Document of The World Bank FOR OFFICIAL USE ONLY Report Number: 72899-AL INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR ALBANIA FOR THE PERIOD FY11-FY14 April 18, 2013 South East Europe Country Unit Europe and Central Asia Region International Finance Corporation Europe and Central Asia This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS GOVERNMENT FISCAL YEAR (Exchange Rate Effective November 1, 2012) January 1 to December 31 Currency Unit = Albanian Lek (LEK) WEIGHTS AND MEASURES US$1 = LEK 12 Metric System ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities APL Adaptable Program Loan BoA Bank of Albania CAD Current Account Deficit CEDB Council of Europe Development Bank CPS Country Partnership Strategy CPS PR Country Partnership Strategy Progress Report DeMPA Debt Management Performance Assessment DHS Demographic and Health Survey DP Democratic Party DPL Development Policy Loan EBRD European Bank for Reconstruction and Development EC European Commission ECA Europe and Central Asia Region ECSEE Energy Community of South East Europe EIB European Investment Bank EITI Extractive Industry Transparency Initiative EU European Union FDI Foreign Direct Investment FY Fiscal Year GDP Gross Domestic Product GPF Governance Partnership Facility HIV Human Immunodeficiency Virus IBRD International Bank for Reconstruction and Development IDA International Development Association IDF Institutional Development Fund IFC International Finance Corporation IPS Integrated Planning System KfW German Reconstruction Credit Institute ii IFI International Financial Institutions IMF International Monetary Fund IPA Instrument for Pre-Accession JSDF Japan Social Development Fund LAMP Land Administration and Management Project LFS Labor Force Survey LITS Life in Transition Surveys NPL Non-Performing Loans OECD Organization for Economic Cooperation and Development PEFA Public Expenditure Financial Accountability PER Public Expenditure Review PHC Public Health Center PPP Public Private Partnership REPARIS Road to Europe Program for Accounting Reform and ROSC Report on the Observance of Standards and Codes SEE South East Europe SECO Swiss State Secretariat for Economic Affairs SIDA Swedish International Development Corporation Agency SLRP Secondary and Local Roads Project SPIL Social Protection Investment Loan TA Technical Assistance TF Trust Fund UN United Nations UNDP United Nation Development Program UN MDGs United Nations Millennium Development Goals VAT Value Added Tax WBG World Bank Group WBI World Bank Institute IBRD IFC Vice President Philippe H. Le Houerou Dimitris Tsitsiragos Country Director Ellen Goldstein Tomasz Telma Country Manager Kseniya Lvovsky Per Kjellerhaug Task Team Leader Kseniya Lvovsky Gjergj Konda/Elira Sakiqi 111  Table of Contents I. Introduction t...................... 1 II. Country Context........................................................ 1 III. Key Development Challenges for the Remainder of the CPS Period ........... ......... 5 IV. Progress towards achieving CPS objectives and outcomes .................. .........7 V. Modifications to the CPS and the way forward ............................ ...... 10 VI. Risks................................................................ 14 Tables: Table 1: Key Economic Indicators, 2005-2015 ..............................................2 Table 2: Lending, FYI 1-14 (in US$ million) .......................................... 12 Table 3: Actual and Planned Country Specific AAA, FYI 1-14 ........................ .....13 Table 4: Actual and Planned Regional AAA, FYI 1-14. ...................................14 Boxes: Box 1: Governance and Public Sector Management...................................... 10 Annexes: Annex 1: Results Matrix for the Country Partnership Strategy ........................ ..... 16 Annex 2: Gender Issues in Albania........................................... ...... 23 Annex 3: The World Bank Group and Other External Donors..............................27 Annex 4: List of Active and Planned Trust Funds in Albania ........................29 Annex 5: Standard CPS Annexes........................................... .......31 iv  I. Introduction 1. This Progress Report assesses the implementation of the FY11-FY14 joint Bank-IFC Country Partnership Strategy (CPS) for Albania and sets out planned activities for FY13 and 14. The CPS identifies three strategic objectives for World Bank Group (WBG) support: (i) supporting a recovery in economic growth by improving competitiveness through fiscal consolidation, better public sector management, an improved business climate, deeper access to credit and reduction of infrastructure bottlenecks; (ii) sustaining and broadening social gains through enhanced social protection and more effective social services; and (iii) reducing vulnerability to climate change through improved water resource and disaster management. 2. The objectives and pillars of the CPS remain unchanged since its preparation in FY11, but the prolonged volatility in Eurozone economies since 2008 points to the need for increased emphasis on reducing economic vulnerabilities and supporting economic growth. In this context, the Bank allocated an additional US$275 million to help Albania respond to the Eurozone crisis through increased support for the financial sector, structural reforms and social protection - allowing for a total program under this CPS of up to US$575 million. To date, the Government has made progress towards realizing CPS milestones and outcomes in a number of areas, although fiscal consolidation has remained an elusive goal. High levels of public debt and a sensitive dialogue on fiscal consolidation have thus far limited the absorption of CPS financing through development policy operations. Going forward, the dialogue will continue toward a satisfactory fiscal framework, and the Bank will diversify planned lending instruments to better support growth and reduce economic vulnerability. Most investment projects have met or are meeting their development objectives. Challenges have remained, however, in supporting improved financial performance and reliable supply in the energy sector. A strong knowledge program supported by IBRD and IFC has been an important part of the partnership strategy, in addressing the economic crisis as well as supporting sector level reform programs. IFC's program complemented IBRD's efforts in private sector development. During FYI 1-13 (as of March 25), IFC significantly increased its program in the country, investing in six projects totaling about US$125 million. Details of progress to date and updated performance indicators are reflected in the Results Matrix (see Annex 1). II. Country Context 3. Relations between Albania's two main political parties remain tense, but there has been cooperation on the EU accession reform agenda leading to an EC recommendation that the country be granted EU candidate status if progress continues. Following the close elections of 2009, the ruling Democratic Party (DP) formed what has proven to be a relatively stable governing coalition with a smaller party, the Socialist Movement for Integration. The coalition has been able to move forward with its agenda in most cases. However, legislation requiring a three-fifths majority has been more difficult to pass by the DP and its main opposition, the Socialist Party (SP). Since November 2011, the two parties have come together to deliver on substantial reforms identified by the EC in its 2010 Opinion as pre-requisites for EU candidate status. Most recently, the parties came together to pass laws on electoral reform, administrative courts and elimination of the exemption from prosecution for high officials. In light of these developments, the October 2012 EC Progress Report has recommended that Albania be granted candidate status by the EU Council subject to completion of key measures in the areas of judicial and public administration reform and revision of the parliamentary rules of procedure. 1 4. With a large majority of the population supporting EU membership, EU accession remains a key driver of reform in public policy. In this regard, particular focus will be placed on: conducting elections in line with European and international standards; strengthening the independence and accountability of judicial institutions; combating corruption and organized crime; reinforcing protection of human rights and antidiscrimination; and implementation of property rights. The successful conduct of Parliamentary elections in 2013 will be a crucial test of commitment to the new electoral reform and is a pre-condition for opening EU membership negotiations. 5. Since the 2008-09 globalfinancial crisis, growth has remained subdued. After the pre- crisis decade of a 6 percent average growth rate, growth fell to 3.3 percent in 2009. The crisis led to lower remittances and exports, which in turn contributed to lower growth and fiscal revenues. GDP grew by 3.5 percent in 2010 and 3 percent in 2011, supported mainly by services and industry. 6. Albania's growth outlook has weakened substantially due mainly to the continued deterioration of the external environment. Like all countries in Southeast Europe, Albania has been hit hard by the prolonged crisis in the eurozone. Given its close links to the Greek and Italian economies via exports and through remittance and financial flows, the sovereign debt crisis affecting these key economic partners has dampened the growth outlook for Albania. Growth in 2012 has been estimated at 0.8 percent. With the Eurozone crisis lingering, growth in Albania is projected to remain modest averaging just 2 percent between 2012 and 2015 (Table 1). Table 1: Key Economic Indicators, 2005-2015 Actual Est. Proj. Proj Proj. Proj 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Real GDP growth (%) 5.5 5.0 6.0 7.7 3.3 3.5 3.0 0.8 1.6 2.0 3.0 Retail prices (end-period, %) 2.0 2.5 3.5 2.7 2.7 2.9 1.7 3.0 3.0 3.0 3.0 (in percent of GDP unless otherwise noted) Fiscal sector Revenues and grants 24.5 25.3 25.5 26.7 26.0 26.5 25.3 25.0 25.2 25.3 25.3 Tax revenue 22.0 23.0 23.4 24.3 23.6 23.5 23.2 23.1 23.3 23.4 23.4 Expenditures 28.1 28.6 29.2 32.3 33.1 29.7 28.7 28.5 28.6 28.4 28.4 Overall balance (including grants) -3.6 -3.2 -3.7 -5.5 -7.0 -3.1 -3.4 -3.5 -3.4 -3.1 -3.1 Primary balance (including grants) -0.5 -0.4 -1.1 -2.7 -3.9 0.3 -0.3 -0.5 0.4 0.8 0.7 Public Debt 56.9 55.9 53.7 55.5 59.4 58.5 59.4 60.8 61.7 61.9 61.4 External sector Current account balance (incl. official transf.) -6.7 -7.3 -11.2 -14.9 -15.4 -11.8 -12.3 -10.5 -9.7 -7.9 -6.0 Trade balance (goods and services) -24.0 -24.3 -27.2 -26.7 -25.0 -21.3 -22.6 -18.5 -19.1 -17.6 -16.0 International Reserves (in months of imports) 4.0 4.7 4.3 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Remittances 12.6 13.2 12.5 10.2 10.4 9.8 9.3 8.7 8.9 9.1 9.3 FDI 3.3 3.6 6.0 7.0 7.8 9.3 7.6 7.4 6.2 6.3 6.3 Source: World Bank staff, IMF and authorities' estimates 2 7. While an expansionary fiscal policy helped mitigate the negative effects of the global crisis in 2009, fiscal space is now exhausted and public debt is projected to exceed 60 percent of GDP in 2012 and 2013. The fiscal stimulus, which started in 2008, consisted of elevated public investments (mainly on roads) and increases in public salaries and pensions. The resultant rise in fiscal deficits, combined with a 10 percent depreciation of the Lek, brought public debt levels close to 60 percent of GDP, the legal limit set in 2008. In 2010, with fiscal space tight and revenue growth slowing, the Government cut expenditures by 9.5 percent at mid-year, reducing the fiscal deficit to 3.1 percent of GDP (from 7 percent in 2009). Another mid-term fiscal adjustment (1.4 percent of GDP) was made in 2011 to keep public debt within 60 percent. For 2012, though revenues were again lower than projected, the Government did not make a mid- year fiscal adjustment in anticipation of receipt of privatization revenues. However, a looming energy shortage (see para. 19) and delays with completing privatization transactions made an increase in the fiscal deficit to 3.5 percent of GDP in 2012 unavoidable, pushing the debt level to 60.8 percent. In addition, there are sizable outstanding bills and accumulated arrears for public works and full VAT reimbursements (approx. E200m per IMF estimates). In December 2012, the parliament approved the removal of the 60 percent ceiling from the organic budget law, without proposing any other limit or goal. Albania's 2013 budget targets a general government fiscal deficit of 3.4 percent and foresees a further increase in public debt. 8. Clearing arrears to private companies, together with establishing an effective mechanism for commitment control, is a key priority. The ambitious agenda of public investments put forward in 2007 was based on anticipation of much higher fiscal revenues than actually happened after the global financial crisis in 2008. Many public works continued at the same pace as initially planned despite considerable cuts in the annual budget funding for these works because of growing fiscal constraints. These works were often carried out through commercial bank lending. While the unpaid claims could not be identified in the treasury due to the lack of a multiannual commitment system, the delays in arrears clearance showed up in the increasing level of Non-performing Loans (NPLs, see para. 11). Swift clearance of arrears is important for the credibility of public finances, as well as for supporting the private sector at a difficult time, reducing pressures on the commercial banks, and improving the quality of bank lending. Recently, government has accelerated the work on setting up the mechanisms that would prevent recurrence of arrears in the future and publicly committed to clearing existing arrears in the first half of 2013. Fulfilling this commitment will be a good step forward. 9. Lowering public debt over the medium-term remains critical to macroeconomic stability and growth. Albania's public debt is among the highest in Eastern Europe. A high and growing public debt means increased rollover risks and elevated interest costs. Interest expenditures are much higher than in other SEE countries, crowding out more productive spending and representing a major source of vulnerability for the budget. While the deficit has been mainly used for the development of infrastructure, which has historically suffered from the lack of investment, financing the deficit is becoming unsustainable. Increased public borrowing would also damage growth prospects by crowding out the private sector. Additional fiscal consolidation measures embedded in structural reforms are needed to send a credible signal to the markets. Priority actions being discussed with the Bank include: (i) strengthening tax administration and exploring new revenue sources; (ii) reforming power sector rules and tariffs to make the sector more self-sustaining; and (iii) reforming the pension scheme to stem the pension fiscal deficit. The use of future privatization revenues, to complete clearance of arrears 3 and reduce debt will be of paramount importance. Albania would also benefit from entering into a new program with the IMF, after the precautionary program was terminated in 2009. 10. External imbalances improved in 2012, but remain high. After reaching 15 percent of GDP in 2009, the Current Account Deficit (CAD) dropped to below 12 percent of GDP in 2010, owing to an increase in exports, particularly of minerals and electricity. The resumption of large public investments in 2011 resulted in a spike in imports of machinery and equipment, contributing to a small deterioration in the trade deficit which was fully financed through foreign loans. In 2012 CAD dropped to 10.5% of GDP as a result of narrowing trade deficit. The trade deficit is expected to decline further in the medium-term (to 8 percent by 2014) due to the moderation of large public investments, which should result in lower imports. The CAD will be financed by foreign direct investment (banking sector inflows). 11. The financial sector has remained largely stable vis-d-vis the on-going Eurozone crisis but faces escalating risks derived from the prolonged unfavorable external environment and the continued deterioration of banks' loan quality. Albania's banking sector, with assets equaling about 85 percent of GDP (2011), comprises 16 banks. Five banks collectively hold about three-quarters of total banking system assets. Four of these banks are Austrian, Greek or Italian owned. As of September 2012, the overall banking sector capitalization was 15.9 percent and deposits exceeded pre-crisis levels (having recovered steadily from a sharp drop in 2008). The banking system is relatively well-provisioned, as the ratio of provisions to total loans has increased four-fold since 2007. However, this increase in provisions has impacted banks' financial performance, which is evidenced by declining returns. Furthermore, there has been a sharp rise in non-performing loans (NPLs), from 6.7 percent in 2008 to 22.7 percent at end- September 2012, by now the highest level in the region. This reflects both the general economic slowdown and the difficulties faced by banks in the execution of their collateral. These weaknesses are exacerbated by the obstacles some bank borrowers are facing in obtaining VAT reimbursements and/or payments for goods and services provided to the Government. The tide of rising NPLs has undermined banks' earnings, capitalization and their ability to extend new loans. 12. The Bank of Albania (BoA) has been proactive in adopting prudential measures to safeguard financial stability but continued efforts are needed. Important steps already taken include requiring banks to seek additional capital, putting in place higher liquidity ratios, stepping up financial sector monitoring, and finalizing the transformation of bank branches into subsidiaries. The banking sector has increased its capitalization by over US$200 million in the last two years. A November 2011 amendment to the Law on Banks strengthened the BoA's capacity to deal with distressed banks by providing it with the power to establish a bridge bank. The Ministry of Finance, Financial Supervisory Authority and BoA also established the Financial Sector Action Group in early 2012 to strengthen macro-prudential supervision across the financial sector, to enable quick action in the event of a threat to financial stability. While these actions have helped to maintain financial stability, ongoing Eurozone uncertainty necessitate continued vigilance and further actions to reduce remaining financial sector vulnerabilities, stem the tide of increasing NPLs, and encourage banks to resume lending once private sector demand re-emerges. 13. The recent sluggish economic performance has likely been insufficient to reduce poverty. Although Albania experienced rapid poverty reduction up to 2008, the effects of slower growth appear to be placing a large part of the population under increasing strain. While there 4 has been no official household survey to measure poverty since 2008, available sources such as the Life in Transition Surveys (LITSs) conducted in 2006 and 2010 indicate that poverty has stagnated or possibly worsened. This is also supported by Labor Force Survey data on employment, which shows that 27 percent of Albanian households have at least one member who had lost a job versus an ECA average of 18 percent. Furthermore, available data on unemployment indicate a slight increase from 12.5 percent in 2008 to 13.3 percent in 2011. While the situation of Albanian women has improved over the past decade (particularly with regard to social services access), gender gaps are pronounced in terms of economic opportunity. The share of women entering the labor force has increased gradually since the transition but a large gap in labor force participation is still apparent - with a 56 percent activity rate for women compared to 77 percent for men. Albania also has a comparatively large wage gap, with women earning only around 65 percent of men's earnings. See Annex 2 for further information on gender. 14. Overall, Albania still faces a number of challenges with respect to the availability and accuracy of statistics in terms of both macroeconomic monitoring and social welfare measurement. Annual national accounts data (on expenditure basis) have not been published since 2007, while quarterly GDP statistics are available only with significant lags. The International Monetary Fund (IMF) is providing TA to develop capacity to complete national account statistics. As noted above, a comprehensive household survey dataset has not been published since 2008, complicating the measurement of trends in poverty and household welfare. The Life in Transition Survey (LITS) program, supported by the Bank, should help to partially address this gap, but more efforts will be needed - including further analysis of available data to understand the impact of the slowdown on the most vulnerable groups (e.g., Roma, children and the elderly). The Bank is increasingly coordinating its assistance in this area with EU-funded support to raise Albania's capacity to undertake censuses, data processing and analysis, and dissemination. III. Key Development Challenges for the Remainder of the CPS Period 15. In broad terms, the main challenges facing Albania remain unchanged since the CPS was prepared but there are some shifts in specific priorities given external and internal developments. These shifts in priorities are described below to provide context for the changes in the CPS program described in Sections IV and V below. Improving Competitiveness 16. While Albania has made notable achievements in some areas affecting competitiveness, recent external developments and/or policy inaction have complicated progress in others. One area in which concrete progress is observable concerns the legal and regulatory framework for business, which has been substantially overhauled and modernized. Since 2011, the Government has also stepped up efforts to strengthen property rights, though deficiencies persist in some key related areas such as construction licensing. 17. Albania continues its efforts to obtain EU candidate status. In particular, recent positive steps in terms of governance include the passage of key legislation linked to the EU accession agenda and the recommendation of EU candidate status, subject to clear conditions. The past two years also saw some important results with regard to public sector management, 5 including more transparent public procurement and improvements in tax administration. Going forward, efforts to strengthen public administration, public financial management and the rule of law must continue. Priority should also be given to the ongoing efforts to fully implement new financial management and procurement procedures within the central government and municipalities. Finally, efforts to introduce EU and international accounting standards for the private sector will also need to be strengthened. 18. Albania's competitiveness is adversely affected by the fiscal and financial sector issues discussed in the preceding section. As mentioned in para 9, the high government demand for credit (to roll-over the large public debt) tends to crowd out the private sector and keep interest rates at levels above those seen elsewhere in SEE. In turn, weaknesses in fiscal and public financial management - particularly the non-payment of government contractors and timely VAT reimbursements - have exacerbated both the rise of NPLs and private sector hardship during the economic slowdown. 19. Overcoming infrastructure bottlenecks remains critical to Albania's competitiveness. The WBG in 2008 supported Albania in a major reform of its power sector. Key elements of this reform included unbundling of generation, transmission and distribution, and privatization of the distribution arm (76 percent of shares) to a strategic investor. After initial improvements to the distribution network, the situation in the sector deteriorated in 2012, leading to the removal by the regulator of the operating license for the private distributor in early 2013 and appointment of an interim administrator. Furthermore, Albania and Southeast Europe more broadly suffered a severe drought through most of 2011-12. This, combined with the dispute with the distribution company, brought the sector to the verge of crisis, threatening social welfare and economic growth, undermining investment, and adding pressure on public finances. While favorable hydrology since December 2012 has helped avert the worst-case scenario for power supply, all main power sector entities remain exposed to severe financial stress, weather volatility and uncontrolled energy losses, and the country still faces a constant risk of imminent power shedding and potential outages. Regarding the dispute between the Government and the majority shareholder of the distribution company, the two sides are heading towards arbitration, but are also beginning to engage in informal mediation towards an amicable solution. The World Bank Group has a long-term commitment to develop Albania's power sector as a key to unlocking growth. 20. Addressing this situation in a permanent way will involve, inter-alia: (i) rapid reduction of power losses, which have increased since 2008; (ii) investments in the grid and in generation to increase reliability and diversify; (iii) mobilization of funds to inject liquidity and restore creditworthiness of the public generation company; (iv) restoration, and enforcement, of commercial contractual practices in the power market and with suppliers; and (v) consistent Government commitment to implementation of market rules to encourage investment. Another priority with regard to infrastructure is to strengthen the maintenance, quality and safety of the road network through institutional reforms to strengthen the nascent roads authority and develop sustainable road management and financing systems. Sustaining Social Gains 21. In light of the potential impact of the economic slowdown on poor households, it is imperative to ensure that social services and the social protection system alleviate declines in 6 welfare. Despite comparable expenditure patterns, Albania's health and education outcomes continue to lag behind EU 10 country averages. The key challenge is to improve the efficiency and quality of services, while continuing to close remaining coverage gaps in rural locations and for ethnic minorities, such as the Roma. In health, it is critical to strengthen the management of health care institutions and payments systems to improve the quality and efficiency as well as to address regional imbalances in the access and quality of service provision. Such efforts need to be complemented by investments in water and sanitation and waste management to improve not only population health but also the business environment. In education, it is important to strengthen school accountability and incentives, reform curricula and improve teacher training. To foster growth, it is also critical to invest in higher education and skills. Finally, it is of utmost importance to enhance the effectiveness and efficiency of Albania's social safety net to avoid the impoverishing effects of the economic slowdown, including improving the targeting, benefit design and coherence of the various programs. Strensthenins Water Resource Management and Adapting to Climate Chanse 22. Albania's high dependence on its water resources, particularly for hydropower and irrigation, and the increased incidence of both floods and droughts due to climate change make it imperative to address water management in a comprehensive and integrated way. Albania is among the countries in Europe that are most exposed to climate change -- particularly with respect to damage due to floods and overall water resource management. Climate variability has magnified serious weaknesses in the management of Albania's water resources, which is characterized by fragmentation and duplication and inadequate stakeholder involvement. High priority needs to be accorded to addressing these weaknesses inter alia through strengthening river basin authorities, developing realistic river basin management plans, rehabilitating dams and ensuring dam safety while at the same time modernizing irrigation systems in collaboration with local governments. These efforts should be complemented by improving watershed and forest management at community level. IV. Progress towards achieving CPS objectives and outcomes 23. The Bank program is delivering important development results in many areas although efforts to achieve fiscal consolidation and reduce public debt have encountered difficulties in the face of political pressures and the prolonged Eurozone crisis. While many activities are still underway, some important results have been achieved to date across all three CPS pillars. * In Pillar I - Competitiveness: With regard to the business climate, key achievements include establishment of an EU-compliant National Metrology Laboratory, adoption of an EU- compliant regulatory framework for inspections, and associated training of 175 government officials. The inspection legislation has seen major changes with the aim of making the inspection regime more transparent, efficient and corruption-free. A new central inspectorate was established and the number of inspectorates has been reduced from 36 to less than 15. The number of days needed to register a business has been further reduced from 5 to 4 days. Support to land administration and management, including computerization and capacity building of major property registration offices, has helped reduce the time to register a property transaction (now being undertaken within 10 days in Tirana) and improve the quality of services, according to customer surveys. In public sector management, key outcomes included implementation of an automated treasury system, tax e-filing, and e-procurement, supported by the Integrated Planning 7 System (IPS) and the Governance Partnership Facility (GPF) multi-donor trust funds. The IPS project has been instrumental to improve analytical capacities for running effectively the medium-term expenditure framework, and strengthening planning and budgeting processes (see Box 1). Debt management processes have seen major improvements. Of more than 50 countries assessed by the World Bank under the Debt Management Performance Assessment (DeMPA) program so far, Albania stands out as one of the few which has sound debt management practices in the largest number of areas as defined by the DeMPA methodology. Albania jointed the Extractive Industry Transparency Initiative (EITI), produced two assessment reports and has asked the International EITI Secretariat to conclude the evaluation exercise, which could result in Albania being declared EITI compliant during the Global EITI Conference in May 2013. Following Bank's recommendation to link education with labor market needs, progress has been made on the adoption of the Bologna process for modular education that is compatible across Europe, the expansion of the numbers of students in higher education, and the introduction of short-cycle, sub-degree programs in regional universities. In addition to curriculum reforms, there has been progress on setting up an accreditation system for universities, and university ranking procedures. The regional REPARIS program promoted the introduction of EU requirements and standards in corporate sector accounting, helping over 170 local companies. IFC's engagement helped to improve corporate governance, and environmental and social standards at the firm level. Through introduction and implementation of international standards, IFC helped to increase their sales and exports. Further, an IFC alternative dispute resolution program contributed to resolving commercial disputes, avoiding lengthy and expensive court cases and releasing funds for investments. IFC also invested US$6.7 million additional equity in a state-of-art cement production facility, which, in total, increased local availability of cement at more competitive prices and provided 400 new jobs. Another area in which outcomes have largely been met concerns transport bottlenecks. As planned, 110 km of secondary and local road networks were rehabilitated or constructed, 81 communities are now connected by road to services and markets, and an asset management system for secondary and local roads is in place. * In Pillar II -- Broadening and sustaining Albania's social gains -- some key achievements include universal retraining of primary health care providers, unification of primary and secondary health care purchasing, and adoption of performance based contracts in the funding of public hospitals, as well as adoption of the legislation on mandatory health insurance. With respect to education, secondary school curricula have been fully revised and enrollment has risen to over 75 percent (versus a target of 70 percent), triple shifting of classrooms has been eliminated and double shifting reduced from 36 percent to 16 percent in basic education and 6 percent in secondary education. Independent assessment of student achievement is another important innovation. In social protection, significant legal reforms were implemented to improve targeting of the main programs. * In Pillar III -- Improving water, environment and climate risk management -- one notable result has been improved management of forest, pasture and water resources in about 250 communes, as evidenced by a 28 percent increase in income generated by forest and agricultural lands, and a significant reduction of soil erosion. Albania also became one of the first countries to sequester carbon on eroded lands, realizing an emissions reduction payment of nearly US$200,000 (with an additional payment being processed, following confirmation of verification of 178,600 tons of Emission Reductions undertaken in September 2012), mainly for the local communities. Further results have been achieved with respect to remediation of one of the most contaminated coastal sites in Albania at Porto Romano. In addition, disaster risk 8 management has been strengthened through equipping first responders and piloting a regional affordable catastrophe risk insurance program. IFC helped foster the private sector role in renewable energy through supporting a new Renewable Energy Law. Also, IFC financed US$11.8 million credit line to support a local bank in Albania. The proceeds from the loan will be utilized to finance energy efficiency and renewable energy projects through eligible sub-loans to Albanian companies. 24. The World Bank supported portfolio currently consists of nine operations totaling US$243.5 million of which 31.2 percent has been disbursed. Eleven operations closed during FYs10-12, all but one of which were rated satisfactory or moderately satisfactory with respect to achievement of their development objectives. The outcome of one project, the Power Sector Generation project, was rated moderately unsatisfactory in the ICR due to problems with the cooling system at the Vlore Power Plant which appeared after project closure. The Bank has helped to assess the causes of this late-breaking problem, and plans to include support for upgrading the cooling system within the program going forward (see para. 29). In line with the operational objective defined in the CPS, closure of these operations led to a significant consolidation of the portfolio from 18 projects at the end of FY09 to 9 projects by end FY12. 25. Of the eight projects in the current portfolio, four projects - the Education Excellence and Equity project, the Land Administration and Management project (LAMP), the Integrated Coastal Zone Management and Clean-Up project, and Dam Safety Project - are rated moderately unsatisfactory for implementation progress. For the LAMP, development objective was also rated moderately unsatisfactory because implementation delays have put at risk the completion of some key activities. The Government and the Bank have jointly worked on addressing the implementation issues, and these projects have recently shown improved progress and are expected to be upgraded in the next months. . During FYsI 1-12, the disbursement ratios (22 and 24 percent respectively) were in line with ECA averages). As of March 2013, IFC's investment portfolio consists of nine projects totaling US$159 million, of which US$135.6 million is outstanding. 26. Trust Funds managed or implemented by the WBG total US$19.1 million and are fully aligned with Bank activities in support of the CPS pillars (Annex 4). Half of the TF portfolio - about US$9.2 million - is in support of Pillar 3 of the CPS, focusing on water and natural resources management. Nine grants totaling about US$8.7 million are in support of Pillar 1 activities, largely covering the financial sector, infrastructure and land administration. The governance agenda in particular received substantial support during the CPS period through: (i) a GPF grant for US$1.5 million aimed at strengthening governance, accountability and public sector management in a number of areas; and (ii) a US$6 million multi-donor trust fund for an IPS operation. Both trust funds closed at the end of FY12. A follow up IPS-2 operation has been prepared, also financed by a multi-donor trust fund, for an initial amount of about US$4 million dollars, with a further contribution expected in FY14 (Box 1). Additionally, it is expected that Albania will receive a grant from the new Russia-financed ECA Capacity Development Trust Fund to prepare a Roads Safety and Maintenance project for delivery at the beginning of the new CPS period, most likely in July 2014. Finally, for Pillar 2, the CPS program includes US$1.2 million for a community-based youth program financed by a grant from the Japan Social Development Fund, and the EU is considering support to the work on strengthening social assistance through IPA13. 9 27. The Bank Group is using its analytical expertise to engage with the Government, the private sector and other partners through both formal reports and just-in-time assistance. The FY11 Country Economic Memorandum focused on priorities for returning to higher economic growth rates and helped inform the ongoing national debate on the economy. The Bank also provided analytic and advisory support on debt management (through DeMPA) and carried out an assessment of Public Expenditure and Financial Accountability (PEFA) at the request of the Ministry of Finance. A major AAA on strengthening governance and anti-corruption efforts was influential in shaping both Government programs and Bank projects. In addition, the Bank partnered with UNDP to undertake a joint project on Economic Governance, Regulatory Reform and Pro-Poor Development. The Bank also provided Aarhus Convention Compliance TA to improve access to information, public consultations and justice with respect to the environment. A country specific FY12-14 Corporate Financial Reporting Reform TA project builds on past REPARIS regional efforts to strengthen corporate sector accounting and financial management practices in line with EU requirements. In parallel, IFC has been helping to develop a better corporate governance culture through work with the key regulatory and market institutions and establishing the Corporate Governance Institute of Albania. IFC's sub-national program helped assess implementation of streamlining procedures at sub-national level. Box 1: Governance and Public Sector Management Governance and public sector management remain important challenges as Albania strives for rapid and broad-based socio-economic development and convergence with the EU. Given the centrality of improved governance to Albania's progress towards EU accession, the EC through its annual Progress Report and accompanying technical and financial assistance has been taking the lead on a wide range of political and governance criteria. Albania has made notable progress in several priority areas including electoral reform, anti-corruption actions (such as lifting immunity for high officials, see para 3), judicial reforms, and strengthening public sector management in areas such as donor coordination, adoption of a single treasury account and on-going improvements in personnel administration. With the EC in the lead on governance activities, the WBG and other external partners are playing supportive roles in areas of their respective expertise. Specifically, the Bank, with EU and bilateral donor financing, has been involved in strengthening the policy planning and budgeting framework to ensure that core policy and financial processes function in an integrated manner. Inter alia, the Integrated Planning Systems (IPS) 1 project, which closed in 2012, helped develop an orderly process for budget preparation, development of a results-based monitoring system, implementation of an automated single treasury system and capacity development in central and line ministries. An IPS 2 project, also funded by donors, is currently being prepared to ensure full implementation of reforms introduced under IPS 1. The project will also strengthen: input cost analysis in public budgets; the quality of M&E in line ministries; capacity for decentralized management in conformity with EU practices; and, more dynamic macro-fiscal forecasting, including promoting transparency and improved outreach to all stakeholders. . V. Modifications to the CPS and the way forward 28. The CPS program has been adjusted in some important respects to better help Albania to manage the risks arising from economic vulnerabilities. As originally designed, the CPS envisaged total IBRD commitments of US$275 million for FYI 1-14, which was increased to US$300 million at the end of FY11 to help with catastrophic flooding and safety of major dams. It retained some flexibility with respect to the pipeline of operations (especially for FY13 andl4) in view of ongoing Eurozone volatility and the need to calibrate new lending to the pace of consolidation of the existing portfolio. In light of the continued deterioration in the external 10 environment, growing fiscal constraints, and power sector problems, the Government and Bank recently agreed to increase the CPS' emphasis on reducing economic, financial sector and energy sector vulnerabilities. In FY12, the Bank allocated an additional US$275 million to help Albania respond to the Eurozone crisis, for a total CPS envelope of US$575 million. Incomplete fiscal consolidation has slowed the pace for absorbing the CPS financing envelope, and efforts in the second half of the CPS period will focus on structural reforms to create the fiscal space needed for growth-enhancing investments and targeted support for the economically vulnerable. 29. The CPS program for FY13 and 14 will include projects under all three Pillars as described in the following paragraphs (Table 2): * Pillar 1 - Competitiveness: To reverse the deteriorating situation in the energy sector (para. 19), the Government has requested technical and financial support for: i) undertaking, on a priority basis, a study for optimizing the use of hydro reservoirs along the Drin river cascade and advising on the tendering process for cooling pipe upgrading works at the Vlore TPP; and ii) to restoring financial viability and service provision in the sector over the medium-term. While the first part of the request is being addressed by the on-going program of TA and implementation support , a new Energy Sector Reform and Recovery Project (US$150 million) will be delivered in FY14 to help restore financial viability of the sector through: (a) financial restructuring of the key public energy companies; (b) enforcing application of commercial practices among energy utilities and consumers, including payment discipline, and (c) targeted investments to increase efficiency in the power utilities. The Bank and IFC will provide coordinated technical assistance and advice. Building on its FYI 1-12 investments in re-development of an onshore oilfield in southern Albania, IFC will continue to be involved in infrastructure through three projects: (i) a first PPP transaction for the operation and maintenance of the main highway connecting Albania's coast with Kosovo; (ii) privatization of a series of hydropower plants; and (iii) a PPP transaction for integrated solid waste management in the Municipality of Tirana. Support to public sector management and governance will continue through a multi-donor funded IPS2 project, which has been developed in place of the IBRD financed operation proposed under the original CPS. Given heightened external and internal risks to the financial sector, a new DPL to strengthen financial sector resilience (US$150m) would be considered for delivery, as soon as the government demonstrates a clear commitment to a credible program for sustainably tackling fiscal issues, tentatively in FY14. Provided such commitment, a new series of budget support operations (US$50-75m per loan) focused on fiscal consolidation and competiveness would follow the financial sector DPL. Preparation of the roads project, which was planned in the original CPS program, will begin in FY13, but, provided that all the above operations materialize, the project will be delivered early under the next CPS to make room under this CPS for the energy and DPL operations. Should the DPL operations be further postponed, the road project will be brought forward for FY14 delivery. * Pillar 2 - Social Sector: The bulk of IBRD lending under this CPS during FYs 11 and 12 has focused on Pillar 2. The Social Sector Reform DPL (US$25m) was approved in FY11 and was followed by a results-based investment project for Social Assistance Modernization (US$50m). The latter project was doubled in size to help Albania address increased household vulnerability associated with the economic slowdown. A follow-on project is planned in health for FY14 (US$42m). If both financial and fiscal DPLs go forward in FY14, the health project 11 will be postponed for the next CPS period. An education project will be prepared for the next CPS, following completion of the ongoing Education Excellence and Equity project. * Pillar 3 - Water and Climate Change: The Water Resources and Irrigation Project, originally planned for FY12, was approved in the second quarter of FY13, and the Water Sector Investment Project will be delivered later in FY13. Processing of these projects was delayed due to the challenges in preparing projects involving central and local governments as well as community organizations. To support the use of clean energy, IFC invested US$8.6 million equity in a holding company in Albania, which in turn will invest in small hydro projects during FYs 13-14. Table 2: Lending, FY11-14 (in US$ million) FY11 Social Sector Reform DPL (US$25m) 25 Total FY11(Actual) 25 FY12 Additional Financing for APL5 Dam Safety 21.6 Social Assistance Modernization Project 50 Total FY12(Actual) 71.6 FY13 Water Resources and Irrigation (Actual) 40 Water Sector Investment Sector 86 Total FY13 126 FY14 Energy Sector Reform and Recovery Project 150 Financial Sector DPL* 150 Health Project 42 Environment Services 10 Total FY14 352 Total FY11-14 574.6 *The DPL will go forward if the macro outlook improves. In this case, the fiscal DPL, planned for FY15, may also be delivered in FY14. 30. The Bank Group's knowledge work will continue to play a prominent role in support to Albania. The Bank's AAA program will continue to be demand driven, providing economic and social analyses, as well as best practice examples and experience from other countries to aid the authorities in developing policy choices for future reforms. At the request of the Ministry of Finance, the main support the main focus on AAA in this period will be on supporting fiscal and financial management. FY13 TA to help the government update its Public Finance management (PFM) Strategy (FY13) and a FY14 formal report on Public Expenditure and Finance Review 12 will help define means of consolidating and increasing efficiency of spending. In addition, TA activities for pension reform (FY14) and the energy sector (FY13-14) will focus on increasing performance and financial sustainability. NPL TA (FY13-14), undertaken with the Bank of Albania, aims to help reverse an increasing trend in NPLs. In the environment sector, the Bank will undertake an innovative research activity to value specific environmental services and develop strategies for payment to communities for the services. Findings will feed directly into design of the proposed Environmental Services Project (FY14). IFC will continue to use its advisory services to support Albania to further improve the investment climate in line with the country's overall EU accession aspirations. Table 3: Actual and Planned Country Specific AAA, FY11-14 Supporting the recovery in Albania's Broadening and sustaining Albania's Water resource management and economic growth/competitiveness social gains adapting to climate change Actual (FY11-12) Country Economic Memorandum FY11 Economic Governance, FY12 Better Governance Policy Notes FY11 Regulatory Reform Debt Management Assessment FY12 Public Economic and Financial FY13 Accountability Planned (FY13-14) PFM Strategy TA FY13 Youth Empowerment (JSDF) FY14 Comprehensive flood FY13 Extractive Industry Transparency FY14 Pro-Poor Development FY14 management (GFDRR) Initiative Pension Reform TA FY14 Aarhus Convention Compliance FY13 NPL TA FY14 Public Finance Review FY14 Energy Sector TA FY14 Policy Notes on key reforms FY14 IPS2 FY15 31. Albania will also benefit from regional AAA work on Regular Economic Reports, Jobs, Safety Nets, Health Financing, Capacity Building for Monitoring and Evaluation, and the Regional Energy and Climate Change Strategies, as well as the multi-year efforts on Poverty Analysis and Gender Monitoring. IFC will also make use of regional programs to support Albania. The ongoing Balkans Renewable Energy Program will support private sector efforts to develop and operate feasible energy plants. It will continue to emphasize streamlining of regulations at the sub-national level and support investment generation and policy advocacy capability at the national level investment generation and policy advocacy capability at the national level. 32. The Bank will work closely with the EU as well as other donors in the delivery of both lending and AAA activities building on the successful collaboration over the past two years. Going forward, the Bank will partner closely with the EU, particularly in the social assistance and public sector management areas. In both these areas, the EU expects to provide IPAl3 financing which will expand and complement ongoing Bank-supported programs. The Bank and EU also expect to work closely in the areas of property rights and environment in the coming years. Monthly joint operational meetings have been introduced in order to ensure adequate coordination. Cooperation will also continue with other multi-lateral partners especially EBRD, EIB and the UN system. The Bank program also benefits from strong collaboration with a 13 number of bilateral partners including Austria, Japan, Germany (KfW), Sweden and Switzerland. See Annex 3 for additional information on donor and IFI activities. IFC's extensive advisory service programs are supported primarily by EU, Austria and Switzerland. Table 4: Actual and Planned Regional AAA, FY11-14 Supporting the recovery in Albania's economic Broadening and sustaining Water resource management and growth/competitiveness Albania's social gains adapting to climate change Regular Economic Reports FY12-15 Program. Gender FY12-15 Adaptation to Climate FY11 TA Science Research and Development Monitoring Change in Agriculture and Innovation (EC TF) FY12-14 Programmatic Poverty FY12-15 PROFOR Innovative FY14 Monitoring & Evaluation (EC TF) FY12-15 Monitoring Financing for Sustainable Programmatic Financial Sector FY12-15 Smart Safety Nets FY13 Forest Management in Development Health Finance FY14 Southwest Balkans Gas Ring Study (WBIF) FY12-15 Employment and Jobs FY14 Climate Change FY14 Transport Study (WBIF) FY12-15 Strengthening Public Financial Management (EC TF) FY13 Energy Strategy FY14 Trade Logistics IFC FY14 Renewable Energy Advisory IFC FY12-15 Corporate Governance IFC FY12-15 Investment Climate IFC FY12-15 33. The adjustments to the CPS program under this Progress Report are reflected in the revised results matrix attached as Annex 1. Most of the indicators have remained unchanged because they derive from the ongoing portfolio which has been implementing satisfactorily during this CPS period. However, some modifications have been introduced to reflect: (i) introduction of the new financial sector operation and related technical assistance: (ii) the delay in moving forward with the original DPL program; (iii) delays in processing of the Water Resources and Irrigation Project and the Water Sector Investment Project; and (iv) the postponement of the roads project to the next CPS. VI. Risks 34. The CPS faces three main risks: (i) fiscal management and high debt levels; (ii) energy sector issues; and, (iii) political polarization. * Fiscal management and high debt levels: The main risk for the CPS objectives and program is fiscal management and associated mounting pressures on the public finances. The problems Government is experiencing in effecting fiscal adjustments have already increased the debt level beyond the 60 percent benchmark. In addition, there remain sizeable arrears with respect to VAT reimbursements and payments to contractors for services provided to the state. A prolongation of the Eurozone crisis would further depress growth prospects in the medium term, making it difficult for the country to maintain macroeconomic stability, banking sector resilience and growth without swiftly initiating structural reforms. Lack of fiscal consolidation and exhausted fiscal space has also delayed the implementation of the existing portfolio and the planned CPS program. The Bank would support a reform strategy through continued policy dialogue, a AAA program, and DPL operations. 14 * Energy sector: The situation in the energy sector, which has dramatically deteriorated over the past year, presents a major fiscal, financial and supply security risk. The WBG is helping to mitigate the sector's fragility and vulnerability through: (i) encouraging the government to find an amicable solution to the dispute with the majority shareholder of the distribution company through negotiations; (ii) FY13-14 TA to assist with hydropower management and preparing a long-term sector recovery plan; (iii) a subsequent Energy Reform and Recovery Project in FY14 to strengthen performance and viability of sector participants in the medium- term; (iv) a power sector reform pillar in the fiscal DPL series, which are expected to start in FY14 or early FY15; and (v) Bank's technical assistance coordinated with IFC support to bring in competitive private sector. * Political context: Although the ruling party and the opposition have recently increased cooperation (para 3) there is a risk that the extreme polarization of 2009-2011 could reemerge in the run up to and after the June 2013 general elections. This risk is partially mitigated by the common objective of both parties to achieve EU accession and the position of the EU that successful conduct of the elections will be key to opening membership negotiations. 15 Annex 1: Results Matrix for the Country Partnership Strategy OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE Strategic Objective 1: Accelerating the recovery in Albania's economic growth through improved competitiveness (i) Sound macroeconomic management and improved public expenditure management ISSUES AND OBSTACLES and COUNTRY DEVT GOALS Albania needs to strengthen the credibility and contestability of fiscal policy and the budget process, including by introducing more ex post monitoring and analysis of expenditures and development outcomes, and improving the quality of national statistics. Meanwhile continued progress on fiduciary reforms is essential to improve the governance of public expenditures. lImproved credibility and Automated treasury system fully implemented across and By 2011 the milestones were fully achieved. Completed: Integrated Planning contestability of fiscal policy, used by all central government ministries and agencies for System (IPS) MDTF strengthened financial stability, payments, receipts, commitments and asset management.* Planned: IPS2 MDTF FY13 national economic statistics, Detailed and consolidated government in-year budget Achieved. However reporting needs improvement in reporting on development outcomes execution reports published monthly on-line by 2012. order to be timely and more user-fr7iendly. Planned: Fiscal DPL FY14 and governance of public spending All Bank-finance projects budgeted fully in the MTBP, Quarterly Econ Reviews using Treasury System for financial management, and In progress. The automated Treasury System has reported on in government financial reports.* been enhanced and is expected to be decentralized. SEE biannual regional reports The Bank is using the system in a number of projects. Completed: Governance The Bank financed projects are partially considered in Partnership Facilityprogram - Fully functional EU-compliant procurement complaints the.MTBP and Annual Budget preparation and Fiduciary Review review mechanism in place. revision process. In progress. Procurement complaints revieweCommneted: mechanism is in place but not yet fully compliant with Completed: ROSC on Fiscal EU. A new institution (PPC) is responsible for the Transparency (FY12) complaints review mechanism, instead of Public Onog:RSonDtQuly Procurement Agency (PPA). Both agencies are not Ongoismn: ramCok Daa(uiY e-procurement system certified for use by some donor- decentralized and report to the Prime Minister.AsemntFawok(Y3 financed projects, including World Bank.* Ongoing: PFUStrategy (FY13) Achieved. E-procurement was used in the Local and A back-stop facility with the MoF for the Deposit Insurance Secondary Roads project. Planned: Public Finance and Authority established. Expenditure Review (FY14) Completed: MoU between MoF, DIA and BOA Planned: Financial Sector DPL Foreign bank branches, which retains capital in country, are signed. FY14 converted into subsidiaries. Completed. Ongoing: NPL TA (FY1 4) B emiyestones for Goveyance Filter v2.0 Completed: The Financial Stability Action Group (FSAG) was established to regularly monitor and identif threats to financial stability. The FSAG is led by the Minister of Finance, and issues a press release 16 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE with each of its meetings. Completed: The remaining foreign-owned bank branches were converted to wholly-owned subsidiaries, ensuring domestic capital is available if called upon at times of need. (ii) Improving business regulations and reducing compliance costs for the private sector The cost of doing business in Albania remains high in part due to administrative corruption and a high "time tax", Albania's investment climate is undermined by inadequate property administration and weaknesses in urban land administration. Albania is slowly introducing EU and international standards for the private sector, but there is a need to reinforce the implementation and strengthen private sectors ability to comply with these requirements. Increased satisfaction with quality of Regulatory framework for business inspections revised and Achieved in 2012. Completed: Business Environment regulations (base: 3.3 in 2005; target: adopted. Reform and Inst Strengthening 2.5 in 2012; 1=very satisfied; 6=very Project dissatisfied). Increase in government officials trained in techniques for Achieved. 175 government officials were trained in Ongoing: FYO7Land regulatory review (status: 3 in 2008; target: 175 in 2011). regulatory review techniques by 2012. Administration and Management Project Reduction in time for registering Development of land and property rights regime. Achieved. Average time to register property in 2012 Completed: Governance immovable property transactions. was 9.8 days. Partnership Facility program - (status: 30 days in 2009, target: 10 Property rights and Expropriations days in 2012). Assessments Complete computerization of Tirana Immovable Property Achieved. The IT system is operational in Tirana and Registration Office. is being rolled out to municipal offices. IFC Trade Logistics Program IFC Tax Simplification Project IFC Sub-national Competitiveness Program Improving private sector compliance By-laws and regulations developed for an audit oversight In progress. To be completed by end 2013. Completed: Business Environment with selected EU and international system in line with EU directives. Reform & Inst Strengthening requirements particularly with Project respect to: (i) accounting and National Accounting Council regularly publishes updated In progress. The NAC has taken leadership in auditing standards; (ii) compliance International Financial Reporting Standards, strengthening its capacity. Results will be visible in Completed: Aarhus Convention with EU standards for exports; and early 2013. Compliance TA (IDF) (iii) issuance of environmental Ongoing: REPARIS Corporate permits. Finance Reporting Enhancement EU-compliant National Metrology Laboratory fully Achieved. An EU-compliant National Metrology operational. Laboratory is staffed with equipment to be fully Extractive Industry Transparency operational fCom January 2013. Initiative TA (MTDF) 17 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE IFC International Standards Public, on-line database on environmental permit Achieved. & Technical Regulations Program applications in place by Dec 2012. Increase in number of individuals and organizations trained Achieved. At least 250 individuals/organizations were in AaC principles (status: 0 in 2010; target: 250 in 2012) trained in AaC principles by 2012. (iii) Improved and more financially sustainable, infrastructure services in roads, energy, and irrigation Albania's energy sector continues to face technical and financial challenges, in part owing to an unfinished reform agenda. Recent reforms including unbundling of the system, privatization of the retail supply and investments in strengthening generation and transmission capacities need to be brought to fruition before the impacts can be felt. Albania's competitiveness is impaired by inadequate road infrastructure. Over 75% of the local network is in poor condition. There has been a significant increase in road investments requiring commensurate increases in provisions and the efficiency of road maintenance. Efforts to improve road management institutions are underway and need to be consolidate. Increased agricultural productivity by improving irrigation system. Albania has high potential for agriculture, but faces significant rainfall variability, and irrigation and water management practices are fragmented and inefficient. Improved domestic energy supply Complete construction and initiate commercial operations of In progress. Construction of Vlora Thermal Power Completed: Power Sector Gen & (800 gigawatt of additional power Vlore Thermal Power Plant. Plant completed, but the plant is still not operational Restructuring Project supply per year), transmissions due to a failure of the cooling system. Planned: AF for Dam Safety system operation, safety and FY13 operational efficiency of hydropower Rehabilitation of three substations completed. Achieved. dams. Completed: ECSEE Energy APL2 Complete restructuring of Transmission System Operator In progress. Result are expected to be visible and Transmission Project and business plan including new tariffs approved. measured in 2014 Remedial measures of high and medium priority targeting In progress. Spillway rehabilitation and Dam Safety Project spillways and other dam infrastructure completed. electromechanical rehabilitation of Koman Completed: FY10 Partial Risk hydropower plant is underway Guarantee for Privatization of Timely tariff adjustments approved for Distribution System In progress. The tariffs were adjusted three times Operator and Retail Public Supplier in conformity with the during the 2010-2012 regulatory period, tariff levels IFC Renewable Energy Program Improved cost recovery within the agreed Regulatory Statement. Financial Recovery program will have to be adjusted in January, 2014. for Small Hydro Power Plants electricity distribution system. in the Sector, to allow KESH to clear its arrears to suppliers IFC Residential Energy Efficiency Achieved. Cooperation agreements were signed and Micro Loans Cooperation Agreements signed with five banks to implementation of the program is underway. lFC direct investments & implement the Residential Energy Efficiency program. specialized financial products in Promote energy efficiency and use In progress. Draft Laws and related bylaws have clean and renewable energy of cleaner energy (progress will be Revised step-in rights law encourages banks to finance been prepared and are awaiting parliamentary lFC credit line to finance energy measured by the number of projects Small Hydro Power Plants (SHPPs). approval. signed: base: 0 in 2010; target: i D a ey 18 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE 2013). projects Completed: Economic Governance of Utilities - UNDP Fee-based service Improved road conditions and 108 km in local and secondary roads Achieved. 110 km in local and secondary roads have Completed: Transport Project sustainability of road investments. reconstructed/rehabilitated (by Bank project). been reconstructed / rehabilitated to date. Improved road access to services and markets (status: 0 in Achieved. 81 communities with improved road access Ongoing: FY08 Secondary & 2010; target: 26 communities in 2012). to services and markets. Local Roads Project Increase in share of regional and local roads in better Achieved. 108 km of regional and local roads conditions (status: 0 km in 2009; target: 108 in 2012). rehabilitated. Oraio d M n Operation and Maintenance Creation of an asset management systems for secondary Achieved. The Asset Management Database and local roads and Albania National Road Authority. Systems have been established, the former under the Bank-funded SLRP, and the latter by EU. Percentage of the national road network covered by performance based maintenance contract (status 0 in 2009; Achieved. 10% of Albania National Roads Network target 10% in 2014). was under performance based maintenance contract by 2012. Strategic Objective 2: Broadening and sustaining Albania's social gains (i) Broader access to education, particularly secondary and higher education, and improved quality at levels Albania needs to broaden its sources of productivity and employment growth through more effective investment s in human capital - secondary enrollment is low in part due to poor quality and learning outcomes , and tertiary education needs to be more market-responsive. Improved access to and quality of Complete reform of curricula for all three grades of Achieved. Revised curricula used in all three grades Ongoing: FY06 Education, secondary education. secondary school. of secondary school. Excellence, and Equity Project Increase in secondary enrollment (status: 60% in 2009; In progress. In 2011, secondary enrolment was at target: 100% at end-2014). 76,1%. Increase in teachers participating in continuous professional In progress. To date about 45% of teachers have development (status: 25% in 2009; target: 70% at end- participated in professional development activities. 2010). Achieved. Triple shifting has been fully eliminated, Triple shifts eliminated; double shifts reduced from 36% in while double shifting has reduced from 36% overall basic and secondary schools. tol6% in basic schools and only 6% in secondary schools. 19 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE Construction of 12 new schools; extension of 8 existing In progress. 4 new schools have been built, 6 schools schools; and rehabilitation of 10 schools completed by end- have been rehabilitated, and 3 schools have been 2013. extended, resulting in 112 new classrooms and 20 new science laboratories. Higher education institutions Performance based financing in place for all (11) public In progress. Financing reform framework is drafted reformed to strengthen financing and universities by 2014. and is under consultation with relevant stakeholders. overall quality through establishment of a comprehensive assurance system. 100 university labs provided with modem didactic Achieved. More than 100 labs have been provided equipment. with modern didactic equipment. A quality assurance system has been established for higher Achieved. A quality assurance system for higher education institutions. education institutions has been fully set up and institutional accreditation is underway. (ii) Improved access to quality primary health care and more efficient ofpublic spending on health care Access to quality primary health care services is inadequate in Albania, particularly among the poor. Health care financing and governance is fragmented, and an inefficient distribution of facilities impairs effective delivery of care. Improved access to quality primary Universal re-training of PHC providers completed. Achieved. Nearly all PHC provider have received re- Completed: Health System health care. training. Modernization Project Basic Benefits Package for PHC established and Completed: FYI .Social Services implemented. In progress. Legal framework is in place and bylaws CPL are under preparation. Law will require provision of the basic benefits package to 100% Ndihme Ongoing: FY12 Social Assistance Unification of primary and secondary health care purchasing Economike recipients. Modernization Project under the Health Insurance Institute. Achieved. Increase in the population enrolled in health insurance Achieved. Almost 90% of population was enrolled in (status: <10% in 2009; target: 70% in 2014) health insurance by October 2012. Improve the efficiency of public All public hospitals financed under performance-based spending on health care, as contracts to achieve efficiency in spending and reduce share Achieved. Spending on hospital care amounted to evidenced by: Decrease in the share of hospital spending in total health spending. (status: 58%; US$130m for 2012, amounting to 44.8% of the total of public sector spending on hospital target: 48%). public sector health spending in 2012. care. (iii) Improved targeting and effectiveness of Albania's social protection systems Poverty impact of Ndihma Ekonomike is low, in part due to the need for better targeting. Meanwhile, the administration of social benefits is inefficient, and spending on non-contributory disability 20 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE program is disproportionate. Pension system has significant long term fiscal deficits and low coverage. Improved efficiency of social Assessment procedures and eligibility criteria revised for In progress. The Gov. is working on strengthening Ongoing: FY01 Social Service assistance expenditure and benefit disability benefits (including disability pensions). the eligibility criteria and processes for the disability Delivery Project administration to increase the assistance program to ensure that the disability Completed: FY11 Social Services percentage of the poor receiving benefits reach the disabled. DPL means-based social assistance and to Electronic central registry of beneficiaries introduced and improve the equity and effectiveness fully operational. In progress. The DPL supported the legislation to Ongoing: FY12 Social Assistance of the Ndi(ma Ekonomike program. initiate the process to create a unified registry of Modernization Project beneficiaries of social assistance programs. The coverage of the poor by the Ndihma Ekonomike In progress. Programmatic Poverty Analysis program is estimated to increase (status: 22% in 2008; target Economic Governance of Utilities - 40%in2014). UNDP Fee-based service Improved financial management systems and fraud and In progress. Ongoing: Pension Reform TA error controls for NE fully operational. (FYj3) Improving the solvency of the Parametric reform of the pension system, to improve pension system (measured by participation and the long term fiscal deficit, under In progress. gradual decline of 1% per year in implementation Pension reform strategy adopted. dependency rate - total number of beneficiaries divided by total number of contributors; base line in 2013 is 83%) and improve participation (base line (2010): 30% of the working age population (ages 15-64); target: 1-2% increase in the CPS period) Strategic Objective 3: Reducing Albania's vulnerabilities to climate change (i) Improved the conversation, management and efficient use of Albania's water resources Forests and water catchments in mountainous regions face increasing pressures from erosion, illegal logging, and development, but local capacity to manage resources is limited. Improved coastal infrastructure and services to conserve tourism potential and ensure development in a sustainable manner Lack of critical environmental infrastructure and services in the Southern Coast risk damaging coastal resources and jeopardizing tourism development. Improved water resource management toward more efficient and sustainable use of Albania's water resources. Albania will likely face significant impacts from climate change on the availability and pattern of its water resources which it needs for energy, municipal water and irrigation, meanwhile water resources management practices are fragmented and inefficient. Albania is well endowed with water resources but faces serious shortfalls of supply in critical economic areas. Reduce upstream risks of erosion by Continued implementation of community-based micro- In 251 communes the following has been achieved: Completed: Natural Resources improving management of Albania's catchment management plans in 30 communes and (a) 8 % increase in income earned from forest Development Program Project - wetlands, forest and pasture community-based forest and pastures management plans in activities in communal forest and pasture lands IDA + GEF 21 OUTCOMES THE WBG PROGRAM IS MILESTONES EXPETEDTO IFLUNCEPROGRESS TO DATE WBG INSTRUMENT EXPECTED TO INFLUENCE resources and water catchments to: 239 communes. (baseline in 2005 was 0%); (b) 28 %increase in (i) increase in income earned from income earned from forest and agriculture activities in Ongoing: Natural Regeneration forest activities in communal forest 30 micro-catchments(baseline in 2005 was 0%);; Bio Carbon project (H) and pasture lands; (ii) to reduce 400,000 tons of erosion reduced 2014. erosion. In progress. Approximately a 220,000 ton reduction Ongoing:s IMprovee t Natralec inrerosion Restructured forestry extension services. Achieved. Forestry extension service established. And training provided to 20 key extension staff. Increased carbon sequestration from sustainable forestry activities (status: est 45,000 tons C02 sequestered in 2009; In progress. As of January 20012 an estimated target: 18(1,000 tons in 2014). amount of C02 sequestered was 143,000 tons. The first installment of emission reduction payments of US$200,000 for project beneficiaries has been transferred by BioCarbon Fund. Improved critical public Completed remediation of one of the most contaminated Achieved. The remediation of the contaminated site Completed: Butrinti conservation environmental infroastructure and coastal sites at Porto Romano. of Porto Romano was completed in May 30, 2011. project (medium-size GEF grant) municipal services as evidenced by: (i) tons of household waste safely Operational landfill near Saranda and transfer center in In progress. The construction of the regional landfill Ongoing: FY05 Integrated Coastal disposed in accordance with EU Himara. was postponed because of late community acceptance Zone Mngt & Clean-Up Project standards in South Coast (status: 0 and is expected to be completed in early 2014. tons, target: at least 5000 tons of Completed extensions to the sewage network and household waste); (ii) tons of treated wastewater outlet in Saranda. In progress. Expected to be completed in early 2014. sewage in coastal cities (status : 0 in 2010; target: 48,000 in 2012). Adoption of new management plan for Butrint National Achieved. The management plan for Butrinti National Park and wetlands in line with Ramsar Convention. Park was approved by the Ministerial Decree in September 2011. Improvements in the fr7amework for Capacity building programs provided to the National Water In progress. A Position Paper on Integrated Water Completed: FY08 Lake Shkodra management of water resources. Council, water user associations, and drainage boards. Resource management (IWR) and a functional Integrated Ecosystem Mgmt GEF analysis of the water sector were prepared and Ongoing: Water Resources and Joint Albania! Montenegro Lake Shkodra management cross endorsed by the MEFWA. Irrigation project FY1 3 border institution fully operational. Achieved. Albania and Montenegro have committed that they will bear the costs of operation of the Joint Ongs, target: atn a t Secretary and Lake Commission after project closure by end 2012. Completed: GFDRR Flood Management Studyfor Drin- Buna basin 22 Annex 2: Gender Issues in Albania Dia2nostic The situation of women in Albania has been improving overall during the past decade. In addition, the country has made notable progress in raising awareness around the core principles of non-discrimination and reforming the legal framework to reflect this priority. Nonetheless, evidence from a recently completed Gender Profile shows that gender concerns persist in several areas, particularly in: (i) education, particularly access for some population groups; (ii) access to economic opportunities with, for example, evidence of a gender gap in labor force participation and wages; and (iii) agency, including issues of domestic violence and women's representation in high level positions and politics. Across all areas, efforts need to be made for more timely collection and dissemination of data to allow for better monitoring of gender-related outcomes. Gender gaps in literacy and education are, on average, low; however, disparities appear for some population groups and for higher education. Literacy is very high across all parts of the Albanian population, and universal among young people for both genders. Poor rural girls are less likely to be enrolled in primary school than any other group, though their enrollment rate is still over 83 percent. However, both boys and girls, non-poor and poor, see a dramatic drop in enrollment after primary school. Less than a third of poor Albanian girls are enrolled in secondary school, and even fewer in rural areas. Poor boys, however, fare even worse: 23 percent of poor boys are enrolled in secondary school (17 percent in rural areas). In the general population, the female secondary school enrollment rate outstrips the male rate by more than four percentage points. For all groups-poor and non-poor, male and female- secondary school enrollment is higher in urban areas, though still just above half of the population. The group with the highest enrollment rate is non-poor urban girls, at 65.7 percent. Girls appear to be at a learning advantage over boys. The latest PISA findings show that girls outperform boys not only in reading, but also in math and science, which are often seen as more "male" subjects. University education has expanded dramatically in recent years, especially among females. Urban women have the largest absolute gains while rural women have made tremendous relative gains. Focusing on the urban population between 20-24 years, there is a 20 percentage point gender gap in higher education attainment in favor of girls. In this time, the share of urban women who have completed college has doubled to more than half of their population. The share of rural women has gone up by a factor of ten, though overall their tertiary completion rates remain far behind their urban sisters. Men's university education has also increased tremendously. Despite the government's push to make university education available to all Albanians who want it, there are concerns that quality is not keeping pace with the rapid expansion. Gender inequalities in health are not particularly pronounced. Nearly all Albanian women receive pre- natal care and deliver their babies in a professional health facility, though Albania still has the highest maternal mortality rate in the Western Balkans countries at 31 per 100,000 births (ECA average is at 34). Adolescent fertility rates are lower than the regional ECA and OECD averages, at 17 births per 1,000. In addition, the male mortality rate is significantly lower than its neighboring countries and the ECA and OECD averages. This is reflected in one of the highest male life expectancies in the region (74 years), significantly higher than the regional average of 66 years. Life expectancy for women is also high at 80 years (75 for ECA). New health challenges are however emerging for Albania, with the adult population facing a "double burden" of developing and developed world diseases (e.g., infectious diseases such as HIV, as well as problems of obesity and diabetes). Maternal mortality stands out as a big outlier in Albania (21 per 100,000 live births) as opposed to other countries in the region. The share of births attended by health personnel and antenatal care are at the 23 ECA average, according to DHS still there are differences especially in rural and remote areas where antenatal care starts later and it is not as frequent as needed, and there is inadequate emergency response and rapid referral. Another dimension in which Albania appears to stand out against the rest of the region is fertility. Adolescent fertility rates (14.25) are lower than ECA and the rest of the Western Balkans. But while education levels are rising among young women, the adolescent fertility rate is also slowly rising, with one quarter of a percentage point higher than in 2002. Some of the main gender inequalities in Albania are in labor markets. Even though a greater share of women entered the labor force since transition, there is still a large gender gap in labor force participation, with a 56 percent activity rate for women, compared to 77 for men (2009). Among women of working age who are inactive, more than one in three report that this is due to domestic work. The share of inactive women who are housewives has decreased since 2005 while the share of women students has increased. For unemployment, the overall gender disparity is small. Albania has a large wage gap (raw) compared to other countries in the region, with women earning around $0.65 for every $1 men earn. Although women work slightly fewer hours per week than men, many also continue to bear the full burden of household duties. While the female share in the total labor force is comparable to the regional one,with the female participation rate at about 56 percent. Women constitute 43 percent of the economical active population. Female employment is more concentrated in agriculture than in other countries perhaps due to the importance of this sector in the economy. The limited coverage of preschool services (only 40 percent of children attend kindergarten) and of other gender friendly services to explain the low levels of labor market participation. Women not only are less likely to be engaged in market activities, they also are less likely to be in the sectors which before the crisis experienced vigorous employment growth, such as construction. Data show that during the decade to 2006 female trend stagnated, while male employment increased. Firm level surveys confirm this picture, with only 37 percent of women as full time workers, and with only 9 percent of full time non-production workers being women. While this is in line with the regional performance, only 11 percent of firms in 2007 had women participating in their ownership, against an ECA average more than 3 times as high. Registration of immovable property in Albania is done by the male spouse, or head of household in the case of the farming family, who register the property in their own name. Also, the registration for legalization of illegal/informal constructions of matrimonial homes is done at the name of the household. These practices can lead to discrimination against women in access to these properties. For example, there have been problems in the area of applications for credits and alienation of property, when these are done by one of the spouses in both spouses' names, but without even letting the other spouse know or seeking their consent. Important gender gaps remain in agency and domestic violence continues to be a serious issue. Women's roles in public life remain circumscribed by traditional gender norms which limit their decision-making power in local and national politics, though important breakthroughs at the national level took place recently. The share of women parliamentarians and ministers, however, remains relatively low (16 and 7 percent respectively). Women's representation in high positions in firms is also low; only 11 percent of firms have females in their ownership structures and 20 percent of firms have females in top management positions. At the household, evidence suggests that most women have some voice within their household on how their own earnings are spent. On the other hand, violence against women continues to be a serious 24 issue. One out of every three women has been physically abused and 13 percent are survivors of sexual abuse. 51 percent and 39 percent of women have suffered emotional and psychological abuse, respectively. In addition, there are still challenges to overcome in women's property rights, where there are still issues in land titling that put women at a disadvantage. Albania's Family Code generally provides a favorable level of protection to Albanian women. However, challenges remain especially in the private sphere for women to have a productive life. According to a survey run by the Statistical Office (UNICEF-INSTAT 2009) 31 percent of women experienced physical violence, and 13 percent sexual violence in their marriage or relationship, with psychological and emotional abuse even more widespread. In the period 2003-2009 tangible improvements have occurred in the Albanian legislation and the measures taken concerning the prevention and reduction of domestic violence. Among the most important measures were the Law "On Measures against Violence in Family Relations" and the accompanying measures for its implementation and, the adoption of two new laws, "On Gender Equality in Society" and "On Protection from Discrimination". However, indication are that enforcement of the law remains weak. Important measures have been taken to facilitate the reporting of violence and to create new specialized structures for the protection of women from domestic violence such at the Police Directorate in the Ministry of the Interior, and the Ministry of Labor. In the courts there are judges who specialize in family law and the examination of petitions for protection orders. However, Ministry of Justice must ensure offering of free legal assistance for the victims as provided by the law. Further training and monitoring of the activity of bailiff s offices with regard to the enforcement of protection orders is needed. Women's roles in public life remain circumscribed by traditional gender norms which limit their decision- making power in local and national politics, though important changes took place in 2009. In the run-up to the 2009 parliamentary elections, Albania adopted a quota calling for 30 percent of all candidates on party lists to be women. While the target for representation in political positions has not been reached, the legislation nevertheless had an impressive impact, helping to sweep 23 women into the 140-MP Parliament, bringing the share of seats held by women to nearly 16 percent, up from 7 MPs in the previous election cycle. Also, more women voted in the last elections and participated in electoral commissions than in previous years (UN MDGs report). At the local level, women's representation has been very low. Less than three percent of those nominated for mayor in 2007 were women. Of the 33 women nominated, only nine won. At the national level, there is currently only one woman in the Cabinet of Ministers, though women now make up 22 percent of the deputy ministers. In the lower-level governmental jobs, women are much better represented, making up almost 57 percent specialists in the public administration of line ministries, and 32 percent of directors (UN MDGs report). Gender in the Bank Pro2ram The Albania portfolio includes examples of successful gender mainstreaming in several operations, but continued efforts to strengthen the inclusion of gender considerations in both ongoing and new projects are needed. During FYs 13 -14, the "Gender in the Western Balkans" AAA initiative will support gender mainstreaming into the Albania portfolio with a specific focus on increasing monitoring and evaluation of gender-aware interventions. Some examples of gender mainstreaming are: * The Land Administration and Management Project (LAMP), which addresses gender-biases in land ownership - from legal frameworks to registration practices. Specific project actions to reduce gender inequalities in land rights include: (a) public awareness/information campaigns; (b) gender-sensitivity training of central and municipal office workers; and (c) encouragement of joint titling during registration. * The Secondary and Local Roads project created spaces for women's participation at the community level. Women are represented in communal authorities and have been part of project consultations such as 25 safety improvements, and design improvements -- translating into better physical access to health, education and administrative centers for rural women. * The Health System Modernization project supported maternal health by increasing access to antenatal services and setting quantitative targets to measure progress. It improved early detection of breast cancer through introducing screening at the primary care level and provision of mammography equipment at four hospitals. * The Social Assistance Modernization Project, which focuses on improving the targeting and efficiency of Albania's main social assistance programs, should also contribute to narrowing gender gaps in living standards given that women are slightly overrepresented among the poor. * In some cases, gender-informed work is taking place outside the lending portfolio. A particularly noteworthy example is the JSDF grant for Youth Empowerment which is enhancing young people's access to opportunities in education and employment, with a major focus on young women. Lessons from this type of intervention can inform future programs and lending operations. Four investment projects included in the FY13-14 program are expected to focus on gender. Preparation of the two water projects (WRIP and WSIP) is already well advanced and both included early consultations with gender specialists to ensure sensitivity to gender concerns. For example, the WRIP will pay special attention to the needs of the over 5,00 women farmers living in the project area through targeted social mobilization activities. All relevant indicators will be disaggregated by gender with special attention paid to participation of women in public consultation processes and in water user organizations. The two FY14 investment projects (environment services and health services respectively) are still at a very early stage of development but will involve careful attention to gender concerns in the projects' design and ensure that women participate in, and benefit fully, from the projects' components. 26 Annex 3: The World Bank Group and Other External Donors The WBG continues to be among the biggest donors in Albania with an average of US$36 million per year in terms of disbursements. Moreover the Bank Group has continued to play the role of a catalyst in helping the Government coordinate donor assistance and mobilize financing for key sector programs, with considerable success. The current portfolio of 8 projects totals US$218.5 million in IDA credits and IBRD loans and is co-financed with other partners for an the amount of US$112.1 million - implying a ratio of US$0.5 in co-financing for each dollar of Bank financing. Notably, in the transport sector, the Secondary and Local Roads Project (IDA US$20m) has benefitted from the partnership of several international and European financing institutions, mobilizing parallel financing of around US$430 million. The Education Excellence and Equity project, designed as a sector- wide operation, is supporting a broad based sectoral reform with parallel financing from EIB and CEDB. The regional Energy Community of South East Europe project and the Dam Safety project are co- financed by SECO, EBRD and KfW. In public sector management, the Bank successfully managed a First Multi-Donor Trust Fund of US$6 million which included financial contributions from seven donors. IFC has also been successful in mobilizing support from a wide range of development partners for its advisory services and technical assistance. With Government's support in promoting donor coordination, the World Bank program in Albania is enhanced by several co-financing trust funds - both stand alone grants and grants linked directly to projects. Some examples include, the second multi-donor TF for the Integrated Planning System (IPS-2), currently planned to be financed by multiple donors at a level of about US$4 million; a Multi-Donor Trust Fund of US$ 1.8 million under the REPARIS program to improve financial reporting; the Japan Social Development Fund (JSDF) grant of US$1.1 million for youth empowerment; an IDF grant of US$370,000 to implement the Aarhus Convention agreements; a grant of US$ 1.1 million from the GFDRR for flood risk mitigation; a Swedish TF for Improved Natural Resource Management of about US$ 2.8 million, and a US$ 740,000 fee-based-service from UNDP on public utility governance in water and electricity. In line with the objectives set forth at the beginning of the CPS, the Bank and IFC have intensified the dialogue and collaboration with the EU in support of Albania's European integration process and in mobilizing co-financing for the forthcoming operations. As a result, EU is committed to co-finance the TA component under the Social Assistance Modernization Project at the amount of Euro 1,5 million. The Bank and EC also expect to work closely in the areas of property rights and environment in the coming years. Cooperation will also continue with other multi-lateral partners especially EBRD, EIB and the UN system. Joint operational meetings on monthly basis have already been initiated. The Bank program also benefits from substantial support from a number of other bilateral partners including Austria, Japan, Germany (KfW), Sweden and Switzerland. Close cooperation with these partners will continue through Government-led platforms as well as on a bilateral basis. 27 Sector/Thematic Areas >~ n 0~0 E e C w, F; 02:- f D m CD -u CEB. 15 5 6. 2 Germany r 61 0. -2. u~ -v o m EBR 32 6.3 26C SpainZx ty 23 2 12 0 5. 23 9 O .f3 CD CD VI 0> r -> ~ n ' 0o -oc2 0. 0 0 0n 0 0CD European Commission 1.5 World Bank 42 3.5 8.3 8 3.7 7.9 2.7 2.1 5.9 United States 1.4 CEB 15 5 6.8 2.4 i____ Germany 61l l EBRD 32 6.3 26 EIB x x x x x Spain x United Nations 5.9 3.6 0.5 0.8 taly 56 2.3 20 12 0.8 5.4 2.8 2.3 9 OFID 4.3 Sweden 6.5 1.6 1.3 1.4 Switzerland 9.5 1.1 1.5 2.6 1.1 0.3 0.3 0.3 1.4 DB x x x x Netherlands 0.4 0.1 0.3 Norway 5 Greece 4 Austria 3 Japan 0.6 __ __ __ __ __ __0.6____ Fra nce i OSCE 0 x_ l_ _ _ _ x x lx 28 Annex 4: List of Active and Planned Trust Funds in Albania Net Grant Grant Funds Grant Sign PILLARS Trust Fund Name Amount Disb. to Date Closing Donor Name Exec. By (in Date Date US$000) Date Albania # 10051 Liberalizing MTPL Insurance Market 327.70 187.32 6/29/2011 4/30/2013 MULTIPLE DONORS Bank Albania #10177 Strengthening Deposit Insurance and Resolution Framework 119.03 80.42 1/30/2012 4/30/2013 MULTIPLE DONORS Bank Co-financing for Land Administration and Management Pillar 1: Project 269.56 195.84 5/31/2007 6/30/2013 SIDA Bank Accelerating the Co-financing for Land recovery in Administration and Management 2,503.40 2,012.64 7/17/2007 6/30/2013 SIDA Recipient Albania's Co-financing Land Administration Management Project 2,882.16 0.0 12/18/2012 6/13/2013 SIDA Recipient economic growth through improved LAMP phase II contribution 320.24 187.58 12/01/2009 6/30/2013 SIDA Bank competitiveness Residential Energy Efficiency Project - Albania 350.00 104.00 10/26/2009 2/28/2014 MULTIPLE DONORS Bank Albania: Residential Energy Austria - Federal Ministry of Efficiency Project 300.00 134.56 11/11/2009 6/30/2013 Finance Bank REPARIS - ALBANIA - Corporate Financial Reporting Enhancement 1,669.06 490.56 3/28/2011 10/30/2013 MULTIPLE DONORS Recipient Project (CFREP) Pillar 2: Youth Empowerment through Broadening and Community Development in Albania 1,155.70 561.52 11/6/2009 11/6/2013 Japan - Ministry of Finance Recipient Youth Empowerment through Albania's social Community Development in gains Albania (Bank-executed) 20.00 13.74 11/6/2009 11/6/2013 Japan - Ministry of Finance Bank Swedish International Pillar 3: Improved Albania Improved Natural Development Cooperation Agency the conversation, Resources Management Project 2,716.03 200. 5/31/2012 12/31/2013 (SIDA) Recipient management and Co-financing Integrated Coastal Zone Management and Clean-up Austria - Federal Ministry of efficient use of Project 2,617.09 6.02 5/17/2006 10/31/2014 Finance Recipient Albania's water Albania Improved Natural resources Resources Management Project supervision 200 65.40 12/19/2011 12/31/2013 SIDA Bank 29 Co-financing Integrated Coastal Zone Management and Clean-up project 2,230.0 1,298.25 8/6/2005 6/30/2014 Japan Ministry of Finance Recipient Albania Assisted Natural Regeneration Project 1,013.58 203.64 6/29/2007 12/31/2018 MULTIPLE DONORS Recipient Albania: (BETF) Strengthening of Flood Risk Management (GFDRR: Track II TA Core) 400.00 109.40 2/16/2011 12/31/2013 MULTIPLE DONORS Bank TOTAL : 19,093 Planned Trust Funds (in US$000) IPS2 5,200 Water Resource and Irrigation 5,000 Social Assistance 4,000 Environment Services 10,000 30 Annex 5: Standard CPS Annexes ANNEX 5.1: ALBANIA AT-A-GLANCE Europe & Upper Key Development Indicators Central middle Albania Asia income Age distribution, 2010 (2010) Male Female Population, mid-year (millions) 3.2 405 2,452 75-79 Surface area (thousand sq. km) 29 23,614 59,328 60_64 Population growth (%) 04 04 0.7 Urban population (% of total population) 48 64 57 45-49 30-34 GNI (Atlas method, US$ billions) 12.7 2,947 14,429 15-19 GNI per capita (Atlas method, US$) 3,960 7,272 5,884 GNI per capita (PPP, international $) 8,520 13,396 9,970 0-4 10 5 O 10 GDP growth (%) 3.5 5.7 7.8 percent of total population GDP per capita growth (%) 3.1 5.3 7.1 (most recent estimate, 2004-2010) Poverty headcount ratio at $1.25 a day (PPP, %) <2 0 . nder-5 mortality rate (per 1,000) Poverty headcount ratio at $2.00 a day (PPP, %) 4 2 - Life expectancy at birth (years) 77 71 73 Infant mortality (per 1,000 live births) 16 19 17 Child malnutrition (% of children under 5) 6 2 3 50 40 " Adult literacy, male (% of ages 15 and older) 97 99 96 Adult literacy, female (% of ages 15 and older) 95 97 91 Gross primary enrollment, male (% of age group) 87 99 111 2 Gross primary enrollment, female (% of age group) 87 98 111 20 Access to an improved water source (% of population) 95 96 93 1990 1995 2000 2010 Access to improved sanitation facilities (% of population) 94 84 73 GAlbania 0Europe & Central Asia Net Aid Flows 1980 1990 2000 2010 (US$ millions) Net ODA and official aid .. 11 318 338 Growth of GDP and GDP per capita (%) Top 3 donors (in 2010): European Union Institutions .. 0 87 75 20 Italy -. 5 18 55 10 Greece -. - 12 52 0 Aid (% of GNI) .. 0.5 8.4 2.9 10 Aid per capita (US$) .. 3 103 105 -20 -30 Long-Term Economic Trends -401 95 05 Consumer prices (annual % change) .. 4.2 3.4 GDP implicit deflator (annual % change) -2.2 -0.5 4.3 3.5 GDP - GDP pr capita Exchange rate (annual average, local per US$) .. 8.0 144.0 103.9 Terms of trade index (2000 = 100) .. 100 143 1980-90 1990-2000 2000-10 (average annual growth %) Population, mid-year (millions) 2.7 3.3 3.1 3.2 2.1 -0.7 0.4 GDP (US$ millions) .. 2,102 3,687 11,786 1.5 3.8 5.4 (% of GDP) Agriculture 33.6 35.9 29.1 20.2 1.9 4.3 1.4 Industry 45.0 48.2 19.0 19.3 2.1 -0.5 4.7 Manufacturing .. .. 11.4 19.3 . Services 21.4 15.9 51.9 60.5 -0.4 6.9 8.1 Household final consumption expenditure 56.1 60.5 84.8 88.0 .. 1.2 9.1 General gov't final consumption expenditure 9.0 18.5 8.9 8.1 .. 14.5 6.3 Gross capital formation 34.5 29.3 24.7 25.9 -0.3 25.8 5.1 Exports of goods and services 23.1 14.9 19.1 29.8 .. 18.9 9.2 Imports of goods and services 22.7 23.2 37.5 51.8 .. 15.7 11.8 Gross savings - 21.1 14.9 Note: Figures in italics are for years other than those specified. .. indicates data are not available. Development Economics, Development Data Group (DECDG). 31 Balance of Payments and Trade 2000 2010 Governance indicators, 2000 and 2010 (US$ millions) Total merchandise exports (fob) 255 1,301 Total merchandise imports (cif) 1,076 3,909 Voice and accountablity Net trade in goods and services -816 -2,587 Political stability and absence of violence Current account balance -274 -1,451 asa%ofGDP -7.4 -12.3 Workers' remittances and Role of law compensation of employees (receipts) 598 1,156 Control of corruption Reserves, including gold 608 1,420 0 25 50 75 100 Central Government Finance 02010 Country's percentile renk (0-100) 02000 higher val-w imply biter ratings (% of GDP) Current revenue (including grants) 23.8 26.1 Tax revenue 19.6 23.5 Current expenditure 25.3 24.0 Technology and Infrastructure 2000 2010 Overall surplus/deficit -8.2 -3.0 Paved roads (% of total) 39.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual subscribers (per 100 people) 6 152 Corporate . 0 High technology exports (% of manufactured exports) 0.7 0.9 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 1,070 4,736 Agricultural land (% of land area) 42 44 Total debt service 26 464 Forest area (% of land area) 28.1 28.3 Debt relief (HIPC, MDRI) .- - Terrestrial protected areas (% of land area) 7.1 9.8 Total debt (% of GGP) 29.0 40.2 Freshwater resources per capita (cu. meters) 6,706 ,425 Total debt service (% of exports) 2.2 8.2 Freshwater withdrawal (% of internal resources) 6.8 4.4 Foreign direct investment (net inflows) 143 1,110 C02 emissions per capita (mt) 0.99 1.3 Portfolio equity (net inflows) 0 8 GaP per unit of energy use (2005 PPP $ per kg of oil equivalent) 8.3 13.8 Composition of5total external debt, 2010 Energy use per capita (kg of oil equivalent) 575 538 I19.6,22. Slht-term, 5736 I 2A, 850 World Bank Group portfolo 2000 2010 11MF, 58 Fixed line (US$ millions) lateral, 646 IBRD Total debt outstanding and disbursed 0 26 Privte, 1,91 Disbursements 0 3 Principal repayments 0 0 lateral, 637 Interest payments 0 0 US$ millions IDA Total debt outstanding and disbursed 346 850 Disbursements 64 26 Private Sector Development 2000 2011 Total debt service 2 17 Time required to start a business (days) - 5 TFC (fiscal year) Cost to starts business (% of GNI per capita) - 29.0 Total disbursed and outstanding portfolio 10 78 Time required to register property (days) .- 33 of which IFC own account 10 78 Disbursements for IFC own account 3 16 Ranked assa maGor constraint to business 2000 2010 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 0 4 Anticompetitive or informal practices 46.8 Tax rates h m B40.9 MIA Gross exposure 2 27 Stock market capitalization (% of GDP) lNew guarantees 2 25 Bank capital to asset ratio o(%) a s8.5 Note: Figures in italics are for years other than those specified. 4/2/12 indicates data are not available. - indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 32 Millennium Development Goals Albania With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) Albania Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2010 Poverty headcount ratio at $1.25 a day (PPP, % of population) .. <2 <2 <2 Poverty headcount ratio at national poverty line (% of population) .. .. 25.4 12.4 Share of income or consumption to the poorest qunitile (%) .. 8.7 9.1 8.1 Prevalence of malnutrition (% of children under 5) .. .. 17.0 6.3 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) .. .. 99 80 Primary completion rate (% of relevant age group) .. 93 102 86 Secondary school enrollment (gross, %) 89 71 72 89 Youth literacy rate (% of people ages 15-24) .. .. 99 99 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 95 97 97 98 Women employed in the nonagricultural sector (% of nonagricultural employment) 29. Proportion of seats held by women in national parliament (%) 29 12 5 16 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 41 35 29 18 Infant mortality rate (per 1,000 live births) 36 31 25 16 Measles immunization (proportion of one-year olds immunized, %) 88 91 95 99 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 48 44 41 31 Births attended by skilled health staff (% of total) 93 89 99 99 Contraceptive prevalence (% of women ages 15-49) 58 69 Goal 6: halt and begin to reverse the spread of HIVIAIDS and other major diseases Prevalence of HIV (% of population ages 15-49) Incidence of tuberculosis (per 100,000 people) 24 24 23 14 Tuberculosis case detection rate (%, all forms) 81 84 87 97 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 97 98 98 95 Access to improved sanitation facilities (% of population) 76 78 84 94 Forest area (% of total land area) 28.8 .. 28.1 28.3 Terrestrial protected areas (% of land area) 3.4 3.5 7.1 9.8 C02 emissions (metric tons per capita) 2.3 0.7 1.0 1.3 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 4.8 8.5 8.3 13.8 Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 1.2 1.3 5.0 10.4 Mobile phone subscribers (per 100 people) 0.0 0.0 1.0 141.9 Internet users (per 100 people) 0.0 0.0 0.1 45.0 Computer users (per 100 people) Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 200 1 75 150 50 50 100 25 2 25 50 00 0j. . . .2O5. . . .21 1990 1995 2000 2010 2000 2005 2010 --4-- Primary net enrollment ralo --- Ratio ofgiristo boysin primary& senecdary GAlbania GEurope & Centrl Asia =Fixed + Mobile subsnbersilntemet user education Note: Figures in italics are for years other than those specified. .. indicates data are not available. 4/2/12 Development Economics, Development Data Group (DECDG). 33 ANNEX B2: IBRD/IDA PROGRAM SUMMARY (as of March 31, 2013) Proposed IBRD/IDA Base-Case Lending Program a Fiscal Proj ID US$(M) Strategic Rewards Implementation b year b (HIMIL) Risks (H/M/L) 2013 Water Resources and Irrigation 40.0 Water Sector Investment Project 86.0 H L H L 2014 Health Project 42.0 H L Environmental Services 10.0 H L H H Financial Sector DPL* 150 H H Energy Sector Reform and Recovery Project 150 *the DPL will go forward only if the macro outlook improves 34 ANNEX 5.3: IFC INVESTMENT OPERATIONS PROGRAM (as of March 31, 2013) $million FY10 FY11 FY12 FY13 Original Commitment Activity - IFC 2.3 0.4 112.7 11.8 Original Commitment Activity - partners - 13 - - Original Commitment Activity - IFC (by sector) Oil, Gas and Mining - - 25.0 - Nonmetallic Mineral Product Manufacturing - - 6.7 - Finance & Insurance 2.3 0.4 - 5.9 Electric Power/Energy Efficiency - - 81.0 5.9 Total 2.3 0.4 112.7 11.8 Original Commitment Activity - IFC (by product) Guarantee 2.3 0.4 - - Loan-LN - - 97.4 11.8 Straight Equity (incl. Fund) - - 15.4 - Total 2.3 0.4 112.7 11.8 35 ANNEX 5.4: SUMMARY OF NON LENDING SERVICES (as of March 31, 2013) Product Completion FY Audience' Objective b Recent completions Country Economic Memorandum FY11 G, B, PD, D KG, PD, PS GAC Governance Policy Notes (4) FY11 G, B, PD, D KG, PD, PS Debt Management Assessment FY12 G, B, D KG, PS Public Economic and Financial FY12 G, B, D KG, PS Accountability Underway Extractive Industry Transparency FY13 G, B, D KG, PS Initiative Public Expenditure and Finance FY13 G, B, PD, D KG, PD, PS Review PFM Strategy FY13-14 G, B, D KG, PS Energy Sector TA FY13-14 G, B, D KG, PS Economic Governance, FY12 G, B, D KG, PS Regulatory Reform and Pro- Poor Development Pension Reform TA FY13 G, B, D KG, PS Aarhus Convetion Compliance FY13 G, B, D KG, PS PROFOR lnnovative Financing for Sustainable Forest Management in FY13 G, B, D KG, PS Southwest Balkans Monit. & Evaluation (EC TF)* FY12-13 G, B, D KG, PS TA Scienc., R&D/Innov. (EC TF)* FY12-14 G, B, D KG, PS Program. Financial Sector Dev* FY12-15 G, B, D KG, PS Programmatic Gender Monit.* FY12-15 G, B, D KG, PS Programmatic Poverty Monit.* FY12-15 G, B, D KG, PS Smart Safety Nets* FY13 G, B, D KG, PS Gas Ring Study (WBIF)* FY13-14 G, B, D KG, PS Transport Study (WBIF)* FY13-14 G, B, D KG, PS Public Fin Mgt/PEFA (EC TF)* FY13-15 G, B, D KG, PS Trade Logistics IFC* FY12-15 G, B, D KG, PS Renewable Energy Advisory IFC* FY12-15 G, B, D KG, PS Corporate Governance IFC* FY12-17 G, B, D KG, PS Investment Climate IFC* FY13-15 G, B, D KG, PS Planned Health Finance* FY14 G, B, D KG, PS Employment and Jobs* FY14 G, B, D KG, PS Energy Strategy* FY14 G, B, D KG, PS Climate Change* FY14 G, B, D KG, PS a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. * Regional Western Balkans Non-Lending (AAA) 36 ANNEX 5.5: ALBANIA SOCIAL INDICATORS Latest single year Same region/income group Europe & Upper- Central middle- 1980-85 1990-95 2004-10 Asia income POPULATION Total population, mid-year (millions) 3.0 3.1 3.2 405.2 2,452.1 Growth rate (% annual average for period) 2.0 -0.9 0.4 0.3 0.7 Urban population (% of population) 35.1 38.9 48.0 64.1 57.4 Total fertility rate (births per w oman) 3.8 2.6 1.5 1.8 1.8 POVERTY (% of population) National headcount index .. .. 12.4 Urban headcount index .. .. 10.1 Rural headcount index .. .. 14.6 INCOME GNI per capita (US$) .. 670 3,960 7,272 5,886 Consumer price index (2005=100) .. 47 115 143 127 INCOM E/CONSUM PTION DISTRIBUTION Gini index .. .. 34.5 Lowest quintile (% of income or consumption) .. .. 8.1 Highest quintile (% of income or consumption) .. .. 43.0 SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 1.6 2.8 3.9 3.2 Education (% of GDP) 4.9 .. .. 4.4 4.8 Net primary school enrollment rate (% of age group) Total .. .. 80 92 94 Male .. .. 80 92 93 Female .. .. 80 91 95 Access to an improved water source (% of population) Total .. 98 95 96 93 Urban .. 100 96 99 98 Rural .. 96 94 91 86 Immunization rate (% of children ages 12-23 months) Measles 96 91 99 96 96 DPT 96 97 99 95 96 Child malnutrition (% under 5 years) .. .. 6 2 3 Life expectancy at birth (years) Total 71 72 77 71 73 Male 69 69 74 66 71 Female 74 75 80 75 75 Mortality Infant (per 1,000 live births) 41 31 16 19 17 Under 5 (per 1,000) 48 35 18 23 20 Adult (15-59) Male (per 1,000 population) .. .. 95 273 161 Female (per 1,000 population) .. .. 46 116 100 Maternal (modeled, per 100,000 live births) .. 44 31 34 60 Births attended by skilled health staff (%) .. 89 99 98 98 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 17 April 2012. 37 ANNEX 5.6: KEY ECONOMIC INDICATORS Actual Estlimate Projected Indicator 2007 '2008 2009 ' 00 0 1 02 21 04 21 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 21 20 19 19 18 18 18 18 17 Industry 19 19 18 16 16 16 16 16 15 Services 60 61 63 65 66 66 66 67 67 Total Consumption 96 94 96 96 97 95 97 95 91 Gross domestic fixed investment 30 32 29 26 25 25 20 21 24 Government investment 6 9 8 6 5 5 5 4 4 Private investment 24 24 21 20 21 20 16 16 20 Exports (GNFS)b 29 30 28 32 34 34 35 35 36 Imports (GNFS) 55 56 54 54 56 54 52 51 51 Gross domestic savings 4 6 4 4 3 5 3 5 9 Gross national savingsc 20 18 13 13 12 12 11 14 18 Memorandum items Gross domestic product 10703 12985 12129 11842 12946 13415 14163 14736 15710 (US$ million at current prices) GNI per capita (US$, Atlas method) 3320 3820 3960 3990 3970 4040 4290 4430 4650 Real annual growth rates (%, calculated from 96 prices) Gross domestic product at market prices 5.9 7.7 3.3 3.5 3.0 1.6 2.5 3.0 3.5 Gross Domestic Income 14.7 13.8 -4.3 5.7 5.9 0.6 2.5 2.6 3.8 rReal annual per capita growth rates (%, calculated from 96 prices) Gross domestic product at market prices 4.7 7.1 2.7 2.9 2.4 1.0 1.9 2.4 2.9 Total consumption 14.3 11.3 -3.0 2.8 6.4 -1.2 3.3 -0.3 0.1 Private consumption 14.8 10.6 -2.3 3.7 6.4 -1.2 4.0 -0.6 -0.7 rBalance of Payments (US$ millions) Exports (GNFS)b 3080 3832 3446 3840 4376 4572 4890 5215 5664 Merchandise FOB 1407 1973 1445 1637 1878 1739 1677 1572 1533 Imports (GNFS)b 5883 7287 6490 6380 7250 7269 7340 7496 8070 Merchandise FOB 3859 4803 4224 4180 4829 4750 4660 4683 5040 Resource balance -2803 -3455 -3044 -2540 -2874 -2697 -2450 -2281 -2406 Net current transfers 1463 1393 1266 1172 1208 1108 1200 1297 1401 Current account balance -1039 -1895 -1887 -1467 -1732 -1656 -1279 -1001 -977 Net private foreign direct investment 653 866 940 1086 750 800 850 900 950 Long-term loans (net) -78 311 492 -15 467 336 97 -21 -45 Official 115 225 198 67 52 53 -32 -78 -95 Private -193 85 293 -82 415 283 128 57 50 Other capital (net, inel. errors & ommissions) 121 399 741 430 222 491 303 70 -117 Change in reservesd 342 320 -285 -35 293 29 29 52 188 Memorandum items Resource balance (% ofGDP) -26.2 -26.6 -25.1 -21.4 -22.2 -20.1 -17.3 -15.5 -15.3 rReal annual growth rates ( YR96 prices) Merchandise exports (FOB) 8.0 5.3 1.5 4.9 3.9 2.4 2.6 2.6 2.7 Primary Manufactures .. .. .. .. .. .. .. Merchandise imports (CIF) 34.1 22.7 -12.9 -1.4 14.8 -2.4 -1.9 -0.4 6.0 38 ANNEX 5.6: KEY ECONOMIC INDICATORS (continued) Es tinite Projected Inidicator 2007 2008 2009 '2O00 2011 ~2012 '2013 p2014 "2015 Public finance (as % of GDP at market prices)e Current revenues 25.5 26.4 26.0 26.0 24.7 24.5 24.8 24.8 24.8 Current expenditures 23.6 23.7 25.0 23.9 24.0 24.2 23.8 23.8 24.0 Current account surplus (+) or deficit (-) 1.9 2.7 0.9 2.1 0.7 0.3 1.1 1.0 0.9 Capital expenditure 5.9 8.6 8.4 5.5 4.6 4.6 4.5 4.4 4.3 Foreign financing 1.1 3.5 3.8 2.8 2.3 3.5 2.5 2.1 1.8 Monetary indicators M2/GDP 78.3 75.0 75.7 79.5 81.5 82.6 83.3 84.0 84.7 Growth ofM2 (%) 13.7 7.7 6.8 12.5 8.8 6.1 6.5 7.0 7.5 Private sector credit growth/ 82.9 90.5 93.9 95.9 100.6 86.7 87.7 88.1 87.1 total credit growth (%) 'Price indices( YR96 =100) Merchandise export price index 205.4 273.4 197.3 213.0 235.1 212.7 199.9 182.7 173.4 Merchandise import price index 110.2 111.8 112.9 113.3 114.0 114.9 115.0 116.0 117.7 Merchandise terms oftrade index 186.3 244.6 174.8 188.0 206.3 185.1 173.9 157.6 147.3 Real exchange rate (US$/LCU) 92.3 82.7 92.2 98.6 93.7 92.6 167.3 308.0 556.2 Real interest rates Consumer price index (% change) -4.4 -1.6 10.4 3.0 0.4 3.8 3.2 3.4 2.4 GDP deflator (% change) 2.0 4.4 2.4 3.5 3.0 3.0 3.0 3.0 3.0 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 39 ANNEX 5.7: KEY EXPOSURE INDICATORS Estimated Projected Indicator 2007 2008 2009 2010 2011 2012 2013 '~2014 2015 Total debt outstanding and 2343 2495 2788 2840 3122 3126 3094 3094 3195 disbursed (TDO) (US$m)a Net disbursements (US$m)a 10 159 296 52 283 3 -35 0 101 Total debt service (TDS) 128 123 128 157 162 186 189 191 201 (US$m)a Debt and debt service indicators (%) TDO/XGSb 48.0 46.0 60.2 57.4 56.1 54.6 50.0 46.7 44.3 TDO/GDP 21.9 19.2 23.0 24.0 24.1 23.3 21.8 21.0 20.3 TDS/XGS 2.6 2.3 2.8 3.2 2.9 3.2 3.0 2.9 2.8 Concessional/TDO 61.8 64.6 61.5 62.7 58.4 59.1 58.5 56.7 52.7 IBRD exposure indicators (%) IBRD DS/public DS 0.2 0.8 3.6 4.9 5.9 8.3 11.6 13.9 14.5 Preferred creditor DS/public 58.9 66.2 75.1 74.3 74.7 66.0 69.8 70.1 65.1 DS (%)c IBRD DS/XGS 0.0 0.0 0.1 0.1 0.2 0.3 0.3 0.4 0.4 1BRD TDO (US$m)d 6 17 88 94 126 191 233 249 258 Of which present value of guarantees (US$m) ShareofIBRDportfolio(%) 0 0 0 0 0 0 0 0 0 IDA TDO (US$m)d 750 809 833 848 856 855 843 821 793 IFC (US$m) Loans 38.8 42.7 65.7 78.2 95.6 144.5 197.4 Equity and quasi-equity /c 8.2 7.7 17.7 29.7 29.7 35.2 35.2 MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 40 ANNEX 5.8 (IFC): COMMITED AND DISBURSED OUTSTANDING INVESTMENT PORTFOLIO (As of January 1, 2013) (In USD Millions) Commitment Institution Committed Outstanding Fiscal Year Short Name Loan Equity Quasi Equity* Total Part Loan Equity Quasi Equity* Total Part 2012 Antea Cement - 24.4 21.9 46.4 - - 23.2 21.9 45.1 - 2009/ 2012 Bankers 55.0 12.1 - 67.1 - 53.0 12.1 - 65.1 - 2008 Best Constr. 6.4 - - 6.4 - 3.8 - - 3.8 - 2013 Credins Bank 11.8 - - 11.8 - - - 0 - 2005 Fushe Kruie 16.0 - - 16.0 - 16.0 - - 16.0 - 2007 Konstruksione 2.6 - - 2.6 - 2.6 - - 2.6 - 2012/2013 enso Albania - 7.7 - 7.7 - - 3.0 - 3.0 - Total Portfolio 91.5 44.2 21.9 158.0 - 75.4 38.3 21.9 135.6 - * Quasi Equity includes both loan and equity types 41 ANNEX 5.8 (IBRD/IDA): COMMITED AND DISBURSED OUTSTANDING INVESTMENT PORTFOLIO CASAnnexBB1- Albania Operations Portfolio (IBRDIIDA and Grants) As Of Date 41120t3 Closed Projects 63 IBRDfiDA* Total Disbursed (Actve) 73.93 of which has been repad 1.82 Total Disbursed (Closed) 453.03 of which has been repad 79.18 Total Disbursed (Acte+ Clsed) 526.96 of which has been repad 81.0f Total Undisbursed (Actme) 167.53 Total Undisbursed (Ckmsed) 1.78 Total Undisbursed (Actme+Clsed) 169.31 Active Proiects Last PSR Supervision Rating Original Amount in US$ Mions Project ID Project Name Develoment iuplementation Fiscal Year IBRD IDA GRANT Obiectives Proc ls P086807 COASTAL ZONE MGMT (A MS MU 2005 17.5 P110845 DISASTER RISK MITIGAT1 MS MS 2008 3 6.16 P110481 ECSEE APL 5 DAM SAFE MS MS 2008 21.6 35.3 P078933 EDUC EXCEL & EQUITY MS MU 2006 15 P096263 LAND ADMIN & MGMT PR MU MU 2007 1996 15 P107833 SECONDARY AND LOCAL S S * 2008 20 P122233 Social Assistance Moderni. MS MS 2012 50 P121186 WATER RESOURCES AN # # 2013 40 Overall Result 134.56 108.96 42 IBRD 33359RI 긔 」ULY 2009