International institutions: Focus on human resources and education

2024-02-11 08:36:00, Sociale CNA

Until a few years ago, Albania had the competitive advantage of free labor. But emigration and declining births have reduced the youth population.

In 2022, the general population recorded an annual decrease of 1.3%, while the population in the 20-24 age group recorded a decrease of 7.1%.

Businesses across the country have raised the alarm about employees, as future developments will be limited by their lack.

The representatives of the international financial institutions in our country, Salinas from the World Bank, Weber from the IMF and Solovova from the EBRD shared with Monitor some ideas on how development can be improved in the future.

International institutions: Focus on human resources and education

Salinas: Investment in human capital, the only path to development

The manager of the World Bank in our country, Emanuel Salinas, thinks that Albania is now obliged to invest in young people.

"Albania's human capital is the heart of the country's development trajectory, its ability to progress towards EU membership and the approximation of income and living standards to the European Union average.

To put it simply, Albania cannot become a strong, advanced country with a higher income without engaging an equally strong and productive human capital", he said.

But, we cannot have a stronger and well-used human capital by ourselves, according to him.

"To achieve this, well-thought-out policies are needed and this requires that this capital be the priority of current and future investments and also requires major reforms in institutions and sectors such as education.

All this will not happen overnight and will require effort and resources, but it is the one important investment that we cannot ignore. The sooner we start with all this, the sooner we will be able to deal with this major danger for Albania", says the senior official of the WB.

Human capital can be improved by increasing investments in education and health.

Mr. Salinas estimates that the Albanian population can increase its productivity by 40% throughout its life, through improvements in health and education. Indeed, for people to have access to better jobs, it is not only essential to have the skills and knowledge required in the economy, but also physical, mental and social well-being, he said.

"With the Ministry of Health and Social Protection, we have rebuilt the hospitals affected by the 2019 earthquake and renovated the regional hospitals with better equipment and a new management information system to increase the quality and adaptability of the service. All this is a good basis, but I think more is needed to enable healthy lives throughout the country", he added.

Mr. Salinas notes that Albania's competitive advantage should not be low labor costs.

"We simply cannot advance convergence in the EU and towards a high-income country based on low wages.

I see this as a wake-up call: We need to transform the economy towards higher value-added production, and we need to do it quickly.

And to achieve this (sorry for repeating), we need to leverage our human capital. There is simply no other way."

International institutions: Focus on human resources and education

IMF's Weber: Human resources will condition growth, to be treated with attention

Population aging and continued emigration of the workforce represent two of the main sources of concern for the medium-term perspective, says Anke Weber, head of mission in Albania of the International Monetary Fund (IMF).

According to her, these factors put pressure on government spending on pensions and health. Continued emigration of workers could exacerbate skills-demand mismatches and further tighten the labor market.

The current favorable economic situation creates opportunities to advance in undertaking a broad set of reforms that would ensure sustainable and inclusive growth, the senior official explained.

But she also points out some reforms such as "progress in the agenda of increasing revenue efficiency, including strengthening their administration, is the key to a credible strategy of fiscal consolidation and to ensure resources, which will address growth challenges.

Important to mitigate fiscal risks are the implementation of a sound debt management strategy, the provision of a sound public investment framework and a budget process that integrates PPPs.

Efforts to integrate climate change adaptation policies into national decision-making processes and policies must continue."

Ms. Weber says that decisive implementation of policies for the development and preservation of human capital is necessary, which would stimulate potential growth and improve living standards.

"Further investment in education and training, including an updated education curriculum, higher quality vocational education and training, and a focus on digital skills can reduce skills mismatches," she stressed.

Undertaking reforms in the aforementioned areas, according to Mrs. Weber, along with further progress in improving the quality of working conditions and revitalizing the labor market, can support the authorities' intentions to curb immigration flows.

These measures can be financially supported by the implementation of a sustainable and reliable medium-term revenue strategy, she advised.

International institutions: Focus on human resources and education

EBRD's Solovova: Low labor cost is no longer an advantage

Low labor cost is not a sustainable competitive advantage. As countries develop, wages rise, but productivity and sophistication of products and services offered by the country also grow, said Ekaterina Solovova, head of Albania for the European Bank for Reconstruction and Development (EBRD).

According to her, Albania should also move away from low-value-added outsourcing activities in the clothing industry and offer more complex and higher-value-added products and services.

According to her, the attraction of quality Foreign Direct Investments can help diversify Albania's economy, increase economic complexity in the production sector, but also in services (e.g. tourism, IT) as has happened in Central and Eastern Europe. and in other countries of the Western Balkans.

Albania is really changing and this is a positive phenomenon.

Natural resources and renewable energy are very important assets of the country and should become equally important sectors of the economy, but Ms. Solovova says that attention should be paid to their development, but taking into account environmental sustainability and the impact on other sectors such as tourism.

The latter has proven to be a growing sector with a lot of potential, which should move further towards a sustainable industry throughout the year, which can be very well linked with agriculture in successful agribusinesses and local production capacities, which complement tourist demands.

There are several interrelated factors and cross-cutting areas where more needs to be done to enable this, such as investing in better and more sustainable infrastructure and education, reducing informality and fighting corruption, strengthening the rule of law and improving the efficiency of public administration.

Meanwhile, low-value-added manufacturing in light industry and outsourcing of basic business services are losing their labor cost advantage, the senior official said.

They still employ a large number of the population and there must be incentives to push them higher up the value chain into more specialized and less labor intensive types of production of products and services.

The EBRD official says that emphasis should be placed on strengthening and enabling small businesses to become medium-sized companies, through formalization and increasing their competitiveness, so that they can survive and thrive in regional markets – which they will soon become an EU single market.

Energy diversification is also important, as Albania is highly dependent on unstable hydrological conditions, due to high dependence on hydropower plants.

Fortunately, the country has other renewable resources, including solar and wind power, and Albania is making progress in securing power generation capacity from these sources, including through public auctions.

The EBRD is active in this area, both in providing technical assistance to the government and private financing and public sector projects.

Another pressing issue facing the country is the lack of labor force due to high emigration and population decline.

In surveys conducted by the Investment Council (which is supported by the EBRD) and various other associations, businesses continue to report the lack of qualified local staff as one of the biggest obstacles to growth, she said./ Monitor.al