Albanian Cities: Review of Post-Communist Economic Development Issues

1. Serbian Spatial Planners Association 4thScientific and Professional Symposium with International Participation LOCAL SELF-GOVERNMENT IN PLANNING AND REGULATION OF SPACE ANDSETTLEMENTS Zlatibor Mountain 15th-17th of March 2012 Albanian Cities: Review of Post-Communist Economic Development Issues DorinaPojani Assistant Professor EpokaUniversity Department of Architecture Tirana, Albania Contact: dpojani@epoka.edu.al +355 686081986

2. Main points • Critical transformations have occurred in urban areas of Albania since the fall of communism in 1990 • Overview of local government structures • Focus on local economic development issues • Negative aspects: • Albanian cities are underserved in infrastructure and public services • Still high unemployment in urban areas • Average income levels are below the average in West Europe • Positive aspects: • Impressive economic growth since 1990 • One of the fastest in transitional economies, with a relatively high increase in the Gross Domestic Product. • Reduction in poverty • Differences between regions were reduced • Albanian cities do not have a significant hungry or homeless population like most industrial nations • Family cohesion is still great in comparison to the West

3. URBANIZATION AND MIGRATION • Three quarters of the Albanian population of approximately three million lived in the countryside during the communist era • Today almost half lives in cities • Almost half of rural-urban flows going to the Tirana municipality • Now, at least a quarter of the Albanian population lives in the capital Tirana • Tirana has doubled in population since the fall of communism: from 300,000 to well over 600,000 • The remaining municipalities are small in size relative to the capital

4. Main inter-district migration flows Note: The size of the arrows is proportional to actual migration flows. Source: FAO 2009. • In recent years internal migration flows have slowed down • Improvement in economic conditions in the country • World economic recession • Nearly one million Albanians migrated to other countries, mainly Greece and Italy

5. Reasons forrural–urban migration in Albania • A long-standing desire to move to urban areas, which was repressed in the past by communist era controls on mobility; • The depletion of many villages and towns in the post-communist years of professional services; • Escaping natural disasters and harsh weather conditions; • Freedom from the harsh Kanun laws of revenge and vendettas • An introduction to urban life - a stepping stone for international migration

6. Role of Remittances • Enormous in relation to the size of the Albanian economy • In 2007, remittance funds reached 945 million Euros • An estimated 13% of GDP • Three times higher than net foreign direct investment • Double the official development aid received by Albania • Covered 50% of the trade deficit • Tirana ranks by far the highest in the average amount of remittances made • About a third of Albanian households report being recipients of remittances from abroad

7. THE URBAN GOVERNANCE SYSTEM: THE (DE) CENTRALIZATION REFORM • Year 2000: • New structure: • 12 regions, • 65 municipalities, and • 309 communes. • Forty eight percent of the municipalities and communes have less than 5,000 inhabitants. • Purposes: • Optimization of the provision of public services • Better coordination

8. Local government structure • The local government in Tirana operates at two levels: • the elected City Council, headed by a mayor, and • 11 “borough” councils (mini-bashki) • The Mayor of Tirana is typically a powerful political figure in the country (practically second to the Prime Minister) • Boroughs have little political power A typical municipal organization scheme in Albanian cities.

9. Municipal functions • Cities are charged by law with: • the provision of infrastructure and public services, • land use management, • local economic development, and natural and built heritage and law and order protection within their borders • set and levy local taxes and fees in order to provide these services • Albania is gradually devolving decision-making powers from the national to the local governments • A law on the Organization and Functioning of Local Government • The decentralization law implementation has been slow

10. Municipal finances • Local financial resources remain limited • A substantial portion of cities resources are transfers from the central government • The central authorities have been reluctant to devolve real powers to the local levels, citing their lack of expertise and limited financial resources • The central government influences local government decisions through agencies such as the prefectures • The process of determining local budgets is highly politicized; • Often, the budget approval is significantly delayed, thus standing in the way of the implementation of public works • Citizensare skeptic about what they can expect from local authorities • low respect for local laws • diminished local tax and service fee payments • vicious circle • a few NGO initiatives to strengthen public participation in decision making

11. Other challenges • Significant disparities in size and capacity of local governments • Inability of communes and small municipalities to take responsibility for public services that require large or/and increasing scales of production and which also involve significant externalities • (e.g. water supply, waste management, secondary education) • The autonomy of the smallest local governments is mostly symbolic • Challenge in establishing an independent, efficient and merit-based civil service to prevent corruption • The law provides for exceptional legal remedies, such as retrenchment and restructuring • Frequently used to dismiss civil servants on uncertain grounds

12. Changes in the urban economy • Profound structural transformation of the Albanian economy • From traditional agriculture and basic industry to higher productivity activities: services and construction • The private sector, dominated by small-size enterprises - riving force of the economy • A significant share of Albanian businesses operates in the informal sector • construction and services sectors in urban areas • Construction • Until the recent economic crisis - one of the most dynamic sectors • Overcoming housing shortages • Lack of secure alternative outlets for savings • Shield for hyper-inflation • Tourism • Major part of the service sector • Combination of naturally beautiful shorelines and cultural and archaeological heritage from Greek and Roman times in the south • tourist numbers have increased substantially in the last decade and investment is on the rise • the tourism industry is still tiny in proportion to other countries in the region • Agriculture • Traditional important role, more than half of the employment in mid-2000s. • Focused on traditional low-value outputs for the domestic market • Mainly low productivity subsistence farming • Agro-processing industries might become a future driver of the local economy • Industrial sector • Slow • A few food and clothing production centers

13. From left to right: agricultural, industrial, and service sectors. Source: CEAT - Instat, 2010.

14. Competition and Cooperation among Cities • Three broad regions • The Central region • Anchored by the capital city Tirana and Durrës, the major port of Albania, • Sets the pulse of economic activity • The strongest business activity is within the western-coastal corridor • The main trading hub of the country • Includes the country’s only international airport • The greater Tirana area is estimated to account for about half of the country’s total economy - per capita income at least 50% higher than the country average • Unemployment is estimated to be 19% of the workforce in Tirana - significantly higher than the national average • However, the Tirana labor market seems to deliver on the promise of improved welfare that continues to attract residents to the capital • The Coastal Zone • Potential in tourism and agriculture • Agribusiness - an established pillar of the local economy, with untapped potential to supply the domestic and international market • Strong potential for tourism development, once appropriate infrastructure is provided and structured tourism promotion is put in place • Italian investments - small and medium-size enterprises - are concentrated near the Adriatic Sea • Greek investments - trade, textiles- dominate in the south and southeast of the country, close to the border • The Inland Zone • Continues to lag behind • The mountainous inland in the north and south-east - poorer agricultural fertility than the coastal areas • Enterprise activity declined strongest during the period of 1997 to 1999 (pyramid schemes) • The Kosovo crisis • Particularly dilapidated infrastructure • Many locals have moved to the central region or abroad over the last decade • Trade with Kosovo and Macedonia might increase with the construction of a highway to Kosovo (Rruga e Arbrit) • The cities of Berat and Korça are a positive exception and still retain some regional dynamic and enterprise growth

15. Vlora Tourism potential Butrinti Gjirokastra Berat Durres Albanian Alps

16. The future • Rapid urbanization • Exceptional growth in the economic role of the capital • Urbanization has contributed to a host of problems, • Higher unemployment in urban areas than in rural areas • Poor governance, including lack of transparency and excessive centralization • Poverty • Impact of urbanization on traditional social structure • Solutions are not simple • No readily available models from other countries that Albanian cities could adopt • A proactive government role is needed to encourage, support, and help diversify the economic base of cities • Promotion of a positive image for the capital as a desirable place to live and do business for potential foreign investors • Creation of a better business climate for local investors • Marketing efforts to foreign enterprises need to be accompanied by actual interventions in the city fabric

17. Thank you! Questions? Dorina Pojani Assistant Professor Epoka University Department of Architecture Tirana, Albania Contact: dpojani@epoka.edu.al +355 686081986