Enterprises and Firms
Prior to the 1990s, the state owned and ran all enterprises.
Reams of instructions sent from central planners constituted upper
management. Enterprise directors did not have power over investment,
employment, production, or any other decision-making areas but
were responsible for maintaining initial capital stock. Competition
among enterprises did not exist. In October 1990, however, as
the economic system's breakdown became fully apparent, the government
enacted a new enterprise law giving workers management, but not
ownership, of the enterprises that employed them. In August 1991,
the law on economic activity enabled persons seeking to open businesses
to register at the court of the district in which they wished
to operate. The court would, within a ten-day period, decide whether
or not to grant an operating license. If denied a license, a registrant
could appeal to a higher court, which had to decide on the matter
within another ten days. The law on business activity also required
private enterprises to abide by government standards for quality;
weights and measures; safety, sanitary, and working conditions;
and environmental protection.
With the help of consultants from the European Community ( EC--see
Glossary), the International Monetary Fund ( IMF--see Glossary),
and the World Bank (see Glossary), the Council of Ministers also
began working on a new law on the activities of state enterprises.
In draft, the law provided for the state to supervise the operation
of surviving state-owned enterprises but allowed their managers
a broad measure of independence. The draft also provided for the
creation of a steering council for each enterprise, which would
be nominated by the appropriate ministry or a local government.
The council would make major management decisions; work up the
enterprise's business plan; manage relations with the government,
other enterprises, and employees; and set wages and bonuses. A
delegate elected by fellow employees would represent the enterprise's
workers on the steering council but would not have a vote. The
draft bill also defined how net revenues would be divided among
capital reserves, development funds, social assistance, and employee
By freeing prices, eliminating barriers to trade, applying banking
criteria to credits, and instituting new policies on interest
rates, Albania's government gradually bolted together a new framework
for assessing the potential viability of the country's enterprises.
Western economists proposed a recovery program calling for infusions
of aid, management supervision, and closure of loss-generating
enterprises. The program included commitments by donor nations
of US$140 million in spare parts and raw materials to jump-start
paralyzed industries. Under the program, enterprises whose output
was valued at less than the cost of inputs would not be restarted
because halting production and paying full wages to idled workers
would be less damaging to the overall economy than maintaining
operations. The viability of restarted firms would be evaluated
six to nine months after the introduction of free-market conditions.
These enterprises would face either a rollover of capital credits,
a rollover of working capital credits accompanied by an investment
credit, or liquidation by the auctioning of assets.
Data as of April 1992