East European Energy

Albania, by far the poorest nation in Europe, has recently emerged from a long period of Communist rule and international isolation to embrace democratic and free market principles. The reform-oriented government elected in March 1992 confronts an economy in shambles and desperately needs foreign investment to recover. Albania's energy sector can play a key role in speeding the country's economic recovery. This report discusses the (1) trends in and problems related to Albania's energy production, imports, exports, and use; (2) plans by Albania to address its energy problems; (3) role of foreign trade and investment in Albania's energy sector and factors that discourage them; and (4) U.S. government and international organizations' efforts to help Albania's energy sector and improve its business climate.

GAO found that: (1) Albania's declining energy production threatens its' economic development; (2) Albania has abundant oil, gas, and coal resources, but energy resource production has declined due to a lack of suitable port facilities and outside access to pipelines, poor mining conditions, a lack of financial resources needed for energy imports, outdated and obsolete mining equipment and spare parts, insufficient insulation and glass for buildings and residential homes, reduced exports due to the political turmoil in Yugoslavia, and an inadequate distribution system; and (3) Albania relies on hydroelectric plants to generate most of its electricity and recent droughts have also decreased power exports and production; GAO also found that: (1) Albania plans to modernize and expand its oil, gas, coal, and electricity industries by raising energy prices; (2) Albania plans to acquire new extraction technology to exploit coal resources and is interested in importing coal from Europe and the United States; (3) Albania has raised energy prices to reduce state subsidies and encourage efficiency; (4) Albania is moving away from a centrally planned government to a local enterprise level; (5) Albania is attempting to gradually privatize its economy to help attract foreign businesses through joint ventures, and reduce the size of its public sector; (6) impediments to foreign investment in Albania included decentralization and privatization process difficulties, a lack of financial resources to finance trade or investment, a lack of legislation protecting foreign investment, an unresolved political situation, and the population's unfamiliarity with a market economy; and (7) Albania's long term economic outlook is positive because of a low wage, educated work force, the country's small size, an improving political situation, and low religious tensions.