Ermal Frasheri

This report aims to answer the critical but difficult question: "What will it take for Jordan to grow?" Though Jordan has numerous active growth and reform strategies in place, they do not clearly answer this fundamental question. The Jordanian economy has experienced more than a decade of slow growth. Per capita income today is lower than it was prior to the Global Financial Crisis as Jordan has experienced a refugee-driven population increase. Jordan’s comparative advantages have narrowed over time as external shocks and responses to these shocks have changed the productive structure of Jordan’s economy. This was a problem well before the country faced the COVID-19 pandemic. The Jordanian economy has lost productivity, market access, and, critically, the ability to afford high levels of imports as a share of GDP. Significant efforts toward fiscal consolidation have further constrained aggregate demand, which has slowed non-tradable activity and the ability of the economy to create jobs. Labor market outcomes have worsened over time and are especially bad for women and youth. Looking ahead, this report identifies clear and significant opportunities for Jordan to strengthen new engines of export growth that would enable better overall job creation and resilience, even amidst the continued unpredictability of the pandemic. This report argues that there is need for a paradigm shift in Jordan’s growth strategy to focus more direct attention and resources on activating “agents of change” to accelerate the emergence of key growth opportunities, and that there are novel roles that donor countries can play in support of this.

This industry targeting tool is custom-made for Albania. Users can choose any of 272 industries (based on NACE Rev. 2 industry codes) from the above drop-down list and explore the industry’s match with Albania’s current productive capabilities and comparative advantages and disadvantages. The tool is designed for use by government and non-government entities that seek to attract foreign direct investment (FDI) to Albania to accelerate economic development. Harvard Growth Lab research in Albania shows that the long-term pace of economic growth will be determined by the pace at which the country can absorb new economic activities and productive capabilities from abroad. Detailed information on the methodology and data sources used in this tool can be found here. This tool can be used in combination with the Growth Lab’s Atlas of Economic Complexity to explore patterns in global trade in very high detail.

Immigration and Economic Transformation: A Concept Note

Ljubica Nedelkoska, Tim O’Brien, Ermal Frasheri, Daniel Stock

In May 2017, CID prepared a concept note that described the connection between immigration and knowhow transfer internationally and profiled the current state of low immigration levels and immigration policy issues in Sri Lanka. The note identifies immigration policy reform as an important area of opportunity for unleashing higher levels of entrepreneurship and the introduction of new knowhow for economic diversification in Sri Lanka, but stops short of providing specific recommendations. Instead, the note lays out broad ideas for making immigration policy more flexible and encourages the Government of Sri Lanka to activate a cross-government policy team that is capable of developing reforms that meet Sri Lanka’s particular needs. 

A Comparative View on of Immigration Frameworks in Asia: Enhancing the Flow of Knowledge through Migration

Ermal Frasheri, Ljubica Nedelkoska, Sehar Noor, Tim O’Brien

Later in 2017, at the request of a policy team of the Government of Sri Lanka, CID conducted research to compare immigration policy frameworks in other countries in Asia to understand promising policy options for Sri Lanka. Our resulting research note focuses on Indonesia, Vietnam, Thailand, Malaysia, Hong Kong, and Singapore. We find that the immigration policies of the six countries vary across numerous dimensions as each country prioritizes attracting the talents, skills and resources it needs from abroad in different ways. These variations provide a range of examples that may be relevant to decision-makers in Sri Lanka. Additionally, we find an emerging pattern among the six countries where more developed economies tend to have more elaborate immigration systems and target a more diverse set of people. By looking at available data, we also confirm that more elaborate immigration systems are closely associated with more actual immigration, higher presence of foreign firms, and higher levels of foreign direct investment (FDI) among this group of countries. Based on the comparative analysis, together with the issues identified by the Department of Immigration and Emigration’s Gap Analysis, it is possible to identify a number of principles around which future immigration reform in Sri Lanka should be organized. 

About four years ago, at the onset of CID’s engagement in Albania, the country faced two issues that were threatening its macro-fiscal stability: a skyrocketing public debt and an insolvent, publicly-owned electricity distribution system that was plagued by theft and technical inefficiency. These two interlinked issues constrained both short-term economic growth and the ability of the country to develop new drivers of long-term growth. Over the subsequent years, the government was able to successfully respond to these constraints through a now-concluded IMF program and through a series of reforms in the electricity sector. With these constraints now relaxed, CID saw the need for a new analysis of the current and emerging constraints to growth in Albania. This analysis will guide future research and inform the government and non-government actors on emerging economic issues for prioritization.

While growth has accelerated over the last several years, to over 3% in 2016, this is not a pace that will allow for a rapid convergence of incomes and well-being in Albania with that of developed countries in Europe and elsewhere. This growth diagnostic attempts to identify the binding constraint to sustainably higher economic growth in Albania.

Recognizing that economic growth requires a number of complementary inputs, from roads to human capital to access to finance and many more, this report compares across eight potentially binding constraints using the growth diagnostic methodology to identify which constraint is most binding. This research was conducted throughout 2016, building on prior research conducted by CID and other organizations in Albania. Each constraint discussed in this report is cited by analysts within or outside the country as the biggest problem for growth in Albania. Through the growth diagnostic framework, we are able to evaluate the evidence and show that some constraints are more binding than others.

Despite serious issues in many other areas, we find that the binding constraint to stronger growth in Albania is a lack of productive knowhow. By “knowhow,” we mean the knowledge and skills needed to produce complex goods and services. Albania faces a unique knowhow constraint that is deeply rooted in its closed-off past, and the limited diversification that has taken place in the private sector can, in nearly all cases, be linked to distinct inflows of knowhow. The strongest sources of knowhow inflows into Albania have been through foreign direct investment and immigration, especially returning members of the diaspora who start new businesses or upgrade the productivity of existing businesses.

The evidence also points to particular failings in rule of law in Albania that play an important role in keeping Albania in a low-knowhow equilibrium. Weaknesses in Albania’s rule of law institutions, including frequent policy reversals and corruption in the bureaucracy and judiciary, increase the risk of investments and transaction costs of business. While it is difficult to separate perceptions from reality in this area, both perceptions of weak rule of law and actual rule of law failings appear to play critical roles in constraining more diversified investment in Albania. We find that while existing firms in Albania successfully navigate the rule of law weaknesses, and in some cases benefit from the system, potential new investors are acutely sensitive to rule of law issues.

 

Despite their historic and ethnic ties, trade and investment between Albania and Kosovo remains underdeveloped. To be sure, even if fully developed, Kosovo is unlikely to play a major role in Albanian external economic relations. Nonetheless, increased economic integration between the two countries can serve as the basis not only for enhancing the ties between the two countries, but also for spurring the measures that could act as a springboard for Albania’s integration with respect to other countries in the Balkans as well as with the EU.