Dear Chairman Ahmetaj and honorable members of the Finance Committee of Parliament.
Thank you very much for inviting me to your meeting.
The invitation to attend this Committee meeting was issued prior to the earthquake, and my remarks were drafted also in before-hand. Allow me to preface my remarks, therefore, by expressing on behalf of the United Nations system our heartfelt condolences for the victims and their families, as well as my appreciation for the rapid action of the Government and its collaboration with international partners. I am happy to report that the UN integrated two UNDAC experts into the EU-led civil protection team, as well as a health emergency specialist, a risk communication expert and an Emergency Medical Teams expert mobilized from WHO. UNHCR has been providing tents and non-food items, WHO support to the Ministry of Health, UNICEF focusing on child protection and psycho-social support and UNDP ensuring access of the marginalized to support – in this case Roma communities. UNDP is also working closely with structural engineers to assist with damage assessment in order that Albania can – as we say – “build back better”, more resilient, and stronger.
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I had an interest in attending today because we have a common interest in maximizing the speed of development for the Albanian people. There is no question in my mind that the most critical determinant of that development, when it comes to financing, is what you decide to do with the domestic resources expended by the Budget under your current consideration.
Allow me to say a word about the concept of “development”. While growth of GDP is important, it is frankly over-rated as a single indicator. It misses critical factors like equality across society, well-being of citizens, quality of life, human rights and the inclusion of the marginalized. The Human Development Index – championed by UNDP - does a much better job of this, as its inclusion of longevity counts lives and not dollars, and thus by definition gets at the issue of inequality. (The next global, annual HDI report will be launched on the 9th of December.)
And since 2015 we have another robust framework in which to consider development, the Sustainable Development Goals, or Agenda2030. This set of 17 Goals – to which every Government in the world including that of Albania has committed – describes a vision of a sustainable society in which education and health care, clean water and safe food are available for all citizens; a society where women have equal rights and can walk and lead without fear; an economy that offers pathways to productive engagement for everyone; and a country which is protecting its natural resources for all its citizens, in this generation and those to come.
In the minutes that you have generously allowed me, I would like to advocate today that in your deliberations you consider how to use your finances best to accelerate the achievement of these Sustainable Development Goals.
In 2018, the United Nations system – all of its 8 agencies resident in Albania and many other offices as well – undertook an analysis with Government and its partners to see how the SDGs could be accelerated. There are implications of this assessment for the Budget.
The assessment highlighted three clusters of work that could accelerate Albania’s development, accelerate its achievement of Agenda2030. The thing about the Sustainable Development Goals is that they are all inter-connected. It is like a Rubik’s cube. When you work on one side of the puzzle – it has impacts on the other. So you need to consider how they work together.
The first acceleration cluster is to focus on programmes in the area of rule of law and good governance. Here, I would like to make two points:
- First, from the perspective of the Albanian people, it is not just a question of corruption and vetting, it is a question of access to justice. Will everyday people have access to legal counsel that is affordable? Will they have a fair hearing in the courts? To achieve this requires investment in some of the safeguard mechanisms that work to protect this access to justice. I am talking about sufficient investment in free legal aid; sufficient financing for the independent human rights institutions like the anti-discrimination commissioner or the People’s Advocate; and meaningful financing and space for NGOs to operate, as they are often the most vigorous defenders of communities, as is the case these days, for example, for those NGOs trying to ensure environmental justice. Are investments in these critical institutions being made in this year’s budget? The frank truth is that without these safeguard mechanisms, the rights of citizens without connections and without cash are too easily dismissed. If you care about those rights, you need to invest in the institutions that protect them. It is how you build trust amongst the citizens that the Government is genuinely interested in their well-being.
- Second, in 2015 the Government made a huge step forward in adjusting the administrative territory to create 61 municipalities. Those municipalities have received increased authority to manage their own development; and have received significantly increased responsibilities in terms of services and protection of the environment. They have not received, however, significantly increased financial resources. Some, yes, but not enough to stimulate the creation of real economic opportunities at scale, nor reliably manage their natural resources successfully.
The second acceleration cluster is in the area that we call the ‘green, inclusive economy’. In other words focusing on economic opportunity but in ways which are environmentally sustainable and which maximize opportunities for regular people. Growth in recent years, driven by the large investments such as TAP and hydropower investments, are critical for the nation but not employment intensive. In addition to these large investments, growth has been driven by increased consumption, aided by large remittances from Albanians abroad.
In reaction to this context, focusing on the ‘green, inclusive economy’ might focus on additional areas of renewable energy, such as solar and wind. It would include training – engineers and vocational training for technicians – in these areas. Capitalizing on Albania’s labor rates, increased investment in information technology training – again at tertiary and vocational levels – can help Albania skip ahead into the 4th revolution economy. And it certainly includes focusing on eco-tourism, sustainable tourism. Albania’s rich nature and hospitality are one of its greatest assets, and should be carefully managed to ensure that the economic profits from this are widely shared and can be enjoyed for generations to come.
Inclusiveness is another key factor for reducing poverty and inequality. I congratulate the Government for its passage of the employment promotion law this year. As it becomes implemented, this law should make the investments that the Government makes in employment much more likely to result in sustainable jobs for individuals, with more of a case-oriented approach, rather than simply subsidizing businesses. The employment promotion law also includes elements to support persons with disabilities, both recognizing employer’s obligations towards creating an inclusive economy, and also resulting in greater opportunities for people with disabilities to become productive contributors to society.
A vital element for reducing poverty and increasing inclusion is a greater involvement of women in the formal labor force. Especially in rural areas, women are contributing unpaid and unrecognized work on family farms. The informality of their work inhibits the ability of family farms to take loans, and become small businesses and grow. To increase women’s engagement in the formal labor force requires implementation of existing legal rights, a change in culture that gives women an equal place in work environments, and increased pro-equality and pro-family policies such as more investment in child-care and elderly care. In fact, increased government investment in child care and elderly care is an example of a win-win solution: most of the jobs created in these areas are for women, thus directly increasing women’s employment, and simultaneously enabling other women to enter the formal market [with the benefit of more support for child-care and elderly care]. Some studies have shown that investment in the so-called ‘care economy’ have more economic multiplier effects than other traditional investments such as transport infrastructure. In the case of women’s empowerment, I would like to recognize some important progress, not only in the area political participation in Government, but also with its well-integrated Gender Responsive Budgeting, as well as programmes like such as the maternity benefit from social security.
The third acceleration cluster is investment in human and social capital. To be blunt: spending on education and health care is not a luxury, it is an investment. It is an investment in people’s rights; it is an investment in the people’s faith in government and in the democratic system; and it is an investment in the economy. As countries move higher up a competitive economic ladder, the most important kind of investment is the one in secondary and higher education, research and development, and professional skills. However, Government investment in education and health-care in Albania, including in next year’s budget – each estimated as just under 3% of GDP (in other words as a share of your own wealth) – are several percentage points below other countries in the sub-region and in Europe. What we call out-of-pocket spending on health care by citizens is too high. I would like to recognize that the National Health Strategy has set a target for increased spending in health care – to 4% by 2025. This Committee has the power to ensure that target is met. Put simply, Albania is not as wealthy as EU country averages today, but there is no reason why Albania cannot invest a similar share of whatever wealth it has in these critical areas.
We might consider a slightly broader conception of social investment, and call it social protection. This includes Ndima Ekonomika and disability payment schemes, [as well as health and education]. Here too, the share of Albanian wealth that is being invested in social protection is below other countries in the sub-region, both amongst EU accession countries and neighboring EU states. In the area of social protection spending, in fact the trends over the past 25 years in southern and eastern Europe have been quite steady. Looking at 2015, Italy, Austria and Greece all hovered around 25% of GDP – one quarter of national wealth – spent on “social protection”, while Croatia and Serbia were just above 20%. Albania, however, stood at closer to 13%.
One mechanism which can help is the Social Fund, launched this year by the Ministry of Health and Social Protection, a mechanism to increase social protection investments at Municipal level through better cooperation between Municipal governments and civil society. We encourage that this initiative be expanded in coming years.
Finally, it might be time to start looking more closely at the condition of migrants and asylum seekers. In addition to human rights considerations, and noting Albania’s excellent reputation in terms of respecting those rights, Albania may wish to also start investing in the integration of the small but likely growing number of asylum seekers who wish to stay in Albania, so that they can become active and vibrant agents of development.
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Honorable Committee Members,
While our joint analysis already highlights that these three cluster areas can accelerate development, what might be additionally helpful is an investment plan for the achievement of the Sustainable Development Goals.
This is something that the Untied Nations would be pleased to assist you with.
What we have done so far is try to estimate current budget expenditures over recent years – in particular 2015, 2016 and 2017 – as it relates to the SDGs. We estimate that Albanian government investment in SDG’s amounts to approximately 18% of GDP. To be honest, at this point we don’t have a view as to whether this is too much or too little (though we suspect too little!), but we would be interested to work with you more to have a more pro-active plan in this regard.
I know, Honorable Members, that you now have additional burdens related to the earthquake response that you must shoulder. As the UN we will certainly advocate that your financial partners come to your aid with respect to reconstruction. Additionally, however, we advocate that this Committee finds ways to meet the burden of reconstruction that do not sacrifice important investments in human capital.
I thank you for your attention.