THE ALBANIAN THIRD FIVE-YEAR PLAN AND EXTERNAL AID

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001000040002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 12, 2016
• Document Release Date: June 24, 2002
• Sequence Number: 2
• Publication Date: January 31, 1961
• Content Type: BRIEF

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CIA/RR CB-61-4
Copy No.________
31 January 1961
25X1
CURRENT SUPPORT BRIEF
THE ALBANIAN THIRD FIVE-YEAR PLAN AND EXTERNAL AID
OFFICE OF RESEARCH AND REPORTS
CENTRAL INTELLIGENCE AGENCY
This report represents the immediate views of the
originating intelligence components of the Office
of Research and Reports. Comments are solicited.
W-A-R-N-I-N-G
This document contains information affecting the national defense of
the United States, within the meaning of the espionage laws, Title 18
USC, Sections 793 and 794, the transmission or revelation of which
in any manner to an unauthorized person is prohibited by law.
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THE ALBANIAN THIRD FIVE-YEAR PLAN AND EXTERNAL AID
Since World War II the Albanian economy has been subsidized, first
by Yugoslavia and then by the USSR and other members of the Sino-Soviet
Bloc. The conservative nature of the draft of the Third Five-Year Plan
(1961-65) probably reflects the Albanian regime's uncertainty concerning
the extent of foreign aid likely to be received during the plan period,
considering the generally pro-Chinese position taken by Albania in the
current Soviet-Chinese ideological dispute. Difficult economic problems
for Albania could result from this position, if it reduced Bloc aid to
the country.
The draft directives of the Albanian Five-Year Plan call for a
much lower rate of industrial growth than has been achieved in any
comparable period since the war. Gross industrial production is sched-
uled to increase by 8.6 percent annually, compared with a claimed yearly
rate of increase of 16.3 percent during 1956-60 and of 22.8 percent dur-
ing 1951-55. In this still backward economy, a planned 55-percent growth
in the national income is based primarily on highly uncertain develop-
ments in agriculture, the output of which is scheduled to rise by an
extremely ambitious 64 percent. Although total state investments are
to rise by 47 percent compared with those of the Second Five-Year Plan,
they must grow at a uniform annual rate of only about 4 percent from
the 1960 level in order to reach the announced total for the period
1961-65. This rate represents a drastic cutback from the 19-percent
rate achieved during the period 1956-60. Plans also call for a 36-
percent increase in domestic trade turnover and a 50- to 55-percent
increase in exports. No plan has been published for imports.
The planned rate of growth of industrial production is among
the lowest of the European Satellites, whereas in. previous years Al-
bania often claimed the highest rate in the area. Although some de-
cline in the rate of growth could be expected, the extent of the pro-
jected decline is striking, particularly for a country still at a
very early stage of industrialization. To a very great extent Al-
banian industrialization is linked to foreign assistance; in view of
Albania's generally pro-Chinese position in the ideological dispute
between the USSR and the Chinese, the Albanian regime may well be
uncertain as to how much aid it can expect to receive during the
Third Five-Year Plan. Credits already available appear to be insuf-
ficient to support even the present plan.
Investments and industrial production in Albania depend heavily
on imports; indigenous production of machinery and equipment is neg-
ligible. Imports are also virtually the only sources of most metals
and chemical fertilizers and are important sources of some manufactured
consumer goods and agricultural products, especially wheat.
In all years for which statistics are available, Albania has in-
curred a large deficit in commodity trade. The Albanian economy was
sustained by aid from Italy before World War II, from Yugoslavia in
the immediate postwar period, and from the European Satellites, China,
and especially the USSR since the Bloc's 1948 break with Yugoslavia.
Albania's annual deficit on commodity trade since 1950 has ranged
from about 50 to 75 percent of the value of imports.
Between 1950 and 1955, known long-term credits from countries of
the Sino-Soviet Bloc apparently were almost sufficient to cover the
commodity trade deficit. During 1956-60, however, the known long-
term credits were considerably smaller than the trade deficit. Al-
bania probably filled the remaining trade gap by means of unpublicized
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credits and with receipts from the local expenditures of Soviet Bloc
technicians in Albania and from services such as those that may be
connected with the construction and operation of the'Soviet submarine
base at Pasha Liman. The following tabulation shows the estimated
Albanian trade deficits, long-term credits, and service receipts
and/or unspecified credits for selected periods. Albania's foreign
currency earnings for transportation, services are undoubtedly smaller
than expenditures; this net addition to the trade deficit has not been
taken into consideration in the tabulation. or in the discussion.
Albania: Foreign Trade and Aid
(in million US dollars)
1961-65, assuming
an increase in imports
over 1960* of
1950-55
--
1956-60
00
25%
5070
Imports
20
348
Exports
64
147
233
233
233
Commodity
trade deficit 138
201
221
288
349
Average
deficit
annual trade
23
40
44
58
70
Long-term credit uti-
lized or planned to be
utilized:**
Total 119
144
107
107
107
From USSR 83
83
75
75
75
From European Satel-
lites 30
43
18
18
18
From China 6
18
14
14
14
Unspecified credits and/
or service receipts 19
57
Additional credits and/
or service receipts
needed for period
--
114.
181
242
Additional credits and/
or service receipts
needed per year -- --
23.
36 48
Assuming for 960, exports of about 1.8
billion
leks and imports of
about 4.5 billion leks. From 1960 to 1965
exports
are assumed to in-
crease by 55 percent.
** Periods of utilization have been estimated on the basis of incom-
plete information.
For 1961-65, the known credits of about $107 million. already pro-
mised Albania by the Sino-Soviet Bloc would not be sufficient, given
the Albanian export plan, to finance even the present level of imports.
Under selective assumptions on changes in imports for the period 1961-
65, Albania will need about $220-a50 million in credits ($44-70 million
per year), less possible receipts from services, to meet the goals set
forth in the Third Five-Year Plan. Thus, Albania would have to find
$114-242 million in additional credits (less service receipts) during
the period to fill the gap between. the projected deficit and the credits
already promised.
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Projections of past trends in the relationship between investments
and imports suggest that, if the goals of the Third Five-Year Plan are
to be met, imports will have to increase by at least 25 percent (the
intermediate assumption in the table), with a resultant annual average
trade deficit of $60 million or more. Given the nature of the Albania
economy, a substantially reduced growth of imports could seriously in-
hibit further industrialization of the country, although the simple
level of living, which depends in most essentials on domestic produc-
tion, would not necessarily be affected.
Albania's great economic dependence on the Soviet Bloc, and especial-
ly on the USSR, makes it vulnerable to economic sanctions. The USSR could
create a very difficult economic situation in Albania simply by refusing
to grant new credits and by preventing the European Satellites from do-
ing so. Withdrawal of aid already promised and an embargo on exports
would, of course, be even more effective weapons. However, the USSR
may not contemplate the use of severe sanctions, and additional credits
quite possibly will be granted by Soviet Bloc countries. Even so, it
is very uncertain that total credits extended by the Soviet Bloc will be
sufficient to support Albania's present moderate industrialization plan
for 1961-65.
Communist China, which has already granted small credits to Al-
bania, represents an obvious substitute source of credits. The Chinese
probably could give Albania whatever aid it would need, although some
types of goods, now supplied by the USSR or the European Satellites and
not exported in sufficient quantities or appropriate types by China,
would have to be purchased--probably outside the Bloc--with foreign ex-
change provided by the Chinese. However, despite the small size of the
aid involved in relation, to China's total economic capabilities, such
aid would impose a significant additional burden on China's already
strained balance of payments. Actual aid expenditures by China have
been. about $90-110 million annually in recent years (1955-59), and a-
bout $125-150 million were allocated for use in 1960. Extension of
aid to Albania of, for example $40 million a year, would require either
a substantial increase in the total aid program of Communist China or
a substantial cut in its aid commitments to other countries. Albania,
moreover, produces few goods--and these in very small volume--that the
Chinese need, or are likely to need in the.future. Only in the expecta-
tion of major political gains, therefore, would the Chinese be likely
to give large-scale economic aid to Albania.
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