Albania: Free Trade Jitters

Tuesday, 6 September, 2005

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Ilir Aliaj

The government is heading for an angry showdown with Albanian business bosses, who fear they may face bankruptcy as a result of an EU-endorsed free trade agreement with neighbouring countries. They want the government to offer some safeguards for their companies before it allows cheaper products to enter the country untaxed.

The local businessmen are particularly anxious about the import of heavily subsidised grain and beer from neighbouring countries, and have asked the government to consult them over which products are to be covered by the agreement.

Their objections appear to have already prompted Albania to postpone signing a free trade deal with Serbia, a major grain producer. The agreement with Belgrade was due to have been sealed in December 2002.

Luan Bregasi, president of the Albanian chamber of commerce, told IWPR that the Serbian government lavishes subsidies on its farmers, which bring down the price of their produce, "If Serb flour is allowed into Albania without any tariffs, it would mean bankruptcy for us and serious problems for society. That is why we are not exactly applauding this agreement."

The creation of a free-trade zone involving seven countries - Croatia, Bosnia and Herzegovina, Yugoslavia, Macedonia, Albania, Bulgaria and Romania - was agreed in January 2001, under the aegis of the EU's stability pact. Lifting customs barriers between these countries for a variety of products is regarded as a vital first step towards eventual consideration for EU membership.

The Balkan countries were meant to have completed all individual free trade agreements with each other by the end of 2002. So far though, Albania has only struck a deal with Macedonia. It has asked Stability Pact officials for more time before it completes the remaining five deals.

Government official Adriana Civici, who heads the trade negotiations for Albania, told IWPR their decision not to conclude the Serbian arrangement in December was intended to signal her country's difficulties in managing the transition from a "closed economy to a free trade environment".

The economy of Albania is still struggling to find its feet after years of communist and post-communist mismanagement. According to the economics ministry, the trade deficit in 2002 totalled an alarming 1.1 billion US dollars. Losses in trading with EU member countries and Balkan neighbours making up around 80 and about 7 per cent of the total respectively.

Although the trade liberalisation is intended to improve Albania's long-term prospects in Europe, Civici concedes that the government has yet to make a thorough analysis of how the country's ailing economy will cope in the short term.

Civici, nonetheless, insists that the liberalisation process is inevitable and local enterprises cannot duck the challenge of competition from abroad. In her view, business chiefs who opposed the agreement with Serbia did so for fear of losing their monopoly at home.

Bregasi dismisses this argument, saying that monopolies are a thing of the past. Indeed, some large companies in Albania have woken up to the challenge of the free market. They have been investing heavily in recent years - to the tune of 17 million dollars in the grain sector alone - so their products can match up to European standards, and it is exactly this investment that they are now most worried about.

Ali Kazai, senior manager of Birra Tirana brewery, said that the prospect of free trade agreements and European competition had forced his company to make an investment of six million euro in order to upgrade technology and lower costs.

"Otherwise we would not be able to face imported products. Moreover, the burden of this move will fall on the employees, because the higher technology will lead us to cut the number of jobs," he added.

Bregasi says he has asked the government to protect key agricultural sectors for another year from cheaper Serbian imports. "After that, we will be able to enter the free market competition," he said.

Albanian businesses are not opposed to trade liberalisation in principle - they just want to ensure that they enter a level playing field.

Agim Rrapaj, president of the Albanian Council of Agro-business, suggested that Serbia could be penalised for subsidising its grain industry so heavily, as this contravened the principles of the World Trade Organisation, which Albania joined last year. He added that he had doubts about the quality of the flour exported by Serbia.

The business community's jitters have been worsened by the fact that Albanian leaders meet EU officials in February 2003 to discuss the country's participation in a Stabilisation and Association Agreement, another critical test for eventual entry into the trade bloc. Businessmen fear their government will not be able to stand up for them in the face of pressure from Brussels to liberalise.

Irfan Hysenbelliu, a spokesman for the beer industry, said, "All countries in the region protect their domestic products, except for our country."

Ilir Alijaj is a freelance journalist based in Tirana.