Time for a strategic leap on industrial policies in Albania and Kosovo

A global turning point that calls for reflection

At a time when industrial policies are experiencing a global resurgence, a recent IMF paper, “Do Industrial Policies Increase Trade Competitiveness?” (May 2025), offers an in-depth analysis of the effects of such policies on trade competitiveness.
Using a new database and an advanced empirical approach, the study reveals that industrial policies can increase the competitiveness of targeted products, particularly if they are already competitive.
Domestic subsidies have a temporary impact, while export incentives show improvements in the medium term.
Furthermore, policies that target the early stages of the value chain, such as those in renewable energy and electric vehicles can have positive spillover effects on related products.

In this new approach, Albania and Kosovo cannot remain peripheral spectators.

But are we moving in the same direction?

Albania – Industrial ambition without an executive engine
Albania has taken a significant conceptual step with the adoption of the Industrial Development Strategy, linked to other strategies, marking an attempt to transition from a low-value-added production economy to a model based on technology, diversification, and value creation.

On paper, the strategy aims for an “industrial renaissance” that guides the country toward smart manufacturing and integration into global value chains.
But beyond the document, reality tells another story.

What penalizes Albania is not the lack of ideas but the lack of an “executive engine”: the absence of concrete implementation, inter-institutional coordination, and sectoral prioritization.

The approach remains horizontal, subsidies are distributed diffusely, without an economic filter to identify sectors with a multiplier effect or technological potential.
This renders the strategy more of a political statement than a development tool.
It is not tied to production cycles, does not create conditions for building domestic technologies, and fails to establish smart intermediations between market demand and industrial supply.

As a result, Albania’s export base remains narrow, dominated by textiles, minerals, and primary agro-processing, sectors with low profit margins and little transformative impact.
Meanwhile, real potentials, such as green energy, logistics for rural areas, or agrobusiness technologies remain underutilized. This signals not a lack of resources, but a lack of strategic guidance and capacity to operationalize them.

Without an institutional engine to keep this strategy in motion, Albania risks stagnating, seeing industrialization more as a rhetorical horizon than a measurable and traceable process.
To move forward, Albania needs not just well-written strategies, but institutions that execute with precision, policies that select intelligently, and coordination that links sectors with the real needs of the market and technological transition.
Without these, every industrial strategy remains an elegant but parked machine.

Kosovo – Sectoral energy without national architecture
Kosovo presents an interesting picture of emerging economic dynamism, a kind of “policy lab” where agriculture and information technology (ICT) are vibrant nodes of experimentation and rapid intervention.
Subsidy policies, grants for startups, and partnerships with international donors have created a fertile ground in these sectors.
But this enthusiasm has not translated into a national architecture that sustainably and integrally guides industrial development.

The core issue is the absence of a comprehensive and coordinated industrial strategy that connects the dispersed energies in agriculture, ICT, and other sectors with clear industrial objectives.
Sectoral policies operate like isolated islands: agricultural subsidies are not linked to value chains or rural transformation, while the ICT sector, though energetic, operates without a national plan for its integration into productive or export-oriented economies.

In this sense, Kosovo is moving, but without a shared compass.
There is mobility, but not strategic direction. This results in the vast potential of sectors like ICT not yet translating into broad impact on the real economy, neither in productivity growth nor in building technological infrastructure for other industries.

However, Kosovo holds an important asset that distinguishes it from Albania: a dynamic software sector, oriented toward exports and decentralized innovation.
This sector does not suffer from the classic bottlenecks of physical infrastructure and could scale up with minimal intervention, if supported by an industrial policy that promotes technology, human capital absorption, and fiscal ease.

To overcome fragmentation, Kosovo needs an industrial strategy based on vertical linkages between sectors and the construction of a national architecture for economic transformation.

Policies should not remain disconnected initiatives but should be structured around an industrial vision that connects agriculture with processing, ICT with production, and investments with export value chains.
Only in this way can sectoral energy become a development engine, rather than an institutional consumer.

The Green Economy – A runway in need of skilled pilots
Neither Albania nor Kosovo can claim a competitive future without transitioning through the green economy.
But while the world shifts toward low-carbon products and clean technologies, industrial policymaking in both countries remains slow and fragmented.
Albania mentions solar energy and energy efficiency, but without synergy with other sectors.
Kosovo has only just begun experimenting with renewable energy, but the lack of integration makes it a sporadic effort.

In both countries, the potential exists, but the vision to turn it into a competitive advantage is missing.
Without a green and integrated industrial policy, neither EU funds can be absorbed effectively nor can sustainable growth be genuinely sustained.

Industrial policies are not a luxury, but a sovereign development instrument
In an era where industrial policies have reemerged as strategic tools in the hands of states from the United States with the Inflation Reduction Act, to the European Union with the Green Deal Industrial Plan, to China’s strong orientation toward manufacturing technologies, Albania and Kosovo risk becoming spectators in a game where the rules of global economic development are being rewritten.

This is no longer an academic debate or a political option: industrial policy has become a matter of economic sovereignty.

It determines who controls technology, who builds production capacities, who creates sustainable jobs, and who shields society from global supply shocks.

In this context, the main problem for Albania and Kosovo is not the lack of means modest budgets, international assistance, and existing human capital are present, but the lack of a sustainable, coordinated, and data-driven approach.

Current horizontal approaches, which distribute subsidies without clear connection to strategic objectives, only deepen sectoral inequalities and create illusions of development.
Without a joint national and regional platform for industrial policy, development remains episodic, dependent on political cycles rather than on production value cycles.

The time has come for the region to shift from ad hoc approaches to a targeted industrial architecture that sets:

• technological priorities (e.g., automation in processing, software for productive sectors, decentralized energy),
• climate priorities (decarbonization, waste management, energy efficiency),
• and a continuous impact assessment system based on production, employment, and innovation data.

If this does not happen, the risk is clear: we will be stuck in a vicious cycle of “politics without production and production without politics.”

This means public interventions that do not create new industries, and productive sectors that survive without the support of a sustainable development policy.

In a global market that is fragmenting and technologies that are becoming centralized, this is the fastest path to economic dependency and strategic weakness.
Industrial policies today are the language of economic sovereignty, and in this language, our countries must learn not only to speak, but to write their own chapters.

From rhetoric to implementation, from imitation to innovation.
It is time for Albania and Kosovo to embrace an industrial policy oriented towards products with transformative potential, linked to exports, technology, and the green transition. To build internal value chains.

To coordinate public, private, and academic actors. And to place institutional capacity at the foundation of every reform.
In a world where technology doesn’t wait, politics can no longer be passive. Industrial policy is not a return to the past, but an opening towards the future, and in this future,
Albania and Kosovo must develop this opportunity that should not be missed.