WikiLeaks, Corruption Lost Albania Millions in Aid

Former US ambassador John L Withers | Photo courtesy of the US Embassy Tirana

Problems with corruption at the highest levels and the Albanian government's poor administrative capacities convinced US officials to withdraw substantial grants out of fear that the money would be mismanaged, leaked cables show.   

In November 13 2009, a cable from US Ambassador in Tirana John Withers warned the Millennium Challenge Corporation, MCC, that although Albania technically qualified for "compact status", a classification which allows access to large grants, the embassy had strong reservations about whether Tirana would manage such funds properly.

“The plain fact... is that corruption in Albania remains endemic and entrenched at all levels of government and society,” Withers wrote.

“Although prosecutions and convictions of corrupt, mainly lower level government officials have increased in the last two years, there remains a crippling atmosphere of impunity,” Withers added.  

The secret memo is part of about a hundred confidential diplomatic cables from the US embassy in Tirana that WikiLeaks released over the last weekend.

The Millennium Challenge Corporation is a US aid mechanism created by former president George Bush in 2004. Under the MCC countries are eligible for compacts or aid grants only if they perform well on a scorecard of 17 indicators, compiled by a group of thinks tanks and international organizations like the World Bank, UNESCO, the WHO, IMF and others.

The MCC indicators range from civil liberties, political rights and control of corruption, to public expenditure rates, trade and fiscal policy.

In November 2009, Albania, with the help of US lobbying firm Patton Bogs, qualified with a median score of its peer group in the 17 indicators, making the country technically eligible for compact grants.

But the MCC board did not upgrade Albania’s status under the programme, most likely following the negative report from its embassy in Tirana.

Despite noting the considerable achievement that the country has made since the collapse of a series of pyramid-like investments schemes in 1997, ambassador Withers expressed strong doubts about delivering substantial aid under the programme.

“Embassy Tirana urges the MCC Board carefully to consider how this endemic corruption would impact the effectiveness of a compact program in Albania,” Withers wrote to the MCC.   

“Without a tight oversight mechanism, the Embassy cannot be sure that substantial
amounts of US taxpayer money would not go to wrongful and illegal uses,” he added.

Map of countries benefiting from MCC grants | Photo courtesy of MCC

Withers underlined that there was growing credible evidence that the Prime Minister's  immediate family, senior members of the opposition party, and numerous members of the parliament engaged in corrupt acts on a large scale.

Apart from the problems with corruption ambassador Withers also highlighted Tirana’s incapacity to manage large funding levels.

“The government's ability effectively to budget for, spend and  account for its own funds remains woefully inadequate - not only because of corruption, but because the government lacks the necessary expertise and bureaucratic structures necessary to manage its money in all but the most elementary ways,” Withers said.

MCC signs either a compact or a threshold agreement with a partner country. A compact is awarded if the country scores highly on the selection criteria indicators. If the country scores poorly but has a positive, upward trend on the selection criteria, it can still be eligible for a smaller grant, called a threshold program.

Under the MCC Albania received two threshold grants, in 2006 and 2008, worth respectively $13.8 million and $15.7 million. However, in September, 2010 the second threshold grant was forfeited, after the opposition and ruling parties failed to reach a compromise to pass a bill on the new administrative court, which would have been funded under the programme.

Following the ambassadors’ recommendations Albania was never upgraded by MCC to a compact status, although as the embassy cable admits it has met the technical criteria. Compact status would have given Tirana potential access to grants worth hundreds of millions of dollars.

For example if MCC’s threshold grant for Moldova was 24.7 million in 2006, when it reached compact status in 2010 it received a grant of $262 million. A full compact funding under the MCC program could have had a considerable impact in Albania, however the former US diplomat notes that the failure to benefit from the funds rests solely with Albania’s government.

“A full Compact for Albania would at least in theory provide momentum for change in Albania in the areas of poverty reduction and economic development - but only if the program is properly administered, a dubious proposition in the Albania of today,” Withers concluded.