The Country Co-operation Framework (CCF) serves as the Government’s proposal for the use of UNDP's and cost-sharing resources for Albania. The proposed time-frame of the CCF is four years, 1998-2001.

The government and especially its Council of Ministers, has worked closely with the UNDP office in Albania in the preparation of this CCF. The contents of the CCF have been developed based on extensive consultations with key development partners.

I. NATIONAL DEVELOPMENT SITUATION FROM A SUSTAINABLE HUMAN DEVELOPMENT PERSPECTIVE

II. RESULTS AND LESSONS OF PAST COOPERATION

III. PROPOSED STRATEGY AND THEMATIC AREAS

A: Good Governance and Public Administration
B: Economic recovery and employment generation
C: Social sectors development

IV. MANAGEMENT ARRANGEMENTS

I. NATIONAL DEVELOPMENT SITUATION FROM A SUSTAINABLE HUMAN DEVELOPMENT PERSPECTIVE

Albania aims to promote and maintain sustainable economic development through the promotion of democratic, institutional and legal reform and a free market system based on private ownership of property and means of production. Poverty alleviation is to be achieved through securing rapid economic development with measures instituted to promote equity. The driving force for development is privatization, while foreign direct investments and trade are encouraged and seen as strategic assets in the promotion of overall development goals. Within this context the Government sees UNDP as a catalytic factor, to promote its key policy objectives as well as its aim of reducing both absolute and relative poverty in the country.

Albania had made some progress in its transformation towards a market economy and building democratic institutions. Transformations in the areas of economic, political and social domains resulted in industry being reduced to 11% of GDP, having been the main sector of the economy in 1990. The collapse in industrial production has now stabilized since this time and a moderate increase can be detected, based primarily on activities in the small and medium sized enterprises sector. The last five years saw a rapid increase in the service sector which has been growing at nearly 20% annually. Also construction and transport activities have showed increases. The agricultural sector is at present the largest contributor to GDP but per hectare productivity is low.

However, towards the end of 1996 both the Government and the economy began a rapid decline closely related to the collapse of a number of fraudulent pyramid investment schemes. In March 1997 the country descended into near total chaos and anarchy and public institutions ceased to function. After the establishment of a transitional Government of National Reconciliation, general elections were held in July 1997. The elections resulted in a new Government and the appointment of a new president. The new Government has established a policy of economic recovery and growth. The main elements of the government’s strategy for political, social and economic reform and recovery are: (i) political normalization and democratization; (ii) restoration of law and order; (iii) institutional reform; (iv) addressing poverty caused by the crisis; (v) financial sector reform and resolution of the pyramid schemes; and (vi) privatization of strategic sectors.

In 1990, two million people or 65% of the population lived in rural areas without any form of private property. By the end of 1994, roughly 97% of agricultural land had been distributed creating some 455,000 new private farms, averaging 1.5 hectares in size. The lack of employment possibilities has forced people to migrate to urban areas and abroad. This has weakened village social structures, and has placed pressure on social and physical urban infrastructures.

The impact of the privatization program has been a slow but increasing level of economic productivity and accumulation of wealth for a small portion of the population, and a relative increase in the standard of living for others. On the other hand, it has also contributed to rising under- and unemployment (13% registered unemployed in 1995) and hardship for long-term unemployed and pensioners. In the health and education sectors the situation has deteriorated and today's educational system is not responsive to the demands of the new Albanian society. The deteriorating quality and delivery of social services (e.g., health and education) are more pronounced in rural areas than in urban centers.

The growth of a large number of NGOs and civil society institutions is indicative of an active civil society and of its involvement in socio-political and economic issues.

The key elements of Sustainable Human Development (SHD) - poverty eradication, employment creation, sustainable livelihoods, and regeneration of the environment - will remain a priority in the coming years. Support should be given to democratic participation as well as integration into Europe through sound governance and special care for the participation of women in the country’s political and socio-economic development.

Poverty eradication

Since no nationwide household survey of incomes and expenditures have been undertaken it is difficult to make an accurate assessment of the poverty situation in Albania. However, available information as presented in a recent World Bank study suggests that about 30% of the rural population and about 15% of the urban population can be considered poor relative to the rest of the country’s rural and urban populations. Excisting information suggests that while poverty is more pervasive among the rural population than the urban population, it is less severe in rural areas. In addition the World Bank study finds that many people are vulnerable to poverty since incomes are only marginally above the poverty line.

Environment

In general, the mismanagement of natural resources continues to be significant and serious environmental degradation has been the result of past economic policies.The most serious environmental problems are soli erosion and deforestation, groundwater contamination from agricultural chemicals as well as industrial and domestic wastes.This is economically significant since 75% of the country’s land resources are devoted to agriculture and forestry and these sectors account for about 50% of GDP. Urban environmental hazards include a severe shortage of water,totally inadequate sewerage facilities, serious airpollution from exhaust emissions and inefficient solid waste collection and disposal.

Governance

The weakness of state institutions was a major factor leading to the crisis in early 1997. Wide-ranging institutional reforms will be necessary for the rebuilding of a democratic state adhering to the principles of the rule of law. Consequently, Albania will adapt its legislative framework to the principles and rules of a new legal system, and to modern economic legislation in order to address the needs of a market-oriented economy, and for eventual future accession to the European Union (EU). The government is conscious that improvements in central and local public administration and the eradication of corruption require radical changes in public sector management practices. A State Institutions and Public Administration Reform (SIPAR) program has therefore been designed. In June 1995 Albania was admitted to the European Council, an important step towards the integration of Albania into Europe. Albania is, therefore, committed to endorse the European Convention on Human Rights as well as other standards and laws.

Gender

The involvement of Albanian women in the areas of both public policy and management is generally modest as evidenced by the fact that no women serve as mayors or head of local Government, nor are there any women in senior management positions in the private sector. While there is no culturally based adverse attitude towards women serving in senior government or political positions, little has been done at national level to promote women into decision making positions.On the other hand more than 20 women NGOs are actively involved in improving the status of women in society in general.

II. RESULTS AND LESSONS OF PAST COOPERATION

UNDP has been assisting the Government of Albania since 1981. In 1994 the Governing Council of UNDP approved the fourth Country Programme (CP IV, 1994-96) for Albania which focused its resources on three areas: (i) Alleviation of the social impact of structural reforms; (ii) Human resources development, including human rights and democracy; and (iii) National capacity building. A one year extension until 1997 of the country program was approved by the third regular session of the UNDP Executive Board in September 1997.

The publication of two Albanian human development reports (1995 and 1996) has been a major step in promoting the concept of people-centered development and also providing a forum for public debate on how such an objective should be met. The aggressive resource mobilization campaign undertaken by UNDP, in close collaboration with the government, has resulted in approximately $8 million non-core funds allocated to UNDP-supported initiatives. It is evident that continued resource mobilization will be one of the vital prerequisites for producing high-impact results during the present CCF period.

The main lessons learned from the implementation of the Fourth Country Programme are as follows: (1) to avoid dispersion of UNDP development assistance; (2) to increase impact through a more systematic use of the program approach, and creating a better understanding of this concept among the government, national NGOs, UN specialized agencies and other donors; (3) in increasing its support to NGOs/CSOs, the government and UNDP should work more with organizations which are active in rural and remote areas of the country. UNDP should lead the effort among the donors to build the capacity of NGOs/CSOs at the local level, both in advocacy and program delivery; and (4) National Execution (NEX) has been a cost-effective modality and contributed to capacity building and overall national ownership. Future UNDP Co-operation will continue to promote the national execution modality.

III. PROPOSED STRATEGY AND THEMATIC AREAS

The unprecedented human suffering and civil unrest caused by the collapse of the "pyramid" schemes in early 1997, the election of a new Government and the need to strengthen its capacity to govern resulted in the adoption of a Reform and Recovery Programme (RRP) as the main short- and medium-term planning framework to put the country back on a path of sustainable development. The RRP, which was based on a document "Albania: Directions for Recovery and Growth" prepared jointly by the World Bank, the European Commission, the EBRD and the IMF and endorsed at international donors meetings in Rome and Brussels in October 1997, will provide the framework for future UNDP support to Albania.

The RRP identifies seven main elements of government’s strategy for political, social and economic reform, namely: (i) political normalization and democratization, (ii) restoration of law and order, (iii) institutional reform, (iv) addressing poverty caused by the crisis; (v) macro-economic stabilization; (vi) financial sector reform and resolution of the pyramid schemes and (vii) privatization of strategic sectors. In addition to these strategies, the RRP includes sectoral measures which are focused on four main thematic areas: (a) public administration and governance; (b) private sector and agricultural development; (c) social sector programs; and (d) public infrastructure.

Work has been initiated on the preparation of a United Nations Joint Programme Presentation (UNJPP). The UNJPP will attempt to cluster UN system co-operation in such a way that UN programs, funds and specialized agencies, including the Bretton Woods Institutions, can support in a coherent and complementary way the various goals and strategies of the RRP.

Within these clusters, it is proposed that UNDP will provide support at both the strategy level, as well as at the sectoral level, and be concentrated on the following three main thematic areas(i) good governance and public administration; (ii) economic recovery and employment, and (iii) social sectors development. The fourth thematic area of the RRP on infrastructure, relates more to other agencies rather than UNDP.

Gender considerations and environmental management and conservation issues are considered as cross-cutting concerns to be taken into consideration in all three areas.To this end a wide-ranging program on Gender equality issues has been developed, funded by UNDP and the Italian Government, to provide support for both government and UNDP activities.

The proposed strategy for UNDP’s development co-operation is based on a number of principles: a) The need to ensure linkages, as far as possible, to a series of specific national programs which would provide the necessary framework for project design, resource mobilization, donor co-ordination and information sharing; b) The strategic placing of UNDP inputs in the context of the formulation or implementation of national program frameworks so as to have the greatest multiplier effect; and c) The promotion of complementarity with the support of other donors.

In substantive terms, UNDP assistance is designed to support three main thematic areas which together can contribute to reducing poverty and promoting a process of sustainable human development. These are addressed in greater detail below, but whose goals can be summarized as: (i) Good governance: the establishment of a suitable enabling environment for economic and social development, through the reform and strengthening of the process of governance, and in particular, of the judicial system, macro-economic policy, etc.; (ii) Economic recovery and employment generation: the provision of support to the able-bodied through the promotion of income generating activities, small and medium-scale enterprises and regional development; and (iii) Social sectors support: the strengthening of mechanisms for support to and empowerment of the more vulnerable members of society, through social welfare, training and education and health.

Thematic Area A: Good Governance and Public Administration

The lack of adequate governance was one of the main causes of the civil unrest in early 1997, and reforms in many institutional areas (the judiciary, public administration, the civil service) were already needed before the onset of the crisis. Major emphasis has been placed in the Reform and Recovery Programme on a) the restoration of public authority through enhanced security measures and reform of certain institutions of government, e.g., local government, b) the strengthening of the judiciary through the re-establishment of the rule of law and the independence of the judiciary; c) the design and implementation of civil service reforms to provide for an efficient, honest and effective public administration and civil services, and 4) the promotion of the development of civil society, through the strengthening of non-governmental organizations (NGOs) and other civic associations, and the encouragement of a participatory approach in local governance. A comprehensive state institutions and public administration reform program (SIPAR) at an estimated cost of US$130 million has been developed to carry out a wide range of activities in the areas of civil service reform, the judiciary, police and security, revenue collection, constitutional reform, administrative oversight (including Ombudsman institution), expenditure management, reorganization of ministries and agencies, policy and law-making as well as Parliament. Linked to all this is the need to strengthen the institutions of civil society and their participation in the governance process.

Several donors are supporting various components of the SIPAR including the European Union, OSCE, EBRD, the World Bank, USAID, France, Italy, the Council of Europe and UNDP, while WHO, UNICEF and UNFPA have provided support to the restructuring of the Ministry of Health.

Under the present CCF it is proposed that UNDP will assist in the areas of (i) judicial reform through the preparation of development strategy for the Judiciary; (ii) local government reform; (iii) human rights, including the establishment of a Human Rights Documentation Center; (iv) support for the establishment of a public service training facility; (v) support for external debt management and central aid co-ordination and (vi) strengthening CSOs. Special emphasis will be given to good governance at the local level, both through capacity building of local governments in development planning and by engaging civil society in the development process. Complementary support in several of the above areas will be sought from RBEC regional programs on DGP (democracy, governance and participation), external resource management and gender in development

With respect to aid co-ordination and management, the expected substantial influx of foreign aid to Albania over the next three to four years makes its co-ordination a critical factor in determining the medium and long-term impact of development assistance in the country. Recognizing this, UNDP, in close consultation with the new Ministry of Development and Economic Co-operation (MoDEC), has embarked on a strategy to strengthen the government’s aid co-ordination capacity in the identification, preparation, monitoring and evaluation of projects and programs. Agreement has also been reched among the UN system in Albania and the government that a UN Joint Programme Presentation will be prepared to further strengthen co-operation among UN agencies under the Resident Co-ordinator system and assist in enhancing the effectiveness and impact of the UN assistance in Albania.

Impact: The impact of UNDP support should be measured by improvements in: (i) the functioning of the judicial system and the formulation and execution of laws and regulations at the central and local levels; (ii) work practices of the civil service; (iii) the degree of decentralization throughout the country; (iv) increased capacity of the local authorities (i.e. government and NGOs/CSOs) in policy formulation, program planning and implementation; and (v) debt monitoring and management.

Thematic Area B: Economic recovery and employment generation

Sustainable economic development and the creation of new employment opportunities depends on the recovery and expansion of the private sector. The role of Government in supporting such development is through the creation of an enabling environment for both local and foreign entrepreneurs. This, in turn, requires the establishment of an appropriate legal and regulatory framework and a modern financial services sector.

A number of factors continue to constrain the development of private enterprise. These include an inadequate legal framework, arbitrary implementation of customs and taxation regulations, limited access to credit and inadequate financial services to support trade transactions. Consequently government priorities for the sector can be summarized as follows: (i) providing effective security to businesses through an appropriate and uniformly enforced legal framework; (ii) restoring confidence of foreign investors by providing guarantees through international financial institutions against certain categories of non-commercial risk, and (iii) strengthening the financial services sector and providing seed financing for credit lines and/or equity participation programs.

UNDP will provide support in this sector through the development of small and medium-scale enterprises, both to increase incomes as well as promote employment, privatization, and restructuring of newly privatized enterprises. Direct investment promotion and trade facilitation will also be supported. Close links will be maintained with the regional small and medium-scale enterprise project.

UNDP will also support the government’s strategy to promote decentralized rural development through strengthening its capacity in the design of comprehensive regional development programs in selected geographical areas. UNDP resources should be directed towards policy formulation and implementation of local development schemes to provide basic needs such as employment, health and housing, access to education and skills training, and promotion of the role of women through income-generating opportunities including setting-up small scale revolving funds.

Impact: The impact of UNDP's participation in this focus area should be gauged by an increased number of small and medium size enterprises, reduction in the number of unemployed, including those of women, a transparent and effective privatization process as well as a marked increase in foreign joint venture activities in the country. In addition, regional development schemes will have been prepared, and activities initiated.

Thematic Area C: Social sectors development

The incidence of poverty increased significantly following the collapse of the pyramid schemes and the ensuing loss of personal savings and increase in unemployment. The number of people living in poverty is estimated to be about 1 million, of whom 40% are retired and receiving monthly pensions of between $7 and $22. The number of families registered as qualifying for income support was 165,000 at the beginning of 1997. Over 650,000 people live on social assistance programs averaging less than $12 per month. With over 15,000 public sector workers due to be made redundant over the next six months, the strain on the social assistance budget will be considerable.

UNDP will assist the government to address the economic needs of the most vulnerable groups through the development, in close collaboration with other donors in these fields, of a comprehensive social welfare program. This would provide skills training and job placement opportunities. This would include support to efforts of reducing the state monopoly in social welfare and promote greater participation of NGOs/CSOs and the private sector in this area. Within this overall strategy the role of women will be the subject of particular attention.

Impact: The expected combined impact of the interventions should be assessed in terms of their contribution to the reduction of vulnerability in the targeted regions as well as the degree of planning, decision-making and participation at the local level, and improved social benefits. Another indicator of success should be a significant reduction in government involvement in the management of social welfare and the corresponding increased participation of NGOs and the private sector.

IV. MANAGEMENT ARRANGEMENTS

Execution and implementation

The experience with NEX in Albania has been generally positive in terms of its cost-effectiveness and increased national ownership, although difficulties have been encountered due to the lack of capacity. During the period covered under this CCF the NEX modality will continue to be used in most projects, to be complemented by the UN agency execution. In order to improve the national capacity, however, a training program has been established for both the co-ordinating unit as well as technical ministries.

The MoDEC will remain as UNDP’s main counterpart for co-ordination of operational activities. In addition to MoDEC, appropriate line ministries and NGOs will also act as the implementing bodies for UNDP-supported interventions. To complement and assist the government in the implementation of the program, relevant UN agencies such as UN/DESA, UNOPS, ILO, UNV, WHO, and HABITAT may also be involved. In addition, exchanges of regional expertise through TCDC programs would be promoted and initiated when appropriate.

Monitoring, review, and reporting

Regular monitoring of the implementation of the CCF will be undertaken by the Local Programme Advisory Committee (LPAC) in which key government counterparts will participate along with NGO representatives, UN agencies, and donors directly involved in UNDP program areas. A comprehensive review of the CCF will be undertaken during the triennial review and at the end of the four-year financial resources framework. These reviews will be based on a independent assessment of performance by sub-theme gauged by built-in project monitoring information and impact indicators, as well as performance criteria indicated in individual program outlines. In addition, each of the projects and programs will define its own set of monitoring and evaluation criteria against which progress and impact can be measured.

Resource mobilization and aid co-ordination