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 bonuses.

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.

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Source: U.S. Library of Congress