July 2012
Business Environment Macroeconomic Outlook Prepared by: Mr. Darko Konjević, Montenegro Business Alliance (MBA) Capital Market Banking Sector The second quarter of 2012 continued to be characterized by problems inherited from the past. Privatization and Investments Liquidity problems and a lack of financial support presently dominate the Montenegrin economy. The budget was rebalanced as promised and some new taxes were also imposed to meet the state Economic Freedom budget. For the first time ever, the Central Bank of Montenegro published a list of companies Business News whose accounts had been frozen. Montenegro also received a date for starting negotiations with the EU. This confirms that Montenegro has good prospects and that foreign investments are In the Spotlight Coming up... quite secure in the country.
Business Environment in Montenegro
This quarter was characterized by the adoption of the following regulations that influence the business environment in Montenegro: Law on Financial Collateral Arrangements. The main reason for the adoption of this law is to secure the implementation of EU practices in Montenegro. Other goals mainly include: removing formal barriers for doing business in areas such as financial collateral arrangements connected to collateral, financial instruments, the payment of cash or credit balances. The law also aims to increase legal security, to decrease credit risk and to improve the general situation regarding financial and capital markets in the country. Law on Custom Tariffs. Due to changes in the harmonization system operated by the World Custom Organization, the Government of Montenegro proposed changes to the Law on Custom Tariffs. The parliament accepted these suggestions and adopted the changes. These changes were also part of the required criteria for membership of the European Union. Law on Changes of the Law on Road Transport. In order to decrease the cost for transport companies when applying for various different licenses, the Law on Road Transport was changed. The cost of obtaining licenses decreased by an average of 30%. The Law on Taxes on Access to Certain Services of Common Interest and on the Usage of Tobacco Products and Electro-acoustic and Acoustic Appliances. One law that generated productive discussions for both experts and non experts was this law on taxes. It appears that the main intention of the government was to collect additional revenue to support the state budget without increasing general taxes. Instead of imposing a general overall tax, they increased taxes on certain goods and services. Therefore €1 a month tax has been introduced for every SIM card (pre or post paid) that is used in Montenegro. The same applies to every cable TV connection and every electric meter. The law also proposes that a fee of €1 per square meter per month should be introduced for smoking areas in catering facilities. Budget Rebalance Due to an insufficient level of budget income and other circumstances regarding the budget of Montenegro the Ministry of Finance proposed that the 2012 state budget should be rebalanced. The budget rebalance was proposed both for current expenditure and for capital. The current budget, after the rebalance, was reduced by €11.27 million and the capital budget was reduced by €4.7 million. Cuts were made in almost every area with the intention of continuing to decrease public consumption in the future.
Business Statistics and Data Business Registration Statistics (Number of registered companies in Montenegro, as of 1st July, 2012)
353
Joint Stock Company Limited Liability Company
26,446
Part of a Foreign Company
437
General Partnership
61
NGO
295
Limited Partnership
430
Entrepreneur
17,185
Institution
1,125
Other
113
Total
46,445
Tax Rates 17%, 7% and 0%
Value Added Tax Corporate profit tax
9%
Personal income tax
9%
Source: Commercial Court
Economy Statistics Selected indicators
2011*
Population (625,082 in 2003)
2012**
625,266
Real GDP (billion) 2011 / May 2012
3.273
3.405
Negotiation Process for EU Membership Montenegro started the negotiation process to become a full member of the European Union on 29 June. This will be a long process which will involve adjusting national legislation and national habits to meet the demands of the EU. But this also shows that Montenegro and its economy are on the right track and that the initiatives implemented previously have yielded results. This is also important for foreign investors as it represents Montenegro in a positive way with a safe and stable environment for investment.
Real GDP growth 2011 / May 2012
2.5%
0,5%
Inflation rate (average annual CPI) 2011/ Jan-May 2012
0,1%
3,5
Unemployment rate 2011/ May 2012
11.56 %
Frozen Accounts Published Central Bank of Montenegro, for the first time ever, published a list of the companies whose accounts had been frozen. The list contained around 2,500 companies in Montenegro. Two conditions were imposed for the publication of the list of companies. The first was that companies listed should have had their accounts frozen for more than 30 days and the second was that their debt should exceed €10,000. The list will be published each month. The aim of the initiative is to increase the awareness of companies that are struggling; the aim is also to ensure that solvent companies avoid doing business with blacklisted companies. This initiative is questionable as it may influence the position of blocked companies by making their predicament even worse.
Net FDI (million) 2011/January-April 2012
389
13% 79.8
* Ministry of Finance ** Ministry of Finance, Monthly Macroeconomic Indicators, May 2012. Official currency
Euro
Source: Ministry of Finance, Central Bank of Montenegro, Monstat, Employment Agency of Montenegro
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