ICT Sector study North Macedonia Albania Kosovo. Presentation by PwC North Macedonia April 2020

Transcription

1 ICT Sector study North Macedonia Albania Kosovo Presentation by North Macedonia

2 PricewaterhouseCoopers () was engaged by the Embassy of the Kingdom of Netherlands to perform a study on the ICT sector in North Macedonia, Albania and Kosovo. The Multi-Annual Action Plan adopted at the Western Balkan Summit in Trieste in 2017 highlights the significance of the digital agenda for the Western Balkan. As a result, a sector study is considered as a primary step to position potential stakeholders and to facilitate their plans to expand/develop in the region. North Macedonia supported by Albania and Kosovo, performed a detailed market research on the ICT sector in the MAK region (North Macedonia, Albania and Kosovo) comprising the ICT ecosystem, status of the available workforce, ICT education, government support for the ICT sector, national strategic documents and government policies and regulations. As part of the Project, ICT companies, government institutions, faculties were considered as a primary source of information on the sector. 2

3 I North Macedonia II Albania III Kosovo ICT Ecosystem Available workforce Review of the existing market ICT sector support Government policies and regulation National strategic documents ICT Infrastructure 3

4 Business opportunities for Dutch companies North Macedonia The ICT sector in North Macedonia is the fastest growing industry Excellent supply of young well-educated IT experts at among the lowest labor costs in the region (average age structure in our survey shows that 63% of the employees are years old) The survey shows that 19% of the participants in the survey had above 1 million EUR average revenue for 2019, their most common business activity is custom software development with 38% and selling software solution with 25%. Export is of crucial importance due to the small national market. There is continuous growth in the ICT market supported by decrease in the price of IT equipment, and a decrease in VAT for the equipment.. Albania Young and educated population with foreign language knowledge (average age structure in our survey shows that 69% of the employees are years old). The survey shows that 23% of the participants had above 1 million EUR average revenue for 2019, Major export market is Italy with 24% of IT services export. Albania has the lowest corporate income tax rate for all companies whose activity is software production and development. The country has high entrepreneurial potential and growing soft infrastructure. The government strategies continue to strengthen Kosovo The ICT sector is among the few sectors within the Kosovo economy that is characterized by a positive trade balance, whereby around 78% of already existing companies export their services. The Government of Kosovo is working to position the country as a regional hub for information technology (IT)-related products and services, building on the strong IT and English-language skills within the workforce. As per the survey, about 27% of the companies export to Switzerland and 23% to Germany. 4

5 N. Macedonia 5

6 Key Facts Republic of North Macedonia KEY FACTS 2019 Name Area 25,713 km 2 Population National currency GDP in current prices Republic of North Macedonia million Macedonian denar (MKD) EUR bn POLOG Kumanovo Tetovo Skopje Gostivar Kichevo NORTHEASTERN SKOPJE EASTERN VARDAR SOUTHWESTERN Kochani Shtip Veles Berovo NORTH MACEDONIA Prilep Radovish Strumica SOUTHEASTERN GDP per capita EUR 4,853 Inflation rate 1.5% Corporate tax 10% Unemployment rate 17.1% Struga Lake Ohrid Lake Prespa PELAGONIJA Bitola 6

7 I ICT Ecosystem 7

8 The ICT ecosystem in North Macedonia Academics Creative IT professionals Tech Companies Ministries and public agencies ICT ecosystem Investors Entrepreneurs ICT Chamber of Commerce Accelerators 8

9 Doing business and improvement of government policies Labour force Digital transformation Highly skilled, competitive and cost effective labour force Young and well educated population with foreign language knowledge Macro factors One of the smallest gaps in in the region regarding digital transformation in comparison to the EU 2nd in Network readiness index in the region after Slovenia (Rank 46 th ). Some of the measured parameters are Political and Regulatory environment, Business and innovation Environment, Infrastructure, Affordability, Skills, Government usage Free economic zones Skopje region is the most developed Optimal geographical location Improvements of government policies Develop to the fullest e-government and government services to citizens and businesses Ease of Doing Business ranking (17h among 190 countries) with best indicators relating to: - Getting Credit ( Rank 25 th ) - Paying Taxes ( Rank 37 th ) - Trading across borders ( Rank 32 nd ) Speed up procedures in the administration and reduce costs Further improvement of legislation related to property rights and urban planning Reduce the informal economy, including undeclared work 9

10 Background of the survey North Macedonia ran a survey among local ICT players with the aim of assessing the current situation. The survey focuses on exploring the following issues related to the ICT sector: Policy and regulatory environment Education level and existing skills Digital infrastructure Human resources Financial performance Barriers for development The overall sample consisted of 90 companies from North Macedonia, out of which 34 companies responded. The questionnaire was prepared in Google Forms and it was delivered through in the period March 9 th - April 24 th. The survey was conducted in English Language. The survey consists of open ended, multiple choice and licker-scale questions. The results on some of the key questions covered by the survey are presented in the next slides. 10

11 Survey results (1/3) Which of the following best describes your business? List the industries you have worked for so far: Education 9% Software consulting and other related services 6% Energy Transport 5% 9% Outsourcing IT services 31% Telecommunications Retail 6% 8% Selling your own software solutions 25% Public administration Game of chance Healthcare 4% 8% 8% Custom software development 38% E-commerce & web Business conuslting 10% 15% Banking and financial services 18% What is the average age structure in the company? How many vacancies are currently available in your company? % % % % % % 21 and more 6% 11

12 Survey results (2/3) For which technologies / programming languages do you have deficit of human resources? Please provide info on average revenue in 2019 (in EUR) CSS 9% PL/ SQL 6% Swift 9% 0 to 500,000 25% Ruby JavaScript 6% 15% 500,001 to 1milion 13% PHP 6% Above 1 milion EUR 19% Python C# 12% 15% no answer 44% C++ 9% Java 12% In which countries do you currently provide export services? How much export contribute to total revenue? Serbia Netherlands UK Germany Israel Croatia Switzerland North America Norway Sweden Denmark USA 6% 6% 6% 6% 6% 6% 6% 11% 11% 11% 17% 17% no answer % % Up to 50% 6% 6% 25% 63% 12

13 Survey results (3/3) Do you face any difficulties in recruiting skilled labour to your company / start-up a challenge? How adequate is the current local policy and regulatory environment for your business? 5 0% % 4 13% 3 27% 3 40% 2 47% 2 40% 1 7% 1 0% 5 - Satisfactory 1 - Unsatisfactory Rate the quality of schools and training for people working in the digital tech sector in your local area? 5 - Satisfactory 1 - Unsatisfactory Evaluate what factors limit your company's growth 5 0% % 5 - Satisfactory 1 - Unsatisfactory 13% 33% 47% Non-harmonized education programs Lack of skilled workforce Tax policy is discouraging Insufficent cooperation with government inst. Employee turnover rate Insufficent no. of knowledge sharing events Not sufficently connected with the ecosystem Do not have access to young talent 15% 15% 14% 14% 12% 11% 10% 9% 13

14 II Available workforce 14

15 Potential workforce Name of the institution Students enrolled in ICT Programmes % of students enrolled in ICT Programmes Public Private University "Ss. Cyril and Methodius" - Skopje 5, University "St. Kliment Ohridski" - Bitola 1, University "Goce Delchev" - Shtip 1, University for Information Science and Technology "St. Paul the Apostle" - Ohrid State University - Tetovo University of Mother Teresa European University - Skopje 30 6 SEE University - Tetovo FON University - Skopje American College - Skopje International Slavic Institute - Sveti Nikole International University Vision International Balkan University, Skopje Source: State Statistics Office The data refers to the year 2018/2019 The vast majority of students opt for public universities when it comes to ICT programmes The only university dedicated exclusively to ICT programmes is a public university 15

16 Employees in the ICT sector ICT sector employees Number of employees Year Year ICT 13,600 13,587 12,995 12,657 ICT sector (% of total employment) Total 723, , , ,546 Source: State Statistics Office The data represented in the table relates only to employees in information and communication, not taking into consideration the other service activities Out of the total number of employees, in 2019 only 1.6 % were employed in the IT or IT-related sectors 16

17 Average salary by sector, in Euro NATIONAL AVERAGE SALARY INFORMATION AND COMMUNICATION Motion picture, video and television programme production, sound recording and music publishing activities Programming and broadcasting activities Telecommunications Computer programming, consultancy and related activities 805 1,044 1,059 1,029 Information service activities OTHER SERVICE ACTIVITIES Activities of membership organizations Repair of computers and personal and household goods Other personal service activities Source: State Statistics Office Note: All figures are in net amount in euros and are translated with the exchange rate available at the end of the year The average salary in the ICT sector is 52% higher than the national average On average, computer programmers receive the highest salaries in the ICT sector 17

18 Average monthly salary Average monthly gross salary per employee for 2019 (EUR) 1,800 1,600 1,400 1,200 1, National Minimum Wage (NMW) is 236 EUR Information and communication Computer programming, consultancy and related activities Source: State Statistics Office The average monthly salary in December is higher by about 10% compared to the rest of the year. The average salary of the ICT sector is lower by 35% compared to the sub-sector Computer programming, consultancy and related activities 18

19 III Review of the existing market 19

20 ICT Industry s % contribution to the GDP In EUR GDP 9,108,095 9,877,268 10,077,853 10,736,715 11,342,195 ICT 302, , , , ,121 ICT Industry % contribution to the GDP ,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, GDP ICT ICT Industry % contribution to the GDP 3.5% 3.4% 3.3% 3.2% 3.1% 3.0% 2.9% 2.8% 2.7% 2.6% Source: State Statistics Office * The last available data of the total turnover and value added of the ICT industry is for year 2018 In 2019 the contribution of the ICT Industry to the GDP was 3.4 %, which is the highest in the last five years Total turnover of the ICT sector for the year 2018 amounts EUR 668 million * The value added at factor cost for 2019 is EUR 336 million* 20

21 Introduction I Macedonia II Albania III Kosovo Contact Established entities in the area of ICT in Source: Central Register of the Republic of North Macedonia The region of Skopje is leading in attracting new ICT companies with 68%. The total number of ICT companies for Macedonia in 2018 is 1,919, compared to 2017 when there were 1,689 companies. 21

22 ICT service exchange between North Macedonia and rest of the world ICT service exports (BoP, current 000 ) 312, , ,196 / ICT service exports (% of service exports, BoP) / Computer, communications and other services (% of commercial service exports) Communications, computer, etc. (% of service imports, BoP) Computer, communications and other services (% of commercial service imports) Source: Trading Economics Since 2015, computer, communications and other services make up a majority of commercial service exports Imports and exports of IT services are deeply intertwined 22

23 E-commerce in the enterprises, according to the number of employees, 2019 E-commerce Total (10+) (10-49) (50-249) (250+) Е-sales: have received orders via computer networks Web sales: received orders for products or services via a website Percentage of the total turnover resulting from orders received via a website = /> 1% < 1% The proportion of enterprises that use e-commerce increases with company size. Sales via a website by type of customer B2C (Sales to private consumers) B2B (Sales to other enterprises) and B2G (Sales to public authorities) EDI-type sales: received orders via EDItype messages in an agreed format, e.g. EDIFACT, UBL, XML Source: State Statistics Office 23

24 Social Media Usage Companies that use social media (categories by number of employees) Number of employees Total (10+) 56.90% 54.50% 55.20% 68.10% % of social media use in 2019 Source: State Statistics Office The majority of Macedonian companies with more than 10 employees use social media. The proportion of companies that use social media increases with company size. 24

25 IV ICT sector support 25

26 Sources of funding Fund for Innovation and Technological Development Public Employment Service Agency of the Republic of North Macedonia Support to the employment of young people internship programme up to the age 29 Agency for Promotion of Entrepreneurship of Republic of North Macedonia Western Balkans Guarantee Facility EU funding COSME Horizon 2020 Private funding and other SEEUT TechPark, Seavus Accelerator, South Central Ventures, Business Angels Club (CEED BA Club), CEED Hub Skopje, X Factor Accelerator, Small Enterprise Assistance Funds (SEAF) Hub Skopje Business Accelerator, PSM business incubator, New Man s Accelerator, SuperFounders Accelerator 26

27 Fund for innovation and technological development (state owned) Co-financed grants for newly established start-up and spin-off companies Co-financed grants and conditioned loans for innovation commercialization Co-financed grants for Technology Transfer Technical Assistance through Business- Technology Accelerators Financial support instruments under pillar 3 of the Economic Growth Plan Co-financed Grants for Fast-growing Small and Medium Enterprises (Gazelle) Co-financed grants for micro enterprises Co-financed grants to enhance innovation Co-financed in-service training and grants for newly employed youth Source: Fund for Innovation and Technology development 27

28 Co-working spaces Coffice Coffice is a shared office space for entrepreneurs, located in Skopje s city center. Funky Co-working A community of startups and freelancers who organize meetups to network and celebrate co-working lifestyle. #MKstartups SPACE The 1 st entrepreneurial community center in Skopje. The meeting space for start-ups, innovation leaders and the community. Public Room Public room is a restaurant and a co-working space for entrepreneurs, designers, freelancers and startups. Co-working spaces in North Macedonia are available in limited number and capacity mostly in Skopje. 28

29 Incubators and Accelerators YES Business Incubator Youth Entrepreneurial Service (YES) Foundation with its main component, business incubator for supporting micro, small and medium enterprises in the ICT field. 6&l=63&c=22 Seavus Incubator Seavus Incubator is a multi-functional working space intended for tech start-ups and entrepreneurs, digital artists and online media. CEED Hub CEED Hub Skopje acts as a central root of a fastmoving community and actively boosting and inspiring idea generation, creation, innovation and cooperation for startups and business. New Man s Business Accelerator Over the last 5 years NewMan s BA has hosted over 160 startup events, and have worked with over 1200 individual entrepreneurs and 430 startup teams. INNOFEIT INNOFEIT is a place where the faculty staff, students and company representatives can interact, network and transfer technologies and innovations. SEUUTechPark SEUUTechPark Incubator offers professional training and counseling provided by professionals. 29

30 Private non-formal education Brainster Brainster is a digital education platform specialized in IT and digital, combining the most relevant technologies with the market demand. Data Masters Data Masters is unformal education specialized in Business Intelligence, Machine Learning and Advanced Analytics. Seavus Education Centre Seavus Education Centre is specialized training center for education of staff in the fields of programming, design, computer networks and software testing. Semos Education The main task of Semos Education is developing a wide range of courses designed for various end users with a different level of computer technology knowledge. Creative Hub Creative Hub is a business center in Skopje that offers computer courses, graphic design courses, digital marketing courses and more. The non-formal education has come a long way in its recognition, validation, verification and acceptance in North Macedonia. 30

31 V Government policies and regulation 31

32 General laws Law on Labor Relations Law for Protection Against Harassment At Work Law on Health and Safety at Work Law on Financial Discipline Law on Payment Operations Law on Archiving Companies Law Law on Protection of the Use of Macedonian Language Law on Whistle-blowers Law on Foreign Exchange Operations Inventory Obligations Transportation Regulations Law on Protection And Rescue Law on Personal Data Protection Law on Personal Income Tax Data Protection Law Aligned with the EU General Data Protection Regulation (GDPR) Industry-specific laws The Law on Waste, the Law on Waste from Electrical and Electronic Equipment and other laws in the field of waste management Law on Copyrights Methodology for Assessing the Value of Information Technology Agreement between North Macedonia and EU for the Horizon 2020 programme * Annex 1 *General laws are not industry specific and are valid for every incorporated company. 32

33 VI National strategic documents 33

34 National Cyber Security Strategy and Action Plan The National Cyber Security Strategy of Republic of North Macedonia is a strategic document that fosters the development of safe, secure, reliable and resilient digital environment, supported by high-quality capacities based on cooperation and trust in the field of cyber security. Open Data Strategy and Action Plan The Government of Macedonia recognizes that open data can be a powerful incitement for social and economic development and that it can also be used to improve public governance by enhancing transparency, openness, integrity and public participation at the central and local levels of government. Public Administration Reform Strategy Public Administration Reform (PAR) is a continuous process of reorganization of the institutions in the public sector and improving their administrative capacity, time and one of the key priorities in the accession partnership and an important prerequisite in the European integration of the Republic of Macedonia. National Operational Broadband Plan The Government adopted the National Operational Broadband Plan - NOBP ( ). The underlying aim is to reach speed and utilization of broadband that are in place in EU memberstates. Source: Ministry of Information Society and Administration

35 VII ICT infrastructure 35

36 Use of ICT by households for 2019 Percentage (%) Households with PC (desktop or laptop) / Internet Access Households with Internet access 81.8 Households with Internet access Households without Internet access 18.2 Households that are unaware whether they have access to the Internet 0.2 Broadband vs. mobile data Households with broadband Internet connectivity (fixed or mobile) 70.0 Internet connectivity via mobile broadband connection, 3G or better (e.g. UMTS) 57.6 Total population aged Internet users (ever to have used Internet) 83.4 Used Internet in the last 3 months Used Internet between 3 months and a year ago 1.0 Used Internet more than a year ago Households with Internet access Linear (Households with Internet access ) The number of households with Internet access is increasing every year Never used Internet 16.6 Used every day or almost every day 72.9 At least once a week (not every day) 7.7 Source: State Statistics Office 81.8% of Macedonian households have access to Internet 36

37 Use of Internet for private purposes for 2019 Percentage (%) Leisure Reading or downloading online newspapers, magazines 54.1 Uploading personal content on webpages 70.4 Communication Social networks 68.4 Telephony via the Internet/video-calls (webcam) 64.9 Sending/receiving mail 47.2 Posting opinions on civic or political issues via websites 7.2 Taking part in online consultations or voting to define civic or political issues 3.8 Research Finding information about health-related issues 45.1 Finding information about products/services 53.6 Services Looking for a job or sending job application 8.6 Online-banking 14.8 Participating in professional networks 5.2 Sale of products/services (e.g. ebay) % of respondents use online-banking, whereas more than 68.4% use social networks 53.6% Search information about products/services online Source: State Statistics Office 37

38 Key indicators for the development of ICT for Source: Agency for electronic communications 38

39 Findings from EU progress reports The potential and capabilities of modern ICT systems are still growing exponentially fuelled by the progress in electronics, microsystems, networking, the ability to master increasingly complex cyber-physical systems and robots, and progress in data processing and human machine interfaces.. EU investments in ICTs are due to increase by about 25% under Horizon 2020 compared to FP7 Information and Communication Technologies underpin innovation and competitiveness across private and public sectors and enable scientific progress in all disciplines. 39

40 Albania 40

41 Key facts Republic of Albania KEY FACTS 2019 Name: Republic of Albania Area: 28,748 km 2 Population: National currency: 2,846 million Albanian lek (ALL) Tirane GDP in current prices: EUR 14.3 billion GDP per capita: EUR 4,846 Inflation rate: 1.3% ALBANIA Corporate tax: 15% Unemployment rate: % 41

42 Macroeconomic situation Macroeconomic indicators Indicators FY14 FY15 FY16 FY17 FY18 FY19 Population (in mln) Real GDP growth (in %) GDP per capita (euro) 3,450 3,546 3,727 4,026 4,846 4,970 Inflation (in %) Employment (in %) Average salary (euro) Corporate Income Tax rate (In %) Source: Trading Economics 1 Eur/122 ALL After expanding by 4.1% in 2018, annual growth for 2019 is projected to slow to 2.9 %, as a drastic decline in rainfall cut hydroelectric power production. An expansion in domestic demand led growth in Net exports reduced growth, as stagnant growth among trade partners limited traditional exports. Employment continued to grow. Unemployment reached a record low of 11.5% in the second quarter of Poverty remains high, however; it is estimated that roughly 34.6% of Albanians are living on less than US $5.5 per day. Inflation declined compared to end-2018, reversing the trend of the recent past. The Bank of Albania has maintained its policy rate at a record-low 1% since June The monetary easing and improvements in the loan portfolio has facilitated private sector credit growth. Although Albania s fiscal position improved in 2019, risks from contingent liabilities and state-owned enterprises (SOEs) remain high. In 2019, fiscal revenue growth was limited by lower GDP growth and especially by the increased repayment of value added tax refund arrears. The budget deficit is projected to widen to 2.2% of GDP in 2019, while the public debt, including guarantees and arrears, is expected to decline to 68.4% of GDP. 42

43 Doing business and recommendations for improvement of government policies Recommendations for improvement Improvement in Doing Business ranking (53th among 190 countries) The Global Competitiveness Index (2019) has assessed Albania with 57.6 points Why doing business in Albania? Continue fiscal consolidation to meet the medium-term target for public debt reduction. Bolster financial stability further by continuing to promote the resolution of NPLs and the use of the domestic currency. Optimal geographical location Free economic zones Young and well educated population with foreign language knowledges Competitive labour cost Reduce the informal economy, including undeclared work. Further improvement of legislation related to property rights

44 Business opportunities in the ICT sector 1. Development of e-services Despite the small share in the software development there is room for potential growth. One of the main government priorities is the development of public service delivery focusing especially on e-services and related platforms in place. Main areas for further development especially relying on international expertise are: infrastructure management services software related services Further R&D software IT consulting services 2. BPO sector an employment generator The BPO sector in Albania is one of the most developed in the last 5 years resulting to be a real employment generator, especially for youth generation. Referring Albanian Outsourcing Association (AOA) members there are around 300 call-centres in Albania with over employees. Most of the players in the market are Italian companies but there is room for growth for other European countries and companies. 3. Introduction of technology in many priority sectors like health and agriculture Further improvement and modernization of health sector based on supply of up to date medical equipment/medical labs and reliance on technology (best practices) from European countries. Automation and further improvement of technology in place related to existing landfills and improvement of waste management processes Process automation and further technology or systems improvement in agriculture sector related to specific processes like; packaging, storage and distribution or supply chains. 44

45 Background of the survey North Macedonia ran a survey among local ICT players with the aim of assessing the current situation. The survey focuses on exploring the following issues related to the ICT sector: Policy and regulatory environment Education level and existing skills Digital infrastructure Human resources Financial performance Barriers for development The overall sample consisted of 60 companies from Albania, out of which 30 companies responded. The questionnaire was prepared in Google Forms and it was delivered through in the period March 9 th -April 24 th. The survey was conducted in English Language. The survey consisted of open ended, multiple choice and licker-scale questions. The results on some of the key questions covered by the survey are presented in the next slides. 45

46 Survey results (1/3) Which of the following best describes your business? List the industries you have worked for so far Software consulting and other related services Outsourcing IT services Selling your own software solutions Custom software development 17% 17% 25% 25% Education Energy Transport Telecommunications Retail Public administration Healthcare E-commerce & web Business conuslting Banking and financial services 9% 9% 8% 8% 12% 9% 11% 11% 14% 9% What is the average age structure in the company? How many vacancies are currently available in your company? % % % % % % We don't have 15% 46

47 Survey results (2/3) For which technologies / programming languages do you have deficit of human resources? Please provide info on average revenue in 2019 (in EUR) JavaScript 27% 0 to 500,000 38% Python 7% 500,001 to 1milion 23% C# 20% C++ 13% above 1milion 23% Java 33% no answer 15% In which countries do you currently provide export services? How much export contribute to total revenue? USA United Kingdom Bosna & Herzegovina Macedonia Greece Italy 6% 6% 6% 6% 6% 6% 6% 6% 6% 12% 12% 24% no answer % % Up to 50% 15% 15% 31% 38% 47

48 Survey results (3/3) Do you face any difficulties in recruiting skilled labour to your company / start-up a challenge? How adequate is the current local policy and regulatory environment for your business? 5 8% 5 8% 4 8% 4 8% 3 38% 3 69% 2 38% 2 15% 1 8% 1 0% 5 - Satisfactory 1 - Unsatisfactory Rate the quality of schools and training for people working in the digital tech sector in your local area? 5 - Satisfactory 1 - Unsatisfactory Evaluate what factors limit your company's growth % 0% 23% 38% 38% Non-harmonized education programs Lack of skilled workforce Tax policy is discouraging Insufficent cooperation with government inst. Employee turnover rate Insufficent no. of knowledge sharing events 12% 11% 12% 10% 12% 15% Not sufficently connected with the ecosystem 15% 5 - Satisfactory 1 - Unsatisfactory Do not have access to young talent 12% 48

49 I ICT Ecosystem 49

50 Accelerators and incubators Garazh (The Garage) is a project brought up by the startup and innovation enthusiasts who are already contributing into building the startup ecosystem in Tirana. With the main objective to contribute, promote and shape the innovation in Albania, the organization aims to become the one-stop for professionals, entrepreneurs, and startups by offering access to resources and knowledge. Yunus Social Business helps create social businesses around the world through setting up incubator funds and helping people in developing and emerging countries to become successful entrepreneurs through financial support but most importantly through training, coaching and mentoring as well as access to local and global networks. Protik Innovation Center is one of the two active seed accelerators in Albania. It mainly focuses on ICT education and covers laboratory provision and other required support to startups. There is a future plan for an accelerator programme as well which is highly depended on financing sources Oficina covers and provides support to a number of start-up teams. Interested parties have the chance to test and certify their ideas and to connect with potential investors. Although the accelerator has a very good output and feedback it still struggles to find sufficient funding to sustain its operations. While there is a lack of incubators there are two seed accelerators identified in Albania like Protik and Oficina both located in Tirana. 50

51 Co working spaces Co-working spaces in Albania are available in limited number and capacity only in Tirana. All of them provide not only physical workspace but also aim at connecting their community of founders and to provide coaching and support programmes. MyOffice.al MyOffice.al is a co-working space situated near a very favorite area of the city of Tirana. MyOffice premises, located in an area where the greatest number of startups are situated, offers modern workplaces, no contract obligation, office for single person or team, meeting/teleconference room use for free a bar and entertainment room. Price for private office per month: 140 EUR. Creative Hub Creative Hub is the first center for informal and creative education in Albania offering courses in marketing, public relations, business communication, human resources and design. Innovation Hub Tirana Innovation Hub currently putted on hold is an 800 sq. space in Tirana that provides workspaces and community building activities. It can host up to 10 start-up teams mainly focusing on coaching, mentoring and acceleration activities. The project was launched from the Ministry of State for Innovation and Public Administration and financed by the Italian-Albanian Debt for Development Swap Program IADSA. Tirana Business Park, Tirana Tirana Business Park is a project aiming to establish a business park and an economic center of European standards, and to give the Albanian area a real potential of economic and social development. The business park is open to all businesses and offers co-working spaces. Tirana Talent Garden, Tirana Is an international network with a focus on digital offering a space for technology/digital/creative entrepreneurs, freelancers and startups. Located in Tirana is one of the first campus in Albania that can host up to 48 members. It is part of the Italian Talent Garden Network and seeks to combine digital, tech and creative talent. Talent Garden thus far remains a provider of work spaces rather than an entrepreneurial community center. 51

52 II Available workforce 52

53 Available workforce statistics (1/2) Labour force participation rate Age Total Male Female Total Male Female Skilled youth labour force with improved technical skills and knowledge of foreign language; mainly in English and Italian Employment rate Age Total Male Female Total Male Female Official employment for the workforce within age range is 72% and followed by a positive trend in the last 4 years Source: Institute of statistics 53

54 Available workforce statistics (2/2) Gross average salaries as per activity 2018 (Euro) Sector Total Male Female Agriculture, forestry and fishing Mining and quarrying; manufacturing; electricity, gas, steam and air conditioning supply; water supply; sewerage, waste management and remediation activities Construction Wholesale and retail trade Information and communication Financial and insurance activities Real estate activities; Professional, scientific and technical activities; administrative and support service activities Public administration and defence; compulsory social security; education; human health and social work activities Arts, entertainment and recreation EUR Average salary in ICT sector for 2018; male 670 EUR, female 559 EUR National Minimum Wage is 213 EUR Average gross salary per employee for 2019 in EUR Q1 Q2 Q3 Q4 Quarter Source: Institute of statistics 54

55 Potential workforce for the ICT sector Students enrolled by Faculty and Programmes, academic year , in Public Education Total Man Women Total bachelor students in Albania 75,604 32,828 46,915 Tirana University 19,582 4,448 15,134 Faculty of Natural Sciences 5,352 1,903 3,449 University of Polytechnic 10,057 6,974 3,083 Faculty of Information Technology 1, University "Aleksandër Xhuvani"Elbasan 8,701 3,238 5,463 Faculty of Natural Sciences University "Luigj Gurakuqi" of Shkodra 7,058 2,651 4,407 Faculty of Natural Sciences 2, ,161 University "Eqrem Çabej" Gjirokastra Faculty of Natural Sciences University "Aleksandër Moisiu" of Durrës 12,887 5,161 7,726 Faculty of Information Technology 2,436 1, Almost 15% of total students in the public universities are students enrolled on ICT programs. 54% of students enrolled on the faculties related to ICT programs and majors are women Number of graduated students on the public universities Academic years Bachelor only 17,469 19,152 18,652 20,423 20,108 Source: Institute of statistics No official data is available on graduated students from ICT studies, however as per unofficial data, the trend is similar as for the overall education and is around 20% graduated students from the total enrolled per year. 55

56 III Review of the existing market 56

57 ICT Industry s % contribution to the GDP In EUR GDP 11,194,420 11,507,330 11,813,581 12,440,701 13,123,210 ICT Industry % contribution to the GDP In 2018 the ICT Industry's % contribution to the GDP was 2.9 %. ICT Industry % contribution to the GDP 13,500,000 13,000,000 12,500,000 12,000,000 11,500,000 11,000,000 10,500,000 10,000, GDP ICT Industry % contribution to the GDP 3.2% 3.1% 3.1% 3.0% 3.0% 2.9% 2.9% 2.8% 2.8% 2.7% 2.7%. Total turnover of the Transport, Information and Communications sector for the year 2018 amounts EUR 1,255 million* The value added for 2018 is EUR 512 million* Source: Database Government Albania * The data includes the Transport, Information and Communication Sectors; There is no available data only for the ICT sector 57

58 ICT usage ICT usage 2018 (in %) Sector Source: Institute of statistics Companies using computers Employees using computers at work Companies with internet access Companies that did e-commerce sales Manufacturing Utilities (energy, water) Construction Wholesale & retail Transportation and logistics Accommodation and food service activities Information and communication Real estate activities Professional, scientific and technical activities Administrative and support service Repair of comp.&communication equipment Total

59 IV ICT sector support 59

60 Mapping of government involvement Policy maker level Ministry of Infrastructure and Energy responsible for ICT infrastructure Ministry of Finance and Economy responsible for business environment Ministry of Education, sports and youth responsible for science, academia and youth National Council for Investment National Council of High education and science Consulting council for businesses Council of strategic planning AKKSHI National Agency for Scientific research and innovation AKEP Electronic and Postal Communications Authority AKSHI National Agency for Information Society AIDA Albanian Investment & Development Agency Chamber of Commerce and Industry Executive level 60

61 Sources of funding In terms of financing main sources remain the donor ones with USAID and Italian donors being very active in promoting the competitiveness of the SME sector and the ICT industry, Germany s GIZ and UNDP in supporting vocational training and Swiss-contact promoting new ventures in the social business space. Donor funds Private sector Public funds On the government side main actors remain the Agency for Investment and Development in Albania (AIDA), National Agency for scientific research and innovation (NASRI)and Municipality of Tirana as well. NASRI allocates research grants on a competitive basis and it seeks to foster bilateral projects between science and industry. The Albanian Investment and Development Agency (AIDA) has established a number of new funding instruments, like the Innovation Fund assists SMEs and start-ups seeking scientific collaboration by providing matching funds up to EUR 10kr. Innovation voucher schemes also are under consideration. Even the private sector has became an active actor in the last years trying to support development of SMEs and startups based on small sized grants (average of EUR 5k) covering the initial launching if ideas, products and services. 61

62 Grants & Subsidies Yunus Social Business Yunus Social Business helps create social businesses around the world through setting up incubator funds and helping people in developing and emerging countries to become successful entrepreneurs through financial support but most importantly through training, coaching and mentoring as well as access to local and global networks. Until now, YSB Albania funded and supported the launch of several social businesses with more than $850,000 in financing, with a further $500,000 in in-kind investments. Vodafone Foundation USAID Vodafone Foundation aims to allocate grants to local organizations, including non-profit organizations and other civil society institutions in order to respond to community needs. Vodafone Albania Foundation also delivers donations in kind that are generated by the benefits and development of mobile communication technology. USAID offers some supporting grants and subventions to different categories of businesses. USAID s programs in Albania strengthen democratic institutions, promote civil society, reduce corruption, promote gender equality and, at the same time, create a more favourable environment for inclusive economic growth all necessary to move Albania forward more quickly towards greater democracy while meeting criteria that are essential to achieving its European aspirations. Support Embassy financial support Embassies like the Embassy of the Netherlands in Albania, Embassy of the United States, the Embassy of Israel or the Embassy of Switzerland through different projects offer grants and financial support for startups and local project in specific area of interest. 62

63 V Government policies and regulation 63

64 General laws Industry specific laws Albanian Labor Code and Law Law on Trading Companies Law on Personal Data Protection Law on Strategic Investment Law on Health and Safety at Work Law on Labor Inspection and State Labor Inspectorate Law on the Status of Civil Employees Law on Public procurement Law on Whistle-blowers Law on Science and Technology Development Law on Higher Education and Scientific Research in Higher Education Institutions of the Republic of Albania Law on the Academy of Science in Albania Memorandum of Understanding between Albania and EU in the light of 7 th framework agreement for RDI Agreement between Albania and EU for the Horizon 2020 programme *General laws are not industry specific and are valid for every incorporated company. *Annex 2 64

65 VI National strategic documents 65

66 Introduction I North Macedonia II Albania III Kosovo Contact National strategic documents Digital Agenda Development of legal and institutional framework Development of ICT infrastructure and the facilitation of cheap and fast internet Development of e-governance; Education related to ICT knowledge Promotion of e-business National strategy for Science searches, Technology and Innovation (NSSTI) Improvement of legal, institutional, financial serving to science, innovation and technology Support to scientific researches as an incentive of innovation and technology development in the business community Raise awareness among key players like business community, media, and public National Strategy for Development and Integration Modernization of ICT in public institutions Develop e-governance and offer interactive public services via internet for the citizens and the businesses Complete switchover from analogue to digital broadcasting 66

67 VII ICT infrastructure 67

68 ICT Infrastructure The digital transformation gaps between Albania and the EU, which compare the values of digital transformation indicators to respective EU averages, suggest the level of digital transformation falls short relative to more propulsive regional peers in Central Europe and the Baltics (CEB). These gaps are marked by significant deviation from EU averages both in infrastructure and individual use indicators. In terms of the proportion of households with computer, internet access at home and households with a personal computer, Albania has the weakest performance in these indicators, lagging behind EU average by more than 60 percent. Social Impacts Econimic impacts Government usage Network readiness index in 2019 Political and regulatory environment EU AL Business and inovation environment Insfrastructure and digital content Affordability Business usage Skills Source: World Economic Forum Individual usage 68

69 Findings from EU progress reports In the coming year, Albania should in particular: adopt the necessary amendments to the Law on Electronic Communication, in alignment with the new European Electronic Communications Code, and prepare an action plan for the digital agenda. Albania has made some progress in terms of energy, transport and digital infrastructure development, but lack of productive know-how, low education levels and technology transfers hinder Albania s competitiveness and integration into international value chains. In order to monitor progress made by Albania towards the compliance with the European Union rules for electronic communications and information society services and convergence with the internal market, as well as the alignment with the Digital Agenda for the Western Balkans, the country needs to improve the collection of statistical data on digital performance and digital competitiveness. 69

70 Kosovo 70

71 Key Facts- Kosovo KEY FACTS 2018/2019 Name: Republic of Kosovo Area: 10,908 km 2 Leposavić KOSOVSKA MITROVICA Podujevo Population: 1.9 million National currency: Euro (EUR) GDP in current prices: EUR 7.9 billion GDP per capita: EUR 3,812 Inflation rate: 1.2% Corporate tax: 10% Unemployment rate: 24.5% Peć PEĆ Klina PRIZREN Prizren Glogovac KOSOVO Uroševac Priština KOSOVO POMORAVLJE Gnjilane 71

72 Advantages of doing business Business-friendly Set up a business in 2 business days Reduced administrative burdens (one-stop-shop) Online application Strategic location Located in the heart of the Balkans Modern road infrastructure to capital cities in neighbouring countries Driving distance from Macedonia and Albania Low taxes 10% corporate tax rate 0-10% personal tax rates Low social security contributions (5% contribution by employee and employer) Strategic location Business friendly Low taxes Why Kosovo? Young population Fast-growing economy Low labour costs Young population 42% of the population under the age of 25 Majority of talent pool with university-level education Low labour costs Average private sector salary approx. EUR 400 Wide and low-cost pool of young, English-speaking workforce. Fast-growing economy EUR is the official currency Strong macroeconomic stability GDP growth rate expanded 4.4% in 2019 Low inflation rate Source: Kosovo World Bank; Kosovo Statistical Agency; CIA Factbook Investment and Enterprise Support Agency; 72

73 Areas for improvement Increase awareness of the importance of digital skills in the economy There is a lack of knowledge and resources among stakeholders which is necessary for the promotion of IT sector. More efforts needed to establish an institutional framework for the promotion of the IT sector. Promote and enhance skills specialization IT companies are not highly specialized or differentiated in terms of technologies, target industries (vertical specialization) and specific functional areas (horizontal specialization). Improve formal and vocational IT education The curriculum of the education system (tertiary education) does not a meet the needs and requirements of IT companies, which negatively affects the competitiveness of local IT companies. Specialized formal and training-focused education programs are necessary to increase the skill set of local IT graduates and professionals. The domestic market in Kosovo is comparatively small and underdeveloped, hence creating difficulties in generating growth impulse in the IT sector or promoting local innovation. There is a lack of information on IT market and technology trends, especially with regards to potential export markets Source: Emerging Europe; Digital 2019, Datareportal; 73

74 Background of the survey North Macedonia ran a survey among local ICT players with the aim of assessing the current situation. The survey focuses on exploring the following issues related to the ICT sector: Policy and regulatory environment Education level and existing skills Digital infrastructure Human resources Financial performance Barriers for development The overall sample consisted of 60 companies from Kosovo, out of which 20 companies responded. The questionnaire was prepared in Google Forms and it was delivered through in the period March 9 th -April 24 th. The survey was conducted in English Language. The survey consisted of open ended, multiple choice and licker-scale questions. The results on some of the key questions covered by the survey are presented in the next slides. 74

75 Survey results (1/3) Which of the following best describes your business? List the industries you have worked for so far: Software consulting and other related services Outsourcing IT services Selling your own software solutions Custom software development 10% 30% 30% 30% Education Energy Transport Telecommunications Retail Public administration Healthcare E-commerce & web Business conuslting Banking and financial services 5% 5% 8% 8% 10% 10% 10% 13% 15% 15% What is the average age structure in the company? How many vacancies are currently available in your company? % % % 60% % % We don't have 20% 75

76 Survey results (2/3) For which technologies / programming languages do you have deficit of human resources? Please provide info on average revenue in 2019 (in EUR) CSS 5% PL/ SQL Swift 5% 5% 0 to 500,000 30% Ruby JavaScript 5% 10% 500,001 to 1milion 40% PHP Python C# 5% 10% 15% above 1milion no answer 10% 20% C++ 20% Java 20% In which countries do you currently provide export services? How much export contribute to total revenue? Norway Austria Canada UK USA Finland Netherlands Switzerland Belgium Germany 4% 4% 4% 4% 8% 8% 8% 12% 23% 27% no answer % % Up to 50% 10% 10% 20% 60% 76

77 Survey results (3/3) Do you face any difficulties in recruiting skilled labour to your company / start-up a challenge? How adequate is the current local policy and regulatory environment for your business? 5 0% 5 10% 4 10% 4 30% 3 60% 3 30% 2 20% 2 30% 1 10% 1 0% 5 - Satisfactory 1 - Unsatisfactory Rate the quality of schools and training for people working in the digital tech sector in your local area? 5 - Satisfactory 1 - Unsatisfactory Evaluate what factors limit your company's growth 5 20% Non-harmonized education programs 10% % 50% Lack of skilled workforce Tax policy is discouraging Insufficent cooperation with government inst. 13% 11% 12% 2 10% Employee turnover rate 11% 1 10% 5 - Satisfactory 1 - Unsatisfactory Insufficent no. of knowledge sharing events Not sufficently connected with the ecosystem Do not have access to young talent 13% 15% 15% 77

78 I ICT infrastructure 78

79 Mobile, Internet and Social Media use (1/2) Total Population 1.91 Million Mobile Subscriptions 1.86 Million Annual change in mobile subscription: % The mobile connections as a percentage of total population is 97% Total number of mobile connection is 1.86 million users. Annual change in population size: + 0.7% Female population: 48.5 % Male population 51.5 % GDP per capita: $ 10, % 80% 60% 94% 63% Overall literacy (adults aged 15+): 92% Female literacy (adults aged 15+): 88% Male literacy (adults aged 15+): 97% Source: Datareportal- Digital 2019:Kosovo 40% 20% 0% Pre-paid mobile connections 6% Post-paid mobile connections Broadband mobile connection (3G & 4G) 79

80 Mobile, Internet and Social Media use (2/2) Internet users Active Social Media users Facebook 780,000 Instagram 580, Milion 870 Thousand Twitter 65,500 LinkedIn 48,000 Internet users as a percentage of total population: 88% Total number of active mobile internet users: 1.49 Million Mobile Internet users as a percentage of total population: 78% Annual change in population size: - 21% Active social media users as a percentage of total population: 45% Total number of active social users accessing vie mobile devices: 770,000 Active mobile social users as a percentage of the total population: 40% 100% 80% 60% 40% 20% 0% 62% 59% 77% 65% 38% 41% 23% 35% Male Female Source: Datareportal- Digital 2019:Kosovo 80

81 E-commerce indicators 52% Has an account with a financial institution 10% Has a credit card 6.7% Percentage of women with a credit card 14% Percentage of men with a credit card 12% Percentage of women making online transactions 18% Percentage of men making online transactions 15% Makes online purchase and/or pays bills online While e-commerce is seen as an important driver in developing the ICT sector, it is still not all that popular in Kosovo, more than 54 per cent of individuals prefer to see and buy products in shops. Source: Datareportal- Digital 2019:Kosovo 81

82 II ICT Ecosystem 82

83 Introduction I Macedonia II Albania III Kosovo Contact Existing ICT ecosystem Non-Government Organizations (1/2) 1. Kosovo ICT Association (STIKK) The Kosovo ICT Association (STIKK) was established in 2008 and aims to help create a better ICT business environment by improving standards and educational opportunities, and advocating with the government on behalf of its members to ensure that the sector will attract new business and investment. IT Barometer study STIKK is a key contributor to the Kosovo s IT strategy, a member of the Steering Committee for the implementation of the Kosovo IT Strategy and it also conducts the annual IT Barometer study providing an insight of the IT industry of Kosovo and market trends. STIKK currently accounts for 125 +members, which represents 90% of the ICT market of Kosovo. Tech Park in Pristina STIKK together with relevant ministries and government agencies established the first Tech Park in Pristina, where the sector of Information and Communication Technology would be the leading sector. Tech Park Prishtina is planned to become an internationally acknowledged and supportive environment for new businesses, by enabling entrepreneurship through technology, competitiveness and global business promotion. Innovation Centre Kosovo (ICK) The Innovation Centre Kosovo is founded by STIKK to support entrepreneurship, innovation and commercially based business development with focus on information and communication technology. ICK is the leading integrator for start-ups. 83

84 Introduction I Macedonia II Albania III Kosovo Contact Existing ICT ecosystem Non-Government Organizations (2/2) 2. CEED Kosovo CEED Kosovo is an organizing providing entrepreneurs training, connections to finance and access to new markets. They offer peer-to-peer learning programs, relationship building through mentoring and connecting and helping businesses with accessing capital and financing. It also implements several donor projects on entrepreneurship, business consultancy and executive development. 3. UNICEF Innovations Lab UNICEF Innovations Lab is a unit of UNICEF Kosovo that aims to help young people with innovative ideas get start-up funding (up to EUR 3k) and coaching/mentorship throughout implementation of their project. They support young people between the ages with sustainable business plans with a social impact/change component. 84

85 Introduction I Macedonia II Albania III Kosovo Contact Existing ICT ecosystem Incubators / Accelerators & Co-working spaces 1. Innovation Centre Kosovo (ICK)- Innovation Centre Kosovo (ICK) was established and funded by the Swedish and Norwegian Embassy in Kosovo. It runnetworkss a structured incubation program with access to mentors and international funding. 123 startups have participated so far, in 15 calls for applications. ICK Incubator provides pre-incubation, incubation, training and courses, and co-working spaces. Together with STIKK, ICK is one of the key players in the Kosovo ICT ecosystem. 2. Gjirafa Lab - Gjirafa Lab is a startup factory made for Internet entrepreneurs and provides space, mentoring, networking, technology, and funding to develop their business in Kosovo and the region. It was founded by Mergim Cahani of Gjirafa, Inc., a Kosovo startup success story, in funding partnership with USAID. 3. Innovation Centre Jakova- ICG is an innovation centre based in Jakova, a city in Kosovo. It was established by the Ministry of Education, Science and Technology, along with the local municipality and with the support of the British Embassy. It provides coworking space, incubation support services and trainings for participants. 4. Prishtina Hackerspace Prishtina Hackerspace is a member-based co-working and open experimentation space established exclusively for technological, educational, cultural and scientific purposes. The aim of the space is to provide workspace, equipment and other resources for communal use by all members; encourage continued and after-school learning and create a safe and open environment for experimentation in technology and art. 85

86 Introduction I Macedonia II Albania III Kosovo Contact Government Institutions 1. Ministry of Education, Science and Technology The Ministry of Education, Science and Technology is responsible for both the development of the scientific research and the higher education system, and for the promotion of innovation and technological development. Additionally, the ministry is in charge of the formulation of an overall strategy for the development of education, science and technology in Kosovo and the promotion of a single, unified, non-discriminatory and inclusive education system. The Department for Science and Technology takes care of the creation of a good infrastructure, institutional and financial basis for science and research as well as of the promotion of technological developments in the economy. 2. Ministry of Economy and Environment (previously Ministry of Economic Development) The Ministry of Economy and Environment is the key institution in charge of drafting of policies and strategies on the overall economic development of Kosovo, including the provision of support to information technology and innovation. The Ministry also participated in the preparation and implementation of international agreements in the sectors of energy, mining, postal services, telecommunications and information technology and environment. 3. Kosovo Investment and Enterprise Support Agency (KIESA) KIESA, the Kosovo Investment and Enterprise Support Agency, operates under the Ministry of Trade and Industry and it is responsible for the protection and promotion of investments and develops SME-related policies. KIESA runs an SME Grant Scheme that includes Consulting Vouchers for small and medium enterprises to assist them with their business needs as well as export-promoting. It also works closely with foreign donors to run financing schemes for MSMEs KIESA is promoting support to young entrepreneurs and women. 86

87 III Review of the existing market & available workforce 87

88 ICT Industry s % contribution to the GDP In EUR GDP 5,567,494 5,807,009 6,070,113 6,413,861 6,725,913 ICT 109, , , , ,063 ICT Industry % contribution to the GDP In 2018 the contribution of the ICT Industry to the GDP was 1.9%. 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 ICT Industry % contribution to the GDP 2.0% 2.0% 1.9% 1.9% 1.8% 1.8% The turnover of the ICT sector for the year 2017 represents 3.8% of the total turnover % GDP ICT ICT Industry % contribution to the GDP Source: Kosovo Agency of statistics * There is no data available regarding the value added of the industry 88

89 Introduction I Macedonia II Albania III Kosovo Contact Overview of the existing ICT market (1/2) EUR 717 average salary in ICT sector for % of the IT companies work in international market, compared to the 39% in local market. The revenues from exporting in the EU market are almost three times higher compared to exports in non-eu countries. The total number of companies registered in the ICT sector in Kosovo is 982. In 2019 alone, 621 new companies were registered. * The average gross salary for the employees in the ICT sector in Kosovo for 2018 was EUR 717, compared to the national average gross salary in 2018 which was EUR 558. The national minimum wage (NMW) is 170 EUR. Companies have found different ways to do business with international companies, by far the most popular way is direct exports from your country to the client abroad 68%. Others are doing business by a subsidiary / branch office in the target market 26%, as a distribution partner / Local Partner (sales agent) 26%, with a representative office 18%, and as a joint venture 8%. Central Europe, USA and UK have the highest potential to export to, namely Switzerland and Germany, followed by North America (USA and Canada), and United Kingdom. East Asia, and Middle East and Africa are seen with little or no potential to export. The revenues from exporting in the EU market are almost three times higher compared to exports in non-eu countries (51% in EU countries and 14% in non-eu countries for the year 2019). * There is no data available regarding the number of companies pers sub-sector in ICT or per type of organization 89

90 Introduction I Macedonia II Albania III Kosovo Contact Overview of the existing market (2/2) Workforce 83% of companies face a deficit of skilled/qualified workers. Top 10 programming languages: 1. JAVASCRIPT 2. HTML, XML 3. PHP 4. JAVA 5. C++ 6. C 7. SCRIPT LANGUAGES 8. PYTHON 9. PL/SQL 10. SWIFT The latest available data for the number of employees in the ICT sector is from 2017 and it is 9,597 employees, compared to 2016 and 2015 when there were 8,714 and 8,019 employees respectively. Most of the companies provide Software/IT services i.e. 87% of the IT companies. A third of the IT companies namely 26% of them provide hardware products and 11% of the companies provide other services and products like: Cyber security, customer care, BPO, E- procurement, Digital Marketing (specifically SEO and SEA), Document Management Services, ICT Consulting & Audit, Information Security and, Business Solutions, Education and Training, etc. In general there is a lack of skilled/qualified workers. In 2019 STIKK survey, a majority of 83% of companies declared that they face a deficit of skilled/qualified workers. Whereas in terms of ways how these companies cope with the deficit of the workers is by investing in training and certifications. The most popular investment is inhouse training followed by other specific training. Almost all employees of the companies speak English, followed by German (74%), Turkish (24%), Serbian/Croatian (24%), French (13%), Italian and Spanish (5%). 90

91 Introduction I Macedonia II Albania III Kosovo Contact ICT education system There are 6 universities in Kosovo teaching computer science & IT-related subjects, producing ca. 350 IT graduates per year. 1 University of Pristina (UP) National public university 2 University of Business & Technology (UBT) Private university 3 American University of Kosovo (AUK) Private university 4 Iliria University Private university 5 University of AAB Private university 6 University of Prizren Local public university In addition to universities, there is a private VET institution established by a prominent local IT company (Cacttus), Cacttus Education, which offers diplomas in network and system administration, and web and mobile application development. In addition to academic programs, it also offers trainings and a children s learning program. Other educational initiatives include Jcoders Academy and The Digital School which provide learning programs for young people, as well as Open Data Kosovo, an NGO that provides trainings and mentoring in ICT-related topics. Creative Hub is non-formal education and co-work centre for everyone that wants to change career, develop new skills and work as freelancers or learn new things. They offer variety of courses which last 2-3 months, skill-up courses which are one day workshops or the 6 to 9 months Academies which offer both practical and functional education. The current state of ICT education in Kosovo reveals deficiencies both in quality and quantity. There is a high dropout rate from university due to employment before graduation. Universities are also severely underfunded and require substantial investments in infrastructure and staffing. The education strategy focuses on the implementation of new curricula, textbooks and ICT implementation in education. 91

92 IV ICT sector support 92

93 Introduction I Macedonia II Albania III Kosovo Contact Funding Sources (1/2) 1. Loan facilities To alleviate credit requirements from commercial banks, the Kosovo Credit Guarantee Fund was established by USAID and Ministry of Trade and Industry, which cover up to 50% of the risk for loans to micro, small, and medium enterprises. SMEs are also eligible for loans with reduced collateral requirements through EBRD-EU programme, where 25 million has been allocated to two partner commercial banks ProCredit Bank Kosovo and Bank per Biznes, which will be coupled with a dedicated package of technical assistance and incentive grants in excess of 5 million from the EU national Instrument for pre-accession funding (IPA). In 2019, the World Bank s Board of Executive Directors has approved the Kosovo Financial Sector Strengthening Project, to improve access to finance for Micro, Small and Medium Enterprises (MSMEs), including startups, young entrepreneurs and women-owned businesses, by strengthening the financial and technical capacity of the Kosovo Credit Guarantee Fund (KCGF). The financial support for the project is 22.3 million ($25 million equivalent). 2. VCs / Angel Investors Kosovo does not have any VC firms and angel investors were previously organized under KOSBAN (Kosovo Business Angels Network), though this organization is now defunct. Nevertheless, local angel investors are recognized in the ICT community and regularly appear in ICT events and take part in initiatives to meet startups. 93

94 Introduction I Macedonia II Albania III Kosovo Contact Funding Sources (2/2) 3. Funds Through WB ENIF (Western Balkans Enterprise Innovation Fund), Kosovo SMEs are eligible to obtain equity and quasi-equity financing to stimulate and support commercially viable companies in the region. The fund is managed by South Central Ventures and ENIF investors are EC, EIF, EBRD, KfW together with institutional and private investors from the Western Balkans. ENIF also includes investments from the beneficiary economies of the Western Balkans. 4. COSME COSME, the first EU programme that Kosovo has joined, will bring new possibilities to Kosovo entrepreneurs for increasing the competitiveness of SMEs. It will support projects on a wide range of topics that include clusters, SME internationalization, building entrepreneurship skills, tourism, reducing the administrative burden for companies and protection of intellectual property rights. It will also help SMEs identify funding sources. 5. Horizon 2020 Kosovo is eligible to participate in the EU Research and Innovation Program Horizon 2020, allowing participation of private sector companies, academic institutions, associations and researchers. Currently uptake in Kosovo is minimal and awareness of Horizon 2020 funding is needed. There is very limited, almost inexistent government support for ICT. Special industry zones or incentive schemes (e.g. like in Macedonia) do not exist. The only financial support provided was Micro, Small and Medium Enterprise Grants project supported by the EU Office in Kosovo, co-financed by Ministry of Trade and Industry. The project provided 36 grants to MSMEs with the potential to export and import substitution. Grants were provided across different sectors such as metal processing, wood processing, textile, food processing, ICT, glass processing and automotive industry etc. 94

95 V & VI National strategic documents & government policies 95

96 Introduction I Macedonia II Albania III Kosovo Contact National strategic documents on ICT and Government policies and regulations 1. Kosovo s Economic Reform Programme (ERP) recognizes the need for further extension of the ICT network infrastructure and its link to socio-economic development, and lists the establishment of the digital technology park as one of the key measures to be taken. 2. Kosovo National Development Strategy , through its measure Deployment of information and communication technology infrastructure identifies needs which lay out specific points to be addressed in order to enhance the competitiveness of Kosovo s digital businesses. 3. Kosovo National IT Strategy sets the sector s overall goal, to become the main driver for economic growth, employment and innovation by 2020 through increasing the international competitiveness of the Kosovo IT industry based on digital excellence. The main beneficiary and target group of the strategy is the Kosovo IT industry. 4. Digital Agenda for Kosovo is in compliance with the objectives set out in the Communication from the European Commission of 19 May 2010 to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "A Digital Agenda for Europe" (COM (2010) 245 final) and aligned with the Communication from the European Commission of 3 March 2010 A strategy for smart, sustainable and inclusive growth" (COM (2010) 2020 final). Kosovo s legislation covering the field of ICT is generally harmonized with the relevant acquis of the EU. Relevant laws include: Law no. 04/L-109 on electronic communications Law no. 04/L-094 on the information society services, which includes ecommerce law, esignatures law, epayments law, electronic contracts, etc. Law on copyright and related rights, Law on amending and supplementing the Law no.04/l-065 on Copyright and Related Rights Law on the Protection of Personal Data (to be harmonized with GDPR) Law on Prevention and Fight of the Cyber Crime 96

97 Introduction I Macedonia II Albania III Kosovo Contact Findings from EU progress reports On electronic communications and information and communication technologies (ICT), there has been no improvement in the financial and organisational independence of the Regulatory Authority of Electronic and Postal Communications. The mid-term targets of the Digital Agenda for Kosovo have been fully achieved and the strategy is being implemented. The computer security incident response team, set up in 2014, is still understaffed. Modernisation of the public administration is a key element for successful digitalisation. Kosovo should put more effort in implementation of e-government frameworks and services. 97

98 Annexes

99 Annex 1 North Macedonia Laws & Programs Link Description Law on Personal Income Tax 0/1132/ZAKON_ZA_DANOKOT_NA_LICE N_DOHOD Sl_vesnik_na_RM_br_241 _od_26_ i 275_od_27_12_2 019.pdf Although this is general law, the ICT sector is strongly affected due to the level of salary. According to the latest amendments of the law, a personal income tax rate of 18% will apply to incomes exceeding MKD 90,000 per month ($1,660). Incomes up to that amount will continue to be taxed at 10%. Effectively, the tax reform introduces an additional tax bracket. Law on Waste, the Law on Waste from Electrical and Electronic Equipment This law regulates the requirements for environmental protection that should be met by legal entities and individuals that produce and market on the market in North Macedonia electrical and electronic equipment and that deal with electrical waste and electronic equipment. Law on copyrights /mk/mk038mk.pdf This law regulates the copyrights of the products in the Information Communication and Technology sector. Methodology for assessing the value of Information Technology bl_files/documents/legislation/metodologija _za_procena_na_it_sredstva.pdf This methodology determines the way of assessing the value of information technology. Agreement between North Macedonia and EU for the Horizon 2020 programme ata/ref/h2020/grants_manual/hi/3cpart/h202 0-hi-list-ac_en.pdf Horizon 2020 is the European Union s Framework Programme for Research and Innovation. Running from 2014 until 2020 with a budget of nearly 80 billion, Horizon 2020 is the biggest multinational research programme in the world. It funds research in all areas of science and innovation. 99

100 Annex 2 Albania Laws & Programs Link Description Law on Science and Technology Development ON-SCIENCE-AND-TECHNOLOGY- DEVELOPMENT.pdf Sets out the objectives of S&T policy, including incentives for global integration of national R&D and measures to encourage privatization. Defines the main functions of the Committee for Science and Technology, currently performed by the Ministry of Education and Science. Law on Higher Education and Scientific Research in Higher Education Institutions of the Republic of Albania slacioni/ligji%20nr.%2080,% pdf Regulates the activities of universities and faculties, the establishment and work of managing bodies, appointments and promotions of teaching staff, etc. The role of university, its scope of work and basic work conditions and objectives are regulated by laws, while the overall organization and activities are more closely elaborated by their statute. Law on the Academy of Science in Albania ON-THE-ACADEMY-OF-SCIENCES.pdf Regulates the activity of Academy of Sciences of Albania and its scientific institutes and research centers. Memorandum of Understanding between Albania and EU in the light of 7th framework agreement for RDI Agreement between Albania and EU for the Horizon 2020 programme _en.pdf ata/ref/h2020/grants_manual/hi/3cpart/h202 0-hi-list-ac_en.pdf The Framework Agreement of 22 November 2004 between the European Community and the Republic of Albania establishes the general principles for the participation of Albania in Community programmes, leaving the Commission and the competent authorities of Albania to determine the specific terms and conditions, including financial contribution, with regard to such participation in each particular programme. Horizon 2020 is the European Union s Framework Programme for Research and Innovation. Running from 2014 until 2020 with a budget of nearly 80 billion, Horizon 2020 is the biggest multinational research programme in the world. It funds research in all areas of science and innovation. 100

101 Introduction I Macedonia II Albania III Kosovo Contact Annex 3 Kosovo Laws & Programs Link Description Law no. 04/L-109 on electronic communications The purpose of this law is to regulate electronic communications activities based on the principle of technological neutrality and the EU regulatory framework for electronic communications, promoting competition and efficient infrastructure in electronic communications, as well as guaranteeing appropriate and appropriate services in the territory of the Republic of Kosovo. Law no. 04/L-094 on the information society services. Law on copyright and related rights Law on the Protection of Personal Data (to be harmonized with GDPR) Law on Prevention and Fight of the Cyber Crime nglisht).pdf content/uploads/2012/01/law-on-personal- Data-Protection-Kosovo.pdf LIMINDHE_LUFTIMINE_KRIMITKIBERNE TIKE alb eng.pdf This Law shall make electronic documentation legally equivalent to its traditional counterpart in paper format, in order to facilitate electronic services including, but not limited to, consumer shopping and sales over the internet (ecommerce), electronic banking and financial services (epayments), government provision of services (egovernment) and electronic purchasing by enterprises (eprocurement) and applies where electronic signatures are used. The aim of this Law is to amend and supplement Law No. 04/L-065 for Copyright and Related Rights, with the aim of harmonizing the law with the European Union directives in the field of copyright and related rights. This Law determines the rights, responsibilities, principles and measures with respect to the protection of personal data and sets up an institution responsible for monitoring the legitimacy of data processing. This Law aims to prevent and combat the cyber crime with concrete measures, prevent, discover and sanction violations through computer systems, by providing observance of the human rights and safeguard of the personal information. 101

102 Thank you! 102

103 Contact PricewaterhouseCoopers dooel Skopje 16, 8 Septemvri Blvd. Hyperium Business Center, II floor Skopje, North Macedonia T: