The tragic tale of ammunition trade in Albania

How corruption and lack of accountability can set a country on fire:
The tragic tale of ammunition trade in Albania
The integration in the European Union and NATO is the only common political
objective for the Albanian political class. The right wing came in power in 2005,
under the slogan “With clean hands” – a fight in all fronts against corruption.
Part and parcel of the ideology was the thinking that private sector can do better
in terms of efficiency, transparency and corruption-free services than the
government structures. It is under this thinking that the Prime Minister Sali
Berisha proudly points to Albania's now having the smallest government per
capita in Europe 1 . It has enacted a 10% flat tax on both personal incomes and
business profits. This rate is lower than Albania's previously low maximum rates
of 23% on individual incomes and 25% on profits. Social security levies have
been lowered by 31%. Tariffs with European countries have been eliminated.
Government personnel is been cut by almost 30%, and the cost of procurement is
down 20%. Total revenues have surged from 22% of GDP to 27%. Even the IMF
strongly advised Albania against slashing tax rates, but such advice was ignored.
To make government more efficient, the prime minister initiated a program with
Estonia--a pioneer in this--to bring high tech to tax collection and government
contracts.
While the Government proudly declares that the inflation is under control and
that it is successfully fighting the corruption, most of the Albanians have to face a
very tough life. The country continues to depend heavily on remittances, which
according to some sources are as high as 13.5 percent of the GDP, although the
figure could be much higher, according to the Bank of Albania. The Albanian
emigrants have remitted more than the international assistance or 3 times more
than the FDI in the country. An important part of the government attention in
the last years has been on the fight against informal economy. However, it has to
be noted, that the whole informal economy fight has as its main objective to
collect more taxes and social security contributions. There is nearly no
mentioning of informality in terms of labour relations and working conditions,
which appear to be highly problematic in Albania, particularly in sectors such as
building and construction, mineral extracting industry and textile, where many
serious accidents have been registered and sometimes with casualties in people.
The most extreme case has been the one of the Bulqiza mine, where 7 workers
have died in the last 16 months. No matter the very dangerous working
conditions in these sectors, workers have no choice but to continue their work
and the casualties continue…
1
Forbes, 2008. http://www.forbes.com/forbes/2008/0407/015.html
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Gerdec, Tirana, 15 March 2008
It is against this very gloomy reality that the tragedy of 15 March, in Gerdec,
Tirana, should be considered. At least 24 people are known to have been killed,
4,200 houses destroyed more than 300 wounded by a series of massive
explosions at an arms dump near the Albanian capital, Tirana on 15 March 2008.
Many of the wounded people are still in serious conditions, and the number of
casualties may rise. They happened as workers were dismantling obsolete
munitions in a factory, which was a central collection point for an arsenal
amassed by Albania's former dictatorship. Albania has about 100,000 tons of
excess ammunition stored in former army depots across the country, according
to Defence Minister Fatmir Mediu. The dismantling of the excess ammunition is
part of the country’s reform to join the NATO, which is promised to happen in
early April 2008. The tragedy of Gerdec, more than any other event showed the
very face of the political, economic and social system in Albania. As such, the
story of Gerdec has many facets, each of them worth to be analysed separated
and in relation to each-other.
The international press has reported on the tragic story, referring to people
working in the factory as specialists. The truth is rather different. The most
obvious facet of the Gerdec tragedy is the life story of many poor Albanians who
were willing to get such a dangerous job, for which they were paid hideously
low. The stories told from people working there are shocking. They reported to
have not been trained for the job, but only told not to smoke inside the factory.
The price of dismantling one projectile was from 10 to 13.3 leke (approx: 10 euro
cent). Attempting survival, in a country which continues to be the poorest in
Europe, many of them would bring their wives and children to help dismantle as
many pieces as possible. Children of the age 12-16 were reported to have been
seen working in the factory and teenagers as old as 18 were employed from the
private employer. Most of these workers were not officially registered as
employed by the firm. They worked in black market, and so were their wives
and children. The concerns over child labour and the responsibility of the state
structure were denounced from many political subjects and organizations, such
as CRCA, which has asked also the Minister of Labour to resign.
The catastrophic blast in Gerdec is a typical complicated story of corruption,
which involves very high levels of politics and of state structures that were
completely obsolete in controlling such a dangerous business. Often done in the
name of small government, it reflects clear signals of government/politics
capture. Although, the case is now under the investigation of the Attorney
General, it is clear that the tragedy is a direct consequence of a corruptive affair
of millions of Euros. Different sources report that there are violations of official
procedures, which have created spaces for the sub-contracting private firm to
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enefit not only from the sell of scrap metal from the dismantling of ammunition
in the international market 2 , but also to benefit illegally millions of euros through
illegal sell of ammunition. The international traffic of weapons is another serious
facet of the story.
The state capture? (Extracted from the Albanian Newspaper Shqip)
On 28 of December 2006, Mihal Delijorgji – a young, talented and successful
businessman, registers its business the “Albdemil” company, with the main
objective “dismantling and export of all kinds of ammunition”. The headquarters
of the company are declared to be in Gerdec. Patrick Cornelious Henry III, a
representative of the American company SAC (Southern Ammunition
Company), is a co-partner of Albdemil company. Until this time, there was no
legislation in Albania which permitted a private company to trade or
ammunition.
On 14 March 2007, two months and a half later, the Council of Ministers decides
that the state company MEICO (established with the purpose of ammunition
export-import on behalf of the government) can contract “different subjects” to
sell and dismantle ammunition. Up to this moment, MEICO – the state company
– had the monopoly of trading any ammunition in and out of the country.
Likewise, the dismantling of the ammunition up to this moment, was done only
by the military factories under the strict surveillance of the Armed Forces,
though the projects financed from international donors. Any ammunition trade
was done with special decision of the Council of Ministers.
On 5 April 2007, amidst opposition from the left wing political parties, the
Parliament approves the law on “The state control on the import-export activities
of military goods of the double use technology”. After the Decision of the
Council of Ministers of March 14, 2007, this law takes totally away the state
monopoly on the ammunition of trade and opens up for the private operators.
In the same day that the law is approved by the President of the country, 17
April 2007, the private company “Albdemil” is registered in the Court of Tirana
as a private subject with main activity “Trade, export-import, of the military
goods and dismantling of the ammunition”. Seven days later, “Albdemil”
registers in the Directory of Taxes and in the same day is given the certification
of the recognition. This is particularly strange, given that all the reports in doing
business in Albania, point to the long waiting time to be registered and certified.
The day after, the Minister of Defence signs and approves the project “On the
procedure of treating the weapons, technique and equipments of the Armed
2
There are also voices who argue that there is a percentage of gold as high as 3% in the scrap from the
ammunition. But the technology in Albania can not separate these elements. (http://www.gazeta-shqip.com/
artikull.php?id=38935)
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Forces regarding selling for dismantling of an amount of ammunition”. On the
very same day, the Minister of Defence, orders the United Command, to make at
the disposal of the dismantling the ammunitions, the facilities of the formermilitary
base in Gerdec. This was the same place where the company “Albdemil”
had its headquarters. The high officials claim that the order of the Minister has
circumvented the Armed Forces from the surveillance of this process, although
up to that time the dismantling was done only from them. In the meanwhile, the
work to create the dismantling factory had already started in Gerdec.
What lies beneath?
The American company SAC, was selected (it is unclear whether there were
other companies) in the waiting hall of the Secretary General of the Ministry of
Defence, based on a presentation provided with a laptop according to the V.
Colonel Ndreu. But what is SAC? SAC was established in 1975 and its main
activity is trading bicycles and equipments for sportive weapons. The company
is reported to have many problems with taxes in the US and has been sued 9
times from the tax authorities for not complying to the rules. Albanian
newspapers claim that behind Southern Ammunition Company and Patrick C
Henry III, is just a ghost company which has sold its American name to benefit
from weapon and ammunition traffic in Albania. Mero Baze, a well-known
commentator close to the right-wing political parties, argues that there are good
reasons to believe this is a pure history of high corruption. The SAC was
presented from the Minister of Defence as one of the three most specialised
companies on dismantling ammunition in the world. The scenario seem to have
been very simply, says Baze, the Albanian company Albdemil, has been
promised this contract from the Ministry of Defence. Albdemil found an
American company that had something to do with the ammunition, paid to them
part of the profit and ensured the monopoly in this very profitable business.
Indeed, the first declarations of the government said that the Ministry of Defence
has contracted SAC, which then in return has sub-contracted Albdemil. SAC did
nothing to help the poor budget of the Albanian government, but just took out its
part by selling its name. But, as the General Attorney is working on giving the
real history behind this contracting and subcontracting, there are many issues to
be considered.
The SAC, in which Albdemil has also its share, was given a first contract from
Ministry of Defence for not more than $2,200 thousand. The second contract,
dated 28 December 2007, in between MEICO and SAC specifies the conditions
under which SAC would accept the goods from the seller. The point 7.4 of the
contract says, if during the dismantling process there will be ammunition which
contains steel, instead of brass, this ammunition will be turned back to the seller
(Albanian government). Such a condition was not part of the first contract.
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The workers employed in that factory confirm that the way they cleaned the
brass projectile shells was special. After being dismantled, they were cleaned
carefully so there was no sign of any gun powder. They were then separated
from the rest of the scrap metal, and were then loaded in trucks towards Rinas
airport. For every ton of ammunition, there was nearly 70 percent of scrap metal.
Only in the first phase of the project there were about 1,875 tons of scrap metal
which is being sold in the market of the neighbourhood countries with about 5-6
thousand Euro per ton. There were about 20 thousand tons of ammunition being
dismantled in the first phase, resulting in about 14 thousand of scrap metal or
about 70 million euro. This amount does not include the sell of other elements.
The second contract (which could not be terminated) foresees the dismantling of
a huge amount of ammunition, which profits amount to billions of euro.
But there is more to that…
Why was such a dangerous business placed in an inhabited area? One answer is
that parallel to the business of dismantling ammunition and selling the scrap
metal, the Albanian company was also involved in hidden business of selling
ammunition with main destination Afghanistan. From a simple check in the
Albanian Centre for International Trade, it results that Albania has been trading
bullets with Argentina, Iran, Iraq, Israel, Georgia in the last years. Whether, this
were only the coverage and were later on sold elsewhere this is not yet clear and
it may need an international investigation. It is however, shocking that to get the
best of profit, someone would place the business in the middle of villages.
Gerdec is close to the airport and the Durres harbour. So the company would
have the lowest costs of transportation each other way, given that the transport
of the ammunition from the military bases to Gerdec as specified in the contract
was on the Ministry of Defence. The Ministry of Defence decided to shoulder all
the economic risk of this transport and not only.
The whole contracting to the private company is more shocking considering the
fact that there are three state-owned companies which are specialized in
dismantling ammunition. They are placed in special areas, isolated from the
inhabited areas. The process of dismantling is done from special machineries far
from the workers, who are specialized for many years and get training for more
than a week every new type of ammunition that they are going to dismantle. The
factory of Polican is one of the three state-owned specialized companies that
operate based on projects of dismantling. 3,500 workers of this company that
have been working on dismantling ammunition for 40 years have no work to do,
waiting for contracts from the Ministry of Defence, which apparently was too
busy to contract with the private company - Albdemil. Albdemil from the other
side was far too greedy to let any other company dismantle ammunition. This is
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the reason why in the moment of explosion there were hundred, thousand of
projectiles stored in the factory, although according to the contract the Albanian
military should have sent only an amount of ammunition that was possible to be
dismantled in a day. From 2005 to February 2008, the Ministry of Defence has
given the Albdemil about 41% of the total ammunition to be dismantled. Given
the existence of three state-owned companies, Albdemil thought of better
collecting as much as possible ammunition, no matter what is written in the
contract.
The tragedy of Gerdec raises many serious issues, but so far we have seen only
the Minister of Defence resigning. The Prime Minister has accused all the
institutions, but has not taken any responsibility. Truly, Gerdec is testimony of
institutional failure, but the main question hanging is: What happened to the
reform of fighting the corruption that the Prime Minister declared so proudly
when he came in power? In fact, in the last years thousand of civil servants were
fired from the public administration, either in function of a small government,
but more often to employ completely incompetent staff, which had only one
merit – being militants of the political parties. Shouldn’t we all think that the
reforms to fight the corruption were nothing more than attempts to control the
state with people that were only puppets led by the Prime Minister? What the
Prime Minister calls today failure of public administration is only the direct
result of the reforms undertaken by him. The public administration, in the
ministries and other central institutions, was fatally hit from with massive, illegal
lay-offs of the professionals only to be replaced by dangerous, incapable and
coward militants. The Prime Minister implemented a reform of public
administration which sought to employ people who could be easily controlled
and ordered to sign corrupted documents, so after they could also be accused
and even condemned, just to close any case. Indeed, the Albanian public
administration today is now crowded with such people, completely dependant
on the political parties, people who are afraid and who are totally unprotected
but from the following blindly the orders of their leaders.
It is extremely sad that if this tragedy wouldn’t have happened, the bosses of the
military business would have continued their business as usual. The wealth of
poor Albanian, which during the totalitarian system was transformed in
ammunition, during the so-called democracy is being transformed in gold and
deposited in the bank accounts of few mafia bosses and their political allies. All
these issues are now raised in the media, from the political parties and civil
society organisations. Indeed, a state that is not even able to stop illegal
constructions should have it much harder to monitor and regulate the activity of
the private sector and all the perversities it may produce. The question that we
do not hear is: Are we privatising the state in the name of liberalisation
movement? Who is going to say stop to the decisions taken in full secrecy? Who
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is going to challenge the ideology of privatisation and mobilise the society to
stop the privatisation of public services and other vital services? Isn’t there
enough evidence in the last 17 years?
And to conclude, as our government is very much committed to the construction
of nuclear power in the country and in the wake of the Gerdec tragedy, is
Albania going to be the next Chernobyl?
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