Albania

Albania has significant natural resources, including fertile agricultural land, an Adriatic/Ionian coastline, abundant water resources with hydropower potential and valuable mineral deposits. Since the fall of communism in 1991, the country has made significant progress toward establishing a multi-party democracy and has implemented numerous economic reforms. Albania’s economy is one of the fastest growing in Europe (averaging 5.5% in the 2006 – 2009 period) and the percentage of the population living in poverty fell from 25% in 2002 to 12% in 2008.

However, despite its progress Albania remains one of the poorest countries in Europe. Per capita income was US $4,070 in 2009. Of its labor force of about 2 million people, an estimated 1.2 million work abroad; remittances are responsible for an estimated 30-40% of GDP. The country faces high unemployment (13% in 2010), low foreign direct investment, poor infrastructure and rising trade deficits. Albania applied for European Union membership in April 2009. In November 2010, the European Commission‘s assessment recognized the progress that Albania has made but concluded that Albania‘s democratic institutions have not yet achieved the effectiveness and stability required for membership.

One area called out by the European Commission in its assessment was Albania’s persistent land tenure insecurity. Land reforms implemented after the fall of communism provided hundreds of thousands of people with smallholdings and urban residences but failed to address the rights of pre-1945 landowners. The estimated 41,000 claims to restitution and compensation remain largely unresolved and undermine tenure security and the development of functioning formal land markets. Almost 70% of all civil cases pending in Albanian courts involve land disputes. The courts suffer from an inadequate legal framework, inefficiencies, and corruption. Albanian citizens have resorted to bringing property claims against the Government of Albania (GOA) before the European Court for Human Rights (EctHR) – where initial decisions are going against the GOA. The GOA is taking steps to strengthen property rights, including continuing a national project to register all property and to regularize the significant number of informal landholdings in urban and peri-urban areas. Creating a plan to address the claims for restitution and compensation from pre-1945 landowners is proving most challenging.

The GOA is also targeting the agricultural and mining sectors with initiatives designed to promote growth and good governance of natural resources. Albania‘s 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. GOA strategies to improve agricultural performance will require support for modern equipment and extension services, sufficient high-quality inputs, continued rehabilitation of irrigation infrastructure, and the development of farmer associations and a functioning rental market for agricultural land. In the mining sector, the GOA is in the process of revising the legal framework and developing systems to support its candidacy for an Extractive Industries Transparency Initiative county.

Prior to 1944, landholdings in Albania were highly concentrated. When the communist government came to power in 1944, the state confiscated and nationalized all land and formed large-scale cooperatives and state farms. When communism collapsed 46 years later, the post-communist government introduced a system of individual property rights. In an effort to avoid re-empowering pre- 1945 landowners and returning to a feudal system, the government passed legislation allocating the land held by agricultural cooperatives on an equal per capita basis to cooperative members. Land was allocated without reference to the pre-1945 boundaries and landowners. In addition, land held by state farms was distributed to the workers and urban residents were given ownership of the apartments and individual houses they occupied and a minimal amount of land around the dwelling.

In much of the north and mountainous and hilly areas, the legislation was ignored and land was distributed to former pre-1945 owners based on the former boundaries. In the other areas, including fertile lowlands, farm families received ownership rights to smallholdings, usually split among several parcels. Since the 1990‘s, the average farm size has slowly risen to about 1.2 hectares per family.

The initial land distributions were followed by legislation recognizing the rights of pre-1945 landowners to restitution of their land or compensation. However, much of the land claimed by pre-1945 landowners had already been granted to new owners, creating disputes over ownership rights and undermining tenure security. Efforts to compensate landowners for the value of the land they lost (estimated at US$ 5 billion in 2010) have been stalled by the lack of adequate funds.

Internal migration from the northern and mountainous regions of the country to urban and peri-urban areas has been steady, which has strained urban water and sewage systems and caused to health and environmental problems. Approximately 25% of the urban population lives in informal settlements. Residents of these settlements often lack secure tenure and are subject to eviction.

Under formal law, women have rights equal to those of men, including the right to own property. However, during privatization agricultural land was primarily titled to men as heads-of-households, even when women were heading the household in practice, reflecting a continuing dominance of men over productive assets. Customary law (the Kanun), which continues to govern issues of personal law and land rights in many areas, supports paternalistic practices. Under customary law land is considered owned by the extended family rather than by individuals, but male family members tend to make decisions regarding the land and its production, and land commonly passes to male heirs. Women obtain access to land through their husbands.

LAND USE

Albania is a mountainous country covering 27,400 square kilometers on the western edge of the Balkan Peninsula. The country has three main ecosystems: coastal plains; a hilly transition zone; and a mountain zone. The landscape is a diverse mix of grasslands, marshland, fertile cropland, hundreds of rivers and lakes, coastal lagoons, sand dunes, high plateaus and rocky mountains (NACFP 2007; Shundi 2006).

Albania had a population of 3.1 million (2008), 98% of whom are ethnic Albanian. The majority of the population is rural (53% in 2008). Internal migration from the northern interior and mountainous regions to the cities — especially the greater Tirana area — is steady, and the urban population is growing at an annual rate of 2%. In 2008, GDP was US $12.3 billion, of which 21% was from agriculture, 20% from industry and 59% from services. Of the 2 million people in the labor force, and estimated 1.2 million work abroad and remittances constitute between 30% – 40% of GDP. Agriculture and related sectors employed roughly 38% of the labor force in 2008. An estimated 30 % of livestock and crop production is market-oriented, while the remaining 70% is intended for home consumption. Ninety-one percent of farm households keep livestock, usually a mix of dairy cows, sheep, goats, and chickens. Livestock is responsible for roughly 47% of agricultural production (World Bank 2009a; World Bank 2011a; Shundi 2006; World Bank 2007d; USDOS 2010a; USDOS 2010b).

Albania is a low middle-income country, with per capita income at $4,070 in 2009. Albania averaged 5.5% economic growth between 2006 and 2009, making it one of the fastest growing economies in Europe. The number of people living in poverty is declining: between 2002 – 2005, urban poverty fell 43% and rural poverty fell 18%. Nonetheless, with about 11% of urban residents and 24% of rural residents living below the national poverty line, Albania continues to be one of the poorer European countries. Poverty is highest in the mountain areas and among female-headed households (World Bank 2007c; USDOS 2010a).

Approximately 41% of Albania‘s land is classified as agricultural land, including the 15% of total land classified as pasture. The amount of arable land has increased from 21% in 2007 to an estimated 24% in 2010. Agricultural land is primarily concentrated in the coastal plains of the west, river valleys and high plateaus. About 60% of pastureland is in the highlands, hills and mountains and is used for summer grazing; 40% of pastureland is in lowlands and used during the winter months. Fifty-one percent of cropland irrigated (World Bank 2007a; World Bank 2009a; Shundi 2006; World Bank 2011a).

Agricultural land must be used only for agricultural purposes. In rural areas, a statutory ―eyllow line‖ on zoning plans defines a village settlement, and construction of dwellings and buildings for non-agricultural purposes outside of the line are prohibited. Sanctions, including fines and withdrawal of rights to land, can be levied for violating these provisions. Nonetheless, violations are common, in part because families traditionally build houses on their fields rather than in the village (World Bank 2006c).

Internal migration from Albania‘s less prosperous mountainous areas and the northern region of the country to urban and peri-urban areas has strained housing supplies and urban water and sewage systems, leading to health and environmental problems. Approximately 25% of the urban population lives in informal settlements with substandard housing, limited services and the threat of eviction and wholesale destruction of settlements (USAID 2005; Tsenkova 2009; World Bank 2010a).

Forests cover an estimated 29% of total land area in Albania. In the 2000 – 2005 period, the country gained forestland at an annual rate of 0.6%. The amount of nationally-protected land has increased from an estimated 8% of total land in 2008 to 13% of total land in 2010. The mountainous terrain, heavy autumn and winter rains, overgrazing and deforestation make the country‘s soil vulnerable to erosion. Lowlands are subject to flooding during rainy periods, and with limited waste water treatment facilities operating, surface and groundwater have become contaminated by industrial and domestic effluents (World Bank 2009a; World Bank 2003a; Zdruli and Lushaj 2001; GOA 2010a).

LAND DISTRIBUTION

Prior to collectivization during the communist era, land ownership in Albania was highly concentrated. When land privatization began in the early 1990s, policymakers were concerned that returning land to the original owners would recreate feudal structures. Between 1990 and 1994, agricultural land from collective farms was distributed to member families. In about half the rural areas, distribution followed the legislative requirement of equal per capita shares. The head of household received the land and was responsible for distributing shares to family members. In the other half of Albania‘s rural areas (primarily the north and hilly and mountainous areas in the central part of the country), local leaders distributed former cooperative farmland based in large measure on pre-1945 landholdings, or ―old boundaries. These distributions recognized the ancestral land rights that enjoyed high levels of social legitimacy and while they were not necessarily consistent with the formula in the formal law, do not appear to have been challenged (Frangakis et al. 2008; World Bank 2006c; Kola 2007).

In the fertile lowlands and coastal areas, pre-1945 landowners were initially excluded from consideration for land distributions. In 1993, legislation granted the pre-1945 landowners rights to claim or be compensated for non- agricultural land, as well as agricultural land in holdings up to 100 hectares. The legislation and the granted rights have been subject to numerous amendments, abrogation, and revision with each shift in political power. The resulting ambiguity in rights, coupled with limitations in the extent of land and amount of funds available for restitution and compensation, have combined to leave the majority of original landowners uncompensated (Frangakis et al. 2008; World Bank 2006c).

The distribution of agricultural land created a system of small, fragmented landholdings. Albania has between 354,000 and 375,000 household farms on 700,250 hectares of land. Thirty-six percent of households hold between 1-2 hectares of land; 10% hold more than 2 hectares. The average farm size has been increasing slightly to about 1.2 hectares, made up of between 2-4 separate parcels. These separate small parcels were allotted when farmers refused initial allocations of larger parcels land that were of poor quality or without irrigation facilities and are often located far from each other. Researchers note that numerous small parcels can create production inefficiencies and discourage investment, although multiple plots can also allow farmers the opportunity to develop different crops and spread the risk of environmental shocks (Frangakis et al. 2008; World Bank 2006c; World Bank 2007d; Kola 2007; Hristov 2009).

The state owns about 26,780 hectares of agricultural land that has not been distributed. Most of the land is in mountainous areas, remote regions, or is of poor quality and was refused by farmers. The state must hold the land until all restitution claims have been determined because the land may be granted as restitution or as an alternative land grant (World Bank 2006c; Frangakis et al. 2008).

Eighty-seven percent of urban housing is privately owned. In 1992, urban households received ownership rights to 237,700 residential units. Despite successful privatization of urban housing, demand for urban housing – fueled by steady internal migration to urban areas – has overwhelmed supply. Between 1991 and 2004, only 45,000 legal residential units were constructed. The slow rate of construction of formal residences has caused housing shortages and growth of informal settlements, most of which are on public land (Sallaku and Tota 2006; World Bank 2006c; World Bank 2007a; Frangakis et al. 2008).

LEGAL FRAMEWORK

The Constitution of 1998 guarantees the right to private property and provides that property rights cannot be infringed without due process. The 1991 Law on Constitutional Principles (No. 7491) committed the state to developing economic relations based on market principles and private land ownership (GOA Constitution 1998; World Bank 2006c).

Albania‘s 1994 Civil Code is the principle legislation governing land ownership, leaseholds, and rights of possession and use. The system of property ownership depends upon whether it is private, state or municipal land, with each category of land having its own regime for ownership, possession and other rights (World Bank 2006c).

Land reform started with three laws in the early 1990s, which formed the legal basis for distribution of state land:

1. The Law on Land (No. 7501)(1991) transferred ownership rights to collective farmlands to member families living in the rural area at the time of the distribution.
2. The Law on Privatization of State-Owned Housing (No. 7652) granted urban families ownership of the apartments and individual houses they occupied.
3. The Law on Sanctioning and Protecting Private Property (No. 7512) recognized private property and allowed the ownership and leasing of urban land (World Bank 2006c).

The 1993 Law on Restitution and Compensation of Properties to Former Owners (No. 7698), which was revised most recently in 2004, allows pre-1945 landowners to claim non- agricultural land and agricultural land up to 100 hectares. However, most of this land was already distributed to collective farm workers under the 1991 and 1992 laws. Compensation in lieu of restitution can take one or more of the following forms: state land of equal value; land in tourism development zone; shares in companies with state capital; the value of objects, such as farming equipment, subject to privatization; and money exempt from fees or taxes. The revised law (2004) established a State Committee on Restitution and Compensation of Property (World Bank 2006c; Frangakis, et al. 2008).

The 1995 Law on Pasture and Grazing Land (No.7917) provides for devolution over rights to manage and use state-owned pastureland to local governments. Communes can establish ten-year lease contracts with pasture- users (Shundi 2006).

The 2004 Law on Legalization & Urban Planning of Informal Zones (No. 9304) was designed to address the widespread problem of illegal occupation of urban land through formalization of rights. The Law created a system of self-declaration applications, by which occupiers could apply to pay the market price to acquire ownership of their land from the state (World Bank 2006c).

RESOURCE QUANTITY, QUALITY, USE AND DISTRIBUTION

Albania is a water-abundant country, with 362 kilometers of coastline and coastal wetlands, 247 lakes and hundreds of lagoons. Albania shares four natural lakes with Greece, Macedonia, and Montenegro, including Lake Skadar, which is the largest lake in the Balkan Peninsula, and Lake Ohrid, which is the deepest. The country has 721 kilometers of rivers, the most significant of which are the Drin in the north and the Shkumbin and Seman in the south (World Bank 2003b; Beddies et al. 2004; NACFP 2007).

With 41.7 billion cubic meters of annual renewable water resources, Albania‘s water resources exceed its consumption needs. However, the country suffers from shortages of water for drinking and irrigation. Annual rainfall averages 1485 mm but it is unevenly distributed over time and space: the country‘s hills receive an average of 800 mm of precipitation annually while its coastal plains and mountain regions regularly receive 2,000 mm per year. Eighty percent of rain falls in the winter months, flooding cropland, while summer and perennial crops are dependent on irrigation. As much as 2/3 of the country‘s water resources is lost during transportation and distribution because infrastructure is outdated and in disrepair. Efforts to rehabilitate and rebuild the irrigation systems have been ongoing since the 1990s. In 2007, about 340,000 hectares had irrigation infrastructure; roughly two-thirds was functioning (World Bank 2003a; World Bank 2007a; Sallaku et al. 2003; Beddies et al. 2004; World Bank 2010a).

An estimated 78% of households countrywide have some access to piped drinking water but service is intermittent and water quality low. The average urban household has water only 6 to 13 hours a day. In rural areas, access is less reliable and many households dig their own wells. In the early 2000s, 73% of such wells were contaminated by bacteria. Gastrointestinal illnesses caused by contaminated water are very common (World Bank 2003a; World Bank 2010a).

Albania has over 600 reservoir dams for irrigation and power generation. Ninety percent of the country‘s energy is supplied by hydropower, and demand has outstripped supply since 1998. The country has numerous of aquifers but many are vulnerable to the intrusion of saline water or pollution. Albania has very limited wastewater treatment facilities and both ground and surface water is often contaminated by human and industrial and agricultural waste (Sallaku et al. 2003; World Bank 2006a; Zdruli and Lushaj 2001; World Bank 2010a).

LEGAL FRAMEWORK

Albania‘s 1996 Law on Water Resources (No. 8093) (Water Law) is the primary legislation governing the country‘s inland, maritime, surface, and groundwater and is intended to ensure the protection, development, and sustainable use of the country‘s water and provide for its proper distribution. The Water Law addresses water rights, water use, and governance of water resources. A new law on water management has been drafted and was being circulated internally for review in 2010 (GOA Water Law 1996; GOA Draft Water Law 2010b).

The 1999 Law on Irrigation and Drainage (No. 8518) established the structure for Water User Associations (WUAs), which are private groups that manage water irrigation infrastructure at and below the secondary canal level. Federations of WUAs manage the primary canal networks. The government maintains ownership of the infrastructure (Sallaku et al. 2003).

The Law on Organization and Functioning of Local Government (No. 8652) (2000) transferred responsibility of water supply and management of water utilities to local government (communes and municipalities) (Rohde et al. 2004).

The 2008 Law on the Regulatory Framework in the Sector of Water Supply and Waste Water Administration (No. 9915) and 2009 Ministerial Order No. 66 provide authority for the establishment of an inter-ministerial working group for the evaluation of projects and issues related to drinking water supply and sewage sector in Albania. The working group is led by the Minister of Public Works (REC 2010; World Bank 2010a).

TENURE ISSUES

Under the 1996 Water Law, the state owns all water resources in Albania. The Water Law provides that surface water may be used freely for drinking and other domestic uses, such as livestock watering, so long as the use is limited to individual and household needs. Water use is also subject to administrative controls imposed by water authorities. Water authorities may restrict free use of water during periods of water shortages or in the event of contamination. The draft Law of Water Management circulating in 2010 retains these provisions (GOA Water Law 1996; GOA Draft Water Law 2010b).

Under the 1996 Water Law, non-domestic water users, and users of groundwater for domestic purposes must obtain permission, authorization, a concession, or a license from the appropriate water authority, subject the following conditions:

1. Permission. Water authorities may grant administrative permission for the use of underground water for any purpose, water supplied by permanent installations, and water used for irrigation, livestock, aquaculture, and industry. Permission is also required for planting of trees and crops on river beds and the removal of solid material from river banks. Permissions are granted to WUAs for 10-year periods and 5 years for all other users.
2. Authorization. Authorizations for water use necessary for research, exploration, and study of surface and groundwater are available for periods up to 2 years.
3. Concession. Water authorities may grant concessions for the use of surface and groundwater for public purposes, including hydropower stations, supply of potable water, and irrigation by agricultural enterprises. Concessions are available for initial terms of 30 years with a potential 10-year extension.
4. License. Commercial well drillers must obtain a license and separate permission for every well drilled.

(GOA Water Law 1996).

The draft Water Management Law circulating in 2010 maintains the system of water rights set forth in the 1996 Water Law. In addition, the draft law adopts a national water strategy and establishes river basin districts and a river basin-level management structure (GOA Draft Water Law 2010b).

GOVERNMENT ADMINISTRATION AND INSTITUTIONS

The National Water Council, which is under Albania‘s Council of Ministers, is the primary authority responsible for water resources management. The National Water Council has responsibility for: proposing legislation; managing the drainage basin plan; approving any water management plans relating to agricultural, urban planning, industrial development or other projects; establishing necessary agencies and organizational units; and approving water concessions. The Technical Secretariat is the executive agency of the National Water Council and has responsibility for: implementing national water policy and the legal framework; creating an inventory of water resources; issuing permissions and authorizations for water use; and promoting research and development. The General Directorate of Water Supply and Wastewater (GDWW) is a public institution established by the Council of Ministers specializing in water infrastructure. The GDWW is responsible for providing technical support to the water and wastewater policies and creating the strategic framework of the water and wastewater sector (GOA Water Law 1996; REC 2010).

Responsibility for municipal water utilities was devolved to Albania‘s local governments (municipalities and communes) under the Law on Organization and Functioning of Local Government (2000). Local governments have four areas of authority: administrative, investment, maintenance, and regulatory. Tariffs are based on the principle of cost recovery under the discretion of local government and within general national policies. Actual transfer of responsibility for water resource governance to local governments was a slow process that took place over several years. Most local governments were ill-prepared to take on responsibility for water distribution; they did not have sufficient human and financial capacity to create and rehabilitate infrastructure or manage the utilities effectively. Water utilities tend to have high losses, low revenues and low collection rates. Illegal connections, especially by poor households, are common (World Bank 2006a; World Bank 2003b; Beddies et al. 2004; World Bank 2010a).

Water User Associations (WUAs) can be established at local levels to manage water resources. WUAs are designed to be financially independent entities that create water schedules and distribution plans, maintain water distribution infrastructure, set and collect fees, and resolve conflicts. As of 2007, 489 WUAs had been established (covering 280,000 hectares), of which 316 (about 65%) were fully functional. A national union of WUAs has been established to represent the interests of WUAs at various institutional levels. Some observers have attributed improved irrigation system management, reductions in farmer disputes and increases in farm production in some areas to the work of WUAs. However, despite some positive outcomes, overall, WUAs have suffered from low membership numbers, poor collection rates and low cost recovery. In many areas WUAs have been unable to maintain infrastructure for the distribution of water or to manage conflicts between different water users effectively (Sallaku et al. 2003; World Bank 2007a).

GOVERNMENT REFORMS, INTERVENTIONS AND INVESTMENTS

The GOA adopted a Water Supply and Sanitation Strategy in 2003. The strategy included a short-term priority reform and investment program (2003-2006) and medium-term reform and investment program (2007-2012) to stabilize and improve water supply and sanitation services. The long term objective of the strategy for the water supply and sanitation sector is to achieve sustainable water supply and sanitation services at the EU Standards in urban and rural areas. Implementation of the ambitious strategy was slow, but by 2008, ownership of the utilities had been transferred from the government to local authorities. The utilities are not yet financially self-sustaining. With support from the World Bank, the GDWW provides technical assistance to local government and water supply and sewage companies, including helping the water supply and sewage companies prepare five-year business plans and developing a phased program on the reduction of subsidies covering the gap between tariffs and total cost, with a goal of eliminating subsidies by 2012 (REC 2010).

With support from the Japanese Government, the GDWW prepared a study designed to support the regionalization of water supply and sewage utilities. In addition, the water companies serving Berat and Kucova were successfully merged and infrastructure constructed and rehabilitated with a grant by the German Government (REC 2010).

The European Union, Government of Germany, and other donors are supporting the GOA‘s effort to prepare an updated National Water Strategy, which is contemplated as part of a new Draft Water Management Law under internal consideration. Other government projects include participation in the Albania-Montenegro Lake Shkoder Integrated Ecosystem Management Global Environment Facility, which is establishing a Bilateral Lake Management framework for the shared water resource (World Bank 2010a; REC 2010; GOA Draft Water Law 2010).

DONOR INTERVENTIONS AND INVESTMENTS

The World Bank funded a series of projects designed to support the rebuilding of irrigation and drainage works and the organization of WUAs. The Water Resources Management Project (2004-2009, US$ 16 million) helped increase agricultural production through the provision of reliable irrigation services; increase the financial viability of irrigation and drainage schemes through institutional strengthening; and reduce the risk of dam failures and floods through infrastructure repairs. The Municipal Water Project (2003 – 2009, US$ 16 million) improved water supply and sanitation facilities for an estimated 400,000 people in 4 towns. The project also helped improve the financial viability of 4 utilities, but the utilities did not achieve the goal of financial independence (World Bank 2010a; World Bank 2009b).

The World Bank-funded Integrated Water and Ecosystems Management Project (2004-2009, US$ 5 million) aimed to improve municipal wastewater services for three important tourist areas that depend heavily on a healthy coastal environment: the cities of Durres, Lezha and Saranda. The project involved building man-made wetlands for wastewater treatment and improving management of the Kune-Vain protected marshland. Project outcomes suffered from poor understanding by both the general population and many within the government about environmental management practices. The World Bank‘s on-going US$ 38 million Integrated Coastal Zone Management and Clean-up Project (2005-2012) includes support for water supply and sanitation projects. The project, which has the goal of reducing coastal degradation, includes activities to address soil and groundwater contamination in the former chemical plant at Porto Romano; upgrade water supply and sanitation facilities and service in two coastal municipalities; construct an EU-compliant solid waste landfill; and develop a management plan for Albania‘s most important Ramsar 4 site. As of June 2010, the project had begun clean-up of the contaminated chemical plant site and construction of water supply and improvement subprojects ((World Bank 2009b; World Bank 2010b).

RESOURCE QUANTITY, QUALITY, USE AND DISTRIBUTION

Estimates of the amount of forestland in Albania range from 28% to 36% of total land area, with the lower estimates recorded by FAO, the World Bank, and international forest organizations (based on 2005 – 2007 surveys) and the higher estimate reported by the GOA (based on a 2004 National Forest Inventory). The difference in the estimates may be attributed to inconsistencies and ambiguity in definitions of forestland, conversion of forest to agricultural land and reclamation of degraded forestland. Using the more recent and conservative estimates, Albania has at least 776,000 hectares of forest, including alpine and sub alpine mountain ecosystems with Mediterranean fir and pines, oak woodlands and beech forests, and expanses of Mediterranean shrub. About 11% of forestland is classified as primary forest, 77% is other naturally regenerated forest, and 12% plantation. Approximately 90% of Albania‘s forestlands are state-owned; the balance is private land. Local governments have use and management rights to an estimated 284,000 hectares of state forestland (Dida 2003; World Bank 2009a; Mongabay 2010; NACFP 2007; FAO 2005).

About 79% of Albania‘s forests are classified as production forests. The forests supply the population with timber and forest vegetation used for construction, fuelwood, grazing and agricultural land, wild aromatic and medicinal plants, and food. Forests are also used for tourism, recreation, and hunting. The country‘s forests protect habitat, promote biodiversity, and protect soil against erosion and degradation. Estimates of the extent of Albania‘s protected areas vary from 0.7 (World Development Indicators) to 2.3% (Earthtrends) to 13% (GOA) of total land area (World Bank 2009a; NACFP 2007; GOA 2009a; Mongabay 2010; Earthtrends 2003).

During the communist era (1944 -1 990) and through the decade of transition that followed, Albania‘s forests were threatened by deforestation from illegal logging, uncontrolled grazing, and the steady expansion of agricultural land. Since 2000, use of the forests for fuelwood, timber, and forest products continued but interventions have slowed the overall rate of deforestation. In the 2000-2005 period, Albania added forestland at an annual rate of 0.6% (World Bank 2009a; NACFP 2007; Nabolli 2009).

Albania is a globally significant producer of wild herbs and spices, including rose hips, sage, raspberry leaf, nettle, chamomile, thyme, oregano, and licorice. Historically, the country exported most of the products in their raw form. In early 2000‘s, with the support of USAID, the country began production of essential oils to international markets (USAID 2007; USFS 2010).

LEGAL FRAMEWORK

The Law on Forests and Forestry Service (No. 9385) (2005) (Forest Law) superseded the 1992 Law on Forests and Forest Service Police (No. 7263) and governs the administration, protection, and use of forests. The Forest Law addresses forestland tenure and forest use rights, including community-based forest management, and establishes forest governance bodies. The Forest Law is supported by various regulations setting stumpage and other forest fees, guidelines for auctions of standing wood, instructions for protection against forest fires, the principles for the selection and establishment of protected areas, and the use of forests for recreational purposes (GOA Forest Law 2005).

Law No. 8302 for the Management of Revenues Generated from the State Forest and Pastures (1998) allocates income from state forests and pastureland for management by the Director General of Forest and Pasture (DGFP) (70%) and the central government (30%). Regulation No. 308, entitled On the Transfer of Forests and Pastures in Use to Communes (1996), governs the process of decentralization to community-based forestry management (World Bank 2006c; Shundi 2006; Mine 2002).

The Law on Protected Areas (No. 8906) (2002) sets out a six-level grading system for levels of protection and restrictions imposed, such as the width of buffer zones. Forest areas within protected zones are separately classified and protected; environmental permits are required for any activity not explicitly permitted or prohibited under the law. Private forest areas within designated protected areas can only be used in accordance with an approved management plan (Kola 2007).

TENURE ISSUES

Under the Forest Law, Albania‘s forests are either owned by the state (90%) or by private individuals (10%). State forests include forests subject to forest management or use agreements between the state and local government bodies (communes and municipalities). Local government bodies are responsible for: drafting forest management plans; establishing the technical and administrative bodies to conduct forest inventories; and create plans to fund investment in forests (GOA Forest Law 2005).

Prior to the communist era every Albanian village had its own forest and pasture areas, which were owned communally or divided among families. Village elders governed forest access and use. During the communist era, all forest and pasture areas were nationalized, and central-level forestry enterprises managed forest uses. The forest laws retain a degree of government authority over forest access and use. The government designates the trees available for harvesting and issues permits for logging. Individuals must also obtain permission to gather secondary forest products and access to forests for recreation, health, and general occupation also require permission. Enforcement of the laws is, however, limited by lack of capacity within the forest department and local governments (GOA Forest Law 2005; NACFP 2007: Kola 2007).

The GOA has designated about 40% of state forestland as eligible for use and management by local government authorities. Use rights are granted for 10-year, renewable terms and require a management plan that is entered into between the Forest Directorate and the commune. The commune is responsible for managing local community use of the forest in a manner consistent with the management plan. In some areas, Forest User Associations are organized and have subordinate rights of use for activities such as grazing and harvesting firewood and herbal plants, as negotiated. Families can be granted use rights to certain areas, as agreed to between the Forest Directorate and the commune and between the commune and forest user. Use rights do not include the right to sell timber and none of the legislation explicitly grants communes the right to sell forest products, leaving the issue for negotiation with the forest department (World Bank 2006c; TWA 2003; NACFP 2007; Kola 2007).

Albania began transferring use and management rights to local governments in 1996. The World Bank-supported Communal Forests and Pasture Management Program helped draft forest management plans and establish Forest User Associations and Village Forestry Commissions. Most communes and Forests User Associations have required support and capacity building in order to undertake management of forestland. The transfer of management and use rights have created some confusion in areas where local communities have longstanding and ongoing patterns of forest access and use that conflict with management agreements (World Bank 2006c; Clarke 1999; NACFP 2007).

GOVERNMENT ADMINISTRATION AND INSTITUTIONS

The Ministry of Environment, Forests and Water Administration, which includes the General Directorate of Forests, has primary authority over Albania‘s forestland. Within the General Directorate are the Directorate of Forests and Pastures, the Directorate of Forest Service Police, the Directorate of Communal Forests and Pastures and Extension and the Directorate of Protected Areas and Hunting, which includes the National Parks Administration (World Bank 2006c).

In response to increased illegal logging in the 1990‘s, in 2000 the GOA convened an interministerial task force for the protection of the forest estate. The Task Force Commission for Forest Resource Protection involves 11 ministries, including the Ministry of Public Economy and Privatization, the Ministry of Local Government, the Tourism Development Committee, the Ministry of Environment, the Directorate for State Police within the Ministry of Public Order, the Directorates of Taxes and General Customs within the Ministry of Finance, and the Ministry of Justice. The task force was created in order to support local, intersectoral collaboration to address illegal logging in the field. The impact of the task force has not been reported; the GOA points to a combination of interventions – including the implementation of community-based forest management and various forest programs – as responsible for a reduction in deforestation (World Bank 2006d; REC 2010).

GOVERNMENT REFORMS, INTERVENTIONS AND INVESTMENTS

As part of a central government decentralization effort and in recognition of the role forests play in rural livelihoods, GOA forestry reform is focused on transferring management of state forests to local government units. The program called for a transfer of 40% of state forest areas to communes and the GOA has expressed a desire to transfer ownership rights to local governments in the future. As of 2005, the Albania Forestry Project transferred management responsibility for an estimated 356,000 hectares of forest to 138 communes serving 1290 villages and 724,230 inhabitants (Dida 2003; World Bank 2006c; World Bank 2009b; Savcor 2005).

Albania has joined the United National Framework Convention on Climate Change (UNFCCC) as well as the Kyoto Protocol. The GOA has taken steps toward the implementation of the UNFCCC and has compiled the National Action Plan (NAP) to address climate change with UNDP/GEF support (UNDP 2005).

DONOR INTERVENTIONS AND INVESTMENTS

USAID provided early support to the development of community-based forest management in Albania, beginning with its Private Forestry Development Program in 1995. The goal of the program was to increase rural household income and reduce forest degradation by supporting development of sustainable private sector forestry management on private and communal forests. The program helped communities establish forest user groups, prepare forest management plans, and improve the health of the forest. The 6-year Albania Forestry Project (1997-2002), which was funded by the IDA/World Bank, FAO, and the Italian and Swiss governments provided continued support for the transfer of forestlands management to local government. The project helped: bring about 250,000 hectares of forestland under local management; create the Directorate for Communal Pastures and Forests; establish forest user groups; and rehabilitate degraded forestland. The World Bank‘s 2005-2011, US$ 5- million Natural Resource Development Project has focused on developing sustainable income-generating activities and as of mid-2010 reported: a 25% increase in income earned from forest activities in communal forest and pastureland; reduction in erosion; reorganization of forest extension services; and separation of the control and management functions for forests and pastures (Chemonics 2000; World Bank 2006c; World Bank 2003c; World Bank 2010b).

Between 2005 and 2007, UNDP supported the Sustainable Land Management Initiative to combat desertification and land degradation and strengthen the enabling environment in rural Albania. The project helped the GOA develop its public and private sector capacities to access carbon finance in Albania by: (1) creating a legal and institutional framework for carbon finance; and (2) building in-country capacities for identification, implementation of and resource mobilization for the greenhouse gas reduction projects eligible for Clean Development Mechanism and other carbon market mechanisms (UNDP 2010).

RESOURCE QUANTITY, QUALITY, USE AND DISTRIBUTION

Albania has substantial deposits of good quality chromium and copper in the northern region of the country and nickeliferous iron ore, which is mined in the eastern-central region. The country also has reserves of gold, zinc, titanium, and platinum, and intermittently mines dolomite, gypsum, kaolin, marble and phosphate rock. In 2006, petroleum reserves were estimated at 1.96 billion barrels. The Patos-Marinza oilfield in south-central Albania, which began production in 1930, is the biggest on-shore oil field in Europe and is currently operated by the Canadian company, Bankers Petroleum, Ltd. Other large foreign investors in the mining sector are Turkish, Chinese, and Australian companies (Brininstool 2010; World Bank 2009; Steblez 2006).

Mining for precious metals has taken place on the Balkan Peninsula since the 5th century BC. Albania’s minerals sector was developed and steadily expanded during the communist era. Albania was among the top three producers of chromite in the world, and in 1989, chrome, copper, and nickel accounted for 80% of the country‘s total exports (by value). The sector all but collapsed in the early 1990s as a result of political instability and economic decline. Investment in existing mining operations ceased and assets were stripped from facilities. As part of its efforts to restructure and revive the sector, the GOA divided large, integrated mining operations into smaller parts and granted licenses to medium and small enterprises, many of which lacked the necessary capital and expertise. In the early 2000’s the sector was operating at about 10% of capacity, and the GOA has begun the make reforms designed to increase sectoral performance. Exploration for minerals rose between 2002 and 2007 and some existing operations were rehabilitated and expanded. The global recession took a toll on progress, but industry experts predict operations will rebound within 3 – 5 years (World Bank 2009c)

LEGAL FRAMEWORK

The 1994 Mining Law, amended in 2004, governs Albania’s mining sector in Albania. Under the Mining Law, the state owns all minerals. The state may grant mineral rights to individuals and entities through prospecting permits, exploration concessions and mining concessions. A mining concession may be granted for 20 years, with four renewals of five years each, upon payment to the state of an annual rental fee plus royalties. Foreign and domestic companies enjoy the same rights under the Mining Law (Steblez 2006; GOA 2009b; Brininstool 2010).

The General Mining Directorate can levy fines for mining violations. If violations are repeated or the company reduces the level of work in the mine for 180 consecutive days, the mining permit is subject to cancellation (Brininstool 2010; GOA 2009b).

TENURE ISSUES

The 1994 Mining Law has been considered by industry experts to be progressive legislation because it includes a comprehensive licensing framework and attention to environmental issues. However, the law has been poorly implemented and license holders have not been held to the conditions of the grants. In addition, observers note that the sector‘s recovery was inhibited by the break-up of large operations and transfer of licenses to under- capitalized speculators. Large investors were less interested in the fragmented operations, which lacked economies of scale necessary for efficient and profitable operations (World Bank 2009c).

In the event of a land claim, the licensed investor must negotiate with the alleged land owner. If the parties are unable to reach an agreement, the conflict is decided by the court (GOA n.d.).

GOVERNMENT ADMINISTRATION AND INSTITUTIONS

The Ministry of Economy, Trade and Energy (METE) includes the National Agency of Natural Resources, which supervises mining and post-mining activities, negotiates mining contracts and develops and implements policies on mining. The agency in responsible for implementing legislation, promoting the mineral sector, evaluating projects, promoting safe mining and closing unused mines. The METE has been hampered in performing its responsibilities by economic decline, lack of technical expertise with in the ministry and some mining operations, and corruption. The METE has been responsible for drafting the new mining law and updating the national mining strategy. In 2009 METE reported the successful consolidation of numerous small mining licenses for transfer to large, international investors (GOA n.d.; World Bank 2009c).

GOVERNMENT REFORMS, INTERVENTIONS AND INVESTMENTS

The GOA recognizes the role that a revival of the mineral sector can play in stimulating the economy. The mineral sector can promote infrastructure development, create jobs, stimulate the transfer of technology and knowledge, and generate foreign exchange earnings. The GOA has drafted a new mining law, which is being reviewed internally. The draft law includes a transparent licensing system, includes clear and consistent standards governing relations between holders of mineral rights and land rights, and includes a flexible system for rights of exploration and exploitation. Gaps noted in the World Bank‘s evaluation of the draft law include the lack of a national minerals policy and updated sector strategy. In addition, the draft law does not impose adequate environmental and social obligations on license holders (GOA 2009b; World Bank 2009c).

Albania is an Extractive Industries Transparency Initiative (EITI) candidate country. The EITI is a global initiative that helps governments account for the proceeds from extractive industries in a transparent fashion and promotes investment of proceeds in local and national development. The Prime Minister issued an order (No. 156 dated 27.12.2008) establishing an inter-institutional working group consisting of representatives from several state institutions, industry representatives and civil society. The group has been established, and efforts are underway to extend the involvement of industry and civil society groups. Albania has until 14 May 2011 to complete the EITI validation process (EITI 2011).

DONOR INTERVENTIONS AND INVESTMENTS

The International Finance Corporation (IFC) is supporting the further privatization of the Patos Marinza oilfield in southern Albania to help revive the industry and promote the reduction of pollution in the area. Patos Marinza is severely polluted following decades of ownership by the state-owned operator, Albpetrol. With a US$110-million long-term loan agreement from IFC and the European Bank for Reconstruction, the Canadian company, Bankers Petroleum Ltd., will clean up existing wells inherited from Albpetrol and take action designed to reduce pollution and oilfield-contamination risks as their operations expand (IFC 2009).

The World Bank has a two-year (2010 – 2011), US$280,000 project to support the GOA’s participation in the Extractive Industries Transparency Initiative. The World Bank also conducted a comprehensive review of Albania‘s mining sector, which included an analysis of the legal framework and proposed new mining law. The Bank‘s 2009 report makes recommendations regarding the improvement of sector governance and regulatory effectiveness; strengthening of technical capacities; and the need to update the geological database and address environmental and social issues, including community benefit sharing (World Bank 2011b; World Bank 2009c).