Assessing Ict Role to Economic Convergence of Albania and Western Balkans to European Union

Abstract

The Western Balkans countries are still considered economies in transition. Coming from centralized systems with low level of GDP per capita the region can accelerate substantially the growth pace as lectured in neoclassical growth theory. The region is considered attractive for foreign investments due to a series of advantages such as the political EU agenda and vicinity to EU markets, low labour costs combined with relatively well educated people. The growth models recognize the importance of technology factor to sustain the productivity, competitiveness and economic growth. Promoting innovative businesses and introducing information and communication technologies (ICTs) will enhance the potentials for economic convergence towards developed economies such as EU. The aim of this paper is to bring in focus the impact of ICT on productivity in the Western Balkans (WB) as well as to the structural convergence within the region. One of the contributors for introduction of new technologies and use of ICT remains the foreign direct investments. The paper will assess the role of FDIs in modelling aggregate production reflected through the exports variety and in particular ICT and high technology goods exports. The methodology of the paper makes use of time series data for a set of indicators for each of the Western Balkans countries: Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. The main conclusion is that the Western Balkans and Albania have shown a slight trend of convergence of productivity among them and to EU by still is not following the same pace as the convergence of GDP per capita. The impact of ICT development in Albania at firm level but also at economic growth is lower than in other Western Balkans countries. The penetration of FDIs in Albania has generated limited contribution to the introduction of new technologies and sophistication of business models. Additionally, it is necessary to address some incentives to promote ICT businesses and professional skills in order to enable the innovation and competitiveness of Albanian economy. JEL classification: F15, F43, O16, O47.