Balkans Must Focus on Knowledge-Based Economy

Camille Nuamah

Balkan countries have made little progress in the last decade in developing a knowledge- based economy, stagnating in an environment that is not conducive for knowledge based economic development.

According to the recently published World Bank Knowledge Economy Index, KEI, new EU member states Bulgaria and Romania lead the region ranked respectively in 43 and 47 place, out of a list of 145 countries.

The other countries quoted, include Serbia ranked 53, Macedonia 58, Bosnia and Herzegovina 79 and Albania 93.

Apart from the comparison with other countries, the region has made little progress in its KEI score, when compared to the first time it was measured in 1995, with Albania even backsliding - albeit by just a single point.

All indicators underlying the Knowledge Economy Index track structural features of an economy and usually change slowly over time as a result of deep institutional reform and long term infrastructural investments, in anything from Information Communication Technology, ICT, to universities, but more importantly, in establishing policies and institutions that can translate knowledge into innovation with direct effects on economic outcomes, explains Camille Nuamah, World Bank Country Manager for Albania.

“Due to the low initial level of infrastructure and institutional quality, the Western Balkans, as a whole, and Albania, in particular, can hardly be expected to excel in a global ranking,” Nuamah notes.

In Albania for example the economic incentive and institutional regime, which is an average of key variables like tariff barriers, regulatory quality and the rule of law, have actually worsened since 1995, according to the index, as has the score for the impact of information and communication technologies. Meanwhile, education and innovation have seen moderate progress.

“Albania still ranks poorly in all underlying indicators ...[ ], however in recent years we have seen a resurgence of efforts towards more investments in a knowledge economy framework with the passage of some key legislation, such as on digital signature, as well as focused reforms, “Nuamah said.

As has been also pointed out in the Investment Climate Assessment report of the World Bank, the rule of law and regulatory quality, frequently changing or differentially interpreted legislation, the gap between formal laws and their implementation and enforcement are critical issues for Albania, which should be tackled head on since they cause economic uncertainty.

“If the regulatory quality improves per se, but the rule of law falls behind, both the domestic and foreign investors will still face uncertainties regarding investment in Albania,” Nuamah said.  

According to Nuamah much of the earlier progress in the region has been focused on rehabilitation of physical infrastructure and reallocation of resources from an inefficient industrial complex toward more productive activities and the knowledge economy agenda is a fairly recent one, which has made some progress, but only in recent years. 

However she warns that in the long run its consequences for the real economy are very important and the region cannot afford to fall behind.

“Slow progress in translating knowledge into innovation - which for our countries is more likely to mean effectively adopting knowledge developed elsewhere - prevents reaching and sustaining a higher growth path, resulting in slower convergence to higher incomes per capita,” Nuamah underlined.