Albanian EU Integration and its Economic Convergence in the Agricultural Sector

Abstract

Recently, the core of political and economic debate in Albania consists on reflections related to increasing the Albanian competitiveness in international markets. Fiscal pressures, low labor costs in the Albanian market and the attraction of foreign investment during the last years seems to have not yielded the expected results, not only for being more competitive in foreign markets but even for domestic consumption. It is mentioned here domestic consumption because focused on agricultural sector, it can be considered as a strategic sector of the future in Albania, and especially the EU where we aspire to take part, requests from Albania to orient production toward agriculture. This sector although constitutes 22 percent of GDP and occupies 47 percent of total employees fulfills only a quarter of domestic consumption (INSTAT, 2013). The impact of this sector in EU countries is only 1.7 percent. These indicators are simple enough to understand that even though agriculture is the most important sector of the country, from the standpoint of employment and the strategies remains still one of the sectors with the lowest productivity in Europe and shows that our country in order to achieve EU levels, has a lot of work to do and it is very essential for this process taking in consideration or paying attention to the "best practices" of this sector to reduce the gap created between Albania and the EU countries if we truly aspire to become part of this family. It is often discussed about the stimulation of foreign enterprises to displace a part of their manufacturing in our country. Or more precisely, it has often been demanded that foreign enterprises should operate in traditional sectors with output compartments that use a non-specialized labor intensive. According to modern economic theories, low labor cost is one of the primary factors in the international fragmentation of production (Lucas, 1988; Stokey, 1991; Bassanini and Scarpetta (2002b). While talking about labor cost, this should not be confused with low salaries, because not always a low salary coincides with a low labor cost. The problem of these entrepreneurs is the fact that although they shift their production to countries like Albania, they do not create a long-term cooperation with these countries. Not even a distribution of technology or an increase of total productivity is noticed, even in those sectors where there has been a shift of production. The objective of this paper is to measure the convergence in the agricultural sector and the role that integration has played in the economic development of the country in order to give some modest suggestions for policy makers which may be necessary for designing development strategies in the future