Albania WT/TPR/S/229
Page 103

IV.  trade policies by sector

(1)  Overview

  1. Agriculture is the main source of employment in Albania, and still contributes a significant, albeit declining, share to GDP. The sector, however, is uncompetitive and lacks investment. Farms are small and fragmented and the sector suffers from organizational and infrastructural shortcomings. Albania is a net food importer. Tariff protection and government support to the sector is relatively low: Albania's average applied MFN tariff on agricultural products (WTO definition) is 8.8%, the highest tariff being 15%. Most of Albania's imports are from the EU. However, Brazil, Russia, and Turkey are key sources of imports for certain agricultural products. Domestic production is largely consumed domestically, and Italy is the destination for most of Albania's agricultural exports. Albania does not provide agricultural export subsidies, and just over 60% of government support to the sector in 2008 was green box support. Direct payments to farmers, have largely been for drainage and irrigation, and more recently to subsidize the planting of trees to increase fruit production.
  2. The services sector is by far the largest contributor to output in Albania. Albania has made wide-ranging and substantial commitments under the GATS, with commitments in 11 out of the 12broadly defined services areas, or 111 of the 160 services sectors. Albania has also made over 100GATS notifications.
  3. The telecommunications sector is largely liberalized. Key developments in the sector over the review period include: the liberalization of the fixed-line market in 2005; the privatization of the incumbent, Abtelecom, in 2007; and the enactment of new telecommunications legislation in 2008. At end 2009, Albtelecom was still the largest provider of fixed-line services, but more providers are entering the market; fixed-line penetration, however, remains low. There were four mobile operators and a high, 129%, mobile penetration rate. Broadband penetration rates have increased substantially
  4. In the financial services sector, key legislative and institutional developments since 2000 include: new laws on insurance, banking and securities; the separation of the Tirana Stock Exchange from the Bank of Albania; and the establishment of the Albanian Financial Supervisory Authority, an independent institution responsible for superving the insurance, securities, and private pensions markets and other non-banking financial activities. The banking system in Albania is dominated by foreign capital, which accounts for nearly 90% of total capital. Foreign banks may take the form of branches or of subsidiaries incorporated in Albania. Branches are required to invest part of their initial capital in certain assets. The banking system has so far proven itself robust in the face of the global financial crisis. None of the 16 commercial banks operating in the country have failed or been provided with government support, and stress tests undertaken in 2008 indicated the system's resilience to various risks. An increase in non-performing loans, however, is of concern. Foreign insurance companies may be established as subsidiaries, branches, or representative offices, and they receive national treatment. Risks that occur in Albania must be insured locally, unless otherwise foreseen in international agreements to which Albania is a party or with respect to insurance of risks connected to sea or air transport.
  5. Modernization of Albania's transport infrastructure is seen as central to sustaining trade and private-sector development and, at a more general level, economic growth and investment. Albania has scheduled GATS commitments on maritime, air, and road transport, as well as services auxiliary to all modes of transport. The Stabilization and Association Agreement with the EU also has a transportation component.
  6. With respect to maritime transport, key developments over the review period include the adoption of a new maritime code and a law on security of ships and port facilities. In addition, the Durrës Port Authority was established to operate the main port on a commercial basis. A Maritime Administration is being established. There are no restrictions on the provision of international maritime services for passengers or freight. Cabotage is restricted by law; however, this has no practical implications since there is currently no such activity. The authorities confirmed that all port services at Durrës Port are operated by the private sector, with substantial participation by foreign companies. Efforts are ongoing to upgrade the infrastructure at all four of Albania's ports.
  7. Albania has one international airport. In 2005, following an international tender, a 20year concession for the management and operation of the airport, including ground-handling, was granted to a private consortium. Under the agreement, this consortium has the exclusive right to international traffic in the country. This may hinder the development of the five other national airports, which currently operate only domestic charter flights. Albania has signed and is in the transition process of implementing the European Common Aviation Area Agreement (ECAA). The ECAA will replace the majority of the bilateral air services agreements in place and, in extending the Single European Sky to Albania, will represent a significant liberalization of the sector.
  8. Albania has undertaken commitments on all the professional services subsectors in the classification list, with only a few limitations scheduled under market access and national treatment. A new law "Regulated Professions in the Republic of Albania" was adopted in 2009; this law mandates the establishment of professional associations to regulate and set the qualification requirements for doctors, dentists, pharmacists, nurses, midwives, physiotherapists, vets, architects, and engineers. Following an overhaul of statutory auditing requirements, a new law has also been adopted to regulate the accounting profession.

(2)  Agriculture and Agri-Food

(i)  General features and policies

  1. Agriculture continues to be an important economic activity for Albania. In 2008, around 1.7million people (nearly 50% of the population) were employed in farms. Agriculture (together with hunting and forestry) makes a significant contribution to total GDP (basic prices), although this declined gradually over the review period, from 26% in 2000 to 19% in 2007.[1]
  2. As reported by the Ministry of Agriculture, Food and Consumer Protection (MAFCP) in 2008, livestock (mainly cattle, sheep and goats) accounted for 52% of total agricultural production (around lek 76 billion), field crops for 32% (lek 46 billion) and fruit trees, 16% (lek 23 billion). Particularly strong recent growth has been reported for fruit (especially vineyards) which nearly doubled over the period 2000-08.[2] Most farming is subsistence, with only 30% of livestock and crop production being orientated to the market (mainly vegetables, potatoes and fruits).[3]
  3. Albania is a net importer of food. Agri-food imports totalled just over US$908 million in 2008, representing 17.3% of total merchandise imports; in the same year the value of exports was just over US$104 million, or 7.7% of the total (Tables A1.1 and A1.2). Italy is the principal destination for Albania's exports (Table IV.1).


Table IV.1

Exports of agricultural products (WTO definition) by main trading partners, 2008

(US$ million and shares)

Product / Value of exports
(US$ million) / Main trading partners
Certain grains, seeds and fruit; straw and fodder / 25.7 / Germany (38.4%) / United States (14.7%) / Turkey (11.2%)
Preparations of meat and fish / 22.2 / Italy (93.7%) / Greece (4.2%) / Croatia (1.8%)
Raw hides and skins (excl. fur skins), leather / 18.3 / Italy (78.4%) / Turkey (9.5%) / Bosnia and Herzegovina (6.7%)

Note: Data provided at the 2-digit HS level.

Source: UNSD Comtrade database.

  1. The Albanian authorities have identified a number of challenges facing the agriculture sector. Primarily, farm land is fragmented, with mostly small farm holdings, averaging 1.2hectares in 2008.[4] This resulted from land reforms undertaken in the 1990s when large collective farms were dismantled and the land distributed to former workers, and the subsequent reluctance of the new landowners to sell their land. Other challenges include: diversifying farm production; increasing the use of mechanized farming techniques[5]; improving food safety standards (see Chapter III(2)(ix)); improving the marketing of products for export and facilities to store, process, and pack products; and developing infrastructure (transport, water, and electricity). In its current state, the sector is not competitive, nor is it an attractive target for private sector investment.[6]
  2. Government policies to date have been focused mainly on rehabilitating infrastructure, particularly irrigation and drainage, and market infrastructure and laboratories (see section (v) below); creating a favourable environment for business through land privatizations; and assisting farmers through training and extension services and the transfer of knowledge, new practices, and technologies. Technical and financial aid from external donors has played an important role in supporting the sustainable development of agriculture. Aid for projects being implemented over the period 2003-11 amounts to some €48million.[7] The agriculture sector is eligible for funds from the European Agricultural Fund for Rural Development (EAFRD), and the EU Instrument for Pre-Accession Assistance for Rural Development Programme (IPARD). Under the latter, Albania received €2 million for the period 2010-12.

(ii)  Legal and policy making framework

  1. The Ministry of Agriculture, Food and Consumer Protection (MAFCP) is responsible for policy development and implementation in the agriculture sector.[8] The MAFCP produces an annual integrated programme setting out how it intends to implement the Government’s objectives for the sector. The MAFCP is also responsible for developing draft laws and regulations; providing education and training; undertaking analytical and development studies; as well as providing public service activities such as irrigation and drainage, and extension services; agricultural research and laboratory control; breeding services; analysis of agricultural policies; and marketing services. A newly established Payments Agency, under the MAFCP is charged with implementing agricultural policy measures, including the administration of funds from the State and international donors, as well as analysis and evaluation-related work.[9] The establishment of this agency was required by the EU in order for Albania to benefit from EU funding.[10] Approximation with EU law will also require the establishment of a rural development directorate in the MAFCP, which must be accredited by the EU and will be responsible for developing the policies and programmes for the use of rural development funds.[11]
  2. The main law governing the sector is Law No. 9,817 of 22 October 2007 (for agriculture and rural development), which is based on four principle EU Regulations: Council Regulation (EC) No. 1,698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)); Council Regulation (EC) No. 1,234/2007 of 22October2007 establishing a common organization of agricultural markets) and on specific provisions for certain agricultural products; Council Regulation (EC) No. 1,782/2003 of 29September 2003 (consolidated version) establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers; and Council Regulation (EC) No. 1,290/2005 of 21 June 2005 on the financing of the common agricultural policy-CAP.
  3. The Sector Strategy of Agriculture and Food (SSAF), 2007-13 lays out the Government’s programme for the sector, in line with the overall objective of moving towards integration into the EU.[12] The SSAF is the agricultural component of the National Strategy for Development and Integration (NSDI). It sets out five strategic priorities: increased financial support for farms, agricultural and agri-processing businesses; improved management of irrigation and drainage of agricultural land; improvements to the marketing of agricultural and agri-processing products; increased level and quality of technologies, information, and knowledge of farmers and agriprocessors; and better quality and safety of agricultural and agri-processing products. In addition, certain strategic subsectors have been identified for priority development: fruit growing (including olives) and viticulture; horticulture; livestock; and industrial processing of fruits, vegetables, milk, and meat. The Government estimates that expenses plus investments to implement the SSAF may grow from lek 5.5billion in 2007 to around lek22 billion over 2011-13.
  4. The Inter-sectoral Rural Development Strategy of Albania (ISRDSA) also contains government priorities for the agriculture sector as they relate to rural development. The authorities note that these priorities have been developed to reflect those of the European Union. Strategic priorities include increasing the competitiveness of the agricultural and agri-processing sector through farm modernization measures and support for restructuring and value-added activities.
  5. The European Partnership (EP) with the EU adopted in November 2007 stipulates the main priorities for the future development of agricultural policy. In the short term, the priority is to adopt a new law on food in line with EU standards, strengthen the food safety system and related control systems, and improve the phyto-sanitary and veterinary legislation and practices. In the medium term, Albania is expected to develop strategies for land use, creating a land market, rural development, and diversifying farm activities in order to enhance agricultural competitiveness.

(iii)  Border and related measures

  1. Tariff protection granted to the agriculture sector is higher than the overall simple average applied MFN tariff. While the latter was 5.2% in 2009, the average MFN applied tariff for agriculture (WTO definition) was 8.8%, with a highest tariff of 15%. Under its WTO commitments, Albania has bound all agricultural tariff lines and does not maintain tariff quotas (Chapter III(2)(iv)).
  2. In 2008, in value terms, most imports of agricultural and food products were from other European countries. However, Brazil was the main source of imports of meat and of sugars and confectionary; Russia was the main source of cereals, and Turkey of preparations of cereals, flour, starch or milk (Table IV.2).

Table IV.2

Imports of agricultural products (WTO definition) by main trading partners, 2008

Product / Value of imports, (US$ million) / Main trading partners
Principal / Second / Third
Cereals / 136.0 / Russia (26.7%) / Hungary (15%) / Ukraine (8.9%)
Beverages, spirits and vinegar / 83.0 / Italy (29.9%) / Greece (22.3%) / Austria (20.9%)
Tobacco and substitutes / 81.8 / Germany (35.2%) / Greece (28.9%) / Poland (15.9%)
Raw hides and skins (excl. fur), and leather / 76.8 / Italy (96.4%) / India (1.4%) / Spain (0.6%)
Fats and oils / 75.7 / Hungary (19.5%) / Ukraine (13.7%) / Bulgaria (13.2%)
Meat and edible offal / 68.8 / Brazil (38.9%) / United States (16%) / Italy (15.8%)
Preparations of cereals, flour, starch or milk / 59.8 / Turkey (38.7%) / Italy (23.9%) / Bulgaria (15.3%)
Edible fruit and nuts / 57.0 / Italy (35.8%) / Greece (27.5%) / Ecuador (25.6%)
Sugars and confectionary / 44.6 / Brazil (80.5%) / Turkey (6.5%) / Greece (2.9%)
Live animals / 41.7 / Bulgaria (54.9%) / Hungary (11.9%) / Greece (11.8%)

Note: Data is provided at the 2-digit HS level.