3. Boosting education and competencies in Albania

The Initial Assessment of this Multi-dimensional Review of the Western Balkans identified education and competencies for economic transformation as the top priorities for Albania and for all economies across the region (OECD, 2021[1]). While economic structures vary significantly from one economy to another, finding new sources of productivity growth and engines for future transformation is an urgent task for all the regional economies. Good jobs are scarce and young people continue to leave. Boosting youth and workforce competencies can unlock new opportunities to overcome these trends. The more unfavourable an economy’s current wage-to-productivity ratio, the more urgent it becomes to find new and more productive activities to build a strong economy.

High-quality education also tops the list of aspirations for the future in Albania and in the region. Quality education is an essential element of quality of life for all; young people in school; families; those who want opportunities for their own children; those who want to have children in the future; and those who depend on younger generations to shape the future of their societies. Beyond innovation and economic opportunity, education also matters for civic engagement and respect for diversity and for the rule of law. With impressive unanimity, quality education ranked topmost in all four aspirational foresight workshops held in Tirana and other capitals of the region as part of the Initial Assessment of this review (OECD, 2021[1]).1 The foresight workshops gathered a range of participants from various ministries and agencies, the private sector, academia and civil society, who developed vision statements based on narratives of the lives of future citizens.

This report builds on an extensive peer-learning process with practitioners in the region and expert assessment to provide suggestions for strengthening education and competencies in Albania and in the region. Building on the Governmental Learning Spiral methodology (Blindenbacher and Nashat, 2010[2]), two peer-learning workshops brought together experts and practitioners from across the region and beyond to prioritise among challenges and solutions, develop ideas for action, and learn from each other (Box 2.1 of Chapter 2). The peer-learning workshops on education and competencies served three complementary aims: to identify of outcome-level challenges hampering the build-up of competencies; to identify key policy challenges; and to put forward key policy priorities for Albania and for the region (Figure 3.1).

Over the past decade, Albania has taken important steps to boost the quality and relevance of education across all levels. Learning outcomes, as measured by the OECD’s Programme for International Student Assessment (PISA), have improved quickly in Albania, placing it among the fastest improvers. In science, Albania’s mean performance increased particularly quickly between 2009 and 2015, rising by 37 score points (OECD, 2018[3]). As a result, learning outcomes are now similar to the average for all Western Balkans economies. In 2021, Albania has approved the National Education Strategy for 2021-2026, which integrates the pre-university education strategy and the university education strategy (Ministry of Education, Sport and Youth/UNICEF, 2021[4]). The strategy gives great importance to inclusiveness and equality in education, strengthening the competencies of teachers, mastery of lifelong learning competencies, digitalisation of education, and quality management and assurance. In recent years, a new law for vocational education and training (VET) has encouraged engagement between vocational schools and the private sector, especially through work-based learning.

To sustain progress in building key competencies of students and adults, Albania must now tackle a set of important remaining challenges. Albania’s education outcomes also vary by geographical region. Many companies in Albania report that they cannot generate jobs because they cannot find the skilled workforce needed to fill them. Some 25% of firms recently surveyed identified an inadequately educated workforce as a major (the third-largest) obstacle to business (World Bank/EBRD/EIB, 2019[5]). Although digital technology offers potential for Albania (in the ICT sector and more broadly), the lack of digital skills can be an important bottleneck for development. In 2019, about a fifth of Albanians (21%) still had basic or above basic skills, low in comparison to the EU average at 56% (Eurostat, 2021[6]). The pupil-teacher ratio in primary, secondary and upper secondary education is rather favourable; the teaching quality, however, remains inadequate. Improving teacher quality is especially important given the recently adopted competency-based curriculum. VET, which is key for generating labour-market relevant competencies in any economy, remains an unattractive option for many students; as many students choose to pursue studies in areas that are in low demand, the current system leads to both lack of skills and skills mismatch.

This chapter proposes eleven priorities for strengthening education and competencies in Albania, with overall digital transformation of the education system being the key priority identified by peer-learning workshop participants (Figure 3.1).

  • Overall digital transformation of the education system (peer-learning priority)

  • Increasing access to early childhood education and care (ECEC)

  • Foster equitable education at all levels

  • Strengthen the governance of education policy

  • Ensure adequate financing and improve efficiency of spending

  • Update and modernise curricula

  • Upgrade and further professionalise the teaching profession

  • Reform vocational education and training and link it to labour market needs

  • Increase access to and quality of adult education

  • Leverage foreign direct investment to boost skills

  • Foster closer linkages with diaspora.

This chapter is divided into three sections. Sections 3.1 and 3.2 provide policy implications for Albania across the eleven policy actions through a prism of challenges specific to Albania. Section 3.3 provides indicators against which policy progress can be measured in implementing all the policy priorities for Albania. This chapter is complemented by the regional chapter (Chapter 2) by providing more specific policy options for the eleven policy actions based on international practices that may be applied, albeit to different degrees, also to Albania.

The peer-learning participants from Albania selected digital transformation of the education system as a key priority to strengthen competencies of the future workforce and to create new opportunities in the emerging information and communication technologies (ICT) sector. Globally, digital tools and their use have become an increasingly important part of schooling. Application of digital technologies implies the use of computers and technologies for several purposes: to access the internet; to obtain and share knowledge among students and teachers; to use learning analytics in order to collect data and measure performance; and to setup collaborative learning networks to solve problems and foster creativity among students (van der Vlies, 2020[7]). But digital technology alone does not generate outcomes: these tools needs to be complemented with skilled teachers (OECD, 2015[8]). Skill in using digital technologies also offers growth opportunities in the emerging ICT sector and is a key means to boost productivity in all economic sectors, highlighting the importance of ensuing that adults also acquire relevant digital skills.

At the level of formal education, building on recently developed teachers' standards, developing and implementing a performance appraisal system linked to career advancement, and increasing teacher training were identified by peer-learning participants as three priority actions to improve teaching quality (Box 3.1). In vocational schools, a lack of dedicated ICT teachers is among the key obstacles to developing the digital skills of students: 77% of teachers report needing training in the use of ICT for teaching purposes. Recognising this shortcoming, the National Employment and Skills Strategy and its Action Plan 2014–20 (NESS 2020) provided basic skills development to 700 teachers. Yet, the subsequent results showed the need for more training and to make such training compulsory during initial teacher education (ITE) (ETF, 2018[9]).

Beyond formal education, Albania needs to support VET and emphasise work-based learning, especially in ICT companies (Box 3.1). Work-based learning is still nascent in Albania and not yet compulsory for initial vocational education (ETF, 2020[10]) (Section 3.1.8). Considering that ICT is among the fastest-growing sectors in Albania and has attracted foreign investors, this is a missed opportunity. In 2018, the ICT sector accounted for 2.9% of GDP (OECD, 2021[11]). However, innovative firms in Albania face higher obstacles when searching for new employees, for both routine and non-routine tasks (World Bank/World Bank/WIIW, 2020[12]).

To complement the actions above, Albania should upgrade its digital infrastructure, which remains an obstacle for applying digital technologies in schools and beyond. Schools in Albania lack computers and have poor access to the internet; at about 0.2 computers per pupil, schools are substantially below the average of OECD countries of 0.8 (Figure 2.10. of Chapter 2). Additionally, while nearly all school computers in OECD countries are connected to the internet, in Albania the figure is just over 70% (OECD, 2020[15]). Although improving, in 2020, only 25% of Albanian schools had internet access at a speed above 10 Mbps (megabytes per second) (OECD, 2021[11]). Likewise, only one-third of pupils attend schools where the principal feels effective online support is available, compared with more than half of pupils in OECD countries. In turn, less than half of Albanian pupils attend schools where principals report adequate software, compared with more than two-thirds of pupils in OECD countries (OECD, 2020[15]).

Albania should develop frameworks for digital skills and competencies, and define IT qualifications and curricula, especially in collaboration with the private sector. While the Albanian Digital Agenda 2015–2020 highlights the importance of integrating the use of ICT in the education system, and the National Pre-University Curriculum Framework mentions it as one of seven key competencies for general and vocational education, both documents lack any concrete framework on how digital skills and competencies should be integrated into the learning practice (ETF, 2018[9]). IT qualifications and curricula are not yet defined within the Albanian Qualifications Framework (ETF, 2018[9]). For curricula development, industry representatives should collaborate in defining learning outcomes (OECD, 2021[11]). Establishing a coherent approach to digital skills development across all levels of the education system is important (OECD, 2021[11]). Montenegro, as the first economy in the Western Balkans, has adopted a Digital Competence Framework aligned with the European Digital Competence Framework.

Given the skills gap of the current labour force, digital skills should also become an integral part of adult learning. Albania’s current Employment and Skills Strategy 2019–2022 does not treat digital skills as a priority. Other regional economies have already started to address the digital skills gap among adults. Serbia’s Digital Skills Strategy from 2021 includes a framework for adult learning as well as local coalitions for digital skills through which diverse stakeholders will participate in developing curricula. In addition, the public employment service in Serbia launched an IT requalification programme and a special programme targeting women in rural areas (OECD, 2021[11]). Learnings from the digital skills gap analysis, as stressed by the peer-learning participants, could guide training programmes and frameworks for lifelong learning.

Albania has made important progress over recent years in increasing participation in ECEC. With 75.1% of children aged 3-5 years old attending a preschool facility in 2020, Albania is outperforming its regional peers (Figure 2.15 of Chapter 2). In parallel, Albania’s preschool teaching has improved through the adoption (in 2016) of a competency-based Preschool Curriculum Framework, which is in line with contemporary child development theories and practice. In addition, a law from 2018 sets new minimum standards and special selection procedures for pre-primary school principals (Maghnouj et al., 2020[14]).

Albania should now strive to improve the quality of preschool education, including teaching and addressing physical conditions of ECEC facilities, especially by targeting rural areas. When it comes to preschool education, significant differences are evident between richer and poorer (e.g. the northeast) regions, with the migration of qualified teaching personnel to cities playing a substantial role (Maghnouj et al., 2020[14]). The physical conditions of preschool facilities in Albania require improvement and investments (Psacharopoulos, 2017[16]).

To provide the necessary resources to ECEC, a potential reallocation of funding from primary education could be considered. Financing for pre-schools makes around 0.5% of GDP or about 15.6% of total spending on education (NALAS/USAID, 2019[17]). Estimations indicate that an increase of pre-school enrolment to 90% (equivalent to additional 10 000 children) would cost about USD 2.5 million (Psacharopoulos, 2017[16]). With primary education budget taking up a lion’s share of the total education spending in Albania (56.8% in total government expenditure on education in 2015) (Maghnouj et al., 2020[14]), there is scope for potential efficiency gains in primary education spending and reallocation of some funding to ECEC. Since many children not enrolled in pre-school often come from disadvantaged families, additional financial assistance for those families for pre-school enrolment could be considered (Psacharopoulos, 2017[16]).

In comparison to many international benchmarks, students from disadvantaged backgrounds in Albania have been performing relatively well. Although a 61-point performance gap exists between students from disadvantaged families (bottom quarter of the PISA index of economic, social and cultural status) and those from top quarter, this difference is smaller than in the OECD (89 points). Albanian students from disadvantaged families are also academically relatively well resilient2 – scoring 12.3% against 11.3% in the OECD (OECD, 2019[18]).

Going forward, providing support for children from disadvantaged families, especially those living in rural areas, can further close the education gap. Young people living in Albania’s urban regions spend on average two more years in schools than their peers in rural areas (Psacharopoulos, 2017[16]). Considering that about 40% of Albanians live in rural and mountainous areas, poor quality education affects many. Large distances between school and home, lack of teacher incentives to work in rural areas (despite a national surplus of teachers), children’s obligations to contribute to the family income, and early marriages (especially among ethnic communities, such as Roma and Egyptians) are some of the factors contributing to such inequalities (Maghnouj et al., 2020[14]). While Albania has been making important efforts to address the urban-rural divide, including introducing transport subsidies for teaching staff, a more comprehensive package of education and social protection policies will be required, especially in areas that are trailing behind. Among others, comprehensive financial and career development incentives could be used to encourage good teachers to work in hard-to-staff areas. In addition, sufficient preparation and support (e.g. through networking opportunities) should be given to help both new and experienced teachers to work effectively in rural schools.

Better access to education for ethnic minorities, such Roma and Balkan Egyptians, is also important for ensuring their integration, creating new opportunities and fostering social cohesion across all groups. Some estimates (based on somewhat old data) show that about half of Roma children aged 6-16 have never been enrolled in school (ACCE, 2013[19]). At about 50%, Roma and Egyptian students have among the highest dropout rates in the economy: on average, Roma accumulate about 4.4 years of schooling compared with 9.6 years among non-Roma (Psacharopoulos, 2017[16]). Census data from 2011 reveal that only 49% of Balkan Egyptian and 21% of Roma communities have attained at least a lower secondary education, low in comparison to 80% among the general population (United Nations, 2015[20]). Roma also lag in terms of education outcomes: with a literacy rate of about 65%, the Roma population is about 30 percentage points behind non-Roma neighbours (Psacharopoulos, 2017[16]).

Albania is making important efforts to improve educational outcomes for the Roma and Egyptian population, yet it would be important to scale up such activities. Some recent policy responses include measures such as a textbook reimbursement programme and efforts to promote Roma and Egyptian identities as an integral part of Albania’s cultural heritage (Psacharopoulos, 2017[16]). The National Action Plan for the Integration of Roma and Egyptians 2015-2020 promoted integration of these marginalised groups. Important progress has been made, especially in improving enrolment of Roma and Egyptian children in preschool and compulsory education. From a 2015 baseline of 4 437 Roma and Egyptian children enrolled in preschool and compulsory education, the number increased to 13 310 by 2018 (CoE, 2020[21]).

During and after the COVID-19 pandemic, learning recovery needs to be handled with a close eye on equity and inclusion. As Albania is still struggling with the pandemic, learning recovery will be key. Those with fewer home resources, in terms of access to online learning at school as well as parental support and other cultural resources such as books, are likely to fall behind (Papa et al., 2016[22]). A recent OECD report (OECD, 2020[23]) collates the experiences of different countries in responding to the pandemic, including managing periods of school closure and subsequent reopening. First, targeted measures, tailored to local requirements, are needed to support pupils with few digital resources at home. Colombia, for example, developed an online learning resource for disadvantaged pupils that can be accessed on mobile phones without cost in terms of data. In Rome, city authorities are providing targeted help (including laptop provision) to Roma children. Second, given the ongoing uncertainty, some countries are developing “hybrid” models of teaching and learning, which blend face-to-face teaching (to the greatest extent possible) with use of digital resources and online learning. In such circumstances, vulnerable students who lack home digital resources must be prioritised for face-to-face teaching.

In Albania, the Ministry of Education, Sports and Youth has the lead responsibility for education at all levels, with the exception of VET, which is managed by the Ministry of Finance and Economy. The Ministry of Education, Sports and Youth is responsible for strategic direction, but over the last two decades has devolved many responsibilities for managing schools, partly through by creating regional directorates and offices that manage implementation of policy (Maghnouj et al., 2020[14]).

Leverage on the new National Education Strategy for 2021-2026 by ensuring strong co-ordination and collaboration in the implementation of education policies. In the context of the previous Pre-University Education Development Strategy (2014-2020), implementation of different policies has often happened in isolation with limited co-ordination across various agencies.3 Given that the key competencies for education policies have been divided between two ministries as described above, solid co-ordination and collaboration is even more important.

Evaluation should play a key role for the new education strategy and policy making. Albania made important progress in developing a modern education management information system (EMIS), which could provide a solid, factual basis to conduct evaluation. To date, lack of high-quality data and a relatively weak culture of evaluation limit the use of evaluation to improve policies. As a result, regular monitoring and reporting on progress is limited, and thus does not provide adequate information to address capacity constraints. At present, real-time monitoring of administrative data is not possible due to the long procedures of data reports from schools first to local education offices and then to regional directorates that compile data and share it with the ministry (Maghnouj et al., 2020[14]).

Albania should also strengthen the impact of external school evaluations by building the capacities of the regional education directorate to conduct unbiased evaluations. In 2019, Albania reorganised its external school evaluation system by shifting responsibility from the independent school inspectorate agency to regional education directorates (REDs). Previously, due to budgetary constraints, the inspectorate agency was able to conduct only a few external evaluations (Maghnouj et al., 2020[14]). At present, each RED has only four staff dedicated to this work while Albania counts a total of 3 759 schools at the primary and secondary levels (Wort, Pupovci and Ikonomi, 2019[24]). As REDs also have the role of supporting schools to improve their performance, the integrity of their external evaluation of the same schools could be compromised (Maghnouj et al., 2020[14]).

Albania could consider increasing funds for education, as well as resort to potential funding reallocation. At 4% of GDP in 2019 Albania’s spending on education is in line with regional peers, albeit lower than EU (4.6% – 2018) and the OECD (4.9% – 2018) averages (Figure 2.13 Panel A of Chapter 2). As a share of total government expenditure on education, most (56.8%) goes to primary education, more than double the OECD average at 25.2% (Maghnouj et al., 2020[14]). Considering low government spending on pre-primary (15.6% of total spending on education) (NALAS/USAID, 2019[17])) and secondary education (25.4%) (Maghnouj et al., 2020[14]), some funding could be redirected to these levels – especially to secondary education, which is key for developing labour market competencies.

Building the capacities of REDs, local entities and municipalities can improve allocation of funds. While the largest part of pre-tertiary education funding comes from central funds, REDs and local education offices manage and distribute these funds to schools. Any additional funding streams are managed by local government units, such as municipalities. REDs and local education offices cover costs such as salaries of teaching staff, while local governments units deal with construction, infrastructure and maintenance. At present, the regional and local entities often lack the financial management capacities and human resources to manage funds and deliver decentralised services (Maghnouj et al., 2020[14]).

Considering the disparities across Albania, it would be important to better target the funding. While provisions in the law call for the pre-tertiary budget to be based on a per-pupil formula, this has not yet been implemented (Wort, Pupovci and Ikonomi, 2019[24]). Funding formulas provide an effective means to provide differential funding based on need and thereby help redress disparities (Maghnouj et al., 2020[14]). The peer-learning participants from Albania also stressed the need to invest in building and maintaining of dormitories at different levels of education. More dormitories, especially at the secondary education, would make it possible for young people from rural areas to have better access to education.

Given the lack of competencies currently in demand in Albania’s labour market, ensuring implementation of modern curricula that focuses on current and future labour market needs is critical. Employers often cannot find the right skills among workers: 44% of firms report being constrained by an inadequately educated workforce. Skills gaps are particularly high in larger firms and foreign firms, for both non-routine and routine tasks (Figure 3.2 – Panel A). At the same time, most firms in Albania do not provide training to their employees (Figure 3.2 – Panel B).

Albania has introduced competency-based curricula across all grade levels, but teachers require more training to implement the curricula and assess student performance. Since the school year 2019/20, competency-based curricula of pre-university education has been implemented while learning standards have been introduced as a baseline for syllabuses, teacher guides and other support material (OECD, 2021[11]). Competency-based curricula focus on student-centred approaches and developing higher-order competencies of students (Maghnouj et al., 2020[14]). However, teachers received only a three-day training on the new curriculum (European Commission, 2020[25]). At the same time, an ambitious assessment framework was introduced in line with the curricula reform, which teachers are struggling to implement (Maghnouj et al., 2020[14]).

Albania needs to address the oversupply of teachers and build on recently adopted teachers’ standards to improve teaching quality. In Albania, the length of ITE is comparable to the OECD average (Maghnouj et al., 2020[14]). Despite a current oversupply of teachers, there are no enrolment limitations for ITE (UNESCO, 2017[26]). In some rural areas, there are only five students per teacher. In recent years, Albania made entry standards for primary teachers more selective; this has not yet been applied to secondary teacher education programmes (Maghnouj et al., 2020[14]). Demanding standards for entry to initial teacher education programmes should linked to projections of the required teacher workforce (UNESCO, 2017[26]).

Through accreditation arrangements, providers of ITE programmes should be obliged to demonstrate that they will develop the required competencies of new teachers, as reflected in new teaching standards, giving particular attention to practical experience. In Albania, ITE programmes have no commonly agreed core; as such, large differences exist between programmes offered in different universities. Discussions are underway to align the ITE curricula with the competency-based curricula already being implemented in the pre-university education system (European Commission, 2021[27]). At present, new teachers face an onerous requirement to undertake a one-year, unpaid internship. This should be replaced by an induction programme to help novice teachers develop their classroom skills with the support of trained mentors. Novice teachers should undergo a rigorous appraisal process prior to full certification. Relevant criteria for initial employment should relate to teaching and interpersonal competencies evidenced during candidates’ studies, such as assessments or references from the practicum placement.

Albania should improve its regular teacher appraisals and better link them with career advancement and opportunities for continuous professional development (CPD). Although Albania undertakes annual teacher appraisals, these are rarely used to identify CPD needs (European Commission, EACEA and Eurydice, 2019[28]). Current appraisals are mainly based on quantitative targets (e.g. student grades) while lacking more qualitative criteria (such as a description of the teacher’s performance and learning objectives). The Quality Assurance Agency should accelerate its planned introduction of guidelines to support appraisals (Maghnouj et al., 2020[14]). Likewise, the appraisals are not used adequately to assess teacher promotions. Currently, promotion within the teacher career structure is based primarily on years of service and an exam prepared by the Quality Assurance Agency; these criteria do not adequately measure teaching competencies (Maghnouj et al., 2020[14]).

Making VET more attractive for students could play an important role in creating competencies needed to thrive in the labour market. Enrolment in VET is relatively low in Albania; in 2017, about 17% at upper secondary students were enrolled in such programmes, significantly lower than OECD (44%) and EU (48%) averages. One possible reason is that VET students can enrol in tertiary studies only after completing four years of vocational education, whereas only three years are required for students in general programmes. This difference makes general education a more attractive option for those planning to pursue further studies (Maghnouj et al., 2020[14]).

Albania is making important steps to better align VET with labour market needs. As part of the National Employment and Skills Strategy and its Action Plan 2019-2022, the Albanian government created an Integrated Policy Management Group (IPMG) with the objective to involve enterprises and business associations in developing occupational and qualification standards and in revising framework curricula (ETF, 2020[10]). The strategy also covers: the organisation of basic pedagogy training for all VET teachers and instructors; the creation of multifunctional centres catering to the needs of both young people and adults; and the development of flexible offerings for school- and work-based VET.

Work-based learning should be made mandatory during VET programmes and should be adequately regulated. In recent years, a new VET law has encouraged engagement between vocational schools and the private sector, especially through work-based learning. A new framework curriculum for secondary VET programmes allows for 30-35% of practical learning – to be implemented in real-work settings – during the first two years, 50% in the third year and 20% in the final year (Hilpert, 2020[29]). To date, work-based learning remains non-compulsory for initial vocational education and, in the case no company placement is found, the training is provided in VET school workshops. Regulation on obligations and rights of companies that receive students is in the drafting process but has not yet been implemented (ETF, 2020[10]).

Teaching quality in VET schools should be enhanced by exploiting the expertise of practitioners from the private sector and offering CPD to existing teaching staff. Developing options to exploit the skills of private sector practitioners with strong technical skills as instructors, possibly part-time, could enhance the quality of VET teaching and its labour-market relevance (Hilpert, 2020[29]). In parallel, both technical and pedagogical skills for teachers and instructors in VET schools should be continuously improved by introducing CPD opportunities.

Albania should increase participation in adult learning, especially by strengthening incentives for participation. In 2016, only 9.9% of Albanian adults aged 25-64 years participated in some form of formal and/or non-formal education, compared to 43.7% in the EU-28 (Eurostat, 2021[6]). Yet, in 2019, almost half (44.7%) of this age group had low educational attainment (meaning primary education or less), which is double the EU-27 average (21.6%) (European Commission, 2020[25]). Considering that long-term unemployment in Albania was about 64.3% in 2019, increasing participation in adult learning would be particularly important (World Bank/WIIW, 2021[30]). Broad-based collaboration between key stakeholders – including the private sector, trade unions, training centres and international partners – can create a platform to develop incentives for adult participation in training based on labour market needs. As mentioned in Section 3.1.1, Albania could build on the existing skills gaps to identify which types of skills are needed.

Complementary, it would be important to strengthen the provision of training for all skill sets, in all parts of Albania. VET is mainly provided by public vocational training centre. In 2019, only 15 154 persons participated in such training (European Commission, 2020[25]), while the number of long-term unemployed persons stood at about 106 000 in Q2 of 2019 (World Bank/WIIW, 2021[30]). Albania lacks adequate facilities and services to carry out adult learning, especially outside bigger cities. Courses offered in the VTC are mainly intended for persons with low skills. To address gaps in trainings for persons with medium and high skills, Albania is currently developing bylaws to outsource provision of training to private sector providers (European Commission, 2020[25]).

Albania should leverage its accumulated FDI to boost local competencies. Since 2007, Albania has attracted considerable FDI: at an average rate of 8.4% of GDP, its annual net FDI inflows over the period have been among the strongest in the region (World Bank, 2021[31]). A significant part of the uptake in investment relates to two large energy projects4 (35% of all FDI over the past five years). Remaining investments have predominantly been in the non-tradable sector, including financial services (9.5%) and real estate (6.5%). Most export-oriented FDI went to extractive industries (29%), while sectors such as manufacturing and ICT received less than 5% of total FDI over the past five years (Bank of Albania, 2020[32]). Over the past two years, FDI growth has also been sustained by small-scale investments.

To attract more investors, especially those with large spillovers in terms of skills and competencies, it would be important to streamline national and sectoral investment frameworks and strategically target investments that can build national competencies. The overall framework for investment and business conduct in Albania remains complex and hampers attraction of investment, especially in manufacturing. Currently, investment activities are governed by several general laws as well as sectoral laws and regulations,5 which makes business conduct complex. A new law, drafted in 2019, aims to simplify and unify existing legislation to improve and streamline the current complex investment regime. The Albanian Investment Development Agency (AIDA) plays an important role in developing linkages between local firms and multinational enterprises (MNEs). One of AIDA’s core pillars to attract investment has been to focus on strategic investments in key sectors including: energy and mining; transport, electronic communications infrastructure and urban waste; tourism (tourist structures); and agriculture (large agricultural farms) and fisheries (OECD, 2021[11]). Increasing the scope of its strategic investments can potentially attract investors in manufacturing and improve national competencies through linkages.

While foreign investors can bring important skills and competencies, higher skills also act as an incentive for foreign investors; it is thus important to foster development of skills and competencies and showcase them to prospective investors. About 32% of foreign companies report that the education system fails to meet labour market demand (ETF, 2019[33]). The ICT sector is among the fastest growing in Albania and has large potential for private sector investment (OECD, 2021[11]), but difficulties in recruiting staff limit its attractiveness.

Albania can build national competencies. Some estimates suggest that up to 1.6 million Albanian citizens live abroad – more than half of the total population (ETF, 2021[34]). Based on the OECD DIOC database (OECD, 2016[35]), of about 505 400 persons born in Albania who are living and working in OECD countries, 61.7% are employed in medium and highly qualified professions such as plant and machine operators and assemblers; technicians and associate professionals; professionals; services and sales workers; and craft and related trades workers (Figure 2.18 of Chapter 2). This indicates a great potential for knowledge transfer, particularly as the Albanian diaspora also maintains familial connections as evidenced through the large volumes of remittances. The share of remittances in GDP was 9.6% in 2019, in line with other regional economies (World Bank, 2021[31]).

Albania has in place a solid diaspora policy to mobilise and leverage its human capital potential and their capital. Since November 2019, the Albanian Diaspora Business Chamber, an independent non-profit organisation, attracts and supports investors willing to establish or expand their businesses in Albania. In addition, the National Strategy for Diaspora 2021-2025 (adopted July 2020 by the Council of Ministers) aims to mobilise professionals abroad and attract innovative investments from the diaspora.6Albania plans to tap into the diaspora through three policy actions: attracting investments from abroad, putting remittances to productive use, and ensuring knowledge transfer from the diaspora to Albania. Leveraging professional networks among Albania’s diaspora is key to implementing these actions. Examples of such initiatives include “Ready for Albania”, which invited Albanians living abroad to propose ideas and projects that could contribute to developing the economy. To date, hundreds of ideas have been submitted. The Albanian American Development Fund plans to establish a platform and a short-term fellowship programme to connect highly qualified Albanians to engage in educational transfer. Survey data among the scientific Albanian diaspora show that 88% would be willing and ready to contribute through co-operation with universities and other scientific institutions in Albania (ETF, 2021[34]).

To monitor the policy progress in digital transformation of the education system and other policy priorities in Albania, the OECD suggest a set of key indicators, including values for Albania and benchmark countries (either the OECD or the EU average, based on data availability). Table 3.1 provides the differences between the benchmark value and the value for Albania.


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[32] Bank of Albania (2020), Foreign direct investments flow (dataset), Bank of Albania, Tirana, http://www.bankofalbania.org/Statistics/External_sector_statistics/Foreign_Direct_Investments/Foreign_direct_investments_flow.html?evb=agregate&evn=agregate_detaje&cregtab_id=721&periudha_id=3 (accessed on 14 April 2020).

[2] Blindenbacher, R. and B. Nashat (2010), The Black Box of Governmental Learning, The World Bank, https://doi.org/10.1596/978-0-8213-8453-4.

[21] CoE (2020), ECRI report on Albania - sixth monitoring cycle, https://rm.coe.int/report-on-albania-6th-monitoring-cycle-/16809e8241 (accessed on 26 October 2021).

[34] ETF (2021), How migration, human capital and the labour market interact in Albania.

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← 1. Due to the outbreak of the COVID-19 pandemic, the foresight workshop was not held in Bosnia and Herzegovina.

← 2. Able to beat the odds and achieve high performance levels in PISA.

← 3. The key education agencies in Albania include the Quality Assurance Agency in Pre-University Education and the General Directorate for Pre-University Education, Educational Services Centre.

← 4. The Trans Adriatic Pipeline (TAP) natural gas network (which links Greece with Italy and other Western European countries) and hydropower plant investments on the Devolli River.

← 5. This includes the 1993 Law on Foreign Investment and the 2015 Law on Strategic Investments, as well as a number of sectoral laws and regulations (OECD, 2021[11]).

← 6. The National Diaspora Strategy 2021-2025 also aims to reorganise the management of migration flows, reform electoral citizenship to enfranchise Albanian voters abroad, and promote identity, language, culture and art.w

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