PRESS RELEASE
Speech by Mr. Ardian Fullani, Governor of the Bank of Albania held at the meeting with the business community, representatives of the local government and of the banking system, and academics of Shkodra, ''Improving information on economy - a key element

The main purpose of our coming here is multiple, but above all it is in line with our vision of approximating the Bank of Albania to the best international standards and practices of central banking. This is logical not only due to the needs of increasing our human capacities, but also due to the indispensability for raising the monitoring degree and the presence of the Bank of Albania expertise in all the regions of the country. I believe that this annual meeting of the Governor of the Bank of Albania with its branches and with the most striking communities of the region, where we exercise our activity, has been changed into a tradition, whose aim is not only to evidence our operational problems, but also to identify them and provide advice for a proportional and harmonised development of various geographical regions of the country.

During 2005, the Bank of Albania, being an important institution in making the decisions of economic policies and in ensuring our country's financial stability, has multiplied its efforts for a better inflation control, believing that this contribution is of a vital importance for the overall economic activity performance, including that of the region as well.

On the other hand, we have done our best to associate the further consolidation of macro balances in economy with a financially stabilised banking system, so that it is capable of financing ever more the country's economic development.

We see and touch the Shkodra business increase and integrate with the banking system and this fact makes me feel optimistic for the future. I think that this banking business interest in being extended to your region represents the specific developments this region has in ratio to other areas of the country. Personally I am of the opinion that this region has a large economic potential, and moreover I would emphasise that this region is among the fewest in the country that has a multi-sectorial potential, agriculture included. Also, I deem that the inter-border relations are also a good opportunity for its intensive development, and generalising what I said above, I would encourage the banking system to be more aggressive in this region, with concrete plans and objectives to sustain your economy.

Regardless of the above, as the central Bank of Albania, we are conscious that the process of banking system growth and consolidation is a permanent challenge. Therefore, in our work programs of 2006 we have included other concrete steps that will contribute to this direction.

More concretely, we are compiling and implementing new measures, which will increase the banking system activity, not only in terms of mobilising free funds in the form of deposits, but also by making it more active in allocating funds to the economy, in managing free funds more effectively, in better managing risks that go with the funds investment, in increasing the competition to minimise costs and in consequence banks' commissions, in establishing other facilities to assist the banking system in loan extension, in further perfecting the payments system, aiming at further reducing cash in economy, including even appropriate legal and regulatory improvements that relate to everyday banking system business.

I would like to clarify that the banking system stability is taking an ever higher importance to us. To this end, we are committed to accurately implement all the recommendations provided by the report of the Financial Sector Assessment Program of the IMF during 2005, whose implementation will increase significantly the efficiency and security of the banking system, and the financial system in a broader context. I would like to stress that the Bank of Albania, as the supervisory authority of commercial banks, feels as obliged to attract the attention that the high increase in the volume of lending during 2005 and the further increase of its volume in the coming years, must be associated with effective measures for increasing the monitoring, analyses and controlling capacities of the banks themselves, so as to avoid the credit portfolio worsening. On the other hand, we will strengthen our supervisory capacities, particularly the on site examination, by setting up plans of measures, aiming at supervising prudentially each member bank of the system.

Naturally, our idea to invite the business community to our meetings is a new one. In our philosophy we believe that the business is an important partner which, with its decisions and behaviour, impacts on our policies and also on a sustained and harmonic development of the banking system.

In this context, I would like to put forward some theses. I have mentioned some of them even in any other occasion, but thanks to current and future developments I feel it's relevant to re-emphasise them once more.
The first issue I would like to share with you has to do with the role of the Bank of Albania branch in the region where it operates. The role of the Bank of Albania branch should be different from the one we are used to see. We made the first step in this regard during 2005, when after many efforts and meetings we achieved to harvest some data on the economy of your region through a specific questionnaire.

However, my philosophy for the Bank of Albania branch is a little more avant-garde, why not, much more ambitious. I would not like to hide my goal to transform the Bank of Albania branches into powerful and professional centres of economic-financial collection, processing and analyses of the region. I think that the Bank of Albania branch should be open for cooperating with various interest groups, making the utmost to include in this "vortex" of analyses and studies the intellectual elite of the region, where, of course, the local academic circles will be in the vanguard.

However, passing to the second issue, a question arises: How can our branch play such a role if it does not possess the proper information needed for this purpose?

Information on markets and latest economic developments may be regarded as a key to success for businesses in modern times of robust developments of technology and information. Though in the first view the acute problem the Albanian businesses are currently facing may not be obvious, not far from now the need will arise to know and analyse the market in real time - i.e fresh information, so as to encounter the globalisation challenge. From a broader viewpoint, a country's economy can not be competitive in international plan, if the development policies are based on a weak real information basis.

For the Bank of Albania, the information on the latest economic developments and expectations is irreplaceable for monetary policy decision making. It is made clear since a long time ago that the process of maintaining price stability - our primary target - is a forward looking one. Given the current situation of national statistics, which come out with delays, sometimes with a delay of up to two years, it is understandable that our task becomes very difficult.

While the reforms in statistics area are under process, as in many other areas, the results may need time to be accomplished. On the other hand, our decisions should be based on sound bases. To avoid this information "gap", we have sorted the situation out by surveying various economic agents. Since four years ago the Bank of Albania has started to estimate the business confidence index and the consumer confidence index. The questionnaires carried out each quarter with the assistance of the INSTAT involve 600 businesses of production, construction and services sectors, and 1500 consumers. The information obtained is about the performance of consumer prices, income, production, employment, investments and many other indicators which assist us so much in monetary policy decision making.

The results of our surveys on the last year indicate a good performance of the economy, supported by a strong demand, reflected in improvement of production, investment and employment. These results are confirmed even by real data on annual growth of the volume of sales, increased employment rate, rapid increase in the volume of lending to the economy and increased fiscal revenues. This economic growth has been developed under the conditions of a low inflation around our three percent target and of the budget deficit within the programmed values, without infringing the macroeconomic balances and the main ratios. Normal performance of inflation has enabled the Bank of Albania to pursue a neutral monetary policy, leaving the key interest rate unchanged, at 5 percent.

Expectations for the current year remain positive. We expect that inflation will fluctuate within the 2-4 per cent targeted band, while the economic growth seems to have been returned to its normal trend upon the electricity situation improvement.

However, so far the surveying results have been indirectly reflected in our periodic analyses and reports and in various studies of the Bank. Soon enough the bank thinks to start the regular publication of these results. Initially, we have planned to organise some meetings, as the present one, with businesses and academics in cooperation with the chamber of commerce and universities, where we can receive suggestions on the validity of such questionnaires.

Along the same line of improving the economic information sources, another new initiative undertaken by us more than one year ago has to do with making the Bank of Albania branches more active in collecting information and analysing the economic developments in different regions of Albania. So far two questionnaires have been realised, which in spite of the initial difficulties, have provided very interesting results, which we are presenting here today to share them with you. The main purpose of surveying the enterprises in districts is the collection of quantitative data on the real economy of the country, on a quarterly frequency. The questionnaire has aimed to collect as complete and ongoing information as possible on the situation of labour market, performance of prices, production and bank-business relations. Such information will be used to compute some important indicators such as productivity, cost per labour unit, etc., which are often very necessary for the Bank of Albania survey analyses. Currently these indicators are not provided by the current official statistics.

Another objective is the prevention of problems that emerge from the delay in time of the official statistics data. Also, the collected information is thought to be used to fulfil the qualitative information that is obtained from the business confidence surveying.

The periodical carrying out of this survey by the Bank of Albania branches is aimed at increasing its presence in the districts. The direct involvement of the branch employees in the interviewing process has the aim to make use of their interpersonal acquaintances as well with company managers or financiers. This would make possible to receive answers on some delicate problems, such as: informal labour market, fiscal evasion, earning, etc.

The branches' personnel are committed directly to compiling businesses' lists, in the areas where the Bank of Albania branches operate, as well as to their interviewing process. In spite of good efforts, we would state that difficulties have existed. The main problems reported by the branches' personnel have been as follows: lack of cooperating possibilities from firms for being interviewed, difficulties in contacting the authorised persons, lack of sincerity in the declared figures, etc. I take advantage of the occasion to make the businesses aware of the importance of such questionnaires, not only from the macroeconomic viewpoint but also in corporate level. In this initiative, businesses will not be considered simply as information providers but also as users of final analysis, which would assist them in knowing the markets better. Given that the final results have been disseminated to participating businesses, they may constitute valuable information for their future plans.

As concerns the other difficulties the branches have been faced with, particularly with regards to overloading from the organisation of these interviews, taking into account that their main objective is operational, I am of the opinion that an effective alternative, to the costing extension of branches with new structures for facing the load of such surveys, may be the encouragement of cooperation with local universities as that of Shkodra. This would facilitate the work of the branches for collecting information and would create possibilities to students to participate in and be familiarised with economic analyses. I would invite here the participants of the university to discuss on the cooperating abilities in this regard.

Passing to other traditional initiatives of the Bank of Albania, those on business bank relations or consumer - banking system relations, I would like to attract the attention in some other opportunities of the bank - business cooperation.

After the completion of the large value payments RTGS) and the Automated Electronic Clearing House, the Bank of Albania deems that the proper infrastructure is ensured for channelling all periodic payments for utility services through the banking system. On the other hand, the functioning of this new system will significantly increase the speed of settlements between bank users, an element whose lack has kept the businesses stand aloof from banks.

I take advantage of the opportunity to make the businesses aware of the benefits that accompany the functioning of this system, since among others, both systems will assist in the achievement of international standards of the ATM and POS per number of population. The encouragement of the public to use them remains a challenge to the banking system and the businesses.

To make what we previously said a reality, I would encourage the banking system to be more active, meaning that the banks should provide the population and businesses with clear and ready products, with fast and efficient services.

Naturally the steps in this direction will be more complex and some of them require inter-institutional cooperation. The Bank of Albania is already paving the way towards broad use of cards in Albania. The credit cards service will not only contribute to cash reduction in the economy but will also provide a positive impact on reducing informal economy.

I think that the encouragement of the banking system to increase the services level, wherever the banks carry out their activity, is important for this meeting. Only in this way we would create real chances for a harmonised development geographically, providing a genuine contribution to raising the standard of living throughout the country.