Eastern and Central Europe is witnessing a fundamental transformation, as these countries transform from traditional low-cost manufacturing areas into dynamic centers of innovation and technology.

The structural changes taking place in these countries are more than a superficial economic reform – they reflect a deep transformation that includes the development of digital infrastructure, the improvement of labor qualifications, and the adaptation of economic policies to an increasingly competitive global environment, Monitor reported.

While advanced economies are facing growth challenges and geopolitical tensions, the CEE countries are marking a dramatic turn towards economic diversification.

This process involves major investments in technology and digitalization, focusing on new sectors such as IT, value-added production, and technological innovation.

These changes are also a response to global pressures, including trade tensions and the need to restructure global supply chains. In an environment where traditional business models are disappearing, investors must rethink their strategies to capture the opportunities offered by a region in transformation.

Competition for investment also remains fierce among countries. Eastern European countries are taking important steps to improve the investment climate, modernize public administration, and create more favorable conditions for business development.

These measures are helping to attract foreign capital and increase innovation, positioning the region as a strong and competitive alternative in the global arena.

In this race, Albania continues to lag behind. In terms of figures, Foreign Direct Investment FDI is high, but its structure is not encouraging.

Real estate activities have become the main source of FDI in the country in the last two years, driven by the development of tourism and the construction sector in the capital.

For the first 9 months of 2024, this sector brought 270 million euros of investments into the country or 23% of the total. 17% came from financial activities, which are mainly bank capital increases About 14% of FDI was brought by the extractive industry which is the capital increases. About 14% of FDI was brought by the extractive industry, which is the simple exploitation of the country's natural resources.

Beyond tourism and construction, which are the two sectors that are driving economic growth in recent years, the local economy needs to diversify in line with regional trends.

The advantage of cheap labor is now gone and there is no going back. What the most advanced countries of Eastern Europe experienced a decade ago is happening now in Albania and the Western Balkans.

However, while countries that lost the advantage of cheap labor costs replaced this by investing in the modernization of the production chain, moving from traditional low-cost production to value-added production, we do not see this happening in Albania.

Albania has been on a roll in investments in renewable energy, including solar, wind, and other clean energy technologies, which are growing significantly as countries aim to reduce dependence on traditional energy sources and address climate challenges. But it lags far behind what is happening in developing countries, which are becoming important centers for the development of IT, digitalization, and Artificial Intelligence.

Albania is not even catching up to the pace of neighbors like Serbia or North Macedonia, with the former being a model for IT development through long-term investment in the education market and the latter having attracted large manufacturing firms and increased the value chain.

On the contrary, Albania is not focusing either on the development of traditional sectors, such as agriculture, which has been in negative territory for 6 consecutive quarters, or on the sustainable and structured development of branches such as tourism, which has great potential.

On the other hand, the country has damaged the quality of the workforce through the decline in the quality of education, with the country marking the largest deterioration in the world in the latest PISA test. Technological development needs knowledgeable people and for this, the focus must be on human capital.

Albania needs a transformation that cannot happen by relying solely on investment in real estate.