gent sejko : convergence process challenges facing south - east europe and albania speech by mr gent sejko, governor of the bank of albania, at the 7th ecb conference on central, eastern and south - eastern europen ( cesee ) countries on " institutional quality and sustainable economic convergence ", frankfurt am main, 5 october 2017. * * * accompanying slides honourable participants, it is a pleasure for me to participate in this conference, and discuss about the role of our institutions in the eu economic convergence process, such a relevant topic nowadays. i believe sharing our knowledge and experience in this area is extremely beneficial to all of us. my thoughts will be organized along three main dimensions. to begin with, i will highlight some of the challenges that the see convergence process is facing, from bank of albania ’ point of view. next, i will briefly describe how albania is positioned across these dimensions. lastly, i will try to emphasise how the convergence process itself can be enhanced to anchor our policymaking. 1. see convergence process challenges the long - term political future and economic prosperity of the see region is firmly linked to eu convergence and integration processes. while individual countries have differences, a common specific they all share is the economic and political benefits from the process. the convergence process is difficult and full of challenges, most importantly, the risk of falling into a ‘ middle income trap ’, a feature that is especially relevant given the slowdown in the speed of convergence that the region experienced in the aftermath of the crisis. the main reasons that can entrap an economy in a middle - income level are a low level of innovation, poor quality of institutions and unfavourable demographics. from a certain point of view, the ability of any country to move up the development ladder depends on the upgrade of its internal economic system, from an efficiency - driven into an innovation - driven economy. obviously, upgrading the whole economic systems and adopting best practices is easier said than done. diminishing marginal returns on labour and capital, as well as a reduced scope for total factor productivity growth, coming mainly from imported technologies, decelerate growth and increase the risks of getting stuck in a ‘ middle income trap ’. therefore, progression to the next development stage requires improvement of the human capital stock, facilitation and innovation in production processes, advancement of domestically generated technology and expansion of high value added exports. in a nutshell, the see countries need to transform themselves into innovation - driven economies

3 to 2016, to 10 in 2022 ). however, in order to achieve these objectives, a concrete and detailed action plan is needed. this action plan would require the support of all the stakeholders in the payments market, as well as interventions in many aspects, such as : 1. improvement of the applicable legal and regulatory framework ; 2. development and improvement of financial services infrastructures ; 3. expansion of the number and use of accounts and payment services ; 4. expansion of access points for these services ; 5. increase of education, awareness and financial inclusion ; 6. increase of the volumes of transactions processed by payment systems. while the strategy was only recently approved, in june, concrete steps have been taken in this 1 / 3 bis central bankers'speeches regard, for example, the drafting of the bill “ on payment services in the republic of albania ", which transposes the revised directive of the european union “ on payment services ” ( psd2 ). the adoption and implementation of this bill is considered to have a direct impact for fostering competition and innovation in the field of retail payments, thus promoting efficiency and reduction of the costs for using them. moreover, the bill is expected to enhance transparency in the services provided by the market and to create a consolidated framework on consumer protection, a very important component for our market. last but not least, the bill also aims to expand the presence of bank services across the territory of the country ( including rural areas ). beyond legal improvements, important steps have been noted in the framework of financial education. i would like to highlight the initiative undertaken in cooperation with the world bank, and funded by the seco, for the implementation of project greenback 2. 0 in berat. this project consists in enhancing financial inclusion and financial education for emigrants and their families, who receive these funds, as well as in establishing effective channels in terms of costs for the delivery of these funds. in addition, to expand the market knowledge regarding remittances, in june, the bank of albania published “ remittances : a support for development ". this publication is entirely dedicated to remittances and adopts a comprehensive approach to various aspects in the domestic market. some of these aspects are the macro - level analysis of remittances and their impact on development in general and on the receiving families ; the analysis of the infrastructure of the remittances market in albania, and the need for intervention, as well as providing adequate