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Albania-Dependence on China, 1961-78

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The Albanian leadership's fixation on heavy industry contributed significantly to its decision to break with the Soviet Union. Enver Hoxha gambled that China not only would be less likely than the Soviet Union to threaten his ascendancy but also would be more likely to provide investment money and equipment for his pet industrial projects. Albania's Third Five-Year Plan (1961-65) amounted to outright defiance of Soviet advice to concentrate mainly on agriculture. The plan allocated industry 54 percent of all investment and called for a 52-percent rise in overall industrial production, including increases of 54 percent and 50 percent in the output of producer and consumer goods, respectively. Moscow responded by canceling credits. The Albanian leaders foresaw that a cut in Soviet investment and aid would disrupt their economy but calculated that maintaining power and continuing industrialization would outweigh the failure of one five-year plan. The Soviet aid stoppage brought Albania's foreign trade to a near halt and delayed completion of major construction projects. Spare-parts shortages led to a 12.5-percent decline in labor productivity between 1960 and 1963. China compensated Albania for the loss of Soviet credits and supplied about 90 percent of the spare parts, foodstuffs, and other goods Moscow had promised. The Chinese, however, proved unable to deliver promised machinery and equipment on time.

In 1962 the Albanian government introduced an austerity program to keep the country's sputtering economy from stalling entirely. Official public appeals to cut costs and conserve resources and equipment netted a claimed 6 percent savings. The government also initiated a campaign of "popular consultation," asking individuals to submit suggestions for improving self-sufficiency. Years of state terror and still-rigid central control, however, had undermined the Albanians' willingness to assume personal responsibility. Party hard-liners, fearing they would lose their positions to a younger generation of more technically sophisticated managers, sabotaged cost-cutting measures.

The government launched a program to increase the amount and quality of arable land by terracing hillsides and draining swamps. A new phase of collectivization was initiated. However, agricultural output grew only 22 percent over the entire five years instead of the planned 72 percent. Overall industrial production grew a mere 14 percent in 1964 and 1965.

Fearful of a potential domestic power struggle and disappointed that heavy industry's output had failed to increase significantly overall between 1950 and 1965, the Albanian regime adjusted its Stalinist economic system in the mid-1960s. The government altered the planning mechanism in February 1966 by allowing for a small degree of worker participation in decision making and reducing by 80 percent the number of indicators in the national economic plan. The leadership also decentralized decision-making power from the Council of Ministers to the ministries and local people's councils and included a slight devolution of control over enterprise investment funds. The system was specifically designed, however, to ensure that resources were allocated in accordance with a central plan. At no time, at least in public, did Albania's rulers entertain the notion--heretical to all orthodox Stalinists--that economic decision making should be devolved to the enterprises.

In March 1966, an "open letter" from the Albanian Party of Labor to the Albanian people heralded radical changes in the egalitarian job allocation and wage regime. The authorities cut 15,000 jobs from the state bureaucracy, replaced executives, and shunted managers and party officials into the countryside. The government then eliminated income taxes and reduced the salaries of highly paid workers. Wages varied by industry, but the ratio between the lowest and highest salaries was only about 1:2.5. Reviving a scheme originally launched in 1958, the government began assigning all employees to perform "productive" physical labor. People engaged in "mental work"--for example, intellectuals, teachers, and party and state bureaucrats--were required to toil in the fields for one month each year. Even high-school students took part in "voluntary" construction and agricultural work. Only the party elite remained unaffected by the egalitarian reforms.

In emulation of China's Cultural Revolution, which was designed to rekindle the revolutionary fervor of the masses, Hoxha prescribed a regular rotation of managers to prevent "bureaucratic stagnation," "bureaucratism," "intellectualism," "technocratism," and a whole neologistic lexicon of other "negative tendencies." The campaign, called the Cultural and Ideological Revolution, also prescribed the replacement of men with women in the party and state administrations.

The government's economic adjustments militated against efficiency. Workers, who were given a voice in planning, lobbied for the easiest possible production targets and worked to overfulfill them in order to earn bonuses. But because one year's output figures became the basis for the next year's targets, they tried to limit overfulfillment to prevent the imposition of difficult targets in the next planning period. The government's campaign to send office workers out to the fields, mines, and factories encountered resistance. The policies of guaranteed full employment and extensive growth--expanding productive capacity rather than squeezing more from existing capacity--made huge numbers of workers redundant. The low quality and quantity of consumer goods and virtually flat income-distribution curve dampened incentive. Workers dealt in pilfered state property and rested at their official jobs in order to moonlight illegally. Although the government had herded all artisans into cooperatives by 1959, many craftsmen, including tailors, carpenters, and clothing dealers, earned undeclared income through private work. Black-market construction gangs even performed work at factory sites and collective farms for directors desperate to meet plan targets.

In the late 1960s, thanks mainly to massive capital inflows from China, the Albanian economy expanded. The Fourth Five-Year Plan (1966-70) called for an increase of about 50 percent in overall industrial production, with producer-goods production increasing by 10.8 percent annually and consumer-goods output rising 6.2 percent. Most sectors exceeded plan targets. Heavy industry's share of overall industrial production rose from 26 percent in 1965 to 38.5 percent in 1970, the largest increase registered in any five-year period in Albania's history (see Table 4, Appendix). In 1967 the government launched a "scientific and technical revolution" aimed at improving self-sufficiency. For the first time, the Albanian Party of Labor made a serious attempt to take into account Albania's natural resources and other competitive advantages while planning industrial development. Government officials examined blueprints for coal-fired and hydroelectric power plants as well as plans for expanding the chemical and engineering industries. Despite chronic worker absenteeism, the engineering sector performed remarkably well, tripling output between 1965 and 1973. The late 1960s also saw changes in the agricultural sector. The authorities announced a farm collectivization drive in 1967 and, in an attempt to take advantage of economies of scale, amalgamated smaller collectives into larger state farms in 1967 and 1968. By 1970, Albania's power grid linked all the country's rural areas.

In the early 1970s, Albania's economy entered a tailspin when China reduced aid (see Shifting Alliances, ch. 4). During the period of close ties, the Chinese had given Albania about US$900 million in aid and had provided extensive credits for industrial development. In the mid-1970s, China accounted for about half of Albania's yearly US$200 million in trade turnover. The economic downturn after the aid reduction clearly showed that Albania's Stalinist developmental strategy failed to provide growth when levels of foreign aid were reduced. In the Fifth Five-Year Plan (1971-75), the government called for an increase of about 60 percent in the value of overall industrial production; producergoods production was to increase by about 80 percent and consumer-goods output by about 40 percent. General results from the first two years of the plan were relatively satisfactory. But after China reduced aid to Albania substantially in 1972, many key sectors fell disastrously short of plan targets. Tiranë responded by launching an export drive to the capitalist West a year later. In 1974 the government criticized consumer-goods producers for failing to meet assortment and quality objectives. During the five-year period, overall industrial production rose just over 50 percent; producer-goods output, 57 percent; and consumer-goods output, 45 percent. Despite the obvious link with the curtailment of Chinese aid, the Albanian government offered no official explanation for the economic downturn. Widespread purges were reported in 1974, 1975, and 1976.

Data as of April 1992

Background		Albania declared its independence from the Ottoman Empire in 1912, but was conquered by Italy in 1939. Communist partisans took over the country in 1944. Albania allied itself first with the USSR (until 1960), and then with China (to 1978). In the early 1990s, Albania ended 46 years of xenophobic Communist rule and established a multiparty democracy. The transition has proven challenging as successive governments have tried to deal with high unemployment, widespread corruption, a dilapidated physical infrastructure, powerful organized crime networks, and combative political opponents. Albania has made progress in its democratic development since first holding multiparty elections in 1991, but deficiencies remain. International observers judged elections to be largely free and fair since the restoration of political stability following the collapse of pyramid schemes in 1997; however, there have been claims of electoral fraud in every one of Albania's post-communist elections. In the 2005 general elections, the Democratic Party and its allies won a decisive victory on pledges to reduce crime and corruption, promote economic growth, and decrease the size of government. The election, and particularly the orderly transition of power, was considered an important step forward. Albania joined NATO in April 2009 and is a potential candidate for EU accession. Although Albania's economy continues to grow, the country is still one of the poorest in Europe, hampered by a large informal economy and an inadequate energy and transportation infrastructure.
Location		Southeastern Europe, bordering the Adriatic Sea and Ionian Sea, between Greece in the south and Montenegro and Kosovo to the north
Area(sq km)		total: 28,748 sq km land: 27,398 sq km water: 1,350 sq km
Geographic coordinates		41 00 N, 20 00 E
Land boundaries(km)		total: 717 km border countries: Greece 282 km, Macedonia 151 km, Montenegro 172 km, Kosovo 112 km
Coastline(km)		362 km
Climate		mild temperate; cool, cloudy, wet winters; hot, clear, dry summers; interior is cooler and wetter
Elevation extremes(m)		lowest point: Adriatic Sea 0 m highest point: Maja e Korabit (Golem Korab) 2,764 m
Natural resources		petroleum, natural gas, coal, bauxite, chromite, copper, iron ore, nickel, salt, timber, hydropower
Land use(%)		arable land: 20.1% permanent crops: 4.21% other: 75.69% (2005)
Irrigated land(sq km)		3,530 sq km (2003)
Total renewable water resources(cu km)		41.7 cu km (2001)
Freshwater withdrawal (domestic/industrial/agricultural)		total: 1.71 cu km/yr (27%/11%/62%) per capita: 546 cu m/yr (2000)
Natural hazards		destructive earthquakes; tsunamis occur along southwestern coast; floods; drought
Environment - current issues		deforestation; soil erosion; water pollution from industrial and domestic effluents
Environment - international agreements		party to: Air Pollution, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, Wetlands signed, but not ratified: none of the selected agreements
Geography - note		strategic location along Strait of Otranto (links Adriatic Sea to Ionian Sea and Mediterranean Sea)
Population		3,639,453 (July 2009 est.)
Age structure(%)		0-14 years: 23.1% (male 440,528/female 400,816) 15-64 years: 67.1% (male 1,251,001/female 1,190,841) 65 years and over: 9.8% (male 165,557/female 190,710) (2009 est.)
Median age(years)		total: 29.9 years male: 29.3 years female: 30.6 years (2009 est.)
Population growth rate(%)		0.546% (2009 est.)
Birth rate(births/1,000 population)		15.29 births/1,000 population (2009 est.)
Death rate(deaths/1,000 population)		5.55 deaths/1,000 population (July 2009 est.)
Net migration rate(migrant(s)/1,000 population)		-4.28 migrant(s)/1,000 population (2009 est.)
Urbanization(%)		urban population: 47% of total population (2008) rate of urbanization: 1.9% annual rate of change (2005-10 est.)
Sex ratio(male(s)/female)		at birth: 1.1 male(s)/female under 15 years: 1.1 male(s)/female 15-64 years: 1.05 male(s)/female 65 years and over: 0.87 male(s)/female total population: 1.04 male(s)/female (2009 est.)
Infant mortality rate(deaths/1,000 live births)		total: 18.62 deaths/1,000 live births male: 19.05 deaths/1,000 live births female: 18.15 deaths/1,000 live births (2009 est.)
Life expectancy at birth(years)		total population: 77.96 years male: 75.28 years female: 80.89 years (2009 est.)
Total fertility rate(children born/woman)		2.01 children born/woman (2009 est.)
Nationality		noun: Albanian(s) adjective: Albanian
Ethnic groups(%)		Albanian 95%, Greek 3%, other 2% (Vlach, Roma (Gypsy), Serb, Macedonian, Bulgarian) (1989 est.) note: in 1989, other estimates of the Greek population ranged from 1% (official Albanian statistics) to 12% (from a Greek organization)
Religions(%)		Muslim 70%, Albanian Orthodox 20%, Roman Catholic 10% note: percentages are estimates; there are no available current statistics on religious affiliation; all mosques and churches were closed in 1967 and religious observances prohibited; in November 1990, Albania began allowing private religious practice
Languages(%)		Albanian (official - derived from Tosk dialect), Greek, Vlach, Romani, Slavic dialects
Country name		conventional long form: Republic of Albania conventional short form: Albania local long form: Republika e Shqiperise local short form: Shqiperia former: People's Socialist Republic of Albania
Government type		emerging democracy
Capital		name: Tirana (Tirane) geographic coordinates: 41 19 N, 19 49 E time difference: UTC+1 (6 hours ahead of Washington, DC during Standard Time) daylight saving time: +1hr, begins last Sunday in March; ends last Sunday in October
Administrative divisions		12 counties (qarqe, singular - qark); Berat, Diber, Durres, Elbasan, Fier, Gjirokaster, Korce, Kukes, Lezhe, Shkoder, Tirane, Vlore
Constitution		approved by parliament on 21 October 1998; adopted by popular referendum on 22 November 1998; promulgated 28 November 1998
Legal system		has a civil law system; has not accepted compulsory ICJ jurisdiction; has accepted jurisdiction of the International Criminal Court for its citizens
Suffrage		18 years of age; universal
Executive branch		chief of state: President of the Republic Bamir TOPI (since 24 July 2007) head of government: Prime Minister Sali BERISHA (since 10 September 2005) cabinet: Council of Ministers proposed by the prime minister, nominated by the president, and approved by parliament elections: president elected by the Assembly for a five-year term (eligible for a second term); four election rounds held between 8 and 20 July 2007 (next election to be held in 2012); prime minister appointed by the president election results: Bamir TOPI elected president; Assembly vote, fourth round (three-fifths majority (84 votes) required): Bamir TOPI 85 votes, Neritan CEKA 5 votes
Legislative branch		unicameral Assembly or Kuvendi (140 seats; 100 members elected by direct popular vote and 40 by proportional vote to serve four-year terms) elections: last held 28 June 2009 (next to be held in 2013) election results: percent of vote by party - NA; seats by party - PD 68, PS 64, LSI 4, other 4 note: Parliament in November 2008 approved an electoral reform package that transformed the electoral system from a majority system to a regional proportional system; the code also established an electoral threshold limiting smaller party representation
Judicial branch		Constitutional Court, Supreme Court (chairman is elected by the People's Assembly for a four-year term) and multiple appeals and district courts
Political pressure groups and leaders		Citizens Advocacy Office [Kreshnik SPAHIU]; Confederation of Trade Unions of Albania or KSSH [Kastriot MUCO]; Front for Albanian National Unification or FBKSH [Gafur ADILI]; Mjaft Movement; Omonia [Jani JANI]; Union of Independent Trade Unions of Albania or BSPSH [Gezim KALAJA]
International organization participation		BSEC, CE, CEI, EAPC, EBRD, FAO, IAEA, IBRD, ICAO, ICCt, ICRM, IDA, IDB, IFAD, IFC, IFRCS, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO (correspondent), ITU, ITUC, MIGA, MINURCAT, NATO, OIC, OIF, OPCW, OSCE, SECI, UN, UNCTAD, UNESCO, UNIDO, UNWTO, UPU, WCO, WFTU, WHO, WIPO, WMO, WTO
Flag description		red with a black two-headed eagle in the center; the design is claimed to be that of 15th-century hero George Castriota SKANDERBERG, who led a successful uprising against the Turks that resulted in a short-lived independence for some Albanian regions (1443-1478)
Economy - overview		Lagging behind its Balkan neighbors, Albania is making the difficult transition to a more modern open-market economy. Macroeconomic growth has averaged around 5% over the last five years and inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment. The economy is bolstered by annual remittances from abroad representing about 15% of GDP, mostly from Albanians residing in Greece and Italy; this helps offset the towering trade deficit. The agricultural sector, which accounts for over half of employment but only about one-fifth of GDP, is limited primarily to small family operations and subsistence farming because of lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land. Energy shortages because of a reliance on hydropower, and antiquated and inadequate infrastructure contribute to Albania's poor business environment and lack of success in attracting new foreign investment. The completion of a new thermal power plant near Vlore has helped diversify generation capacity, and plans to upgrade transmission lines between Albania and Montenegro and Kosovo would help relieve the energy shortages. Also, with help from EU funds, the government is taking steps to improve the poor national road and rail network, a long-standing barrier to sustained economic growth.
GDP (purchasing power parity)		$21.86 billion (2008 est.) $20.61 billion (2007 est.) $19.44 billion (2006 est.) note: data are in 2008 US dollars Albania has an informal, and unreported, sector that may be as large as 50% of official GDP
GDP (official exchange rate)		$12.96 billion (2008 est.)
GDP - real growth rate(%)		6.1% (2008 est.) 6% (2007 est.) 5.5% (2006 est.)
GDP - per capita (PPP)		$6,000 (2008 est.) $5,700 (2007 est.) $5,400 (2006 est.) note: data are in 2008 US dollars
GDP - composition by sector(%)		agriculture: 20.5% industry: 19.8% services: 59.7% (2008 est.)
Labor force		1.103 million (not including 352,000 emigrant workers) (2007 est.)
Labor force - by occupation(%)		agriculture: 58% industry: 15% services: 27% (September 2006 est.)
Unemployment rate(%)		12.5% (2008 est.) 13.2% (2007 est.) note: these are official rates, but actual rates may exceed 30% due to preponderance of near-subsistence farming
Population below poverty line(%)		25% (2004 est.)
Household income or consumption by percentage share(%)		lowest 10%: 3.2% highest 10%: 25.9% (2005)
Distribution of family income - Gini index		26.7 (2005)
Investment (gross fixed)(% of GDP)		23.1% of GDP (2008 est.)
Budget		revenues: $3.458 billion expenditures: $4.175 billion (2008 est.)
Inflation rate (consumer prices)(%)		3.4% (2008 est.) 2.9% (2007 est.)
Stock of money		$3.028 billion (31 December 2008) $2.707 billion (31 December 2007)
Stock of quasi money		$6.251 billion (31 December 2008) $6.433 billion (31 December 2007)
Stock of domestic credit		$8.176 billion (31 December 2008) $7.247 billion (31 December 2007)
Market value of publicly traded shares		$NA
Economic aid - recipient		ODA: $318.7 million note: top donors were Italy, EU, Germany (2005 est.)
Public debt(% of GDP)		51.9% of GDP (2008 est.) 51.4% of GDP (2007 est.)
Agriculture - products		wheat, corn, potatoes, vegetables, fruits, sugar beets, grapes; meat, dairy products
Industries		food processing, textiles and clothing; lumber, oil, cement, chemicals, mining, basic metals, hydropower
Industrial production growth rate(%)		3% (2008 est.)
Current account balance		-$1.906 billion (2008 est.) -$1.202 billion (2007 est.)
Exports		$1.345 billion (2008 est.) $1.076 billion (2007 est.)
Exports - commodities(%)		textiles and footwear; asphalt, metals and metallic ores, crude oil; vegetables, fruits, tobacco
Exports - partners(%)		Italy 55.9%, Greece 11.6%, China 7.2% (2008)
Imports		$4.898 billion (2008 est.) $3.999 billion (2007 est.)
Imports - commodities(%)		machinery and equipment, foodstuffs, textiles, chemicals
Imports - partners(%)		Italy 32.2%, Greece 13.1%, Turkey 7.2%, Germany 6.6%, China 4.5%, Russia 4.4% (2008)
Reserves of foreign exchange and gold		$2.364 billion (31 December 2008 est.) $2.162 billion (31 December 2007 est.)
Debt - external		$1.55 billion (2004)
Exchange rates		leke (ALL) per US dollar - 79.546 (2008 est.), 92.668 (2007), 98.384 (2006), 102.649 (2005), 102.78 (2004)
Currency (code)		lek (ALL) note: the plural of lek is leke
Telephones - main lines in use		316,400 (2008)
Telephones - mobile cellular		3.141 million (2008)
Telephone system		general assessment: despite new investment in fixed lines, the density of main lines remains low with roughly 10 lines per 100 people; cellular telephone use is widespread and generally effective; combined fixed line and mobile telephone density is approaching 100 telephones per 100 persons domestic: offsetting the shortage of fixed line capacity, mobile phone service has been available since 1996; by 2003, two companies were providing mobile services at a greater density than some of Albania's neighbors; Internet broadband services initiated in 2005; Internet cafes are popular in Tirana and have started to spread outside the capital international: country code - 355; submarine cable provides connectivity to Italy, Croatia, and Greece; the Trans-Balkan Line, a combination submarine cable and land fiber-optic system, provides additional connectivity to Bulgaria, Macedonia, and Turkey; international traffic carried by fiber-optic cable and, when necessary, by microwave radio relay from the Tirana exchange to Italy and Greece (2008)
Internet country code		.al
Internet users		471,000 (2008)
Airports		5 (2009)
Pipelines(km)		gas 339 km; oil 207 km (2008)
Roadways(km)		total: 18,000 km paved: 7,020 km unpaved: 10,980 km (2002)
Ports and terminals		Durres, Sarande, Shengjin, Vlore
Military branches		Joint Force Command (includes Land, Naval, and Aviation Brigade Commands), Joint Support Command (includes Logistic Command), Training and Doctrine Command (2009)
Military service age and obligation(years of age)		19 years of age (2004)
Manpower available for military service		males age 16-49: 944,592 females age 16-49: 908,527 (2008 est.)
Manpower fit for military service		males age 16-49: 800,665 females age 16-49: 768,536 (2009 est.)
Manpower reaching militarily significant age annually		male: 34,778 female: 31,673 (2009 est.)
Military expenditures(% of GDP)		1.49% of GDP (2005 est.)
Disputes - international		the Albanian Government calls for the protection of the rights of ethnic Albanians in neighboring countries, and the peaceful resolution of interethnic disputes; some ethnic Albanian groups in neighboring countries advocate for a "greater Albania," but the idea has little appeal among Albanian nationals; the mass emigration of unemployed Albanians remains a problem for developed countries, chiefly Greece and Italy
Trafficking in persons		current situation: Albania is a source country for women and girls trafficked for the purpose of commercial sexual exploitation and forced labor; it is no longer considered a major country of transit; Albanian victims are trafficked to Greece, Italy, Macedonia, and Kosovo, with many trafficked onward to Western European countries; children were also trafficked to Greece for begging and other forms of child labor; approximately half of all Albanian trafficking victims are under age 18; internal sex trafficking of women and children is on the rise tier rating: Tier 2 Watch List - Albania is on the Tier 2 Watch List for its failure to provide evidence of increasing efforts to combat trafficking in persons in 2007, particularly in the area of victim protection; the government did not appropriately identify trafficking victims during 2007, and has not demonstrated that it is vigorously investigating or prosecuting complicit officials (2008)
Electricity - production(kWh)		2.888 billion kWh (2007 est.)
Electricity - production by source(%)		fossil fuel: 2.9% hydro: 97.1% nuclear: 0% other: 0% (2001)
Electricity - consumption(kWh)		3.603 billion kWh (2007 est.)
Electricity - exports(kWh)		0 kWh (2008 est.)
Electricity - imports(kWh)		2.475 billion kWh (2008 est.)
Oil - production(bbl/day)		5,985 bbl/day (2008 est.)
Oil - consumption(bbl/day)		34,000 bbl/day (2008 est.)
Oil - exports(bbl/day)		748.9 bbl/day (2005 est.)
Oil - imports(bbl/day)		24,080 bbl/day (2007 est.)
Oil - proved reserves(bbl)		199.1 million bbl (1 January 2009 est.)
Natural gas - production(cu m)		30 million cu m (2008 est.)
Natural gas - consumption(cu m)		30 million cu m (2008 est.)
Natural gas - exports(cu m)		0 cu m (2008)
Natural gas - proved reserves(cu m)		849.5 million cu m (1 January 2009 est.)
HIV/AIDS - adult prevalence rate(%)		NA
HIV/AIDS - people living with HIV/AIDS		NA
HIV/AIDS - deaths		NA
Literacy(%)		definition: age 9 and over can read and write total population: 98.7% male: 99.2% female: 98.3% (2001 census)
School life expectancy (primary to tertiary education)(years)		total: 11 years male: 11 years female: 11 years (2004)
Education expenditures(% of GDP)		2.9% of GDP (2002)