Skills and Smart Specialisation in Montenegro and Moldova

Since 2018, the ETF has not only embraced smart specialisation, an innovative policy approach that drives innovation, but has enriched it by ensuring that skills are part of the mix. Initially developed by the European Commission’s Joint Research Centre, smart specialisation aims to boost jobs and growth by enabling countries and regions to better exploit their competitive advantage. Smart specialisation has been deployed successfully in EU countries, which has prompted the European Commission to share its benefits beyond EU borders, including the ETF’s partner countries, where it can promote decentralised, innovation-led economic transformation.

Stakes

Analysing skills supply and demand is essential to smart specialisation strategies. Indeed, human capital is a key component of innovation ecosystems, on a par with science, research and technology. Yet, vocational education and training (VET) along with skills development are not central to smart specialisation strategies. For this reason, in 2019, the ETF teamed up with two of its partner countries, the Republic of Montenegro and the Republic of Moldova, to redress the imbalance and connect VET as well as skills to the broader drive for innovation, growth and competitiveness.

Two pilot studies emerged from this collaboration. The studies examine the priority areas identified through the smart specialisation process from a skills perspective. In this way, both skills supply and demand are evaluated for each priority area. This has led to recommendations on how to equip the Montenegrin and Moldovan labour forces with the skills necessary to ensure growth in the selected priority areas.

Selecting priority areas in Montenegro

The selection of Montenegro’s priority areas, renewable energy sources and sustainable health tourism, was based on economic and labour market analysis that reveal their capacity to grow, innovate and create quality jobs. Renewable energy sources can exploit the country’s rich natural resources and is primed for innovation. Also, it is highly correlated with other economic sectors such as tourism, transportation, construction, agriculture and industry. Tourism, in general, is one of Montenegro’s strongest economic assets with almost 25% of the country’s GDP in 2018. Before the pandemic, revenue and investment in the sector were steadily increasing while global health tourism was experiencing 15% to 20% growth indicating the sector’s strong potential. Moreover, growth in this sector will spill over to the sectors with which it intersects such as energy, agriculture, industry, transportation and ICT.

Identifying skills supply and demand in Montenegro

Both priority areas require technical, linguistic, digital and personal skills. Renewable energy sources specifically calls for engineering competences along with the ability to use tools and machinery, and make evidence-based decisions. Sustainable health tourism requires health competences as well as the ability to make evidence-based decisions in terms of diagnosis and therapy prescription. The other skills requirements are the same for both priority areas: fluency in several languages, especially English; mastery of digital technologies; and finally, social and learning-to-learn competences including self-knowledge, self-education, teamwork, resilience, time management, and career management.

Selecting priority areas in Moldova

Moldova’s preliminary priority areas are energy development and food processing development. Moldova’s energy dependence on Russia and the Ukraine represents a huge burden especially for a growing economy. For this reason, Moldova’s energy policies seek to enhance energy security, reduce CO₂ emissions and promote the sustainable development of its economy. The Moldovan government has recognised the energy sector’s potential for economic growth and job creation. Indeed, renewable energy consumption has been growing; it reached 27.8% in 2017. Biomass, accounts for 98% of this consumption. This emerging energy resource is closely linked to Moldova’s strong agricultural sector where the residue and waste to make biomass is produced.

The agriculture and food processing sector accounts for 18% of Moldova’s GDP and 50% of its total exports. The sector also supplies raw materials for other sectors dependent on agriculture. However, to achieve stable growth in agri-food exports, diversifying exports and increasing access to high value markets are necessary. Challenges include emigration and an ageing labour force; the lack of product testing units in industrial quantities; and limited exploitation of functional products by the private sector. Moldovan organic products are the exception. Seventy-five thousand tonnes of the country’s organic products are exported to the EU’s high value markets each year, making Moldova the region’s market leader.

Identifying skills supply and demand in Moldova

To grow, both priority areas need technical, linguistic, digital and personal skills. More specifically, the energy priority area requires engineering skills; fluency in several languages especially English; digital competences from basic ICT literacy and the ability to manage and analyse data to the management of IT systems and operational technology; and finally, analytical and problem-solving skills, critical and innovative thinking, motivation/desire to learn, working with others and resilience.

Based on the evidence, the following technical and generic skills were identified as key to supporting the growth and innovation in food processing: advanced mechanical operations; the ability to operate and maintain machines; extensive knowledge of safety-related issues; environment-related issues related to sustainable plant design, waste reduction and water protection; basic computing, data management and customer service skills; and communication skills.

Supporting skills development in Montenegro and Moldova

To support skills development in Montenegro and Moldova the studies recommend strengthening the educational institutions currently offering courses relevant to the priority areas and giving them resources to provide students with shorter, flexible and modular courses of study. Greater investments in IVET, VET, and CVET are also necessary. Standard qualifications for careers in the selected priority areas need to be established. In order to have greater precision in terms of skills and training gaps, better data collection at the subsector level is also recommended.

Neither individual companies nor the broader economy can withstand growth and innovation if the labour force is not equipped with the requisite skills that enable increased productivity and the capacity to adapt to market demand. Skills also have an important role in enabling workers to seize the best available opportunities. The types and levels of skills companies require changes with consumer preferences, increased international trade and technological change. Addressing skills mismatches will allow both Montenegro and Moldova to face the future with confidence.

Looking ahead with the ETF’s innovative research tools

To carry out this skills assessment and identify training needs, the ETF relied on its own tools and methodologies, for example, labour market analysis, skill-mismatch analyses, skill-needs anticipation, and holistic analyses of VET systems, such as the ETF’s Torino Process¹. Labour Force Surveys (LFS), other quantitative and qualitative data sources, guiding frameworks such as Small Business Act (SBA)², and close engagement with the country’s stakeholders, at central and sectoral levels, were also used. The ETF’s methodological approach proved to be a valid and reliable tool in Montenegro and Moldova. The tool is being further piloted in 2020-2021 at regional level in Ukraine, in Rivne and Kharkiv. The studies will be published in summer 2021.