Albania is an upper-middle income country with a population of around 2.8 million. Its economy is currently expanding, driven by a favourable domestic and external environment – for example, real GDP growth reached 4.2% in 2018, reflecting an increase in capital investments but also the rise of private consumption. Exported goods fall mainly into three product categories: textiles and footwear; minerals, fuel and electricity; and construction materials and metals. The tourism sector is projected to expand at an average annual growth rate of 6.2% until 2027 (EC, 2019).

Table 1: Gross value added by broad economic sectors (%)

Sources: World Bank; WDI database; ETF database.

The Albanian economy is dominated by micro enterprises (those with fewer than 10 employees), which make up 87.9% of all the country's enterprises. Micro enterprises account for the single biggest share of workers in businesses of any size (30.7% in 2016), while medium enterprises generate slightly more employment than large concerns (OECD, 2019). The absolute number of large companies, which often play a decisive role in promoting and offering work-based learning schemes, is still very small – only 335 in 2017 (estimate by Instat).

Table 2: Enterprises and employment in Albania (2016)

Sources: OECD (2019), SME Policy Index 2019: Western Balkans and Turkey, Albania Small Business Act Profile.

Labour indicators have lately shown some improvement. The activity rate has increased over recent years and in 2018 stood at 68.3% (age group, 15–64). Inactivity remains strongly gendered: it is primarily a phenomenon seen in women, as well as being prevalent among young people and those with low levels of education. Albania's employment rate (63.9%; age group, 20–64) is high in comparison to other countries in the region, but still 8.2 percentage points lower than the EU average (72.1% in 2017). Employment in the agricultural sector has decreased over recent years, from 44.2% in 2013 to 37.2% in 2018 (Instat, LFS).

In 2018, Albania's unemployment rate (age group, 15+) was 12.3%, showing a decrease of 1.4 percentage points compared to 2017. The unemployment rate for males was 0.8 percentage points higher than for females (Instat, LFS).

Long-term unemployment continues to be high, and accounted for 64.8% of all those out of work in 2017 (NES administrative data). However, compared to the previous year, the proportion of the long-term unemployed decreased by 1.5 percentage points (Instat).

Fiscal consolidation and the reduction of public debt remain important priorities for the Albanian government. Fiscal consolidation will be supported by structural reforms in many areas of the economy, such as the transport, energy and ICT infrastructure; the regulatory framework for businesses, in particular small and medium-sized enterprises (SMEs); and regional trade. In the area of social and employment policies, addressing the mismatch between the skills people possess and those needed in the workplace has been identified as a key priority. The government has stated that more effort needs to be expended in terms of investing in skills and professional qualifications, which would help to increase employment opportunities (Economic reform programme of Albania 2019–2021, p. 59).

Albania applied for EU membership in 2009 and has been an EU candidate since June 2014. The country is currently waiting for a conditional date for opening EU accession negotiation talks.

The EU's bilateral policy dialogue with Albania uses the EU's economic governance process as the key political framework, in addition to the current status of the acquis communautaire. The Albanian government submits an annual update from its national Economic Reform Programme (ERP) and reports on progress made in the annual EC-Country Subcommittee meetings. The Subcommittee on 'Innovation, Information Society and Social Policy' covers vocational education and training, employment and social inclusion issues.

In 2018, the European Commission confirmed the prospect of merit-based EU membership for the Western Balkans, and renewed its engagement through six new flagship initiatives[1] https://ec.europa.eu/commission/sites/beta-political/files/six-flagship…
.

Albania is a member of several EU working groups, such as the EQF advisory group, the EQAVET and others. Further, Albania is a Programme Country for Erasmus+ and has established a National Agency.

Albania participates in regional cooperation, which has been given a new impetus since 2014 in the context of the Western Balkans Six Initiatives and the Berlin Process. Cooperation builds on the South East Europe Strategy (SEE 2014–2020) developed by the Regional Co-operation Council (RCC) and mirrors the EU 2020 Strategy. The regional policy dialogue has seen the development of a number of frameworks for regional cooperation: the connectivity agenda; the positive agenda for youth; the digital agenda; and the creation of a Regional Economic Area (July 2017 in Trieste). Important pillars of the regional dialogue include removing obstacles to the mobility of professionals and building cooperation on employment and social policies in South East Europe. Another focus is on strengthening the support for the growth of SMEs in order to meet the competiveness criteria of the EU's internal market (European Council, 1993, Copenhagen Economic Criteria).

As of January 2019 the population of Albania was 2 862 427. Around 46% of the population lives in rural areas, where agriculture is the main activity. Albania's population is rapidly ageing, mainly as a result of migration and falling birth rates (Instat).

According to a study funded by Friedrich-Ebert-Stiftung, 52% of the Albanian population aged 18 to 40 intends to migrate from Albania. This phenomenon is partly explained by economic factors and the large income gap with more developed economies. However, the related survey data also shows that a majority of the Albanian population has little to no trust in public services such as the justice system, the civil service, social security provision, healthcare and the education system (Gëdeshi and King, 2018, pp. 34–6).

Table 3 shows the structure of the Albanian population as of January 2019. The age group 0–4, which will enter upper secondary education in around 10–15 years, is already 25% smaller than the 15–19 age group (i.e. the group largely congruent with students in upper secondary education), and 34% smaller than the 20–24 age group (i.e. the cohort largely congruent with the age of students in higher education).

Table 3: Population as of January 2019 by age groups

Source: Instat.

It can be expected that the younger age groups (e.g. those aged 0–14) will continue to decrease over the coming years as there are no indications that the current international migration trend will be reversed. Of those who intend to migrate, 51.7% are married, which also suggests that in the future many migrants will leave the country with their children (Gëdeshi and King, 2018, p. 41).

Figure 1 shows the downward trend of the numbers in the 15–19 age group over the past five years. This group is now 15.2% smaller than it was in 2015. On average, the number of 15–19-year-olds decreased at the rate of 4.1% per year over the period 2015–2019.

Figure 1: Size of the age group 15–19 (2015–2019)

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Sources: Instat. Chart: ETF.

In Albania, only nine years of education are compulsory. The average number of years of schooling was 10 in 2017 (Unesco UIS database). General and vocational upper secondary education starts after completion of the nine-year compulsory education. Vocational schools offer formal initial vocational education. Some of these schools are mixed, that is, they provide both general education (gymnasium) and vocational education at upper secondary level. Both general education (gymnasium) and four-year vocational education programmes lead to the State Matura exams. Successful completion of this stage allows access to higher education and/or post-secondary education.

Graduates from the general education (gymnasium) stream usually perform better in State Matura exams and have a wider choice when it comes to selecting higher education institutions and programmes. Vocational education offers exit points after two, three or four years, depending on the programme. At completion, graduates who have successfully passed the related exams receive a State Matura certificate (ISCED/Albanian Qualification Framework (AQF) level 4), as well as a final certificate for the vocational education programme they attended (usually ISCED/AQF level 3).

Albania's vocational education system is very small and attracts very few women. Some 21 071 students were enrolled in upper secondary vocational education programmes in the academic year 2018/19. This accounted for nearly 18.2% of the total enrolment in upper secondary education. Only 16.1% of the total number of vocational education students were women. Vocational education programmes are currently offered in 35 vocational schools.

Table 4: Students enrolled in education in Albania

Sources: Instat; MoESY; ETF database.

There are limited VET opportunities for drop-outs or graduates from general schools/gymnasiums who can't afford, or don't wish, to take up university education.

Vocational Training Centres offer a limited choice of short-term vocational training courses – for example, there are few programmes aimed at unemployed persons with different education backgrounds (compulsory education, vocational education, general upper secondary education, and to some extent also higher education). Most of the programmes are outdated and the main demand (and supply) is for language courses.

In recent years universities have started to expand their offer to include short-cycle (usually two years) non-tertiary programmes (post-secondary)[2] See also Heitmann et al. (2013).
. Further, private and not-for-profit training providers offer fee-based courses. According to a World Bank assessment, in 2017 there were 169 private and 19 not-for-profit initial and specialist VET providers active in the country (World Bank, 2017).

Albania's National Employment and Skills Strategy 2014–2020 defines four strategic priorities: (i) to foster decent job opportunities through effective labour market policies; (ii) to offer quality education and training for young people and adults; (iii) to promote social inclusion and territorial cohesion; and (iv) to strengthen the governance of labour market and qualification systems. A new Action Plan 2022 is now being drafted, extending some of the present actions up to 2022, revising others, and adding new ones as a result of current policy demands.

To enhance the quality, relevance, attractiveness, effectiveness and efficiency of the VET system, the Albanian government is currently revising the legal and financial framework. Pursuant to Law 15/2017 'On Vocational Education and Training in the Republic of Albania' (VET Law), only a few of the required sub-legal acts have so far been adopted. Recently decreed by-laws relate to, among other requirements, quality assessment procedures, the recognition of qualifications, the updated National List of Occupations, and the Steering Boards of VET institutions, as well as issues related to financial quotas for supplying food for boarders, scholarships and payments for pre-university students in public education institutions.

The new National Agency for Employment and Skills (NAES) is to be set up under the recently formulated Law on Employment Promotion, which was adopted in early 2019 (Law no. 15 dated 13.03.2019).

The following changes are among those envisaged by the implementation of the 2017 VET Law:

The National Agency for Employment and Skills (NAES) will become the key agency to manage both employment and VET services, along with the related transfer of responsibilities for managing VET schools from the Ministry of Finance and Economy (MoFE) to NAES.

The mandate of the National Agency for VET and Qualifications (NAVETQ) will be extended to cover all areas of VET, including formal and non-formal VET, and the continuing professional development of VET teachers and trainers, as well as quality assurance procedures.

A comprehensive new sub-legal act will be introduced, regulating the affairs of public VET providers, while assigning to them a higher level of autonomy and introducing seven new school development functions, including the continuing professional development of teachers and trainers and work-based learning.

The establishment of Multifunctional Centres that would offer vocational education and vocational training under one roof is an important cornerstone of the Strategy. Such centres are expected to enhance economies of scale while at the same time offering an attractive learning environment to a variety of target groups. Multifunctional Centres will be at the heart of a national VET provider development plan. However, little progress has been made in this respect in recent years.

More and better work-based learning remains high on the agenda of the MoFE and the NAVETQ.

The National Employment and Skills Strategy (2014–2020) envisages the full implementation of the Albanian Qualifications Framework (Law no. 23/2018 'On some Amendments and Additions to Law no. 10 247, dated 4.3.2010, “On the Albanian Qualifications Framework”') as one of the key elements in reforming qualifications and enhancing the quality of the education and training system.

Albania receives substantial support from the EU and other multi- and bilateral donors in the skills and employment sector.

A major recent intervention funded by the EU IPA programme included a Sector Reform Contract for the employment and skills sector (2016–2019; max. €27 million). In addition, a new IPA budget-support programme for social policy is being prepared, targeting inclusive, community-based social care facilities as well as training and employment support measures for disadvantaged people, and including a technical assistance component.

Other major donor interventions include:

Swiss Development Cooperation: Swisscontact Skills for Jobs project (€7.1 million); UNDP Skills for Employment Development II project; Risi Albania-Phase 2 project (€7.17 million) to create employment opportunities for young people; SECO programme for aspiring entrepreneurs;

Gesellschaft für Internationale Zusammenarbeit (GIZ): ProSEED programme (€16.5 million);

Austrian Development Agency: NABER project to support dual training in the garment industry; KulturKontakt Al-Tour project to upgrade tourism and hospitality training; funding for the Hermann Gmeiner ICT school; introduction of a school management information system;

The Albanian-American Development Foundation, which funds a junior achievement programme in secondary schools, an ICT resource centre and an agricultural school of excellence.

Furthermore, the Deputy Minister of the Ministry of Finance and Economy coordinates a multipartite Integrated Policy Management Group (IPMG), which also includes key donors and convenes three to four times per year.human capital: Development and challenges

This chapter provides a brief overview of human-capital-related challenges in the following areas: (i) the economy and labour market; (ii) demography; and (iii) education and training. Three key issues with regard to human capital development will be discussed in more detail in Chapter 3.