Interview with Emanuel Salinas, World Bank Country Manager for Albania, with Monitor magazine. This interview was originally published in Albanian on January 8, 2024.
Economic performance during 2023 was better than expected, showing Albania¡¯s potential, especially of the tourism sector. World Bank Country Manager for Albania, Mr. Emanuel Salinas, says that construction and consumption are the main contributors to the country growth, but they are not necessarily the drivers of growth that Albania will need on a longer-term basis ¨C and certainly they are not the sources of better jobs that people aspire to. According to him the main source is investing in human capital, while the risk of losing it is critical for Albania. ¡°We should all focus in stronger and better utilized human capital¡±, said Mr. Salinas recommending that is needed to put is as the highest priority for current and future investments.
Monitor: How do you evaluate the performance of Albanian economy during 2023. How it was the performance compared to your initial forecast and why?
Emanuel Salinas: In a nutshell, it was definitely better than we expected. This is one of those occasions when I am very happy to be wrong.
These trends show Albania¡¯s enormous potential. I was particularly impressed by the performance of the tourism sector. Clearly Albania is in the radar screen of travellers worldwide. This is very well deserved considering Albania¡¯s outstanding mix of cultural heritage, natural beauty and warm and welcoming people.
Monitor: How do you expect the progress of the country's economy in 2024? What are the factors that will affect it positively and negatively?
Emanuel Salinas: Albania has had a very impressive trend in the past years, starting with a very strong recovery after the pandemic and then achieving rates of growth that were among the highest in the region. Barring major surprises, I hope that this trend will continue in 2024 and beyond.
At the same time, as you know, construction and consumption have contributed significantly to Albania¡¯s growth in the past years. I see this with mixed feelings. On one had yes, it is good to have growth, but it is clear that these sectors are not necessarily the drivers of growth that Albania will need on a longer-term basis ¨C and certainly they are not the sources of better jobs that people aspire to. So, it will be important for all of us to proactively leverage this phase of growth to move rapidly in transforming the economy from construction and consumption to investment, and from inward-looking growth to export-oriented growth ¨C which is the only way in which better jobs and better livelihoods can be sustainably created.
Monitor: What are the main risks that Albania might face in medium and long term, and how prepared the government is to face them?
Emanuel Salinas: Every time we get to the end of a year, we look back and wonder ¡®where did the year go?¡¯ and then we look forward and wonder ¡®what will the new year bring?¡¯. And it is easy to be worried about that. We live in uncertain times and we, as humans, find uncertainty painful. But as we do this, we need to differentiate very clearly between uncertainty and risks. Risks are knowable and quantifiable and we, most importantly, we can take action to mitigate their impact on us. A simple example, we are exposed to the risk of increase of interest rates, we can estimate their impact on our pocket if they increase, and we can mitigate that impact ¨C maybe not get a loan for that new flashy car or the newest iPhone?
Uncertainty on the other hand is unknowable and thus unquantifiable and, more importantly, there¡¯s not much that we can do about it, other than waste precious time and energy worrying. Will there be a new pandemic? What will happen with Russia¡¯s invasion of Ukraine? Will AI make all our jobs disappear? Will it take over from humanity? There is simply no limit to the number of things we can worry about. But can we, you, me, do anything about it? Probably not much.
So, let¡¯s focus on what we, you, me, us, can and should worry and take action about, shall we? Or as an old Mexican saying goes, ¡®do not preoccupy yourself (as in idle worrying), occupy yourself (as in take action!)¡¯.
So, here is one thing that I think should be our main occupation: the risk of losing Albania¡¯s human capital.
Albania¡¯s human capital is at the heart of the country¡¯s development trajectory, its ability to advance towards EU accession and its ability to converge to EU¡¯s income and living standards. To put it simply, Albania cannot become a strong, advanced and higher income country without an equally strong, productive and engaged human capital.
But stronger and better utilized human capital will not happen by itself. It requires well thought-through policies, we need to put is as the highest priority for current and future investments, and we need to have the fortitude and drive to do the major reforms to institutions and sectors like education. All of this will not happen overnight and will take effort and resources, but it is the one critical investment that we simply cannot ignore. The sooner we start with all of this the sooner we can start addressing this one critical risk for Albania.
Monitor: Emigration of Albanian workforce has become a severe problem for the economy and businesses. In your opinion, how is this affecting the economy and what should be done by the government and other actors to curb the rates of emigration?
Emanuel Salinas: Yes, it is worrying from a macroeconomic perspective and sad from a human perspective. But we should shift the focus from migration (which is the outcome of a myriad of factors) to making the most of the human capital that remains in Albania. I personally do not think that there is an adequate or even humane approach to curb migration ¨C we, humans, are a migratory species, it is in our DNA! As a species, we go wherever we see better conditions for life and better prospects for our offspring and I would like us to keep the right to make that decision individually.
It really is not about preventing movement, but about creating the conditions here so that people (especially the Albanian youth) naturally chooses to stay, and so that those that have left naturally choose to return. It means making Albania the natural choice for people to have healthy, productive and fulfilling lives.
Now, once we get into this broader issue it is easy to lose focus, as this depends on so many factors that we can easily get lost.But we need to avoid being distracted by that complexity and focus on what we can (and should) influence. I think that we should collectively (and decisively, and rapidly) focus on strengthening human capital and ensuring good use of it. The human capital agenda is much, much broader than migration, but luckily for us, it is an agenda that is fully in our hands to handle:
First, it is about ensuring that Albania¡¯s youth is equipped with the skills and knowledge that will enable them to have productive lives and access to better jobs. Unfortunately, there is a lot of work to be done on that side. Albania¡¯s latest PISA results[1] are sobering. According to these indicators, 70 percent of 15-year-old girls (77 percent of boys) did not achieve a basic proficiency in mathematics and 65 percent of girls (81 percent of boys) did not achieve a basic proficiency in reading. Basic proficiency means ¡°a baseline level of proficiency needed to participate effectively and productively in society and in future learning¡±. Moreover, these results were worse than those captured in 2018, reflecting learning losses during the pandemic. Just looking at this, I am left with the impression that we need a major reform of the education system to radically enhance its quality and relevance. We recently started working closely with the Ministry of Education and Sports to take stock of this challenge and put forward actionable solutions. Personally, I see this as my highest priority for the year ahead.
Second, it is about having healthy lives. We estimate that the Albanian population could increase by forty percent its lifetime productivity 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 that are in demand in the economy, but also physical, mental, and social well-being. With the Ministry of Health and Social Protection we have been reconstructing hospitals affected by the earthquake in 2019 and refitting regional hospital with better equipment and with a new management information system to enhance the quality and expedience of service. This is all a good foundation, but more is needed to enable healthy lives across the country.
Third, it is about enabling women to be economically active. As we know, women have the highest educational attainment, which is very good. However, we also know that many women are unable to be fully economically active due to the burden of housework, and the time they dedicate to child and elderly care. This is both the outcome of limitations in provision of childcare, short school hours and social norms. So, a large number of women (again, the most educated part of the Albanian society) largely remains at home doing unpaid work. A recent analysis by Expertise France estimates that if we were to convert the amount of such unpaid work, it would be the equivalent of 1.3 million workers and, if it were to be quantified, it would be around 32 percent of the GDP. In other words, that is the amount of subsidy that women bring to the rest of the Albanian economy, to all of us, through unpaid housework[2]. But beyond the pure quantification in terms of GDP, we cannot possibly imagine what new ideas, new companies, new inventions, new creations will never happen due to the underutilization of women¡¯s talent. Like a broken record, we have been advocating for a lasting and inclusive solution to this issue. While we cannot change social norms overnight, we can start by ensuring adequate provision of childcare throughout the country. The benefit for Albania of investment in provision of adequate childcare will likely be several times the amount of investment needed. We have had promising discussions with the Ministry of Health and Social Protection, Ministry of Education and Sports, State Ministry for Local Government and I think we are close to moving forward with a solution. Fingers crossed!
Fourth, it is about engaging the talent and energy of the youth. We estimate that around 27 percent of the of the youth in Albania is unemployed and a further 25 percent is inactive (not actively participating in education, employment or training). That is a loss that no country can afford! It is like trying to run a marathon using just one our two legs. Moreover, beyond the macroeconomic implications, there are also adverse social concerns that stem from that ¨C as the French saying goes ¡°L'oisivet¨¦ est m¨¨re de tous les vices¡±, idleness is indeed the mother of all vices. Increasing youth inclusion and participation is a complex issue in itself. But as I mentioned before, it is important to not be lost in the complexity and focus on what is needed no matter what, including (improved basic and vocational education to better job opportunities); and, importantly, I think we need to collectively listen more intently to young people themselves as we put together tangible solutions. I am grateful to the Minister of Youth and Children as she constantly brings me closer to the Albanian youth and their voices. For the moment I would say that we are actively listening but I hope that 2024 will be the year where we take decisive actions.
Fifth, it is about tapping the potential of Albania¡¯s global human capital. Albania¡¯s diaspora has demonstrated the ability to succeed in competitive fields in the most advanced economies. It is time that we stop seeing migration as a permanent loss of talent and see it as an opportunity to bring back the expertise, knowledge and linkages to global industries that reside with the Albanian diaspora abroad. There are many countries that have succeeded in that (think Ireland), leveraging diaspora to speed up the transformation of the home country. Similarly, every year there are thousands of returnees from EU countries to Albania. We need to ensure that they find a welcoming society and a clear path to economic integration.
Sixth, it is about more efficiently connecting jobseekers to employers. We see this peculiar labor market where at once there¡¯s high demand for labor coexisting with high proportion of economically inactive people. In this context, we need to rethink and probably revamp active labour market (ALMP)[3] approaches to make sure that they are as effective as possible in matching supply and demand for labor. Together with the Ministry of Health and Social Protection and the Ministry of Finance and Economy we prepared a new program that will radically improve the efficacy of ALMP in Albania and equally improve the efficacy and efficiency of the social protection, creating a path for economic inclusion of those that are not currently included.
But all of this comes down to one thing: we, all of us, need to urgently prioritize investments in human capital as the most important priority for Albania. I am sure that every single lek invested in human capital has a multiplied impact on the overall development of Albania¡ and, by consequence, any needed lek that is not invested now, carries an amplified loss throughout the generations to come.
Monitor: Albania is losing its main competitive advantage of low labour cost due to quick wage growth. What should be the focus in the future to attract foreign investments?
Emanuel Salinas: I think that Albania¡¯s competitive advantage shouldn¡¯t be low labor costs. We simply cannot advance on the convergence to EU and become a higher income economy on the basis of low salaries. I see this as a wake up call: We need to transform the economy towards higher added value production and we need to do this fast. And to do that (sorry to be repetitive), we need to leverage our human capital. There is simply no other way.
You mention foreign direct investment (FDI), but I think we need to be precise when we talk about. There are various types of FDI from resource-seeking investment (investors coming to the country seeking access to natural resources) to market seeking investment (companies coming to the country to sell their products) to efficiency seeking investment (companies establishing higher added value production in the country, linking it to global value chains). Each type of FDI has its own economic, impact and some types of investment are much desirable than others. The first two types have come and will likely continue coming to Albania. We do not need to spend precious resources (like tax breaks, grants and subsidies) on incentivizing them to come. Our focus should be on ensuring that their contribution to the economy is positive and that they do not have a negative impact on the environment and society.
The most important FDI for Albania should be efficiency-seeking. This is the type of investment that can create better jobs and opportunities, can bring in new production processes to Albania and has and potential to develop an eco-system of local suppliers. But this is the most difficult type of FDI to attract. When you ask this type of investors what is the most important factor to decide on where to invest the answer is very clear: access to a broad pool of labor force with the right set of skills ¨C so, human capital is really at the core of it all.
Monitor: How do you evaluate the performance of your projects in Albania till now?
Emanuel Salinas: Impactful, but not as fast as we wish they would be. Our new year¡¯s resolution for 2024 is to, together with our counterparts and stakeholders, move much faster on implementation. We started by creating monthly progress reports where we outline what has been done, what has been delayed and what is expected for the 30 days ahead. We shared these reports with the Ministry of Finance and Economy (our main counterpart) and we plan to keep this as a recurrent report. My hope is that we will collectively use that to collectively be super impatient with delays and to identify and pro-actively resolve bottlenecks.
Monitor: What are your plans for the future regarding projects and supports for Albania?
Emanuel Salinas: I very much hope to have a more substantive engagement on education and inclusion of women and youth in all the areas that I mentioned above when I talked about human capital. At the risk of being too repetitive, I am convinced that investment in human capital is by far the most important investment that Albania can make. We owe it to the youth, to women and to all those that do not have the right opportunities to use their talent and skills. We have to eliminate the obstacles and create the foundations for healthy, productive and fulfilling lives here, at home in Albania. The solutions are a lot less complex than they seem. I suggest that we all take 2024 as the year when we collectively take decisive actions to strengthen and make better use of Albania¡¯s human capital.
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[1] The OECD¡¯s Programme for International Student Assessment (PISA) measures 15-year-olds¡¯ ability to use their reading, mathematics and science knowledge and skills to meet real-life challenges.
[2] This analysis showed that women in Albania on average, spend more than 5 hours each day on domestic and care tasks (while men spend around 50 minutes) and, in consequence, on average women can only dedicate around 1 hour and 57 minutes per day to paid work
[3] ALMPs are government programmes that intervene in the labour market to help the unemployed find work, but also for the underemployed and employees looking for better jobs.
