ISSN 1800-8623
February 2012 A QUARTELY REPORT #39
CEED Consulting
Business Environment Macroeconomic Outlook Banking Sector Privatization and Investments Capital Market Business News Economic Freedom In the Spotlight Coming Up
MBO Summary Welcome Business environment: Another challenging year for Montenegrin business has arrived. It seems that business is on the road of slow but steady recovery with some obstacles to the thirty nine edition of that we it need to overcome in this year. Lot of it will depend on situation in the EU and Montenegro Business Outlook. international market but also domestic action is needed. MBO is Economic Freedom: Economic Freedom of the World 2012, Annual Report quarterly publication of pertinent Macroeconomic Outlook: The indicators in the period from January to December 2011 economic indicators presenting a were as follows: annual inflation (CPI) in December 2011 was 2.8%, budget revenue in October 2011 showed decrease of 9.5% in comparison with its planned value, and net FDI comprehensive view of inflow during the period January-November 2011 decreased by 25.3% comparing to the Montenegro’s same period of 2010. Overall situation at macroeconomic level is stable even though the consequences of the crisis are still present. business environment. This publication is Banking sector: The inflow of foreign direct investments for the period from January to October 2011 was €309.7 mill, which was a decrease of 30.8 % in comparison with the intended to serve international same period last year. Securities and the Exchange Commission suspended the license to operate a joint investment fund Moneta, because it operated in a way that was contrary to business people seeking the law. Among other things, it issued millions of guarantees to third parties with money investment from the Fund. Some of the banks in Montenegro opened a new service, mobile banking, which is used a lot in Western countries and is very popular there. opportunity in Montenegro. We welcome your comments. Expert’s Opinion: A Network of Mentors for Women Entrepreneurs founded in Montenegro Capital Markets: Global economy crises slowed down the investments in Montenegro. This led to lack of money power for further development of the private companies. In 2011, the negative trend was stopped and it was recorded a slight growth of 0.9%. The Montenegrin capital market has a great potential, however, present activities on this market are at a low level because the lack of bigger investments. In the Spotlight: Capacities of local self - governments to absorb EU funds
MBO Interview with: Mr. Velimir Mijušković, President of the Chamber of Economy of Montenegro
Kralja Nikole 27a/4, Business Center “Čelebić”, Podgorica, Montenegro Phone/Fax: +382 (0) 20 633-855, +382 (0) 20 620-611 web site: www.ceed-consulting.com e-mail: info@ceed-consulting.com
Privatization and Investments: Two tenders are currently open in Montenegro that relate to long term leases for the locations of Orjenski Batalion and the Mamula Fortress in Herceg Novi. Despite the slow-down in investment over recent years, the interest of foreign investors for Montenegro still remains high. This is confirmed by interest in plans for major projects, including: renovation of the Hotel Crna Gora according to Hilton building standards; €250 million investment in a hotel resort at Tivat, etc. In addition to these initiatives, energy based projects are making progress: three building permits have been issued for the construction of three small hydro power plants at Kolašin. We introduce: Entrepreneurship among youth
Montenegro General Info Area Position Length of border Coast line Length of beaches Climate Average temperatures of air Maximum sea temperature Average num. of sunny days Major Cities Albania Croatia
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Geographic information 13,812 km² 41º52’ - 43º42’ lat., 18º26’ - 20º22’ long 614 km 293 km 73 km Mediterranean 27.4Co (summer) 13.4C o (winter) 27.1Co 240 Podgorica (Capital), Niksic, Bijelo Polje Border Crossing Bozaj Debeli brijeg
Serbia
Kula,Vuče, Dračenovac, Dobrakovo,Čemerno, Ranče, Bijelo Polje
Bosnia and Herzegovina Sea border
Vilusi, Vracenovici, Scepan Polje, Metaljka ports and piers: Bar, Kotor, Budva and Zelenika
Population Population in country (2011) 625,266 Montenegrin population in foreign countries 54,816 Total population 675,027 Number of households 191,047 Source: Census 2003 Transportation Airports Podgorica and Tivat Bar (line to Italy: Bar-Bari, Bar-Ancona) and Kotor Ports (line to Italy: Kotor-Barleta) Railways Bar – Beograd and Podgorica- Niksic Total railways length 249 km Total highway lenght 5,174 km National Parks Durmitor 39,000 ha Biogradska gora 5,650 ha Lovcen 6,220 ha Prokletije 21,647 ha Skadar Lake 40,000 ha
February 2012
Business Environment in Montenegro Prepared by: Mr. Darko Konjević, Montenegro Business Alliance (MBA) for doing business. One major change in the new law relates to the limitation of fixed term contracts, a restriction that was not applied according to the old Law. Fixed term contracts can, according to the new law, be signed and prolonged for a maximum period of 2 years. After this time they are no longer fixed. Other changes include the implementation of protection against mobbing, strategies for defining the practice and work of agencies that employ workers on a temporary basis, the definition of procedures regarding firing and hiring At the end of last year the Parliament of and also the clarification of the rights and Montenegro adopted several new laws and obligations of employers and employees etc. also introduced new legislation that will affect businesses in 2012. These include changes to For the first time in Montenegro rules on the following laws: the Law on Excise, the lobbying as an activity have been prescribed by law. The new Law on Lobbying will be Labor Law, the Law on Lobbying. implemented from the 1st of January 2012. Changes to the Law on Excise include the Lobbying is defined as an activity that is introduction of new excise goods as well carried out with the intention of influencing as increases to certain excises. In addition the authorities regarding the processes of to existing excise products, the new law adopting laws and other important documents. prescribes that coffee and carbonated water The law defines procedures for physical should also be added as new products. Excise persons and companies to become registered on coffee will be 20% and on carbonated water lobbyists as well as defining conditions for which has added sugar or other sweeteners, the implementation of entering successful applicants into the registry of the lobbyists. the tariff will be €10 per hectoliter. In 2011, Montenegrin business environment was characterized by the strong presence of the financial crisis; its effects were shown through a variety of problems including a lack of liquidity, low turnover, low access to capital etc. This has had a very negative effect on the economy, and has resulted in an increase in the number of companies with blocked accounts and an increase in the level of internal debt. The government predicts that Montenegro will have a growth in GDP of 0.5% in 2012.
Excise duties were also raised from €70 to €100 on mid-level alcoholic drinks and from €550 to €650 per hectoliter on pure alcohol. The excise on cigarettes was increased from €10 to €15. There was a minimal increase in excise on cigarettes from 100% to 110%. Excise on gas oil/petrol decreased from €370 to €350 per ton. It is estimated that the new excises tariffs will collect an additional €11 to €14 million in the state budget during 2012. On of the most disputed laws in Montenegro is the Labor Law. Since it was adopted in 2008 there have been a number of ideas regarding changes and amendments that should be made. There has been pressure from both sides, from employers and from employees, each defending his or her own view of the subject. The business view is that an employer should be free to hire and fire workers depending on their abilities and needs, in accordance with rights, and as stipulated by the law. From the employees’ point of view this has somehow been interpreted as a protection of existing jobs. The changes that were made to the law were an attempt to try to create a win-win situation. However, in the end businesses face the same barriers as they did previously and the labor market remains constrained
Total foreign trade in Montenegro during the period January-November 2011, according to preliminary data supplied by Monstat, was €2,072.2 million. This showed an increase of 14.8% in relation to the same period of last year. Montenegro exported goods to the value of €418 million, an increase of 38.9% when compared with last year. Imports were recorded as €1,659.2 million, showing a growth rate of 10% when compared with the same period of last year. Exports were 25.2% higher than total imports, which was 5,2% higher than last year. This is a sign that export activities in Montenegro are strengthening but we still do not have a great export structure. In the export structure, the main items were ferrous metals (€204.4 million) and iron and steel (€26 million). In the import structure the most highly represented goods were meat and meat products (€65.3 million) and cereals and cereal products (€52.8 million). The main trade partners were Hungary (€76.4 million), Serbia (€73.7 million) and Greece (€39.1 million).
Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Business Statistics and Data Business Registration Statistics (Number of registered companies in Montenegro as of 1st of January 2012)
355
Joint Stock Company Limited Liability Company
25,526
Part of a Foreign Company
434
General Partnership
62
NGO
293
Limited Partnership
436
Entrepreneur
17,040
Institution
1,103
Other
110
Total
45,359
Tax Rates 17%, 7% and 0%
Value Added Tax Corporate profit tax
9%
Personal income tax
9%
Source: Commercial Court
Economy Statistics Selected indicators Population (625,082 in 2003)
2010
2011
625,266
Real GDP (billion)*
3.025
3.273
Real GDP growth
0.5%
2.5%
Inflation rate (average annual CPI) XII 2010** / 2011
0,7%
0,1%
Unemployment rate XII 2010 / 2011
12.13%
11.56 %
451
361,5
Net FDI (million) I-XI 2010 / 2011
* Estimates, Ministry of Finance Bulletin, October 2011 ** Base 2010 Official currency
Euro
Source: Ministry of Finance, Central Bank of Montenegro, Monstat, Montenegrin Investment Promotion Agency (MIPA), Employment Agency of Montenegro
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Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...
Economic Freedom Economic Freedom of the World Annual Report In the 2012 ‘Economic Freedom of the World’ report, published by the Heritage Foundation and the Wall Street Journal, Montenegro’s economic freedom score was 62.5, making its economy the 72nd freest in the 2012 index; four positions better than it was last year. Montenegro ranks as 33rd out of 43 countries in Europe, and its overall score is above average in the world.
The Index of Economic Freedom comprises results in the following components : Business Freedom (ranked 77th). The business freedom
managed to stay within the Maastricht criteria. Public debt was component quantitatively measures what is required to start, recorded as almost 45% of GDP. operate, and close a business in a given country. It represents the overall burden of regulations as well as a government’s efficiency Monetary Freedom (ranked 35th). Last year good progress was regarding regulatory processes. Business freedom actually made in this area. Montenegro’s overall result was 81.2 and the means making procedures simpler or faster with minimum world average was 78. An improvement of 5.2 points was made in capital requirements, and with a main goal of encouraging this area; overall price levels were moderated, although pressure entrepreneurship. due to inflation remained. The Montenegrin procedures required for setting up a business have been streamlined, the number of licensing requirements Investment Freedom (ranked 77th). In an economically free have been reduced, and the overall pace of reform has slowed country, there should be no constraints on the flow of investment down. The enforcement of regulations is, however, sometimes capital. Such an ideal country would receive a score of 100 in the inconsistent and non-transparent. Montenegro was ranked in 77th area of investment freedom in the Index of Economic Freedom. place in the area of business freedom, meaning that it is within the Montenegro recorded no changes in its score which showed that foreign investments are officially welcomed. However, investment area of moderately free countries. regulations remain too bureaucratic to enable a dynamic level of Trade Freedom (ranked 51st). Montenegro joined to the World growth in investment. Trade Organization in December 2011 as the 156th member. The fact that Montenegro is a member of WTO expanded the scope Financial Freedom (ranked 72nd). There was no change of Montenegro’s freedom to trade. Trade freedom is a composite in the score achieved in the area of financial freedom. Access measure of the absence of tariff and non-tariff barriers that affect to loans has gradually increased, and the banking system has the import and export of goods and services. been completely privatized. The presence of foreign banks in The trade freedom score is calculated by inputting two figures: the Montenegro is very evident and investment levels are significant. trade-weighted average tariff rate and the non-tariff barrier (NTB). Despite growing competition, credit tariffs remain fairly high. The The weighted average tariff calculates the weighting of each tariff small Montenegrin financial sector has gradually become more based on the percentages of the different categories of goods competitive and diversified, but the number of non-performing imported. Montenegro’s weighted average tariff rate is 3.2% loans has increased. and its non-tariff barriers are high. This negatively influences the cost of trade by increasing it, and has consequently resulted Property Rights (ranked 72nd). The property rights component in Montenegro being ranked in 51st place in the area of trade assesses the ability of individuals to accumulate private property, freedom. secured by clear laws that are fully enforced by the state. It measures the degree to which a country’s laws protect private Fiscal Freedom (ranked 22nd). Taxes are essential. They property rights and the degree to which its government enforces fund public amenities, the infrastructure and other services that those laws. In Montenegro, infringements of intellectual property are crucial for a properly functioning economy. But the different rights are fairly widespread, and the laws regarding trademarks levels of tax rates need to be carefully chosen, and needless need to be amended in order to achieve EU standards. complexities in tax rules should clearly be avoided wherever possible. Montenegro enjoys competitive flat tax rates. The Freedom From Corruption (ranked 70th). Corruption erodes corporate tax rate is a flat 9%; a competitive tax rate such as this economic freedom by introducing insecurity and uncertainty contributes very favorably to entrepreneurial dynamics. Other into economic relationships. The score for this component is taxes include value-added tax (VAT) and inheritance tax. This last derived primarily from the International Corruption Transparency year, the overall tax revenue as a percentage of GDP was 30%. Perception Index. In Montenegro, there is a continuing mistrust of In comparison with the previous year, Montenegrin made good the government which is particularly due to pervasive corruption progress and obtained an overall result of 91.3 points. which exists in the executive and judicial branches. Montenegro’s score in the new report is 2 points less than it was last year. Government Spending (ranked 151st). This component considers the level of government expenditure as a percentage Labor Freedom (ranked 15th). The labor freedom component of GDP. Government expenditure, including consumables quantitatively measures the various aspects of the legal and and transfers, accounted for the entire score. Total government regulatory frameworks of a country’s labor market. Last year expenditure increased to 47.7% of GDP. In recent years the Montenegro was ranked as 4th, but in the new report it is ranked budget balance has been negative. However, the budget deficit 15th. This drastic fall has been caused by a lack of flexibility in was reduced from 3.9% in 2010 to around 3.3% of GDP in 2011. labor regulations which has discouraged the dynamic creation of This put Montenegro among the few European countries that jobs.
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February 2012
Macroeconomic Outlook Gross Domestic Product (GDP)
According to estimations made by the Ministry of Finance, the Montenegrin GDP in 2011 amounted to € 3,273.4 million, thus recording a growth rate at a level of 2.5%.
Industrial production
Industrial production in Montenegro in December decreased: for the period JanuaryDecember of this year compared to the same period last year by 10,3%, compared to the average monthly production from last year 16.5%, compared to the same month last year, 37.1%, in comparison with the previous month it shows a 7.4% decrease. Observed by sectors, in the period January-December of this year compared to same period last year, two sectors recorded a growth of production: Mining and quarrying 6.3% and manufacturing 6.8%, while production of electricity, gas and water decreased in the period by 32.7%.
Budget
Current budget revenue in October 2011, according to estimates, amounted to €90.8 million, thus showing decrease of 9.5% in comparison with its planned value and 8.3% in comparison with last month level. This amount represents the 2.5% of estimated budget value. In the budget revenue structure, taxes accounted for the main share of 61.6%, followed by contributions with 30.1%. Revenues from the tax collection were 12% lower than planned, due to a decline in the collection of all tax revenues except legal persons’ tax and personal income tax.
communications (0.1%), while the fall in prices was recorded in groups: clothing and footwear (-0.9%), food and non-alcoholic beverages (-0.2%), transport (-0.2%), other goods and services (-0.2%). Prices of products and services in groups: alcoholic beverages and tobacco, hosting, health, culture and recreation, education, restaurants and hotels, remained at the level of average prices from the previous month.
Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Graphic 1. Budget structure 2.2% 0.3% 4.4% 1.4%
Taxes Contributions
30.1%
Duties
Employment and Wages
The average number of employees from administrative sources in December 2011 was 162 450, which is 3% more than in December 2010. The unemployment rate in December was 11.56% and was lower compared to 12.1% in December 2010. The average salary in December 2011 in Montenegro amounted to €722, while the average salary without taxes and contributions amounted to € 484.
Fees
61.6%
Receipts from the repayment of loans Other revenues
* MONSTAT ** Estimates made by Ministry of Finance, October 2011
Compared to November 2011 the average (net) earnings in December 2011 recorded a Graphic 2. Inflation (CPI Index) growth of 0.2%. The average (net) earnings in December of 2011 compared to same month last year dropped by 6%, while compared to 3.7 3.7 3.6 3.6 3.5 3.4 the average (net) profit in 2010 grew by 1%. 3.3 3.0 At the level of 2011 the average gross salary 3.0 2.8 amounted to € 722, while the average net 2.0 Consolidated budget expenditures (total salary amounted to € 484. Average net earnings revenues less debt repayments) amounted to in 2011 year recorded a growth of 1% of the 1.1 € 90.6 million (2.8% of GDP), thus showing average net earnings in 2010. 0.7 year-on-year decrease in October 2011 of 18.8%. The decrease is explained by higher expenditures for position of other health Foreign Direct Investments (FDI) protection rights (by 39.6%), and substantial According to available data for the period expenditures (by25.8%), in relation to the same January-November 2011 the net foreign direct * MONSTAT period of 2010. In October 2011, the Budget of investment amounted to € 361.5 million and by Montenegro ran a surplus of € 0.2 million or 24.8% less than in the 2010 year due to less 0.01% of GDP, whereas the deficit in the first interest of foreign investors. The total inflow of foreign direct investment amounted to € 454,2 ten months of the current year amounted to million, while at the outflow recorded in the Graphic 3. Average salary without € 62.4 million or 1.9% of GDP. taxes and contributions (in €) amount of € 93 million.
Inflation
Annual inflation measured by consumer price index in December 2011 was 2.8%, and its lower in comparison to November 2011, an average of 0.2%. The growth rate of consumer prices in the period January-December 2011 compared to some period last year was 3.1%. When it comes to main groups of products and services by purpose of consumption in December 2011, compared to the previous month, the price increase was recorded in groups: furniture and accessories (0.1%),
Of the total inflow, equity investments were €316.9 million, while the inflow in the form of intercompany debt amounted to € 115.9 million, a decrease of 15% compared to same period last year. The structure of equity investments, investment companies and banks makes 33.9% and the structure of total inflows and investment in real estate amounts to 36.2%. The inflow of funds arising from the withdrawal of funds invested abroad by residents amounted to €19.4 million.
Dec-11
484 483
Oct-11
477 477 475 476 475 479 473
Aug-11 Jun-11 Apr-11
484
Feb-11
506 518 515
Dec-10 450
460
470
480
490
500
510
520
530
* MONSTAT
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Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...
Banking Sector The governor’s report in October 2011 concluded that all of the activities carried out by the Central Bank during the current period have been realized in accordance with the planning obligations that were established in the Central Bank’s program for 2011.
Total Bank Assets and Liabilities
Total bank assets and liabilities amounted to € 2,886.4 million at end-October 2011, recording monthly and annual declines of Graphic 4. Structure of deposits, in % 0.2% and 1.1% respectively. In the structure 40.5 of total bank assets, loans accounted for Demand deposits 39.7 the main share of 67.3%, and was followed 59.5 Time deoisits 60.3 by monetary assets and deposits made by 12.4 Up to 3 months 12.1 depository institutions at 24.9%. Other asset 32.6 From 3 months up to … 34.1 items accounted for the remaining 7.8%. 11.2 From 1 to 3 year In the structure of total bank assets, the 11.0 3.3 highest monthly decrease was recorded in the Over 3 years 3.1 area of custodial operations,9.7%. Regarding 0.0 20.0 40.0 60.0 80.0 bank liabilities, deposits accounted for the main share of 64.7%, followed by borrowings Septembar2011 October 2011 at 19.9%, and total bank capital at 10%. The remaining 5.4% was other miscellaneous liabilities. At a monthly level, the highest monthly Graphic 5. Structure of deposits by sectors decrease was recorded in the area of custodial operations,45.0%. At end-October 2011, total 5.2 Financial institutions 5.6 capital amounted to € 289.5 million, showing 29.7 Non-financial institutions 30.2 decreases of 0.5% and 6.9% at monthly and 5.4 General Government annual levels, respectively. 5.0 55.1 54.7
Households 1.2 1.3
Non-profitable organisations
3.4 3.2
Other 0.0
20.0
Sep-11
40.0
60.0
Oct-11
Graphic 6. Structure of loans, in %
IX
93.50%
6.50%
Corporate and household loans
Banks and other financial institutions X
93.70%
6.70%
Graphic 7. Interest rates (IX, X) 10
9.61
9.73
3.11
3.09
0 Septembar 2011
Novembar 2011
The weighted average lending effective interest rate The weighted average deposit effective interest rate
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Deposits Total bank deposits amounted to € 1,868.0 million at-end October. In relation to September 2011, total bank deposits were 0.5% lower, while in relation to October 2010 they were 4.4% higher. The maturity structure of total deposits shows that 60.3% of total deposits referred to time deposits, while demand deposits accounted for 39.7%. In the structure of time deposits, the highest share was recorded by deposits with maturity periods from 3 months to 1 year (56.6%), and deposits with maturity periods of up to three months (20.0%).
improvement in comparison with endOctober 2010 when it was 1.26. The loans/deposits-plus-borrowings ratio was recorded as 0.80 at end-October this year, and remained unchanged in relation to the previous month, although it did improve in comparison with October 2010 when it was recorded as 0.91. Loans that were granted to the corporate and household sectors accounted for the main share of 93.3%, while the remaining 6.7% was made up of loans granted to financial institutions, public organizations, foreign companies, the government, and various non-profit organizations.
Interest Rates In October 2011, the weighted average nominal lending interest rate (WALNIR) and the weighted average lending effective interest rate (WALEIR) amounted to 9.05% and 9.73%, respectively. WALNIR recorded a monthly decline of 0.01%, while WALEIR showed an increase of 0.12%.
Bank Liquidity Average liquid bank assets amounted to €419.9 million in October 2011, €27.3 million lower than it had been the previous month. In October 2011, liquidity ratios, both daily and ten-day, were above the prescribed minimum for the entire banking system.
Micro-credit financial institutions (MFIs)
Household deposits amounted to € 1,022.4 million at end-October 2011, thus recording a decrease of 1.2% at a monthly level. Within the maturity structure of household deposits, time deposits made up 67.4%, while demand deposits recorded a share of 32.6%.
MFI’s total assets amounted to € 44.9 million at end-October 2011, and were thus 1.3% higher than they had been in September 2011, and were 27.7% lower in comparison with the same month last year. Total MFI loans amounted to € 33.7 million, which represented the continuation of a downward trend. They declined by 1.8% in comparison with the previous month, as well as by 27.0% in comparison with October 2010.
Loans
Lending Interest Rates
Total banking loans amounted to € 1,941.3 million at end October 2011, which showed monthly and a year-on-year declines of 0.8% and 13.9%, respectively. The loans/deposits ratio amounted to 1.04 in October 2011. This ratio remained unchanged in relation to the previous month, yet showed an
In October 2011, the weighted average nominal lending interest rate (WALNIR) and the weighted average lending effective interest rate (WALEIR) amounted to 9.05% and 9.73%, respectively. WALNIR recorded a monthly decline of 0.01%, while WALEIR showed an increase of 0.12%.
Household Deposits
February 2012
Expert’s opinion Prepared by: Biljana Janković, Center for Enterpreneurship and Economic Development (CEED)
The National Network of Mentors for Women Entrepreneurs in Montenegro Although Montenegro can be characterized by inequality for women, in terms of achieving economic and social rights, it should, nonetheless be stated that economic independence is the basis for achieving any other type of independence. Despite the fact that more women complete higher level education, the status of women in the labor market shows that they are still at a disadvantage in comparison with men. In order to draw attention to those who are creating new values and to show the importance of female entrepreneurship in a developing economy, the Center for Entrepreneurship and Economic Development (CEED) and the Montenegrin Chamber of Commerce have together launched a project named ‘The National Network of Mentors for Women Entrepreneurs in Montenegro’. The project is financed by the European Union (DG Enterprise).
For the purposes of the project, all of the selected mentors are successful business women. They include the following: Edita Klein, Pingvin, Podgorica; Mirjana Babić, Olivmont, Bar; Nata Dobalj, Finans Albatros, Podgorica; Nemša Omerhodžić, Merkator, BijeloPolje; Olgica Nikčević, Charme Unikum, Podgorica; Radojka Ražnatović, Frutiera, Podgorica; SannaKoritz, Create Business, Budva; Velida Hodžić, Eco Nova, Rožaje.
The activities carried out in the mentoring program focus on providing entrepreneurship support and help with development in the private sector. The aim of the network, however, is to encourage and inspire women to develop their own businesses through personal and professional development. The mentoring program identifies two target groups: mentors (successful entrepreneurs, businessmen and managers who are ready to share their knowledge) and mentorees (women entrepreneurs who are looking for external guidance and skills to help them face challenges effectively). As a result, mentoring relationships are established so that mentorees can get advice and suggestions for improving business improvement. Within the activities foreseen in this project, selected mentorees will attend practical training organized on a monthly basis on the following topics: communication skills, business plan development, strategic planning, access to sources of financing, tax liabilities and accounting etc. It is very important to state that the project was promoted at the Inauguration Conference of the European Network of Mentors for Women Entrepreneurs that was held in Warsaw on 15th November, 2011. The Montenegrin mentors were given the opportunity to share their experience and knowledge with 150 mentors from 17 European countries, all of which are involved in this regional project.
This project represents a pioneering step towards the establishment of a mentoring scheme in Montenegro. The project provides an exceptional opportunity for those who are starting out in entrepreneurship to get ’first hand’ help directly from others who have been successful in their own businesses.
Status of women in Montenegro Many surveys that have been conducted in Montenegro so far have shown that women face the same barriers in doing business as do men. Around 27% of all enterprises that have been established since 1997 are owned by women, as opposed to just 5% in 1990. Recent research shows that 30% of companies in Montenegro are led by women.
Conversely, regarding statistics, the Labor Force Survey conducted by MONSTAT, showed that at a national level 42.9% of women (against 57.8% of men) are economically active; 34.4% of women (against 46.7% of men) are employed; the unemployment rate is almost equal between the sexes and amounts to 19.8% among women compared with 19.2% among men.
Interestingly, a higher percentage of registered companies have a female executive director. In general, women prefer to establish micro companies, keeping their home as the main business location. This is not only for financial reasons but also to enable them to remain close to their family and children.
Additionally, the survey suggests that businesswomen are energetic, highly motivated, dedicated, and show a high degree of responsibility towards their employees the and environment they live in.
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Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Graphic 8. MONEX20
Capital Markets Trading Volume The downward trend in volume and in values on the market, as we have seen over the last few years, finally stopped in 2011. A slight growth of 0.9% was recorded in 2011, due primarily to an increase in the volume of trade stock of 58% in comparison with the previous year. Additionally, important drops in the levels of trade volume were recorded in bonds (83%) and in the investment fund (44%).
Trade on the Stock Exchange
18,000
During 2011, the total volume of trade carried out on the Montenegrin stock exchange amounted to €58.9 million, which was 0.9% more than the volume of trade that had been seen on the previous two stock exchanges during 2010 (€58.8 million). During 2011, a total number of 13,386 transactions were completed, which was 36% less than in 2010.
16,000 14,000 12,000 10,000 8,000
Three types of security were traded: company shares, privatization-investment fund shares and bonds which included government bonds. During 2011, the greatest turnover was recorded in the area of company shares (88.5%). This was followed by investment funds at 7.5%, and the total turnover of bonds amounted to 4.0%.
6,000 4,000 2,000 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Graphic 9. MONEXPIF 8,000 7,000 6,000
Taking into consideration shares from a single company, the highest monthly trade volumes in 2011 was reached in July, when the shares of Hipotekarna Banka reached a volume of 5.43 million through 74 transactions. Other companies that traded well in 2011 were Prva Banka Crne Gore (€5.38 million through 74 transactions - April), Aluminum Plant (€3.50 million through 405 transactions - September) and Invest Bank Montenegro (€3.24 million through just one transaction - November).
5,000
Stock Exchange Indices
4,000 3,000
The new stock exchange uses the two indices MONEKS20 and MONEKSPIF. These indices were developed from the former Montenegrin stock market indices.
2,000 1,000 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Graphic 10. Turnover structure 7.5%
4.0%
88.5% Shares
PIFs units
Bonds
Graphic 11. Turnover in PIF’s 800,000 700,000
698,647
26,446,041 682,107
757,107
600,000 14,295,036
400,000
305,990 8,916,534
250,815
200,000
15,000,000 10,379,172 10,843,333 10,000,000
4,320,645
5,000,000
100,000 0
0 Atlas Mont
Eurofond
HLT Volume
8
The value of the Montenegro Security Exchange, MONEX20, upon which MSE’s 20 most liquid companies are traded, showed a downward trend from the beginning of 2011. The highest value that was reached by MONEX20 in 2011 was recorded on January 24th at a level of 15,724 points, and the lowest value was recorded on December 12th at a level of 8,346 points. Variations in the index value have influenced all of the changes shown by the shares represented in this index, particularly those belonging to the Electric Power Company, Aluminum Plant and to Telekom Montenegro.
The value of this index showed significant fluctuations, including considerable growth and also considerable dips in 2011. It reached its highest level on February 15th with a total of 6,673 points. The lowest point was recorded on December 2nd with a value of 3,251 points. The index value was influenced in such a way that a similar trend was evident in all of the six privatization investment funds.
Privatization – Investment Funds on the Stock Exchanges
20,000,000
500,000
300,000
MONEXPIF
30,000,000 25,000,000
597,760
MONEX20
MIG Shares
Moneta
Trend
The total volume of trade that involved PIF shares in 2011 amounted to €3.29 million. This represented a drop of 44% when compared with figures in 2010 (about €7.91 million in trade volume). In total there were 3,391 transactions, and these involved a total number of 75.2 million shares taken from all six PIFs. The most actively traded shares during this period were Euro fond, whilst the least traded were MIG shares.
April 2011 February 2012
1 concern 21 target markets insurance
40 companies employees &
20,000 agents 7,500,000 customers 16,500,000 contracts
Insurance of a New generation.
Plav KOTOR
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Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...
In the Spotlight Capacities of local self - governments to absorb EU funds The EU accession process will increase the importance of local governments and their role in the regional development of Montenegro. Programs and projects are being implemented to encourage development at local and regional levels, and to obtain available financing from a variety of bodies in order to achieve EU regional policy status. If local governments are able to attract funds from the pre-program they will also clearly be successful in managing much larger resources available from structural funds which are one part of EU regional policy.
The Center for Entrepreneurship and Economic Development (CEED) has conducted an analysis to assess the capacity of local governments in attracting funds from the EU. The research contains several thematic sections: human resources, participation in the European Union programs, cooperation with other organizations and the assessment of needs for further development. According to the results of the research, it can be concluded that local governments play an important role in the use of available funds. Apart from NGOs, local authorities fall into the category of successful users of available funds. Also, it should be noted that local governments have worked hard over the last two years to strengthen their own capacities in order to attract EU funding.
Human resources
Cooperation with other organizations
Over the last two years there has been an increase of 200% Local governments have developed cooperation initiatives with a regarding the number of employees involved in the preparation and variety of state authorities, NGOs, and local governments from implementation of projects. This indicates that local governments Montenegro and other countries during the preparation and have recognized the importance of investing in human resources implementation of projects. However, there is still room to expand in order to better utilize their available resources. In the future it the level of cooperation between local governments and other will be necessary for all local governments to form units for the organizations that are interested in applying for EU initiatives. preparation and implementation of EU projects. In turn, these units The results showed that it is necessary to improve the level of will be represented by special bodies within local governments. cooperation that presently exists between local governments and However, the further training of employees during the preparation business associations, as this is currently a low level. By doing so, (feasibility studies, cost benefit analyses, assesments of the impact and to better use EU funds, it is necessary for local governments on environmental processes) and the implementation of projects to intensify existing levels of cooperation among themselves in (knowledge and use of PRAG and the preparation of tender order to create regional EU projects. documents during the implementation of the project) is also needed.
Participation in EU programs
The need for further improvement
During the last two years, local authorities have submitted 42 The results clearly show the need to further strengthen the capacity project applications, of which 21 projects were approved. The total of local governments. The five most important priorities are: value obtained from these successful project applications totaled to improve the training of staff who work on applying for and about â‚Ź 12 million. As it is known that a much larger number of implementing projects, to appoint more employees to work on resources will be available in the future, it is necessary for local applying for and implementing projects, to make available more governments to increase their number of EU project programs. funding for applying for and implementing projects, to improve Evidently, more financial resources will be required to increase cooperation with European partners, to create a better work the number of projects applications as well as implementing evironment including improved technology. successful projects. To resolve the problem of co-financing of projects, it will be necessary to establish a mechanism to ensure Among the specific skills that are required during the application co-financing between local governments that receive EU project process for projects and and also during the implementation of grants. projects, the local government has earmarked the following priority needs for further training: feasibility studies, cost benefit analyses, knowledge assessment procedures, assessment of the impact on the environment, knowledge and use of PRAG and the planning of a project budget.
Step towards EU: Montenegro has received a conditional date for negotiation to commence A year after receiving candidate status in early December, Montenegro received a date for starting negotiations on accession to the EU under certain conditions. The European Council decided that Montenegro could be given a date to start negotiations in June 2012, when the Council will review the progress Montenegro has made in implementing reforms. There will be a particular focus on the following areas: the rule of law, respect for fundamental rights and combating corruption and organized crime.
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February 2012
We introduce
Prepared by: Mr. Anton Jurovicki, University of Donja Gorica (UDG)
Entrepreneurship among youth Youth should be a stimulating force in every country; the force of positive change in fields such as the economy, information technology, science, medicine, tourism, sport, culture and many others. Through their enthusiasm, youth people become the drivers of entrepreneurial innovation at both local and global levels. They are the ones who shift the flow of events in the world. We listen to news about entrepreneurship on a daily basis, we see that young minds change the way we do things, the way we communicate, the way we do business. Young people introduce us to new innovations that affect us all. Nowadays, as the world is facing economic recession, one of the things that brightens up our day is new innovation; something that an entrepreneur has accomplished, solved, made, helped to create, and has contributed to. Europe, in particular, is facing numerous social challenges which are growing day by day. Innovation, creativity and entrepreneurship are strong vectors with which to address these challenges. One of the reasons why young people should try dedicate themselves more to entrepreneurship, rather than waiting for jobs to turn up, is the fact that they represent one fifth of the world’s entire population; 50% of the total unemployed global workforce. Youth unemployment is one of the major challenges faced by most governments in the world today. The importance of entrepreneurship was stressed by the Vice President of the United States, Joe Biden, in December, in Turkey when he addressed to thousands of young people at the Global Youth and Entrepreneurship Summit in Istanbul. He declared, “We’re all here because we believe in the power of entrepreneurship to transform lives and lift up entire communities and nations. It is no coincidence, ladies and gentlemen, that 19 of the top 20 most prosperous countries in the world are also the most entrepreneurial countries in the world, according to leading international indexes.” One of the messages that Biden spread to so many young minds was that they should do what is natural; to dream and to risk. In his speech he stressed that entrepreneurship is crucial for the development of mankind and that, as such, it should drive innovation. He also said that young people should be inspired by the memorable words spoken by Steve Jobs, ``Think different.``
However, entrepreneurs all around the world still face challenges such as not being taken seriously by colleagues or business contacts, age discrimination by suppliers or customers, difficulties in attracting funding to their business, a lack of career information and business possibilities, problems with business registration procedures and costs, a lack of ICT infrastructure, a lack of business experience and skills and a variety of other important problems connected to property rights, copyright, patents and trademark regulations. These obstacles don’t stop entrepreneurs, but rather give young entrepreneurs an advantage. They are filing less afraid to develop new markets, to create new products, to promote the use of modern technology in small-scale manufacturing, to enhance higher productivity, and to reduce the negative aspects of the informal economy.
All of this shows that being an entrepreneur is not easy; it is very risky, but despite this, young people still decide to get involved. Every successful entrepreneur brings benefits not only for himself or herself, but also for his or her municipality, region or country, something that is very important during these difficult times. Innovation is the engine of progress and is most often delivered by entrepreneurs! We should mention the institutions supporting entrepreneurial initiatives at the national level as for example: Business Incubator Inventivnost- which directs all of its available capacity to launching and supporting new businesses; the Directorate for the Development of Small and Medium Sized Enterprises, Investments, Business Support Center Bar, and the Development Fund, later provide credit to support to help small and medium enterprises.
When mentioning this, it is important to state that entrepreneurship in Montenegro is on the increase. Montenegrin high school students study entrepreneurship as part of their education, contests are held and there are also special schools that offer courses on entrepreneurship. A good example of this new type of innovation is the second School of Entrepreneurship and Innovation for Youth which was founded by the first generation of UDG students. This year the school hosted 70 students (in the first year there were 35 high school students) which shows that interest in entrepreneurship is definitely changing in a positive way! The school comprises educational and extracurricular activities, all of which encourage creativity, networking and socializing between participants. By the time the courses end, participants will have all learned new things and made new friends; the synergy of entrepreneurial language. There are also other institutions that are willing to help to boost entrepreneurship in Montenegro. Lack of funding may no longer be an excuse for the lack of creative projects, because Montenegro Telekom has recently launched Inovatorium- a program that will allow students and young entrepreneurs to get full support in realizing their business ideas in the areas of information technology and telecommunications. As time passes we are witness to the fact that progress is generated from young brilliant minds that are ready to change and create. Ideas change the world. Ideas are the most marketable goods! Therefore we must be aware that the proverb “the world is in the hands of on young people” was said with good cause. Young people are the creative force of today, and of the future!
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MBO Interview Could you single out one reform that has been made to the Montenegrin economic system which has resulted in positive changes that benefit national companies? Reform processes, launched by the government of Montenegro to improve the business environment, have been initiated in almost all areas of business. Within this comprehensive and complex process, I believe we should outline the positive effects that have come out of the reform of the fiscal system, and from policies aimed at reducing tax rates and other charges that are burden to business operations. Recently, tax rates on income, company profits, compulsory social security contributions and other similar taxes were reduced, and this had a beneficial effect on reducing costs in the business sector. Mr. Velimir Mijušković, President of the Chamber of Economy of Montenegro
Biography: Mr. Velimir Mijušković was born in 1950 in Danilovgrad. He graduated from the School of Economics in Podgorica. During his professional career, he was: Director of the Inspection Services of the Municipality of Danilovgrad; General Director of the Construction Department of the Municipality of Danilovgrad; General Director of the Crafts and Communal Services; General Manager of the company “Žitopromet AD Spuž”. He was Vice-President of the Montenegrin Chamber of Economy until 2008, when he was elected President. Mr. Mijušković is actively involved with the following government bodies in Montenegro:
It is well known that many countries, when confronted with the global financial crisis, have resorted to increasing the level of VAT. This did not happen in Montenegro. Consequently the level of this tax, which was already among the lowest in Europe, remained at the same level; something which I find very positive. Despite the positive changes that have resulted from the reform process, businessmen still face problems associated with complex procedures, whose scope and duration in terms of time undoubtedly remain as obstacles to business. However, when talking about the reform of the Montenegrin economic system, this process should not be limited to just a single area of procedures, as it has a much broader scope. In my opinion, Montenegro has one problem which is the cause of many others, and that’s a poor usage of the available resources. However, if we put this factor in the center of our attention, it could only be a generator of further development.
Montenegro is currently in the negotiation process for gaining accession to the European Union. How do you think this process is affecting the private sector in Montenegro? The process of negotiations regarding accession to the European Union, amongst other things, implies an acceptance of new rules that essentially harmonize national legislation with the so-called EU acquis. It is known that the EU’s goal during the process of negotiations is to encourage state candidates to complete reforms in order to improve legal and economic systems to the point where they meet the level of standards and principles embedded in the foundations of the EU.
Regarding the economy of Montenegro, this means that it will be necessary to apply such measured to all of the provisions to which the state is bound. It will also mean coping with the pressure of competition that is inherent in the demanding European ‘road’. To make deep and Privatization and Capital Investment real changes that result in qualitative steps forward for the entire unit, it is crucial to influence Council; Sustainable Development the most mobile, most adaptable and most vital segment of society - the private sector. Trends Council; Council for the Elimination of that we have learned through our experiences in human history clearly confirm that, without Business Barriers a developed private sector, we cannot aspire to enter the arena of developed countries, as will and Higher Education Council. be assumed by EU membership. Therefore, Montenegro’s ambition to integrate itself into the system must include a vision of the development of our society based on a strong private sector.
Montenegro has recently become a member of World Trade Organization (WTO). Could you highlight the main benefits of this membership for the private sector? Bearing in mind that the rules, as defined in the WTO agreements, have been applicable in our country for three years now. This dates from the time of entry into the Stabilization and Association Agreement, CEFTA and other bilateral agreements with Russia and Turkey, through which Montenegro generates over 80 percent of its foreign trade exchange; and consequently much less importance was given to WTO membership. However, it is a key steps in the process of institutional integration into the contemporary system of international economic relations. It is also an important element for supporting the process of internal economic reforms, and is also a necessary step in the process of accession to the EU. Summarizing the benefits of our membership in this organization, we should primarily keep in mind that WTO is not an institution of "free trade", but is rather a system of rules that promote open and fair competition. These guidelines must also now be adhered to by the Montenegrin economy. This includes an obligation to function using the principles of a non-discriminatory trading system; a system that regulates the rights and obligations of all its members. As a member of the WTO, each country has the assurance that its exports will be treated by the same precisely stated laws as those from other countries. Inclusion in the basic institution of a universal trading system must bring advantages to its members. With international trade functioning in a free and predictable manner, WTO represents to its members a framework for increasing the standard of living, an increased level of employment, a steady level of growth in real income along with an increase in demand, an increase in the level of production, an increase on the level of foreign trade and services, a reliable level of sustainable development, environmental protection whilst also maximizing world reserves, and a level of economic development that conforms with the needs and interests of all countries, irrespective of their different levels of development.
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February 2012
What are the main challenges that Montenegrin companies will face during the forthcoming period? Despite the results of regulatory reform and the enhancement of the business environment, many business barriers are still present; particularly in terms of slow and time-consuming procedures, especially at a local level. In addition to the challenges that the real sector has already had to face as a result of a fall in the level of industrial production, there is also the problem of a high degree of illiquidity.
Are you satisfied with the benefits gained by the Montenegrin economy to date as a result of the implementation of CEFTA? Since the agreement confirming entry into CEFTA came into force, an increase in the volume of regional trade has been recorded. The total trade exchange between Montenegro and other CEFTA countries in 2011 amounted to 43 percent. In order to protect its their own production levels, signatories occasionally resort to non-tariff barriers and hidden measures of protection. These are the greatest obstacles to realizing the full potential of the CEFTA agreement.
As a result of institutional and legislative reforms carried out by the banking sector, an environment which encourages an increase in lending has been created. However, due to an increased level of A significant step forward in improving the application for this illiquidity in the real sector, this is still well below the expected agreement was made part way through last year. At this time, level. During the current year it is also realistic to expect a Montenegro had agreed to implement a greater level of freedom slowdown in lending, difficulties in returning loans that have been with Croatia. Subsequently, a higher level of trade freedom has also taken out, higher levels of interest rates, a reduction in foreign started to be implemented with Albania. direct investments, a slowdown in the field of construction (due to a fall in demand and also in property prices), the construction of The former CEFTA agreement, which dates from the time of the tourist facilities, a slower level of growth in the number of tourists Cracow Declaration in 1992, was a successful way of adopting and lower investments in capital infrastructure projects. international business rules and resulted in EU membership for In order to trigger the economic cycle and to put immobilized funds all of its signatories. The present agreement, CEFTA 2006, has into circulation, the option of creating private-public partnerships been enriched in certain new areas, and also provides a framework to implement large investment projects in energy and tourism could for “training” in the area of implementing international standards, be very positive. A significant contribution to stimulating activity concentrating on the growth of regional trade. Breaches of the in the economy would be to give willing investors relief from taxes, agreement’s provisions, which have occasionally happened from utility fees and other similar obligations in order to develop sectors time to time, have called into question its validity. However, in which the state can see a long-term interest. lessons have been learned and ultimately the signatory parties have demonstrated their commitment and dedication to the European One of the projects that promotes Montenegrin companies ‘road’.
is called “Good from Montenegro” . Could you tell us more about this project and whether are you satisfied with the results that have been achieved?
A growing foreign trade deficit has been characteristic in Montenegro for years. We produce, among other things, food which wins numerous awards at trade fairs. Our production is certified according to international standards, but our products don’t successfully find their way to local or to foreign customers. We have noted that this is an area that requires special attention and have therefore started to work on this with a precisely defined plan. We have consequently registered the trademark "Good from Montenegro". Activities are aimed at consumers through the promotion of high quality products, services and manufacturers to effectively give products a high profile. Among other things, the Chamber of Economy of Montenegro has implemented this through training, market research, business networking, numerous business forums and participation at trade fairs. Today, 13 manufacturers who offer a total of 73 products are allowed to use the trademark. Analyses have shown that there is now a better and greater recognition of high quality local products by local consumers. The project "Good from Montenegro" has, over the course of three years, achieved a good reputation, trust and an unusually high level of support from Montenegrin citizens. The popularization and promotion of local quality products were the main objectives of the project in the last phase. The Chamber of Economy was, in this case, able to help in real terms and we are very satisfied with the results. The rest is up to the companies themselves. They should now seize the opportunity offered to them through a very positive perception of their collective trademark; a guaranteed level of quality by which some of their products are marked. When producers have completed this stage successfully in the local market, they can then turn to the foreign export market.
One of the activities carried out by the Chamber of Commerce is the staging of meetings for the Committee of Women Entrepreneurs. How do you provide support for women entrepreneurs? The development and promotion of women as entrepreneurs is supported by regular activities that are carried out by the Chamber of Economy of Montenegro. It provides support to women entrepreneurs through activities aimed at analyzing conditions and tries to find ways of improving the business environment for women entrepreneurs. It also: provides information and organizes consultations with women entrepreneurs; organizes training; facilitates workshops and round table discussions on current topics that are important for the promotion of women as entrepreneurs; encourages women entrepreneurs to network through the development of local and regional networks. The Chamber of Economy of Montenegro, together with the Center for Entrepreneurship and Economic Development, is currently implementing a project to support women in business (Womenled Business Support Program). Within this project, funded by the European Union, the first national network of mentors for women entrepreneurs in Montenegro was established, as a part of the European network which is made up of 17 countries. It aims to support and help women entrepreneurs to develop their own businesses. Even before this project was initiated, through the Association of Balkan Chambers of Commerce and the Forum of Adriatic-Ionian Chambers, the Montenegrin Chamber of Economy conducted activities to encourage women entrepreneurs. They did this by encouraging them to participate in activities associated with them concerning this same issue.
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Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...
Privatization and Investments
investments Qatari Diar to Invest €250 Million in Montenegrin Resort Qatari Diar Real Estate Investment Co., part of the Emirates’ sovereign wealth fund, plans to invest €250 million in building a five-star Adriatic resort in Montenegro. Following the takeover of an existing hotel in a bay near the town of Tivat, the company owned by the Qatar Investment Authority will redevelop the 24-hectare (60-acre) site over the next two to twoand-a-half years. This resort will include a luxury hotel, villas and apartments, sports facilities and shopping malls. This is the fourth project that Qatari Diar is building in Europe, and officials have stated that during the first phase, Qatari Diar will invest €42 million in the project. Although the tourism industry in Montenegro is seasonal, Qatari Diar said that it expects the resort to stay open all year round.
Tender for Daily Pobjeda The Bosnian company, Avaz-roto Press, submitted the sole bid received in the tender for an 86% stake in Daily Pobjeda. The offered price for one share is €1 (3,142,950 shares in total). The tender documentation was also purchased by Media Nea, the owner of daily “Dnevne Novine”, but it did not submit an application in the end. Previous tenders for the sale of this company in 2007 and 2008 failed due to its debts. According to the latest data, the company’s total current debt is €10.53 million. The candidate buyer, Sarajevo-based Avaz-roto Press, offers to invest €2.1 million in Pobjeda’s core business during the first three years after it becomes private. It also intends to cut the number of employees to around 170 by 2015.
Montenegro’s EPCG Replacement Project
Launches
€43.5
Million
Electric
Meter
The Montenegrin power utility company, Elektroprivreda Crne Gore (EPCG), launched a €43.5 million project in mid-December, 2011, to replace old electric meters with new multifunctional devices in a bid to reduce losses in electricity and to raise the level of revenue collected from bills. It was planned that approximately 1,000 meters would be replaced in Podgorica by the end of 2011, with a total of 175,000 new devices being introduced over the next three years. The project will be co-financed by a €35 million loan that has been granted by the European Bank for Reconstruction and Development. The EPCG said that the level of power transmission loss in Montenegro is around 18%.
Montenegro to Invest €40 Million in Road Infrastructure in 2012 The Montenegrin Ministry of Transport and Maritime Affairs has announced that it will invest €40 million in road infrastructure projects during 2012. As part of its infrastructure upgrade plans, Montenegro will launch a project to overhaul 13 local roads next year. The Transport Minister, Andrija Lompar, announced that a project plan for this will be drafted in cooperation with the European Bank for Reconstruction and Development (EBRD).
Hilton Hotel Reconstruction Project in Podgorica gets Regulatory Nod The company managing the hotel, Normal Tours recently announced that the oldest hotel in Montenegro, Capital Podgorica Hotel Crna Gora, will be renovated according to the building standards of the hotel chain Hilton. Representatives from the European Bank for Reconstruction and Development and Normal Tours signed the contract regarding the financing of this venture on 11th April, 2011. A year ago, a contract was signed between the “Hilton” Hotel Corporation and "Normal Tours". Under the terms of this agreement the new hotel will have 210 rooms along with all the necessary facilities, and will be based on five star facility standards. The Hilton should be in a position to manage the newly renovated hotel within the next 15 years. The Montenegrin Ministry of Sustainable Development and Tourism has issued the relevant permits for the renovation of a hotel in Podgorica that will reopen under the Hilton brand following a revamp costing €20 million.
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February 2012
Bulgaria and Montenegro to Cooperate on Energy Montenegro gets Two Bids for Golf Course Projects Project Tender Sofia and Podgorica are considering setting up a joint company for the transfer of electricity to Italy after talks were held in Sofia between the Montenegrin Prime Minister, Igor Lukšić, and Prime Minister, Boyko Borissov. Following the meeting, the head of the Bulgarian government stressed that this venture would give Bulgaria the chance to enter the Italian energy market. Energy was the key subject of the bilateral talks. The Bulgarian National Electricity Company and the Economy and Energy Ministry have been working actively on drafting a long-term contract for the export of electricity to Montenegro. For his part, Borissov reiterated his country’s support for the bid made by the Western Balkan state to obtain EU membership. Montenegro gets €4 million EBRD Loan for Heating System Project The EBRD is helping to improve the energy efficiency of district heating systems in Montenegro with a €4 million loan to finance the construction of a new biomass-fuelled district heating energy system in Pljevlja, in the north-western part of the country. The heating facilities currently in use in Pljevlja are outdated and operate using brown coal. The EBRD loan will be used to convert the obsolete heating facilities in Pljevlja town centre into a ‘stateof-the-art’, centralized district heating system based on biomass.
LPGD, which was founded in Podgorica by Dutch Limon, submitted a better financial offer for the construction of a golf courses in Tivat than PM Golf Development. LPGD put forward a €11.3 million offer for the 90 year lease on Tivat Montepranzo along with a nine-year investment program of up to €181.6 million. It also offered an annual rent of 16 cents per square meter of land; 786,600 square meters were offered for rent by the government. The Tivat-based company, Porto Montenegro Golf Development, founded by Adriatic Marinas, was prepared to pay a total of €10.6 million and offered to pay an annual rent of 15 cents for every square inch of land. PM Golf Development announced a five-year capital investment program worth €10 million.
The total cost of the project cost is set to be € 6.5 million. The balance will be covered by a grant from the EU Western Balkan Investment Framework.
New Tender for Montenegro Steel Factory
Tenders Tender for Orjenski Batalion in Herceg Novi The government of Montenegro announced an invitation for tenders to bid for a long-term lease of 90 years for Orjenski Bataljon Barracks in Kumbor, Herceg Novi, to include both the construction and management of the facility. The tender process is aimed at experienced international investors with a proven financial capacity, along with experience in designing, constructing and operating large multi-purpose tourist resorts. Bids should be submitted no later than March 15, 2012, to the Ministry of Defense, to the Tender Committee for the Valuation of Former Military Property.
Tender for the Mamula Fortress in Herceg Novi The government of Montenegro announced an invitation for tenders to bid for the long-term lease of 30 years, with a possibility to extend up to 90 years, for the tourist resort of Lastavica Island on which is situated Mamula Fortress, Herceg Novi, to include both the construction and management of the facility. The tender process is aimed at experienced international investors with a proven financial capacity, along with experience in designing, constructing and managing complex tourist facilities. Bids should be submitted no later than 14th February, 2012 to the Ministry of Defense, to the Tender Committee for the Valuation of Former Military Property. Note: The regular session of the Privatization and Capital Projects Council was postponed because of the state of emergency declared in Montenegro due to the worst winter weather in decades that grasp the Balkans. For this reason, there is no information regarding the opening of the Bids for the tender for Mamula fortress available yet. •
Montenegro has received two offers for a long-term lease on a plot of land designated for the construction of a golf course. The offers were submitted by the companies Porto Montenegro Golf Development and LPGD Podgorica.
The name of the successful applicant will soon be made public. Limon was the top-ranked company 4 years ago, but the tender committee ended negotiations, claiming that it could not confirm the guarantees that had been put forward to support the investment program which was worth €205 million.
Bankruptcy Committee of the Steel Plant opened new tender for the sale of the whole property of the plant (land, construction facilities, plants and equipment, property that has the status of uncompleted investment, etc.) through public bidding under initial price of 21 million. The bids can be delivered until March 22, 2012. The public bidding will be held on March 26, 2012 at the premises of the Commercial Court in Podgorica. This is the second tender for this plan in this year. The plant went up for a sale under initial price of €30 million. However, Montenegrin Government received no bids following a preliminary call for the sale of insolvent steel mill Zeljezara Niksic. The majority of Niksic Steel Plant shares were transferred to MNSS BV in 2008, when the old company, under the same name, changed its headquarters and ownership structure. Since then, the former industrial giant has witnessed a decrease in the number of workers and an increase in the firm’s debts, the biggest share of which goes to its most recent owner. The bankruptcy of the steel plant, declared in April and confirmed in November 2011, was met with dissatisfaction by the company’s workers. This is the fourth time shares in the Niksic plant have changed hands. Companies from Russia and Great Britain previously held shares.
Sultan Corporation Expects to Re-open Montenegro’s Brskovo Mine The Australian mining company, Sultan Corporation, expects to re-open a disused Montenegrin mine, Brskovo, within four years having verified the existence of zinc, lead, copper and silver deposits. Samples of deposits that were found at Brskovo, in the eastern part of the municipality of Mojkovac, were confirmed following three months of exploratory activities. Exploratory drilling will continue for the next two-three years. Sultan Corporation holds a 25-year exploration and mining lease for the Brskovo lead and zinc complex.
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We Introduce: Christmas Discussions on topic ‘Culture and Development’ Each year discussions take place on the 6th January on Christmas Eve according to the old Julian calendar. This year it took place at the University of Donja Gorica (UDG) from Podgorica. This, now traditional, event was first established in 1992. The host and the founder of this event is Professor Veselin Vukotic, and the topics of discussion are related to economy issues. The discussions are very popular with students as they are a good social event and also stimulate discussions about various topics. The main topic was ‘Culture and Development’; the importance of culture, seen as a basis for future development. The first Christmas Discussions was attended by only 12 people, while this year’s event - the 20th consecutive year hosted over 300 people! Participants in the Christmas Discussions were: Veselin Vukotic, Dean at the University of Donja Gorica, Dusan Janjic, the Forum for Ethnic Relations and the Institute of Social Sciences, Professor Branislav Micunovic, the Montenegrin Minister of Culture, Professor Branko Baletić, the director of the Montenegrin Cinematheque and Veselin Jevrosimovic, CEO of the software company ComTrade. The Professor Vukotić, gave the introductory speech and stated: “Some of the socalled opinions held by 'left-wing intellectuals' regarding free markets leading us to a crisis are about as true as saying that cyclists are to blame for traffic jams. It is evident that the market and even the whole world, have never been regulated to the extent they are today. In previous times our behavior was controlled through the 10 commandments, but today we are ruled by over 10 billion pieces of legislation. Instead of being surrounded by rainforests, we live in a jungle of bureaucratic regulations.” Later he added, “Today when we cross over from industrial capitalism to cultural capitalism, ideas will become the most convertible currency. That will mark a transition from material things being most highly valued to the importance of having ideas being of most value.” For the daily news “Vijesti”, Professor Vukotić stated that culture becomes an economic issue, and it slightly becomes the basics of modern society, similar as the power of politics and economic power. “Nowdays, industrial capitalism is increasingly evolving into a new type – which is more and more defined as a cultural capitalism… Market of ideas increasingly becomes important. There is increasingly demand for the people who have ideas and the power of creation, the power of research, not just the power of imitation and passive use of the already achieved knowledge.” Dušan Janjić stated: “This crisis represents the acceleration of globalization, and that globalization has brought about the spread of cultural values. However, at the same time he stressed the need to protect national values.” Branislav Mićunović stressed that it is "difficult to preserve cultural heritage within the environment of a restrictive budget". He explained that the preservation of culture should be seen as a general concern in Montenegro as it has great potential in the context of the development of tourism. Branko Baletić agreed with all of the above comments and concluded that Montenegro’s main problem is a lack of knowledge. Regardless of the crisis, the budget for culture in EU countries is presently increasing, because there is an understanding that new creativity is necessary in order to solve existing problems. "Culture is the foundation of all relationships in society, but in transition periods it has remained in ‘no man's land'," concluded Baletić. He also recalled that "the cultural identity is the basis of all identities." Veselin Jevrosimovic stressed that information technology, often referred to now as digital economy, is becoming an important and crucial activity within the infrastructure of all countries. He also announced the introduction of a new initiative, the Knowledge Factory which will be organized in Montenegro with the assistance of the University of Donja Gorica (UDG). These most recent Christmas Discussions were much better attended than were previous ones. The discussions finished late at night, concluding the formal part of the evening; the participants then continued with a party that was held in the student club.
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February 2012
Business news Montenegro Wants to Reduce Food Imports During 2012, the Ministry of Agriculture and Rural Development of Montenegro wants to reduce the number of food products that are imported, and to stimulate the production of meat, milk, cereals and animal feed. IN addition to this, Montenegro should try to realize some of its great opportunities in the European market for wine, meat, meat products, ham, and various types of cheeses, fish, vegetables and fruit. The ministry believes that producers need further resources in terms of refrigeration and storage. This is something that companies often complain about, but that can easily be solved by using the warehouse space of companies that have gone out of business. Source: www.mpr.gov.me
Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up...
Ready for a Green Economy By basing the development of Montenegro on the fact that it will receive most of its energy from renewable sources and through the application of energy efficiency mechanisms, it shows that Montenegro is totally ready to implement the basic guidelines of the EU energy-climate package. Montenegro, as a developing country, has no obligation to reduce pollution levels, but it does have to define the way that it intends to take over the energyclimate package. Montenegro is keen to be one of the first countries to implement the concept of a green economy. Source: www.mrt.gov.me
Privatization Plan 2012 The Government of Montenegro adopted the Privatization Plan for 2012. The Plan contains companies planned to be privatized either through public tender or to be put on lease. The following companies will be privatized by public tender: “Pobjeda” JSC Podgorica, “Montecargo” JSC Podgorica; “Montenegro airlines” JSC Podgorica, “Kontejnerski terminal i generalni tereti“ JSC Bar; “Željeznička infrastruktura Crne Gore“ JSC Podgorica (manteinance), “Jadransko brodogradilište“ JSC Bijela; “Zora” JSC Berane; HG “Budvanska rivijera“ JSC Budva, HTP “Ulcinjska rivijera“JSC Ulcinj; “Institut crne metalurgije“ JSC Nikšić i Fabrika elektroda “Piva“ Plužine. The former military locations and facilities planned to be put on lease by applying the model of private-public partnership are the following: “Ada Bojana” Velika plaza, Bjelasica-Komovi, “Montepranzo-Bokaprodukt” JSC - Tivat, “Pošta Crne Gore “ JSC Podgorica, military barracks “Orijenski bataljon” – Kumbor; Island “Mamula”. Some military-touristic complex are yet to be evaluated, such as: complex “Valdanos”, Ulcinj, “Ostrvo cvijeća” and land “Prevlaka” - Tivat, “Bigova” Trašte, Kotor, etc. Source: www.savjetzaprivatizaciju.me
Montenegro Became a Member of WTO Montenegro became the 156th member of the World Trade Organization. During a Ministerial Conference, on the occasion of the Montenegrin accession to WTO in Geneva, the Prime Minister of Montenegro said that Montenegro was walking firmly towards integration into the European structure. This was also confirmed by the recent decision of the European Council to open negotiations with the EU in June 2012. The formalization of Montenegro’s membership in WTO is another important and successful step towards its integration into modern international markets. Source: www.mek.gov.me
Montenegro has been Added to the Existing List of 53 Eligible Countries for US H2 Visa Programs The U.S. Citizenship and Immigration Services (USCIS), in consultation with the Department of State, have published a list of 58 countries whose citizens are eligible to participate in the H-2A and H-2B programs for 2012. Haiti, Iceland, Montenegro, Spain and Switzerland have been added to the existing list of 53 eligible countries for visa programs for the first time this year. The H-2A visa program allows U.S. employers to bring foreign workers to the U.S to fill temporary agricultural positions while the H-2B visa program enables U.S. employers to offer employment to foreign nationals for temporary non-agricultural positions. Source: www.balkans.com
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Business news Montenegro and Albania have Strengthened Economic Cooperation and Signed Agreement on Transport Montenegro and Albania will enhance their cooperation in the sector of economy, but also in other areas, as their shared path of the EU integration is ensured by the cooperation. The two countries signed an agreement on a motorway connecting Montenegro’s town of Plav with capital city Podgorica, good portion of which goes through Albania. This project showcases good cooperation between the two states and it should be deepened through other economic projects, such as using the resources from the bordering Lake Skadar and Bojana River. The two countries should continue and enhance their cooperation, noting that both have excellent potential for tourism, in particular emphasizing the future importance of Prokletije Mountains that border the two states. Source: www.isria.com
Establishment of Payment Operations between Montenegro and Serbia The Montenegrin Prime Minister appealed to the Central Banks of Montenegro and Serbia to come up with an agreement that would enable the establishment of direct payment operations between the two countries, thus eliminating one of the biggest business obstacles. During the assembly of the Serbian-Montenegrin Business Club in Podgorica, both the Montenegrin and Serbian prime ministers invited businessmen from the two countries to help in strengthening the cooperation. The establishment of such payment operations would reduce the commission charged by banks. Source: www.balkans.com
Montenegro Receives €12 for Strengthening of Public Administration Montenegro can count EU aid worth €12 million. It has been donated by the IPA program for the strengthening of public administration and the judicial system and for supporting basic rights in 2012. The European Commission has initiated aid programs worth a total value of €1 billion; €790 million of which provides individual support to countries, while €210.5 million is intended for projects relating to cross-border cooperation. Most of the funds for individual support will be given to Turkey (€232.9 million) and Serbia (€178.5 million). Other countries that will also receive funds include: Bosnia and Herzegovina (€91.3 million), Albania (€82 million), Kosovo (€62.9 million), Croatia (€39 million), Macedonia (€28.9 million) and Iceland (€26.5 million). Source: www.balkans.com
Montenegro’s Government Adopts the PEP Montenegro’s government adopted the pre-accession economic program (PEP), a fiscal surveillance procedure. PEP aims at preparing EU candidate countries for participation in multilateral surveillance and in economic policy co-ordination procedures that are currently in place in the EU as part of the Economic and Monetary Union. The priority goal in the medium-term is to secure conditions for FDI growth. This can be achieved by upgrading the economy’s credibility on the basis of fiscal and financial stability. Montenegro’s PEP 2012-2014 expects GDP growth to be between 0.5-2% in 2012, between 1.5-3.5% in 2013 and between 3.5-4% in 2014. It is planned that public expenditure, currently at 43%, will be reduced to 38% by 2014, and that a budget surplus of 1.03% of GDP will be seen in 2014, along with a decline in the trend of public debt which is expected to reach a level of 42.9% in 2014. A less optimistic scenario envisages a small reduction in public expenditure, to 40.2% in 2014, a decline in the public finance deficit to 1.7%, and a decrease in the public debt to 47.4% in 2014. Source: www.mek. gov.me
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February 2012
Montenegro at the Tourism Fair “Travel Turkey Izmir” This year’s tourism fair, “Travel Turkey Izmir”, was held for the fifth time in the third largest city in Turkey. The fair took place between the 8th and 11th of December, and included over 600 exhibitors from Germany, Austria, Azerbaijan, China, Indonesia, France, Croatia, India, Netherlands, Great Britain, Kosovo, Malaysia, Slovenia, Tunisia, Jordan, Greece, Montenegro, and Turkey. It was the first time that Montenegro took part in this event as an exhibitor. Montenegro was represented at “Travel Turkey Izmir” by the Tourist Organizations of Bar, Budva and Ulcinj, Podgorica City & Crna Gora Hotels, HTE Ulcinj Riviera Hotel, the Hotel Mediterranean from Ulcinj and the Tourist Agency Adria DMC from Budva. Visitors were mostly interested in the natural beauty of Montenegro. Source: www.pkcg.org
EIB Considers Loaning €50 Million Credit Line to Montenegrin SMEs The European Investment Bank (EIB) has said that it is considering lending €50 million to finance small and medium-sized projects in the fields of economics, energy and environmental protection, and tourism in Montenegro. In a public statement, the EIB announced that projects to be carried out under this umbrella would primarily be carried out by SMEs, as well as by public sector authorities and a variety of different sized entities. The aim of this initiative, which is worth €100 million, is primarily to give SMEs and public sector authorities access to long-term funds at affordable interest rates. The project is being promoted by the Investment and Development Fund of Montenegro. Source: www.wbif.eu
Hundred Building Permits Issued in 2011 The Ministry of Sustainable Development and Tourism of Montenegro issued about a hundred building permits in 2011, for the most significant investment projects in Montenegro - small hydro power plants (SHPPs) and hotel and tourism facilities. Indicative value of projects for small hydro power plants on rivers Crnja, Bjelovićka and Bistrica, for which in the last 14 months building permits have been issued, or are in the process of issuance, amounts almost €48 million. In addition to SHPPs, significant investment project are related to reconstruction of building of hotels. The total value of future investments amounts near €150 million. Thus, in 2011 three building permits were issued for hotels in Petrovac, Podgorica and Tivat worth €43.847.370, while in January this year one permit was issued for a condo-hotel in Petrovac worth €7.771.075. Also, two additional requests for construction of hotel capacities in Petrovac and Budva (€97.909.391) are pending. It is important to emphasize a three-year work on eliminating business barriers in the area of spatial planning and construction. Unnecessary procedures have been cancelled, time required for issuance of building permit shortened and collection of fees eliminated or brought to reasonable extent. Now, there are only two procedures and the term for obtaining permit is 105 days. Source: www.portalanalitika.com
The Netherlands Invests € 1.7 Million in Small Companies
IPA Cross-Border Programme
Over the past four years, the Dutch government has invested €1.7 million in the development of small and medium-sized enterprises in Montenegro through the programs of TurnAround Management (TAM) and Business Advisory Service (BAS).
The Second Call for proposals in the frame of the IPA Cross-Border Programme Croatia-Montenegro was launched on 5th December 2011. The deadline for submission of the proposals is March 5th, 2012. The priority measures under this Call are the following:
A total of 410 projects have been realized during the past nine years, out of which 204 projects have been financed by the Dutch Government; over the last four years they have paid for the services of 120 consultants. Companies that deal with the production of food and beverages, tourism and civil engineering have all participated in the program. As a result, their total turnover has increased by 57 % and the number of workers has increased by 38%. Source: www.balkans.com
(1) Joint actions for environment, nature and cultural heritage protection (2) Joint tourism and cultural space (3) Small cross-border community development projects The overall indicative amount of € 2,430,000 is made available for financing actions under this Call for Proposals.
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Coming Up…
Strategy and Action plan for Cluster Development in Montenegro until 2016 According to the Work Program for 2012, which the Government of Montenegro adopted on January 26, it is planned that the Ministry of Economy creates the Strategy of sustainable economic development through introducing clusters until 2016 with Action Plan. For the purpose of creating this strategy a special Commission for economic policy and financial system will be formed. Forming of clusters will enable Montenegrin companies to, through better cooperation, influence strengthening of competitiveness, which would result in the improvement of regional development component. Adopting of this Strategy will bring Montenegro linking of entrepreneurs at regional level and their cross border networking for strengthening competitiveness and development, better use of available EU funds and other sources for this purpose.
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Institute of Social Sciences within the Centre for Economic Research Organizes Traditional Scientific Conference The Institute holds traditional multidisciplinary scientific assemblies since 1989 on various topics of scientific-economic character. This year’s conference is 22nd in a row and the main topic will be “Population and Development”. The main idea is to raise public and officials attention to the problems of biological substance of society – population and consequences those problems have on economy and overall social development. At this year’s scientific assembly there will be 26 topics from the area of demography. Deadline for application of topics is 01.03.2012, and final versions of papers are to be sent no later than 20.04.2012. The assembly will be held on the last Thursday on May (31st May 2012) and the head of scientific assembly is Professor Veselin Vukotić.
Conference in the Honor of Professor Pejovich September 9-10, 2012 in Serbia
Svetozar Pejovich, Professor Emeritus of the Texas A&M University is completing 50 years of a distinguished academic and scientific career. To mark the occasion, a Conference in honor of Professor Pejovich entitled Law, Rules and Economic Performance will be organized in Belgrade, Serbia on September 9-10, 2012 by the Faculty of Law University of Belgrade. To honor Professor Pejovich appropriately, the most eminent scholars are invited.
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Editor in chief Ivana Božanović info@ceed-consulting.com MBO Team Dragana Radević Mihailo Zečević Darko Konjević Jefimija Pavićević Vesna Bojanović Jelena Međedović Jasna Žarković Biljana Janković Zoran Popović Anton Jurovicki ASSOCIATE Charlotte Rimmer, Editor
After 15 years of experience, today CEED Consulting is the leading business consulting company in Montenegro which helps clients improve their business operations, further develop and perfect both their service and product and meet the need of their customers. We integrate our business development and project management services, providing solutions for setting up and growing your business activities in Montenegro. Focusing on customer care, our team emphasizes quality of service, which we are continually striving to improve. Loyalty and dedication transpire through our unique and professional approach to advising our clients. Implementing international standards of business practice, CEED Consulting relies on its expert knowledge of the local market to provide tailored solutions based on accurate and timely information. We are professional, flexible and different! And always dedicated to you! CEED Consulting Team
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Front page picture: “Gospa od Škrpjela” Kotor Author of the picture: Duško Miljanić Photography provided by CSTI for project “Photography Adventure“ Printing: Opus 3, Podgorica