The objective of this paper is to analyze the situation in Balkan countries, outline the directions for policy reform in tertiary education and research and development, and identify options for World Bank support to these countries, both through national projects and different types of regional collaboration.

Tertiary education and research and development contribute to economic growth and competitiveness by providing highly skilled graduates prepared to take up their role in an open economy and democratic society, as well as by the creation, transfer, and adaptation of knowledge.

The region’s economies are already rewarding individuals for their level of educational attainment. The gap in labor market outcomes between those with and without tertiary education is substantial. There are signs that the more successful companies in the region are seeking stronger skills among employees—in particular, higher education skills—as a part of their competitive strategy. The supply of a highly skilled labor force with tertiary qualifications to  meet this rising demand is, however, weak in Balkan countries. In higher education, dropout rates are high and graduation rates are low. These countries also report stagnating or even decreasing numbers of graduates with an advanced degree at the master’s or doctoral level. Talented people from these countries are more likely than residents of other European countries to leave their country to pursue opportunities elsewhere.