Conditions for Re-Opening Exports of Albanian Mussels to to the EU

The Centre for International Development (CID) at Harvard University has been leading a two year project with the Government of Albania to help identify and implement growth strategies by studying the constraints that bind specific sectors. In May this year, the Ministry of Agriculture tasked CID to look at the ban imposed by the European Union (EU) on the export of mussels from Albania. The research was sponsored by the Open Society Foundations, as a part of the grant OR2013-10995 Economic Growth in Albania granted to CID.

During the research project, we studied the value chain of mussel production and certification in Albania, mapped the requirements laid down by EU legislation and identified shortfalls in compliance. This report presents our findings and recommendations.

The Butrint lagoon is the main production center for mussels in Albania. By 1989, production from the lagoon had increased to 5,000 tons per year. It dropped dramatically in the 1990s due to an outbreak of cholera and the subsequent ban on the export of mussels by the EU. The ban has not been lifted since. Albania still cannot export mussels to the EU because these do not meet the required sanitary standards.

Our research finds that lack of reliable and affordable purification facilities is at the root of the problem. Unless this constraint is alleviated, it will continue to frustrate efforts to ensure compliance with standards.

Fresh Tomatoes: Ideas to Build a Productive Ecosystem in Albania

During the last years production of fresh vegetables in Albania had an important growth due to the increase in the number of Ha using Greenhouses technologies. Many of the new investments came from former expats who spent a few years working abroad and came back -in some cases because of the crisis in Greece – with money and some experience in the field. However, although exports showed an important growth (in tomatoes, for example exports doubled from 2013 to 2011!), the sector has not been able to definitely take off and be a relevant player in the international market. The problem is not only that the share of Albania in the European trade is almost negligible but also that diversification didn’t happen, quality has not improved and as a consequence the prices that Albanian producers get is very low – the lowest in Europe for some products like tomatoes. In this context, Albania has been focusing on the regional markets (probably not consciously but as a consequence of not having established a commercial relation with higher-end markets and not having a proper quality produce to offer), has been excluded from the best markets and has not improved the productive methods, practices, etc. Given this situation the building of new capacity was not necessarily a success: local markets started to be oversupplied and production losses are very high as a consequence.

In this report we analyzed the value chain of the fresh vegetables sector, focusing on the production of tomatoes. We detail the problems of the whole value chain (from the production to the marketing), pointing out the “missing links” that are preventing Albania to become a major tomato exporter in the European market. We find that there is a huge potential for the country – in terms of the natural conditions and also in terms of competitiveness -, but it is very difficult to be reached without making a re-organization of the sector to make it more integrated and give the proper incentives to solve simultaneously all the problems.

We found that in order to improve the general productivity of the sector it is not necessary to make huge capital disbursements. Although some of the constraints are clearly money-related, most of them are organization-related.

What the propose in this report is a method to re-organize the sector in a way that makes it easier for the economic agents to vertically and horizontally integrate and transform the sector into a “factory”, where every participant has its defined role and work is divided with specific roles. The role of the Government is twofold: first, to facilitate the organization of this model, find the actors that can lead the change and provide them the incentives to coordinate. Second, to provide all the public goods that are now missing or incomplete (not only in terms of infrastructure but also in terms of marketing, negotiations, etc). In the next sections we explain with detail the constraints and missing links we found throughout the value chain of tomatoes and propose a new model to solve them. We show that with little organizational changes, Albania could increase its tomato exports by four times in a few years.

Constraints to Sustained and Inclusive Growth in Sri Lanka

In late 2015, CID was requested to conduct an initial analysis of constraints to sustained and inclusive economic growth in Sri Lanka. The findings of this analysis were presented at the Sri Lanka Economic Forum in Colombo in January 2016. This presentation outlined the initial findings and offered a series of questions that were then discussed at length with policymakers and academics during the two-day forum. The initial analysis found that recent growth and the sustainability of growth moving forward are constrained by weakness in Sri Lanka’s balance of payments, where a trade imbalance combined with low levels of foreign direct investment effectively puts a speed limit on economic growth. While monetary and exchange rate policy could be used to soften this constraint, solving the underlying problem requires structural transformation, which has proven difficult in Sri Lanka. At the same time, the analysis identified the government’s inability to raise revenues as a major risk that threatens to be more binding moving forward. Finally, the analysis identified the primary dimensions of inequality in the country as between regions and between cities and rural areas.

Sri Lanka’s Edible Oils Exports

By request of the Government of Sri Lanka, the Growth Lab at Harvard’s Center for International Development reviewed edible oils exports in September 2016 based on the latest available international trade data. The analysis identified the products and markets key to Sri Lanka’s edible oils sector and compared with competitor countries. Although edible oils are non-complex products that make up a small share of the country’s total exports (0.5% in 2014), they help to diversify Sri Lankan exports and may serve as stepping stones toward further diversification into other more complex exports in the future. Coconut oil, which made up 86% of Sri Lanka’s edible oils exports in 2014, is particularly promising, with exports growing by more than a factor of 10 in just five years and much room to grow based on global demand.

Targeting Investment from Japan: Promising Leads in Targeted Sectors in Sri Lanka

In October 2016, at the request of the Government of Sri Lanka and in advance of a investment promotion trip to Japan, this presentation was prepared to experiment with new forms of communication to Japanese industry groups. The Growth Lab at CID used export data, qualitative research on companies, and comparative work on free trade agreements to identify promising opportunities for Japanese investment in Sri Lanka in targeted sectors, which were emerging through work by Sri Lanka’s Ministry of Development Strategies and International Trade with the support of CID.

Immigration Policy Research

Immigration and Economic Transformation: A Concept Note

Ljubica Nedelkoska, Tim O’Brien, Ermal Frasheri, Daniel Stock

In May 2017, CID prepared a concept note that described the connection between immigration and knowhow transfer internationally and profiled the current state of low immigration levels and immigration policy issues in Sri Lanka. The note identifies immigration policy reform as an important area of opportunity for unleashing higher levels of entrepreneurship and the introduction of new knowhow for economic diversification in Sri Lanka, but stops short of providing specific recommendations. Instead, the note lays out broad ideas for making immigration policy more flexible and encourages the Government of Sri Lanka to activate a cross-government policy team that is capable of developing reforms that meet Sri Lanka’s particular needs. 

A Comparative View on of Immigration Frameworks in Asia: Enhancing the Flow of Knowledge through Migration

Ermal Frasheri, Ljubica Nedelkoska, Sehar Noor, Tim O’Brien

Later in 2017, at the request of a policy team of the Government of Sri Lanka, CID conducted research to compare immigration policy frameworks in other countries in Asia to understand promising policy options for Sri Lanka. Our resulting research note focuses on Indonesia, Vietnam, Thailand, Malaysia, Hong Kong, and Singapore. We find that the immigration policies of the six countries vary across numerous dimensions as each country prioritizes attracting the talents, skills and resources it needs from abroad in different ways. These variations provide a range of examples that may be relevant to decision-makers in Sri Lanka. Additionally, we find an emerging pattern among the six countries where more developed economies tend to have more elaborate immigration systems and target a more diverse set of people. By looking at available data, we also confirm that more elaborate immigration systems are closely associated with more actual immigration, higher presence of foreign firms, and higher levels of foreign direct investment (FDI) among this group of countries. Based on the comparative analysis, together with the issues identified by the Department of Immigration and Emigration’s Gap Analysis, it is possible to identify a number of principles around which future immigration reform in Sri Lanka should be organized. 

Increasing Your Chances of Success while Leaving Your Comfort Zone: Adapting Sri Lanka’s Growth Model

View Ricardo Hausmann’s presentation to the Ministry of Development Strategies and International Trade.

Accessing Knowhow for Development

Economies grow by adding new products and services to their production portfolio, not by producing more of the same kinds of products. The key to such diversification is access to know-how, but know-how often has to come from abroad. This is because it is often easier to move brains to new countries than to move new know-how into brains. In the experience of Singapore, India, Vietnam and most other dynamic economies, three channels of know-how transfer stand out: FDI, immigration and diaspora networks.

In this lecture, Professor Hausmann explores the relationship between economic development and the accumulation of know-how. In particular, he discusses how to tackle Sri Lanka’s limited export diversification.

Video – Accessing Know-how for Growth in Sri Lanka
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Video – Full Q&A on Sri Lanka’s export diversification
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Can Industrial Zones Address the Binding Constraints to Sri Lanka’s Growth?

This note collects evidence related to possible constraints to economic growth, and their relation with GoSL’s industrial zone development agenda. We find that new zones are especially well-suited to help address Sri Lanka’s lack of industrial land and high policy uncertainty, both of which may be holding back growth. Less clear, however, are zones’ impact on Sri Lanka’s limited transport links beyond the Western Province. Finally, partnering with well-connected zone management companies may also help create opportunities to connect with firms in new, non-traditional sectors.

Diversification in the Industrial Sector of Albania: Identifying Strategic Areas

In this study, we analyzed Albania’s industrial exports using the frameworks of the Product Space and Economic Complexity in order to determine which products Albania could diversify into in the near future. In particular, we identified groups of products that are technologically close to those which Albania already exports and which at the same time are technologically more sophisticated (more complex) than Albania’s average exports. This analysis does not suggest that products that do not fulfill the criteria of technological proximity and product complexity should not be invested in. However, it suggests that some products may have higher chances of succeeding in Albania because of its existing technological capabilities, while also bringing about diversification towards more complex, higher value-added production.

We find that the top two sectors that satisfy the criteria of being in close proximity to the existing technological capabilities in Albania, while also having relatively highly complex products, are Plastics/Rubbers and Agriculture/Foodstuffs. Within each of these sectors, we list more specific products that make for good candidates for diversification.