Our post-pandemic potential lies in the area of ​​information technology and related human capital

Written by Driton B. Hetemi

Kosovo, as a transitioning and developing country, does not have the same potential as developed countries that are building enormous financial packages to support economic recovery after the pandemic. However, our financial packages, however modest they may be, should be channeled towards supporting human capital in the field of information technology, so that the capitalization of subsidies is more meaningful and effective.

When global economies face financial crises, uncertainty about the future quickly grips businesses (especially small and medium-sized ones). In such cases, the first step businesses try to take is to rethink the business models they operate. The tendency of businesses is directed by how to reduce and manage risks, while certain businesses channel the strategy of action also towards how to grow and how to conquer new markets.

In this way, financial crises, in addition to giving a signal for remodeling businesses to survive, they also create new business opportunities after the crisis is over. Consequently, the crisis produces negative effects, causing many businesses to weaken and disappear, but on the other hand, it also produces new opportunities in the market, causing some businesses to grow further or some others to be established and developed from the beginning.

The pandemic, among other things, has given different lessons to businesses in terms of internal production and operating organization. Among other things, businesses or manufacturers will start thinking more about automating production in their countries of origin, than about finding other production opportunities in countries with low labor costs. This will help producers to develop within their countries of origin, but will negatively affect developing countries from which production may be withdrawn in whole or in part. On the other hand, the pandemic will also affect the way the service sector is organized and the way the routine activity is operated. For example, virtual meetings on online platforms, mail order, electronic payments, contactless bank cards, working from home, and many other remote services are clearly gaining eminence and are being preferred more than the same activities in a physical way. All this new routine should serve for analysis and as a basis for reflection on how many and what routine activities carry inefficiency and high costs of organization, in the university, in the office, in public services and everywhere else.

Consequently, there are still many unknown variables whose effect will only be measured after the pandemic is declared over. And the act of declaring victory over the pandemic does not seem to be close. This is because in order to do such a thing, we must either have a perfect health system that would be able to accommodate the infected continuously, or we must have an effective vaccine or therapy ready for the market to fight the disease. .

On the other hand, the post-pandemic situation will find us in a different frame of mind. People will continue to resist intense physical contact and their consumer behavior will be guided by virtual or technological channels. Finally, life and routine experience during the pandemic period will teach us other faster, more effective and cheaper ways of operating, either in work or business environments, or in the environment of public organization. The mindset will change, and sensitive questions will be asked about the changes in the level of behavioral economics, beyond the simple financial and business recovery. So, there is no turning back and the most important question is which area should be given priority in change and reorganization?

What can Kosovo do?

In times of crisis, manufacturing companies compare the savings from robotization to the savings from manual production by exploiting the low cost of labor in developing countries. Economic history shows that such a comparison during the last global crisis has resulted in higher production costs abroad than if it had been invested in automation and domestic production.

On the other hand, each government tends to subsidize or implement assistance through various financial packages in times of crisis, giving companies the opportunity to invest more and at a cheaper cost in research and development (R&D), including investments in digitization and automation. The same applies to services in both the private and public sectors. In this regard, Kosovo has a lot of room for change and investment, thus increasing the competitiveness of our manufacturing or service companies, even globally.

Since Kosovo is a small and open economy, the effect of a global crisis can be very large. On the other hand, Kosovo is not known as an attractive destination for large world manufacturers, who have come here for production looking for a low labor cost, and this constitutes an aspect that will not generate a large attraction of investors from our country, because there is none. Consequently the associated negative effect will be smaller. As a result, Kosovo does not have to think about preserving the presence of large foreign companies, but this allows space for creativity and study, how and in which way to create our economic advantage against other countries, the export of which advantage helps in economic recovery in the private sector.

Thus, Kosovo should focus more on information technology, so that our potential for virtual export increases more, while global demand will increase as a result of the need for digitization. It has now been proven that one of our country's biggest export potentials is qualified human capital. In line with this, the export does not have to be physical, as long as new companies (Start-ups) are motivated, given a boost through financial incentives, legal and infrastructural support, but also promotion by organized state mechanisms, which must unleash potential through formal communication networks.

Our market has a real opportunity to assert itself on the global level, stimulating companies engaged in technological and software developments, based on the fact that the demand for such services will increase globally. The average age in Kosovo, as an essential advantage in human capital, should be channeled into productivity in areas that coincide with the potential, which in our case is undoubtedly information technology. The affinity and interest of Kosovar youth to integrate into the global technological market should be seen as the most valuable asset that should be invested in and promoted.

The effects of the pandemic on the global or even local level are still in the fog. Large auditing companies, consulting companies or even government organizations are building models and forecasts for the expected post-pandemic situation, but as long as the Covid-19 disease is still among us, any certainty in forecasts or modeling can lead to deviations and surprises. similar to those following the recent global financial crisis. Therefore, each current modeling of the effects of the pandemic is at variance with other models.

However, this does not mean that one or the other aspect of the possible effects should not be addressed while waiting for a global or health triumph over the pandemic. Time does not wait, and we must respond in the same way, whether as individuals, society or government, by engaging immediately in the design of processes or programs that help to heal the post-pandemic economic and social situation, but also in creating of competitive advantage as an economy, aiming for further development and being a relevant factor of progress, not only locally.

And when we are in Kosovo, as a small and open economy, its comparative advantages are almost clear and stubbornly driven by information technology, but they are not exploited, promoted and supported. Institutional engagement in this field would increase our export potential and make it more attractive, in relation to the demands of developed countries. Those countries or those multinational companies, instead of looking for an attractive place to install the production line due to the low cost of labor (although this has almost never happened in our country since the 90s during the initial phase of manufacturing hyper-globalization), will seek an 'offshore' destination for the development of automation and digitization programs of the production process in the countries from which those companies come.

*Sponsored article