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The three transitions of the Western Balkans

Ivailo Izvorski's picture
The small, open economies of the Western Balkans* are at various stages of progress on three transitions: the transition to market economy, the transition to EU membership, and the transition to high-income status. The first transition started in the 1990s and its ultimate completion will help advance the second. Progress on the second transition, the EU integration, will unleash the EU convergence machine that has seen all but two countries in Europe achieve and sustain high income status.

Apply for SAFE Trust Fund grants

Soukeyna Kane's picture



The SAFE Trust Fund application (Word document) is now open until 27 February 2015.
 
What is SAFE?
 
SAFE means Strengthening Accountability and the Fiduciary Environment. It is a Trust Fund group administered by the World Bank and established by the Swiss State Secretariat for Economic Affairs (SECO) and the European Commission with the aim of improving public financial management in the Europe and Central Asia region. This Trust Fund group provides support for activities to assess public financial management (PFM) performance, identify and implement actions to achieve improvements and share knowledge and good practices across countries in the region.

Managing EU Funds – What We Can Learn from Slovenia

Maya V. Gusarova's picture
Effective management of European Union (EU) funds is not only high on the agenda of the new EU member states but also of the Western Balkan countries that are progressing in the EU integration process. As such, these countries face several important challenges and questions today.

On becoming an EU member, how much will the budget calendar and its preparation need to change? How best to plan and execute projects which are pre-financed? How to record unspent EU funds in the next fiscal year? To what extent should the Ministry of Finance be involved in the process before the signing of financial agreements with the EU? These and other questions arise in relation to the impact on a country’s fiscal position, co-financing obligations, pre-financings and bridging resources, and payment of errors.

Managing EU Funds – What We Can Learn from Slovenia

Maya V. Gusarova's picture
Effective management of European Union (EU) funds is not only high on the agenda of the new EU member states but also of the Western Balkan countries that are progressing in the EU integration process. As such, these countries face several important challenges and questions today.

On becoming an EU member, how much will the budget calendar and its preparation need to change? How best to plan and execute projects which are pre-financed? How to record unspent EU funds in the next fiscal year? To what extent should the Ministry of Finance be involved in the process before the signing of financial agreements with the EU? These and other questions arise in relation to the impact on a country’s fiscal position, co-financing obligations, pre-financings and bridging resources, and payment of errors.

The Best School for Entrepreneurship is on the Job, Not in the Classroom

Wolfgang Fengler's picture

This has been a very engaging debate and I want to thank Omar as well as the organizers and contributors. In this concluding statement, I’d like to highlight both those areas where we agree and those where we still end up with different perspectives.

We can agree on the following:
 

Skills Gaps and Jobs Strategies

Omar Arias's picture
Working at a call center in Romania The blog I posted to debate with my Bank colleague Wolfgang Fengler the chicken-and-egg question of which comes first, skills or jobs, generated a rich exchange and contributions. While the question was framed around tackling the problem of unemployment in the Western Balkan countries, it naturally applies to almost any country. I want to thank all of those who took the time to write, whether or not they agreed with my main thesis: that countries should invest and strive to develop the basic skills that lay the foundation for the technical or job-specific skills that should be in turn acquired a la par with the changing needs of labor markets.
 

How to Break the Curse of Unemployment: Jobs First or Skills First?

Omar Arias's picture

Some Skills should Come Before Jobs, Others Develop with the Job
 
Students work on an engine at Sisli Vocational High School To be clear from the onset: I will not oversimplify the unemployment (or inactivity) problem in the Western Balkan countries as solely due to a lack of skills in the population. Low employment rates result from both insufficient creation of jobs by enterprises and too-high a fraction of the workforce that is ill-equipped to take on the jobs that a modern economy creates. Both issues are intertwined. Solutions, therefore, require efforts on several fronts to enable a more vibrant private sector –including improvements in the business environment, enterprise restructuring, integration in global markets and promoting entrepreneurship— as well as to prepare workers for new job opportunities.

Why Jobs Need to Come Before Skills

Wolfgang Fengler's picture

The Western Balkans Case

When I travel to the Balkans for work, the journey typically begins with a cab ride to the airport from my home in Vienna. The taxi company I use is run and operated by Serbs living in Austria. It’s a great company: very reliable, clean cars and friendly drivers who are always keen to discuss the politics and economics of the Balkans. When I arrive in Belgrade, I’m picked up by drivers who have very similar skills to those of their compatriots in Vienna. However, the former have better salaries and opportunities simply because the company they work for operates in an environment that is much more conducive to nurturing and growing a business. In Austria, unlike in Serbia, a company can operate efficiently, is subject to a relatively fair tax treatment and knows the industry standards it needs to comply with. In turn, this explains to a large extent why workers, at any given levels of skills, are more productive in Austria – a basic intuition which William Lewis develops in his book The Power of Productivity, projecting the gains that Mexican construction workers make when moving to the USA.

Overcoming the Middle Income Trap

Wolfgang Fengler's picture

The Western Balkans Case

ZM-SE003 World Bank The Western Balkans have a lot going for them: ideal location next to the world’s largest economic bloc, a well-educated workforce, relatively low wages and decent infrastructure. FDI and investors should be rushing in … but are they?

Southeast Europe is the next frontier of EU expansion and includes six countries: Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. These countries have a lot in common and an equal amount of differences. They are all relatively small open economies, with a growth strategy premised on deeper international integration. Some, especially Macedonia, are more advanced in attracting international investors but as a whole, the region seems to be stuck in a classical Middle Income Trap: they are too rich to compete on low-cost manufacturing but are too poor to be global innovators. After a strong recovery following war and conflicts in the 1990s, the growth momentum has stalled over the last five years and the region has been particularly vulnerable to external shocks.

Why Women Don't Work in the Western Balkans

Ellen Goldstein's picture
Finding and keeping a job, and even participating in the labor market, is harder if you are a woman than if you are a man living in the Western Balkans. This is a conclusion I can draw from my first year as Country Director for the Western Balkans, reminding us that gender inequality persists in many forms while another International Women’s Day passes. 

Only half of the working age population participates in the labor force in the Western Balkans. This is low by both European and global standards - but participation among women is even worse. This rate was only about 42% in Bosnia and Herzegovina, and a mere 18% in Kosovo in 2012 - the lowest in all of Europe and Central Asia. This participation gap persists throughout a woman’s life, contributing to low employment rates, and widens during child bearing years. In Bosnia and Herzegovina, the gap between male and female employment rates has reached a whopping 44 percentage points for those aged 25 to 49 years with a young child living at home.

Failure to address these labor market inequalities is a missed opportunity for faster economic growth, poverty reduction and increased shared prosperity in a region struggling to recover from the neighborhood effects of the Eurozone crisis.

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