The privatization process started in 1991 with the approval of the Law n. 7512, which set general principles on the ownership transformation and methods of privatization, and established the National Privatization Agency to implement the privatization. However, the Government’s privatization program was chaotic as it did not follow a clear strategy and was regulated by a series of legislative decrees.

Albania implemented its privatization program in three major waves. In the first wave, which covers the period between 1991 and 1994, the Government focused on the privatization of agricultural land, dwelling houses, and SMEs. By the end of 1994, almost 100% of Albania’s agricultural land and state-owned farms were distributed and given in use to former owners of the land and/or employees. In 1995, the using rights were converted in ownership rights. The process of privatization of dwelling houses started in March 1993 and within one year about 98% of total number of dwelling houses were privatized thorough direct sale to their tenants at about 1-2% of their market value. From the privatization of dwelling houses, the Government collected about US$17 million. Between 1991 and 1993, the Government implemented the Small Scale Privatization. Small units in retail trade, public services and handicraft, vehicles, tractors and agricultural machines were privatized through direct sale to employees in cash. After a long pause, direct sales to employees started again in 1995, when payment in vouchers became allowed. However, the second phase of the SSP had a smaller weight in the privatization process. Privatization of SMEs, defined as those with a book value of up to US$ 500,000 or 300 employees, started in 1993 and the public auction was the designed method of sale. The privatization procedures of public auction implied total decentralization at the local level, granting full decision power to the country’s 37 districts. In each district, a privatization board was formed to manage the process of ownership transfer. The Board had the power to decide on a case by case basis the methods of sale: public auction or sale to former owners of the land, employees or other qualified parties. By the end of 1995, about 5,000 enterprises were privatized either through auctions or sale to the former owners.

The second wave of privatization started in 1995 and focused on the larger enterprises. Large enterprises were split into smaller units able to function on their own and privatized as small/medium enterprises. For those that proved more difficult to be split and sold, the Government introduced the Mass Privatization Program (MPP), which gave each citizen vouchers to buy equity in privatizing enterprises. Publicity campaign and information on MPP was inadequate and did not fully convey to the citizens the potential benefits of vouchers and the rights and duties of shareholders and managers. As a result, only about 9 percent of the total distributed value of privatization vouchers was used. Between 1995 and 1997, 97 joint stock companies were privatized by public auction. Difficulties in implementation and its interruption during the unrest of 1997 led the Government to reassess the process.

The third wave started in 1998 with the approval of the law on "Privatization Strategy for Important Branches" which spelled out the strategy for the privatization of the remaining non-strategic and strategic enterprises. Non-strategic enterprises were mainly sold following an auction-based approach. The international tender was the method of sale designed for four of these companies as they were viable joint-stock companies with a brand name and a reputation in the country. As of September 2000 all these non-strategic enterprises were privatized for a total revenue of about Lek2 billion. Privatization of strategic sectors (telecommunications, mining, chrome, copper and petroleum sector) is being carried out through international tenders in order to attract foreign investors.

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March 28, 2001 4:34 PM