ECONOMIC SYSTEM
In mid-1970 the economy, which is wholly controlled by the Albanian
Workers' Party, approached the conclusion of the Fourth Five-Year Plan,
during which it made a further advance along the road of industrialization,
in line with the totalitarian leadership's goal of transforming the
economy from the stage referred to as agricultural-industrial to a more
advanced industrial-agricultural level. The Fourth Five-Year Plan
(1966-70) actually called for a more rapid growth of agriculture than
that of industry and for an increase in the share of agriculture in the
national product by 1970. This departure from proclaimed policy was
dictated by the failure of agriculture to meet the goals of the Third
Five-Year Plan (1961-65) and by an overriding need to increase farm
production in order to reduce to the maximum extent possible the
perennial food deficit.
Despite government efforts, the five-year plan goals for agriculture are
not being achieved, even though substantial advances in production have
been made. The agricultural output target set by the annual plan for
1970 is significantly below the five-year plan figure for that year. By
contrast, the five-year plan goal for industrial output was reported to
have been surpassed in 1969 and to have been raised in the annual plan
for 1970 substantially above the original level.
The basic reasons for the failure to attain the planned farm output
targets, apart from their magnitude, lie in the difficulty of inducing
peasants to relinquish age-old traditions in favor of modern scientific
farming methods and of motivating them to work industriously in a
collective farm system that they strongly reject. Although problems of
adaptation and motivation are also present in industry, the much smaller
size of the industrial labor force and the presence of foreign
technicians in key areas mitigate the difficulties and make possible a
somewhat more rapid rate of growth.
Reliable information on Albania is scarce. Few foreigners capable of
observing and evaluating conditions objectively have been able to visit
the country in the past twenty-five years. Articles from official
journals or newspapers available in English translation, which
constitute the major source of data, provide only a partial coverage and
must be used with caution because of a lack of means for verification.
Published statistics, available in detail to 1964 and nonexistent after
1967, leave many important gaps. Because of apparent shortcomings in the
underlying statistical methods, only data in physical terms can be
accepted with some degree of assurance as to their accuracy.
The economy is administered through a small number of specialized
ministries, and most information about it comes from Communist sources.
Control over labor is maintained through trade unions, which constitute
a political arm of the Party (see ch. 6, Government Structure and
Political System). Economic activity is governed by a series of
five-year and annual plans prepared by the State Planning Commission in
accordance with Party directives.
Agriculture is organized into state and collective farms, which are
dependent upon machine-tractor stations for the performance of
mechanized farm operations. Industry is poorly balanced with regard to
the country's domestic needs and is heavily oriented toward exports.
Foreign trade primarily serves the purpose of obtaining needed resources
for the development of production. Limited domestic resources are only
partially developed, and the economy depends heavily on foreign economic
and technical assistance. The country's political orientation has
restricted the sources of such aid to other Communist states, and its
alignment with Communist China in the Sino-Soviet dispute brought about
the loss of Soviet support with severe repercussions to the economy.
After twenty-five years of forced draft economic development, the
country in 1967 was described by a correspondent of a European journal
as a mixture of the fourteenth and twentieth centuries, where oxen and
buffaloes were to be seen side by side with modern foreign-made
tractors, and where a policeman directed traffic in the main square of
the capital city like a conductor waving his baton at a nonexistent
orchestra.
After a visit in the fall of 1969, a specialist on Balkan affairs
reported that austerity and regimentation were still the rule despite a
substantial measure of economic progress achieved during the period of
independence. He also expressed the view that Albania undoubtedly
remained the poorest country in Europe but that the economic and social
advances attained could be envied by the countries of the Near East.
LABOR
Although economic development is still in its infancy, growing concern
has been officially expressed about the adequacy of the labor force to
meet the needs of industrialization and of expanding social services
without adversely affecting agricultural production. The main cause of
the incipient labor shortage is low productivity owing to a lack of
industrial experience, a low level of mechanization, and the survival of
backward traditional methods in agriculture. Officially, low
productivity has been ascribed to poor labor discipline and inefficient
management arising from an inadequately developed sense of political and
social responsibility. It has also been blamed on a failure of manpower
planning and on the relaxation of central controls over enterprise
funds.
At the end of 1969 the Central Committee of the Party adopted a decision
on means for correcting this situation. An important element of the
program is the education and political indoctrination of the workers.
This task is a major function of the trade unions, which are primarily a
political arm of the Party for the control of labor, without any
significant responsibilities in the field of labor relations (see ch. 6,
Government Structure and Political System).
In 1967, the last year for which official employment data are available,
the working-age population comprised 932,000 persons, 739,200 of whom
were actually employed. The number of employed did not include roughly
6,000 peasants working on the private holdings still remaining in that
year. Including these peasants, the participation rate in the labor
force was 80 percent.
Two-thirds of the labor force was employed in agriculture, the remainder
in a variety of nonagricultural pursuits, chief among which were
industry, construction, trade, and education. Apart from the peasants
working their own land, farm labor included about 427,000 persons on
collective farms and 64,000 on state farms. The industrial labor force
of 105,300 accounted for 14.1 percent of total employment, and 40,000
construction workers, for 5.4 percent. The nearly 32,000 workers in
trade and 25,000 workers in education constituted, respectively, 4.2 and
3.4 percent of the employed manpower.
The officially reported labor force, which comprises nonagricultural
labor and state farm workers only, increased by 53 percent between 1960
and 1967, from 203,800 to 312,400 persons. The increase represents an
annual growth rate of 6.3 percent. At this rate, the labor force in 1970
would be about 375,000 persons. It has been informally reported as
400,000. Collective farm employment rose, in round numbers, from 282,000
in 1960 to 336,000 in 1966 and to 427,000 in 1967. The unusually large
increase in 1967 resulted from an intensive drive to collectivize the
remaining privately owned farms and also from a government policy of
reversing the population flow from the farms to the cities. With the
major reservoir of individual farms exhausted, the number of collective
farm workers could increase up to 1970 by roughly 45,000 to 50,000
through natural population growth. Absence of data on rural-urban
population shifts precludes any firm estimate of the size of the
collective farm labor force in 1970.
According to preliminary estimates by the planning authorities, an
increase of between 120,000 and 130,000 workers outside the collective
farm sector would be needed to implement the industrial and social
programs of the five-year plan for the 1971-75 period if productivity
remained at the level of the 1965-69 period. The natural growth of the
able-bodied urban population during this period was estimated not to
exceed 29,000 persons. An outflow of up to 100,000 persons from the
rural areas would therefore be necessary to meet the estimated manpower
needs. Such a contingency could not be countenanced because of the
severe damage it would inflict on the rural economy. Attainment of a
higher rate of participation in the labor force and of a substantial
increase in labor productivity has therefore been considered by the
Party leadership of utmost urgency to ensure sustained economic
development.
The latest evidence of the leadership's profound concern about these
basic labor problems was provided by the Party's Central Committee
plenum held at the end of December 1969, devoted to a discussion of
means for raising productivity and tightening labor discipline. In its
report delivered to the plenum, the Political Bureau (Politburo) of the
Central Committee expressed strong dissatisfaction with what it
considered an unsatisfactory rate of participation in employment by the
collective farm population. It placed the blame for this situation on
local government organs, which had become reconciled to the backward
traditional concepts that keep homemakers and some young girls in the
home and that require a member of the family to look after the family's
privately owned livestock and thus be unable to seek outside work.
The Party's report also called attention to the prevalence of a petty
bourgeois attitude among many families of workers, employees, and
servicemen that keeps their members from accepting employment. To
facilitate the employment of women, the Party urged more widespread
provision of amenities, such as nurseries and dining halls, that would
free them from household duties.
Meaningful information on labor productivity is not available because
statistics on this subject have not been published and because essential
details of the methods used in calculating the percentage rates of
increase in productivity that appear from time to time in official
public statements are not sufficiently known. Based on physical output
and labor data, Western observers believe that the published data
overstate the actual advance achieved.
According to the Politburo report, productivity in industry rose 2.2
times between 1950 and 1968, and this growth accounted for 60 percent of
the increase in industrial production during that period. In agriculture
67 percent of the increase in output during those years was attributed
to the growth of productivity. These figures indicate a slightly faster
advance in agricultural productivity, but in absolute terms productivity
in agriculture has been very much lower than in industry.
During the Third Five-Year Plan (1961-65) labor productivity reportedly
rose by an annual average of 2.1 percent in industry, 4.6 percent in
construction, and 2.7 percent in automotive transport. Data for the
years after 1965 had not been published by mid-1970 except for official
statements that the planned levels had not been reached.
The lag of productivity has been attributed by the Central Committee to
a pronounced shortage of skilled manpower and to various manifestations
of poor labor discipline and faulty management. Chief among the cited
shortcomings in the field of labor are excessive absenteeism, resulting
in part from inadequate medical and public dining facilities; loafing on
the job; and a generally negligent attitude toward work that entails a
loss of time and a low quality of the product. On the management side,
the main shortcomings include poor organization of production,
acceptance of unjustifiably low work output norms, and labor hoarding.
Both workers and managers have been accused of a reluctance to adopt
progressive production techniques and of frequently putting their own
personal interest or that of their enterprise ahead of the public good.
A disorganization of the material supply arising from frequent
noncompletion of production assignments and poor coordination among
plants and industry branches has also been cited as an important factor
responsible for substantial losses of worktime and, consequently, of
reduced productivity.
Enterprise managers have been repeatedly accused of irresponsibility in
the use of resources, which has entailed a wasteful use of machinery and
labor. Inadequate planning of production schedules and poor maintenance
are said to cause an inordinate loss of machine time. Managers have also
been charged with abusing the legal provision that allows them to employ
up to 2 percent more workers (presumably to meet emergencies or to
increase output) than are called for by the enterprise plan. Such abuse
has been facilitated by the elimination sometime in the middle or late
1960s of the control by banks over enterprise funds allotted for the
payment of wages.
A change in the method of productivity planning, which involved a
redefinition of productivity as a calculated index, is reported to have
been widely misinterpreted as downgrading the importance of
productivity. This misconception has been reinforced by the circumstance
that productivity levels are planned for only about 70 percent of the
nonagricultural workers.
In many enterprises labor norms--that is, the minimum amount of work a
worker in any given job is required to perform per unit of time--are
officially said to be inordinately low. There are reported to be many
enterprises in which the established norms are substantially
overfulfilled despite the fact that the effective workday does not
exceed 6 to 7 hours. These norms, it is said, require only about 5-1/2
to 6 hours of work per day and are thus responsible for a 25- to
35-percent loss of output or, conversely, of labor wastage. Yet, despite
the low norms, about 14 percent of the workers fail to complete their
assigned tasks. Although a Politburo decision in April 1967 called the
attention of Party, government, and economic organs to the importance of
correct labor norms, this matter has been generally neglected and little
has been accomplished. Many of the existing norms have become obsolete.
The Politburo's program that was adopted toward the end of 1969 for
raising productivity is based essentially on an appeal to the social
consciousness of all participants in the economic process and calls for
improved performance in all aspects and at all levels of production
through greater self-discipline and more stringent controls. A practical
difficulty faced by the leadership in the execution of its program is
the lack of a precise concept of productivity and of an effective
methodology for establishing sound productivity targets or for measuring
actual performance. The problem is particularly pronounced in
agriculture. Experimentation with new concepts and methods has been
underway for some time under the joint guidance of the State Planning
Commission, the Ministry of Industry and Mining, and the Ministry of
Construction. Results of the experimentation are to serve as a basis for
further decisions by the Council of Ministers in 1970.
A distinctive feature of the country's labor scene is the practice of
mobilizing large numbers of the population for so-called voluntary work
on various types of construction and agricultural projects, including
the building of railroads, housing, and irrigation canals; land
improvement; harvesting; and the planting of trees. Thousands and, at
times, tens of thousands of individuals from all walks of life,
including members of the armed forces, are assembled by the government
to carry out specific jobs with simple tools or with their bare hands.
Party dogma holds that these projects, which use vast numbers of people,
reflect the Party's strength, the might of the masses, and the great
reserves to be found in their midst. The projects are considered to be
not only of great economic and social importance but also of great
ideological, political, and educational significance because, among
other things, they reflect the determination and readiness of the broad
working masses to implement the Party's line. Official complaints about
flagging enthusiasm for housing construction in 1968 suggest a less
favorable public acceptance of this practice than that proclaimed by the
Party dogma.
AGRICULTURE
Agriculture is organized on the Stalinist Soviet model: all activity is
centrally planned, and farm operations are carried out by state and
collective farms. Government policy has accorded a high priority to the
expansion and modernization of agricultural production as a means of
attaining self-sufficiency in foods. In an effort to obviate the
historical dependence on grain imports, the government has placed
special emphasis on increasing the output of bread grains, which furnish
the bulk of the people's diet, and on a rapid rise in the production of
potatoes as a substitute for bread.
Great importance is attached to the expansion of industrial crops, such
as cotton, tobacco, sugar beets, and sunflowers, in order to provide raw
materials for the growing domestic industries, in addition to
maintaining traditional exports. Expansion of grape vineyards, olive
groves, and other fruit and vegetable growing has also been promoted to
develop larger exportable surpluses. According to official data, farm
output increased half again as fast as the population between 1950 and
1967, but it is still inadequate to supply the country's minimum needs
for bread and livestock products.
The government's ambitious farm modernization program has been imposed
on tradition-bound peasants averse to rapid change. A large part of the
land improvement and irrigation work has been accomplished through mass
mobilization of peasants and of the urban population for so-called
voluntary work on the model of the Chinese coolie system. Socialization
of the land has had a deleterious effect on work incentives, with a
consequent lag in the planned growth of agricultural production.
Measures adopted by the government to ensure better work performance on
the collective farms did not prove sufficiently effective, and a
scaling down of the five-year plan target for agricultural production
could therefore not be avoided.
To provide the additional acreage needed for crop expansion, large-scale
programs of land reclamation and melioration have been executed. At the
same time, heavy stress has been laid on the improvement of farm
techniques and on mechanization as means for increasing yields and
production. A planned expansion of livestock herds and of the output of
livestock products has been hampered by inadequate incentives for
peasants and by a shortage of fodder. The agricultural potential is
limited by the predominance of rugged mountain terrain and by frequent
spring droughts that cause extensive damage to crops. To minimize the
adverse effects of the droughts, an extensive irrigation system is being
developed.
In 1967 the area of land in agricultural use, excluding forests, roads,
and homesites, amounted to about 3.0 million acres, or 43 percent of the
country's total area. More than half of the agricultural land was in
unimproved natural pastures, with an additional small acreage in natural
meadows. Cultivated land bearing field and tree crops totaled about 1.4
million acres, of which about 1.1 million acres were arable land,
equivalent to about two-thirds of an acre per capita. Almost half of the
cultivated land was located in hilly and mountainous zones, which are
less productive than the coastal plains. The agricultural acreage was
expanded by 3 percent between 1950 and 1967, but a significant further
expansion is precluded by the country's rugged terrain.
A high priority has been placed by the leadership on expanding the
cultivated area and raising its productivity through land reclamation,
soil improvement, and irrigation. Most of this work has been
accomplished manually, through mobilization of large numbers of people
for massive projects and with the participation by members of the armed
forces. Between 1950 and 1969 the area of cultivated land rose by almost
one-half to a total of more than 1.4 million acres, at least 185,000
acres of which have been reclaimed since 1965. The bulk of the increase
in cultivated land was achieved at the expense of natural pastures and
meadows, the area of which has declined by about 265,000 and 50,000
acres, respectively, since 1950. About 70 percent of the increase in
cultivated land was added to arable acreage.
By the end of 1969, however, the reclamation work had fallen behind the
five-year plan schedule. In early 1970 the government therefore took
special measures to ensure that the entire 285,000-acre reclamation
program would be completed as planned, bringing the total cultivated
acreage to about 1.5 million acres. Very substantial progress in this
endeavor was reported to have been achieved by the end of March, largely
through the mobilization for this task of about 200,000 persons from
urban and rural areas.
Expansion of the irrigation network has proceeded somewhat more slowly
than planned, with the use of the same mass construction methods. As
reported by the State Planning Commission to the People's Assembly in
mid-February of 1970, about 140,000 acres had been brought under
irrigation during the 1966-69 period, and approximately 55,000 more
acres were to be added in 1970. These figures imply a total irrigated
area of about 645,000 acres in 1969 and about 700,000 acres planned for
1970--an increase of 2,470 acres over the original five-year plan
target. Attainment of this goal would require a construction volume in
1970 equal to the total achieved during the first two years of the
five-year period and almost half again as large as the volume in 1968.
About half the arable acreage was irrigable in 1969.
The agricultural organization consists of two types of farms: state
farms, operated under the direction of either the central or the local
government, and collective farms. State farms, modeled after the
_sovkhozes_ of the Soviet Union, were established beginning in 1945 on
lands confiscated from large landowners and foreign concessionaires and
contain some of the most productive land in the country. Managers and
workers of state farms are salaried government employees, who may
receive special bonuses for superior production achievements.
Collective farms were organized through the forcible consolidation of
private holdings. Begun in 1946 against strong peasant resistance,
collectivization did not assume major proportions until 1955 and was
virtually completed only in 1968 with the consolidation of remote
mountain villages. The basic features of the collective farm are:
complete government control; collective use of the land and other
principal means of production; obligatory common work by the members,
based on established minimum work norms and enforced through economic
and other sanctions; and distribution of the net income to members on
the basis of the quantity and quality of work performed.
With regard to income distribution, collective farm members are residual
claimants entitled to share whatever remains after completion of
compulsory deliveries to the state; provision of prescribed investment
and operating funds for the farm; payment for irrigation water,
machine-tractor station services, and other outstanding obligations; and
setting aside 2 percent of the income for social assistance to members.
Information on farm income levels is not available. Nominally, the
General Assembly of all the members is the highest ruling organ of the
collective farm, but actual control rests with the farm's basic Party
organization (see ch. 6, Government Structure and Political System).
An important feature of the state and collective farms is the small
private plot allotted to a member family for its own personal use. Since
1967, when these allotments were reduced in size, the maximum legal size
of the private plots, including the land under all farm buildings other
than the family dwelling, has ranged from 1,000 to 1,500 square meters
(about 10,750 to 16,150 square feet, or one-quarter to three-eighths of
an acre), depending upon the location and availability of irrigation.
The collective farm statute also entitles each family to maintain a few
domestic animals privately. Only one cow or one pig is authorized, but
up to ten or twenty sheep and goats may be allowed. In typical cases a
family may have a cow or pig and a few sheep or goats. More liberal
allowances for poor mountain farms may include both a cow and pig as
well as the maximum number of sheep and goats.
In 1964 there were thirty-eight large, centrally controlled state farms
with an average of about 7,700 acres of farmland, including about 4,800
acres of cultivated land. In 1968 the average size of the state farms,
the number of which had remained stable, was reported to be about 7,350
acres, a reduction of almost 600 acres since 1964. This decline in
acreage was brought about by a transfer of some state farmlands to small
collective farms as a means of increasing their viability. In 1964, 250
locally administered state farms were reported to average about 380
acres and have probably continued unchanged. In 1970 state farms
cultivated 20 percent of the total acreage under cultivation, and
collective farms worked 80 percent.
The number and average size of collective farms have varied widely as a
result of the continuing creation of new farms and the consolidation of
existing units. In the fall of 1969 there were 805 collective farms,
compared with 1,208 in 1967. The consolidated farms included 568 units
consisting of two to three villages each, eighty farms of six to ten
villages, and another five farms of eleven villages each. Eighty-seven
percent of all collective farms had less than 2,470 acres of cultivated
land each, and only nine percent had more than about 6,200 acres.
Highland farms were among the smallest, many being smaller than 750
acres. In 1968 the average size of all collective farms was reported to
be about 1,400 acres of cultivated land. In 1967, before
collectivization was completed, the population on collective farms
consisted of 184,400 families--an average of about 150 families per
farm--which provided about 427,000 farmworkers. As a result of further
consolidation, the number of families per farm increased significantly.
Although available statistics are inadequate for a comprehensive review
of the crop and livestock situation, five-year plan data and fragmentary
information contained in annual official reports on economic plan
fulfillment provide a reasonable approximation of the production volume
of major crops but only a rough approximation of the size of the
livestock herds (see tables 10 and 11).
Published data on total agricultural production claim a virtual doubling
of output between 1960 and 1969. During this period the share of field
crops in total output is reported to have increased at the expense of
livestock production--a direct result of the government's emphasis on
bread grains. The share of field crops is reported to have risen from 44
percent in 1960 to 59 percent in 1967, whereas the share of livestock
output declined from 43 to 29.5 percent. Fruit production contributed
about 10 percent of total output during the period, and collection of
wild medicinal plants, another 1 to 4 percent.
Bread-grain production, including wheat, rye, and corn, increased by 80
percent in the 1966-69 period, but attainment of the five-year plan
target requires a reversal of the downward trend in annual output
increases since 1966 and a tonnage increase in 1970 from 20 to 38
percent greater than those obtained in the 1967-69 period. The output of
potatoes in 1969 was eleven times larger than production in 1965 yet was
only half the volume planned for 1970. The required doubling of the
output to meet the five-year plan target is roughly equivalent to the
increase in production achieved during the preceding three-year period.
Nevertheless, the substantial rise in the output of bread grains and
potatoes achieved during the first four years of the five-year plan
significantly, although not entirely, reduced the need for grain
imports, which amounted to about 110,000 tons of wheat and 20,000 tons
of corn in 1963 and 1964.
Production of rice, cotton, and tobacco was reported to have lagged
through 1969, and the output of cotton actually declined in 1967 and
1968. This and other reported information about these crops indicate
that the possibility of attaining the 1970 target is precluded for rice
and is questionable for cotton. In the case of tobacco, however,
reported production in 1969 was already about 1,000 tons above the
five-year plan goal, in spite of the reported lag. As early as 1967 the
output of sugar beets approached the volume planned for 1970, but
subsequent developments regarding this crop have been cloaked in
official silence. According to officially reported data, the production
of vegetables in 1969 surpassed the 1970 target by some 60,000 tons, or
nearly 27 percent, yet no mention of this fact was contained in the
report on plan fulfillment for that year.
_Table 10. Production of Field Crops and Fruits in Albania, 1960 and
1965-70 (in thousands of metric tons)_
--------------------------------------------------------------------------
Plan
1960 1965 1966 1967 1968 1969 1970
--------------------------------------------------------------------------
Grains 216.7 324.6 n.a. n.a. n.a. n.a. 659.0[*]
Breadgrains[**] (197.1) (296.6) (389.3) (445.0) (494.0) (533.4) (593.0)[+]
Potatoes 23.4 21.2 108.0 115.9 166.0 238.8 475.0
Rice 4.6 10.2 10.5 11.3 n.a. n.a. 24.0
Cotton 16.1 24.6 24.7 21.9 18.5 25.0 34.0
Tobacco 8.1 13.3 13.7 13.1 14.9 17.1 16.0
Sugar beets 72.7 90.2 132.9 138.5 n.a. n.a. 140.0
Vegetables 71.3 140.9 156.5 172.2 180.8 283.8 224.0
Fruits, deciduous 25.3 39.7 47.8 40.7 58.6 n.a. 69.5
Fruits, citrus 1.7 2.0 2.2 2.6 n.a. n.a. 5.6
Grapes 22.3 42.9 54.1 48.5 61.1 n.a. 94.4
--------------------------------------------------------------------------
n.a.--not available
* Except for the data on fruits, all figures in this column are rounded to
the nearest thousand tons.
** Wheat, rye, and corn.
+ The Fourth Five-Year Plan (1966-70) calls for more than this amount.
In the absence of information on the planting of fruit trees and vines,
the fruit production trends of recent years provide the only indication
of the extent to which the fruit production program of the five-year
plan may be realized. Available data through 1968 for deciduous fruits
and grapes and through 1967 for citrus fruits indicate that the 1970
goals for grapes and citrus fruits may not be reached. Production of
citrus fruits would have to more than double in three years, whereas an
increase of only 53 percent was achieved in the 1961-67 period.
Similarly, grape output would have to rise by 54 percent in two years,
compared with an increase of 42 percent in the preceding three years.
The outlook for deciduous fruits is more favorable. The needed output
increase of 20 percent over two years is well within previously attained
limits.
_Table 11. Livestock in Albania, 1960, 1964-66, and 1970 Plan (in
thousands)_
------------------------------------------------------
Plan[*]
1960 1964 1965 1966 1970
-------------------------------------------------------
Horses 49 44 44 44 n.a.
Mules 17 20 20 21 n.a.
Donkeys 57 60 60 60 n.a.
Cattle 420 427 424 427 475
Cows 146 157 156 158 n.a.
Oxen 100 87 n.a. n.a. 139
Buffalo 7 5 5 5 n.a.
Sheep 1,546 1,682 1,637 1,670 1,800
Goats 1,104 1,199 1,175 1,200 1,400
Hogs 130 147 141 142 n.a.
Poultry 1,580 1,671 1,722 1,746 3,000
-------------------------------------------------------
n.a.--not available.
*Fourth Five-Year Plan (1965-70).
Information on livestock numbers is much more sketchy. The dearth of
published data and repeated official pronouncements indicate
unsatisfactory progress in this farm sector, particularly with regard to
the high-priority target for cattle raising. An important cause of this
lag has been an acknowledged shortage of fodder. Another major reason
has been an officially induced transfer of livestock from individual
peasant ownership to the collective and state farms, where it is subject
to the much-criticized negligent attitude of the peasants toward state
and communal property. About 60 percent of the cattle and sheep and 85
percent of the hogs were kept on state and collective farms in 1969, as
against only about 36 and 64 percent, respectively, in 1964.
Collective farm managers and local government officials have blamed the
fodder shortage on the diversion of pastures and meadows to the
production of bread grains. Statistical evidence indicates that the
output of feed grains declined by about 40 percent from the mid-1950s to
the mid-1960s but that the loss of fodder from grazing lands and meadows
was compensated fourfold through increased production of forage crops.
The validity of the explanation offered by the farm and village
officials was vigorously denied in the theoretical monthly journal of
the Party's Central Committee, which attributed the fodder shortage to a
failure by collective farmers to adopt improved methods of crop
production and to exploit all available fodder resources. In January
1970 all basic Party organizations in farming areas were urged to
eliminate distrust and every conservative idea and harmful tendency that
stood in the way of the rapid development of cattle raising and to see
to it that the existing gap between the collective farms and private
plots was gradually eliminated.
Government efforts to improve livestock breeds and yields through
selective breeding, artificial insemination, and better management
practices have also been impeded by peasant apathy. Although yields of
up to 5,500 pounds of milk per cow were obtained on some state farms in
1966 and yields of about 3,300 pounds to 3,950 pounds on the more
efficient lowland collective farms, the average yield of milk per cow
on all lowland collective farms in that year was only about 1,750 to
2,200 pounds, and a large number of upland farms obtained even less.
The latest available official Albanian livestock statistics are for the
year 1964. Data for 1965 and 1966 have been published by the Food and
Agriculture Organization (FAO) of the United Nations. The Fourth
Five-Year Plan indicates the numbers planned for some of the livestock
categories in 1970 through percentage increases expected to be attained
over the numbers in 1965. In the case of cattle, the largest increase by
far has been planned for draft oxen--60 percent as against only 12
percent for all cattle--in an effort to reduce a draft power shortage.
This increase would inevitably be at the expense of the growth in the
numbers of cows and young stock.
The growth of productive livestock herds, excluding draft animals,
lagged very substantially in relation to the increase in population, at
least through 1966. This has entailed a significant worsening of the
initially very meager supply of livestock products. According to
estimates published by the FAO, total annual meat production, including
all types of meat in terms of carcass weight but excluding edible
offals, increased from an average of 40,000 tons in the 1952-56 period
to 50,000 tons in 1967. The output in 1967 implies a per capita daily
meat availability of only about 2.5 ounces, including bones. A similar
situation prevailed with regard to dairy and poultry products because
there were only about 75 low-production cows per 1,000 population and
one head of inferior poultry per capita.
Total agricultural production, which was planned to increase at an
average annual rate of 11.5 percent or from 71 to 76 percent for the
five-year plan period as a whole, consistently fell short of the targets
in the 1966-69 period and was not likely to attain the 17-percent
increase planned for 1970. Thus, for instance, the actual output
increase achieved in 1969 was only about 10 percent as against a planned
rise of 22.1 percent and in 1968, similarly, about 1.6 as against 12
percent.
This persistent lag in farm output has been extensively and publicly
discussed by the leadership, which is intent on raising the general
level of performance in agriculture and ensuring an adequate domestic
supply of food products. Although some blame has been attached to
unfavorable weather conditions, the lag has been ascribed primarily to
the reluctance of peasants to adopt modern production techniques, poor
farm management, insufficient effort to use available resources to best
advantage, widespread indifference and negligence, and an excessive
preoccupation with personal interests leading to an irresponsible
attitude toward work in the collective sector. These shortcomings were
said to exist not only among the peasantry at large but also among
Communists, who should be serving as models of responsible behavior. The
basic reason that clearly emerges from public discussion is a widespread
opposition of peasants to the collectivization of farms and an
associated tendency to devote their best efforts to the cultivation of
their own private plots.
Impressive evidence on this point is provided by official production
statistics for 1964, the latest available on this subject. These data
show that output per acre on the small private plots of collective
farmers and state farm workers was four times larger than output on
state farms and six times larger than that on collective farms.
Constituting only 6 percent of the cultivated land, the private plots
produced 23 percent of the total farm output. Nevertheless, the
leadership has publicly credited the advance in agricultural production
to the collectivization of farms.
In 1967 the government proceeded to reduce the size of the private
plots, with a view to their eventual elimination, both for ideological
reasons and as a means of forcing peasants to devote greater efforts to
work on collectivized land. Subsequent steps were taken to transfer to
collective ownership some of the livestock allotted to the farm families
by the collective farm statute.
This action did not measurably improve agricultural performance.
Shortfalls in the production of several important crops, including
cotton, tobacco, and rice, were admitted to have occurred both in 1968
and 1969, and the situation in the livestock sector continued to be
unsatisfactory. A scaling down of the original production goal for 1970
could therefore not be avoided. The farm output target set by the annual
plan for 1970 was 12.5 percent below the minimum and 15 percent below
the maximum five-year plan figures for the same year.
INDUSTRY
A few primitive plants producing consumer goods had been built before
World War II, but industrial development began only in 1949, when
construction was undertaken of a 50,000-kilowatt hydroelectric power
station, a textile mill capable of producing 22 million yards of cloth
per year, and a sugar mill with an annual capacity of 10,000 tons of
sugar. Industrial construction continued under the first and second
five-year plans (1951-55 and 1956-60, respectively) during the 1950s,
with substantial financial and technical assistance from the Soviet
Union. This development was temporarily interrupted in the wake of the
political break with the Soviet Union in 1961 but was soon resumed with
aid from Communist China (see ch. 6, Government Structure and Political
System). The interruption was said by the Albanian leadership to have
retarded industrial growth by three years. Disinterested foreign
observers, however, reported that the equipment acquired with the aid of
Communist China was better suited to the needs of the country and of
better quality than that supplied by the Soviet Union.
Among the major industrial projects completed or under construction in
1970 with the assistance of Communist Chinese technicians were: copper,
chromium, and iron-nickel mines; an oil refinery at Fier with an annual
capacity of 500,000 tons of crude oil, a 225,000-kilowatt hydroelectric
power station at Vau i Dejes on the Drin River; a 100,000-kilowatt
capacity of 500,000 tons of crude oil; a 225,000-kilowatt/thermal
power-plant at Fier; a copper-ore dressing installation and a
copper-wire drawing mill; a steel-rolling mill at Elbasan; cement mills
at Elbasan and Kruje; large textile combines at Tirana and Berat; and a
knit goods factory at Korce.
Of special benefit to agriculture was the construction of a nitrate
fertilizer plant at Fier, a superphosphate plant at Lac, and a plant for
the manufacture of tractor spare parts at Tirana. A variety of smaller
plants were also built for the production of such items as caustic soda,
sulfuric acid, rubber products, electrical equipment and light bulbs,
footwear, and vegetable oils.
Along with the construction of technologically up-to-date plants, others
were built with outdated technology through the lack of construction
experience or knowledge of more advanced methods. At the same time,
obsolete plants and workshops remained in use. In 1969 these
technologically backward plants produced less than half the total output
but employed more than half the industrial labor force.
Available information on the structure of industry is ambiguous because
of uncertainties regarding the pricing methods underlying the relevant
data. According to the official figures for 1967 based on 1966 prices,
the food industry accounted for nearly one-third and light industry for
almost one-fourth of the total industrial output. The balance of 44
percent was produced by some fourteen or more industry branches, the
relative shares of which ranged from 8.0 percent for metalworking and
for timber and wood processing to 0.3 percent for the bitumen industry.
As a group, six industry branches engaged in oil production and mining
contributed about 15 percent of the output. The building materials
industry accounted for 5 percent and electric power production, for not
quite 4 percent.
The relationship between the output of capital goods and that of
consumer goods is equally ambiguous. The share of capital goods in the
output of 1968 was officially reported as 55.5 percent, as against 44.5
percent for consumer goods. The apparent discrepancy between the
reported shares in total output of consumer goods as compared with the
production of the light and food industries may be explained, in part,
by the fact that a portion of these industries' output is usually
included among capital goods as, for instance, textiles used by the
clothing industry and leather used by the shoe industry.
Foreign observers have reported the country's industry to be poorly
balanced not only in a technical sense but also in terms of essential
domestic needs and the availability of foreign outlets for its products.
The metalworking industry, for example, which is limited to the
production of automotive and industrial spare parts, apart from a few
types of simple agricultural equipment and household utensils, cannot
even ensure the maintenance of the existing machinery inventory because
it is able to supply only about 60 to 70 percent of the country's needs.
Industrial production is substantially oriented toward capital goods and
exports, whereas the manufacture of products for domestic consumption
continues to be severely restricted.
The leadership is aware of industry's structural shortcomings and is
intent on overcoming them through a program involving the reconstruction
and modernization of old plants and the concentration of small shops
into larger, more efficient specialized units. Progress in this
direction, however, has been hampered by inadequate investment resources
and by a reluctance of managers and workers to cooperate with this
program. It has also been handicapped by a lack of effective planning
and by an inability to organize comprehensive studies that would provide
a basis for both overall and detailed plans.
Nevertheless, a few plants for the manufacture of machine spare parts
and of simple equipment were formed through the concentration of milling
machines previously installed in maintenance shops of various
enterprises, and a step toward the consolidation of small artisan shops
was taken in May 1969 by transforming artisans' cooperatives into state
enterprises.
Owing to the lack of prior industrial experience by both managers and
labor, industry also suffers from poor organization of production and of
the material supply, low labor productivity, and generally inferior
quality of product. Extensive discussion of these problems in the
official press indicates that government efforts toward reducing the
magnitude of these problems are slow in bearing fruit, despite programs
for vocational training and intensive campaigns of political
indoctrination aimed at generating productive enthusiasm and innovative
initiative among workers and managers. A major campaign is being waged
to eradicate artisan traditions and to replace them with industrial
production line methods. The basic difficulty in achieving greater
efficiency lies in the continuing severe shortage of skilled manpower
and of personnel with adequate training in the economics and mechanics
of industrial production.
Because of the underlying pricing methods, officially reported data on
total industrial production in value terms overstate the actual rate of
growth attained. Substantial industrial progress is, nevertheless,
indicated by physical production data for a number of commodities (see
table 12). Since production had started from nothing or from very low
levels in the early post-World War II years, the rates of growth in
output were substantially higher during the 1950s than in the following
decade.
The highest rates of increase during the 1960s, ranging from five to
three times the initial volume, were achieved in the production of
copper, electric power, and cement. Increases of from 69 to 80 percent
were attained for coal, oil, and iron-nickel ore. Production of textiles
and footwear grew by more than half, and that of knitwear more than
doubled. A substantial advance was also made by the food-processing
industry. Least progress was made in the production of cigarettes and
bricks--only about 6 to 7 percent--and the output of timber actually
declined from 6 million to 5 million cubic feet. Most of the mining
output and a substantial share of the food industry production are
exported.
Rapid electrification of the country has been a major goal of the
leadership. Electrification is intended to meet the needs of industrial
development and help attain a higher standard of living in rural areas.
A crash program has been underway to bring electric power to every
village, even in the remotest areas. This project was originally
scheduled to be completed in 1985, but the date has been advanced to
November 8, 1971, the thirtieth anniversary of the founding of the
ruling Albanian Workers' Party. The program is being carried out by the
prevailing method of mass mobilization for voluntary work.
Installed capacity in 1969 was reported to be 210,000 kilowatts, of
which 128,000 kilowatts were in thermal powerplants and 82,000 kilowatts
in hydroelectric power stations. This capacity reflected a fourfold
increase since 1960, a large part of which was accounted for by a single
thermal plant of 100,000-kilowatt capacity put into operation in late
1969. The country's hydroelectric power potential has been estimated by
Albanian technicians as roughly 3 billion kilowatt-hours per year, half
of which is represented by the Drin River. Development of this
potential has barely begun. The first major plant on the Drin with a
capacity of 225,000 kilowatts is scheduled for completion at Vau i Dejes
in 1971, and a second station on that river with a capacity of 400,000
kilowatts is to be built at Fierze during the Fifth Five-Year Plan
(1971-75).
_Table 12. Industrial Production in Albania, 1960 and 1964-69_
-------------------------------------------------------------------------
Commodity Units 1960 1964 1965 1966 1967 1968 1969
-------------------------------------------------------------------------
Electric power million
kilowatt-hours 194 288 322 433 589 712 n.a.
Crude oil thousand
metric tons 728 764 822 887 984 1,137 1,310
Petroleum
products do. 369 476 509 590 692 n.a. n.a.
Coal do. 291 292 331 393 434 491 n.a.
Chrome ore do. 289 307 311 302 327 369 n.a.
Copper ore do. 82 145 219 228 267 304 326
Blister copper do. 1 2 4 5 5 n.a. n.a.
Iron-nickel
ore do. 255 351 395 395 403 440 n.a.
Cement do. 73 127 134 139 221 n.a. n.a.
Bricks million units 130 121 112 106 139 n.a. n.a.
Ginned cotton thousand metric
tons 7 9 8 9 9 n.a. n.a.
Textiles million yards 28 33 33 37 44 n.a. n.a.
Cotton do. 27 31 ... ... ... n.a. n.a.
Knitwear million units 1 2 2 3 3 n.a. n.a.
Leather thousand square
yards 109 126 124 161 158 n.a. n.a.
Footwear (other
than rubber) thousand pairs 1,365 1,835 2,103 2,259 2,103 n.a. n.a.
Shoes and
sandals thousand pairs 831 955 n.a. n.a. n.a. n.a. n.a.
Rubber boots do. 155 201 191 211 248 n.a. n.a.
Flour thousand metric
tons 125 145 152 161 157 n.a. n.a.
Cigarettes million units 3,436 3,990 4,390 3,310 3,620 n.a. n.a.
-------------------------------------------------------------------------
n.a.--not available.
Electric power production is reported to have attained in 1968 the level
planned for 1970. Output of power rose from 194 million kilowatt-hours
in 1960 to 324 million kilowatt-hours in 1965 and almost 800,000 million
kilowatt-hours in 1969. The distribution system has also been rapidly
extended and in 1969 included about 800 miles of high-tension
transmission lines of 35 and 110 kilovolts. Distribution and use of
electric power were reported to be very wasteful, with losses as high as
115 million kilowatt-hours in 1969--almost 15 percent of total output.
Information on the pattern of electric power consumption has not been
published.
FINANCE
Financial operations have been shrouded in secrecy, and little
information can be gleaned from the limited published data. These data,
nevertheless, reflect some of the leadership's basic economic policies,
such as its emphasis on rapidly increasing production while restraining
a rise in consumption, its preference for industrial development as
against agricultural growth, and its drive to mobilize domestic
resources for economic development.
The Budget
Information on budgetary practices is not available, and statistics
relating to the budget are incomplete. The relation between three
different budgets approved annually by the People's Assembly on
recommendation of the Council of Ministers is therefore unclear. There
is a state and a national budget and a budget for local government. The
budget for local government has been growing slowly in relation to the
state-budget--from 16 percent in 1955 to 17 percent in 1960 and 20
percent in 1969 and 1970.
Only about one-fourth of local budgetary revenue is derived from local
taxation, which implies a substantial subsidy from the central
government budget. The amount of this subsidy is roughly double the
usual 7- to 8-percent difference between the state and the smaller
national budget. A surmise that the state budget represents an overall
budget and that the national budget serves to finance central government
activities only is therefore not warranted.
Except for a slight decline in revenues in 1961 and 1963, coincident
with the country's political and economic break with the Soviet Union,
the annual state budget has been rising steadily to a level of 5.21
billion leks (5 leks equal US$1--see Glossary) in revenues and 5.11
billion leks in expenditures for 1970. By comparison with the budget for
1960, revenues increased by 85 percent and expenditures by 102 percent,
with a corresponding decline of 65 percent in the budgetary surplus. On
a five-year basis, comparing the Fourth Five-Year Plan with the Third
Five-Year Plan, both revenues and expenditures rose by about 40 percent,
with a slightly higher increase in revenues.
A relatively greater stringency of funds for budgetary purposes after
the break with the Soviet Union is reflected in the planned annual
budgetary surplus, a permanent feature since 1946 and a matter of great
pride for the leadership. From a level of almost 24 percent in 1950, 15
percent in 1955, and 10 percent in 1960, the surplus dropped to 1.1
percent in 1962 and 1.5 percent in 1963. Despite a slight recovery in
subsequent years, except for 1968 when it declined to only 1 percent of
revenues, the planned surplus did not again approach its earlier size.
Partial information on sources of revenue is available to 1967.
Published statistics listed a turnover tax on all goods produced,
deductions from enterprise profits, direct taxes on the population
(primarily income taxes), and social insurance premiums. These sources
yielded, on an average, 60 percent of the total revenue in the 1960-65
period, and their share rose steeply to 74 percent in 1967. The balance
of the revenue, omitted from official statistics, consisted primarily of
income from agriculture in the form of compulsory deliveries, proceeds
from state farm operations, payments to machine-tractor stations, and
taxes.
The most important among the listed revenue sources were the turnover
tax and deductions from profits. Together their yields ranged from 50
percent of total revenue in 1960 to almost 69 percent in 1967, but their
relative weights changed markedly during this period. In 1960 the
turnover tax yielded 40 percent and profit deductions 10 percent of
revenue; by 1967 their respective shares were 43 and 26 percent. Social
insurance premiums contributed between 3.2 and 4.5 percent, while the
yield from direct taxes on the population declined from 2.7 percent in
1960 to less than 1 percent in 1967. In 1969 income taxation was
abolished for individuals and for some poor collective farms in hilly
and mountainous areas.
The leadership has claimed that the abolition of direct taxes on the
population with the concomitant improvement in public welfare was made
possible by the country's economic advance based on the Party's correct
revolutionary policy, and it contrasted the progressive nature of this
measure with an alleged intensification of exploitation and misery of
workers in what are officially called imperialist and modern-revisionist
countries. This comparison ignores the existence of the turnover tax,
which is particularly heavy on consumer goods, and of the enterprise
profits deduction, both of which are reflected in the sales price of
commodities and, consequently, represent a hidden form of sales taxes.
This method of taxation is known to be regressive, in that it takes no
account of differences in income and places the heaviest burden on those
least able to pay.
The published budget laws usually specify the amount of revenue to be
derived from the socialized economy, including collective farms and
cooperative enterprises. The proportion of this revenue was reported to
have been 85.5 percent in 1960 and from 88 to 89 percent in the 1968-70
period. This information cannot be reconciled with the published revenue
statistics, particularly with the data concerning the taxation of
noncollectivized farm enterprises, the proceeds from which were reported
to be less than 0.5 percent in 1964. The revenue from the nonsocialized
sector consists mostly of taxes imposed on the output from personal farm
plots of collective and state farm workers and, to a lesser extent, of
taxes on some private artisan and other activities still tolerated by
the government within narrowly prescribed limits.
Information on budgetary expenditures is also incomplete. Published
statistics failed to specify the use of 17.5 percent of the total
outlays in the 1960-65 period, and no explanation is readily at hand for
the decline of the unallocated residue from that level to between 3 and
4 percent in 1968-70. The published data included outlays for the
national economy, social and cultural needs, defense, and
administration.
The proportion of total expenditures devoted to social and cultural
needs and to defense remained remarkably stable between 1960 and 1970.
Annual outlays for these two categories fluctuated, respectively, only
from 22.6 to 25.1 percent and from 7.6 to 9.9 percent of total
expenditures. The share of administrative expenditures declined steadily
during this period from 2.7 to 1.7 percent. Outlays for the national
economy were also shown by the published statistics to have been quite
stable in the 1960-65 period, with an annual variation of only 2.6
percent. Coincident with the decline and virtual disappearance of the
unreported expenditure residue after 1965, however, the share of
industry rose sharply from 46 percent in 1965 to more than 64 percent in
1968 and remained above 61 percent through 1970. The reasons for, and
the implications of, this change in reporting practice are not known.
An average of 47 percent of the budgetary expenditures in the 1960-67
period was devoted to investment, with annual fluctuations of this
category between 39 and 55 percent. The lowest rates of investment
occurred in 1962 and 1963 as an aftermath of the abrupt cessation of
Soviet aid deliveries. In absolute terms the volume of investment
increased from 1.1 billion leks in 1960 to 1.8 billion leks in 1967.
Total investment for the years 1966-70 was planned at 6.5 billion leks,
an increase of 34 percent over investments in the preceding five-year
period. Actual investment in the years 1966-69 was reported to have
exceeded the plan for those years by 12 percent. In line with the
Party's policy of promoting a rapid growth of the country's productive
capacity, from 80 to 82 percent of the investment has been devoted to
the construction of facilities for material production.
Industry has received the largest share of investment--48 percent in the
1961-65 period and 50 percent under the plan for 1966-70. On an annual
basis, industry's share ranged from a low of 36 percent in 1962 to a
high of 61 percent in 1965. The proportion of agricultural investment
was much lower--only 15 percent of the total in 1961-65 and less than 19
percent of the total planned for 1966-70. During the first two years of
the 1966-70 period, actual investment in agriculture lagged
substantially and amounted to only 11.7 and 16.2 percent, respectively.
The lack of adequate investments has been a contributing cause of poor
agricultural performance. There has been no consistency in the pattern
of industrial and agricultural investment. The respective shares of
these two sectors in total investment fluctuated widely from year to
year in the 1960-67 period. An adequate explanation of the reasons for
this fluctuation has not been found.
Investment in housing and for social and cultural purposes has been
minimal--8.1 and 3.7 percent, respectively, in the 1961-65 period and
6.1 and 8.1 percent, respectively, under the plan for 1966-70. As in the
case of agriculture, actual investment in 1966-67 was substantially
below the planned levels and amounted to less than 5 percent for housing
and 2 percent for social and cultural needs. This capital starvation has
been largely responsible for the dismal housing situation and for the
inadequacy of other essential amenities.
Money and Banking
The lek, divided into 100 quintars, is a nonconvertible paper currency
with multiple official exchange rates. The basic official rate since
August 10, 1965, has been 5 leks for 1 United States dollar, a rate that
has no applicability in practice. Up to 1965 the exchange value had been
50 leks per US$1. The change in par value had no economic significance
because prices, wages, and all other monetary values were reduced by the
same ratio.
There are two types of so-called tourist or support leks. A rate of
12.50 leks per US$1 applies to the official exchange of Western
currencies by nonresidents and to support payments received by residents
from Western sources. A rate of 7.55 leks per US$1 applies to the
exchange by Communist country residents of their national currencies and
to support and other noncommercial payments transferred by them from
Albania to Communist states. A third variety of official exchange rates
consists of the rates used to balance clearing accounts under special
trade and payments agreements with Communist countries. An illegal black
market rate of about 60 leks per US$1 from early 1968 through early 1969
was reported by reliable sources.
All currency matters are administered by the National Bank jointly with
the ministries of finance and trade. Albania is not a member of the
International Bank for Reconstruction and Development or of the
International Monetary Fund.
Adequate information is not available on the nature of the relationship
between the State Bank and the Ministry of Finance or on the bank's
financial operations beyond some outdated statistics on credits and
savings deposits. As the principal financial institution, the State Bank
carries out the financial policies of the Party and government. It
issues currency, provides credit to all economic sectors, accepts
savings deposits, and serves as the country's treasury. In addition to
these functions, the State Bank helps prepare the financial plans for
the economy, is called upon to assist enterprises in completing their
planned assignments, and is responsible for controlling all economic
activities through the use of its financial levers.
In mid-1969 the State Bank was severely criticized for poor performance,
particularly its failure to exercise adequate control over unauthorized
use of funds and waste of materials by the enterprises it helped to
finance. The bank's failure was largely precipitated by uncertainties
created through a decentralization of economic authority, decreed by the
Party, and a dilution of the bank's control function.
A specialized system of state savings and securities banks was
established within the Ministry of Finance in November 1968, for the
purpose of mobilizing the population's savings for investment through
loans to the state and the sale of its securities. The text of the law
that created this institution contained no provision concerning the
relation of these new savings and securities banks to the State Bank.
Further information on the new banks was not available in mid-1970.
The only available information on the State Bank's financial operations
consists of partial data on loans to agriculture and for housing and on
the number and amount of savings deposits. The total volume of farm
credits, exclusive of credits to state farms for which statistics have
not been published, increased from 95 million leks in 1960 to 252
million leks in 1964, including long-term loans of 38 million and 44
million leks, respectively. By 1967 long-term loans had increased to 56
million leks. The statistics do not indicate whether the published data
refer to the annual volume of loans granted or to the total amount of
outstanding loans. A small fraction of the loans after 1960 was granted
to individual peasants for the purchase of livestock.
Loans for housing construction and repair declined drastically from 17
million leks in 1960 to only 7 million leks in 1964. The distribution of
the loans between urban and rural areas fluctuated widely, but urban
loans predominated by a large margin and constituted from 69 to 93
percent of the total. The number of savings accounts increased from
235,400 in 1960 to 445,000 in 1968, and the volume of deposits rose from
119 million to 247 million leks. Interest paid on these amounts totaled
3.6 million and 4.8 million leks in the respective years, which implies
a reduction of the interest rate from about 3.0 to 2.5 percent.
FOREIGN ECONOMIC RELATIONS
Foreign Aid
The country's foreign economic relations have been conditioned by its
leadership's economic goals and political persuasion. As a poor,
undeveloped country intent on modernizing and expanding its economy at a
rapid pace, Albania has had to rely heavily on foreign economic and
technical assistance during the post-World War II period. The
leadership's extreme Marxist orientation and hostility toward the
Western nations have precluded a recourse to non-Communist sources of
aid and have made the country entirely dependent upon contributions by
other Communist states. But even within the Communist sphere political
disagreements have had a disruptive effect on aid arrangements (see ch.
6, Government Structure and Political System).
From 1945 to 1948 economic and technical assistance was received from
Yugoslavia. After the political break between that country and Albania,
the Soviet Union assumed the role of major aid donor, and smaller
contributions were made by some of the East European Communist states.
Since 1961, when the substantial support of the Soviet Union was lost in
the wake of the political schism within the Communist world engendered
by the Sino-Soviet dispute, Albania has been able to obtain assistance
only from the People's Republic of China (Communist China). The
readjustment necessitated by the abrupt withdrawal of all Soviet aid and
technical advisers was said by Albanian leaders to have retarded
economic development by three years.
The extent of aid received in the form of long-term loans, some of which
became grants through debt cancellations, is only partially known. The
amount of total loan commitments by the Soviet Union in United States
dollar equivalents for the period of 1945 through 1961 was estimated by
one Western source at US$246 million. Another Western source reported
the amount of loans promised by the Soviet Union and the East European
Communist states for the 1961-65 period to have been in excess of
US$132.5 million. These loans were cancelled in their entirety in the
spring of 1961. A partial list of Soviet loan commitments, compiled by a
Western student from Soviet economic literature, totaled US$172 million
for 1957-61. The actual amount disbursed, however, was much smaller.
Aid deliveries, as reflected in official Soviet statistics, totaled only
US$39.4 million for the years 1955-61. Similar information on aid
deliveries from 1949 to 1954 was not readily available. Western
observers believe that the economic crisis created by the Soviet
withdrawal of aid forced Albania to default on the outstanding loans.
Loans granted by East European Communist states and outstanding in 1965
(in terms of United States dollar equivalents) were given by a Soviet
source as follows: Bulgaria, US$11 million; Czechoslovakia, US$25
million; East Germany, US$15 million; and Romania, US$7.5 million.
Information about repayments of these loans was not available. Only a
fraction of the outstanding amounts could have been liquidated through
Albania's trade surplus with these countries. Some Western estimates
placed the debt to the Soviet Union and East European Communist states
at the end of 1968 at a minimum of the equivalent of US$500 to US$600
million.
Economic aid by Communist China dates back at least to late 1954. Stated
in United States dollar equivalents, Albania received in that year a
grant-in-aid of US$2.5 million and a loan of US$12.5 million. An
additional credit of US$13.75 million was made available in early 1959,
and a loan of US$123 million for the purchase of industrial equipment
during the Third Five-Year Plan (1960-65) was extended in early 1961,
after Albania's break with the Soviet Union. Two more loans, for
undisclosed amounts, were negotiated in June 1965 and November 1968 to
finance the fourth and fifth five-year plans, respectively. In public
references to the 1968 loan, Party and government officials gave the
impression that it was substantially higher than the loan of
US$123-million obtained in 1961. Aid has been provided by Communist
China free of interest.
A Western scholar reported unidentified sources to have suggested that
the 1965 loan amounted to about US$214 million, a sum substantially in
excess of the credits granted up to that time. Another Western source
estimated total direct credits for the 1960-68 period to have been more
than US$450 million, exclusive of substantial grants. Yet, other Western
sources thought at the time, and also in 1970, they had discerned
evidence of disappointment on the part of the leadership with the extent
of the financial assistance, delays in the supply of machinery, and an
unwillingness or inability to supply much-needed consumer goods. The
leadership's awareness of the inadequacy of foreign aid in relation to
the planned development program has been evidenced, in its appeals for
greater productivity, by the high frequency of references to the Party's
principle of reliance on the country's own efforts and in its continuing
campaign for the utmost economy of resources.
The country's cumulative clearing debt to Communist China on the
commodity trading account at the end of 1968 was estimated at roughly
US$300 million. This amount did not include the substantial additional
costs of assistance in the form of technical advisers who have guided
the construction and operation of major industrial projects. Estimates
of these costs or of the number of aid technicians in the country were
not available.
Foreign Trade
Because of the dearth of domestic resources in relation to the needs for
economic development and consumption, foreign trade has consistently
shown a negative balance. A marked improvement in this respect has taken
place since 1955, even though the absolute deficit has been growing with
the rising trade volume. In the 1960s exports covered 60 percent or more
of imports, compared with 47 percent in the 1956-60 period and 31
percent in the preceding eleven post-World War II years. This
improvement in the trade balance has been achieved through a consistent
policy of diversifying domestic production with a view to import
substitution, developing all possible resources for the production of
exportable goods, improving product quality, and severely restricting
domestic consumption. The annual trade deficit in 1967 and 1968 was
about 200 million leks.
The volume of trade has been rising quite steadily from 140 million leks
in 1950 to 950 million leks in 1968. During this period imports
increased from 110 million to 580 million leks, and exports rose from 30
million to 370 million leks. The Fourth Five-Year Plan calls for an
increase of 31 percent in total trade over the volume of the preceding
five years, including an increase of 36 percent in exports and 28
percent in imports. These figures imply a planned average annual trade
volume in the 1966-70 period of 885 million leks, of which 355 million
leks were exports and 530 million leks imports. Although the rate of
trade expansion during 1966-68 exceeded the target, the export-import
ratio was not as favorable as that called for by the plan.
The directional pattern of the country's foreign trade has conformed to
the general observation that trade follows aid. The assumption by
Communist China in 1961 of the major aid donor position previously held
by the Soviet Union had an immediate and pronounced impact on the
direction of trade. In 1960 Communist China accounted for only 7 percent
of the total trade volume, as against 54 percent for the Soviet Union.
By 1962 trade with Communist China had grown to 51 percent of a somewhat
smaller total volume, whereas trade with the Soviets had ceased
altogether by 1963. In 1964 Communist China's share of the trade was
equal to that of the Soviet Union in 1960, and the actual volume
represented by that share was 23 percent larger. During the 1962-68
period trade with Communist China amounted to about half the total trade
volume, but the share of Communist China declined below that level
toward the end of this period. This decline was the result of a
successful effort by the leadership to expand the country's trade with
both Communist Eastern Europe and the non-Communist West.
Trade with the Communist countries of Eastern Europe, other than
Yugoslavia, continued after the break with the Soviet Union and
increased by 66 percent from 226 million leks in 1960 to about 375
million leks in 1968. The share of this group in total trade rose during
this period from 35 to 40 percent, almost entirely after 1964. Albania's
most important trade partner in this group has been Czechoslovakia,
second only to Communist China with a volume of 118 million leks in
1968, equivalent to about 12 percent of Albania's total trade volume in
that year. Following Czechoslovakia in order of importance were Poland,
East Germany, and Bulgaria, with trade volumes ranging from 69 million
to 53 million leks. Trade with Hungary and Romania amounted to about 40
million leks and 32 million leks, respectively. With the exception of
Poland and Romania, Albania's trade balance with the countries of
Eastern Europe was positive between 1960 and 1968. The excess of
exports over imports during this period totaled about 65 million leks.
During the early years of the country's dependence upon Soviet aid,
trade with non-Communist countries and with Yugoslavia had been
discontinued, but it was resumed on a very small scale by 1955. In 1964
this trade amounted to only 65 million leks (equivalent to US$13 million
at the official rate of exchange), or 8 percent of the total trade
turnover. Fully two-thirds of this trade was accounted for by Italy and
France. During the following four years trade with the West and
Yugoslavia increased 2-1/2 times to 160 million leks in 1968, and the
share of this trade in the total turnover doubled.
Italy continued to be the major Western trade partner, with a turnover
of 66 million leks in 1968, but the largest advance was made in the
trade with Yugoslavia. The total trade turnover with that country rose
fiftyfold in one year, from 400,000 leks in 1965 to more than 20 million
leks in 1966. Under the 1970 trade agreement the trade volume is
scheduled to reach 50 million leks. In 1968 Italy and Yugoslavia
together absorbed four-fifths of the combined exports to the West and
Yugoslavia and supplied more than half the imports from that area.
Another striking example of the country's trade expansion effort is the
agreement with Greece, a country with which Albania has had no political
or economic relations for thirty years. Signed by the chambers of
commerce of both countries in January 1970 and effective for one year,
this agreement provided for an initial turnover of 7.5 million leks, of
which 4 million leks were in imports and 3.5 million leks in exports.
Commercial orders worth about 1.5 million leks on both sides were
reported to have been placed by mid-1970.
In 1969 trade relations were officially reported to have been maintained
with forty different countries. Relations with thirteen of these
countries, both Communist and non-Communist, were formalized by trade
agreements.
Imports have overwhelmingly served the needs of production and
industrial expansion. Almost 50 percent of the imports in 1964 consisted
of machinery, equipment, and spare parts. More than 23 percent was
accounted for by minerals and metals, chemical and rubber products, and
construction materials. Another 16 percent was made up of agricultural
raw materials, about two-thirds of which was destined for the
food-processing industry. Only 11 percent of the imports consisted of
finished consumer goods and ready-to-eat foods. Continuing Party and
government emphasis on increasing production and the improved domestic
output of foods suggests that the production-oriented nature of imports
did not change significantly by 1970.
Exports have consisted predominantly of minerals and mineral products
but have also included significant amounts of agricultural products and
manufactured consumer goods. In 1969 petroleum and natural bitumen,
chromium and ferronickel ores, and copper (including copper wire),
constituted 55 percent of exports. Another 25 percent comprised
processed foods, such as canned fish and vegetables and preserved
fruits; light industry products, including cotton and linen textiles and
some readymade clothes; and a few chemicals. The balance of 20 percent
was represented by fresh fruits and vegetables and by agricultural raw
materials, such as hides and skins, tannins, and medicinal plants.
Exports of fruits and vegetables to central and northern Europe have
been growing rapidly.
The share of manufactured and semiprocessed products in exports was also
officially reported to be increasing and to have constituted 51 percent
of the export volume in 1968. Students of Albanian affairs have reported
that some of the country's exports are not competitive in world markets
and that Communist China has been willing to absorb them at a good price
only for political reasons, as did the Soviet Union before 1961.