The Politics of Pension Reform in Albania

WP-LPF 7/19

Inspired by the early success of a market-based mandatory pension system in Chile, the World Bank published in 1994 an influential study, Averting the Old-Age Crisis, in which it suggested that both developing and developed countries should radically cut what is considered as financially unsustainable public pensions and partly replace them with mandatory private retirement savings accounts, so as to create sounder “multi-pillar” pension systems. Therefore, under the influence and with the technical and financial support of the World Bank, between the mid-1990s and the early 2000s, a significant number of countries in Central and Eastern Europe (CEE) opted for partial or full pension privatization. However, although economic and demographic challenges were similar, Albania followed a different reform trajectory from other post-communist countries, due to its peculiar domestic environment. Against this backdrop, the aim of the paper is twofold. On the one hand, it illustrates the evolution of the Albanian pension system since its origins as well as the impact of economic and political domestic factors and their interplay with international pressures in shaping the pension system, aiming to explain why Albania constitutes a deviant case compared to other post-communist countries. On the other hand, it analyses the role played by the main actors involved in the policy making process, revealing the peculiarities of the Albanian pension politics: not only there is not a clear division between the policies adopted by the left-wing and right-wing parties, but their implemented policies come in contradiction with their promises and their ideologies. Moreover, the weakness of trade unions and their alignment with parties do not allow political responsibilities and responsiveness.