The Curious Case of Albanian Mussel Exports

By Alejandra Jimenez

Albania is blessed with a long marine coast and abundant inland waters including rivers, lakes, agricultural reservoirs and coastal lagoons. But in spite of the abundance of its water resources, Albania is a net importer of fish. The Ministry of Agriculture, Rural Development and Water Management wants to turn this situation around by understanding and eliminating the constraints on exports faced by the aquaculture industry in general and the mussel industry in particular.

In 1994, after a cholera outbreak, the European Union (EU) imposed a ban on all exports of living products from the fishery sector, and Albanian mussel production collapsed. Mussels had been produced primarily in the Butrint lagoon, at Albania’s southern tip, since the 1960s, with annual production ranging from 2,000 tons to a maximum of 5,000 tons in 1989. Our objective, as Harvard CID interns in the Ministry of Agriculture, was set in front of us eight weeks ago: understand why Albania has not been able to eliminate this ban on mussel exports that is now over 20 years old.

Our work has consisted of visits to aquaculture production sites, talks with all relevant stakeholders, and independent investigative research. We first catalogued the assumptions we encountered about the export ban, and then searched for evidence to support or debunk them. We found that the persistence of the ban has been attributed by various hypotheses:

  1. Mussels produced in the Butrint lagoon are not safe for human consumption
  2. Though mussels are safe for human consumption, the Albanian government does not have the capacity to prove compliance with European food safety standards and stop eventual hazardous batches from reaching the market
  3. Production and consumption of mussels is informal and does not create the incentives to produce in accordance with costly food safety standards
  4. EU countries, particularly Greece and Italy, are interested in maintaining the ban so as to protect their exports from competition from the famous Butrint mussels

So which, if any, is correct? Let’s turn to the evidence, checking the hypotheses in reverse order. The most optimistic numbers place the potential for Albanian mussel production at 8,000 tons a year, a number that is almost insignificant when compared with the more than 300,000 tons of Mediterranean mussel produced elsewhere in Europe. In this context, a conspiracy to ban Albanian mussels based out of Italy or Greece is highly unlikely.

Butrint lagoon in Albania

The third hypothesis, however, seems more plausible. Mussel production and sales are, in fact, very informal. Only 25 mussel farmers have approval to produce in the Butrint lagoon (photo). The inspectors in the zone know these farmers personally and do not always enforce all contract clauses, including the government’s requirement that the mussels from the lagoon must undergo a purification process (called depuration) before entering the market. The inspectors argue that the tests done on the water imply the mussels are safe for consumption and therefore that depuration is unnecessary. Besides, restaurants buy the mussels even if they haven’t undergone the depuration process. Meanwhile, the inspectors do not face a punishment from the central authority when they do not enforce the food safety procedures established by law. Central authorities argue that the production is too small to make the purification process profitable, and that it would be done if production were large enough. They believe they have the capacity to enforce the food safety standards but will only do so when the production is large enough to make the process worthwhile.

The Food and Veterinary Office of the European Commission has a different assessment, in line with the second hypothesis. In audits made in 2007 and 2011, they point out deficiencies, both in implementation and in technical capacity, that undermine enforcement of the standards meant to guarantee that mussels produced in the country, and in the Butrint lagoon specifically, are safe for human consumption. The 2011 audit states that the government has made progress since 2007, but that some work remains to be done before food safety is ensured and the ban can be lifted. Testing of both the water and of the mussels needs improvement. The government laboratory is not able to run some of the tests that the EU requires and transportation of the samples is slow, allowing microorganisms to grow and the tests to be undermined. Additionally, inspections fail to meet standards for formalization and documentation. The EU’s regulatory bottom line remains that the depuration process must happen as long as the lagoon waters are classified as a “B” area by the Ministry of Agriculture, which they currently are, and the inspectors must be able to respond immediately to stop a hazardous batch of mussels.

Accordingly, the first hypothesis, and whether or not the waters of the Butrint lagoon are free of pollution and mussels produced are generally safe for human consumption, is irrelevant because there is no system in place to attest that this is the case for each mussel to be exported. In reality, safety for human consumption is not a constant as environmental conditions can damage mussels at any time, which is why the EU requires a reliable system be in place to ascertain food safety continuously. That said, local and central authorities have worked hard to improve the quality of the Butrint lagoon water, and sources of pollution have been reduced: there is almost no agriculture in the zone, and no untreated waters are discharged into the lagoon by the towns nearby.

So what is the reason that the ban is still in place? It is not the mussels themselves and it is not a conspiracy. The second and third hypotheses both hold some truth, and given this situation, removing the ban on Albanian mussel exports has become a chicken-and-egg problem. Inspectors do not have an incentive to fulfill their responsibilities because they are convinced that the problem is not their control, but in the low production.The domestic market remains small and the ban on exports removes any profit incentive for higher production by cutting off sellers from international buyers. Removing the ban requires a system with reliable testing where inspections to assess compliance with regulatory standards are properly done. However, both testing and inspections seem overly costly at the current levels of production.

Breaking the cycle implies a shock to the system. This could be a strong initiative within government to make the public inspection and testing system work; it could be organized pressure on the government from the communities that stand to benefit from mussel exports; or this could be the entry of a large private player that would own the mussel production and internalize the need for EU compliance. Any solution would entail better organization on the part of the government and also paying some form of upfront costs—as even the entry of a private company would require contracting and oversight. Meanwhile, fixing the system is not outside the capabilities of the ministry, and the government has even received external assistance for this goal. However, as is often the case, the challenge is not only technical but also bureaucratic—someone must take the initiative to reverse the cycle. Our hope is that by debunking some of the myths of this curious case, we can make this outcome more likely.

The Unknown of the Balkans: Albania and Foreign Investment

By Emmanual Steg

Albania has a two-headed eagle on its flag to symbolize a country that looks both towards the West and the East. However, since the end of the Second World War, Albania has been curled up and unable to open up to a dynamic Europe. During the Cold War, it was the most reclusive country in Europe, finding an ally only in the distant People’s Republic of China, and even after the fall of communism, Albania remained an anomaly among its Balkan neighbors, who were painfully taking back their place at the heart of Europe. Why would a country just off the coast of Italy and mere hours from Western European capitals have so much trouble attracting foreign investors?

History has not been kind to the Albanian people. Barely half a decade after the fall of communism, the country teetered again on the brink of collapse when large pyramidal schemes failed to make payments. Those schemes represented up to half of Albanian GDP and offered annual interest rates as high as 100%. With their collapse, rule of law virtually disappeared: legend is that more than a million guns were looted from military reserves. Though Albania is now a politically stable country, those images still hurt its reputation abroad.

Even now, Albania is still fighting to shake the remnants of the communist era. And although there has been improvement in the last few years, Albania still consistently ranks in the bottom half of Transparency International’s Corruption Perceptions Index, lagging behind its neighbors. Foreigners in Albania remain reluctant to invest in a country where the judicial system is perceived as unreliable (a planned reform of the justice system has just been announced by the current government). From the outward signals, it is not hard to see why the rest of the world has been avoiding Albania.

However, they would be mistaken to do so. The potential offered by Albania is almost dizzying. Out of all the possible industries, three are especially interesting.

Tourism – As of today, tourism represents less than 5% of Albanian GDP, while it accounts for up to 10x that share for its direct neighbors. The Albanian coast is an untouched jewel, reminiscent of the French Riviera a hundred years ago. The region from Vlora to Saranda is especially magical: the coast is a succession of daunting cliffs and small sandy beaches, bordered by a pale blue sea. The backcountry is just as impressive; the tall mountains allow hikers to discover traditional villages, natural wells, and UNESCO World Heritage ruins.

Energy – Albania has been blessed with many bountiful energy sources, from oil to hydropower. Although still a net importer of energy, recent years have seen considerable investments in this sector that will allow Albania to become a regional power in electricity. The planned creation of an energy market will allow the government to provide a clearer business environment for investors, who will be able to efficiently and transparently sell their production.

Manufacturing – Albania is not only located close to the big European economies; it also has a population that is young, well-educated (most speak Italian or English), hard-working and inexpensive (minimum wage is under 160 euro per month). This should allow the big manufacturing groups of Western Europe to position reliable factories at their very border for a fraction of the cost it would be at home.

Albania’s potential is slowly being discovered as it starts to open up to the rest of the world. The next ten years may well see dizzying growth coming from the center of Europe.

Beyond Remittances: Engaging the Albanian Diaspora in Development

By Sarah Zehner

Since 2001, a growing number of developing countries have established ministries, government departments or other official institutions dedicated to their diasporas. Albania, which has a Diaspora Unit within its Ministry of Foreign Affairs, is among this group. This shift worldwide is consistent with the recognition that diasporas can contribute greatly to both economic and social development in their countries of origin. In a recent article, Ricardo Hausmann refers to opportunities for diaspora engagement as ‘The Diaspora Goldmine’. But what makes a country’s citizens living abroad so valuable? And how does the Albanian diaspora play a role in Albania’s development.

Perhaps the most tangible way that diasporas contribute to the development of their home countries is via remittances. According to the Bank of Albania, remittances flowing into Albania increased by 8.6% from 2013 to 2014, reaching the amount of EUR 592 million. This is the equivalent of 5.6% of Albania’s GDP. These remittances supplement the incomes of households, serve as a critical source of foreign exchange, and help to promote macroeconomic stability. 

However, remittances are only one small part of ‘The Diaspora Goldmine’. In its publication, Developing a Road Map for Engaging Diasporas in Development, the International Organization for Migration (IOM) lists six ways in which diasporas can play an influential role in their home country’s development: remittances, direct investments, human capital transfers, philanthropic contributions, capital market investments, and tourism. To help better understand and facilitate these types of diaspora engagement, the Economic Growth in Albania Project at CID launched its Albanian Diaspora Program earlier this year.

With over one-third of Albanians living outside of their home country, migration plays a critical role in economic and social change in Albania. Most Albanian emigrants live and work in neighboring Greece and Italy, while the United States is the third most popular destination. Earlier this year, CID did a statistical profiling of Albanian-Americans and found that this group is highly skilled and educated, with most of the population concentrated in just a few states. In March, the Diaspora Program conducted online surveying that confirmed that Albanian-Americans’ high levels of human and economic capital could be better leveraged to spur inclusive growth within Albania. The survey found that the diaspora is willing, able and committed to engage in the development of Albania through education, professional exchange, humanitarian aid, business development, trade, and investment.

The Diaspora Program is now working to bring stakeholders together in order to move toward this vision. You can follow along here and learn more about what the Diaspora Program is doing this summer through the Global Albanians Newsletter. 

Energy as a Big Opportunity in Albania

By Juan Domingo Riesco

This year, Albania’s Parliament approved an ambitious new electricity law. With it, the country is trying to complete the unbundling of its electricity generation, transmission and retail; move toward a non-discriminatory competitive market; and integrate more fully with the rest of Europe, both in energy markets and energy priorities. If that sounds complicated and technical, that’s because it is.

Upon the foundation of the law, the Ministry of Energy and Industry is now working to develop specific procedures and regulations designed to increase the overall supply of energy, decrease losses of electricity in the system, improve service to customers, and reduce financial risk to the government—all within sustainable market systems. The devil is, of course, in the details, but the Ministry is using hard data to rank options and knowledge of international experience to avoid the pitfalls that have derailed a similar process in other countries.

So how important are these electricity reforms in Albania? The answer: hugely. According to business surveys, 21.6% of Albanian firms identify electricity as a major constraint to doing business—higher than accessing finance, taxes, corruption, education levels or transportation. This leaves Albania ranked 152nd out of 189 countries on ease for firms to connect to the electricity grid. And these are, by necessity, only firms in the industries that can survive in Albania. Industries that require large amounts of electricity do not report because they do not exist. Progress on the Ministry’s reform initiatives should help to solve that problem. It may take time, but with well-structured reforms we would expect the share of electricity-intensive industries to grow in Albania’s export basket, helping to generate new permanent employment.

For these and other reasons, getting the technical details right is important. Here is some of what to look for as the Ministry continues its efforts.

In 2019, when the new law is fully implemented, there will be a large flux of high-consumption customers (mainly businesses) moving from regulated to open markets, where tariffs will be market-determined rather than fixed by government. For this to succeed, new markets (day ahead, ancillary and balance) must be in place and complete. Incentives must be structured such that electricity users and electricity sellers both benefit from making the switch and such that generators, transmitters and distributors internalize the need to increase efficiency and invest in their assets. Albania will also systematically integrate into a market much more developed and 654 times bigger than its own. If successful, this will improve energy security and quality of service, while also lowering business and commercial risks to invest in the country.

Albania should view the new framework as a big opportunity for its economic participation in Europe, and ministries must join together to take serious steps to eliminate distortions that could reduce the scope of the gains. A good experience in the electricity transition will improve the overall business environment and will provide better opportunities for industries that depend critically on cheap and reliable energy. If matched by appropriate industrial policies, this could increase economic diversity and complexity, enhancing productivity and economic growth, which the single most important determinant of consistent increases in living standards and reductions in poverty.

The new law and integration may also provide benefits in other ways. First, if investments complement reforms and water storage management is improved, Albanian power, which is already highly valued for its cleanliness and low operating price, could be prized for its flexibility as well. Connecting with markets abroad may allow for the export of electricity at peak hours, improving the trade balance and serving to attract new energy investment. Second, reforms could pave the way for optimized access to and use of natural gas from the Trans Adriatic Pipeline, which is planned to become operational in 2020. Such could allow for much needed diversification of Albania’s electricity production.

With well-designed and implemented public policy, several countries have improved their position significantly in just one generation. One such case is my country, Chile, which was able to quadruple its GDP per capita and reduce poverty from 39% to 8% in just 25 years. In all such cases, there were binding constraints that needed to be lifted to unleash the country’s true potential. This required long-term solutions to complex problems. In Albania, electricity is one of those types of constraints, although maybe not exclusively. The new electricity law is one step toward a long-term solution, but it is one among many steps. The focus on designing procedures and regulations must now remain detailed, and the responsibilities must eventually be shared, to take advantage of a big opportunity.

European Aspirations in the Balkans

By Ishani Desai

“Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.”

– Robert Schuman, 9 May 1950

In his historic declaration in May 1950, Robert Schuman, the architect of Europe, voiced his determination to merge the economic interests of his region and raise living standards, and to eventually create a more unified Europe. The result—the European Coal and Steel Community (ECSC), which included six Western European countries—was the first supranational European institution and would ultimately pave the way for today’s European Union (EU).

Since 1950, the EU has grown to include 28 member states with six others recognized as candidates for membership, including Albania, Serbia, Montenegro, and Macedonia. Bosnia and Herzegovina and Kosovo, for the time being, are potential candidates because they have not yet submitted membership applications. In order for any of these Western Balkan nations to join the EU, they must leave the divisive “balkanized” politics of the past behind and strive for regional cooperation.

Arriving in Albania on the eve of Tirana Talks, a meeting of the Vienna Economic Forum, I was welcomed to a decorated Tirana full of security guards, blocked streets and traffic jams. This was, in part, due to the first ever visit by a Serbian Prime Minister to Albania. The scene must have resembled that of Belgrade last November, when Albanian Prime Minister Edi Rama’s visit to Serbia marked the first for an Albanian head of government since 1947.

In total, Prime Ministers from all six Western Balkan nations were in attendance in Tirana to discuss regional collaboration and prepare for the upcoming Vienna Forum in August. Their shared aim was simple: faster EU accession supported by improved regional integration. While disputes surfaced during the talks, this motivation ruled the day. An emphasis was put on increasing infrastructure and investment; however, securing funding for proposed projects remains a large challenge. To fulfill EU requirements, the region plans to invest in new highways to link ports and capitals and enhance mobility, to establish the first government-led regional youth center to foster social integration, and to work on linking energy markets. With the talks completed, the actions of the six nations over the next few months regarding these and other initiatives will be telling.

The priority of integration is clear within the Albanian Ministry of Foreign Affairs and is broadly supported by public opinion. The EU-funded Balkan Barometer 2015 Public Opinion Survey indicates that more than 84% of Albanians think that EU membership would be a good thing. Meanwhile, the surest path to EU accession is through regional integration. Although there are challenges to regional collaboration that are embedded in deep-rooted history and complex politics, the potential benefits are driving this priority today. One key idea is that regional cooperation will lead to regional security, which in turn will increase investments and help Albania (and the Balkan region) grow.

Working for the Center for International Development, my role for the summer is to help the Albanian Government explore ways to enhance regional integration and prepare for the next meeting of the Vienna Economic Forum. The Tirana Talks have set a positive atmosphere at the highest levels of government. The goal now is to design sound public policy, structure forward-thinking investment plans, and operationalize this spirit of regional collaboration into sustainable joint projects and initiatives. Trade is already encouraged in the region through the Central European Free Trade Agreement (CEFTA), but Albania must lead the push for still greater economic cooperation and improved social integration. Such is the only way to achieve the de facto solidarity that Schuman described more than a half century ago.

Kicking Off the 2015 Summer Internship Program

By Ljubica Nedelkoska

For a second year in a row, the Center for International Development (CID) at Harvard University is organizing a 10-week summer internship program as a part of the Economic Growth in Albania project. Today, 13 master’s level students from Harvard University stepped into government and ministry offices in Tirana, Albania to work towards development goals. About half of them will work at the Ministry of Economy and Tourism. The other half will join the Ministry of Energy, the Ministry of Agriculture, the Ministry of Foreign Affairs and the Albanian Investment Development Agency (AIDA).

Growth Lab interns seated at table with Ricardo Hausmann

 

Albania has ample economic issues to address, some of which are structural in nature and others which are driven by the recent developments in the Eurozone. While still struggling to break with its socialist past and build good institutions, the European economic crisis took its toll on Albania. Almost one-third of the Albanian population lives in Greece and Italy today – migration has been a major mechanism through which Albania reduced unemployment, maintained wage growth and alleviated poverty through remittances. The European Union is also Albania’s largest foreign direct investment (FDI) and trading partner, and ultimately, is the community Albania aspires to join in the near future. The long-standing mismanagement of public funds is why the country is now undertaking a major fiscal consolidation. With little room for fiscal maneuvers, the government, supported by CID’s project, has turned to a strategy of strengthening the productive capabilities of export-generating industries as well as creating opportunities for FDI investments. Like last year, this year’s internship program will help us advance the implementation of this strategy.

The interns will work on key elements of the growth strategy. They will:

Most students have a combined background in economics and policy, and bring a wealth of knowledge and experience into the program. They come from ten different developed and developing countries spread across four continents.

 

2015 Summer Internships with the Economic Growth in Albania Project

The Summer Internship Program of the Economic Growth in Albania Project is now recruiting Master’s level students to spend a summer in Albania working in areas that include but are not limited to:

We are looking for students who are interested in working at various government ministries for about ten weeks from end of May through July 2015. Students will work closely with Albanian senior officials to conduct research as well as policy and regulatory analysis. They will also receive close supervision from CID’s faculty and research fellows involved in the project. Familiarity with economic development theories and methods, and legal research and analysis are helpful for the internship. Familiarity with the country or fluency in Albanian is not required.

Assignments to students will be given by CID and their Albanian counterparts. Last year, the interns presented their findings before the Prime Minister and relevant cabinet members at a conference organized by the Albanian Government at the end of the internship program.

The internship is ideal for those who want to discover an unfamiliar country, work in an environment where politics, policy, economics and law are all intertwined, and be part of joint endeavor with CID in assisting a country in transition. The placement of students in various ministries will be done based on preferences and matching of skills with needs. CID will arrange accommodation for students in Tirana.

Eligibility
Harvard University Master-level students. Students from all Harvard Schools are encouraged to apply.

Funding
Students from the Harvard Kennedy School of Government are eligible for scholarships provided by the project itself. All applicants are encouraged to apply for school-specific scholarships (e.g., Harvard International Development Internship Fund).

Important Dates

Internship Information Session:

Date: February 12
Time: 4:10 pm
Location: Perkins Room, Rubenstein Building 4th floor, 79 JFK Street, Cambridge, MA.

Application Deadline: March 31, 2015

Throughout spring, CID staff will be available to provide continuous information and answer any questions that you may have. Please do get in touch with us!

The End of the Beginning

For such a tranquil airport, Tirana Nene Tereza has a dramatic setting. At 7am on a Saturday, awaiting a flight to Athens and on to London, the mountains that encircle the bright, modern terminal take on misty, mysterious quality in the morning sun. It’s the start of another hot summer day in Albania, and the end of an important first chapter in CID’s engagement with the government.

I am at the end of my second monthly visit to the country, visits that will continue over the next year as the Building State Capability program helps the Albanian government’s ‘Black Belt Teams’ – special implementation committees – drive delivery in priority growth sectors.

We are still in the early stages of a long engagement, but early August signaled the end for the 12 HKS interns who have been in Albania for the last few months embedded across the government, working side by side with civil servants and supporting ministers (as well as blogging here). It is a major transition point for the project, and more importantly for the government as many officials head into the customary August break.

The HKS interns have achieved a great deal. From education and agriculture, to electricity, extractives, finance, fason (manufacturing), industrial parks and more, they have spent time immersed in the challenges facing the country, and learning the challenges in moving the government’s agenda forwards. They have done vital research, analyzed policy and value chains, advised on implementation, helped coordinate the Black Belt Teams, and helped the government crystallize its agenda in many of its priority areas. They will come away with enormously valuable experiences, and will also have left an indelible mark on the ministries and colleagues with which they worked.

Their departure is a moment for pause, take stock, gather lessons learned and above all capitalize on the momentum they have generated. Each of the interns has helped both develop the strategic direction of their sector, and generate will and motivation to put strategies into action. This last part is always the difficult bit, to develop government bureaucracy – a bit like strengthening a muscle – to carry out the difficult, sometimes mundane, but ultimately transformative business of delivery.

And it is why the BBTs exist – to turn ideas and strategies into action. Working in four priority sectors for now – industrial zones, fason, agriculture and tourism – the teams match the right people with the right priority, and empower them to get things done. With they support of the Building State Capabilities Team from CID, the teams start with problems and develop solutions themselves. They learn as they go, iterating, muddling where necessary, but all the while developing ways of moving forwards that work in Albania. We are excited to see how much we can do in the next year together.

The first chapter of CID’s engagement is complete, and thanks to the interns and the many people involved in the project, tremendous work has been accomplished. The challenge now is to translate the analysis and policy development into concrete implementation plans, with clear steps and responsibilities, so that the teams can turn ideas into action. For our work with the Albanian government it is, to paraphrase Churchill, not the end, nor even the beginning of the end. But it is the end of the beginning.

About the author: Peter Harrington is a Research Fellow with CID’s Building State Capability program.

The “Black Belts” of Government Innovation

The Economic Growth in Albania project is focused on establishing mechanisms and practices within the public sector that will improve the government’s ability to develop and implement effective growth strategies. Many of the key growth sectors in Albania require coordination and implementation within and across several ministries, which can lead to delays and bottlenecks. CID has therefore worked with the government to establish “Black Belt Teams” aimed at facilitating problem identification and finding solutions.

The Black Belt Teams (BBTs), modeled after Toyota, are strategically formed to bring together diverse actors of an organization or a network of organizations to analyze problems and strategize solutions. The BBT structure allows civil servants to address issues in a more flexible manner, allowing for adaptation and iteration in the search for solutions. “The BBTs take people who know the system and processes and provide them with a vehicle where they can innovate and operate in a way they are not accustomed to,” says Brad Cunningham, CID Research Fellow.

In Albania, the first BBT was formed with the Ministry of Trade, Economic Development and Entrepreneurship to work on the “Fason,” or manufacturing, sector. Textile and footwear manufacturing made up 32 percent of the country’s exports in 2013 and employs approximately 6,000 people (of whom 95 percent are women). Until now the industry has mainly relied on its strategic location next to Italy’s large fashion industry and its comparatively cheap labor cost to stay competitive. To ensure the sustainability of the sector and the ongoing employment it provides, the government is working to encourage growth and the development of new technologies.

With leadership from the Deputy Minister for Trade, Economic Development and Entrepreneurship, the manufacturing sector BBT includes representatives from within the Ministry as well as the Albanian Investment Development Agency (AIDA), the National Employment Service (NES) and the Institute of Statistics (INSTAT). The BBT has been actively working to implement measures proposed in an incentive package developed earlier in the year in consultation with the private sector. The package includes fiscal and non-fiscal measures to promote growth, investment and technological improvements within the sector.

One of the measures included in the package is the establishment of a technology fund. “The financial capacity of private actors within this sector is low and small manufacturers often do not have the revenue to invest in technology and quality improvements,” explains Hanieh Mohammedi, an HKS Master’s student working with the BBT on the development of this fund. Estimated at 2.5 million USD for the first year, the fund will allow manufacturers to apply for government funding for new machinery, technological improvements or training and capacity development.   

With high unemployment rates throughout the country, the sustainability of the manufacturing sector is a key concern for the Ministry of Trade, Economic Development and Entrepreneurship, as well as other members of the BBT, such as the National Employment Service. Competing textile manufacturers worldwide are forcing Albania to take a proactive approach to remain internationally competitive. By working through the BBT, the ministry and government agencies have been able to identify obstacles to productivity improvements, such as lack of modern machinery and training, and develop effective mechanisms for tackling these obstacles.

Visit our Building State Capability website to learn more about Problem-Driven Iterative Adaptation.

About the author: Karen Vanderwillik is a summer intern for the Economic Growth in Albania project.

Taking a closer look at Albanian agriculture

From above, Albania is a picturesque scene of patchwork farms framed by mountain ranges, lakes and turquoise seas. Look a little closer and you may see a few greenhouses filling the narrow plots of land, goats being herded down dirt roads and chickens scattered across barnyards. A little closer and you may see a few larger fish farms and barns. However, across the country Albanian farming is predominantly small scale.

Agricultural production and export in Albania has been constrained by small and geographically fragmented plot sizes, unclear land titles resulting from the communist-era cooperative systems and limited capacity for technological development. Over half the population of Albania is employed in the agriculture sector yet it makes up only 16-18 percent of the country’s GDP. For small scale farmers, yields are low and input costs are high. Most agricultural inputs are imported, including tractors, fertilizers, and even chicks.

This summer, Koji Ito and Boban Paul, MPA/ID students at the Harvard Kennedy School, have been working with the Albanian Ministry of Agriculture and CID to study the value chains for poultry and medicinal and aromatic plants (MAPs), respectively. They are working with the government and local academics to study constraints and bottlenecks in these sectors and to develop potential policy strategies that could increase productivity. But to really understand the dynamics of agriculture in Albania, they needed to take a much closer look.

2014 growth lab interns Albania image4.jpeg

Koji Ito has been travelling around rural Albania with a counterpart from the Agriculture Ministry and two students from the Agricultural University of Tirana in an effort to interview poultry farmers and retailers first-hand and inquire into the production system, for which little information was available. “At first some farmers were not willing to talk to us,” says Ito, who explained that a good number of businesses operate outside the scope of the government and may prefer to be left untouched. “But others were very open and even interested in what this research is going to reveal about their industry.”

The poultry sector picked up quickly and well in the post-communism transition years; however, Albania still imports more than half of chicken meat on the local market. Most farmers rear chickens for subsistence purposes with minimal technology, and only a handful produce intensively to fill large urban markets. The government is considering potential policies for supporting growth in domestic poultry production, so as to reduce dependence on imports.

For medicinal and aromatic plants however, the focus is on increasing exports. Farmers and exporters of MAPs, particularly sage and lavender, feel there is potential for growth in this sector due to international demand. Boban Paul, along with local students from Agriculture University of Tirana, has been visiting MAPs farms primarily in Northern Albania, at the foothills of the Albanian Alps. By going into the fields and actually seeing how plants are harvested, they found that current production practices are actually not sustainable. “The farmers realize that some of the harvesting practices are leading to a scarcity of MAPs,” explains Boban Paul, “but they are not yet doing anything to change this.”

In Northern Albania, medicinal and aromatic plant farming makes up close to 35 percent of household income and about 18 percent of agricultural exports. However a lack of a quality controls and certification processes limits the market price Albanian producers can fetch for their plants. “Some exporters sell to Germany where they suspect the plants go through additional processing and quality management and are probably re-exported to the United States at a higher price,” explains Paul. 

Growth Lab interns conversing in the outdoors

The field research the students are undertaking will provide the Ministry of Agriculture with valuable data on the characteristics of Albanian agriculture at all stages of their value chains. Some of what they have discovered supports what the government already suspected, but they have also discovered interesting and important nuances about these sectors that will help guide policy decisions.

Field work can be difficult and time-consuming, especially when dealing with rough roads and language barriers, but it will help provide the Ministry with a much clearer picture of what the agriculture sector really looks like. For the students, the opportunity to meet with local Albanian farmers and producers has been informative and at times entertaining:  “During one field visit we asked a cultivator what he pays for fertilizer,” recounts Paul, “and the farmer answered ‘It depends on the cow!’”