Judith Shulevitz, The Science of Suffering -Kids are inheriting their parents' trauma. Can science stop it, New Republic Magazine November 2014 http://www.newrepublic.com/article/120144/trauma-genetic-scientists-say-parents-are-passing-ptsd-kids Accessed 9/5/2015

576

Dr. M. Y. Brave Heart’s influential study, Wakiksuuyapi (Memorial People):Heart Carrying the Historical Trauma of the Lakota published by Tulane Studies In Social Welfare. Her study on transcending trauma states: Under the theme of transcending the trauma, healthy coping strategies used to deal with the trauma, ideas about healing, and transformation of the traumatic past were revealed. Coping strategies included emphasizing traditional Lakota values, focusing on helping others and future generations. Ideas about healing incorporate awareness of and talking about the past with a focus on the commonality among the Lakota of shared trauma. An outgrowth of the first interval and the quantitative study was the formation of the Takini(Survivor) Network, a group dedicated to further research and promoting healing. Transforming the traumatic past involved reframing, finding the positive aspects of a painful experience. p. 260 Most citizens and parents might not consider their past as traumatic for them, just difficult and lived within the boundaries of national or social identity. This sometimes leads to regarding neighbors as inferior or someone to be blamed for outcomes. The intended learning process suggested by this paper is influenced by scientific and symbolic work of Dr. M. Y. Brave Heart, also by inter-racial reconciliations initiated by Desmond Tutu and Nelson Mandela and re-evaluation of the pioneering experiential learning practiced and advocated by educational innovator Johann Heinrich Pestalozzi (1746 –1827). Curriculum for Mutual Care would cultivate respect for differences through a methodical and poetic approach. Cognition through arts It maybe constructive to look at elements of cognitive development as a basis of qualitative experiences children need and participation in expression through the arts as an essential part of growing. Cultural Expression is a field of study situated between the reality of society and social investigationand theory. The tangible, visceral qualities of expression may shed light on issues too complex for verbal theory only. The paper, How Arts Training Influences Cognition (Posner 2008:5) written by a consortium of experts from the University of Oregon presents neurological and psychological aspects of learning through cultural expressions. The University of Oregon paper explores the evidence

577

that arts training influences cognition. The authors state that the intricate brain network that aids attention and perseverance practices are directly related to motivation to express oneself: Moreover, we hypothesized that the enthusiasm that many young people have for music, art, and performance could provide a context for [them] paying close attention. This motivation could, in turn, lead to improvement in the [personal neural] attention network, which would then generalize to a range of cognitive skills. Our training study supported this proposed theory about the mechanisms by which training in the arts can have a persistent effect on a wide variety of cognitive processes. The theory is based on the idea that each individual art form involves separate brain networks. In Figure 1[below], we summarize some of the specific brain areas involved in different art forms.

Figure 1 Arts and cognition diagram for University of Oregon cited paper The paper opened this inter-disciplinary discourse by citing research not only about mirroring as a root of compassion, approaching inherited trauma as a means of mutual understanding but also introducing ideas about multiple stimulus centers within the brain activated by cultural expressions. There is a link to be made between various aspects of cognition and the paradigms of investigating and presenting societal phenomenon. This type of research into processes of stylization in art coupled with abstraction and metathinking of inquiry promises a more complete picture. The open question remains, at what point does an abstraction lose connection to its source and become a reduction. These kinds of generalizations can become cliché in art and truism in thinking. What kind of procedures and institutions retain connection to the vitality of the samples studied or portrayed? One of the aspirations of this paper is to voice possibilities of future cross-disciplinary collaboration where 578

scholars and artists study and articulate societal issues that couldbe incorporated into a song, play and film for example or become part of written hypotheses and theory. These studies would not only focus on issues in the world but also on how they are represented, measured and defined. With numerical or statistical studies only it is difficult to meaningfully communicate the richness of issues at hand. The complexity of educating for Mutual Care would need a multi disciplinary approach congruent to child development needs. Also as life long learning programs for adult and a deep understanding of existing paradigms of identity and inherited world views as a grounding for expanded practice of mutual care and understanding.

Examples and Themes Building blocks of curriculum for Mutual Care are explored in this paper through thework of Artship Foundation and related projects. Artship Foundation main focus is shared between researchinto ComparativeHistory of Cultures, Curriculum Development and Culture Making activates. The Foundation is an educational non-for profit organization. Artship Scholarly research feeds the contemporary art practice - Artship Art practice offers a context for inquiry-based expression. In the last ten years Artship's work has been presented at fifty-two international scholarly conferences in the form of papers or keynote thematic focusing. Approaching delicate and sensitive issues of sharing among people who have inherited mutual distrust may be very difficult if it is approached head on and insisted upon. Words and theories may create barriers while growing food or cleaning polluted creek or river banks may offer a context through physical engagement toward addressing shared needs. The reason for bringing Artship projects as starting point is not to idealize a practice or to offer recipes for solutions, but to open curriculum thinking based on real projects. Seven major topics and community engagement projects as antecedentsare presented and discussed. First Topic - Curriculum for extra curricula, life long learning Project - The reclaiming of public space at Arroyo Viejo Park in Oakland

579

In this inner city, troubled Public Park, an amphitheater was built in late 1930’s and remained popular until 1960 when it became a nexus of crime and illegal activities. A coalition of neighbors invited Artship artists to animate city agencies, inspire repair of the amphitheater and support a series of daytime performances in the summer. At Arroyo, it was important to give voice to and represent as many people as possible, elicit memories of all kinds from the community and help stories flow through the performances. Reclaiming Public space for community use was the gathering impetus, structured curriculum activities were the means. Safe public space and learning were two inseparable goals. In the reality and magnitude of inner-city issues, reclaiming public space through performing and visual arts could sound quaint. However, if and when it comes from citizens enlisting a cultural group, some signs change and initial impetus can, in favorable conditions yield longterm results. Rachele Kanigel, The Oakland Tribune staff writer, wrote in Life Pulses at Arroyo Viejo Park after amphitheater sees rebirth, 1996: For years the old, burned out amphitheater at Arroyo Viejo Park was best known as a setting for pit bull fights, drug deals and assaults. Neighborhood mothers didn't dare let their children play there. The only sounds that came from the theater were shouts and gunshots. But this weekend, the concrete benches were filled with families as a group of artists and community members reclaimed the 67-year-old theater with its first performance in 30 years. The production of "Windfall of Memories," a mélange of dance, song, and performance art, was co-produced by the Augustino Dance Theater, the ARTSHIP Foundation and the Arroyo Viejo Community Center as a christening for the partially reconstructed theater. The group hopes the play, which will be staged again at 2 p.m. Saturday and Sunday, will inspire other groups to consider the site.44 Sara Zaske wrote in her article Moored to Oakland - The Monthly, Berkeley, 2002:

44

Rachele Kanigel, “Life Pulses at Arroyo Viejo Park after amphitheater sees rebirth”, The Oakland Tribune 1996, p. A-9

580

… the dance troupe aims to bring people together through the arts as much as it strives for artistic excellence. Through Artship Foundation, Paich and Ferriols restored a neglected East Oakland theater in Arroyo Viejo Park—reclaiming a space that was once known for blight and crime—and held performances every summer for four years. The success of their efforts inspired a full renovation of the theater and its surroundings, which should be completed this spring.45 The difficult process of reclaiming public space for communities use in inner cities of large metropolitan areas is often triggered by pressing needs for safety from grief stricken families and neighbors who begin to look for solutions, after too many causalities. When the need to make a neighborhood livable is palpable and shared, there appears the will and oftenspontaneous deep convening wisdom of a few citizens who are ready for action which does not use citizens for any gains outside of resolving the issues. Since the example we are citing is a disused outdoor theater that was a center of criminality, the theater performance emerged as a possible catalyst for turning the neighborhood into a safer place. Below is a partial list of ingredients that made reclaiming the space possible: 1. Someone among the convening group knew, valued, loved a troupe of performing artists who have community skills as well as mastery of their art. 2. A political climate and municipal wisdom, beyond rhetoric, is another ever-changing ingredient in the support of citizen’s efforts in reclaiming public space for safe community use. All grass root initiatives always straddle the danger of being viewed as rebellion and are thus dismissed, suppressed or co-opted by some outside interest. 3. The needed-ingredient in conjunction with political climate, is an interest in the empowerment initiatives from philanthropic and grant giving entities and their ability to respond quickly with funds, however small, without large bureaucratic requirements thus insuring that their support is not tied to any ideology or unrelated concerns to the issues at hand. 4. Projects aimed at reclaiming a safer neighborhood create an unspoken standard, wherein events such as this performance, serve as a catalyst to bring in the spirit of mutual

45

Sara Zaske. “Moored to Oakland”, Berkeley, The Monthly, 2002, p. 1- 9.

581

sharing, that is not parochial/cliquish or condescending and most importantly, is nonconfrontational yet inclusive without insisting on inclusiveness. 5. The troupe in question, the performing ensemble of Artship Initiative46, were the artists who had long standing involvement with communities, families and individuals in Oakland. The year before the park project, the troupe created a play Growing Up Invisible inthe historic stables of an old house. The play was a re-enactment of the stories of people whose lives were not remembered. That performance was very successful and beloved by very diverse audiences. This particular group’s work is not so preoccupied with self-expression for the artist, but rather with a relationship to audience that brings about deep solidarity. Also their work is not propaganda or ideology of any kind, but an inspired, poetic response to the people of the place at that time. The troupe works in the ensemble process that is best described by the classic definition of an ensemble theater: “A theater company that maintains a bond with a number of artists who are committed to working with and for each other, over a span of projects, to create performances uniquely characteristic of that ensemble and flowing from the strong personal stake of the artists.” The Members of the troupe were as diverse as Oakland itself, in their program notes read: We aspire that nothing in our work be viewed as unrelated, separate elements or virtuoso showmanship, but rather as a careful, poetically congruent service to the elusive field of art and the cultural experience. From the moment someone enters, whether it is a theater, specific site or outdoor place, we attempt to create an atmosphere and invest our performance space. Great care is taken that every aspect of the multidisciplinary field created gives the audience breathing space for their own spirits to expand.47 This type of theater is not in the main stream of Modernist theater where audiences are often subjected to shocks, derogation and violence. It is in its own style of poetic and communicable quality, transcending the situation and attempting to give deep personal pleasure and insight. It

46

From 1986 to 2011 Artship Initiative’s theater ensemble went through a number of names caring the same ethos, commitment and preoccupation: Augustino Dance Company, Augustino Dance Theater, Artship Dance/Theater and currently Artship Ensemble 47 Mark Beaver, “Snow Falling Upward – Program Notes”, Oakland, Augustino Dance Theater 1998, p.1

582

is not a poor relative of a television or talent show, but a memorable event of its own, idiosyncratic in its quality. Solidarity of Strangers One small side effectfrom the Artship initiative of reclaiming public space at Arojo Park, was that a spontaneous exchange emerged between two immigrant groups not envisioned originally. Often new immigrants, particularly if they are arriving in groups, find themselves in difficult urban areas. At the time of the last theater season in 1999 there was a great number of Bosnian refugee families in Oakland. The performance used multiple puppets, banners and involved an international cast of children and youth including three actors/narrates telling stories in Bosnian, Mexican and East Oakland English. As a side effect of these activities, nonEnglish speaking Bosnian and Mexican mothers with infants in their arms, found each other while their older children rehearsed, performed. The mothers were able to help each other with food bartering, baby sitting and finding small, cash only and menial jobs.48 We venture to hypothesize that perhaps for the Bosnian mothers and their families, the issues brought from the Balkan Peninsula were lifted in the instances of meeting through their children their Mexican neighbors carrying their own difficult stories. There was no history between the two groups of immigrants except shared performance of their children. As stated in the introduction the Balkan burden, not dissimilar to many other groups across the globe, is both a source of identity and pride but also of isolation, oppression even ridiculeoften involving hall clans, carrying unknowingly for centuries the brand of divisive polices affecting their native region through history. The reason for looking at different elements of an actualized contemporary project is to reaffirm the observations of the need for multiple ingredients and the fragility of conviviality. A successful reclaiming of public space for community’s use and safety is a unique entity of a union of all the social and personal elements, it belongs to the time, the place and the people who created it. Reclaiming public space at Arroyo Viejo Park in Oakland, California providedstructured learning outside educational institutions. Multiple elements of this involvement can offer material for thinking about the future of culture, education and its nexus in community. A

48

This exchange was mentioned to the author of this paper a few months after the event by Mr. Overshown, staff at the Arrojo Recreation Center and a parent of one of the participating African-Americans children

583

public space for community gathering use was the impetus, and structured curriculum activities were the way of providing for safe public space and learning as inseparable goals. The multiple aspects of learning were discrete aspects of the reclaiming process, though it was never stated as such. Dependent on mixture of heritages, urban inner city life and intergenerational processes, the project created inadvertently its own culture, not exotic or different from the life of the people involved. There are many projects of this nature around the world each with its own idiosyncratic dynamic and expression. From the point of view of Mutual Care, the combination of having accesses to multiple skilled friends that are invited from the communities own, internal convening impetus, and the spontaneous coalition of neighbors are the most significant aspects. Second Topic - Youth and Crisis of Perseverance Project - Redefining a historic 1940 passenger-cargo/military ship for public peacetime use and a cultural space, 1999 – 2004. This section looks for paradigms that meaningfully respect and transform inherited legacy and its difficult and redeeming parts. We turn to L. Mumford and his Art and Technics where he writes: Yes: the burden of renewal lies upon us; so it behooves us to understand the forces making for renewal within our persons and within our culture, and to summon forth the plans and ideals that will impel us to purposeful action. If we awaken to our actual state, in full possession of our senses, instead of remaining drugged, sleepy, cravenly passive, as we now are, we shall reshape our life to a new pattern, aided by all the ressources that art and technics now placedin our hands.49 One initiative that reflects this call for action was the redefinition of a historic 1940 passengercargo/military ship for public peacetime use and as a cultural space. The ship was (from 1999 to 2004) an exciting, ever - changing campus of cultural activities and art-making surrounding extracurricular children’s activities and potential hard-core youth job training programs. Crisis Of Perseverance, articulated by the members of Artship’s educational initiatives was a response to a global crisis and a local need that addressed a problem, particularly among children and youth lacking role models or witnessing success through perseverance. Artists of

49

L. Mumford, Art and Technic, Columbia University Pres, New York 2000, p. 162

584

all types are the embodiment of achievable mastery and the tangible experience of completion, hence the name ‘Artship,’ expresses an exciting, ever changing campus surrounding hardcore training programs.50 Frank Giunta, the Airship board president at the time, in an annual report for 2004, wrote: When Hallie Williams—a founding member of Artship, its long time chair, and a juvenile probation officer in Oakland—and Artship artists worked at Juvenile Hall [Detention Center for Delinquent Youth and Children], it became clear that artists’ relative mastery of drawing and other arts helped the youth realize their ideas. The presence of a trained artist was essential. The presence of trained visual artists was essential in bringing out safely and nonverbally the pent up issues needing personal consideration. In the same report Frank Giunta describes: What we also discovered over and over again while we had the ship was that bringing people to the ship itself accelerated the motivation in acquisition of skills and mastery better than when we went to their familiar environments. It seemed that the stationary ship—too old for transcontinental voyages and therefore stationary—brought people directly to their imaginative self. They were on an as if poetic journey. The connection to imagination seemed to feed their perseverance and attention.51 Mastery, as achievable potential, is a core valueof Artship Foundation's Work. Access, understanding, training and sharing of mastery for self-actualization, personal creativity, collaboration skills and appreciation of diverse cultural experiences, is the foundation’s daily practice at a verity of scales. The effect of acquisition of life and job skills on the safety and stability of a community cannot be over estimated. Here the universal, timeless issues of mastery areframed by discussion of theskills of musicians. One characteristic of complete performance mastery is the integration of virtuosity and emotional communication, recognizable as an inexplicable visceral response by the listeners. The piece is not just interpreted—it comes to life in front of audience’s eyes, ears and in their cognitive processes. Daniel J. Levitin, writes of mastery in his book, This Is Your Brain On Music, in the chapter titled, What Makes a Musician? 50

O Fulton & R Baili, ‘Artship Master Plan’. Oak to Ninth Avenue Waterfront Development, Port of Oakland, 2002, p. 55. 51 F Giunta, ‘Case Statement’. Artship Foundation Archives, March 2004, p.2

585

[…] ten thousand hours of practice is required to achieve the level of mastery associated with being a word-class expert—in anything. In study after study, of composers, basketball players, fiction writers, ice skaters, concert pianists, chess players, master criminals, and what have you, this number comes up again and again. Ten thousand hours is roughly equivalent to three hours a day, or twenty hours a week, of practice over ten years. Of course, this doesn’t address why some people don’t seem to get anywhere when they practice, and why some people get more out of their practice sessions than others. But no one has yet found a case in which true world-class expertise was accomplished in less time. It seems that it takes the brain this long to assimilate all that it needs to know to achieve true mastery.52 Levitin avails us with an appreciation and understanding of the expertise accomplished musicians have, and why a good one would have been rare, and in demand. There are many examples—from prehistory forward—of artifacts brought from distant places. Along with artifacts came people, skills, and knowledge of materials, lore and ideas. Deeper understanding of those exchanges and transmissions of skills and mastery may offer new paradigms for intercultural appreciations. Not everyone can be a world-class master in their field, but based on Artship’s practice in the community, it seems that a presence of real humans with some level of mastery makes a difference in the way a social group functions or a locality views itself. As a response to a number of local issues such as the discrepancy in educational opportunities for urban poor and multilingual populations, the lack of accessible non-remedial job training, and the lack of access to waterfront amenities and extracurricular recreational and learning activities, a number of Oakland projects were carried out which culminated in the creation of the Artship Initiative in 1992. A legislative process was initiated that brought a decommissioned historic ship in 1999 to Oakland’s waterfront for community use. In the case of the ship’s visitors, the sense of space and intricacy of the rigging and equipment was visceral and needed no words. The children visiting the ship were exposed to activities that gave them insight into ship functions, history, folklore and introduced them to maritime and arts/crafts skills. Also it nurtured a sense of wonder and met the nascent curiosity with care that 52

Levitin D.J. This is your brain on music, New York: Plume, 2006. p 197 586

opened the doors for systematic learning later. The fact that it was not a children’s or youth ship but it belonged to and represented “all the people of the town” helped to value and treasure the learning given and assimilated in that place. There it was a machine turned into an experiential learning place, where the ever-present element of the vast ocean pointed to the relative scale of the machine itself. Although the physical ship part of Artship Foundation succumbed to the pressures from a commercial real-estate development and the vessel lost its mooring and municipal support, the programing continues through smaller scale projects. The initiative in itself is a real world sample and case study of multiple issues of continuity, interpretation, and response to acute contemporary needs, legislative processes and programing. Also Artship experiences contribute to an articulation of needs and intangible values for community gathering places potentially useful in thinking about the future of culture. The most important thing that added to the thinking of Mutual Care process was that the central activities of Artship at the time was structured job training for inner city youth in an out of school setting. Culinary and Merchant Marine skills could be acquired by attending morning classes on weekends in the last two years of high school. The relevant industries offered potentially approximately 200 jobs a year in the future to high school students completing the program. The experience showed through small pilot activities, that constructive energy of other projects of the ship provided the sustaining environment for learning and persevering. This practical and diversely cultural environment can be a beginning of a spontaneous coalition of citizens doing some groundwork for learning and unlearning needed for the practice of Mutual Care. Third Topic - Heritage, conditioning and Oral Histories Project - Tarantella Pizzica as community healing process -Fifteen years’ comparative cultures research inspiring contemporary play. A possible ingredient to strengthen mutual care in the region of South East Europe and surrounding areas is to be exposed to stories from local Diasporas of neighboring communities parallel to one’s own. The tension of emigrants in the struggle of preserving and losing one’s home culture in new circumstances may offer examples and fortitude in facing the leveling effects of Globalization, political and nationalist pressures. Materials evolved from the stories of migrants/refugees offer probing and open-ended speculation about itinerancy, vagrancy, resettlement and economic emigration as part of social plurality. 587

As it was mentioned before Artship Scholarly research feeds the contemporary art practice Artship Art practice offers a context for inquiry-based expression. Collection of oral histories and recorded life stories of most diverse people provide Artship performances and storytelling evenings with immediacy and richness. In a way it is an appraisal, celebration and evaluation of the validity and necessity of hearsay, oral histories, storytelling and performative reconstruction in helping understand heritage and appreciation of difference. An example from Artship practice is the performance of an evening length play Tarantella, Tarantula. A delicate and poignant story of immigration and assimilation, rich with ancient Mediterranean folklore, that is a confluence of cultural elements from Africa, Europe, and Asia that persist to this day, brought to California and across America by immigrants from southern Italy. Ancient practices and modern needs could sum-up San Francisco 2006 and Prague 2007 performances of Tarantella, Tarantula53. The protagonist of the play is a young Italian immigrant girl who works as a cleaning lady in a hospital. She was forced to emigrate with her mother and sister after all the male members of her family and neighbors from her village were killed in the First World War. She was highly trained by her grandmother in the tradition of the healing danceTarantella Pizzica. This is tradition that is practiced in intimate and protected places often temporally adopted within a home or communal spaces. These activities, gatherings and festivals are led and performed for and by women. Since these events were only carried out among the women, written documentary evidence is barely existent. Similar oral traditions to those are practiced today in some parts of North Africa, Eastern Mediterranean including Southern Italy and Asia Minor on the border of Iraq and Iran. There are two forms from this family of traditions that had more ethno-musicological and anthropological research than the others, they are the healing dances and music of Egyptian Zar and Southern Italian Tarantella. Athanasius Kircher, ask a question in 1641 in his encyclopedic work Magnes, sive De Arte Magnetica54 published in Rome: "Why cannot those poisoned by Tarantulas be cured otherwise than by Music?" This contemporary performance and traditional practice is not only about an antidote to a spider Tarantula's bite but also about the age-old yearning to cure ‘The Dark Night of the Soul’. It is

53

ARTSHIP Ensemble 2006 Home Season in San Francisco, ODC Theater

54

A. Kirsher, Magnes sive de Arte Magnetica (Opus Tripartium), Rome1641

588

about human need, in spite of all possible social dysfunctions, to help each other and to continue the search to recover closeness. For migrates these issues are of paramount importance. The production links modern needs to passionate, age-old practices of community, ritual and healing. Karol Harding’s55 description of the Zar singer/healer with her knowledge, harmonizing abilities, understanding of repression and means of relief, paints a picture of a highly trained experienced person leading a deeply structured process. The protagonist of the play Tarantella, TarantulaGovannina helps, at the climax of the performance the first Italian born American trained young doctor through professional crisis and surviving traumatic betrayal and smear tactics by his more established, privileged non immigrant colleagues. Although she was thought illiterate and not intelligent enough, Govannina guides him through the Tarantella process, as he came upon it by accident. He did not know that only women traditionally danced that dance. This and other elements of the performance are a representation of the unexpected adoption and transformation that happen when traditional ways meet a new environment and a country. The portrayal of the multilayered complexity that immigrants experience, can be comprehended, contained and expressed helping understand migrants' precarious positions. Examples of poeticexpressions of uprootedness, cultural continuity and assimilation could open a space for reflections and evaluations that may make contributions to structured learning for understanding diferences. Forth Topic - Managing Tangible and Intangible Surplus Project - Community Poles Project 1986-1991 Managing surplus and creative reuse can be one of the models for spontaneous or need response community convening in preparation for and practice of Mutual Care. In the global culture scarcity is the operational mode and is often created artificially. Disposable goods have replaced the time of ingenious mechanics, repair shops, local tailors and shoemakers in most industrial countries. There are societies where resources are scarce and self-reliance is the primary mode of continuation. In these examples, solidarity versus hording becomes an important seed of community development. Out of the way places may offer the possibility of evolving parallel paradigms to developed nations or entities that are dependent on current saturated economic and social models. Knowing about this real life example could offer thematic elements for Mutual Care curriculum. The issue of tangible resource literacy is easier 55

K. Harding,“The Zar Revisited,”Crescent Moon magazine, July-Aug. 1996 p.9-10

589

to comprehend and practice. If it extends to people someone traditionally considered not worthy or historically antagonist it can become an opening to a subtler more intangible surplus of solidarity, shared wisdom and care. These things cannot be legislated; they have to find space naturally among people. The example here is one of the projects that led to the formation of Artship Foundation. It is about both tangible and symbolic objects that emerge from spontaneous coalition of diverse citizens. Community Poles Project 1986-1991 This project consisted of a great number of semi-permanent sculptures built for and with residents of the Golden Gate neighborhood in North Oakland, California by the author of this paper and many local residents over a five-year period. The sculptures ascend vertically, never too thick to begin with, while the forms rise and insinuate growth and let the air and sky enter them. These are poetic totems, as if messengers from other worlds, filling the urban void of sameness, grayness and decay. Intricately made, they also celebrate work, workmanship and working together. The project grew from an inner city neighborhood of low to medium income households interspersed with homes owned by young professionals and some live work spaces, with a rich mixture of African American, White, Asian and Latino populations. The project started in the garden of a house in the Golden Gate neighborhood that the author of this paper was renting. He began constructing a temporary vertical sculpture out of scrap wood in his garden in front of the house. Curious children from the neighborhood came to watch, and soon they were working on the construction with him. Once the first pole sculpture was completed, one neighboring family asked for a pole installation on their property, and then neighbors across the street did the same. Lottie Rose, landlady of the rented house, liked the sculptures and invited Slobodan to make several for properties she owned in the neighborhood. She offered a shed and outdoor work space in the parking lot of a building she owned on San Pablo Avenue, a busy commercial street in Oakland, this is where the project started in earnest. Every Saturday for five years the author of this paper was involved in constructing the vertical sculptures with the people from the neighborhood, including the future owners of the 590

sculptures. After having poles installed on their own properties, some of the neighbors continued to help with installations for other neighboring properties. Quietly, over the fiveyear life of the project, a great number of people participated. The sculptures were given to the community free of charge. In addition to providing free space to assemble and stage the work, Lottie Rose donated the paint, brushes, nails, hardware, and even the ribbons. People from the community brought wooden scraps all the time, and later on some local businesses made in-kind donations of materials. In 1989, the City of Oakland recognized the project with a “Community Promotion Grant” award. The Sculptural Score To give the project visual continuity and identity, it seemed appropriate to keep on in the same vein as the initial sculptures that were installed. Those sculptures were constructed entirely from wooden elements, most of which were recycled materials. The sculptures were an accumulation of diverse pieces into pinnacles of no more than six inches in diameter, and 15 to 16 feet high that tapered upward sometimes with open forms at the top. The sculptures often included heavily white-painted, thickened and saturated cloth, crocheted -pieces and other found materials. The vertical sculptural forms were punctuated by the distinctive and colorful elements of ribbons flowing out of the sculptural forms, animating the static elements. The allwhite color of the surface was the simplest means of unifying disparate elements and catching the play of light and shadow. Each time something different from this basic score was tried, the sculptural quality and the communication of the forms were lost. When trying to paint the sculptures entirely black or brown, they became camouflaged and their immediacy and presence were lost. When we painted them red, green or yellow they lost sculptural quality as shadows became indistinct and unremarkable. When we tried to paint just one or a few of the elements, that also broke and diluted the form. When we added larger, more recognizable household elements, they made the sculptures appear cluttered and junky. When we added beautiful, specially embroidered, painted or silk-screened fabrics, they wrapped themselves around the sculptures in the wind and smothered them, so that neither the sculptures nor the materials were recognizable. In the end we returned to the basic sculptural score that emerged through the simple acts of people “doing and making” together at the outset of the project. It seems that play of shadows and texture made visible in white on white and their "otherworldliness" was the cause of the success of their presence in the community. They were clearly products of and for imagination. 591

This process was an interesting dynamic in asking, more than answering, questions: What is the artist’s role and what does she or he do in a community setting? How do the artistic sensibilities, vision and cohesive visual language remain while the creative process is shared with community? We found, of course, that there is no set formula, and that each project has its own matrix and score. The one thing that remains clear is that if artistic concept, shaping and curatorial skills are not there, the project drifts from art in to another sphere which, of itself, is not a bad thing. In the case of “Vertical Sculptural Poles,” the project hovers at this edge of art and community building. The Vertical Sculptural Poles Project was a co-winner of the “Regenerating America” competition because neighbors entered photographs and description and surprised the author of this paper. The announcement read as follows: Jeff Berkowitz judged the Regenerating America contest at the Celebration of Innovation Conference in San Francisco, selecting two winners. ‘Slobodan Dan Paich and Mieilli’s Products have both invented outstanding regenerative technologies,’ said Berkowitz. ‘Paich’s is social invention and Mielli’s is a material technology – both of which are essential to building a regenerative future. Paich’s invention is a ‘flagpole’ made from discarded products. The flagpoles are distributed throughout the community and decorated by each household. This invention builds community spirit providing an opportunity for individual creative expression. (Berkowitz 1) Vertical Sculptures engaged in a creation of a shared, tangible—but also discreetly ritualized, symbolic space of a communal experience. It is an offbeat expression of the symbol and signmaking faculty and desires. In this instance the interplay of elusive, symbolic and real is contained by bland urban neutrality of the medium and low-income inner city. Fifth Topic Mutual grieving and understanding ancestors Project - Imaginary Film Workshops- 1997 and 1998 Tact, patience, delicacy and selflessness are needed in approaching inherited trauma. Some period of preparation is needed involving the type of the activities and concerns mentioned earlier. It may involve convening models, critical evaluation and curriculum thinking not only by scholars but by concerned communities as well. The intention in this paper is not to prescribe 592

solutions and recipes for inter-cultural work on mutual grieving and understanding ancestors, but to articulate possibilities and potential accessibility to that process. The example below is toward that end. To contribute to the curriculum research of the Peace University and create appropriate culture centered workshops, the author of this paper conceived, designed and implemented Imaginary Film workshops. These workshops were the experiential models of co-creating and working together and an attempt to democratize script writing. The participants drawn from all aspects of filmmaking and art making process, met at the historic Truman house in Potsdam outside Berlin. Film and theater actors, dancers, seasoned and aspiring film directors, singers, cinematographers and photographers, costume and set designers and members of the international peace university gathered. After individually brainstorming with the author of this paper prier to the workshop participants where ready for the weekend intensive. The theme and the methodology of these workshops was an imaginative portrayal of a family caught up in history. In this case, a German family’s portrait in time from 1935 to 1965, consisting of grandparents, parents and children. Each character was played/cared for by three to four participants of the workshop. In this way a widest possible but manageable unit of collective memory was engaged. The multi-person and multi-disciplinary expressions of the characters became like synchronized work of Japanese Bunraku puppet masters, each caring for a different aspect of the character. The final conjuring of the characters and a story was as a group narration in the dark. This narration was audio recorded and became the raw material for a possible future film script. In preparation for the final telling, on the first day the participants created mini storyboards, costumes and setting ideas, Polaroids of possible scenes and the names and simple description of the characters. On a second day, in the morning before the final evening of the telling of the ‘Imaginary film” story, participants drew on large pieces of paper silhouettes of each other. Then painted into this life size silhouette their notion of the rejected, not visible side of the character. This was shared and created deep and intense preparation for the final telling. The two-days activities created a context, familiarity with the material and each other. The final telling was improvised. The setting of the Truman house was a significant resource. A gloomy mahogany paneled 593

three-story house, overlooking a lake, was originally a summer residence of a progressive publisher confiscated by the Nazis. It became their local headquarters throughout the war and then for a brief period a residence for president Truman and American forces prior to becoming a Soviet lookout for possible defectors. This house was also the place where allies made the decision to deploy the atomic bomb on Hiroshima. Now after the leveling of the Berlin Wall the house is used by many groups including the International Peace University. The choice or preparation of the venue for a gathering, as well as the content of workshops for mutual grieving and understanding ancestors, may enhance the process. Even in the classroom setting, bringing flowers, fruit, bread and cheese may mark the occasion for children and youth. Daunting and sensitive work on inherited and personal trauma begins with care for the event's place and for, with and among the participants. Sixth Topic -Structured learning and nature of continuity Projects - Educational village 1975 - 1980 and Children and architecture 1989 -1995 In thinking about the creation of a curriculum for Mutual Care, the big questions are where to begin and how to prepare. Within the open suggestions of this paper it seems that approaching inherited trauma or dominance assertion of ancestors could be a second phase after an extracurricular learning project which tackles other issues at hand has been experienced together first. The first learning example tock place at a loosely structured village of over 30 trullis (ancient conical dry-stone dwellings) in southern Italy. The dry-stone dwellings were scattered on the estate of approximately four square kilometers surrounding Masseria Fano, a ninth century AD fortified tower and house owned by Maria Vittoria Colona-Winspere. She wanted to turn parts of her agriculturally abandoned land into a different use. She read the findings of the Architectural Competition Extending Education into Community and peoples life - Ideas for a building promoting life long learning sponsored by UNESCO and the French Government and invited the author of this paper to start a project based on his first place winning entry. After brainstorming a decision was reached to create a summer school. Fano - Educational Village: British Summer School in southern Italy (1975 - 1980), convened practicing and future architects, landscape architects, urban planers, established artist and art students. The central communal experiment and curriculum’s intention was building a small lake that involved multiple skills. These gave the participants visceral experience of using 594

ancient technics and pre-industrial methods. The curriculum’s intentions were to better value and understand the benefits and shortcomings of mechanization, automation, absence of toil and social bonding in contemporary culture. For thousands of years people at Fano in southern Italy have maintained almost unique fresh water streams and carefully diverted it into irrigation canals. This meticulous art deeply understands water and its potential. This tradition became the basis of building the lake at Fano. The schools improved the land, repaired the ancient drystone dwellings, some of them had prehistoric origin and were maintained by successive occupants since Paleolithic times. These activities in some way echo L. Mumford's thoughts on pre-industrial technics, tools and bodily engagements: The essential distinction between a machine and tool lies in the degree of independence in the operation from the skill and motive power of the operator: the tool lends itself to manipulation, the machine to automatic action. p.10 T&C The reason of including this example in the paper is the model of learning it offers which can be a contribution to informed responses to environmental design issues and one of the starting points for the curriculums of care. The discipline of doing and making is often visceral and most of the time a non-verbal process. In traditional society such rich learning surrounds children. In the modern urban life, learning is allotted to the school environment and children rarely see parents or neighbors engaged in learning, particularly visceral learning where they could participate. Most architectural, landscape and planning students come from this model of segregated learning. Because building, gardening, arts and crafts activities, instruction, learning and production are often considered remedial, there is significant societal atrophy of some basic cognitive processes that start with the attention span and inability to contain inner and outer agitation. In our view, witnessing and engaging in lifelong visceral learning can help children, students and adults overcome the sometimes debilitating effects of virtual and commercialized reality. Fano - Educational Village conceptually interrelated projects that came from continuous effort to engage learners at all stages of life in doing and making and in acquiring personal mastery that in turns gets shared. Commitment to children and youth in extracurricular settings is a big part of it. Children and Architecture Mumford in his book Myth of the Machine insightfully points to the core issue of the industrial age by pointing to the eighteenth century roots of mechanistic thinking:

595

Descartes could not of course foresee that this one-sided effort to "conquer nature" would bring a special danger, the closer it approached realization: that of dispossessing and displacing human himself. But though we must now confront the ultimate threat.56 This understanding permeates Mumford’s critique of the one-sidedness of contemporary architecture. As a public intellectual and architecture critic of the influential magazine in his time, the New Yorker, he points in many ways to the shortcomings of the Le Corbusier's, International Style fostered architecture branded as Machine for Living.

By the final decades of the twentieth century the crisis of this architectural style was palpable among the users who had to live with these threatening environments. Mumford writes: The great problem of our time is to restore modern man's balance and wholeness: to give him the capacity to command the machines he has created instead of becoming their helpless accomplice and passive victim; to bring back, into the very heart of our culture, that respect for the essential attributes of personality, its ceativity and autonomy, which Western man lost at the moment he displaced his own life in order to concentrate on the improvement of the machine.57 One spontaneous response among many to this crisis of the built environment was expressed in the intentions and methods of the Children and Architecture project, which involved structured learning outside of the school setting. The project’s intention was to integrate children’s internal wisdom of playing with learning about the world of architecture. The program focused around free form model making of architectural principles and indigenous dwellings. It took place twice weekly from 1989 to 1995 at the Museum of Children’s Art in Oakland, California, USA. The project was an extracurricular activity where parents brought their children to the museum as a treat and an educational outing. Regardless of developmental theories of the day, the project allowed children of mixed ages and abilities to work together. Children from 5 to 12 worked together around the table. Each session had a thematic framework. For example, one 56

L. Mumford, The Myth of the Machine, Harcourt Brace Jovanovich, Inc., New York 1970, p. 79

57

L. Mumford, The Myth of the Machine, Harcourt Brace Jovanovich, Inc., New York 1970, p. 48

596

of the themes was an enactment, making a small model of a primeval dwelling as if building a first ever shelter. To accomplish this, basket making materials were bundled up in a number of sizes, eventually tied with string to hold them together as a model making material and as an example of tying and lashing. Dry and fresh leaves or fabric scraps were available for cladding. Simple non-toxic, water-soluble glue and paint was always at hand. Also during the class parents were allowed to sit around the table instead of in the waiting area for parents. The class, with this inter-generational mix and adults present became an ever-changing mini community. Dynamics of this mixture are worthy of reflection in a separate paper. To open possible discussion and to focus on the activities of the children, a summary of some key issues of this learning / containing exercise are below: 1. Framing concept: Simple learning of a building tradition or architectural principle. 2. Openness to the process: Attempt to represent the theme in three dimensions as best as one can. 3. Community building: Helping each other. 4. Valuing and cherishing: Enjoying and finishing the object as it is, regardless of traditional prototypes. 5. Shared meaning: Owning the object and encouraging respect for its duality, of being both one’s own and also helped by others. 6. Intimacy of play: Qualities of enactment usually not associated with architecture and architectural models. The antecedents Paradoxically the most important antecedent of the Children and ArchitectureProgram was not the architecture itself, but working with children and their involvement with puppets. The scale, the anthropomorphic simile of puppets, the intimacy and relatedness they invoked, helped in encouraging a creation and reflection on the architectural model as an extension of the human figure and presence. The multiple layers of this project point to a need for de-conditioning and creating Learning Communities that offer cultivation of sensibilities apart from de-humanizing solutions.

597

The two projects cited are examples of possible coming together of small learning group that may after working meaningfully side by side be ready to tackle inherited trauma or inherited ancestral insistence on dominance and conquest and to understand and forgive both types of inheritance after structured learning and bonding. Closing Remarks and Summary The necessity for structured learning about differences and ways of mutual care is a response to the conference theme Perspectives of Integration in the European Union: The Balkansheld at Albanian Epoka University in Tirana. Legislating for Mutual Care by any parliamentary decry however noble would stay at the level of rhetoric and political posturing. Because work on mutual care needs deep individual and community work at the place where people are, such mutuality may be misunderstood and discouraged by wasted interest. The open suggestions in this paper of themes addressed by some projects of Artship Foundation over last thirty years may help articulate a variety of types of first phase preparatory projects dealing with issues at hand before entering work on mutual care and collective inherited trauma. Brief summaries of themes and projects may offer an overview of possible diversity of approaches and the need to link Mutual Care to cultural and community projects relevant to the time, the people and the places that want to engage and understand their neighbors. In summarizing the curriculum for extra curricula, life long learning was explored through the number of projects and themes. Reclaiming of public space at difficult crime ridden Arroyo Viejo Park in Oakland. Youth and Crisis of Perseverancewere explored through the youth programs part of the process of redefining a historic 1940 passenger-cargo/military ship for public peacetime use and a cultural space, 1999 – 2004.Heritage, conditioning and oral histories were explored through a contemporary play inspired by fifteen years of comparative cultures research into a community healing process exemplified by the Italian Tarantella Pizzica and the Egyptian dance ritual Zar. Managing Tangible and Intangible Surplus was explored through the dynamics of Community Poles Project 1986-1991. Mutual grieving and understanding ancestors’ articulated example and issues was explored with the process of Imaginary Film Workshops- 1997 and 1998 at the international Peace University in Berlin. Structured learning and the nature of continuity were reflected upon with examples of the Educational village initiative 1975 - 1980 and the Children and architecture program 1989 1995.

598

The intention of the paper was to offer thought realized cultural projects that had mutual care as their subtext and an undercurrent way to approach Balkan integration in the European Unionnot as regional or local set of issues but Pan-European and Global responsibility. Solidarity, compassion and mutuality are inborn traits, lets celebrate and study them next to mathematics, chemistry, geography and computer science.

599

School Leader Self-Development Assessment: A Review Paper PhD C. Ibrahim Can Korkut Kosovo

Abstract School leadership concept has continually changed and keeps changing due to societal, methodical and technological developments, changes in pedagogy and teaching environment, the global and national markets, etc., so do standards and assessments for school leaders. Furthermore, in comparison with the history of learning, teaching and school leadership, the history of school leadership standards, assessment tools and standard certification progresses are quite new. However, in our globalized world, standards have gained importance and there has been great progress in school leadership standards and assessment means. Private schooling has become a great business and self-development is a part of the competition. The purpose of this paper is to attract school leaders’ attention to self-development, inform them about self-development and assessment issues and encourage them to assess themselves from the point of self-development. The assessment can focus on personal and professional development. It is also important to introduce some modern-world leadership concepts to school leaders since they might be absorbed in their own way of leading/managing without thinking some key concepts and standards of leadership. Keywords: School leaders, Self-assessment, Private schools. 1. Educational Leadership Policy Standards If it is necessary to apply to the standards, the Interstate School Leaders Licensure Consortium (ISLLC) by the Council of Chief State School Officer provides standards for school leaders which are used by more than 40 states in the USA. ISLLC 2008 uses six standards to define school leadership. According to ISLLC these standards call for: 1. Setting a widely shared vision for learning; 2. Developing a school culture and instructional program conducive to student learning and staff professional growth; 3. Ensuring effective management of the organization, operation, and resources for a safe, efficient, and effective learning environment;

600

4. Collaborating with faculty and community members, responding to diverse community interests and needs, and mobilizing community resources; 5. Acting with integrity, fairness, and in an ethical manner; and 6. Understanding, responding to, and influencing the political, social, legal, and cultural contexts [1]. And each of the ISLLC 2008 standards gives a definition of school administrators as follows; Standard 1 A school administrator is an educational leader who promotes the success of all students by facilitating the development, articulation, implementation, and stewardship of a vision of learning that is shared and supported by the school community. Standard 2 A school administrator is an educational leader who promotes the success of all students by advocating, nurturing, and sustaining a school culture and instructional program conducive to student learning and staff professional growth. Standard 3 A school administrator is an educational leader who promotes the success of all students by ensuring management of the organization, operations, and resources for a safe, efficient, and effective learning environment. Standard 4 A school administrator is an educational leader who promotes the success of all students by collaborating with families and community members, responding to diverse community interests and needs, and mobilizing community resources.

Standard 5 A school administrator is an educational leader who promotes the success of all students by acting with integrity, fairness, and in an ethical manner. 601

Standard 6 A school administrator is an educational leader who promotes the success of all students by understanding, responding to, and influencing the larger political, social, economic, legal, and cultural context [1]. ISLLC gives the highest priority to student and adult learning, setting high expectations, demanding content and instruction that ensure student achievement, creating a culture of continuous learning for adults, using data to guide improvement, and actively engaging the community [2]. 2. Strategies For Self-Development Whether they are mandatory or voluntary, while planning self-development strategies as a school leader, one should have direct purposes with an acceptance of educational environment complexity. It makes an appropriate approach a vital point here. Such an approach should take students' achievement as the centre. Other criteria are as follows; •

availability of continual opportunities for each stage of the career

•

quality, comprehensiveness and a system-based approach

•

focus on practice with knowledge and values

•

variant providers

•

provision of basic training with using other development opportunities

•

bases on the best available evidence

Bredeson (2003) [3] also provides a set of principles for design to enrich learning at schools. According to him there are six themes for research and practice as follows; •

the basic idea about development is learning including teachers and school leaders

•

it is a journey, not a matter of credibility on the basis

•

There is no limit for learning and the opportunities for it

•

There is an intimate link / tie between development, learning and school mission

•

the theme is development of people, not tools or programmes.

As for the strategies to provide school leaders with professional learning and to develop themselves strategies for systematic improvement is needed. The strategies of selfdevelopment should start before school leaders get appointed to their posts and continue after they are hired. This idea is also supported by the OECD report 2008 with the consideration of 602

different needs of school leaders. The most important question for the beginning can be that this learning and development should fulfilled whether by the system or by the self-assessment of school leaders themselves. A middle way can be also found as people should take responsibility on their own improvement and system should supply variant opportunities for different levels and needs. It is apparent that small children and adults learn differently and adults concentrate on problematic areas for themselves. They also learn more through practice than theory. However, theory is a necessity and it makes it essential to build a bridge between theory and practice. This bridge is built through a selection of generic strategies as Huber (2011) [4] suggests. These strategies are categorized as ‘cognitive theoretical ways of learning’ (courses, lectures and self-study), collegial (cooperative group work) and communicative process-oriented procedures (projects), and reflexive methods (feedback and self-assessment, as well as supervision) [5]. The following figure illustrates the connections between generic strategies and experience (p.21). As it is seen in the figure, 'concrete experience' is in the centre and it means practice. Huber shows the importance of individual contribution to development programmes with his recommendations which can be summarised as follows (p.839-841); •

learners' needs, such as time and speed of learning, concerns and demands are important

•

programmes should be organised as reflection and feedback-oriented

•

while deciding on the programme, participants’ ideas should be taken

•

objectives of the programme should target pedagogy, theory and practice, competence and sustainability, effectiveness and competence, quality

603

Figure 2.1: Approaches to learning in professional development.

Source: Demster et al, 2011, Strategies to develop school Leadership The basic question about the school leadership development lies in what brings the result or what is the impact. This first question points to strategies. The second most important question is how this improvement makes a difference. Two more essential points for the school leadership self-development strategies can be added as; 1) Finding Talents In fact, school leadership self-development should start before future leaders take the post. Finding suitable candidates for the post and getting them ready are the key policies behind the continual self-development as talented people likely will have more desire and motivation for self-development and it will be easier for them. McKinsey report (2010) [6] claims that ‘attracting and selecting those with the right qualities is critical to the overall leadership capacity of the system’ (p.9). 2) Experienced Leaders

604

Another problem that school leaders and consequently schools face is that some experienced school leaders can lose their commitment and / or ability to learn to face new challenges and it can become an insurmountable barrier for self-development and school development. One recommendation is that more experienced school leaders’ work as mentors for the new ones to keep themselves developing. In York of Ontario, Canada, school leaders with three years' experience supply mentoring support for the school leaders with an experience of less than two years. It means that school leaders within the first two years of their leadership work with more experienced school leaders with a minimum of 25 hours of tutoring a year and the mentor get paid for their service [6]. 3. Certification As a Means of School Leader Self-Development and Its Drawbacks Although there is an ongoing discussion saying that certification does not mean quality, in today's standards-based societies, certificates out some candidates a step in front of others and it is important to reward people in any field of life who put some extra effort to improve themselves. Certification processes also force people and institutions to build and follow standards. The basic problem of school leadership assessment instruments is also witnessed in certification. There is not a complete coincidence or co-operation between theory and practice meaning real life. Therefore, there have always been some discussions and suspicions over the credibility of assessment tools and certificates. With very fast changing societies and slow academic processes and researches this problem seems insurmountable. Yet, certification stands here as a part of more formal and standard-based processes. There are some basic questions to be asked while considering certification. One of them is the credibility of the certificate. Who provides the certification and the measurement for the selection of participants are the first questions to be answered. Later come deeper questions about the evidence that proves the certificate follows widely-accepted standards and correspondence of the certification programme to professional development and learning. It is quite natural that different certification programmes assess different aspects of school leadership depending on demands of the school environment, leadership styles etc. But the key point here is that such programmes should assess the observable aspects of daily leadership. But sometimes even often there is a gap between what is assessed and the responsibilies that school leaders consider as important [7]. Similarly, there are differences from the point of assessees. Since mostly headmasters and their assistants are considered as school leaders, other components of leadership team such as parents, students association leaders, partners even 605

teacher leaders are assessed. In fact, to have a corresponding educational system standards, development, certification and recognition should be interlinked. However, certification has its own drawbacks. The basic problem of certification is that the problems of school leadership development processes are specifically about the number of certified leaders but their quality. In fact, there is sufficient number certified staff and administrators. Moreover, surplus of school leaders with certification may cause some posting hierarchical problems. There are also some abovementioned certification problems of who certifies, who is certified and standards, credibility and processes. For instance, under some circumstances some people may get certified without completing the requirements and it may distract others' intention from certificates and they may lose their value. Training for certifications and requirements must so balanced that on one hand they should become a load on people's shoulders and on the other hand they should not lose their value if they are too easy to obtain. For instance, in the USA, potential leaders are supposed to finish university courses as certification requirement. Yet, hardly any evidence is there that there is direct impact of university education and courses on leadership skills. Some leaders become successful through their life-long experience and they credit it. Most certification programmes are only open to those with long educational especially administrative experience which makes many talented people waste years before they become certified or they lose their enthusiasm. Some countries such as Russia and some states in the USA apply a step by step certification processes and the first step of certification or in some cases the first certificate is given through their success inside or outside the school. Similarly, the state of Texas has built a different approach to leadership certification as it takes meeting the standards into consideration rather than course completion. While mentioning the standards and certification, it could be very applicable and practical to ask from school leaders’ evidence that they have made some changes improving students' outcomes. It is also understandable that only course-based certification programmes by universities or other course providers are not very likely to be successful. Many successful school leaders complain that certification programmes by universities do not pay enough, if any, attention to some key aspects of schooling such as students' learning and curriculum. An inspiring result of the research by Elmore [8] shows that many successful school leaders owe their success to their personal values and commitments. Kronley [9] also argues that university or outside provider-based programmes lack the practical aspects of school life which of one is classroom assignment. Instead, they focus on conventional aspects of leadership such as instructions about finance, disciple, labour and facilities [10]. One suggestion that can be 606

discussed is that some successful leaders form outside the schooling environment but with a talent of building and / or changing skills may be appointed to the posts of school leadership. However, there is again the same question of development processes of schooling for such leaders. As a sample for a formal certification body, in England the Training and Development Agency (TDA) whose responsibility is to build standards of teacher training and professional development and The National College for School Leadership (NCSL) that is responsible for leadership development and certification for middle-level school leaders are the two bodies appointed by the government for development, standards and certification. National Standards for Headteachers that are basis of development, assessment and certification of headmasters who have to take National Professional Qualification for Headship (NPQH) was created by The NCSL and there is ongoing preparation of development programmes for school leaders by the organisation. 4. Definition and Main Types of School Leadership Assessments Leadership assessment follows locally determined, contract-driven review processes largely for personnel purposes [11]. School leaders set a frame of objectives to be reached at the end of every academic year by themselves or are provided by superiors and at the end of the year their work is evaluated within the school or / and by upper administrators. Most school leadership assessments focus on current practices school leaders, how they do and if they meet the school leadership standards to give themselves and their supervisors’ useful data along with the measures of school outcomes. As the National Association of Elementary School Principals states: Along with greater emphasis on instruction, assessment should be focused more on actual behaviors and actions, rather than on knowledge or traits [2]. Basically there are two types of assessment tests that are summative and formative assessments. Both measure the competence of assessee and all assessment tests try to evaluate a leader's knowledge and ability but summative and formative assessment tools have different purposes. As the summative one is used for employment concerns, there is no improvement plan or remediation after the performing the test. However, it is a difficult and risky decision to make someone redundant merely due to an assessment test. The formative one is the opposite in this way. Although the main objective of the formative one is also measuring the competence, it is 607

served as personal development plan. When assessment tools are used as and offer feedback, they also serve as constructive tools for better performance in the future. Studies of assessment and feedback in other learning contexts [12] — including athletics [13], computer technologies [14], medicine [15], the military [16], and — have all investigated the formative role of feedback. What has been learned from these sources about the purposes and uses of assessment, feedback, and revision to improve practice has important implications for education; though the matter has not yet been extensively studied in school leadership [11]. 5. Importance of School Leadership Assessment In today's highly competitive educational climate a school leader's accountability for students' achievement, improvement and narrowing students' level / performance gap in diverse society has gained great importance [17]. When conducted properly it has great impact on a school leader's, students', educational system improvement, setting organisational targets and focusing on students' behaviour that has influence on learning. A real-life picture of a school leader reflects managerial and leadership work. But since the focus is on instruction and student's learning and behaviour that influences it and the greatest change in the concept of leadership in recent decades is on the learning and teaching improvement, it is better that assessment tools pay more attention to actions and behaviours as they are real-life facts rather than personality traits. In a very broad definition, leadership is to grow professionally and fix realistic objectives. "The Sacramento City Unified School District in California states that the purpose of their evaluation is for “growth of professional educators and commitment to accountability” with the intent “to promote the values, beliefs and norms of the district” and “to promote security, reduce political influences, and promote a sense of fairness.” The evaluation continues to state its purpose of “promoting caring, teamwork, communication and feedback” and “most importantly to improve employee performance” [18]. The basic outcome of all schools is learning. Many countries analyse school / student outcomes through tests / exams. As a matter of fact, improvement is more important than current situation and there is a growing interest in what assessment can do for leaders [19]. If a school leader's performance is judged according to the test results, some even many school leaders will get penalised not because of their schools' history of bad exam results. In fact, if they are judged through the assessment tests, their weaknesses and strengths will be analysed and if there is an improvement, they will be considered successful. And success is not only a matter of teaching 608

and learning although they are in the centre. Today's educational environment forces a school leader to deal with a lot of different issues and a school leader is the second after the class teacher that influence students’ success. One of the most important and fruitful benefits of assessment tests and tools is to introduce new ideas, thoughts for educational institutions, to raise the quality standards and to build a dialogue between the educational environment and stakeholders. In general, assessment tests and tools are used for summative purposes such as employment or formative purposes such as improvement. They can be used to close the gaps between high achieving schools and low achieving schools. Out of 44 assessment tools in the market today, four of them are purely used for summative purposes. For many scholars’ assessment tests - especially leadership assessment tests - are the basic tools for personnel management [20, 21, 22, 23]. This kind of usage is not very popular and fruitful among school or educational leaders. Yet, if they are used as quality control and then if improvement processes follow such as setting new targets followed by certification, identifying new needs and supports of different levels and warning for upcoming challenges, they become much more fruitful tools for leaders, as well as for their supervisors and upper-level administrators. An assessment test can focus on particular / specific area or it can give a general /overall estimation of the leader or their institution. For stake holders it can be a means of rewards, hiring, promotion, assignment, sanctions. If the first usage of an assessment test or tool is personal development (it should be so), the second one is organisational / institutional improvement. It is ministries natural task to check if the process of teaching and learning along with other organisational functions of an educational establishment or a school on the right path or at least working. In both ways, it is working or not working, there should be a programme for improvement and if possible certification. Some assessment tools concentrate on more general items to view the process and development from a broader view such as learning atmosphere, community. But in assessment tests there are more and more attention for school leaders’ improvement and accountability, especially for instructional leadership nowadays. Different assessment tools / tests pay attention to different functions of school leaders. For instance, PRAISE (Performance Review Analysis and Improvement System for Education) pays more attention to a school leaders capacity to improve educational system, VAL-ED to as instructional leaders their capacity and

609

CFSQ (Change Facilitator Style Questionnaire) to a school leader's influence for a change. Naturally they approach to data collection differently. Why conducting an assessment, there are some basic questions to be paid attention. They are as follows; 1. Why to conduct an assessment? 2. Who will be assessed? 3. How will the assessment be done? 4. How will the outcome be used? While conducting the assessment there are some key points / hints that help during the progress. Goldring E. and Porter A.C [18] summarize these hints as follows; 1. Explain the purpose of each data collection strategy 2. Data collection tools should be brief, to the point, and questions should be necessary and phrased appropriately 3. Assure confidentiality of survey participants 4. Allow enough time for surveys to be returned 5. May use information from previously conducted needs assessments if data is current and relevant 6. Much information is already being collected—don’t collect it again—just analyze the appropriate data 7. In analyzing data, look for patterns. For example, chart reading progress reports by monthly averages. Is one month consistently lower than average year after year? Why? Disaggregate data by subgroups. Look for differences and reason for differences [18]. While assessing, some obstacles may appear and it is vital to overcome those obstacles to have a healthy assessment result. Some of the obstacles and answers for them are as follows;

610

1. The issue of trust: As the first concern of an assessment test is the issue of confidentiality, an assessment provider has to gain trust of assessment doers and use trustworthy means of assessing. 2. Organisation's permission: If you are doing an assessment inside an organisation without any highest level permission, this assessment is doomed to fail since it will raise some suspicions. 3. Unwillingness: An assessment test is more likely to be completed if it comes from the highest authority in the organisation. Telling the aim of the assessment with the help of willing participants and making the completion and return progress easy will make it more applicable. 4. Time: If an assessment test does not come from an authority or even it comes if it is too long to complete, it is nearly impossible to have healthy results. So, it should be straightforward, not long enough to detract attention and pleasant by appearance. 5. Cost: High cost for the organization and /or applier can badly effect the assessment to be fulfilled. If possible, computer-based tests cost less than posting or travelling. In general, there are three uses of assessment tools. They are used for management of personnel, leaders' improvement / learning and improvement of organisations. Assessment tools and the results from them can set new learning and improvement objectives, control over organisations and policy making.

6. School Leader Self-Assessment Instruments Training Program Self-Assessment Tool Known as TrainSAT, the aim of this assessment tool is to identify the weak and strong points of anybody's training programme and it is 24 pages. ISLLC Standards and (Self-) Assessment In need of an official set of standards and assessment tools, the National Association of Secondary School Principals (NASSP), the National Association of Elementary Principals (NAESP) and the National Policy Board for Educational Administration built a consortium in 1994. This consortium, called Interstate School Leaders Licensure Consortium (ISLLC), firstly 611

built a set of standards based on dispositions, knowledge and performance in 1996 and revised it in 2008. More than forty states in USA have used the standards as a tool or a source to develop their own standards since 1996. The ISLLC can be considered as a milestone in the history of educational leadership standards and assessments. The first and the most important reason for it is that the ISLLC Standards have changed the concept of leadership assessment from managerial style to learning and teaching centred style. The second one is that "at present, all NCATE-Accredited principal preparation programs in the United States have adopted the ISLLC Standards" [24]. The ISLLC Self-Assessment, which consists of 182 statements on knowledge, dispositions and performances directly linked to the ISLLC Standards, is to give information of school leadership. Leadership Self-Review Tool (LSRT) Developed by The Institute for Education Leadership, Ministry of Education, New Zealand focuses on school administrative boards' help for school leaders. It is set out in six domains meaning key areas and each domain has some indicators and descriptions of research-based and successful practices within the area. Assessees are asked to check the current practice against the priority. A peculiarity that makes LSRT different from others is that it includes two parts of writing with a title of 'Additional sample evidence your board wants you to consider' and a part of 'comment'. Another important key function of LSRT is that it provides a wide range of sample evidences to assist the evaluation. The 'Sample Evidence' section also serves as mind-opening samples of successful school leadership. Educational Leadership Self Inventory It aims at enabling school leaders’ performance with the standards of 'Connecticut Standards for Educational Leadership'. It is consisted of twelve sections linked to twelve standards with several items within. The tool provides a graph to compare school leaders’ performance with those of 251 principals. Graduate Programs Educational Leadership and Administration Administrative SelfAssessment Developed by Philadelphia Biblical University, the tool has got 15 items of competencies considered critical for effective school leadership. The tool uses a ten-level scale and an area 612

for a comment for each area. A significant difference of the tool is that the applicant is asked to send the form to the university to be evaluated. Leadership Self-Assessment (LeadSA) It focuses on three main areas; attributes, skills and knowledge. It provides means of evaluating oneself under the sections of 'Tools for improved advocacy, improved inquiry, at an impasse, individual self-improvement and leadership behavior. Under each of the above mentioned sections there are some thought-provoking questions to be answered. Principal Self-Assessment Tool The tool uses a set of five standards as school leadership concept followed by a question to take into consideration and several items follow the question to be rated form one to five. Any respond from one to three is considered as the area of growth. The tool takes instructional school leadership as the reference.

Training and Educational Leader Self-Assessment (TELSA) TELSA was developed by the Westinghouse Electric Company of CBS, Inc. for the U.S. Department of Energy's Carlsbad Area Office (CAO) to determine training and educational leaders' need for development in 1998. TELSA which consists of forty pages is a free assessment tool that can be used by any organisation and the Westinghouse technology transfer program has been used to deliver TELSA to support governmental institutions in the fields of economy and education to compete with the global economy. Main purpose of TELSA is to provide educational leaders and organisations with development needs. It can be applied to a wide range of educational leadership positions from school headmasters to training managers and academic deans. It consists of ten different sections and employs a Difficulty-Importance-Frequency (DIF) analysis and after each section it gives a list of useful reading material for weak results. 7. Discussion There are many assessment and self-assessment tools and it is an important task of institutions to find the right assessment tool as well as informing about the standards of school leadership standards and assessments for their educational environment, culture and circumstances. Every 613

assessment tool might have their own peculiarities and different schools may focus on different development areas. For instance, TELSA pays specific attention to technological development of school leaders and assesses leaders on specific technological tools such as photocopy machines, scanners, projectors, etc. It gives a chance to different schools to reshape the assessment tool and add some new items such as smart-boards. One task of choosing the right assessment tool is to guide school leaders and their staff about the required type of learning and its necessities as what to know or believe. Three aspects of the tool should be well thought; which are 'what to assess', 'how to assess' and 'how to judge'. It is not enough to reach a consensus about assessment tool but researches especially practical ones should continue to support to see the change and the tool should support the development. May be the hottest discussion about the standards and also assessment tools is about personality traits. Although there are some standards, it is impossible to say there is a set of personality traits to be a successful school / educational leader. Also exceedingly formulized standards will not reflect the realities of a profession or job. Or standards that measure generic skills might be useful in some schools but some older schools may need more specific talents. One criticism about the application of assessment tools that it is not realistic that a person handles all the issues in one leadership style. As a matter of fact a research conducted by Wasserstein-Warnet and Klein in Israel in 2000 [25] showed that successful leaders apply contingent leadership style meaning that they avoid having a static vision against the situations and issues (p.448). Therefore, one vital question about the application of assessment tools can be how relevant your self-assessment is to your leadership style. Along with the self-assessment, school leaders should also try to define their leadership style. In fact, assessment and self-assessment tools should be applied as a set of some assessments. For instance, self-assessment results should be compared with assessment results by staff and supervisors or counselors. One criticism of the TELSA self-assessment self-development section can be that although it contains an item for school leaders to assess their own performance, there could be a more specific item about students' outcomes as student outcomes are the most important objectives of schools and education. In conclusion, it is high time to start school leader assessment and self-assessment practices in developing countries as less importance and frequency might be paid to school leadership selfdevelopment, most probably to development as well, in comparison with the developed countries.

614

References Educational Leadership Policy Standards: ISLLC 2008, pp. 14-15 / http://www.ccsso.org/Documents/2008/Educational_Leadership_Policy Standards_2008.pdf National Association of Elementary School Principals, 2008, “Leading Learning Communities: Standards for What Principals Should Know and Be Able To Do(Executive Summary)”. Alexandria, VA, p. 2. Bredeson, P. (2003), “Designs for learning: A new architecture for professional development in schools”. Thousand Oaks, CA: Corwin Press. in England and the USA: A comparative analysis. Educational Management & Administration. 29 (2), 229-245. Huber, S.G. (2011, in press), “Leadership for learning – Learning for Leadership: The impact of professional development. In J. MacBeath & T. Townsend (Eds.). Springer International Handbook on Leadership for Learning”. (pp.831-853). Dordrecht: Springer. Demster N., Lovett S. & Flückiger B. (2011), “Strategies to Develop School Leadership”. McKinsey & Company (2010), “How the world’s top school systems are building leadership capacity for the future”. Accessed from www.mckinsey.com/clientservice/Social_Sector/our_practices/Education/ Knowledge Marzano, R. J., Waters, T., & McNulty, B. A. (2006), “School leadership that works: From research to results”. Alexandria, VA: Association for Supervision and Curriculum Development. Elmore, R. F. (2000), “Building a New Structure for School Leadership”. Washington, DC: The Albert Shanker Institute. Kronley, Robert A., 2000, “Learning from Each Other: Questions and Answers about the Clark, Panasonic and Rockefeller Foundations' Long-Term Investment in Systemic Education Reform”. San Diego: Grantmakers for Education. L. Darling-Hammond & G. Sykes (Eds.), 2000, “Teaching as the learning profession. Handbook of Policy and Practice”. San Francisco: Jossey-Bass Publishers. Portin, B., Feldman, S., & Knapp, M., Purposes, 2006, “Uses, and Practices of Leadership Assessment in Education”. State of the Field monograph published by the University of Washington Center for Teaching and Policy and The Wallace Foundation. Bransford, J., Brown, A. L., & Cocking. R. R. (Eds.) (2000), “How people learn: Brain, mind, experience, and school”. Washington, D.C.: National Research Council. Darden, G. (1999), “Videotape feedback for student learning and performance: A learning stages approach. The Journal of Special Education, Recreation, and Dance”, 70(9), 40–54. 615

Stolovitch, H., & Keeps, E. (2000), “Human performance technology”: Research and theory to practice. Retrieved March, 12, 2015, from http://www.hsa- lps.com/Articles.htm. Ericsson, A. (2003), “Deliberate practice and the acquisition and maintenance of expert performance in medicine and related domains. Academic Medicine”, 79(10) 570–581. Chatham, R., & Braddock, J. (2001), “Training superiority and training surprise.Washington, D.C.: Defense Science Board Task Force”. Catano, N., & Stronge, J. H. (2006), “What are principals expected to do? Congruence between principal evaluation and performance standards. NASSP Bulletin”, 90(3), 221-237. Goldring, E., Cravens, X, Murphy, J., Elliott, S., Carson, B., & Porter, A. (2008), “The Evaluation of Principals: What and How Do States and Districts Assess Leadership. Paper presented at the annual meeting of the American Educational Research Association”, New York, p. 20. Stiggins, R. (2002), “Assessment crisis: The absence of assessment for learning”. Phi Delta Kappan, 83(10), 758–765. Boyd, W., & Crowson, R. L. (1981), “The changing conception and practice of Publi school administration. Review of Research in Education”, 9, 311–373. Hood, S. (1998), “Culturally responsive performance-based assessment: Conceptual and psychometric considerations. The Journal of Negro Education”, 67(3), 187–196. Stronge, J., & Tucker, P. D. (1999), “The politics of personnel evaluation: An introduction to the special edition. Journal of Personnel Evaluation in Education”, 13(4), 319–320. Davis, G. E. E., & Hensley, P. A. (1999), “The politics of principal evaluation. Journal of Personnel Evaluation in Education”, 13(4), 383–403. Fossey, R. & Shoho, A. (2006), “Educational leadership preparation programs. In transition or crisis? Journal of Cases in Educational Leadership”, 9 (3), 3 – 11. Klein, J. & Wasserstein-Warnet M. (2000), “Predictive validity of the locus of control test in selection of school administrators, Journal of Educational Administration”, vol:38, No:1, 725

616

Gagauzians and Turkish Language within the Context of Balkans Assoc. Prof. Dr. Fahri Turk Department of International Relations, Trakya University, Turkey

Abstract Nowadays, Gagauzians live in Gagauzia within the republic of Moldova. They came in the 11th century to this region. Gagauzians are orthodox Christian in faith but nationally they belong to Oguz tribe of Turks. According to 2004 census in Gagauzia live totally 155.646 people. Beside Moldova one can meet Gagauz people in regions and countries such as Dobrudsha, Northeastern Bulgaria, Western Trace, Ukraine and Central Asia etc. Gagauzians speak Gagauz language, which is a dialect of Turkish. As Gagauzia gained the status of an autonomous territorial unit in 1995 Gagauzians started to use Turkish in public places without any problems, however there exist some severe problems regarding the use of Turkish as an instruction language. This paper deals with the usage of Turkish in public life as well as in schools in Gagauzia, from past to present within the context of Europe. This article analyses which problems do exist in the field of education and how far is developed the Gagauz press and media organs in Gagauzia. Keywords: Balkans, Gagauz people, Language issue, Language laws, Gagauz media organs. Introduction Following the withdrawal of the Ottoman Empire from the Balkans, the Turkish minority was gradually oppressed by the governments of the region concerning their cultural and religious life. Gagauzia was one of the foremost countries where the Gagauzians had to gain some cultural and linguistic rights throughout the history especially within the respect of the use of Turkish as a language of instruction. On the other hand, there were some countries such as Bulgaria, where Turkish minority had to face severe restrictions on its cultural and linguistic rights. Because of assimilation policy of Bulgarian government speaking Turkish language was forbidden in the public and taking Slavic names became compulsory. This paper deals with language rights of Gagauz people as well as that of Turkish minority in Bulgaria from a comparative perspective. However the backbone of this contribution lies on how developed the use of Turkish language in the public sphere in Gaguzia and which obstacles do the Gagauz people have had by the implementation of Turkish as the language of instruction? To give an answer to these questions firstly it will be given an overview about

617

Gagauz population throughout the Moldovan history. Then it will be pointed out that especially in the post Second World War period the Moldovan authorities permitted the exercise of language rights for the Turks, which has been reached to its peak as the Moldovan administration issued a decree on using Turkish as a language of instruction in 1958. This presentation analyses in a further step how to be developed the language issue in the post-Cold War period. Within this context it will be indicated that although the Gagauzians made some progress regarding the use of Turkish as a language of instruction, they could not solve all problems in practise related to the implementation of Turkish as a language of instruction. In the last step the situation of the implementation of the Turkish language as a language of instruction will be compared in Moldova (Ggauzia/GagavuzYeri) and Bulgaria. The data which was available for this research work gatheredmainly from the Gagauzians and Turkish primary sources. As method the researcher used comparative analysis. Moldova (Gagauzia) After the implementation of Latin script on 29th January 1993 by the National Assembly of Gagauzia (HalkTopluşu) the Moldovan Parliament carried the decree 1421-12 about the changing of the Gagauz alphabet from Cyrillic to Latin script on the 13th May 1993, which was proposed by the linguists such as Pokrovskaya, E. Kolta, Tanasoğlu and Gaydarcı. Gaydarcı determined the rules of spelling of Gagauz Turkish and he influenced acting a law on spelling of this language in 1995. Afterwards the National Assembly of Gagauziatook a decision in January 1996, through which the use of Gagauz Turkish became compulsory on the Latin-based alphabet as a language of instruction in the all schools of the Gagauzia starting from 1st September 1996.(1) Within this decision the rules of spelling of the Gagauz Turkish (Gagavuz dilinin ortografiya kuralları) was recognised on the dialects of Ceadir-Lunga and Comrat which are easy and in conformity with the syntax and morphology of the Gagauz Turkish. (2) Although the Gagauz language is one of the official language out of three languages in Gagauzia since 1994 it is difficult to say that this language can be used completely free in public sphere. According to the language law of Gagauziathe head of the territorial unit (Başkan) is the only public officer who is obliged to be able to proficient in Gagauz language and to have to swear an oath in this language. Generally, the people use Russian language in the administrative sphere in Gagauzia. First time in the history of Gagauzia two meetings of executive committee were held in Romanian and Gagauz languages in 2009. In this context it must be pointed out that Gagauz elites are unable to speak their native language very well. According to an opinion survey only the one third of Gagauz elites are in good command of Gagauz Turkish, whereas all of them are excellent in speaking and writing Russian language. 618

(3) Despite the construction of the official website of Gagauzia in four languages (Gagauz Turkish, Russian, Moldovan and English) one can notice that the information in Gagauz language is very rare and not updated. (4) The detailed information on the website of National Assembly of Gagauzia is given only in Russian. As it will be mentioned below the Turkey’s aid played an important part in implementing of the Latin alphabet in Gagauzia. The growing influence of the Turkish language over the Gagauz Turkishworries some circles in Gagauzia. Indeed, the Gagauz journalists, who attended Turkish language courses since 1996 in Turkey, contributed to transfer of some Turkish vocabulary into Gagauz language. Moreover, the change of the script from Cyrillic-based to the Latinbased alphabet eased to receive the Turkish radio and television programs via satellite. So under these circumstances the percentage of people who receive Turkish TV channels via satellite increased very rapidly. An important factor which plays a role in closing Turkish and Gagauz language, is that hundreds of Gagauz women work as babysitter in Turkey. Definitely these women influenced by the Turkish language and they added some Turkish vocabulary into their native language. (5) Within this framework some Western analysers think that influenced by Turkish, Gagauz language will lost some of its original characteristics. However, this situation has an impact on the vocabulary of Gagauz language in a positive way on which base it will be developed as a language of science. Gagauz as a Language of Instruction In the past Gagauz people used the languages of the different nations as a language of instruction under whose rulethey lived. Gagauz people first time used the LatinbasedRumanian alphabet in Bessarabia under the Rumanian rulein their history. (6) Gagauz people attended Bulgarian, Rumanian and Greek schools in 1930’s and used the Cyrillic alphabet as it was practiced by the Karamanlis, Turks of Orthodox faith, in the past. Gagauzians were educated in their native language between 1957 and 1961 in Moldova, which were written in Cyrillic alphabet. In the present time there are 54 schools in Gagauzia. In 51 of them the Gagauz language is used as the language of instruction. On the other hand, two schools are bilingual (Rumanian/Moldovan) and the rest is the mixed school. Gagauz language is to be taught from first to twelfthgrade three hours a week, whereas the Russian language is the language of instructionregarding other subjects. (7) In recent years, Education Ministry of Moldova published textbooks for Gagauz Language and Letters for the first and twelfth grades. Beside Gagauz language they teach also the history, culture and tradition of the Gagauz people.

619

Çimpoeş argue that due to the lack of teaching materials (especially the textbooks) and staffs it is not possible to arrange all classes in Gagauzas a language of instruction. (8) In using Gagauz as a language of instruction on the level of higher education there are serious problems. In Comrat State University one can meet the Faculty for National Culture, which houses the Department for Gagauz Language. However, the Russian language is still the language of instruction in this university. Although it was founded a private university in Comrat namely National University of Gagauzia (GagauzMilliUniversiteti) in which the Gagauz Turkish was the language of instruction, however one semester later the education has to be ceased in this institution. (9) The reason for the closure of this university was the domination of the Russian language among the Gagauz political and cultural elites. Even the books about Gagauz culture, language and history are published in Russian language. Due to not being successful the National University of Gagauzia criticized by the Russified elites. They blamed the Gagauz Turkish for not being a language of science and culture. In recent years however it has been published some books for children in Gagauz language. For instance, Fiodor Angeli translated some books by the famous Russian poet AleksanderPuşkin and by MihailEminescu, the national poet of Moldova into Gagauz Turkish. Moreover, recently it has been published a lot of textbooks for schools. (10) Gagauz Media First radio program broadcasted in Gagauz Turkish was “Bucaan Dalgasında” in 1986. In following years the broadcast time has been increased. Nowadays there is a private radio channel in Gagauzia namely “Radiostansiya Jug” that broadcasts news and music in Russian language. One can meet a National Radio and Television Broadcast of Gagauzia “Gagavuz Yeri Radyo ve Televizyon Kurumu” (GRT) in Comrat. Although the TV programs of GRT concentrate on certain days of the week which scheduled for limited hours, radio programs last longer. After eight o’clock GRT broadcast the programs of the Turkish channel “TRTInternational”. The private TV channels such as “Bizim aydınlık” and “Yeni ay” transmit on the other hand the programs of the Russian televisions. (11) The length of the TV-programs broadcasted in Russian language varies daily from one to six hours. Other programs are transmitted from Russian channels. For instance, the programs by the channel of “Ayin Açık” in Chadir-Lunga are transmitted of 90 per cent by the Russian TV-channels such as ORT and RTR. On the other hand the channel “Bizim Aydınlık” in Comrat transmits the programs of MUZ-TV and Channel 3 in Moscow. These channels are covered by a distance of 10 to 40

620

kilometres. In this framework it must be pointed out that TV Sud (Vulkaneşti) and Yeni Ay (Comrat) are the media organs that have the narrowest coverage area in Gagauzia. (12) According to the Radio and Television Broadcasts of Moldova, it has been broadcasting for 25 years in the minority languages in Moldova. They broadcast annually 24 hours in Gagauz Turkish. The length of the programs in other languages is as follows: Ukrainian (30 hours), Bulgarian (22 hours), Russian (12 hours) and Hebrew (6 hours). (13) The disastrous situation of the Gagauz media is expressed by Tudor Zanet with following words: “We have schools, newspapers, radios and televisions in Gagauz language. The only program in Gagauz language is a half an hour program in a week by the Moldovan TV and programs on GRT in Gagauz language that last some hours. But we have no 24-hours TV programs in our native language. Thus, we have neither a radio nor a TV, where we will hearour nice Gagauz language for 24 hours. If we look at around we would not see newspapers and journals which are published in Gagauz.” (14) Turkey and Gagauz Language Turkish government supported for the Turkish language after gaining independence of the Republic of Moldova as it has been practiced by the Turkish Ambassador to Rumania Hamdullah Suphi Tanrıöver in 1930’s. For instance, the ninth president of Republic of Turkey, SüleymanDemirel gave firm support for the activities within the respect of education. (15) Considering the Comrat State University as a Turkish university Demirel gave a financial support for this institution in an amount of 100 thousand US-dollars during his state visit in Moldova in 1998. (16) Demirel even stated in one of his speech that he transferred a big amount of money to Comrat State University from the state funds that were available to him. Turkey’s support to promote the use of the Turkish language in Gagauzia was not only limited to the personal efforts of Demirel however. Turkey backed Gagauzia in the transition process from Cyrillic to the Latin alphabet. Considering the approval of Kishinev for the project on transition to the Latin alphabet, Turkey donated 200 thousand US-dollars and send NecipHablemitoğlu to Moldova in order to observe the implementation of this project for one year. Within the framework of this project it has been prepared nearly 25 books on grammar and literature in 1998 and they have been published in Kishinev. (17) On the other hand United Nations contributed with an amount of 100 thousand US- dollars to this project as well. Turkey supports for prospering of Gagauz language and its implementation as a language of instruction through the means of other institutions such as Turkish Cooperation Agency (TİCA). This institution realised to publish three thousand Gagauz alphabets in 1996. Moreover, TİCA sent two teachers to Comrat State University for the department of Turcology 621

in 2001 and gave financial aid to the Olympiads of the Gagauz language in an amount of thousand lei in the same year. (18) TİCA supports for the educational institutions in Gagauzia. For instance, it realised a project on the renovation of a boarded Kindergarten consisting 60 children, where pupils can learn in Turkish, Moldovan, Russian and Gagauz as well. (19) Since 1998 TİCA has been contributing to the development of Gagauz language and culture. As some examples we can mention, the subvention of the newspapers such as “Ana Sözü” and “Sabah Yıldızı” (20) and the completion of the renovation of Atatürk Library in Comrat and donation of thousands books to this library in 2013. (21) Moreover, Turkish NGO’s contributed to the development of the Gagauz language in Gagauzia as well.

Among these institutions that supported forGagauz Turkish as a language of

instruction one can mention the Foundation of the Turkic World (Turkish Abbreviation: TDAV), which organised 3-month Turkish courses for the teachers from all over the Turkic World in the Language Center “Kaşgarlı Mahmut” in İstanbul in 1990’s, in which 60 teachers participated from the all parts of Turkic World. In every term about five to ten teachers from Gagauzialearned Turkish in these courses. Apart from this TDAV organised Turkish courses in the Turkish Culture Centre in Comrat which was established in 1990. However, these Turkish courses ceased to exist after a while. (22) Bulgaria The Peter Mladenov administration made an end of the assimilation policy of Zhivkov era and a law enacted in 1991 authorised the Turks to take their Turkish names back. Thus, gradually Turkish names have been purified of Slavic endings like –ov/ova, -ev/eva. New administration allowed Turks to speak Turkish without any restriction. (23) Bulgarian government took some symbolic steps in order to promote the use of Turkish language in the public sphere such as allowing Turkish courses in 1991 in the regions where Turks lived in majority. (24) In 1994, the Bulgarian government passed a law on the permission of introducing Turkish courses of four hours a week in the elementary schools. Five years later taking part in Turkish courses was made compulsory for the Turkish pupils of classes from first to twelfth. In the same year, they started to teach Turkish compulsorily for hours a week in regions such as Kurdzhali and Razgrad, where it has been existed large Turkish communities. (25) In this context it must be emphasized, that there was a severe lack of Turkish teaching staff. To tackle this problem, the Bulgarian government founded classes at the High Institute for Pedagogy in Shumen (1992) and at the Institute of Pedagogy in Kurdzhali (1993). Turkish Government supports these educational institutions by launching programmes on teaching staff for Turkish language. For instance, whereas Turkey gave support for Turkology departments within the universities of 622

Shumen and Kurdzhali in Bulgaria, she arranged summer seminars for Turkish teachers in Turkey. (26) The Bulgarian constitution and the law on national education are the legal institutions within which framework Turkish language should be thought as the mother tongue of Turkish pupils in state schools. The Constitution of Bulgaria guarantees the rights of freedom of thought and the freedom of the use of mother tongue as well. According to paragraph 36th of this constitution, Bulgarian citizens whose mother tongue are not Bulgarian language, ought to learn Bulgarian obligatory and they have the rights of learning their mother tongues. (27) Bulgarian government considered the positive developments in term of using Turkish language and introducing compulsory Turkish lessons four hours a week and daily ten minutes’ news program in the Bulgarian Television as a useful device for guaranteeing the Bulgarian membership in the EU. For instance, the development report 2001 by the EU underlined only above mentioned TV programme regarding the language issue. In the following years, EU reports did not mention the language issue any more, they focused rather on the socio-economic problems by the Turkish minority thought to be integrated in the Bulgarian main society. (28) Although Bulgarian government signed the “Framework Convention for the Protection of National Minorities” in 1997, it avoided to fulfil the requirements of this agreement for the Turkish minority. (29) In this context it is obvious that the Sofia fostered the minority rights so far as they served for Bulgarian membership in the EU.

The Turkish Media in Bulgaria Nowadays there are no visual media organs, radios and TV channels by the Turks of Bulgaria at local and national levels. However in this country it has been existing a 3-hours daily radio programme in Turkish since 1945, which was closed in the period of 1984-1989, Bulgarian government stopped the sender of this radio on January 1st 2015. In February this problem has been solved within the incentives of Turkish Radio and Television Company (Turkish Abbreviation: TRT). There is only one TV program by the Bulgarian National TV BNT-1, in which they broadcast in working days a ten minutes news bulletin in Turkish, which was mentioned in the 2000 EU report as well. (30) However nationalist NGO’s and parties opposes this programme. For instance, ultra nationalist ATAKA launched a campaign against this news program in the Bulgarian TV in 2009. Even ATAKA and GERB party reached a consensus on holding a referendum for removing this news program from the national TV. They consider Turkish language as a minority language that signalises the legacy of the Ottoman rule in 623

Bulgaria. (31) The leader of the Party of Bulgarian Men, Rosen Markov, collected about 12 thousand signatures from people in Varna, who were opposing to broadcast of Turkish news bulletin in BNT-1 in 2009. (32) Turkey and Turkish Language Turkey supported the Turks of Bulgaria through signing of the bi- and multilateral agreements with Bulgaria such as the Treaty of Ankara in 1925. However, there was no specific treaty which regulated the rights of the Turkish minority in terms of education. Ankara encourages the Turks of Bulgaria for reaching the aim of the Turkish as a language of instruction on different levels. Within this framework we can mention preparing textbook for Turkish lessons in Bulgaria and giving a special quota for Turks of Bulgaria who want to get a grant for studying at the Turkish universities. For instance, Turkey received 1,263 students from Bulgaria in 2013. (33) Turkish Government published five thousand updated textbooks for fourth classes in 2013 and distributed in Bulgarian cities such as Kurdzali and Burgas. (34) Turkish statesmen supported the demand of Turks of Bulgaria for achieving their aim Turkish as a language of instruction in all occasions. For Instance, ex-Prime Minister of Turkey, RecepTayyipErdoğan, in Kurdzali in 2008 underlined the importance of Turkish as a language of instruction and required the Turks of Bulgaria to protect their language and culture. (35) Despite the positive developments regarding the use of Turkish language, the Turkish Government and MRFP behaved too passive for realising Turkish as a language of instruction. Therefore, Ankara could not get required permissions for opening branches of Turkish Development and Cooperation Agency (Turkish abbreviation: TİKA) and the Yunus Emre Institute, which are responsible for Turkish “Kulturarbeit” abroad. Pressure on Turkish Language in Bulgaria Despite the EU membership of Bulgaria there are some restrictions in using basic rights for Turks of Bulgaria such as Turkish as a language of instruction, lack of skilled Turkish teachers and so on. National education law has to bring in line with requirements of Turks regarding to introduce Turkish as a language of instruction in schools. This law considers Turkish as a European language such as English, German and French. (36) If a pupil decides for learning Turkish, he or she cannot choose one of the other West European languages. In this case parents think that their children can learn Turkish at home. So they are interested in sending their children for a course where they can learn a West European language instead of Turkish. Within this framework it is not surprisingly that there is not enough demand for Turkish courses. For

624

example, 114 thousand pupils participated in Turkish lessons in 1992, whereas this figure has reduced to seven thousand in 2011. (37) Sofia makes however pressure on the use of Turkish language on the different levels. The mayor of Plovdiv, Ivan Totev changed the Turkish name of “Cuma Meydanı” (Friday Square) in 2012 and renamed it “Rimski Ploşad” (Rome Square). (38) In 2013 the municipality of Varna decided to change the Turkish names of 215 places within the boundaries of the town. For instance, the name of some village will be changed as follows: Akça Ağaç as Yalovo and Yeşil Tarla as Zelenata Niva. Similar decisions were taken by the other local authorities such as the city of Burgas. (39) The municipality of Varna considered changing 350 Turkish names with Bulgarian ones.Due to the initiative of the Turkish Foreign Ministry in the first half of 2014 the municipality of Varna has prevented from this idea. (40) Conclusions Due to the many bi- and multilateral agreements between Ankara and Sofia, Bulgarian Government continues to violate the basic human rights of Turks. Measures taken by Bulgarian Government for promoting the use of Turkish language in the public life are rather in a symbolic manner. Regardless of the assimilation policy of the Zhivkov regime, Bulgarian authorities repress even today the language rights of Turks of Bulgaria in some extend. As I mentioned above local authorities in Plovdiv and Varna changed the Turkish names of places with Bulgarian ones. Even the Bulgarian Government can violate the basic rights of communication of Turkish minority as we showed in the example of preventing the 3-hours Turkish radio from broadcasting to the listeners in January 2015. Turks of Bulgaria have to fight for gaining their democratic rights. Turkish authorities in Ankara and MRFP since 1990 in Bulgarian parliament have also their share for not succeeding in introducing Turkish as a language of instruction. MRFP should set an agenda for Turkish as a language of instruction and defend it in every international platform. Due to the territorial autonomy of Gagauzia the situation of Turkish language is considered to be as positive compared with that of Bulgaria. According to constitution of Gagauzia Turkish is a language of instruction, which is not the case in Bulgaria. However, it is a serious problem that nowadays in Gagauzia there are a few newspapers the majority of which publish in Russian language. It is not enough to publish some media organs such as Mother Words (Ana Sözü), The Voice of Gagauz (Gagavuz Sesi), The Word of Gagauz (Gagavuz Sözü) and Morning Star (Sabah Yıldızı) in Gagauz language. The numbers and qualities of these newspapers will be increased.

The situation of the TV and radio channels is disastrous. The quality and

broadcasting time of these media organs inclusive Radio and Television Broadcast of Ggauzia 625

are very poor. As stressed by Zanet it shold be founded TV and radio channels that broadcast 24 hours in Gagauz Turkish. As I mentioned above Demirel supported Comrat State University. The aid by Turkey is very important for Gagauzia whose resources are very poor. Moreover, in recent time it has been opened some Turkish language courses that closes Turkey and Gagauzia within the respect of lingual and cultural issues. If we consider the current situation of Gagauzia in a comparative perspective with that of the other Balkan countries (e.g. Bulgaria), we can realise that there is no legal obstacle on the wayfor using of Gagauz language as a language of instruction in this country. For instance, tens of thousands of Turks in Bulgaria are excluded from using their mother tongue in public sphere and the Bulgarian authorities changed the Turkish names of some places. On the other hand Gagauz people exercise the rights of having their mother tongue as a language of instruction in Moldova.That means they can use Gagauz language in the public sphere without any limitation. The problem in Gagauziahoweveris that Gagauz people lack of financial and human resources for implementing of the Gagauz language in administrative and educational sphere.

References Güngör Harun andArgunşah Mustafa, Gagauzlar, Gagauz Türklerinin etnik yapısı, nüfusu, dili, dini, folkloru hakkında bir çalışma, Ötüken Yayınları, İstanbul, 1998, p.53. LübovÇimpoeş, Gagauz Dilini EvropaProgramnarın Çevresinde Azınnık Halkların Dilleri Arasında Korumak Hem Eniden Diriltmek, IV. Uluslararası Türkiyat Araştırmaları Sempozyumu, İstanbul, 2012, p.185. AvramAndrei, TerritorialAutonomy of theGagauz in theRepublic of Moldova: A Case Study, IstvanHorvath, Martin Tonk (Eds.), MinorityPoliticswithinthe Europe of Regions, Scientia Publishing House, Cluj-Napoka, 2011, p. 221. Theofficialwebsite of Gagauzia, http://www.gagauzia.md/index.php?l=ru, accessed01.08.2015. Avram, Territorial Autonomy of the Gagauz…,p.223.

626

Özkan Nevzat, Gagavuz Türkçesini Yazı ve Eğitim Dili Haline Getirme Çalışmalarına Bir Bakış, TurkishStudies, International Periodicalfort he Languages, LiteratureandHistory of theTurkishorTurkic, Volume 5/1, Winter 2010, p.85. Stefan Ihrig, Gagausen, KlausBochmann, VasileDumbrava, DietmarMüller, Victoria Reinhard (Hg.), dieRepublikMoldau, einHandbuch, LeipzigerUniversitaetsverlag, Leipzig, 2012, p.206. Çimpoeş, Gagauz Dilini EvropaProgramnarın Çevresinde Azınnık Halkları, p.185. Stefan

Ihrig,

DieGagauzen-

NationsbuildingohneGeschichte?

OderNationohnenation-

building? JahrbücherfürGeschichteundKulturSüdosteuropas, Jahrgang 2005, No. 7, p.90. Ihrig, DieGagauzen-NationsbuildingohneGeschichte? p.94. Özkan, Gagauz Türkçesinin Yazı ve Eğitim…, p.83. AngheliNatalia,

Moldova,

pp.71-94,

http://archiv2.medienhilfe.ch/agenda/OSCE_MM/

OSCE_05.pdf, accessed06.08.2015, p.83. Lübov Çimpoeş, Gagauz Dilini EvropaProgramnarın Çevresinde Azınnık Halkların…, p.185. TudorZanet,

Gagauz

Dilin

İlerlemesinde

Gagauzça

Basının,

http://www.anasozu.com/bilim/?razdel= 38&jd=17, accessed06.08.2015. Hulusi Turgut, Adriyatik’den Çin Seddi’ne Avrasya ve Demirel, Batı Yakasının Hikayesi, ABC Yayıncılık, İstanbul,2002, pp.257-304). Argunşah Mustafa ve Argunşah Hülya, Gagauz Yazıları, Türk Ocakları Kayseri Şubesi Yayınları, Kayseri, 2007, p.73. ArgunşahandArgunşah, Gagauz Yazıları., pp.71-72. Ibid. TİKA’dan Gagavuz Çocuklarına İlk Kez Türkçe Eğitim Fırsatı, http://www.haberler.com/tikadan-gagavuz-cocuklarina-ilk-kez-turkce-egitim-7251268-haberi/, accessed06.08.2015. Angheli, Moldova, pp.82-83.

627

Moldova Proje ve Faaliyetler, TİKA, Ankara, 2013, s. 35-37, http://www.tika.gov.tr/ upload/oldpublication/ moldova.pdf, accessed07.08.2015. Interview with Saadet Yıldırım, the General Secretary of the Foundation of the Turkic World on 17th August 2015 in İstanbul. Konstantinov

Emil,

DieRechtsstellung

der

Minderheiten

in

Bulgarien,

GeorgBrunnerandBorisMeissner (Hrsg.), DasRecht der nationalenMinderheiten in Osteuropa, Berlin Verlag, Berlin, 1999, pp.182-183 Memişoğlu Hüseyin, Geçmişten Günümüze Bulgaristan’da Türk Eğitim Tarihi, T.C. Kültür Bakanlığı Yayınları, Ankara, 2002, pp.264-265. Özlem Kader, Bulgaristan Türklerinin Tarihsel Süreç İçerisinde Dönüşümü, AB Üyelik Süreci ve Türk Azınlığa Etkileri, Uluslararası Sosyal Araştırmalar Dergisi, Cilt:1, Sayı:2, Kış 2008, p. 356. Memişoğlu, pp. 266-267. KonstitutsiyanaRepublikaBılgariya,

Narodna

Sıbraniena

Republika

Bılgariya,

http://www.parliament.bg/ bg/const/, accessed(22.02.2014), Paragraphs 2,3 and 25. 2001

Regular

Report

on

Bulgaria’sProgressTowardsAccession,http://ec.europa.eu/enlargement/archives/pdf/key_docu ments/2001/bu_en.pdf, accessed27.09.2015. http://conventions.coe. int/Treaty/en/Treaties/Html/157.htm, accessed27.02.2014. 2000 Regular Report fromtheCommission on Bulgaria’sProgressTowardsAccession – 8 November 2000”, http://ec.europa.eu/enlargement/archives/pdf/key_documents/2000/bg_ en. pdf, accessed27.02.2014. KolevaYuliana, GERB i Ataka Pravyat Referandum za Novinitena Turski, Dnevnik, 15 Aralık 2009. http://www.balkanturkleri.org.tr/habersite/temmuz 09/haber 8.htm, accessed27.02.2015. Türk Fahri, Türk Kültür Dış Politikası, Paradigma Akademi Yayınları, İstanbul, 2014, p.151. http://umitdergisi.com/tr/2013/05/20-yil-sonra-ilk-turkce-ders-kitabi/, accessed27.02. 2015.

628

http://www. kircaalihaber.com/gazete/05_2008.pdf, accessed27.02.2015. http://www.hurriyet. com.tr/egitim/24857293.asp, accessed27.02.2014. http://umitdergisi.com/tr/2013/05/20-yil-sonra-ilk-turkce-ders-kitabi/,accessed27.02.2015. http://www.dunyabulteni.

Net/haber/284923/bulgaristanda-turkce-isme-tahammul-

yok,accessed 27.02.2015. http://www.gundemgazetesi.com/news/ detay_03.php? h2_id=1402, accessed 27.02.2015. http://www.ulkehaber.com/yazdir/ haber/ 25453, accessed 27.02.2015.

629

Globalizimi dhe Integrimi në BE Dritan Balla Institute of European Studies, University of Tirana, Albania

Abstrakt Kriza e botës bashkëkohore që e ka kapluar globin, është rritur tepër rëndësia e bashkëpunimit ekonomik evropopian ndërmjet vendëve antarë e jo vetëm por edhe atyre që janë aspirante. Debatet e (mos) zgjerimit të BE-së vijojnë të jenë prezentë në fokusin e politikës së jashtme të Bashkimit Evropian. Por edhe pse këto debate janë ende prezentë në politikën evropiane, sot është e pamundur për të frenuar pasojat e glabalizimit në arenën politike ndërkombëtare sidomos aspektin ekonomik. Shtetet janë në krizë nga rrjeti transnacional ekonomik për sa i përket bashkëpunimit ‘për tej kufijeve’ dhe rezistenca e kombë-shteteve është në varësi të bashkëpunimit mes shteteve anëtare. Qasjet politike janë tepër lobuese përsa i përket migrimit të të huajve dhe kufizimeve, kriterëve që kanë përcaktuar. Por e ardhmja dhe shpëtimi i Evropës varet nga zgjerimi i saj, sigurisht pasi të jenë përmbushur kriterët e përcaktuara. Globalizimi ka të mirat pozitive dhe negative të tij, si rreziku nga terrorizmi, krimi i organizuar etj., por bashkëpunimi mes shtetëve e sidomos rasti i Bashkimit Evropian mund të kontribuojë sadopak në stabilitetin dhe qëndrueshmërinë ekonomike. Fjalë kyçe: Shtet, Integrim, Globalizim, BE. Hyrje Europa pas dy luftrave të mëdha botërore u përfshi në një humbje të madhe ekonomike dhe njerëzore. Numri i viktimave ishte rreth 40 milionë të vrarë, ku gjysma ishin civilë. Shkaqet që çuan në këto luftura ishin të ndryshme si politike, ekonomike, fetare, raciale, territoriale, etj. Përpara një shkatërrimi të madh Europa u gjend në vështirësi të mëdha ekonomike, buqësia ishte shumë e rrënuar, lëndet e para dhe ushqimi mungonin. Europa ishte e ngelur në udhëkryq, por çfarë politikash do të ndiqte Europa? Si mund të parandalohej një rikthim i konfliktit në Europë? Si mund të rilindej qytetërimi Europian? E vetmja zgjidhje për Europën ishte bashkimi dhe integrimi i shteteve mes tyre.

630

Dy rrymat që ndikuan në integrimin europian, janë federalizmi dhe e shteteve sovrane. Sipas rrymës federaliste, nëse Europa do të të bazohej në sistemin e kombeve-shtete, atëherë do të sillte koflikte dhe luftëra në të ardhmen, duke parë edhe të kaluarën e hidhur. Kështu që rryma federaliste propozonte një Europë të bashkuar e federale. Ndërsa rryma e shteteve sovrane theksonte se më e favorizuar për BE-në do të ishte ndërtimi apo rikthimi i saj mbi bazat e ekulibrit të kombeve-shteteve. Sips kësaj rryme kombe-shtetet e udhëhequra nga Britania ishte një formë shumë e mirë e përfaqësimit. Në epokën aktuale, globalizimi është një tregues tepër i ndjeshëm. Sot me lindjen e një ekonomie botërore, të transporit dhe të teknologjisë globalizimi ka arritur që të bashkëpunojë ‘për tej kufijeve’ përnes transformimit të tij. Kështu që për sa i përket shtetit tradicional ai është në krizë nga transformimi global i ekonomisë politikë ndërkombëtare.

Qëllimi i studimit: Qëllimi i këtij punimi akademik është studiojë globalizimin nga një perspektivë ekonomike dhe evropiane. Efekti global sot është bërë i pa kontrolluar si në aspektin e kulturës, ashtu edhe në aspektin ekonomik. Nëse deri dje kombet-shtete ruanin formën e tyre të qeverisjes tradicionale dhe të sofistikuar, sot është e pamundur një izolim i tillë nga trysnitë e reja moderne si rasti në fjalë globalizimi. Integrimi në Bashkimin Evropian dhe kryesisht për sa i përket pjesës Perëndimore të Ballkanit do të jetë në dobi të vetë organizatës unikale të BE-së. Por pasi të jenë përmbushur kriterët e vendosur nga Bashkimi Europian. Bashkimin Europian mund ta shpëtojë vetëm integrimi dhe bashkëpunimi mes shteteve antarë.

Pyetja kërkimore: Ky punim akademik zhvillohet mbi bazën e këtyre pyetjeve kërkimore dhe studimore të cilat janë: 1. Cili është roli i shtetit dhe i BE-së në epokën aktuale në ruajtjen e traditës nga transformimi global? -

Dhe përgjigjet e këtyre pyetjeve të ngritura do të shtjellohen te Hipoteza.

631

Hipoteza: Mbi pyetjet e ngritura më lartë rreth kërkimit të këtij punimi akademik, ato marrin përgjigje përmes një hipoteze se: -

Shtetet-kombet në ditët e sotme janë në krizë mund të themi për sa i përket fuqisë transfromuese globale, në rastin evropian është suedia , gjermania etj., që ende në ditët e sotme i kanë bërë rezistencë globalizimit.

Metodologjia: Metoda analitike e ndjekur është qasja konstruktiviste, nisur nga fakti se konstruktivizmi e sheh botën në optikën e ideve, kulturave, normave dhe të perceptimit të strukturës sociale që kemi krijuar në një kontekst të caktuar e mbi të gjitha rreth qenies ontologjike ku në qendër është individi. Formula dhe thënia më e famshme në qasjen konstruktiviste është “…Politika ndërkombëtare është një ‘botë që e kemi krijuar ne.’”58. Konstruktivistët dallojnë thelbësisht nga realistët, që theksin e vinin te siguria e shtetit, e liberalët, në lirinë individuale, ndërsa konstruktivistët e vendosin theksin te idetë dhe identiteti. Konstruktivizmi përfshin studiues të ndryshëm, P. sh., Shpërbërja e Bashkimit Sovjetik, konstruktivistët e nënvizuan, interpretuan si “mendimin e ri”, kjo bëri që studiuesit që gjatë viteve ’90 të përqafonin interpretimin konstruktivist. I njëjti shembull vlen edhe për projektin e themelimit të Bashkimit Europian, që u ngrit mbi bazat e ideve konstruktiviste.

Instrumentat e kërkimit: Instrumentat e kërkimit për burimet e përpunuara janë literatura moderne, e-book (libra dixhital). Jam munduar të jem sa më koherent, i paanshëm dhe objektiv në përzgjedhjen e materialeve të literatures ku kam hulumtuar dhe klikuar në shumë burime të ndryshme si libri “Dilemat e zhvillimit/modelet e zhvillimit ekonomik dhe social përballë globalizimit” me autor Adrian Civici, botim i shtëpisë botuese “Geer”. Një tjetër libër i veçantë që më ka shërbyer në punimin tim akademik për të kuptuar integrimin ekonomik europian, është ai me autorët Richad Baldwin dhe Charles Wyplosz “Ekonomikësi i Integrimit Ekonomik Europian”, botim

58

Për më shumë hollësi dhe argument rreth trajtimit të qasjes së konstruktivizmit e jo vetëm, shih Smith, S., Kurki, M. & Dunne T. (2010: 221-242 ). “Teoritë e Marrëdhënieve Ndërkombëtare/ disiplina dhe shumëllojshmëria.” Tiranë: UETPRESS.

632

i shtëpisë botuese mediaprint. Gjithashtu pjesë e literaturës me rëndësi është edhe libri “Globalizimi dhe tranzicioni – dilemat dhe sfidat” me autor Selman Selmanaj, e të tjera burime hulumtuese. Shteti tradicional dhe ideja e integrimit Evropian Po në ç’gjendje është katandisur Europa?... në tokat e saj të gjera sa të ha syri, mes rrënojave të qyteteve dhe shtëpive të dikurshme, turma të dërmuara e të uritura qeniesh njerëzore që me gojën hapur nga hutimi i plotë zhbirojnë horizontin e zymtë në pritje të ndonjë rreziku apo fushate të re territori… Kjo është ajo çka shtetet dhe kombet europiane morën në këmbim të luftës shkatërruese për jetë a vdekje me njëri-tjetrin. Gjithësesi, ka një rrugë dalje. Duhet rikujtuar famlija europiane, ose diçka sa më e ngjashme me një organizim të tillë, që të sjellë paqe, siguri dhe demokraçi për të gjithë. Ne duhet të ndërtojmë Shtetet e Bashkuara të Europës. – Winston Churchill (Zyrih, 19 shtator 1946). Lufta e Parë dhe e Dytë Botërore ishte një katastrofë për kontinentin europian. Dëmet ishin të shumta e të pa llogaritshme si humbje jetë njerëzish, rënie ekonomike etj. Numri i këtyre viktimave arriti në 40 milionë të vrarë, ku më shumë se gjysma ishin civilë. Luftat ishin për shkaqe të ndryshme si fetare, raciale, politike, territoriale, etj. Europa u gjend përpara një shkatërrimi të madh, rrugët ishin të shkatërruara, buqësia e rrënuar, ndërkohë ushqimet dhe lëndet e para mungonin. Europa u gjend përballë tri çështjeve, e para ishte ekonomike: Si mund të rimëkëmbej europa? Ç’farë politikash duhet të ndiqte? E dyta: Ishte politike, sii mund të parandalohej një rikthim i konfliktit në Europë? Dhe e treta: Si mund të rilindej qytetërimi europian pas këtij rrënimi? E vetmja zgjidhje për Europën për të dalë nga një krizë e tillë ekonomike, politike apo sociale, ishte pa dyshim bashkimi dhe integrimi i tyre në një famije të vetme. Ideja e integrimit europian erdhi nga dy baballarët e Integrimit Europian, i pari ishte biznesmeni francez Jean Monnet (1888-1979) dhe ministri i jashtëm francez Robert Schuman (1886-1963). (parë 12 mars 2015)59.

Jean Monnet ishte iniciatori dhe organizatori i

Komunitetit Europian të qymyrit dhe të hekurit. Ai kontribuoi me projektin e tij që Europën ta transformonte nga një vend i rrënuar në një tokë të paqës, lirisë dhe prosperitetit. Shumë nga idetë e tij janë në themelet e Bashkimit Evropian. Sipas Jean Monnet vendet e Europës janë të vogla e duhet doemos që të bashkohen dhe të integrohen për të zhvilluar ekonominë dhe mirëqenien e tyre, duke ndjekur një politikë të pëbashkët ekonomike. Ndërsa Schuman kishte në plan që të krijonte një Europë të fortë “nën kontrollin e një institucioni mbinacional”, edhe idetë e Schuman janë në themelet e Bashkimit Europian, ku sipas tij kufijtë që i ndajnë shtetet-

59

http://www.slideshare.net/madopol/15-pyetje-per-be-ne

633

kombet nuk duhet të jenë pengesë ndërmjet popujëve dhe kulturave… kështu që duhet të i jepej fund nocionit të “armikut të trashëguar apo historik” dhe se e ardhmja do të ishte që popujt të bashkohen dhe të bashkëpunojnë me njëri-tjetrin. (Civici, A. 2007: 242-244). Kjo do të arrihej përmes një tregu të përbashkët që do të krijohej në vitin 1957 nga Traktati i Romës, duke plotësuar bashkimin doganor, me lëvizjen e lirë të mallrave, të shëbimeve, të punëtorëve dhe kapitaleve. (d’Arcy, F., 2007: 16-17). Trakti i Romës dhe i akt marrëveshjeve të tjera që do të vijonin më pas, ishin një pikënisje për suksesin europian në rimëkëmbjen ekonomike të saj. Dy rryma që kanë ndikuar në integrimit europian janë: rryma federaliste dhe ajo e shteteve sovrane. Sipas rrymës federaliste, nëse sistemi europian i ngritur mbi bazat e sovraniteti kombëtar dhe të kombeve-shtete do të sillte në të ardhmen luftra. Kjo një përvojë për vendet europiane që gjithmonë kanë qenë të përfshiura në konflikte dhe luftra për interesa të ndryshme, si fetare, territoriale etj. Një integrem i formës federale do ta shpëtonte europën nga krizat apo lufta të ndryshme që mund të haste. Gjitashtu shpenzimet për armatime apo fuqizme është bërë e pa përballueshme dhe një bashkëpunim mes shteteve europiane do të ulte kostat për fuqizime dhe sigurisht në aspektin e integrimit ekonimik do të kishte pasoja shumë pozitive. Një tjetër rrymë është ajo e shteteve sovrane, sipas tyre kombet-shtetet e udhëhequra nga Britania, ishte një formë shumë e mirë e përfaqësimit. Ato mendonin se integrimi ekonomik europian duhet të ishte vetëm në aspektin ekonomik dhe kompetencat të mbeteshin në duart e qeverive me një qeverisje unanime. Por të dyja rrymat kishin bazat dhe mbështetjet e tyre të argumentimit, p.sh grupi që ishte për qeverisje federaliste në fakt kishte një mbështetje prej shteteve të humbuara si Belgjika, Holanda, Luksemburgu, Franca Austria, Gjermania dhe Italia. I tillë vlen edhe për rrymën e shteteve sovrane, ku qeveritë ishin të sofistikuara për të shmangur pushtimin e huaj apo humbjet e larta në jetën njerëzore. Këtu mund të klasifikohen vende si Mbretëria e Bashkuar, Danimarka, Norvegjia etj. (Baldwin, R., & Wyplosz Ch., : 10-11) Përkufizimi dhe koncepti mbi Globalizimin Koha në të cilën jetojmë aktualisht, është koha e trasformimit global, ku të drejtat dhe liritë e njeriut dominojnë. Në këtë kohë ku shtetet-kombe janë të ndërlidhura me njëra-tjetrën përmes korporatave multinacionale dhe të rrejtit ndërkombëtar financiar.

634

Me globalizim nënkuptojmë shndërrimin e ekonomive nacionale në ekonomi globale, botërore. Instrumentat nëpër të cilën kalon ky procesj janë: a) rregullimi i ekonomisë b) liberalizimi, si dhe c) privatizimi i saj. Globalizimi si proces ekonomik dhe kulturor, mund ta trajtojmë si ndërlidhshmëria reciproke mes njerëzve për bashkëpunuar dhe zhvilluar qytetërimet e tyre. Kështu që globalizimin mund ta përkufizojmë si një integrim të shpejtë të njerëzimit me një lëvizje dhe transformim të pa parë të kapitalit, teknologjisë së komunikimit, ideve dhe dhe vlerave kulturore midis shteteve dhe popujve. (Selmanaj, S. 2006: 11-12). Globalizimi me efektet e tij që sot po i ndjejmë dhe i komentojmë çdo ditë, është para se gjithash si pasojnë e revolucionit të teknologjisë së informacionit dhe të komunikimit. Gjitashtu edhe si pjese e sistemit liberal ekonomik me shkëmbimet ndërkombëtare tregtare në kuadrin e OBT-së apo marrëveshjeve rajonale të kontinenteve të ndryshme të botës. Rritja e konkurrencës në ditët e sotme aktuale është në shkallë ndërkombëtare më e lartë se në kohën klasike. Ekonomia e re apo “net-ekonomia” po bëhet gjithnjë një realitet imponues. Sfidat tashmë nuk janë vetëm në Europë, por në tërë globin, kështu si pasojë e këtij “revolucioni të tretë teknologjik”, ku të gjithë shtetët mund të ndeshën me njëra-tjetrën. (Civici, A. 2007: 3435). Globalizimi si proces mund të dallohet në tre nivele të tij: a) ekonomik, b) politik, si dhe c) kulturor-ideologjik. (Selmanaj, S. 2006: 21). Globalizimi dhe sfidat e BE-së “Revolucioni europian i epkës sonë synon të zëvendësojë rivalitet nacionale me një bashkim të popujve në liri dhe diversitet...ai synon një hapsirë të re për civilizimin dhe kulturën tonë...është një “renaissance” e re europianee”, “le të vazhdojmë pra...pasi për popujt europianë nuk ka asnjë të ardhme tjetër veç bashkimit”, “njerëzit janë të nevojshëm për të bërë të mundur ndryshimet...por janë institucionet ato që i japin jetë këtyre ndryshimeve...le të përpiqemi t’i modernizojmë vazhdimisht ato”. – Jean Monnet Sot kombet-shtetet janë shumë të ndërvarura me njëri-tjetrin dhe presioni global është prezentë përmes bashkëpunimit ekonomik për tej kufijeve. Sot globalizimi ka prodhuar lindjen e një 635

ekonomie të botërore dhe sistemet e transportit, të tekonologjisë së informacionit kanë mundësuar të kemi një bashkëpunim për tej kufijeve. Kjo mund shihet si një krizë për sovranitetin e sotëm jo vetëm në Europë por kudo në arenën ndërkombëtare. Sot me një shoqëri të hapur dhe me shtete të integruara, elitat politike koordinojnë një grup rregullash të cilat do të mundësojnë sjelljen e tyre në përputhje me epokën aktuale. (Smith, S., Kurki, M. & Dunne T., 2010: 346). Sovraniteti shteteror në epokën aktualë është pak i rëndësishëm për klimën globale. Nevoja për bashkëpunim mes shteteve do të sjellë që këta aktorë të hartojnë politika të ndryshme në shërbim të interesit publik. I vetëmi shtet në europe që i ka bërë rezistence presionit global është Suedia, një shtet i cili edhe në ditët e sotme ka arritur të ruajë traditën e tij përmes politikave sociale. Kjo në shërbim të publikut, kështu që shteti Suedez ndjek politika sociale ose e thënë ndryshe i kushton tepër rëndësi shtresës sociale apo grupeve në nevojë. Me politikat sociale Suedia ka bërë që arsimi të jetë falas, shërbimi shëndetësor deri në një farë tarife (hyrje) është i lirë për të gjithë suedezët, në rastin e papunësisë paguhen rreth 80% të pagës së mëparshme deri në një kufi maksimal. Suedia që pas viteve ’20 do të përqafonte vlerat e demokracisë sociale dhe do të kishte një progres ekonomik social. Arsimi në Suedi është falas dhe shërbimi shëndetësor vlerësohet në maksimal. Suedia ishte vetëm një rast, i tillë është rasti edhe për sistemin politik Gjerman. Gjermania ndjek të njëjtën strukturë për sa i përket politikave sociale si arsimi, shërbimi shëndetësor, etj. (Gombert, T. 2009: 142). Johannes Vogel, zëdhënës për politikën e tregut të punës në Gjermani, në një rast duke folur për një raport të varfërisë, theksoi se gjermania ka më pak të pa punë dhe shkallën më të ulët të papunësisë në të gjithë Europën dhe sektori i pagave minimale është tkurrur. (parë 6 mars 2014) 60. Shteti me gjithë karakterin e tij tradicional dhe centralizues, po përballet me një sërë sfidash për shkak të procesit global dhe lëvizjeve ndërkombëtare, qofshin këto fetare apo ideologjike, si edhe lëvizjet etnonacionaliste. ( Mingst, K., A.,: 2010:169). Nëse shtetet nuk ndjekin një politikë të ekuilibruar dhe sociale, atëherë pa barazia do të jetë me pasoja të larta. Megjithate kjo pabarazi është e theksuar më së shumti në Jug ndaj Veriut, e cili vazhdimisht është dhe vazhdon të pasurohet. Kjo fuqi kapitale dhe globale, ka arritur fuqinë e kapitalit në krahasim me shtetin. (Smith, S., Kurki, M. & Dunne T., 2010: 343). Globalizimi, ashtu sic ka edhe anët negative, ka edhe anët pozitive si bashkëpunimi mes shteteve. Rasti i BE-së me shtetet e

60

http://www.dw.de/debati-p%C3%ABr-raportin-mbi-varf%C3%ABrin%C3%AB-n%C3%AB-gjermani/a16652598

636

Bashkuara të Amerikës është një shembull suksesi përsa i përket bashkëpunimit ekonomk. Jo vetëm ekonomik por SHBA-ja është një partner i fortë për BE-në, sepse Shtetet e Bashkuara të Amerikës në mënyrë të vazhdueshme kanë mbështetur integrimin europian, kjo më së shumti në rastin e mbështetjes strategjike. (Dinan, D.: 331). Fracis Fukuyama theksonte se globalizimi duhet të shihet si një fakt i pandalshëm i jetës me sfidat e tij post-moderne dhe me një mundësi që të kontrollohet me kujdes nën instrumentin e politikës. (parë 6 mars 2015)61. Forcat globaliste, si politike, ekonomike dhe kulturore, dobësojnë sovranitetin shtetëror; ndërhyn në ushtrimin e fuqisë shtetërore në ekonomi, politike dhe kulturë. (Mingst, K., A.,: 2010: 170). Disa nga treguesit e globalizimit janë kur kemi flukes ndërkufitare të mallrave, të investimeve dhe informacionit. Ndërvarësia mes shteteve. përhapja e problemeve si ekonomike, siguria kombëtare, si dhe përhapja e zhvillimi i institucioneve të ngarkuara me përgjegjesi për hartimin e politikave globale. (Smith, S., Kurki, M. & Dunne T., 2010: 348). Në BE janë tashme tre modele sociale kushtet aktuale të evolucionit dhe përsa i përket efekteve të globalizimit, duke u përshtatur me kushtet e reja të kohës, të cilat janë: 1) regjimi liberal ‘anglo-saksion’ Të frymëzuar nga eksperieca e Clinton, laburistët me sukses kanë synuar të bëjnë për vete ‘Middle England’ ose klasën e mesme, në garantimin e mbijetës së binomit ‘efikasitet ekonomik – barazi sociale.’ 2) sistemi ‘konservator-korporatist’ francez, si dhe Pas Luftës së Dytë Botërore, modeli social francez bëri një reformë ekonomike në ndërhyrjen e fortë shtetërore, ku shtresat sociale ishin në fokus si paga minimale e garantuar, sigurime sociale për të papunët, mbulim i sigurimeve sociale për pensionistët etj. 3) regjimi ‘social-demokrat’ skandinav. Me rritjen e procesit të globalizimit ekonomik, strategjia ishte ‘New labor’, e profilizuar si ‘pro-biznes’, ku në thelb ka përpjekjen për të garantuar rritjen ekonomike të qëndrueshme, e duke u marrë njëkohësisht edhe me problemet sociale. (Civici, A. 2007: 87-90).

61

http://www.tiranaobserver.al/globalizmi-mireqenia-dhe-manifesti-i-marketingut-global/

637

Në lidhje me globalizimin dhe transformimin e tij ekonomik, politik dhe kulturor, ekonomistët i kanë shqetësuar dy parashikime që janë sipas tyre: 1. Në një treg financiar global e më të integruar përqidjet e interesit duhet të konvergojnë me një treg financiar botëror të integruar dhe duke eliminuar ndryshimet në përqindjet e interesit, si dhe 2. Duhet të zvogëlohet sipas tyre korelacioni midis kursimeve të brendshme dhe investimeve, ndërsa përsa i përket tregut kapital, ai duhet të bjerë zero – si vazhdim i korelacionit kurisime/investime që mund të shihet si një tregues i mungesës së integrimit të tregut financiar. (Smith, S., Kurki, M. & Dunne T., 2010: 355). Sipas Peter Mandelson efektet ekonomike te globalizimit janë ndjerë për dekata në Europë, duke qenë se kemi një presion mbi biznesin, një rënie ekonomike në prodhim dhe një presion të qëndrueshëm mbi cmimet e importit. (parë 6 mars 2015)62 Konkluzione Në përfundim të këtij punimi akademik mund të arrijmë në disa konkluzione. Mësuam se Dy lufërat e Mëdha Botërore e përkeqësuan shumë ekonominë Europiane dhe duhej doemos një ndryshim i menjëhershëm konstruktiv për të ardhmen Europiane. Ajo u gjend përpara tre pyetjeve: Si mund të rimëkëmbej ekonomia? Si mund të parandalohej edhe një rikthim i konflikti, lufte në të ardhmen? Dhe, si mund të rilindej ekonomia evropiane? Dhe e ideja e Bashkimit Europian u realizua nga dy projektuesit e mëdhenj si Jean Monnet dhe Robert Schuman. Për sa i përket globalizimit ekonomik ai si një proces dhe me transformime globale dhe është bërë pjesë e jetës tonë të përditshme në temat e diskutimit. Si një forcë ekonomike, politike dhe kulturore ‘për tej kufijeve’ ai dominon globin në epokën aktuale. Pavarësisht ndikimit global dhe përpjekjes së shtetit tradicional për rezistencë, ende në Bashkimin Europian kemi kemi shtete të forta që janë rezistentë ndaj globalizimit.

Duke ndjekur politikat sociale të

ekuilibruara për një stabilitet të qëndrueshëm ekonomik, vende të tilla si Suedia, Gjermania, Britania, Franca etj.

62

http://www.spiegel.de/international/ëorld/opinion-globalization-is-good-for-europe-a-590166.html

638

Globalizimi ashtu siç ka edhe anët negative, duhet pranuar edhe anët e tij pozitive si investimi, transporti, tekonologjia informative, etj., për një rend të qëndrueshëm dhe për një stabilitet ekonomik, juridik dhe politik.

Bibliografia: Baldwin, R., & Wyplosz Ch. Ekonomiksi i Integrimit Eropian. Tiranë: Mediaprint Civici, A. (2007). Dilemat e zhvillimit/modelet e zhvillimit ekonomik dhe social përballë globalizimit. Tiranë: “Geer” D’Arcy, F. (2007). Politikat e Bashkimit Evropian. Tiranë: Papirus Dinan, D. Politikat e Bashkimit Europian. Tiranë: AIIS Gombert, T. (2009). Bazat e Demokracisë Sociale. Tiranë: FRIEDERICH EBERT STIFTUNG Karen, A., K. (2010). Bazat e Marrëdhënieve Ndërkombëtare. Tiranë: AIIS Smith, S., Kurki, M. & Dunne T. (2010). Teoritë e Marrëdhënieve Ndërkombëtare/ disiplina dhe shumëllojshmëria. Tiranë: UETPRESS Selmanaj, S. (2006). Globalizimi dhe tranzicioni – dilemat dhe sfidat. Prishtinë: RIINVEST http://www.slideshare.net/madopol/15-pyetje-per-be-ne

Burime nga interneti http://www.dw.de/vler%C3%ABsime-dhe-kritika-p%C3%ABr-globalizimin/a-2588226 (parë 6 mars, 2015) http://www.spiegel.de/international/world/opinion-globalization-is-good-for-europe-a590166.html (parë 6 mars 2015) http://www.dw.de/debati-p%C3%ABr-raportin-mbi-varf%C3%ABrin%C3%AB-n%C3%ABgjermani/a-16652598 (parë 6 mars 2015) http://www.tiranaobserver.al/globalizmi-mireqenia-dhe-manifesti-i-marketingut-global/ (parë 6 mars, 2015)

639

Paqëndrueshmeria Historike e Sistemit Politik në Shqipëri PhD C. Xhensila Pine Qendra e Studimeve Albanologjike, Albania

Abstrakt Ky artikull është një përpjekje për të hedhur dritë mbi atë c’ka vërtet ka ndodhur me sistemet politike nder vite, e atë që vërtet ndryshoi te to dhe ndërmjet tyre si dhe c’ka ngeli e njëjtë ashtu sikundër shumë kush e mendon edhe sot. Në studimet historiko-juridike shqiptare mungon një botim bashkerisht i aktet themelore të rregullimit të sistemit politik (statute, kushtetuta). Krahas kësaj mungon dhe një histori e vetë sistemit politik, e jetës së parlamentit. Ky shkrim mbushë një boshllëk në kuadër të kësaj zbrazëtie të madhe të shumanshme. Qëllimi i këtij artikulli, është që të ndriçojë, në pikëpamjen juridike-historike, gjendjen dhe evolucionin e sistemeve politike në Shqipëri. Të dhënat bazë të evolucionit të historisë politike të Shqipërisë, janë mbledhur e evidentuar tërësisht dhe paraqiten si pjesë e këtij shkrimi. Megjithëse një histori e caktimit të kufijve dhe e zhvillimit të sistemit politik në Shqipëri nuk është shkruar ende, dihet se rruga që ky ka përshkuar gjatë kësaj periudhe shteti shqiptar është me shumë të papritura e ndërlikime. Ndryshimet në këtë sistem kanë qenë të shpeshta e kanë mbetur për një kohë të gjatë të fshehta. Shumë fakte historikë mbeten të pashqiptuar. Tronditjet e herpashershme në sistemin politik, përmbysjet, marrja e pushtetit me dhunë, revolucionet popullore, luhatjet dhe pasiguritë, zigzag-et, si dhe shumë paqartësi të tjera, janë shkak themelor që Shqipëria eshte akoma duke kerkuar rrugen e saj. Pikërisht ky rrotullim e alternim i çuditshëm i formave kontradiktore të qeverimit; është një prej shkaqeve jo vetëm të mosmarrëveshjeve shkencore dhe politike për vlerësimin e së shkuarës, jo vetëm të varfërimit të historisë politike të vendit, por dhe të paqendrueshmërisë së sistemit politik në vend dhe të zgjatjes së tranzicionit. Paqendrueshmëria historike e sistemit politik në Shqipëri është një nga shkaqet themelore të destabilizimit të herëpashershëm të jetës së vendit. Megjithëse një histori e caktimit të kufijve dhe e zhvillimit të sistemit politik në Shqipëri nuk është shkruar ende, dihet se rruga që ky ka përshkuar gjatë kësaj periudhe shteti shqiptar është 640

me shumë të papritura e ndërlikime. Ndryshimet në këtë sistem kanë qenë të shpeshta e kanë mbetur për një kohë të gjatë të fshehta. Shumë fakte historikë mbeten të pashqiptuar. Paqartësia politike dhe formale-juridike në përkufizimin e formës së sistemit politik; e shprehur edhe në ndërtimin e hierarkisë shtetërore dhe të raporteve midis institucioneve; është burim i autoritarizmit dhe shkak i vonimit të tranzicionit politik tashmë zyrtarisht të stërzgjatur63.Problemi është përkufizuar si çështje e historisë politike të vendit, me një ndikim të fortë në jetën e sotme. Tronditjet e herpashershme në sistemin politik, përmbysjet, marrja e pushtetit me dhunë, revolucionet popullore, luhatjet dhe pasiguritë, zigzag-et, si dhe shumë paqartësi të tjera, janë shkak themelor që Shqipëria eshte duke rezultuar nder vendet e prapambetura në Europë, siç ishte në ditën e krijimit. Shqipëria u shpall “e mosvarme“ më 1912. Në historinë e Shqipërisë qeveria e Ismail Qemalit, që mori në dorë fatet e vendit, cilësohet “qeveri kombëtare“. Por burimet tregojnë se njohja ndërkombëtare e Shqipërisë si shtet i pavarur u bë me kushte. Një prej këtyre kushteve ishte që shteti i ri shqiptar të ishte monarki e trashëgueshme. Shqipëria do të ishte një “principatë autonome neutrale e sovrane”. Ndërkohë, parashikohej që vendi të ishte “nën një kontroll ndërkombëtar shumëvjeçar”. Një nga arsyet e dorëheqjes së pakomentuar të Ismail Qemalit dhe e largimit enigmatik të tij drejt Italisë ishte akuza që ministrat e qeverisë së vet i bënë se e kishte shpallur Shqipërinë shtet të pavarur për t’u fronëzuar vetë si mbret sovran i saj. Një akuzë të ngjashme do ta përsëriste gjashtë dekada më vonë edhe Eqerem bej Vlora, në kujtimet e tij të botuara në Gjermani, në kontekstin që kurora nuk mund të trashëgohej në linjën e kushëririt të tij Ismail Qemali, por të një dinastie tjetër të bejlerëve të Kaninës, të përfaqësuar nga ai vetë. Që njohja ndërkombëtare e Shqipërisë pati si kusht krijimin e një “shteti me kurorë“, këtë e tregojnë dhe vendimet e Konferencës së Ambasadorëve (1913), konferencë e cila statusin e shtetit shqiptar e përcaktoi ndërmjet kundërthëniesh të forta parimore: si një shtet edhe autonom edhe sovran, edhe sovran edhe neutral, edhe me pavarësi edhe nën kontroll ndërkombëtar. Ishte pikërisht kjo konferencë që e shprehu vendimin e saj për sistemin politik të Shqipërisë duke paracaktuar kthimin e saj në “principatë të trashëgueshme”, që do të thoshte “shtet me kurorë të kufizuar“ dhe që parakuptonte një lidhje organike froni me një nga monarkitë e mëdha europiane, e cila do të ushtronte autoritetin e kurorës dhe do të trashëgonte fronin. Në këtë

63

. Sh. Sinani, “Një parlament që vetëtiu”, hyrje në “Këshilli I Kombëtar”, Tiranë 2000, f. 3-16.

641

periudhë nisi ajo që është quajtur “parada e princërve“: dhjetëra kandidatura u shfaqën menjëherë, prej dyerve të mëdha perandorake e sulltanore. Pas largimit të Ismail Qemalit, Komisioni Ndërkombëtar i Kufijve shpalli “Statutin organik të Shqipërisë”, një dokument që e kthente Shqipërinë në një lloj principate të tipi feudal, të drejtuar nga një princ i huaj me fuqi të plota. Gjatë gjashtë muajve të sundimit të Princ Wied-it, forma monarkike e regjimit u reduktua më tej, deri në nivelin më të ulët, në atë të principatës, që nënkuptonte kufizimin e pamëshirshëm të sovranitetit të jashtëm dhe të brendshëm të vendit dhe theksonte vazhdimësinë e pakufizuar të protektoratit ndërkombëtar. Ishte pak a shumë e njëjta mënyrë sjelljeje ose më saktë një evokim i marrëdhënieve që Arbëri mesjetar kishte pasur me Mbretërinë e Napolit, të cilat, me përjashtim të një kohe të shkurtër të periudhës së qendresës antiosmane të Gjergj Kastriotit, kanë qenë” marrëdhënie vasaliteti”. Periudha e princ Wied-it shihet kryesisht si ksenokraci, por jo në thelbin e vet, si principatë e trashëgueshme. Slogani më i njohur për periudhën 1925-1938 është se Ahmet. Zogu u vetëshpall mbret, por nuk gjenden shpjegime pse parlamentarizmi i viteve 1920-1924 nuk arriti të kurorëzohej me shpalljen e republikës64. Periudha e Fan Nolit karakterizohet si “demokraci e rrethuar”, por cili ishte sistemi politik që ai donte të ndërtonte?65 Organizata politike e periudhës së luftës antifashiste Balli Kombëtar cilësohet vegël e pushtuesit, por nuk pohohet askund se kjo ishte një organizatë republikane dhe antimonarkike66. Përkundër kësaj, askund nuk gjen shpjegim fakti që krahu nacionalçlirimtar e ruajti më gjatë aleancën me legalistët monarkistë. Në të vërtetë historia politike e sistemit në Shqipëri vërtitet midis dy fjalësh çelësa: midis legalitetit dhe ilegalitetit. Mungojnë tërësisht studimet për republikën e çuditshme, në fakt një sistem politik autokratik, që projektoi e djathta në vitin 1994, me projektin e dështuar të Kushtetutës. Megjithatë, ai mbetet i pari referendum në të cilin populli vetë u ftua të vendosë për formën e shtetit,

64 65

“Ligjvënësit shqiptarë 1920-1995”, botim i Kuvendit të Shqipërisë, Tiranë 2005; f. 2-3. . “Noli dhe miqtë e tij, që erdhën në pushtet me revolucionin e vitit 1924, përfaqësonin atë klasë shoqërore

përparimtare, që kishte udhëhequr procesin e emancipimit kulturor e politik të kombit shqiptar në 50 vjetët e fundit. Si të tillë, ata vunë në rend të parë të programit të tyre ndarjen e Shqipërisë nga sistemi dhe ideologjia turkoshake e organizimit të shtetit. “Çrrënjosja e feudalizmit” si mënyrë të prodhuari, të menduari e të qeverisuri, ishte prioriteti kryesor i qeverisë së Nolit”. 66

. “Unë, Ramiz Alia, dëshmoj për historinë”, Tiranë 1994.

642

megjithëse rezultati i tij qe një dështim. Sa i takon referendumit të vitit 1998, si zgjidhje kompromisi që ishte, votim për pushtetin paralelisht me votimin për formën e qeverisjes, gjithashtu ka pasur vetëm analiza agjitative dhe të pathelluara, sidomos në pyetjen se si qytetari shqiptar ngatërrohet në votën për pushtet me votën për të ndërtuar një shtet me parime kushtetuese të qendrueshme. Një kalendar i sistemit politik67: 1.1. “Qeveria kombëtare” e Ismail Qemalit, e kushtëzuar në njohjen e saj ndërkombëtarisht si “Mbretëria e Shqipërisë”, “Monarkia e Parë”, 1912-1913 (kjo do të bëhej një nga shkaqet e largimit dramatik dhe të zhgënjyer të plakut të Vlorës nga ai vend që vetë e kishte shpallur të pavarur). 1.2. Administrata ndërkombëtare e Princ Vidit, e njohur ndërkombëtarisht si “principatë e trashëgueshme”, një monarki me funksione të rrudhura, që mund të cilësohet edhe “protektorati i parë” monarkik, 1913-1914. 1.3. Qeveria kalimtare periudhës së luftës, e dalë prej një pashallëku, alternativiste e qeverisë kombëtare, me regjencë në krye, e njohur ndërkombëtarisht (në Konferencën e Paqes - 1918) si “regjenca e parë” - 1914-1920. 1.4. “Qeveria kombëtare” e dalë nga kongresi i Lushnjes, me një “pleqësi” në krye, që zëvendësoi “regjencën”; me zhvillim të suksesshëm të parlamentarizmit dhe me elementë të dukshëm të republikanizmit, por pa arritur deri në shpalljen e saj si formë qeverisjeje (formalisht “pleqësia” i përgjigjej “regjencës”) - 1920-1924. 1.5. “Qeveria rebele” e Fan Nolit, e vendosur pas fitores së revolucionit demokratik të qershorit (1924), me projekte për thellimin e republikanizmit dhe të parlamentarizmit, por me jetë të shkurtër, për shkak të restaurimit të pushtetit personal të Ahmet Zogut, i kthyer në atdhe me ndihmën e mbretërisë serbo-slloveno-kroate dhe të mbetjeve të ushtrisë vrangeliste - 1924. 1.6. “Republika e parë” zogiste, e shpallur menjëherë pas kthimit të ish-kryetarit të qeverisë në pushtet, e karakterizuar nga një varfëria dhe formalizmi i jetës parlamentare, për shkak të politikës ostraciste që u ndoq ndaj kundërshtarëve politikë, të cilët u dëbuan nga atdheu - 19251928.

67

. Sh. Sinani, në: “Albania - a patrimony of Europian Values”, Tirana 2000; po ai, “Një Shqipëri tjetër”, Tiranë

2007, f. 370 e vijim.

643

A. Zogu kryeminister me disa nga ministrat e kabinetit 1.7. “Monarkia shqiptare”, e cilësuar “parlamentare”, por realisht absolute, sepse ishte e trashëgueshme, me mbret Zogun e parë. Kjo është periudha e shndërrimit të vendit në një territor ekstra-ballkanik (me sytë e fqinjëve), për shkak të traktateve të lidhura me Italinë, që konfirmonin së brendshmi përmbajtjen e akteve që Lidhja e Kombeve kishte miratuar në dëm të barazisë së Shqipërisë si subjekt i së drejtës ndërkombëtare, duke njohur shprehimisht “të drejtën e Italisë për mbrojtjen e interesave të saj në Shqipëri” - 1928-1939. 1.8. “Protektorati i dytë monarkik”, i shprehur në bashkimin e Shqipërisë me Italinë, nën kurorën e mbretit Viktor Emanuel III dhe me një mëkëmbës të tij në Tiranë, i ngjashëm me mëkëmbësinë princërore të Vidit më 1914. Kjo është periudha e pushtimit të vendit nga ushtritë fashiste italiane 1939-1943. Kurora mbretërore iu dhurua mbretit të Savojës në këmbim të premtimit për krijimin e Shqipërisë shtetërore sipas kufijve të saj historikë. 1.9. “Regjenca e dytë”, e shpallur nominalisht me mbërritjen e ushtrive naziste dhe vendosjen e pushtetit të tyre - 1943-1944.

644

Regjenca shqiptare (1943-1944) ne nje mbledhje 1.10. “Qeveria demokratike” komuniste (fillimisht “komitet antifashist”), e deklaruar për qendrimet e veta antimonarkiste, e dalë nga një kongres i përfaqësuesve të brigadave partizane dhe të përkrahësve të tyre fitimtarë, mbajtur më 24 maj 1944 në Përmet. 1.11. “Republika Popullore” e Shqipërisë, “Republika e Dytë”, e shpallur pas thirrjes së një asambleje kushtetuese më 1945, me pjesëmarrjen e forcave komuniste dhe të një opozite modeste të tyre: 1946-1976; “republika popullore socialiste” e Shqipërisë, vazhdim i “republikës së dytë”, e kryesuar formalisht nga një “presidium”, analog me “pleqësinë” - 19761991. 1.12. “Republika e tretë” e Shqipërisë, e shpallur pas zgjedhjeve të para shumëpartiake, e sanksionuar nominalisht si “republikë parlamentare”, me institucion përfaqësimi presidentin 1991-2005. Disa mospërputhje midis formës së shpallur dhe funksionimit përmbajtësor të sistemit politik: Periudha më e lulëzuar e parlamentarizmit në Shqipëri, që logjikisht do të nënkuptonte edhe republikanizmin, është ajo e viteve 1920-1924. Por në këtë periudhë nuk ekziston një republikë e shpallur. Për herë të parë Shqipëria u shpall republikë pas kthimit të Ahmet Zogut e “rivendosjes së legalitetit” (1925). Por, me funksionin e kryetarit të republikës, Zogu përqendroi në një

645

institucion, në institucionin e kryesuar nga ai vetë, kompetenca autokratike me karakterin e një mbreti të kurorëzuar. Deri në përfundimin e luftës antifashiste, hapur apo tërthorazi, forma e sistemit politik në Shqipëri vijoi me luhatje të vogla e të përkohshme një rrugë monarkike. Shkaqet e kësaj vijimësie nuk janë studiuar.

Kuvendi i Shqiperise ne vitet 1970 Republikanizmi i periudhës komuniste mbylli kushtetutshmërisht dhe realisht këtë traditë historike nga më të paqartat. Por, megjithatë, republikën e premtuar nuk e realizoi. Në të vërtetë Kryetar i Shtetit ishte kreu i PPSH. Pushtetet kryesore ishin përqendruar totalitarisht tek ai. Në ditën e vdekjes së Enver Hoxhës Këshilli i Sigurimit i OKB-së mbajti minutën e heshtjes formale pikërisht duke iu referuar faktit që si udhëheqës partie ai kontrollonte tërësisht veprimtarinë e shtetit68.

68

. “Luhatja /ndodhi/ për shkak të mungesës së një regjimi të konsoliduar, republikë apo monarki. Regjimi me

afatgjatë është republika e krijuar nga komunistët, e cila ishte më shumë një formë monarkie, po pa të drejtë trashëgimie”. P. Xhufi.

646

Në Dispozitat Kryesore Kushtetuese (1991) forma e regjimit të shpallur ishte republikë parlamentare. Pa qenë kushtetutë e plotë, këto dispozita bënë ndarjen e pushteteve. Por kjo nuk e pengoi autoritarizmin dhe autokracinë. Më 1994 një projekt-kushtetutë e refuzuar me referendum parashikonte edhe formalisht përqendrim të fortë pushtetesh në figurën e presidentit. Nga krahasimi i kompetencave të kryetarit të shtetit (republikës) në këtë projektkushtetutë me ato të Statutit të mbretërisë të vitit 1928 del se mbreti sovran kishte më pak kompenteca69. U tentua një mbretëri e pashpallur. Problemi i formës së sistemit politik mbeti i hapur edhe pas referendumit të vitit 1998, për shkak të mospranimit të rezultatit. Vitet e fundme është rishfaqur hapur ndërhyrja në pushtetet e pavarura, kontrolli i tyre, kufizimi i autonomisë vendore, ndalimi i autoritetit të deleguar dhe i autopërgjegjësisë. Rruga historike që ka përshkruar shteti shqiptar që prej themelimit deri më sot, sikurse u vërejt, është inkoherente, e paqendrueshme, me shumë paqartësi, e mbushur me ekuivoke dhe të fshehta. Në gjysmën e pare të shekullit të 20-të, me pak përjashtime, ka sunduar forma mbretërore e sundimit. Kjo formë është shprehur në mënyrë të drejtpërdrejtë (1925-1939); në mënyrë të tërthortë (1912-1914, 1914-1915); ose në mënyrë të pashpallur (1925-1928). Në gjysmën e dytë të shekullit të 20-të, deri në ndryshimet politike të vitit 1991, forma monarkike e sundimit u ndalua, por republikanizmi nuk u zhvillua. Tradita përcaktoi luhatje të tjera në lidhje me formën e qeverisjes edhe pas vitit 1991. Sikurse u konstatua gjatë parashtrimit të kësaj trajtese, përveç një vullneti ndërkombëtar, të deklaruar apo të padeklaruar, paqendrueshmëria e sistemit politik në Shqipëri është kushtëzuar edhe nga cilësi e komplekse etnotipike shqiptare, si protagonizmi, autoritarizmi, autokracia. Paqendrueshmëria në lidhje me sistemin politik është shprehje e një vetëdijeje shtetërore të paformuar, po aq sa edhe shprehje e traditës së kufizuar të vetëqeverisjes. Në luhatjet, ndërprerjet, tronditjet dhe përmbysjet karakter politik, që kanë të bëjnë me sistemin shoqëror, kanë luajtur rol të dukshëm luftërat lokale dhe botërore, konfliktet e brendshme dhe të jashtme; si dhe rendet botërorë të vendosur në konferencat ndëkombëtare të paqeve. Totalitarizmi i periudhës komuniste, që formalisht mbështetej mbi “qeverisjen autentike të popullit”, domethënë mbi idealin “res publicae” të shpallur qysh në antikitetin greko-romak, ishte një dukuri botërore, që gjeti terrenin e përshtatshëm në Shqipëri, ku dhe sundoi më gjatë.

69

. “Kushtetuta e Republikës së Shqipërisë” (projekt), Tiranë 1994.

647

Paqendrueshmëria e sistemit politik në Shqipëri është një dukuri e rishfaqur edhe në periudhën pas vitit 1991. Ajo shprehet në formën e krizës kushtetuese, të krizës institucionale, të krizës së qeverisjes dhe përgjithësisht në mosfunksionimin e strategjive që ngrihen mbi rotacionin dhe përkohshmërinë e qeverisjes. Gjatë afro një shekulli jetë Shqipëria ka ndryshuar mbi 10 herë Kushtetutë (statut), duke përfshirë tri herë periudhën e re (pas ndryshimeve politike). Mungesa e garancive kushtetutese është një prej shprehjeve të drejtpëdrejta të kësaj paqendrueshmërie. Në historinë botërore ndarja me të shkuarën monarkike; shndërrimi i monarkive asolute në monarki kushtetuese dhe së fundmi kufizimi tërësor i pushtetit monarkik duke e reduktuar vetëm në aspekte protokollare ka ndodhur përgjatë një procesi që nis në mesin e shekullit të 17-të. Monarkia në Shqipëri ishte më e vonuara në shkallë europiane. Retardancat që shfaqen herë pas here edhe në kohën e sotme shprehin papjekurinë e një vullneti popullor plebishitar për t’u ndarë nga e kaluara. Kjo nxitet edhe nga faktorë të tjerë, si qendrimi ndaj pronës e qendrimi ndaj pushtetit. Opozicioni “republikanizëm-monarkizëm”, ndryshe prej shumë opozicionesh të tjera (të majtë - të djathtë; popullorë - pasanikë; komunistë - reaksionarë; demokratë - socialistë), është thuajse krejtësisht i pastudiuar. Kjo mungesë përbën një përgjegjësi të pakryer të shkencës ndaj qeverisjes. Pikërisht ky rrotullim e alternim i çuditshëm i formave kontradiktore të qeverimit; është një prej shkaqeve jo vetëm të mosmarrëveshjeve shkencore dhe politike për vlerësimin e së shkuarës, jo vetëm të varfërimit të historisë politike të vendit, por dhe të paqendrueshmërisë së sistemit politik në vend dhe të zgjatjes së tranzicionit.

648

Politika të Sigurisë dhe Specifikat e Policimit në Komunitet në Shqipëri pas Rënies së Regjimit Enverist PhD C. Artur Beu University of Tirana, Albania

Abstrakt Pas një periudhe të trazuar që mbulon më shumë se tre dekada, besoj se duhet të ketë një fokusim më të madh rreth fushes se sigurise urbane/sociale e cila ka qenë preh e zhvillimeve të larmishme politike dhe sociale që nuk bëjnë gjë tjetër vecse e dobësojnë perceptimin ndaj saj. Në fushën e sigurisë urbane/sociale janë ndërmarrë nisma të shumta të cilat deri tani kanë sjellë përmirësime të rezultateve, por që nuk e kanë shënjestruar nëqendër objektivin. Jam i bindur që duhet të ketë një zgjidhje më të thjeshtë, por që gjithsesi kërkon një impenjim të konsiderueshëm si në nivel lokal ashtu edhe në nivel qendror, por ajo që unë mendoj se është më e rëndësishme ka të bëjë me një ndërgjegjësim të vetë qytetarëve në lidhje me prodhimin e sigurisë urbane/sociale nga vetë ata me mbështetjen e autoriteteve shtetërore në përgjithësi dhe atyre ligjzbatuese në vecanti. Qëllimi i këtij punimi është të kontribuojë në përmirësimin e perceptimit të sigurisë dhe në kuptimin më të thelluar të kësaj cështjeje kaq të lidhur me mënyrën e jetesës së qytetarëve dhe me ndikimin që ajo ka në mënyrë të drejtpërdrejtë në zhvillimkin ekonomiko-social të një vendi. Metoda e përdorur në këtë punim është ajo e kërkimit sasior duke marrë në konsideratë literaturën e deritanishme dhe politikat e ndërmarra në fushën e sigurisë në Shqipëri në këto dekadat e fundit. Në një mjedis të pasigurt nuk mund të ketë një jetë të qetë të qytetarëve dhe për rrjedhojë nuk mund të zhvillohen veprimtari sociale dhe ekonomike afatgjata. Në këtë perspektivë nuk mund të ketë një zhvillim të qëndrueshëm ekonomik me pasojat logjike që kjo situatë sjell. Pa një mjedis të sigurt nuk mund të pretendohet një hyrje në periudhën afatshkurtër në BE. Fjalë kyçe: Siguria, Policimi, Komuniteti, Integrimi.

649

Hyrje Një model i ri i sigurisë sociale, duke marrë në konsideratë eksperiencat e vendeve evropiane. Policimi në komunitet apo një qasje e re më e kuptueshme që do të ofrohet nga ky punim, si ajo e policisë në afërsi, si një hap paraprak kundrejt komunitetit në Shqipëri. Më shumë komunikim, më shumë mbikëqyrje, më shumë afrim me pleqësinë, vegjëlinë dhe grupet vulnerabël. Ky punim është realizuar në kuadër të një studimi bazë të vlerësimit të situatës në lidhje me politikat e ndërmarra në Shqipëri dhe në vecanti nga Ministria e Punëve të Brendshme/Policia e Shtetit për rritjen e kapaciteteve dhe efikasitetit të modelit të përzgjedhur si filozofi për t’i ofruar më shumë siguri qytetarëve të Shqipërisë. Por, analiza nuk do të kufizohet vetëm në këtë vlerësim, sepse do të ishte reduktive, ndaj është marrë në analizë i gjithë konteksti shqiptar duke u konsultuar me ekspertë të huaj dhe vendas e duke përdorur të gjithë literaturën përkatëse dhe dokumentacionet në dispozicion në këtë kontekst. Për të qenë më të qartë, dëshiroj të sqarojmë qysh në fillim, se chështja e sigurisë së qytetarëve nuk është eksluzivitet detyrues vetëm i Ministrisë së Punëve të Brendshme dhe i Policisë së Shtetit, por në të janë përfshirë një sërë institucionesh qendrore dhe lokale të cilët kanë të gjithë pjesën e tyre. “Pranë bekimit kur një shtet buron nga një Kushtetutë e shkëlqyer dhe Sistem Ligjesh të përgjithshme, qëndrojnë ato avantazhe që rezultojnë në një plan të mirë-rregulluar dhe energjik të Policisë, i kryer dhe zbatuar me pastërti, veprim, vigjilencë, dhe maturi. Pas kësaj varet, në një shkallë të madhe, qetësia, lumturia, liria e vërtetë dhe siguria e Popullit, që shumë punë dhe vëmendje ndoshta mund të mos duhen për të dhënë një pasqyrim të plotë të administrimit të brendshëm të Drejtësisë në të gjitha rastet e delikuencës penale.”70 Mbetet më shumë për të bërë në këtë drejtim dhe asnjë besoj se nuk do të mund ta mohojë këtë fakt; të gjithë dëshmojnë për rreziqet që jeta dhe prona kalojnë aktualisht nga numri i kriminelëve, të cilët, për shkaqe të ndryshme nuk janë duke vuajtur dënime për aketet e kryera ndaj individëve dhe publikut. Siguria shfaqet si një element themelor në përvijimin e një jete të denjë për një qytetar të një vendi. Më kot do të mburreshim me liritë e fituara për të lëvizuar dhe vepruar nëse pjesa më e 70

Patrick Colquhoun, 2011

650

madhe e komunitetit do të ishte e privuar nga kjo e drejtë për shkaqe të ndryshme të cilat jodomosdoshmërisht lidhen me mundësitë financiare. Më kot do të mburreshim me sigurinë që ligjet tona na mundësojnë, në qoftë se ne nuk do të mund të shtriheshim për të pushuar qetësisht në banesat tona, për shkak të tmerrit të një vjedhjeje të mundshme, apo për pronën e kanosur nga marrja e dikujt që nuk zbaton ligjet, dhe për jetën tonë të ekspozuar ndaj rrezikut të pashmangshëm përpara afrimin e mëngjesit. I papërsosur duhet të jetë plani ose zbatimi i tij, ose që të dy këto, në lidhje me Kodin tonë Penal, nëse krimet janë në rritje; nëse parimi moral pushon së qeni nën kontroll mbi një pjesë të madhe të popullit; dhe në qoftë se mikrokriminaliteti fillon të mbizotërojë në një shkallë të gjerë, sa që të ndikojë në pothuajse të gjithë pjesëtarët e shoqërisë të cilët kanë prona apo sende për të humbur. Nëse, përveç kësaj, paqja e shoqërisë mund të kanoset nga pasojat e një jetë të shthurur nga pasionet vulgare të disa qytetarëve, me siguri që këtu kemi të bëjmë me një hetim interesant, i denjë për të qenë nën vëmendjen e çdo anëtari inteligjent të shoqërisë, nga çfarë vijnë këto sjellje negative të shumëta; dhe a ka një shërim për këto të këqija të akumuluara? Në zhvillimin e shkaqeve që e kanë prodhuar nevojën për siguri është e nevojshme së pari të analizohet sistemi i drejtësisë penale dhe puna e organeve të zbatimit të ligjit për parandalimin e krimeve dhe të sjelljeve që cojnë në akte kriminale. Nëse shikojmë prapa në masat e ndjekura nga paraardhësit tanë dhe para kësaj periudhe, ne do të gjejmë se shumë ligje të mira janë bërë me qëllim të parandalimit, dhe për të siguruar sjelljen e mirë të personave që mund të kryejnë vepra. Shumë rregulla gjatë periudhës enveriste (19441991) kanë ndaluar dhe parandaluar vesin dhe sjellje të tjera të konsideruara të dëmshme në një shoqëri si ajo, e cila i përkiste jo më shumë se dy dekadave e gjysmëmë parë. Tashmë me kalimin në një shoqëri të demokratizuar shumë rregulla të mëparshme janë fshirë si me fshesë dhe pak rregulla janë themeluar për të kufizuar vesin, ose sjelljet e konsideruara të dëmshme në shoqërinë e sotme të cilat janë në rritje. Në Shqipëri, policimi në komunitet ka lindur si plotësuesi më i madh strategjik i praktikave tradicionale të policimit. Me fokusin për të vendosur një partneritet polici-publik, ku e gjithë organizata e policisë, agjencitë publike dhe komunitetet bashkëpunojnë në mënyrë aktive për zgjidhjen e problemeve, policimi në komunitet paraqet një ndryshim në praktikë, por jo në objektivat e përgjithshme të policimit. Këto objektiva vazhdojnë të përqendrohen në: ruajtjen 651

e ligjit dhe qetësisë dhe rendit publik; mbrojtjen e të drejtave dhe lirive themelore të individit – veçanërisht të jetës; parandalimin dhe zbulimin e krimit; dhe dhënien e ndihmës dhe shërbimeve ndaj publikut për të ulur frikën. Partneriteti polici-publik, ofron një strategji për t’i arritur këto objektiva me më efikasitet dhe efektshmëri. Koncepti dhe metoda e Policimit në Komunitet, siç u shpjegua këtu, ka të bëjë me organizatën e policisë. Meqenëse Policia është një nga palët më të rëndësishme në një partneritet mbi Sigurinë në Komunitet, zbatimi me sukses i Policimit në Komunitet është themeli për të garantuar komunitete më të sigurta. Duke pasur parasysh këto parime mund të themi se filozofia e policimit në komunitet ka një bazë të fortë teorike për të qenë e suksesshme, por problemi si në cdo fushë qëndron në aplikueshmërinë e modeleve teorike. Mes të thënit dhe të bërit qëndron në mes një det i tërë thotë populli. Ajo që kam ndërmend, është pikërisht pëlhura ku këto parime do të thuren. Komuniteti ka pësuar një tranzicion që akoma sot vazhdon dhe struktura e komunitetit ka ndryshuar rrënjësisht. Perceptimi i sigurisë publike Nëse i hedhim një shikim strukturës së Policisë së Shtetit dhe nëse do të kërkonim më konkretisht për struktura të posacme në lidhje me vënien në zbatim të filozofisë së policimit në komunitet, atëherë do të mbetemi të zhgënjyer, sepse, në asnjë rast do të hasni një strukturë të tillë të posacme. Filozofia e Policimit në Komunitet ngjet me një jetim, pa një organ i cili është përgjigjës për jetësimin e saj. Kjo filozofi duket se mbështetet vetëm në parime teorike dhe në direktivat e ardhura nga epërorët e policisë për të qenë sa më pranë një komuniteti që akoma nuk e ka kuptuar këtë prani të afërt të policisë. Para ndërrimit të sistemit (viti 91) në Shqipëri kishte një realitet krejt të ndryshëm nga ai i sotmi sidomos në zonat metropolitane dhe veçanërisht në Tiranë. Ndjenja e përkatësisë komunitare ishte shumë e lartë kjo edhe për shkak të regjimit totalitar që kontrollonte tërë jetën e qytetarëve dhe në një farë mënyre për qytetarin e thjeshtë atë të linjëzuar më rrymën e partisë realiteti ishte nga më të sigurtët. Në një sondazh të kryer në vitin 2010 nga Instituti shqiptar për Studime Ndërkombëtare lidhur me temën e perceptimeve të shoqërisë shqiptare mbi demokracinë dhe shtetin pas njëzet vjetëve rezulton se në fushat e ndryshme të jetës shoqërore:

652

Në kontekstin e lirive themelore pjesa dërrmuese e qytetarëve shqiptarë bie dakord se regjimi komunist nuk kishte liri të fjalës (49,7% shumë pak, 23 % pak), nuk kishte liri të shpalljes së fesë (63% shumë pak, 26% pak), dhunoheshin të drejtat individualei (29,8% tejmase, 44% shumë), paprekshmëria e qytetarëve ishte e kanosur nga vetë shteti (18,6 % tejmase, 50,5% shumë), dhe që vendi ishte i izoluar (40,3% tejmase, 34.3% shumë). Ndërsa në fushën e vlerave situata ishte krejt e kundërt. Sipas 77,5 % e qytetarëve të pyetur (34,2% tejmase, 43,3% shumë) familja shqiptare ishte më e fortë gjatë regjimit. Përqindje të përafërta edhe lidhur me besimin reciprok të qytetarëve: 69 % e të anketuarve (21,5% tejmase, 46,5% shumë) mendojnë se ishte më i lartë para 1990. Nga ana tjetër në perceptimet e qytetarëve kushtet e jetesës janë përmirësuar gjatë njëzet viteve të fundit. 2,6% i konsideron të mira (1% shumë të mira, 31,6% të mira), 41,1% mesatare, 26,3% të këqija (2,5% shumë të këqija, 23,8% të këqija). Gërshëra e varfërisë për ata që kanë patur kushtë shumë të këqija gjatë regjimit është reduktuar me 25 pikë, duke kaluar ngal 27,2 në 2,5%, ndërsa përqindja e atij që jeton në kushte të këqija ka kaluar nga 43,8% në 23.8%. Mahnitës del fakti se vetëm 2,5% e të intervistuarve deklaron se ka pasur kushte të mira jetese para vitit 1990 (1,2% shumë të mira, e 1,3% të mira). Mendime më të ekuilibruara për sa i përket cilësisë së arsimimit, shëndetëisë. Niveli i arsimimit ka qenë i mirë para 1990 për 41% (19% shumë i lartë, 23% i lartë) e të intervistuarve, ndërsa kanë të njëjtin mendim për pas 1991 – 2010, 20% e tyre (5% tepër mirë, 15% shumë). Por për 42%, në këto njëzet vite cilësia është mesatare, kundrejt 23% që jep të njëjtin mendim për arsimin në regjimin komunist. Më negativ është perceptimi rreth cilësisë së shëndetësisë publike. Për 52,3 % të qytetarëve (21,5% shumë pak, 30,8% pak), në njëzet vitet e fundit mund të thuhet se shtë e keqe. Të njëjtin përkufizim për periudhën komuniste e japin 30,9% (9,6% shumë pak, 21,2% pak). Në të njëjtën periudhë, 31,1% thotë se cilësia ishte mesatare, kundër 21,2% që shprehet kështu për njëzet vitet e fundit. Interesante është e dhëna që tregon impenjimin e qeverive shqiptare për të garantuar kushte jetese të qytetarëve. 27% e të intervistuarve (4% tej mase, 23% shumë) pohojnë se qeveritë janë munduar shumë pas 1990 për të garantuar një jetesë më të mirë, kundrejt, kundrejt 7 % (0% tejmase, 7% shumë) që pohon po të njëjtën lidhur me periudhën komuniste. Nga ana tjetër këto reflektojnë të dhënat të atyre që thonë se qeveritë janë impenjuar pak: për 30% (13% fare 653

pak, 17% pak) gjatë njëzetviteve, dhe për 62 % (29% fare pak, 33% pak) gjatë regjimit komunist. Vlerat më të përafërta në absolut janë ato që lidhen me impenjimet e qeverive shqiptare në garantimin e sigurisë së qytetarëve. 37% (12% tej mase, 25% shumë) konsideron këtë impenjim të lartë gjatë regjimit komunist, dhe 33% (5% shumë të lartë, 28% të lartë) e konsideron të tillë pas 1990. 29% shprehet për një impenjim mesatar para 1990, dhe 25% jep të njëjtën vlerë për njëzetvitet e fundit. Ndërsa për 33% (6% shumë pak, 27% pak), qeveritë shqiptare janë angazhuar pak lidhur me sigurinë para 1990, dhe 36% (8% shumë pak, 28% pak) mendon të njëjtën për periudhën pas 1990. Krahas kësaj shtohen edhe gjykimet arbitrare të gjykatësve tanë në lidhje me krimet duke sjellë një minim në themel të parimeve dhe të vetë ligjeve në një shtet të së drejtës. Mungesa e dënimeve të ndërmjetme dhe mungesa e mekanizmave për të rekuperuar ata që kryejnë krime në shoqërinë tonë, ka sjellë një kundërvënje të drejtpërdrejtë mes krimit dhe organeve tëzbatimit të ligjit ku këto të fundit ndjejnë presionin e mungesës efektie të dënimeve duke humbur besimin dhe duke modifikuar sjelljen e tyre në drejtim të vetë kriminelëve. Ashtu si ligjet administrohen aktualisht është me të vertëtë për të ardhur keq, sepse pjesa më e madhe e kriminelëve që mbushin vendin, ndonëse janë dërguar para gjykatësve me prova shumë të kënaqshme, janë kthyer të lirë në publik vit pas viti; në këtë mënyrë kriminelët inkurajohen që të rinovojë praktikat e tyre, për shkak të shpëtimit nga drejtësia. Në këto rrethana kemi përfituar një shoqëri me një mosbesim në sistemin e drejtësisë dhe në zbatimin e ligjit, e cila ka nevojë për ndërhyrje konkrete për t’iu rikthyer legalitetit. Nga ana tjetër kemi policinë me të gjithë sistemin e saj të përbërë nga burime njerëzore dhe financiare të mangëta. Por, besoj gjithashtu se problemi i sigurisë nuk varet vetëm nga mjetet, pajimet dhe niveli arsimor i punonjësve të policisë. Problemi i policisë në një shoqëri demokratike nuk është edhe aq një cështje e sigurimit të mjeteve e pajisjeve të një niveli të lartë teknologjik apo e rekrutimit të njërëzve me sa më shume vite të shkollës së lartë. Ajo që duhet të ndodhi në Shqipëri është një ndryshim domethënës i filozofisë së punës së policisë në mënyrë që ta shndërrojnë profesionalizmin e policisë në një vlerë etike të rendit ligjor demokratik dhe jo në një arritje teknologjike71 edhe pse kjo e fundit i shërben qëllimit.

71

Jerome Skolnick, 1975

654

Policia e Shtetit dhe Policimi në Komunitet Sa i përket Policisë së Shtetit të Shqipërisë, ajo ka disa vite që zgjedhur qasjen e policimit në komunitet për të aplikuar një filozofi të re në lidhje me raportet me qytetarët. Në analizën e bërë duke marrë në shqyrtim Ligjin 9874 “Për Policinë e Shtetit” datë 4 qershor 2007, shikojmë se, Policimi në Komunitet është i parashikuar në nenin 122 të tij. Në mënyrë më të detajuar, Policimi në Komunitet është i trajtuar në Strategjinë e Policisë së Shtetit, 2007-2013 dhe në Strategjinë e Policisë së Shtetit 2014-2020, si edhe në Planin e saj të Veprimit. Në këto strategji i jepet një vëmendje e vechantë Policimit në Komunitet duke shpjeguar se, ai mundëson një partneritet mes Policisë me komunitetin duke ofruar një analizim të përbashkët të problematikave për të arrirë në përcaktimin e rrënjëve dhe të shkaqeve të tyre, në mënyrë të tillë që të jepen zgjidhje të mundshme duke synuar në rritjen e sigurisë sociale. Në bazë të këtij konceptimi të ri qëndron ai i bashkëndarjes së përgjegjësive mes institucioneve shtetërore, në këtë rast të Ministrisë së Punëve të Brendshme/Policisë së Shtetit me qytetarët në komunitet. Bazuar në ligjin e lartpërmendur të Policisë së Shtetit, kjo e fundit duhet të konsultohet me një sërë aktorësh në të gjitha nivelet dhe chdo strukturë e vechantë e saj në 12 qarqet e Shqipërisë duhet të përgatitë plane vjetore lidhur me policimin në komunitet. Në strategjinë e re 20142020 vazhdon t’i kushtohet vëmendje policimit në komunitet duke synuar në ofrimin e shërbimeve më cilësore dhe sa më të aksesueshme për qytetarët. Por, a ka funksionuar kjo filozofi deri tani? Këtë do të mundohemi të sqarojmë në këtë punim. Përpjekja e këtij punimi do të jetë ajo e sjelljes së një qasjeje të re, duke ofruar një pikëpamje antropologjike të të jetuarit. Mendoj se, një trajtim i chështjeve nga brenda ofron një pikëpamje më të qartë të situatës së trajtuar. Në këto vite kam qenë i përfshirë në procese të raportimeve periodike të Policisë së Shtetit në kuadër të raportimeve të Progres Raportit, Planit të Veprimit të Integrimit Evropian apo raportimeve të tjera në kuadër të ndjekjes së prioriteteve të identifikuara nga Udhërrëfyesi për Shqipërinë në rrugëtimin e kësaj të fundit drejt Bashkimit Evropian. Në vechanti, është trajtimi i kapitullit 24 “Drejtësia, Liria dhe Siguria” ai që merret specifikisht me chështjet e sigurisë në Shqipëri. Sikurse edhe shihet qartë, edhe në konceptin evropian siguria lidhet në mënyrë të pandashme me drejtësinë dhe lirinë. Sikurse tashmë dihet vendet që aspirojnë të bëhen pjesë e familjes së madhe evropiane duhet të përafrojnë kuadrin e tyre ligjor me legjislacionin Evropian. Detyrimi dhe angazhimi për përafrimin e legjislacionit shqiptar me atë evropian, sanksionohet në nenin 70 të Marrëveshjes së Stabilizim Asociimit. Sipas këtij neni Shqipëria do të përpiqet të sigurojë që ligjet e saj 655

ekzistuese dhe legjislacioni i ardhshëm të shkojë gradualisht drejt përputhjes me legjislacionin evropian por njëkohësisht duhet të sigurojë që legjislacioni ekzistues dhe i ardhshëm të zbatohet dhe imponohet si duhet. Procesi i përafrimit të legjislacionit, përgjithësisht duhet kuptuar si më poshtë: •

Në kuptimin e gjerë juridik, do të thotë së pari transpozim i dispozitave të legjislacionit evropian në legjislacionin kombëtar, së dyti zbatimin në praktike të këtyre dispozitave të këtij legjislacioni nga autoritetet kombëtare publike kompetente si dhe së treti garantimi i zbatimit në praktikë i këtij legjislacioni nëpërmjet gjykatës apo dhe agjencive të tjera zbatuese ligjore.

•

Në terma praktike, është një nga treguesit e progresit të vendit drejt Integrimit Evropian dhe përafrimi është sasia dhe cilësia e akteve ligjore kombëtare që transponojnë dispozita të legjislacionit evropian, si dhe prova për zbatimin efektiv të tyre në praktikë.

Ky përafrim legjislacioni për Shqipërinë ka filluar që me nënshkrimin e MSA-së dhe do të realizohet në dy faza tranzitore. Gjatë fazës së parë të periudhës tranzitore prej dhjetë vjetësh, përafrimi i legjislacionit do të mbulojë disa elementë themelorë të acquis-ë në fushën e tregut të përbashkët dhe në disa fusha të tjera që kanë të bëjnë me tregtinë. Faza e parë do të mbulojë përafrimin e legjislacionit në fushat lidhur me konkurrencën, me pronësinë intelektuale, me prokurimet publike, me standartizimin dhe çertifikimin e produkteve. Faza e dytë e periudhës së tranzicionit do të mbulojë fushat e tjera, të cilat nuk përfshihen në fazën e parë. Përveç MSA, procesi i përfarimit të legjislacionit në Shqipëri realizohet duke u bazuar në aktet nënligjore të mëposhtme: •

Vendim i Këshillit të Ministrave nr. 486, date 25.07.2012 mbi miratimin e Planit Kombëtar për Zbatimin e MSA-s (2012-2015) dhe përcaktimin e përgjegjësive institucionale për përafrimin në legjislacionin shqiptar të çdo akti të Bashkimit Evropian (i cili përditësohet çdo vit);

•

Vendim nr 201 datë 29.3.2006 për disa ndryshime dhe shtesa në Vendimin nr. 584, datë 28.8.2003 të Këshillit të Ministrave “Për miratimin e Rregullores së Këshillit të Ministrave”;

•

Vendim nr.4 data 7.1.2009 një shtesë në Vendimin nr.584, datë 28.8.2003, të Këshillit të Ministrave, “Për miratimin e Rregullores së Këshillit të Ministrave”, të ndryshuar.

656

Gjithashtu, janë analizuar dhe vlerësuar politikat e ndjekura deri tani në lidhje me sigurinë dhe për rrjedhojë edhe të analizoj filozofinë e policimit në komunitet në mënyrën se si është parë ajo dhe se si mund të përshtatej akoma më mirë në një kontekst të ri dhe gjithnjë në lëvizje për Shqipërinë. Në kontekstin shqiptar kërkohet një përshtatje e filozofisë së policimit në komunitet për shkak edhe të një konteksti krejt ndryshe nga ai i vendeve të tjera ku kjo filozofi duket se është aplikuar me sukses. Duke u bazuar edhe në studimet e kryera në bashkëpunim me disa projekte që synojnë në rritjen e efektivitetit të punës së Policisë së Shtetit duke asistuar në mënyrë të drejtpërdrejtë këtë të fundit, ky punim ka si qëllim të ofrojë disa zgjidhje të mundshme në mënyrë që të rritet kapaciteti i Policisë së Shtetit për t’iu afruar më shumë qytetarëve dhe për të ndryshuar një konceptim të trashëguar nga e kaluara si një polici e cila nuk operon bazuar në kalljen e frikës, por si një polici e modernizuar e cila është pjesë përbërëse e komunitetit. Policia e re është në shërbim të qytetarëve duke patur aftësinë e krijimit të partneriteteve efikase nëpërmjet një qasjeje krejt të re. Policia e konceptimit perëndimor është e aftë të krijojë marrëdhënie me të gjithë aktorët e përfshirë në procesin e ofrimit të një mjedisi më të sigurt të mundshëm për qytetarët e saj, duke u shndërruar në një pikëmbështetje për të gjithë qytetarët. Policia e re duhet të jetë e aftë të operojë krah për krah me shërbimet e tjera policore në dobi të së mirës së përbashkët të qytetarëve. Në këtë mënyrë Policia do të jetë e aftë të parandalojë pa qenë nevoja e reagimit pas ndodhjes së ngjarjeve, sepse, duke operuar në afrimitet me komunitetin do të jetë e aftë të zbulojë në kohë lindjen e fenomeneve kriminale. Kjo polici e konceptimit të ri do të jetë e aftë të identifikojë chdo ndryshim në sjelljen e qytetarëve duke u fokusuar më shumë në të rinjtë dhe në ata që asnjëherë më parë kanë qenë pjesë e vëmendjes së policisë. Policia e konceptimit të ri perëndimor është e përkushtuar në ruajtjen e balancave sociale duke respektuar të drejtat e minoriteteve, të identiteteve fetare, identiteve gjinore, grupeve më të dobëta në komunitet në zbatim të filozofisë së adoptuar. Kjo sjellje e re e policisë do të vijë si rezultat e reformave të duhura duke filluar qysh me Ligjin e Ri për Policinë e Shtetit dhe rivendosjen e institucionit arsimor të Akademisë së Sigurisë72 dhe me ndihmën e trajnimeve të përshtatshme për të vënë në zbatim filozofinë e policimit në komunitet e cila sipas këtij punimi do të ofrohet në një qasje tjetër më të përshtatshme në kontekstin shqiptar. Për t’u përshëndetur janë iniciativa si ajo e qeverisë Suedeze me programin e policimit në komunitet dhe me projektet pilote të ristrukturimit të komisariateve të policisë duke u ofruar

72

A. Beu 2012

657

qytetarëve zyra pritjeje më mikpritëse dhe duke iu ofruar atyre shërbime që më parë nuk jepeshin. Në këtë mënyrë shpresohet të rikthehet besimi dhe ndërgjegjësimi i qytetarëve tek policia.

Programi SACP

ka ndikuar në kryerjen e punës së Policisë përmes dy nga

komponentëve e tij (menaxhimi i performancës dhe partneriteti), dhe në anën tjetër ka mare një qasje pak më tradicionale në komponentin e tretë të lidhur me dhunën në familje. Risitë e sjella lidhen me përdorimin e perceptimit të publikut si një mënyrë alternative për matjen e performancës së policisë. Kjo qasje ka përfshire Sistemin e Matjes së Sigurisë në Komunitet si mjet informues në hartimin e strategjive dhe planeve të punës në njësi të vogla policore. Skema e Granteve të Vogla si projekt ka mundësuar krijimin e një hapjeje të konsiderueshme me publikun në përgjithësi dhe me rininë dhe shtresat e margjinalizuara në veçanti. Përveç kësaj, nëpërmjet ndërhyrjes në sallat e pritjes për qytetarët, synohet nje ndryshim tërësor i imazhit të PSH dhe përmirësimi i marrëdhënieve me publikun e gjerë. Menaxhimi i performances ku është përfshirë zhvillimi i anketimeve dhe studimeve të shumta. Qëllimi është ai i matjes së perceptimin e publikut për sigurinë e tyre personale, tendencat e krimit dhe performancën e Policisë së Shtetit. Gjetjet kanë shërbyer për të gjeneruar diskutime se si mund te ndryshoheshin përceptimet negative dhe se si mund të përmirësohej puna e policisë në mënyrë më efikase. Si një risi pozitive përmendet edhe studimi për viktimat e dhunës në familje dhe dhunës seksuale në Shqipëri. Ky studim ka dhënë rekomandime të klasifikuara në 5 grupe: a) për komunitetin rom, b) për komunitetin LGBT, c) për gratë viktima të dhunës, d) për fëmijët, dhe në fund e) për të moshuarit. Sallat e pritjes në komisariatet e policisë, mendoj se kanë patur një impakt shumë të rëndësishëm në përmbushjen e misionit dhe detyrave që ka policia është përmirësimi i mardhënieve të komunikimit nëpërmjet shërbimeve që ofron Policia e Shtetit për qytetarët. Për permiresimin e besimit, transparencës dhe shërbimeve që ofron policia për qytetarët në Drejtoritë dhe Komisariatet e Policisë po funksionojnë Z.SH.Q Zyrat e Shërbimit për Qytetarët.

658

Realizimi i shërbimeve për qytetarët nëpërmjet këtyre zyrave do të rris besimin e qytetarve te policia për të kërkuar ndihmë, do të ndikojë në uljen e treguesve të vetgjyqësisë e deri në parandalimin e fenomeneve korruptive në rrëdhët e vet organizatës së policisë. Polici virtual (polici në facebook) ka qenë një tjetër risi. Drejtoria e Policise se Qarkut Tiranë dhe Komisariatit Nr . 2 (si vlere e shtuar me projektin sallën e pritjes) në bashkepunim me EMP ka filluar përgatitjet për pilotimin konceptit të “policit virtual apo policit në faqen Facebook. Ky është një koncept i policimit në komunitet e cila është duke u përdorur me sukses në disa vende të BE . Faqja e Facebook do të përdoret për të shpërndarë mesazhe mbi sigurinë si dhe për parandalimin e krimit. Publiku mund të përdorë platformën për të bërë pyetje punonjësit të Policisë dhe/ose per të njoftuar ata në lidhje me çështjet e rendit. Policia e Shtetit eshte duke zbatuar programin “Edukimi, ndërgjegjësimi dhe reduktimi i kërkesës për drogë dhe substanca të tjera të rrezikshme”. Kjo iniciativë ka filluar në Nëntor 2009 në DPQ Tiranë, takim i iniciuar dhe zhvilluar nga Programi ICITAP, përfaqësues të Gardës Kombëtare të Neë Jersey dhe Drejtues të DPPSH. Programi është mundesuar nga Zyra e Bashkëpunimit për Mbrojtjen (Office of Defense Cooperation ODC-Ambasada Amerikane Tirane) nëpërmjet Programit të Partneritetit midis Shqipërisë dhe Shtetit të Neë Jersey-it (State Partnership Program-SPP) me bashkëpunimin e Gardës Kombëtare të Neë Jersey- it, Programit ICITAP (Ambasada Amerikane Tiranë), Drejtorisë së Përgjithshme të Policisë së Shtetit, Drejtorive të Policisë së Qarqeve dhe Drejtorive Arsimore Rajonale. Ky program erdhi, pas një vleresimi të situatës së përdoruesve të drogave në Tiranë, dhe synon në pregatitjen dhe formimin e fëmijëve të moshave 12-13 vjeçare, të cilët kur të përballen me fenoment negative të duhanit, alkoolit, marijuhanes etj, të jenë në gjëndje t`i thonë në mënyrë të vendosur “Jo drogave dhe substancave te tjera te rrezikshme”, kur mund t`ju ofrohet këtyre ose miqëve të tjerë që kanë pranë. Ky program perfshin trajtimin e tre temave mesimore, Alkolit, Duhanit dhe Mariuhanes, me mbas vazhdon me konkurset e vizatimeve, ku nxenesit shprehin idete për duhanin, alkolin dhe Marjuanen dhe mbyllet me organizimin e një kampusi ku marin pjesë nxënësit me vizatimet më të mira. Rekomandime -

Rekomandimi i përgjithshëm thekson nevojën për një strategji më të mirë komunikimi me publikun e gjerë.

-

Procesi i përafrimit të legjislacionit shfaqet themelor në mundësimin e zbatueshmërisë së ligjit. 659

-

Konsultimi me aktorët në të gjitha nivelet dhe çdo strukturë e veçantë e Policisë së Shtetit në të gjithë territorin e Shqipërisë të përgatitë planet vjetore lidhur me policimin në komunitet apo me policimin në afërsi dhe matja e zbatueshmërisë së tyre të kryhet nëpërmjet sondazheve dhe pyetësorëve ku universitetet të bëjnë pjesën e tyre të studimit.

-

Partneriteti me administratorët lokalë shfaqet një domosdoshmëri në punën e përditshme të policisë.

-

Vazhdimi i programeve frytsjellëse si ato të përmendura në këtë punim do të sjellë një rritje të besimit tek qytetarët dhe një rritje të efikasitetit të punës së policisë duke sjellë një rritje të perceptimit të sigurisë në vend.

-

Krijimi i figurave të qëndrueshme dhe i strukturave përkatëse në stacionet e policisë të cilat kanë si detyrë kryesore policimin në komunitet, pasi aktualisht nuk gjenden të tilla dhe procesi i policimit në komunitet has problematika të përgjegjësisë së detyrës.

-

Zbatueshmëria e ligjit dhe e drejtësisë mbetet themelore në ndërtimin e një shteti demokratik.

-

Ndjekja e prioriteteve dhe plotësimi i detyrave të përcaktuara nga Bashkimi Evropian janë një domosdoshmëri për rrugëtimin e integrimit në BE.

-

Krijimi i një kulture të bashkëndarë nga të gjithë qytetarët do të sjellë një rritje të ndërgjegjësimit dhe një kuptim ndryshem të sigurisë në vend.

Referenca A.Beu, International Conference on Sustainable Development 2013, “Relationship betëeen the police educational formation system and public security” ICSD2013 A. Beu, Reforma të reja në fushën e sigurisë urbane në Shqipëri, 11-12 Dhjetor 2012, Shkup 2012 A. Beu, International Conference on Sustainable Development 2013, “Relationship between the police educational formation system and public security” ICSD2013 A. Beu, Shtetformimi dhe nacionalizmi shqiptar si çështje të sigurisë kombëtare, shtator 2013, “Politikja” Selmini R. Editore: Il Mulino, Marzo 2004, La sicurezza urbana; Antonio Gagliardo Editori Riuniti Marzo 2006, La sicurezza minacciata. Criminalità transnazionale e terrorismo nell'Europa di oggi; 660

Botimet Toena Tiranë, 2002, Instituti për Demokraci dhe Ndërmjetësim IDN Polici Komunitet së bashku për ndryshim; Strategy of the State Police 2015-2020, drafted and sent for approval to the CoM; Cross-cutting Strategy on the Fight against Organized Crime, Illicit Trafficking and Terrorism 2013 – 2020 and its Action Plan 2013-2016, approved by Decision of CoM no. 663, dated 17.07.2013. In November 2014, the CoM approved an addendum to the CoM Decision “On the Adoption of the Inter-institutional Strategy on the Fight against Organised Crime, Terrorism and Illicit Trafficking 2013-2020, and the Action Plan for 2013-2016; The Strategy for Combating Trafficking in Persons and Action Plan 2014-2017, approved by CoM, November 2014; National Strategy against Narcotics 2012 – 2016 approved by Decision of CoM no. 403, dated 20.06.2012; Cross-cutting Strategy on the Fight against Terrorism 2011-2015 and its Action Plan approved by Decision of CoM no.675, dated 06.07.2011; Strategic National Document on the Investigation of Financial Crime approved by Decision of CoM no. 1077, dated 27.10.2009; National Road Safety Strategy 2011 - 2020 "and" Action Plan for Road Safety 2011 - 2015 ", adopted by Decision of CoM. 125 dated 23.02.2011. National Action Plan on the Fight against Trafficking of Vehicles, 2012 – 2014, Protocol no. 391, dated 24.01.2012; National Action Plan against Trafficking of Works of Art and Culture, 2012 – 2014, approved by Decision of CoM, no. 917, dated 28.12.2011. National Strategy on Integrated Border Management and its Action Plan (Cross-cutting Strategy 2014 – 2020) adopted by the Council of Ministers with Decision No. 119, dated 5.3.2014; Migration Profile in the Republic of Albania 2013: adopted at the Council of Ministers with decision No. 857, dated 10 December 2014;

661

Road Map on 5 key priorities recommended by the European Commission, 2013 (Priority 3: Fight against corruption; Priority 4: Fight against organized crime), approved by Decision of CoM no. 330, dated 28.05.2014; “The national Anti-corruption Strategy and its Action Plan 2015-2017”, March 2015, CoM no. 461, dated 09.06.2010, The Strategy for the Reintegration of Returned Albanian citizens 2010-2015; Decision of CoM no. 760, dated 01.09.2010 “The national strategy of intellectual and industrial property 2010-2015”

662