The year 1999 was characterized for Albania by the overwhelming and far-reaching effects of the war in Kosovo. Albania experienced an influx of about 500,000 Kosovar refugees, the majority of which arrived between late March and May. This number represented an increase in the overall population of close to 15% and severely strained already-lacking infrastructure and resources. Many long-term development initiatives and technical assistance projects came to a standstill as the various line ministries struggled to cope with the management of the refugee crisis, and international consultants were advised by their governments not to come to Albania. The refugee situation created a necessity for maximum flexibility in the project implementation of agencies that do not have a humanitarian aid mandate in order to continue with medium and long-term initiatives while addressing wherever possible the strains on various communities.

The Albanian government’s handling of the Kosovo crisis was, on the other hand, an historic and symbolic milestone. For the first time, Albania was seen by the international community not as a problem, but as a partner. NATO used Albania as a supply and logistics base during the air strike campaign against Serbia, and the image of the country in the eyes of the international community was enhanced immensely by the hospitality shown to the ethnic Albanian refugees.

The crisis also had some positive effects on the economy. After two years of rampant crime following the pyramid scheme crisis of ’97, the massive international presence throughout Albania, including 20,000 NATO soldiers, served to bring Albania a period of relative stability by restricting the activities of armed groups. Economic indicators for 1999 are quite positive, with GDP growth sustaining the 1998 level of 8%, and inflation minimal at an estimated 1%. The official unemployment rate is reported to be 17.8%, but most candid observers agree that the figure is closer to 25% - this discrepancy due to the fact that an estimated 25-30% of the population is not registered with the state benefit systems. Two key factors boosted the economy in 1999: 1) an enormous amount of international humanitarian aid and, 2) the influx of hard cash spent here by relief workers and journalists that provided a mini-boom to local businesses and strengthened the Lek against the dollar. Families also continue to receive financial support from relatives working abroad.

While jobs have been lost to the privatization and subsequent downsizing of state run enterprises, the private sector is growing. The privatization of SME’s was almost completed in 1999, although many formerly state-owned companies suffer due to the persistence of "planned" as opposed to "market" management styles. Strategic foreign investment in this sector remains elusive due to the security situation and lacking infrastructure conditions. The banking system also remains weak. State-owned banks have yet to be comprehensively restructured. Both state-owned and private banks require collateral of between 100% and 200% on credits to the private sector, and interest rates are prohibitively high. Frequent land disputes make loans for land purchases too risky. The "black" economy thrives, accounting for an estimated 50% of GDP and depriving the Government of much-needed tax revenue. While Albania had hoped for accession to the WTO at the Third Ministerial Conference held in Seattle, 30 Nov. through 3 Dec., it was forced to settle for Observer Government status.

The domestic political situation remains one of confrontation especially between the ruling Socialist and main opposition Democratic parties. The Democratic Party, led by Dr. Sali Berisha, has repeatedly called for early elections and has continued protests against the Government’s alleged lack of serious intent to solve the September 1998 assassination of senior Democratic Party leader, Mr. Azem Hajdari. It also continued the boycott of Parliament that it began soon after the assassination through the height of the refugee crisis. The Democrats returned to Parliament in July of 1999, just ahead of the summer recess.

Disputes within the Parties were also acute in 1999. At the Party Congress, held in September, Deputy Chairman Mr. Genc Pollo challenged Berisha for the Chairmanship. Dr. Berisha maintained power, subsequently stripping Pollo of his official party functions. Pollo has since formed a group of "moderates" within the party and is campaigning against Berisha’s leadership style and policies. A similar power struggle ensued at the Socialist Party Congress, held in October, where ex-Prime Minister Fatos Nano, who resigned his post after the September 1998 "attempted coup d’etat," challenged and retook the Chairmanship from Prime Minister, Mr. Pandeli Majko, his former protégé. After the Congress, Mr. Ilir Meta was voted the new Prime Minister. A positive factor to emerge is the election of Albania’s first female Deputy Prime Minister, Makbule Ceco, who has been a key participant in UNDP Gender initiatives.

The legacy of the infamous "pyramid scheme" crisis which threw Albania into chaos and self-destruction in 1997 cannot be overlooked in an analysis of 1999. Over half a million light and heavy weapons, and tons of ammunition and explosives looted from national depots remain, for the most part, in the hands of civilians. Criminal elements profited, and continue to profit, through the illegal trafficking of a portion of these weapons, use them to commit crimes, and have become ready co-conspirators in what has solidified into a vast web of "rampant" corruption in the judiciary, the police, customs and politics in general. Furthermore, thousands of square hectares of agricultural land were either destroyed or damaged during the unrest, making food security a still-pertinent concern.

The Stability Pact for South-Eastern Europe initiated by the European Union, adopted in Cologne, Germany, on 10 June 1999, and endorsed at the Sarajevo Summit of 30 July 1999, stresses the necessity of the Balkan nations to work together and individually towards promoting political and economic reforms, development and enhanced security in the region. It has guided Albanian foreign policy in its stated goals of joining the European Union and integrating into Euro-Atlantic structures. The European Commission late last year approved a feasibility study for Albanian accession into the EU. An active international political agent has been the Friends of Albania, chaired by the EU and OSCE and composed of the main donor countries, the EU, and the UN. It has met in Brussels, Vienna, and in Tirana, where it is chaired locally by OSCE, to discuss concerns and present them to the Government. The FoA group has strongly urged the restoration of law and order, and the implementation of an anti-corruption campaign.

Trafficking of human beings persists, with trips across the Adriatic and Ionian Seas to Italy in quick, agile rubber boats being made whenever conditions permit. Recently there has been a rise in the percentage of non-Albanian (Kurdish, Chinese, etc.) groups attempting to make it to the shores of Italy via Albania. The Italian Guardia di Finanza continues to patrol the coast. The cultivation and trafficking of narcotics has also firmly taken root in Albania, despite an anti-drug campaign by the Government resulting in the destruction in thousands of cannabis sativa plants in central Albania. Law enforcement officials lament that while they generally drive old sedans and are lucky to have a two-way radio, criminals perpetrate and flee from crimes in brand new four-wheel drive off-road vehicles and carry cellular telephones.