Albania in the twilight zone: the perseritje model and its impact on small business.

Approaching the Albanian port of Durres, on the Adriatic Sea one sees a series of semi-sunken vessels; disembarking from a ship, one is greeted by maimed beggars. So too is the economy of Albania maimed and semi-sunken. Albania is the poorest country in Europe, and in 1994 the country had a food

shortage; yet the Bretton Woods institutions consider Albania to be among the most successful of the transforming countries of Eastern Europe. This article reports on the small business sector and on the environment for entrepreneurship in this country which was recently ranked by the European Union as highest among post-communist nations in overall satisfaction with economic reforms. Written on location in Albania, this article is based on empirical data arising from ethnographic research involving in-depth interviews with a cross-section of Albanians. As few people speak English in Albania, the author conducted most of the interviews in Italian.

Crossing into Albania by road is like going back to another time. At Qaf-Thane, a border-crossing point between Macedonia and Albania, the author counted 55 trucks waiting in line to enter Albania - and their rate of entry was painstakingly slow. Once in Albania, drivers are cheered by children who chase after the vehicles, expecting cigarettes and chewing gum. The winding roads are quite dramatic, and relatively devoid of motor vehicles. Along the highways, one inevitably encounters horse-drawn carts transporting hay, shepherds and herdsmen with their animals, as well as soldiers standing in the back of antique Chinese army trucks. There are countless roadblocks, some officially marked as "national roadblocks." Officers on duty appear very confident until a superior drives by and all stop to salute.

Historical Background

In Roman times, Albania was part of the provinces of Epirus and Illyria. The country eventually fell under Ottoman rule and was under Moslem influence for several centuries. In 1912, Albania was declared independent. However, in 1939 Benito Mussolini seized control of it. After World War II, Albania became a totalitarian communist people's republic. It was under Soviet domination until dictator Enver Hoxha aligned Albania with China.

Hoxha was perhaps the most eccentric dictator of Eastern Europe. He banned bananas, beards, bright colors, foreign journalists, most imports, and religion. Hoxha denounced the communist parties of Yugoslavia (in 1948), of the U.S.S.R. (in 1961), and even of his of Chinese allies (in 1978). Paranoid of invasion, he built concrete bunkers across the country. After the death of Hoxha in 1985, Ramiz Alia became president and slowly introduced perseritje, the Albanian version of perestroika. Alia proposed more scope for small business and introduced some liberal reforms, including a multiparty political system. Ironic as it may seem, he was swept from power during Albania's first post-communist elections in 1992, when Sali Berisha succeeded him.

Although in 1992 urban unemployment had reached about 50 percent, by 1994 the unemployment rate was falling and inflation had been reduced to 30 percent annually. Overall output was growing more than 10 percent a year, and pages from Hoxha's books were being used to package roasted almonds or sausages. In recognition of progress, in 1994 the International Monetary Fund approved a further extension of its relationship with Albania.

Economic Conditions in Albania

Modern Albania is a country of 3.2 million people. The currency is the lek. Until recently, there were no bananas in Albania, nor Coca-Cola nor Seven-Up. Imports were few, other than military vehicles from China. An immense privatization campaign has, however, produced some economic progress. In 1987, there were all of forty cars in Albania, and up into 1993, the main boulevard of the capital city, Tirana, looked like a country lane. But by 1994, there were hundreds of cars in Albania, including many Mercedes. In the main square of Korca, there are literally rows of Mercedes (some of them apparently stolen in Italy and imported with forged documents).

Despite food shortages, television commercials for Whiskas cat food are now aired. In 1994, Coca-Cola opened a bottling plant between the major port Durres and the capital city of Tirana; advertisements reading "Gjithmone Coca-Cola" (meaning "Always Coca-Cola") appeared everywhere. The U.S. dollar was traded openly at ninety leks per dollar, and Colombian bananas were sold for 10 leks each on local trains and at many street corners.

All housing in Albania has been privatized; however, by European standards, accommodation in Albania is rather primitive. The Stalinists introduced jerrybuilt tower blocks to Albania, which while functional are less than comfortable. Hotel Durresi, centrally located in the heart of Durres, officially charges foreigners double the rate for Albanians; toilet paper is never included - at best the squat toilets may be supplied with scraps of newspaper. The provision of soap in hotels is unheard of.

Much more upscale is the Ilipia Hotel, located by the bomb shelters of the Durres beachfront. During communist rule, the Ilipia was owned and operated by the state-run tourism agency Albturist. In 1994, it was returned to the grandson of the man who owned it prior to nationalization. Due to lack of maintenance, this potentially grand hotel is in a condition which leaves much to be desired. The lobby is barren, there are (dead) plants along the staircase, and room rates are $20 U.S. nightly. For an additional $3, it is possible to borrow the key to the shower. There is a sink but no mirrors in the rooms. Toilets (a couple on each floor) seldom flush. The author and his research assistant were locked into one of the rooms which had no doorknob on the inside (and consequently could only be opened from the outside). A few bunkers away, along the same sandless beach, is the Albania Motel, on which work began in 1991; it was nearing completion in 1994. The hotel was built by Albanian entrepreneurs (the Ramizi family) on land reclaimed from the Adriatic. In Tirana there is a huge hole in the ground, known for some time as "The Sheraton" (started but never completed). However, in 1995, it was expected that western-style hotels would eventually find their way to Albania.

Agriculture

All agriculture in Albania has been privatized. The huge prairie fields of the state agriculture system have been transformed into strips of privately-owned farmland. In addition to using their own land, farmers also graze their animals along the roadside. It is common, for example, in 40 [degrees] C heat, to see a Moslem woman, her head covered, walking her sheep on a rope. Cows, goats, and sheep are raised not only for their meat, but also for their milk, cheese, and wool. The hides are also an economically important by-product. Poultry is common, and not only among farmers; even urbanites often have a few chickens and a rooster by their home. Agricultural produce includes barley, beans, corn, figs, grapes, honey, lemons, oats, olives, pomegranates, rice, rye, tobacco, tomatoes, watermelons, and wheat. Honey is also harvested, and a Riesling wine is locally produced.

A new problem, however, is that the division of farms into privatized plots has eliminated economies of scale. On many farms, oxen have replaced tractors to plow, and donkeys are used for transport. Thus, privatization has created incentives which did not exist under communist rule, but at the same time the redistribution of land to small-scale farmers has resulted in a return to less mechanized production.

Nevertheless, the net result is that Albanian farmers are obtaining intrinsic job satisfaction, previously nonexistent. This appears to be motivating them considerably. In contrast to the constant shortages during communist rule, there is an abundance of local produce. At the indoor market stalls of Durres, it is possible to purchase fresh cantaloupe, eggs, garlic, green peppers, okra, potatoes, and watermelon. Peaches are available, either canned or fresh. It is also possible to buy tomatoes which are grown in greenhouses. However, wheat continues to be imported, most recently from France.

The (Very) Small Business Sector

Albania has privatized most of its small enterprises. New ventures have begun to sprout; however, most are in the form of subsistence enterprises. It used to be that everybody in Albania was guaranteed a job. Officially, there was no unemployment, and there were no beggars. Today there are both. As giant state-owned factories are rationalized, workers are laid off. The solution for many is to create for themselves a subsistence-level micro-enterprise. Some sell newspapers in the streets as "newsies" did in America at the turn of the last century. Others exchange foreign currency in the streets or in a corner of a local post office. Whereas in neighboring Macedonia German Deutsche Marks are commonly traded, Albanians prefer U.S. dollars. In major cities, independent banana dealers are numerous but each has a minuscule inventory. One has eight bananas. Five meters away, another has 13. Ten meters from that, yet another banana merchant has a total of nine bananas. In Durres, a man sells packages of Camel cigarettes which he carries around town in a duffel bag. Another, in Tirana, sits down with a cardboard box which serves as an impromptu stall; he sells chocolate bars imported from Greece. A sophisticated merchant uses a mini-van as a kiosk. Along the roadside, a self-employed merchant sells watermelons, weighing each with a primitive scale. Finally, another entrepreneur uses his horse to provide a transportation service; the animal pulls a cart loaded with cement. Other horses wait for a cargo at a municipal market. Entrepreneurs in manufacturing enterprises are far fewer.

Restaurants. For Albanians who have worked in restaurants abroad, it is relatively easy to return to Albania with sufficient capital and know-how to set up an eating establishment. Some of these are particularly targeted at tourists. One restaurant in Saranda, for example, accepts only foreign currency; there is no written menu, so the cook/waiter recites the (limited) available assortment orally: "$1 (U.S.) for salad and $2 for steak." A bottle of local wine is served for $1.50; Coca-Cola in a glass bottle from Italy costs 50 cents.

Most restaurants, however, do have printed menus, on which prices are listed in local currency. Typical prices in 1994 were: ice cream, 5 leks; pizza, 250 leks; steak, 200 leks; coffee, 20 leks; cappuccino, 30 leks; beer, 70 leks; a glass of wine, 40 leks; a glass bottle of Coca-Cola, 35 leks; a can of Pepsi, 60 leks; a bottle of 7-Up imported from Greece, 60 leks. It should be noted, nevertheless, that in Albania a menu offering does not indicate availability. A restaurant may have a several-page menu, but not much food to serve. In one instance, the author attempted to order a steak from the menu, but unfortunately, the order could not be filled, as there was no gas upon which to cook it. Fish was "not available today"; nor were several other dishes.

Albania also has its own version of "take-away fast food." Specialized shops make and sell byreks, which are pastry shells filled with local feta cheese made from goat milk. A byrek sells for 10 leks. (For the sake of comparison, a loaf of bread costs 20 leks at a bakery.)

Perhaps the most innovative drinking establishment in Albania is a new venture which was established on a beached boat along the Durres waterfront. People sit there for hours talking and listening to music while watching the sunset.

Tourism. The leading tourist resort in Albania is the beach town of Saranda on the Adriatic Sea, a day's drive from Tirana or Durres, and a couple of hours by boat from Corfu (Dana 1995). At dawn, stray dogs roam the streets, moving to the side as peasants ride their horses through town. Donkeys carry freight past gardens where beans, cucumbers, eggplants, figs, lemons, and oranges grow between chickens pecking for food. There are goats on the road to the beach and garbage is being burned there. Amidst the rubbish is a book entitled Ekonomia Politike Shapitaltzmit (The Political Economy of Albania). There is one hotel in Saranda, the state-owned Butriniti. It has a grand lobby, but its washrooms have no mirrors. A standard room here costs 2,000 leks; a room with a bath costs 4,500 leks. Not far, at the top of Qazim Palim Street, enterprising Spipo Papa and his wife operate a small enterprise. They engage in no marketing; they do not even have a sign to indicate the existence of their business. However, by word of mouth people know that the Papas rent out their extra bedroom on a nightly basis. They charge $10 U.S. for two people to spend a night there. The guests are invited to take a shower in Mrs. Papa's upstairs kitchen, which is full of interesting smells. At the wharf in Saranda, an agent sells tickets for the boat to Greece; he borrows a pen from a passenger to validate tickets.

Infrastructure

In Albania, economic reform has made it possible to buy a Panasonic telephone answering system with facsimile, incorporating one-touch transmission and extra-fine resolution. However, the success rate of sending a fax is probably the lowest in Europe. Although telephone numbers, four digits long, are easy to remember, the telephone system is not very reliable. Furthermore, many public telephones have been vandalized, and few people have a residential line. This results in long line-ups at public telephone offices.

Infrastructure in Albania still needs heavy capital investment. Electricity is no more reliable than the communication network. People can be cut off from power for days at a time. The water and sewage systems also need improvement, as do the roads and traffic signals. In Tirana, it is a common scene to find a Mercedes and a horse-drawn vehicle side-by-side at an intersection with non-functioning traffic lights. The east-west road from Macedonia to the Adriatic is dangerously narrow and cluttered by herds of animals walking on the paved surface. A bus slows down as it encounters a woman using a stick to hit a cow crossing slowly. A peasant riding a mule dodges a bicycle gliding downhill. Meanwhile, along the other principal highway running north- south from Tirana (via Durres to Saranda), antique Chinese trucks vibrate past peasants on foot as well as donkeys and horses pulling carts. A horse-drawn version of a pickup truck (with an enclosed cabin for the driver) suddenly comes to a halt beside a wagon being pulled by two oxen as a Coca-Cola truck almost collides with a covered wagon pulled by two horses.

Public Transportation. Domestic transportation in Albania is quite diverse. At the train station in Durres, a carriage with two horses awaits arriving passengers. Between Durres (the principal port) and Tirana, both train and (dilapidated) bus service are frequent on the busy corridor linking the two cities, which are separated by many vineyards. Train tickets are sold in advance, while bus fare is paid on board to a conductor in whose hands are scrunched plenty of banknotes printed in 1976. Bus drivers must be alert not to collide with shepherds and (usually female) goat herders. On the highway between Durres and Saranda, curtains fly out from the open windows of an antique intercity bus which is passing a family riding on an open wagon pulled by horses. Opposite is a vehicle marked in English "donated by Royal Mail."

In Tirana, secondhand municipal buses are former Brussels transports, which still read "Region de Bruxelles." An urban ride costs 5 leks if one manages to get on with the crowds. Other buses, previously used in Switzerland and in the former Czechoslovakia, are respectively labeled "Postes Suisses" and "Prague." An older bus still displays its sign in Greek. In the outskirts of Tirana, buses must weave between stray calves and dogs.

Transportation by train is far less expensive, but slightly slower than travel by bus. Some railroad cars are Chinese stock from which the ceiling fans have been removed; others are secondhand from Italy. Locomotives are usually old diesels from the former CSSR or steam locomotives. Some of the passengers bring livestock aboard. As the trains have no formal dining facilities, passengers often bring along meals.

For a short time, Albania had a national airline. The flag carrier, a joint venture between the state-owned firm Albtransport and Austria's Tyrolean Airlines, was launched in 1993. (At the time, the average monthly salary in Tirana was $40, not enough to support air travel). In 1994, the Albanian government asked all airlines with offices in Tirana to pay a 15 percent tax on net ticket revenues, backdated to 1993. This angered Alitalia, Swissair, and the French-owned ADA Air, as well as Albania Airlines; Tyrolean responded by withdrawing its fleet from the Albanian venture. When the government offered to exempt Albanian Airlines from the tax, it was too late; the venture had closed. Today, there is no domestic air service within Albania, although there are a number of international links, via Bulgaria, Italy, and Macedonia. Regular boat services connect Albania with Greece as well as with Italy.

Imports

Retailers across Albania have begun to sell imported products: beer from Italy and Macedonia, "Kit Kat" chocolate from Turkey, "Hubba Bubba" chewing gum from Germany, "Wrigley" gum from Austria, cigarettes from Macedonia, corn chips from the U.S., Seven-Up from Greece, and "Lux" soap from Indonesia. However, the trade deficit that results has some deleterious economic consequences.

Albania has an abundance of mineral wealth which, if properly exploited, could contribute to exports. For instance, Albania has unexploited offshore oil as well as considerable deposits of chrome-bearing ore. However, these resources have not been adequately developed.

Changing Values

Since economic reform has opened up the country, foreign investors are slowly arriving. These investors are looked upon with mixed feelings among Albanians. For example, the Greek enterprise "Firma Marceli" has created new jobs in El Basan, but their sophisticated technology may be perceived as intimidating to a local with his horse-drawn wagon. With even greater social implications is the arrival in Albania of Coca-Cola and Benetton.

Under dictatorship, Albania used to barter tomatoes for violins from Czechoslovakia; Albania had 29 music schools, and Albanian students would practice approved music several hours a day. Anyone caught listening to western music would be sent to labor prison. At the central Tirana music conservatory (Misja Artistik Shkola - an old building with many windows broken since the revolution), some students still practice, in damp, dimly-lit, smelly corridors. However, music schools are losing popularity as people realize that they can earn more in one day working as a waiter in neighboring Greece than in a whole month as a musician in Albania (in 1994, a music teacher in Albania earned a basic salary equivalent to approximately $45 per month). American music is no longer prohibited.

Whereas Russian and Chinese were formerly the second languages in Albania, many Albanians have learned Italian on television, and English will doubtlessly become popular in time. Where a statue of Stalin used to stand, there is now Pink Floyd graffiti on a kiosk selling imported cigarettes. A package of Marlboros sells for 150 leks (compared to 15 or 35 leks for local brands). A can of Amstel beer costs 40 leks; a bottle of wine 90 leks, and a big plastic bottle of Pepsi, 105 leks. An "Eros" newspaper shows a price of 8 leks. Not far, people sit in a cafe eating ice cream and listening to music of the Swedish group Abba as a Volvo drives by.

The older generation, on the other hand, clings to traditions. On intercity buses, it is normal to find garlic hanging by the driver to ward off the evil eye. Across Albania, old men get together and play dominoes the way they did decades ago. During the past few years, religion has returned to Albania. Masses worship at the main mosque in Tirana, and new mosques are being built. People in the streets are again wearing crosses and saints, as well as the star and moon symbol of Islam. Moslem and Orthodox Christian death notices are posted side by side.

Towards the Future

A market economy has been proclaimed, but there is still a lack of marketing skills in Albania. The same store in Tirana sells gold jewelry, cigarettes, and lipstick, all jumbled together in an amateur window display. As consumers become more sophisticated, marketing skills will need to be enhanced. Another handicap with which Albania must cope is the lack of automation. Laundry is still washed in streams and hay is still stacked manually. Near the Ministria e Transporteve dhe e Komunikacionit (Ministry of Transportation and Communication), three men spend hours unloading bricks from the back of a truck. Not far, someone is changing a tire without a jack. Construction is slow, as is production. As wages increase, labor-intensive tasks will have to become automated in order to remain competitive.

For the time being, horses wait patiently and earn their keep. Albania is still Europe's poorest country, and will likely remain so for some time. Nevertheless, "success" in Albania must not be measured by Western standards of satisfaction but by another quotient.

REFERENCE

Dana, Leo Paul (1995). Enterprising in the Tourism Industry: Readings and Cases. Montreal, Canada: McGill University, 158-161.

Leo Paul Dana McGill University, Canada University of Nancy, France