The Republic of Albania, a lower middle income country with a Gross National Income (GNI) per capita of US$2,060 in 2004 has experienced relatively high economic growth rates following its transition from communism to a market based economy. The Government of Albania (GoA) has carried out major institutional and economic reforms while maintaining macroeconomic stability. Despite these achievements, Albania remains one of the poorest countries in Europe. According to the Living Standards Measurement Survey (LSMS), a quarter of the Albanian population live in poverty and about 5 percent live in extreme poverty (e.g in the northeastern part of the country). The incidence of poverty is more significant among young families and persons with low levels of education.

Key bilateral donors for Albania include the EC, Germany, Greece, Italy, the Netherlands, USAID and Switzerland. Multilateral development institutions include the EBRD, IFAD, IMF, UNDP and IDA. Based on 2002-2003 gross ODA data, IDA, EC, Greece, and the United States are the country’s major donors and the share of bilateral donors is approximately 63 percent.

GoA in collaboration with development partners, produced a PRSP as the Growth and Poverty Reduction Strategy (GPRS) and launched it in 2001 as the National Strategy for Social and Economic Development (NSSED). The GPRS which rests on two pillars: governance and strong economic growth (with education, health care, and infrastructure as priority areas) was presented to the Boards of the World Bank and the International Monetary Fund (IMF) in June 2002. The objectives of the GPRS are to (i) maintain real GDP growth of 22-25 percent during 2002-2004; (ii) reduce the number of people living in poverty; (iii) improve infrastructure and related services such as supply of portable water, sewage and electric power; (iv) reduce infant and maternal mortality rates; and (v) increase the level of 8-year (elementary) and secondary education and average schooling period.

The GPRS is connected and harmonized with the sector development strategies (e.g. in health, and decentralization). In April 2004, GoA published its second progress report on the implementation of the NSSED which included the priority action plan for 2004-2007. The NSSED (a dynamic document) has evolved into the basic document of mid-term (2004-2007) and long-term (2004-2015) government policies that combine the main agendas of GoA for reducing poverty, guaranteeing sustainable economic growth, achieving the MDGs, integrating the country into NATO, the EU and the region. A department of the NSSED (DoNSSED) has been established within the Ministry of Finance to coordinate all NSSED-related activities.

A group of donors (CIDA, DFID, IMF, Italy, Netherlands, Organization for Security and Cooperation in Europe (OSCE), UNDP, UNICEF, USAID and the World Bank) met on several occasions to discuss the GPRS process and the donors' role. Donors provided inputs to the GPRS process in several forms.

Donor coordination began in 1999 through the Friends of Albania (an informal group of development partners) and evolved in 2003 into a Donor Architecture in which the donor community agreed to allow the EC, UNDP, OSCE and the WB to lead the coordination process (reporting to all donors regularly) based on the work of numerous Sector Working Groups (SWGs). These four lead donors had four distinct but complementary mandates. They formed the Donor Technical Secretariat (DTS) to manage the coordination process. The EC, being the largest donor, became the permanent Head of the DTS.

In the first quarter of 2005, the donors agreed to commence work with GoA to formulate a Harmonization Action Plan (HAP) design by December 2005 and develop it in 2006. A Paris Declaration indicator baseline (2004-2005) is being produced and together with quarterly monitoring, the database will give trends by sector and by donor.

Donor coordination in Albania is undergoing a rapid transition from a donor-led approach to country-owned coordination. It is concentrated in the Prime Minister’s Office supported by Ministries of Finance and European Integration. The Deputy Prime Minister chairs the Quarterly Donor-Government Roundtables now. At this meeting, reports on coordination efforts in the sectors are presented. The DTS convenes Development Counselor Meetings in preparation for the Roundtables.

The Government Technical Secretariat (GTS) consisted of representatives of the core ministries – Finance (budget, public investment), Economy, European Integration (Community Assistance for Reconstruction, Development and Stabilization (CARDS) programming), Interior (public administration) and Council of Ministers (policy coordination, national integrated strategy) under the leadership of the Prime Minister’s office. The GTS was instrumental in drafting the Integrated Planning System (IPS). The GTS and DTS met regularly as the Joint Technical Secretariat (JTS) during the IPS design phase. The JTS coordinated government and donor cooperation on the IPS reform and facilitated roundtables.

In May 2005, GoA launched the IPS which aims to integrate the various policy frameworks (NSSED, Stabilization and Association Process, MDGs, etc.) into a single medium-term development plan in 2007. The IPS also envisages a new architecture for donor coordination and management of external assistance.

As a result of the July 2005 Parliamentary elections, the Democratic party-led coalition formed a new Government in September 2005. It will focus its efforts to wipe out corruption, fight poverty, and move Albania closer to European integration. The new government confirmed its commitment to the implementation of the NSSED and the Integrated Planning System (IPS).

In November 2005, the new government approved a reworked IPS and created two new inter-ministerial committees which supersede the GTS inter-ministerial coordinating role. They are the Prime Minister-led Committee on Strategic Planning and the Deputy Prime Minister-led Committee on Government Modernization. The new functions at the Prime Minister’s Office on IPS, NSSED, and Donor Coordination will take over the concrete work of the GTS. The IPS is a state-of-the-art internal coordination system to translate vision, strategy and policy into multi-annual budgeting, objective-based programming, implementation and monitoring/evaluation of impact.

In January 2003, Albania started negotiations with the EU for a Stabilization and Association Agreement (SAA). Negotiations have advanced since then and focus on political, institutional, and economic issues.

Implementation of the Albania Public Administration Reform Project (PARP) was managed successfully from within an existing GoA institution (i.e. the Council of Ministers (CoM)). The project implementation reports of the Unit for Implementation of the Public Administration Reform Program (UIPARP) are good practice models for tracking all stages of project execution (e.g. TOR preparation, procurement, contracting, and contract execution).

A SWAp is being prepared as a pilot in the transport sector.

The Infrastructure Steering Group held a donor coordination meeting on SWAps in Tirana in September/October 2004.

A Memorandum of Understanding (MoU) on the “Development of the South East Europe Core Regional Transport Network” between all Western Balkan countries was signed on June 11, 2004. This MoU confirms the commitment of Western Balkans countries to work together to (i) enhance regional transport within an agreed regional framework and core network, (ii) have reciprocal consultations on transport policy, and (iii) introduce an institutional framework that facilitates sustainable investments in the sector.

Albania is expected to fully graduate from IDA by 2008.