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https://doi.org/10.29013/ESR-19-9.10-81-85
Petanaj Migena, Professor at the University of Vlora, "I. Qemali", Faculty of Economy, the Department of Finance E-mail: migenapetanaj@hotmail.com Durmishi Veronika, Professor at the University of Vlora, "I. Qemali", Faculty of Economy, the Department of Finance E-mail: veronika_durmishi@yahoo.com
CHALLENGES OF THE ALBANIAN ECONOMY WITHIN THE EUROPEAN INTEGRATION
Abstract. EU membership requires the existence of a functioning market economy and the capacity to cope with competitive market forces. Economic integration is about eliminating boundaries between two or more states so that any constraints over which current and future movements of goods, services, factors of production, and the speed and quality of information are relatively low. The economic frontier does not necessarily mean the territorial frontier.
The purpose of the study is to analyze the development of the Albanian economy in the context of Albania's EU integration and customs legislation changes in line with European legislation, the ability of the economy to withstand the competitive pressures of EU countries.
The methodology used is analytical-comparative. Analytical as it analyzes various sectors of the economy, comparative because they will be compared to the EU average and the challenges for the future.
Keywords: European integration, economic criteria, functional economy, European legislation.
Introduction mon interactions and the abolition of discriminatory
The EU aims to return not only to a common policies between countries.
economic zone, free of customs barriers and to a Albania submitted its application for member-
common monetary policy, but to a community that ship of the European Union on 28 April 2009, based
has a common denominator, a common philosophy on Article 49 of the Treaty on European Union,
and similar vision and values. which states: 'Any European State which respects the
The purpose of economic integration is to in- values referred to in Article 2 and is committed to sup-
crease competition in the current and future peri- porting these values, can apply to become a member of
ods. Economic integration means the integration of the Union. Whereas, Article 2 states that 'the Union is
markets and the integration of policies. The integra- founded on the values of respect for human dignity, free-
tion of markets means that all market participants dom, democracy, equality, the rule of law and respect
in different regions or countries operate on demand for human rights, including the rights of persons belong-
and supply across the European Union. While inte- ing to minorities. These are common values for Member
gration policy does not mean implementing a single States in a society ruled by pluralism, non-discrimina-
policy, as different countries apply different econom- tion, tolerance, justice, solidarity and equality between
ic policies, but it does mean joint institutions, com- women and men'.
Economic Criterion for EU Integration
When it comes to EU membership, from an economic point of view, this process is about meeting not only the political criteria (stability of institutions guaranteeing democracy, the rule of law, human rights, and respect for and protection of minorities) and recognition the adoption of common EU legislation - the "Community acquis" (the ability to assume the obligations deriving from membership, including obedience to the goals of political, economic and monetary union), but also the fulfillment of economic criteria - a functioning market economy and the ability to interact with pressures and market forces within the EU. These principles have been enshrined in many basic EU documents dating back to the 50 s of the last century and processed step by step in accordance with the specific circumstances of particular countries.
In 1993, the European Council set in Copenhagen the following economic criteria for EU membership:
- The existence of a functioning market economy;
- The ability to cope with competitive pressures and market forces within the EU.
The existence of a functioning market economy
The existence of a functioning market economy requires price and trade liberalization, as well as the establishment of an enforceable legal system, including property rights. Macroeconomic stability and consensus on economic policies enhance the performance of a market economy.
The efficiency of the economy improves if there is a well-developed financial sector and if major barriers to entry and exit are removed. A functioning market economy is better able to withstand the pressures of competition, and in the context of EU membership, its internal market is the market taken as a reference point.
In the early years of transition, there was a drastic output contraction, a galloping budget deficit and three-digit inflation. With the help of the international community, in 1993 Albania launched a program to stabilize the economy, which included fiscal
consolidation, strict monetary targets and structural reforms. Advances in macroeconomic stability came to a halt in 1997, with the collapse of so-called pyramid schemes, which had a very negative effect on the economy and caused civil unrest, during most of the 90 s, in line with various adjustment programs and since 2000, a mid-term budget program that is a 3-year spending plan is in place.
The interaction of market forces
The administered prices are set by sectored regulators (electricity, telephone, water supply) or by state authorities. State participation in the economy has gradually declined, and as a result the private sector today accounts for about 3/5 of GDP and 82% of total employment. This is largely achieved through the extensive privatization process. Sectors still owned or controlled by the State include electricity generation, railways, ports and water utilities.
Significant progress has been made in recent years in facilitating the opening of new businesses. In 2007, the law on the National Registration Center, today the National Business Center, was adopted, which provides simultaneous one-stop-shop registration for the purposes of business administration, tax, social and health insurance, and job inspections. The legal system underpinning the market economy has evolved since the 1990 s. However, the legislative process is not fully transparent, as the proposed laws are not always subject to public consultation. Laws and normative acts are not always consistent, complete or lacking implementing legislation, leading to uncertainty.
Customs union and European integration
The Albanian economy has undergone major structural changes in the last two decades and economic policy has been oriented towards macroeconomic consolidation and customs union. The acquis in this sector is made up of the EU Customs Code and its implementing provisions, the Combined Nomenclature, the Common Customs Tariff including trade preferences, tariff quotas and exemptions from customs duties and other legislation related to customs outside the scope of action. Member States
should ensure the implementation of enforcement and enforcement capacities, including links to EU computerized customs systems (tariff systems, NCTS - new computerized transit system), ECS Exports, ICS-Integrated Transport System and EOS-Economic Operator Systems). The customs administration should also ensure the appropriate capacity to implement and comply with the specific rules laid down in the areas of customs related acquis, such as: provisions on foreign trade, health and safety.
In terms of customs legislation, Albania applies the Combined Nomenclature and its classification rules are broadly in line with the acquis, although their implementation is not always consistent. Existing mandatory customs tariff information systems, tariff suspensions, quotas tariffs and duty relief are similar to those of the EU, but are not yet fully harmonized. At the time of EU membership, Albania must ensure the implementation of all EU customs related legislation. Albanian customs legislation does not yet cover security measures or the concept of authorized economic operator (OEA).
The system of administrative fees for customs supervision and control will need to be scrutinized, as some of the fees applied may not be in line with the acquis. Albania will need to align its transit procedures in preparation for membership of the Common Transport Convention. Provisional acceptance into the ATA carnet has been made but is not yet implemented in practice because there are no national guarantors. Albanian customs result in more revenue than taxes, while in other countries the opposite is the case. For countries in transition, such as Albania, the balance of customs and tax revenues is almost the same. However, for developed countries, customs remain the institution, chief ofrevenue provision for the state coffers. Nevertheless, the normal flow of economic development will lead to an increase in income within the domestic economy, namely taxation, driven by the growth of industries, businesses, etc. At the moment this balance is normal, but for 5-10 years next, the advantage will go to the tax system.
Challenges to be faced
One of the direct impacts of moving towards deeper integration will be the reduction of budget revenues from import customs duties.
For 2018 we have a realization of the state budget of 92%. In 2018, we collected ALL 381.1 billion, about 33.3 billion less than planned at the beginning of the year. Difficulties in implementation were due to tax and customs revenues, where only 92.5% of the plan at the beginning of the year was implemented. Specifically, national tax revenues were 81%, personal income tax was 86%, value added tax revenues were only 93%, customs tax revenues were 96% and excise tax revenues were realized by 98%. Profit tax exceeded forecasts by 6%.
The share of budget revenue from customs duties has steadily declined, from 11.3 percent of tax revenue in 1999 to 9.5 percent in 2009, to 3.2 percent in 2018. Customs revenue, however, remains an important source In Slovenia and Bulgaria, they account for 0.6 and 0.7 percent of GDP, respectively.
As a result, in the medium term, it is expected that this source of budget revenue will be gradually reduced, requiring measures to be taken for fiscal adjustment. It is necessary that reforms in the country's fiscal system aim at expanding the taxpayer base, not only to compensate for the loss of this source of revenue, but with the aim of achieving budgetary revenue levels in order to deepen the country's fiscal consolidation and increasing levels of public investment to meet the needs dictated by the country's National Strategy for Economic and Social Development.
According to some estimates carried out by World Bank researchers, it turns out that the combined action of the SAAs and FTAs with the region have a positive effect on the welfare indicator at over 3% of GDP (in dynamic terms), an increase ofsalaries of5.68%; increase ofexports by over 50% and imports by about 6%.
Albania's economic benefits from EU membership
During 2001 and onwards, EU assistance to Albania under the CARDS Program amounted to
approximately €280.000.000. Infrastructure, economic and social development and the promotion of regional co-operation, and focus on several priority areas.
This program aims to help Albania create a modern judicial system that is in line with European standards, through revision of the legal framework, training programs, prison rehabilitation, etc. In addition, efforts are made to increase the professionalism of the civil service, which public administration to be efficient and responsive to EU standards.
Starting in 2014, EU financial support for candidate and potential candidate countries is provided through the new Financial Instrument: IPA II, which will be implemented during 2014-2020. Preparations for this Instrument have started at the end of 2011 and from at that time, there were consultations with all stakeholders involved in the process. The new instrument, different from IPA I, consists of five sectored areas where each beneficiary country will benefit from all sectored areas, regardless of status (candidate or potential candidate), will be programmed based on sectored approach rather than specific projects. In this case, Albania benefits from several areas:
In the area of Police and Public Order. Albanian police have been provided with strategic advice, training and equipment. Police forces have a fundamental role to play in strengthening the rule oflaw, internal security and the fight against organized crime, trafficking and corruption.
Cross-border cooperation - is another area related to the improvement of integrated border management between our country and the regional countries involved in this assistance program.
Building administrative capacity - including improving the implementation capacity and sustain-ability of public administration, focuses on directions that accelerate the Stabilization and Association Process. The Customs Assistance Mission has achieved valuable results in terms of revenue collection, prevention of smuggling and corruption and improvement of customs management and procedures.
Building local administrative capacity's- far as infrastructure development is concerned, the improvement of the energy, transport and water networks, which are essential for economic growth in Albania.
Project Financing - The EU funds the development of several infrastructure development projects. In addition to the substantial assistance our country receives from economic assistance programs, it also enjoys trade preferences with regard to the EU.
Conclusions and recommendations
Albanian customs legislation is partly in line with the acquis, but further efforts are needed in some areas, along with overall alignment with EU customs legislation. The administrative and operational capacity of the customs administration will need to be strengthened to improve implementation of existing legislation and respond to future challenges. The capacity of Information Technology needs to be strengthened, with particular attention being paid to interoperability and interoperability with EU computerized systems.
Our country aspires to EU membership and one of the main objectives required by the EU is to reduce all customs barriers. Thus the role of customs will focus more on filtering the economy than on a source of revenue for the state budget.
Reducing the customs burden will bring about lower costs for exporting businesses in Albania, so Albanian businesses will have the opportunity to expand exports which will definitely be a very difficult challenge of facing foreign competition.
Overall, Albania still faces challenges in the areas of harmonization of legislation and administrative capacity.
Albania's policy on industry and small and medium-sized enterprises is broadly in line with EU principles. However, attention must be paid to the remaining challenges that are improving the business environment and removing the remaining barriers to investment.
The tax administration has made great efforts for taxpayers to meet their obligations voluntarily
and it has been able to effectively collect most of prove law enforcement and reduce the large infor-
its tax liabilities. Current legislation requires full mal economy.
payment of the tax before an appeal against a tax There has been some progress in the area of coadministration decision is made and does not al- toms cooperation. The Directorate General of Cus-low the use of a bank guarantee for this purpose. toms has continued good cooperation and informa-Risk analysis, inspection and co-operation between tion exchange with its counterpart structures in the institutions need to be further strengthened to im- region, in EU countries and elsewhere.
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