Montenegro Business Sector 2022 by CorD Magazine

CONTENTS

MONTENEGRO BUSINESS SECTOR 2022

M ONTENEGRO FACING NEW CHALLENGES DESPITE SOLID RECOVERY COMMENT

W E MUST NURTURE THE STRENGTHS GORAN ĐUROVIĆ Montenegrin Minister of Economic Development and Tourism

NO EASY ANSWERS CHRISTOPHER SHELDON

A GREAT LEAP FORWARD News & Current Affairs

World Bank Country Manager for B&H and Montenegro

E VERY CRISIS ACCENTUATES RISKS RADOJE ŽUGIĆ Governor of the Central Bank of Montenegro

MONTENEGRO IS ON THE TAXI-DRONE MAP GORAN JANDREOSKI Chief Executive Officer, Montenegro Airports

P ARTNERSHIP FOR THE FUTURE DR SANDRA TINAJ General Manager

D R MILICA VUKOTIĆ Dean of the Faculty of Information Systems and Technologies, University of Donja Gorica

S OLIDARITY IS ESSENTIAL IN OVERCOMING THE CHALLENGES WE FACE AMBASSADOR OANA CRISTINA POPA Head of the EU Delegation to Montenegro

EDITOR IN CHIEF: Neda Lukić n.lukic@aim.rs ART DIRECTOR: Branislav Ninković b.ninkovic@aim.rs PHOTOS: Zoran Petrović COPY EDITOR: Mark Pullen

UNWAYS READY FOR TOURISTS R FROM THE WHOLE WORLD PETAR RADULOVIĆ Deputy Chief Executive Officer, Montenegro Airports

TRANSLATION & EDITING: PULLEN EDITORIAL HALIFAX

OFFICE MANAGER: Svetlana Petrović s.petrovic@aim.rs

PUBLISHER: Ivan Novčić i.novcic@aim.rs

SALES MANAGERS: Biljana Dević, b.devic@aim.rs Vesna Vukajlović, v.vukajlovic@aim.rs Mihailo Čučković m.cuckovic@aim.rs

FINANCE: Dragana Skrobonja finance@aim.rs

DIRECTOR: Ana Novčić a.novcic@aim.rs a.novcic@cordmagazine.com

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EXECUTIVE DIRECTOR: Maja Vidaković m.vidakovic@aim.rs

MONTENEGRO BUSINESS SECTOR 2022

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A PLACE TO BELONG LUŠTICA BAY

I NVESTMENT IS A KEY EPCG STANDARD NIKOLA ROVČANIN Elektroprivreda Crne Gore CEO

M ARKET DEMANDS ARE THE MOST IMPORTANT GUIDE PROKOPIJE PERIĆ CEO, Plus d.o.o.

C OOPERATING WITH GOVERNMENT TO FIND THE BEST ANSWERS TO CHALLENGES NINA DRAKIĆ PH.D. President of the Chamber of Economy of Montenegro

A LIFE LESS ORDINARY PORTO MONTENEGRO

GOOD PARTNER TO THE NEW GOVERNMENT CHRISTOPH SCHOEN resident of the Montenegrin P Foreign Investors' Council - MFIC

A N UNSPOILT ADRIATIC ESCAPE PORTONOVI

C ETINJE - ROYAL CAPITAL OF MONTENEGRO TOURISM

MONTENEGRO BUSINESS SECTOR 2022

COMMENT

Montenegro Facing New Challenges

DESPITE SOLID RECOVERY

Experts are in full agreement that restoring the country’s macroeconomic and fiscal sustainability and strengthening its financial sector will be vital if the new Montenegrin government wants to ensure a stable macro environment and stimulate private investment and job creation

espite a better-than-expected rebound from the recession caused by the Covid-19 pandemic, Montenegro is now facing a new array of economic challenges. Indeed, Montenegro’s economy rebounded sharply in 2021, with its growth of 12.4% marking the highest rate among the six Western Balkan countries. However, the outbreak of war in Ukraine and the post-pandemic consequences of global trade have significantly worsened the outlook for Montenegro in 2022, reducing the growth rate to 3.6% from an estimated 5.9% before Russia’s intervention, according to the latest prognosis of the International Monetary Fund and the Wold Bank. Tourism is expected to be hit strongly, which will in turn slow exports, private consumption and employment recovery. World Bank Country Manager for Bosnia-Herzegovina and Montenegro Christopher Sheldon warned recently that Montenegro must accelerate its structural reforms, including pension reforms, and be fiscally prudent if it wants to mitigate increasing risks of the Ukraine war on Montenegro’s service-based economy. In its latest Progress Report on Montenegro, the European Commission stressed the importance of maintaining macroeconomic stability, noting that rapidly rising public debt and high fiscal deficits, together with high external imbalances and high unemployment, are particularly concerning. Moreover, the combined effects of large-scale public infrastructure investments and several new expensive social spending programmes were said to challenge fiscal sustainability. Considering that the expected prolonged war in Ukraine could trigger further disruptions to global trade and energy and food

6 | MONTENEGRO BUSINESS SECTOR 2022

prices, fiscal stability and debt sustainability are becoming a major focus of action for many governments, including Montenegro’s. Indeed, in the limited fiscal space, it will prove very difficult for the government to introduce additional policies to support companies and citizen in times of slowed exports, dwindling private consumption and endangered employment recovery. Furthermore, this would be particularly hard for an economy that relies heavily on capital inflows from abroad to stimulate domestic growth. Luckily, the Montenegrin government has expressed its commitment to structural reforms aimed at boosting productivity,

The Montenegrin government has expressed its commitment to structural reforms aimed at boosting productivity, increasing competition, investing in human capital and strengthening governance increasing competition, investing in human capital and strengthening governance. Measures to reduce business regulatory costs, increase market competition, accelerate pension reforms, support labour market participation and strengthen the independence of public institutions are seen as additional measures supporting growth in an uncertain environment. Despite political changes, consecutive Montenegrin governments have displayed dedication to fiscally prudent policies. That is even more important today, when the risks of the Ukraine war for the service-based economies can be particularly high.

MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

We Must Nurture

THE STRENGTHS GORAN ĐUROVIĆ

MONTENEGRIN MINISTER OF ECONOMIC DEVELOPMENT AND TOURISM

Recognised as an ecological country with great material and intangible cultural wealth, Montenegro represents a world brand that must be represented adequately, promoted strongly and validated sustainably

ollowing the good post-Covid recovery of the economies of our part of the world, particularly in Montenegro, came the conflict in Ukraine, which has also had a significant impact on the world economy. That’s precisely why we began our interview with Montenegrin Minister of Economic Development and Tourism Goran Đurović by asking him about the impact of these trends on Montenegro’s economy. “The Montenegrin economy began its recovery in 2021. Although the collapse of tourism was the main reason for the Covid19-fuelled recession that the country experienced in 2020, it was also tourism that proved to be the driving force behind the revival of 2021. We now have a new world crisis caused by the war in Ukraine. These tough junctures for the globally sustainable system have also spilled over onto Montenegro, which – as a small country with an open economy that’s dependent on import – is feeling the negative consequences. With the right decisions, I’m completely certain that the series of extreme situations in the world economy will only have a short-term impact on Montenegro,” says our interlocutor, before adding that economic development is one of the two key pillars for the new government. “This government will initiate new reforms and maintain and reinforce ongoing economic reform processes that have the aim of improving the quality of life of all citizens and the investment climate, with which foreign direct investment in Montenegro will increase,” says Minister Đurović. “We are very optimistic when it comes to the upcoming summer tourist season. We can expect the complete recovery of tourism this

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year, and the level of revenue projected in the 2022 budget. It is important to note that record levels were achieved during the winter tourism season and, if we judge according to the pre-season, we can estimate that the period ahead will provide a dose of security to our economic and financial stability.” ■ What kind of support can the companies in Montenegro that are the most exposed to the risks of global inflation, as well as disruptions to the energy market and supply chains, count on receiving from your ministry?

- I don’t believe that the negative impact of Russian aggression in Ukraine will greatly imperil the economy and tourism. We must be optimistic and believe that the Montenegrin economy is resilient, that the current situation will resolve itself and that we will have the normal GDP growth that we expect. When

it comes to GDP growth estimates, we don’t consider that to be the only economic variable that we must monitor, but rather as being part of a larger number of indicators that we monitor with the aim of gaining a broader overview of the bigger picture of the Montenegrin economy. A developed economy reflects a stable and developed country, and a highly developed sector of micro, small and medium-sized enterprises, which comprises a large percentage of Montenegro’s total economic activity. Our task is to provide these companies with a transparent and predictable environment for doing business and ensure their participation in the adoption of policies and regulations, but also to provide specific forms of support. During the previous period, through three support packages for the economy, support worth over five million euros was provided for business start-ups, equipment procurement, expanding operations and consulting, as well

IMAGE

CRISIS

Montenegro needs a new image as a green and sustainable tourist destination that’s able to offer its visitors experiences that differ from those they’ve had before, as well as a diversified tourist product

I don’t believe that the negative impact of Russian aggression in Ukraine will greatly imperil the economy and tourism

as for hiring new employees. The aim is to increase financial, technical and legislative support each year, in order for our economy to become even stronger and more resilient, but also more competitive. SMEs are hugely important, and that’s not only from the aspect of them as mere generators of economic growth, but also due the fact that their development creates an increased need to employee more citizens and develop other value chains. Aware of the fact that entrepreneurs require new methods and sources of financing, the state raised the issue of a Credit Guarantee Fund, which is now in the final stage of being established. Funds from the CGF are intended for enterprises or entrepreneurs with limited access to finance. Thus, apart from micro company and SME sector, which represents the dominant segment of the Montenegrin economy, this funding is also intended for special groups, such as companies that are majority-owned by women, independent farmers, tourism enterprises, IT and renewable energy companies, and many others.

new value in our country. We must devote much more attention to micro companies and SMEs, as they represent the backbone of our economic system, which is itself burdened by various charges, fees and financial contributions that are often unnecessary. Foreign direct investments have great significance for Montenegro, as we are a country that’s rich in huge potential that’s unexploited to a significant extent. However,

OPTIMISM Record levels were achieved during the winter tourism season and we can estimate that the period ahead will provide a dose of security to our economic and financial stability - To the satisfaction of us all, 2021 represented a year of recovery for Montenegrin tourism. Unfortunately, the world has been hit by a new crisis prompted by events in Ukraine, but, in some way, we’ve still developed a level of resilience that will help us ensure that this summer’s tourist season is also better than the previous one. Montenegro needs a new image as a green and sustainable tourist destination that’s able

■ What do you consider the ministry’s most important priorities when it comes to creating a favourable climate for investment and entrepreneurship?

- The priorities of the work of this Government are European integration and sustainable economic development. Montenegro needs an open path to Europe, a smooth integration process, rule of law, the combatting of the grey economy and corruption, an improved standard of living and the creation of a society in which one has confidence and a sense of security in the institutions of the system. Each further stride we take in these directions actually represents the main driver and incentive for enticing new investments. Our aim is to create a favourable climate for entrepreneurship and a predictable business environment, thereby laying the foundations for future generations who should choose to remain in Montenegro instead of leaving, as is the case now. As such, we will pay special attention to providing strong support to all enterprises and entrepreneurs that create

Montenegro is resolute when it comes to accelerating its European integration and achieving EU membership and we expect objective recognition of the efforts we’re exerting in this process we must understand that, alongside foreign investments, domestic investments are also very important to us, which we must use certain measures to stimulate, to further and improve business operations. We also plan to develop Montenegro further in the areas of agriculture, green energy and infrastructure, while the tourism development potential, in both the south and north of the country, is infinite. ■ One of the great unknowns is the tourism season and the correct forming of pricing, given the inevitable absence of Russian tourists this summer. What are your predictions and expectations?

to offer its visitors experiences that differ from those they’ve had before, a diversified tourist product, new experiences that are based primarily on active tourism, presenting the potential of the northern region, which will ultimately also result in tourists returning or extending their stay post-season. While working on preparations for the season, we focused our attention on opening new markets and strengthening existing ones that have huge potential. The closure of the airspace of the Russian Federation, Belarus and Ukraine is resulting in aviation routes shifting to a great extent, hindering access to certain destinations, such as those in the countries of the Middle East and Southeast Asia. This will actually have the MONTENEGRO BUSINESS SECTOR 2022

impact that Europeans will focus on Europe, the countries of the Mediterranean, Montenegro. Here I’m primarily thinking of the countries of Western, Central and Northern Europe, with special emphasis on Scandinavia, France and Germany, but also Israel, Kazakhstan, Saudi Arabia and many others. Furthermore, we’re becoming an increasingly attractive destination for tourists from the Middle East, and we implemented a significant promotion of our potential at the recently concluded World Expo 2020 Dubai, which had 24 million visitors over the course of six months. Montenegro also tops the list of the most desirable destinations for people in the Benelux countries, particularly Luxembourg, and it’s been announced that increased numbers of tourists will be coming from Kazakhstan, as a market that opened last year. Saudi Arabian low-cost airline Flynas is establishing flights from Riyadh to Tivat, and negotiations to date suggest that increasing interest will lead to the scheduling of new flight rotations, which is almost a certainty given this market’s size and importance. Following two years of great expectations and enthusiasm, restrictions on sea cruises that were introduced in response to the Covid-19 pandemic have now been eased. The latest news is that Montenegro has also been included on the EU’s white list of “third countries” for cruising. Testifying to the importance of the lifting of restrictions on Montenegro is the fact that a total of 66 large cruisers and more passengers have sailed into the Port of Kotor since the start of the year than during the whole of 2021. Given everything already mentioned, but also announcements, the state of reservations and data related to tourist numbers in the preseason period, we can be very satisfied and can expect that we will this year generate revenue of between 90% and 100% of the total earned in the record year of 2019, which means a figure of around a billion euros. ■ Existing investors remained faithful to their investments in Montenegro during the pandemic. When it comes to tourism, what are your expectations of upcoming investments? What kinds of trends do you expect and in which segments do you see the highest investments?

- Sustainable development is a concept that’s mentioned today in all spheres of society, and thus also in tourism. Tourism has recorded continuous growth over the last few years, and 10 | MONTENEGRO BUSINESS SECTOR 2022

thus become one of the world’s fastest growing industries. Sustainable tourism represents one of the key pillars of Montenegro’s development. In our further actions and projects, we will always make our starting point the pure importance of the tourism product to our overall advancement, taking care that we assign the proper value to resources in a sustainable, environmentally-friendly and green way, thus protecting the natural environment. Montenegro is recognised as a competitive tourist destination, which opens new markets year after year, attracts ever more tourists and increases the profitability of the tourism industry. It is precisely for these reasons that

We can expect the complete recovery of tourism this year, and the level of revenue projected in the 2022 budget… We see huge potential for the successful realisation of the summer tourist season – as has been the case to date – in the countries of the region, especially Serbia we see a large number of investors interested in investing in Montenegro, or in the Montenegrin tourist offer. We also have the aim of increasing the number of interested investors by creating a climate convenient for investment, particularly when it comes to the tourism offer of the north of the country, with which we would reduce regional disparity in tourism. To ensure the higher quality development of the tourism product of the North, it is essential to invest in adequate road infrastructure that will connect northern

Montenegro with the countries of the region, and thus numerous EU transport corridors. Although Montenegro’s coastal region has already affirmed our country as a recognisable destination, we will continue attracting renowned brands. Ada Bojana, Velika plaža, Bar, Kotor, Luštica and many other gems of our coastline create the space for the Montenegrin tourist offer to become even more attractive. ■ Air Montenegro recently introduced new commercial flights from Tivat and Podgorica to Serbia. How many tourists from the region do you expect?

- We see huge potential for the successful realisation of the summer tourist season – as has been the case to date – in the countries of the region, especially Serbia. The National Tourism Organisation of Montenegro presented our offer at the recent 43rd International Tourism Fair, IFT 2022, in Belgrade, which represents one of the most important tourism industry events in this part of Europe. According to data of MONSTAT, the Statistical Office of Montenegro, the number of tourists coming from Serbia last year totalled approximately 430,000, and they accounted for around 27% of the total number of tourists, with more than three million overnight stays, which is around 33% of the total number of overnight stays. Considering the muchimproved situation with the Covid-19 virus this year, and increased aviation connectivity, we expect to record better results this year compared to last year. ■ The Podgorica-Kolašin Highway is set for completion this year. What does this roadway mean for flows of goods and people to Montenegro?

- The priority section of the SmokovacMateševo Highway will be opened this year, which will impact on an improved summer tourism season when it comes to tourists from the region, by relieving certain routes, but will also create a kind of comfortable journey for all those opting to travel to the Montenegrin coast in this way. In the context of the market and goods flows, improving infrastructure is certainly something that contributes to the overall development of the country, along with everything we do on the internal front with the aim of creating the best possible environment on the market. In order for us to continue the kind of economic growth that we achieved during 2021, it’s important for

us to create a single elaborate system, which will encompass infrastructure, the legislative framework, harmonisation with EU standards, the regulating of the internal market, the creation of certain breaks/benefits etc. ■ How important to you is the “Open Balkan” initiative that promotes open borders in the Western Balkans?

- Cooperation between Western Balkan countries, particularly in the field of economic integration, is very important to Montenegro and contributes to us better presenting ourselves to the European market. In this way, we can consider the creation of a common offer, strengthening capacities in areas where we’re already competitive, especially by taking into account the enhancing of opportunities on the internal front when it comes to industry, innovations, IT technology etc. In that sense, a common regional market allowing the free movement of goods, services, capital and people would contribute to the further economic development of Montenegro, while at the same time preparing us for what’s to follow when we become a full member of the EU. The abolishing of certain barriers to regional investment offers leads to geo-

graphically diversified operations and the better distribution of resources within the scope of that common market, with which we would create new value when appearing on the international market. Montenegro is also in the process of reforming bilateral investment agreements and defining a new model that will strike a balance between the

accelerating its European integration and achieving EU membership, and we don’t expect a privileged position in light of that, but rather objective recognition of the efforts we’re exerting in this process. Moreover, Montenegro will – with its responsible approach to regional policy – be a reliable and responsible partner in the region, and one that’s fully committed to

Montenegro will – with its responsible approach to regional policy – be a reliable and responsible partner in the region, and one that’s fully committed to political dialogue and the further development of regional relations in all areas interests of the state and protecting the rights of investors, which is very important for all projects that will be implemented. ■ During these tough moments for Europe, we’ve seen the story of the region's path to Europe intensified once again. From the perspective of your ministry, what do you see as the main directions of action towards developing the Montenegrin economy as part of the European Economic Area?

- Montenegro is resolute when it comes to

political dialogue and the further development of regional relations in all areas. What’s most important is that Montenegro, as part of the European Economic Area, will also be part of the European Union's internal market. All free movement, which implies – among other things – the freedom of movement of goods, services, people and capital, then the possibility of studying or working abroad without a work or residence permit, customs restrictions or other barriers to export etc., is good for Montenegro and its economic and tourism prosperity, and for the well-being of our citizens.

MONTENEGRO, MORE THAN AN INVESTMENT THE MONTENEGRIN INVESTMENT AGENCY works DIRECTLY with global investors to UNLOCK INVESTMENT OPPORTUNITIES and facilitate expansion in Montenegro. We bring industry, community and government partners together to offer seamless services that make it easy for an investor to grow their business in Montenegro. We offer GUIDANCE to investors from the outset, throughout the investment process and following its completion, while our AFTERCARE policy is concentrated on retaining investors and fostering re-investment, thereby generating new investments in a costeffective manner. Our job is to be at the service of all potential investors and our specialist investor advisors have the tools you need to expand or establish your operations in Montenegro. Contact us to start your journey. www.mia.gov.me | mia@mia.gov.me | +382 20 22 00 30 MONTENEGRO BUSINESS SECTOR 2022 | 11 linkedIN: company/montenegrin-investment-agency | Fb: /MontenegrinInvestmentAgency

INTERVIEW

Every Crisis

ACCENTUATES RISKS RADOJE ŽUGIĆ GOVERNOR OF THE CENTRAL BANK OF MONTENEGRO

The negative impact of the war and pandemic will influence the overall macroeconomic situation, growing inflation and the sustainability of the country’s public debt

he war in Ukraine can’t bring anyone anything good and will have a negative impact on many sectors, but also on employment levels, inflation and citizens’ standard of living in Montenegro - says Central Bank of Montenegro Governor Radoje Žugić. In this context, the risks confronting the country are accentuated. However, the Montenegrin banking sector has performed excellently to date, with a low percentage of non-performing loans.

■ How do you see the possible effects of the reform envisaged by the “Europe Now” programme from today’s perspective, when war in Ukraine has led to us entering a new phase of global market instability? - The Central Bank welcomed some of this programme's goals, first and foremost 12 | MONTENEGRO BUSINESS SECTOR 2022

reducing the wage burden and improving economic standards, particularly for the poorest segments of the population. However, prior to the implementing of this programme, we highlighted certain risks associated with it, especially those that could threaten fiscal stability. Given the fact that the parliament has adopted measures to reduce revenue and increase expenditure, but hasn't adopted the measures to increase revenue that were proposed initially, the Central Bank of Montenegro shares the IMF's opinion that this programme should be implemented gradually, in carefully determined phases, with the aim of eliminating the risk of the rise of unemployment and the informal economy that would lead to increased inflationary pressures and failure to achieve planned revenues.

■ How can this situation, which sees us facing energy price disruption, inflation, the collapse of production chains and uncertainty linked to the upcoming tourist season, reflect on budget revenues and economic growth in Montenegro?

- Any growth during this year will certainly be exposed to rising inflationary pressures, which will have a negative impact on consumer spending. Montenegro has been hit by inflationary pressures following higher energy prices and food costs, as well as the country's high dependence on imports. Poor results for the tourism sector could materialise as a direct consequence of the war, due to expected reductions in the number of tourists arriving from Russia and Ukraine, who accounted for almost a quarter of all overnight stays of foreign tourists in

RISKS

CHALLENGES

STABILITY

The Russian-Ukrainian war could impact negatively on the influx of tourists and investments, considering that Russia was the largest foreign investor in Montenegro during the previous year

Although public debt has a declining trend in terms of percentages, its high level in absolute terms is a concern. This is thus the most significant, highest-ranking systemic risk

The banking sector is stable, highly liquid and adequately capitalised. No negative impact of inflation on Montenegro’s banking market has been recorded to date

way. Numerous factors will determine whether these planned investments will be realised, and under which dynamics.

■ How will this situation impact

The risks that were analysed in this study are divided into short-term and long-term macroeconomic risks, risks stemming from the banking system, fiscal risks, inflationary risks, external risks and others. I consider the key challenges as being those linked to the fiscal sphere, and particularly further fluctuations in public debt. The high deficit at year’s end 2020 brought with it a need for additional borrowing, which – coupled with significant GDP declines – caused gross public debt to increase to 4.4 billion euros or 105.3% of GDP, while gross government debt totalled 103.5% of GDP. Estimated GDP growth in 2021 resulted in reducing the share of public debt in GDP. As such, Montenegro’s gross public debt at year’s end 2021 amounted to 4.2 billion euros or 84.7% of GDP, while gross government debt totalled 83.3% of GDP.

on the continued financing of major infrastructure projects?

■ What’s the situation like in the

Montenegro. The decline in this sector, In the case that no replacement tourists from other countries can be found, this sector's decline will lead to a reduction in budget revenues and additional reductions in consumer spending. However, with the waning of the pandemic we can expect the revitalising of the Western tourist market, which could compensate for the decline from the Russian and Ukrainian markets to some extent. When it comes to budget revenues, it is clear that falling economic activity, as well as all other difficulties mentioned, lead to a worsening of the existing budget imbalance, although paradoxically, inflation in the first quarter “favoured” the growth of budget revenues.

- A high level of uncertainty, as a result of the Russian-Ukrainian war and disturbances to international trade, can generally weaken investor confidence and thus create an investment slowdown. With the economic reform program for the 2022-2024 period, planned investments in transport and energy infrastructure projects are worth approximately 172 million euros for the current year, with plans for 75% of that amount to be financed from public sources and 25% from private funds. It is obvious this isn’t an excessively high level of investment, as was the case during the years of the intensive construction of highways, and as such I think that, despite all the challenges, this goal isn’t unattainable, or at least not for the most part. According to the Economic Reform Programme, a new large investment cycle is expected to be launched in the 2023-2024 period, with plans including, among other things, construction of the second section of the Bar-Boljare High-

■ What would you recommend to the Government when it comes to conducting economic policy in 2022?

Montenegrin banking sector and under which circumstances could it maintain such a level?

Expectations for this year suggested economic growth exceeding six per cent, but at the Central Bank we now have several different scenarios showing that the growth rate could range between 3.2% and 4.6%, depending on exposure to geopolitical and other risks - Considering that compiling economic policy recommendations for the Government is not an obligation of the Central Bank, but rather a possibility envisaged by the law, late last year we prepared this document in a slightly different form, in the form of analysis of the most important macroeconomic risks. This document identifies the risks confronting Montenegro. It has been recommended that the government carefully monitor the risks identified and take preventative measures to avoid or minimise their possible consequences.

- The banking sector is stable, highly liquid and adequately capitalised. In February 2022, all key balance sheet items had recorded growth compared to the same period of last year. The banking system is characterised by its high liquidity. Specifically, liquid assets are at a high level and totalled 1,450 million euros at the end of February 2022, which is up 34.6% on the same month of 2021. Banks’ deposit potential is also at a high level, with total deposits at the end of February amounting to 4,292.2 million euros, and growth of 25.6% in the MONTENEGRO BUSINESS SECTOR 2022

comparative one-year period. The trend of falling interest rates on both lending and deposits continued. The Central Bank uses all available supervisory tools to pay special attention to the quality of banks’ assets. Nonperforming loans represented 6.69% of all loans at the end of February and have been recording monthly declines of 0.18 percentage points. NPLs were up 0.99 percentage points at the annual level. The aggregate solvency ratio at year’s end 2021 stood at 18.5%, significantly higher than the stipulated minimum (10%). The Central Bank of Montenegro conducts daily monitoring of deposits at the

■ How is inflation reflecting on Montenegro’s banking market? What are your expectations when it comes to the costs and dynamics of approving both corporate and retail loans?

- No negative inflationary impact on the Montenegrin banking market has been recorded for now. Specifically, all risk indicators are moderate, with interest rates having recorded slight falls during 2021 and 2022, while lending activity remains positive. Although banks are cautious when it comes to lending, they are providing support to clients. This led to total loans having grown annually by approximately

The preserved stability of the system, positive trends and strengthened supervisory activity contribute to our expectation that the banking system will continue to withstand potential shocks and maintain a good performance level of individual banks and the system as a whole, with an emphasis on deposits made by non-residents from Ukraine and the Russian Federation since the outbreak of the war in Ukraine. Data provided by banks on a daily basis show that total deposits at the level of the system have grown since the war began. Excluding escrow accounts, total deposits of non-residents from the Russian Federation represent just 2.7% of total deposits at the level of the system, making it clear that even the complete withdrawal of these clients’ deposits couldn’t jeopardise liquidity at the level of the system. 14 | MONTENEGRO BUSINESS SECTOR 2022

220 million euros by February 2022, or loans having increased by 6.9% compared to February 2021, with corporate loans growing by 5.7% and retail loans by 3.7%. ■ How far have banks in Montenegro progressed on digitalisation and the use of artificial intelligence? - The majority of banks operating on our market are focused on the automating of their internal processes, recognising the various benefits brought by digital transformation, both for the organisation itself and for customers. Apart from the automating of internal processes, banks

are investing the most in, and relying mostly on, payment innovations (digital wallets, QR codes) and chatbot and big data analytics, while there is still no use of artificial intelligence on our market. ■ When could we expect Montenegro to harmonise its regulations with the standards of SEPA (Single Euro Payments Area)?

- The Central Bank of Montenegro has harmonised key regulatory requirements that measure Montenegro’s preparedness to join SEPA. It was back in March 2020 that the Central Bank Council adopted the working version of the draft law on amendments to the Law on Payment Operations, which fully incorporates Directive (EU) 2015/2366 on payment services in the internal market, the so-called PSD2 directive. The Government of Montenegro submitted its Proposed Law on Amendments to the Law on Payment Operations to the Parliament of Montenegro for adoption in December 2021. With the adoption of this law, Montenegro’s regulatory framework governing payment transactions will be fully harmonised with the Acquis communautaire in this area. With the aim of aligning the country with secondary sources of European Union law in the field of payment transactions, the CBCG prepared – and the Parliament of Montenegro passed in December 2021 – the Law on Comparability of Fees Related to Consumer Payment Accounts, Payment Accounts Switching and Payment Accounts With Basic Features and the Law on Interchange Fees and Separate Business Rules Concerning Payment Cards, both of which are fully aligned with the relevant EU directives. In order to ensure the full harmonisation of Montenegro’s regulatory framework with the requirements of SEPA, three more regulations need to be transposed. The CBCG has requested technical assistance from the central banks of EU member states in transposing these regulations, with the aim of adopting them by the end of 2022. The CBCG has proposed, and strongly supports, the concept of networking through the European Central Bank's Instant Payment System (TIPS). This project is planned for completion in 2024.

STATEMENT

Solidarity Is Essential In Overcoming

THE CHALLENGES WE FACE social security systems. The administration’s focus in the coming period should remain on business-centric reforms, in particular digitalisation, which - if successful – could well shrink the informality present in the economy. In order to address these structural challenges and implement the Economic and Investment Plan for the Western Balkans effectively, it would be crucial to exert further efforts aimed at tackling corruption, improving the rule of law, enhancing transparency and strengthening institutions and social dialogue. The EU responded to Russia’s unprecedented military attack against Ukraine by adopting comprehensive packages of restrictive sanctions designed to cripple the Kremlin’s ability to finance the war, impose clear economic and political costs on Russia’s political elite responsible for the invasion, and diminish the country’s economic base. Through the latest package of sanctions, which envisages the phasing out of Russian supplies of oil to the EU, we are trying to maximise pressure

AMBASSADOR OANA CRISTINA POPA HEAD OF THE EU DELEGATION TO MONTENEGRO

The EU appreciates the decision of the Montenegrin authorities to join the EU sanctions against Russia and commends Montenegrin citizens and private companies for hosting and supporting around 7,000 Ukrainian refugees in the country

e are indeed living in challenging times. While the impact of the Covid-19 pandemic continues to linger, geopolitical tensions have intensified dramatically across the European continent over the last two months. Two years have already passed since the first wave of the pandemic hit the world economy, causing economic contraction across the EU and in the enlargement region. The disruptive impact of the Covid crisis started to subside in 2021 and economic activity rebounded in both the EU and the Western Balkans, with an optimistic outlook for 2022. However, since February 2022, the Russian war of aggression against Ukraine has deteriorated the economic outlook across the entire continent. The economic fallout of the war against Ukraine will impact negatively on Western Balkan economies through various transmission channels, through inter alia higher energy and food prices and decelerating trade and investment. In the case of Montenegro, the

The EU’s economy must, and will, remain strong enough to be able to continue providing massive support to Ukraine, but also other countries in the enlargement process ongoing crisis will also have a certain impact on the tourism sector, given that tourists from Russia and Ukraine account for 20% of total arrivals. While the Montenegrin administration needs to ensure a timely response to those downside risks, the implementation of structural reform should regain momentum with a view to fostering a sustainable recovery in the medium-term, in particular by fostering the digital and green transitions. The regulatory and institutional environment is a challenge that hampers private sector development and competition. Widespread informality undermines competition and hinders the efficient allocation of state and private resources, while reducing tax revenues and the funding of

on Russia while at the same time minimising collateral damage to us and our partners around the globe. The EU’s economy must, and will, remain strong enough to be able to continue providing massive support to Ukraine, but also other countries in the enlargement process. It is also important to stand together during such challenging moments. The EU appreciates the decision of the Montenegrin authorities to join the EU sanctions against Russia and commends Montenegrin citizens and private companies for hosting and supporting around 7,000 Ukrainian refugees in the country. EU cooperation and solidarity has been essential in overcoming many previous crises and I’m sure it will be the same this time as well! MONTENEGRO BUSINESS SECTOR 2022

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MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

No Easy ANSWERS CHRISTOPHER SHELDON WORLD BANK COUNTRY MANAGER FOR BOSNIA-HERZEGOVINA AND MONTENEGRO

Following its strong recovery in 2021, the Montenegrin economy is again facing headwinds that are coming both directly, like effects of the war in Ukraine on tourism, and indirectly, through the broader shock to business and investment confidence among Montenegro’s main trading partners. As a result, well-considered policies must be implemented

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CONSTRAINTS

SUPPORT

With fiscal space limited, Montenegro must carefully weigh the costs and benefits of the policies it applies in response to higher prices

The World Bank stands ready to support the government of Montenegro by providing technical, international best practice expertise in designing and implementing critical structural reforms

ontenegro is still recovering from the pandemic, but is facing renewed headwinds. While the economy recovered strongly in 2021, growing at a rate of 12.4%, it still remains below the 2019 level and is now facing new challenges - says Christopher Sheldon, World Bank Country Manager for Bosnia-Herzegovina and Montenegro. The outbreak of the war in Ukraine, coupled with associated developments, worsens the outlook for Montenegro’s economy, which we now expect to grow by 3.6% in 2022, down from an estimated 5.9% prior to the start of the war. “The main direct transmission channel of the war to Montenegro’s economy is tourism, while indirect effects come from the broader shock to business and investment confidence across Europe and the effect of the crisis on Montenegro’s main trading partners”, notes our interlocutor. Expected tourism declines due to the war are expected to slow exports and private consumption, which is still projected to remain strong thanks to the positive effects of higher disposable incomes and the recovery of employment levels. Despite significant improvements in 2021, public debt remains at high levels and calls for strong fiscal and debt management, particularly with regard to the expected tightening of financing conditions.

These include increases in excise duties on tobacco, alcohol and sugary beverages; and the introduction of excise duties on sugary products and single-use plastic. The Parliament also maintained the reduced VAT rate of seven per cent for the hospitality industry, which was introduced as a crisis mitigation measure. Failure to adopt compensating revenue measures is

CONCERNS Tourism requires special attention because its growth is more vulnerable to environmental degradation and climate change

ment’s ability to respond to price increases without being able to use central bank measures as part of its response to rising inflation?

- The cost of living is on the rise around the world, as major global economies face the highest inflation in decades. These increases have been led by post-COVID supply chain disruptions coupled with

■ Under the new circumstances, how does the “Europe Now” reform programme fit into the growth agenda?

- This programme has the potential to increase formal employment and economic growth and reduce inequalities over the medium term, especially if complemented by additional structural reforms. However, it also poses significant fiscal risks. The Parliament rejected several of the programme’s measures aimed at offsetting the loss in revenue resulting from the abolished health contributions.

The World Bank works continuously with the authorities to support policies that can improve the living standards of Montenegrins, especially for the poor and vulnerable likely to result in a wider-than-planned fiscal deficit in 2022, with possible adverse consequences for the following years, and consequently on public debt. ■ How could current inflation trends impact the Montenegrin govern-

rising demand, and they are being further exacerbated by the impact of the Ukraine war on the global economy through higher commodity prices, particularly of food and energy. In the U.S., inflation is hovering near a 40-year high and the U.S. Federal Reserve has already reacted by MONTENEGRO BUSINESS SECTOR 2022

increasing interest rates. Inflation in the euro zone has hit a record high for the sixth consecutive month, reaching 7.5% in April, and the European Central Bank is likely to increase rates during summer. As you rightly pointed out, Montenegro uses the euro as its currency, so it doesn’t have independent monetary policy instruments and is thus greatly affected by the ability of the European Central Bank’s policy reactions to tame inflation. In the absence of its own monetary policy, Montenegro relies on fiscal policy and structural reforms to maintain flexibility, macroeconomic stability and the ability to respond to shocks, including inflationary shocks. However, with limited fiscal space, Montenegro must carefully weigh the costs and benefits of the policies it applies in response to higher prices. ■ How, then, can fiscal policy alleviate the negative effects of inflation and ensure macroeconomic stability?

- Global inflationary pressures are accelerating domestic inflation – in April, Montenegro’s inflation reached 11.2%, driven by rising prices of food, beverages and transportation. And while price rises hit everyone, the lowest-earning and poorest households are particularly hard hit by the rise in prices of food, petrol and other essentials. As such, policy measures to alleviate the effects should target the most vulnerable. However, real disposable income has largely been preserved through an increase in net wages thanks to the Europe Now reform. The average net monthly wage in March reached €704, marking an increase of 22 per cent year-on-year in real terms. Montenegro also adopted other fiscal policy measures to combat the negative impacts of the crisis: it reduced excise duties on petrol, introduced a zero VAT rate on flour and sunflower oil, and adopted a law on limiting the prices of products deemed essential to human life and health, which provides the government with the legal framework to act promptly in the case of emergency. Still, the fiscal space is limited and policy measures should be timebound and target the most vulnerable. 20 | MONTENEGRO BUSINESS SECTOR 2022

Montenegro’s major comparative advantage – tourism – requires that the country accelerates its green transition, improves waste management and invests in green infrastructure ■ To what extent has the government been able to adapt to challenges in the tourism sector?

- While tourism was the main culprit for the economic downturn of 2020, it was also the main driver behind the economic revival of 2021. Reviving

tourism, exports and private consumption led to growth of 12.4% in 2021, with tourism revenues reaching 70 per cent of their 2019 level, up from just 13 per cent in 2020. However, as I have already mentioned, the outbreak of the war in Ukraine and associated developments

have significantly worsened the outlook for Montenegro, primarily through tourism – given that tourists from Russia, Ukraine and Belarus account for almost a quarter of all overnight stays. In the current environment of high uncertainty, and in such a short period of time, it’s unlikely to expect to fully compensate for anticipated losses from these countries with tourists from other countries, and especially in such a short period of time. Nevertheless, Montenegro has intensified marketing activities directed towards other key markets, which - together with an observed surge in global tourism activity - might partially offset the negative impacts of the war. Still, current external challenges aren’t the only ones affecting tourism. Tourism requires special attention, as its growth is more vulnerable to environmental degradation and climate change―environmental degradation has polluted beaches and natural sites, thereby undermining demand for tourism, and many tourism hotspots will be hit by the effects of climate change. The forthcoming World Bank growth study of Montenegro – Country Economic Memorandum – looks at challenges facing Montenegrin tourism and provides specific recommendations to address them and to ensure a more resilient, sustainable and green tourism that will continue to power Montenegro’s growth. ■ How do you see the role of the World Bank in these new circumstances, and how that they influenced the focus of your intervention?

- The World Bank is continuously working with the authorities in support of policies that can improve the living standards of Montenegrins, especially for the poor and vulnerable. This includes ensuring macroeconomic stability and fiscal sustainability, and specific policies in many different sectors, including agriculture, environmental protection, tax administration etc. At the same time, the Bank is also providing technical expertise and assistance to improve the pension, public administration and tax systems. We are currently completing the aforementioned Country Economic

Memorandum growth study, which will be published in July and will provide recommendations for Montenegro to accelerate its growth and make it more inclusive and sustainable. As has always been the case, and particularly in challenging times like today’s, the World Bank stands ready to support the government of Montenegro by providing technical, international best practice expertise in designing and implementing critical structural reforms, including through potential development

and how the crisis can affect the green energy transition going forward. Across Europe and around the world, there are signs that, in the short and medium term, the current energy crisis might slow down green energy transition. But, at the same time, the energy crisis has boosted interest in clean energy sources and energy efficiency, as a means of diversifying the supply mix and enhancing energy security. And Montenegro has a comparative advantage precisely when it comes to clean energy from hydro, solar and wind, which

Despite significant improvements in 2021, Montenegrin public debt remains at high levels that call for strong fiscal and debt management, particularly with regard to the expected tightening of financing conditions financing operations that support ambitious reform programmes and provide financing under favourable terms. ■ How do current challenges impact long-term policies like green transition?

- In the context of the energy crisis in Europe, our 21st Western Balkans Regular Economic Report, published earlier this month, provides an assessment of the vulnerability of the Western Balkan countries, including Montenegro, to energy price shocks, measures adopted by the governments to mitigate impacts,

is also a major growing European market that can help Montenegro diversify its goods exports. Furthermore, Montenegro’s major comparative advantage – tourism – requires that the country accelerates its green transition, improves waste management and invests in green infrastructure, because the quality of its tourism offer – and its sustainability over time – will in large part depend on maintaining a pristine environment. The analysis of, and recommendations for, more resilient and sustainable growth is further discussed in the aforementioned growth study that the Bank will publish in July. MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

Montenegro Is On The

TAXI-DRONE MAP

In its business, APM fosters harmonious relations with the responsible ministry and the company’s board of directors. While focused on restructuring, we also strive to recognise potential in-house leaders who can be entrusted with the task of implementation of the European and international aviation standards at the airport level. GORAN JANDREOSKI EXECUTIVE DIRECTOR, AIRPORTS OF MONTENEGRO at the airport level. Continuous staff training has been brought to the foreground of the APM development. I am proud that on weekly basis we organize various types of job-specific training courses for the personnel throughout the organisation hierarchy ■ How far have you come with the planned international certification of both airports?

haring the stand with the pioneer countries in the urban air mobility could be of a huge significance for Montenegro and its international image. I believe the concept of a drone-taxi will be greatly welcomed, and on our part we will certainly do our best to justify the trust bestowed upon us - says director Jandreoski. ■ Have you managed to cope with all the challenges, to make use of your possibilities and realize at least some of your plans?

- Continuity is the underlying principle of my work. In the last 11 months, with the support of my team, not only have I shown consistency in achieving the targeted goals, but I have also transformed what had been plans into company success. While focused on restructuring, we also strive to recognise potential in-house leaders who can be entrusted with the task of implementation of the European and international aviation standards 22 | MONTENEGRO BUSINESS SECTOR 2022

- Although aware of the complexity and challenges of the international airport certification process, we remained undeterred and got down to business without much ado. At the moment, three aeronautical studies are being prepared for Podgorica Airport, to be submitted to the Civil Aviation Agency. Therefore, I expect certification of Podgorica Airport is just a matter of time. Tivat Airport

period last year, the season has already begun. Management and staff are focused and absolutely ready to accept the increased number of aircraft and passengers. But we are also facing some banal problems. For example, despite the fact that we have long had money to repair the roof and the cooling and heating system at Tivat airport, tenders are failing because there are no interested bidders. But I expect that my colleagues in the administration will find a good way to solve these problems. ■ When will the conditions be created for Tivat to be the third place in Europe for air taxi drones after Paris and Milan?

- At the end of last year we took the initiative of writing to Volokopter, which

Given the actual figures and the traffic, which is already greater than in the same period last year, the tourist season has already begun is an entirely different story, given it involves intervention of the Ministry of Capital Investment, Municipality, Coastal Zone Management Authority and other key stakeholders, and calls for compliance with both national regulations and international standards. ■ Are Podgorica and Tivat airports ready for more intensive air traffic and larger passenger numbers? - Given the actual numbers and the traffic, which is already greater than in the same

deals with public transport and drone taxi services, through the Ministry of Capital Investment. We offered Tivat Airport for testing and the possibility of building a space for vertical landing and take-off according to positions certified by the Civil Aviation Agency. At the moment, Volokopter is preparing to fly in Milan, Paris and Singapore. According to the latest information directly from Volokopter, they are currently focusing on Singapore, so we are on their map for the taxi-drone.

INTERVIEW

Runways Ready For Tourists From

THE WHOLE WORLD Indicators show that Airports of Montenegro will end 2022 with a better result on the year-over-year basis. Announced flights for the 2022 IATA summer season also suggest more intensive air traffic. PETAR RADULOVIĆ DEPUTY EXECUTIVE DIRECTOR, AIRPORTS OF MONTENEGRO

ithout prejudice to the importance of the regional cooperation, we have recently shifted our focus to the strengthening of our position in Europe and in the world. In this light, we have increased company’s presence at all major aviation industry events - says Mr Radulović.

tions, with no indication of any epidemic and a peaceful period in international relations. This lends added weight to the results we have achieved in the first four months of 2022, and we are confident that we will reach greater range by the end of the year. ■ You have announced new flights

■ The corona virus pandemic has had dire consequences for air traffic. How did that affect Airports of Montenegro?

- Just as we were recovering to a new normal, emerging developments on the international scene and the war in Ukraine brought another economic ‘pull on the handbrake’ around the world. However, Airports of Montenegro serve as an example that even in such a changing climate it is still possible to achieve sound results with wise strategic planning and teamwork.

During the first four months of 2022, our company served about 293,000 passengers, which is a 200% increase on the year-overyear basis, and handled almost 2,200 aircrafts, which is by 100% more compared to the same period in 2021. We are particularly proud that the 2022 figures make for more than 72 percent of the services realized in the record year of 2019, which was marked by undisturbed opera-

to Europe. How far have you come with that?

- In the next month and a half, Airports of Montenegro will connect our country with 25 foreign destinations. Tourists from all over the world will land on the runways of the Airports of Montenegro. Places from which we will welcome travellers to Podgorica include Almaty, Katowice, Milan, Luxembourg, Poznan, Yerevan, Pardubice and Tel Aviv, and to Tivat from Stuttgart, Copenhagen, Stockholm, Riyadh, Oslo, Helsinki, Geneva, Ljubljana, Prague, Banja Luka, Bratislava, Munich, Frankfurt, Kraljevo, Niš and Vilnius, of which the new destinations are Tel Aviv, Paradubice, Yerevan and Poznan at Podgorica Airport and Riyadh, Kraljevo and Prague at Tivat Airport. Podgorica airport currently connects Montenegro with 33 destinations, and Tivat with as many as 35. Airports will continue to be a key link in the development of Montenegrin tourism and industry. Airports will continue to act as a key enabler of development of tourism and economy of Montenegro. ■ When will conditions be created for night operations at Tivat Airport?

- This management is determined to put this idea into action. The condition for any talk of night landing in Tivat is international certification, and that procedure is ongoing.

Airports of Montenegro is working hard to provide documentation and verify the procedure. However, we have to say that that day is still not close because the airport has not yet been certified. This management is determined to put this idea into action. The ongoing airport certification process is a prerequisite for any consideration of feasibility of night operations at Tivat Airport. APM has invested its best efforts to produce the necessary documents and ensure the procedure validation. Nevertheless, with the airport certification still pending, the closure of this project will have to stand still for the time being. ■ What kind of cooperation have you discussed with Vršac Aviation Academy?

- Cooperation could certainly be extremely mutually beneficial. On the one hand, Airports of Montenegro can provide colleagues in Vršac with ideal conditions for pilot training in Podgorica and Tivat, and on the other hand, since our focus is on continuous education, we can benefit from the capacities offered by Aviation Academy to further develop our own human resources. MONTENEGRO BUSINESS SECTOR 2022

NEWS & CURRENT AFFAIRS

A GREAT LEAP FORWARD

ess than a month before 21st May, when it marks Independence Day, Montenegro received its 43rd government, led by Prime Minister Dr Dritan Abazović. Since he took office on 28th April, members of his cabinet have set to work with great optimism and even greater plans and ambitions, all with the aim of providing their compatriots with stability, progress and a better life.

MONTENEGRO SUPPORTS THE DECLARATION ON THE FUTURE OF THE INTERNET The United States, all EU member states and 32 non-EU countries have issued a Declaration on the Future of the Internet, which sets priorities for an open, free, global, interoperable, reliable and secure internet. The Declaration on the Future of the Internet was presented in Washington DC and attended by former Montenegrin Minister of Public Administration, Digital Society and Media Tamara Srzentić. The principles of the Declaration include obligations to protect the human rights and freedoms of all people; promoting a global internet that encourages the free flow of information; promoting inclusive and accessible connectivity so that all people benefit from the digital economy; building trust in the global digital ecosystem, including privacy protection; and protecting and strengthening multi-stakeholder access that ensures the internet benefits all. 24 | MONTENEGRO BUSINESS SECTOR 2022

DIGITALISATION IS THE WAY TO BETTER PUBLIC ADMINISTRATION “Montenegrins are ready to use digital tools and services, while a large number of companies are already feeling the benefits of existing online content. However, there is a need to accelerate the development of digital services that are simple and facilitate access to the public administration. Digital literacy is growing, and two-thirds of citizens confirm that they have skills in using the internet. At the same time, awareness of and trust in e-services are growing, with 52% of the public and 64% of companies stating that they have full confidence in the security of e-services.” This was the conclusion of research presented at a conference on the current state, experience and future of the digital transformation of the public administration in Montenegro, organised under the scope of the project E-services and Digital Infrastructure in Response to COVID-19, funded by the European Union and implemented by UNDP in cooperation with the Montenegrin Ministry of Public Administration, Digital Society and Media. This Ministry also provided 10,000 electronic ID card readers as an incentive to the digitalisation process.

MONTENEGRO BUSINESS SECTOR 2022

TRAINING ORGANISED FOR TRANSPORT POLICE Under the scope of the project Technical Assistance for Capacity Support to the Transport Sector and EU Acquis Alignment in Montenegro, the Ministry of Capital Investment, in cooperation with the Police Directorate Department of Traffic Safety, organised the new training of trasport police officers to record data on traffic accidents in accordance with the CADaS protocol. A new form of the Investigation Report was prepared, containing all the necessary data in accordance with EU requirements, with instructions on the use of the new report. Forty transport police officers were trained on the collecting of data on traffic accidents in road accident investigations. The training of 40 further officials and the implementation of the new report will enable comparability of data on traffic accidents across the EU, as well as improved analysis of the current situation and identification of road safety problems, resulting in strategic documents and improved road safety management. BETTER WORKING CONDITIONS WILL BRING SCIENTISTS BACK TO MONTENEGRO “Better living and working conditions, but also the appreciation of scientific research work, are needed to keep young scientists in Montenegro and those who have returned to their country from abroad,” said Minister of Science and Technological Development Biljana Šćepanović, speaking about the completion of works on the Science and Technology Park and the future plans of this newly formed Ministry. SPECIAL ATTENTION TO SOCIAL POLICY Minister of Labour and Social Welfare Admir Adrović met with UNDP Resident Representative in Montenegro Daniel Gašparikov to discuss social protection, the Social Welfare Information System ISSS and the so-called e-social card, the protection of persons with disabilities and genderbased violence. They agreed that the scope of this department's work is of great importance to the public, as it includes care for the most vulnerable and the fairer distribution of material benefits and social services. The Government of Montenegro intends to pay special attention to social policy, which is high on the list of priorities. UNDP Resident Representative Gašparikov stressed the UNDP's readiness to continue supporting the Ministry in implementing social protection policies. 26 | MONTENEGRO BUSINESS SECTOR 2022

MORE MONEY ALLOCATED FOR AGRICULTURE Funds allocated for the implementation of agricultural policy measures for 2022 amount to 50.9 million euros, of which allocations from the national budget are 35.9 million euros, up 33% on last year and 47% more than in 2020. Direct payments for crop production for all arable land have been increased from 220 to 250 euros/ha, with an additional 10 euros/ha for young farmers and a total commitment of 3.2 million euros. A sum of 5.5 million euros has been earmarked for direct payments for livestock production, which has enabled premiums to be increased this year. The premium per head in cattle breeding has been increased from 75 to 85 euros per head, and direct payments for the dairy sector related to on-farm processing and milk purchased by companies have increased from 25% to 33%. Premiums in pig breeding have been increased from 60 to 100 euros, and the premium per head of pregnant pure-breed heifers of known origin has increased from 50 to 150 euros. To strengthen the livestock fund, the Ministry has allocated a million euros for the purchase of highly productive pregnant heifers, where the subsidy will be 70%, and over 30% more funds have been allocated for the purchase of higher quality seed for artificial insemination. A special focus was placed on the development of roads and rural infrastructure and the procurement of machinery. STRONGER WORK ON WASTE MANAGEMENT PROJECTS Minister of Ecology, Spatial Planning and Urbanism Ana Novaković Đurović has exchanged information with the Head of the Office of the European Bank for Reconstruction and Development in Montenegro Remon Zakaria on projects to expand the Regional Water Supply System and wastewater management, but also on energy and energy efficiency projects and improving the efficiency of water supplies by replacing asbestos-cement pipes. “In the coming period, we will pay special attention to EBRD projects that can contribute to the further development of Montenegro's infrastructure in terms of waste management, because resolving open issues in this area is vital to meeting the requirements of Chapter 27 and accelerating the European integration process,” announced Minister Novaković Đurović. Zakaria pointed out to Minister Novaković that he expects more intensive cooperation, not only to complete existing projects, but also to strengthen local government capacities in order to develop and make use of the infrastructure built. MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

DR SANDRA TINAJ, GENERAL MANAGER, AND DR MILICA VUKOTIĆ, DEAN OF THE FACULTY OF INFORMATION SYSTEMS AND TECHNOLOGIES, UNIVERSITY OF DONJA GORICA

Partnership

FOR THE FUTURE Founded in 2007, the University of Donja Gorica (UDG) has evolved to become a unique entrepreneurial university with a strong vision of increasing access to high-quality education. Today, UDG offers a range of undergraduate, master’s and doctoral programmes, serving over 3,000 students

y maximising students’ exposure to a wide range of learning experiences, UDG is becoming a transformational leader in the region. The biggest new addition for the new generation will be access to the repository of Arizona State University (ASU), a leader in innovative teaching concepts.

and encourage their passion for learning. Furthermore, with life expectancy having extended for these generations, a question arises as to what should be instilled in the foundations of students’ character, their knowledge and skills, their value system, to ensure that these foundations endure that longevity.

■ Is the development of an innovative study model the right and best response to the crisis confronting classical university education?

■ The date of 30th March repre-

- Yes, of course. We created our innovative study model as a response to the crisis facing classical university education. First of all, UDG is dedicated to its students and to training them for both their professional advancement and to be responsible citizens of the globalised world. The strictest professor at our university is the professor called life, which means that we don’t teach our students about life, but rather put them in a position to learn from life, to learn by living. Unlike classical universities, which mostly function according to the A = K model (Ability = Knowledge), we are developing our A = K x i² model, where the i variable refers to the intensity of learning by living, equating to the student’s intensity of life during their studies. One knows only what one has experienced and felt. We prepare students for rapid changes and the uncertainties that we mentioned, and we invest a lot to develop the confidence of our students 28 | MONTENEGRO BUSINESS SECTOR 2022

sents an important landmark for you, because it was then that you organised the major launch of a partnership by signing a memorandum of cooperation. What can you tell us about that memorandum?

- The University of Donja Gorica announced a 20-year strategic partnership with Arizona State University, which

has been ranked the most innovative university in America by U.S. News and World Report for the last seven years consecutively and proclaimed one of the world’s most prestigious universities by The Times Higher Education publication; and with the Cintana Alliance, a global network of ambitious universities that work together to develop and scaleup high-quality academic programmes. We are so proud that our university’s delegation – comprising UDG Rector Veselin Vukotić Ph.D., UDG General Manager Dr Sandra Tinaj and UDG Dean Dr Milica Vukotić - attended the ASU-Cintana Presidents' Summit in Tempe, Arizona, from 11th to 13th May. This partnership improves the qual-

Delegation of the University of Donja Gorica (Rector Veselin Vukotić Ph.D., General Manager Dr Sandra Tinaj and Dean Dr Milica Vukotić) at the ASU-Cintana Presidents' Summit in Tempe, Arizona, from 11th to 13th May

ity of higher education significantly, as well as the opportunities that will be open to young people from across the region. Thanks to this partnership, UDG’s academic environment will welcome the world leader in innovation to the region, which will bring with it its global influence in scientific research and the best online programme for undergraduate business degrees. In the future, UDG and the Cintana Alliance will work collaboratively to expand UDG’s resources beyond Montenegro, via online degree programmes and regional learning centres throughout the region. UDG is the exclusive partner of ASU for Serbia, Croatia, BosniaHerzegovina and Montenegro. Through this partnership, UDG will offer a unique educational model providing a wide range of new academic opportunities to students, such as access to the ASU curriculum and the unique opportunity to participate in dual degree programmes, student mobility programmes, co-teaching and research exchanges. ■ UDG is among the few universities to invest heavily in general education, culture, entertainment and student travel. Is that “breadth” as important as a diploma? - All of this belongs to, and is derived from, our equation (inensity of life), without which knowledge has no value. The intensity of life aspect encompasses

all study visits, seminars, training courses, projects, research, excursions, social events, sporting activities etc., generating cultural capital that is built among young people through the various elements of activity mentioned. Based on these principles, and the essence of the A = K x i² model, one can see that the emphasis of our studies is on the essential being of the student; how they can acquire as many skills as possible during their studies, develop a better sense of responsibility and speed of decision-making, and acquire qualities that are important for thriving in the globalised world.

- UDG is known for the constant modernisation of its teaching approach and the introduction of new programmes. We achieve this through UDG’s great openness and great commitment to its own internationalisation. We achieve that through partnerships with a large number of universities and companies from around the world, as well as through international projects that also involve students, in addition to professors and associates. UDG’s programmes are oriented towards each individual student, while still providing fundamental technical

UDG is the exclusive partner of Arizona State University for Serbia, Croatia, Bosnia-Herzegovina and Montenegro Demand for our graduates is growing, but many of them start working independently thanks to having developed their entrepreneurial spirit. During their studies, students engage in a significant number of team projects and are encouraged to develop their entrepreneurial ideas, thinking in a global context. As already noted, we develop students’ awareness to be responsible citizens of a globalised world. ■ Most of your students have opportunities to work and study abroad, and many of them manage to secure employment prior to graduating. How did you achieve that?

knowhow in core areas, including IT, research, entrepreneurial and communication skills, as well as a focus on learning multiple languages. By maximising the students’ exposure to a wide range of learning experiences, UDG is becoming a transformational leader in the region. The biggest novelty for the new generation will be access to the repository of Arizona State University, a leader in innovative teaching concepts. Students will benefit from career-oriented curricula, practical experience in real-world projects and opportunities to solve some of the world’s most pressing challenges while increasing their own competitiveness on their future career paths. MONTENEGRO BUSINESS SECTOR 2022

BUSINESS

LUŠTICA BAY

A Place TO BELONG Luštica Bay is an emerging new Mediterranean town – beyond being the largest investment project in Montenegro, this destination proposes a lifestyle in itself, all encapsulated in the motto and slogan “A place to belong”

olourful stone residences with views of the most beautiful dark blue waters of the Adriatic, in the embrace of the olive groves and flamboyant flora of the Luštica peninsula, form silhouettes and outlines of the secluded Mediterranean town of Luštica Bay. The Marina Village residential collection, The Chedi five-star luxury hotel, a marina for sailing boats and yachts, four sandy beaches, unique gastronomic and shopping experiences, and lifestyle events have built Luštica Bay’s memorable identity.

IRIS RESIDENCE –SOPHISTICATED LIFE BY THE SEA The newest buildings within Luštica Bay’s Marina Village, Iris Residences, offer a vibrant lifestyle by the sea. Located at the heart of this lively destination, just a few steps from the promenade, Iris Residences are already considered as being among the most desirable Luštica Bay locations. Iris Residences offer exclusively designed living spaces, from 49 to 153 sqm, that pulsate with the rhythm of the sea. Spacious terraces and romantic balconies ennoble each unit and provide mesmerising views of the Adriatic. In addition to an exceptional living space, Iris Residences offer tenants benefits like access to swimming pools, common and green areas. Furthermore, residents can enjoy a private beach that’s just a few minutes’ walk away, representing one of the greatest privileges of living in Luštica Bay. LIFE AS IT SHOULD BE This place to belong exudes the harmony of the Mediterranean lifestyle and transforms your favourite summer destination into a new 30 | MONTENEGRO BUSINESS SECTOR 2022

“It is often challenging for me to convey my innovative ideas to people before the projects come to life. Many believe that this type of business requires courage, but I think the secret to success lies in patience. I have enough patience and perseverance to start, and then take as much time as needed to make my vision a reality,” said Samih Sawiris, founder of world renowned company Orascom Development Holding, which is developing the Luštica Bay project on the Montenegrin coast.

home. The colourful stone residences of the Marina Village, overlooking the azure waters of the open Adriatic, provide perpetual respite amplified by the perfect harmony of elegance and simplicity in an incredible natural setting. The residences of the Marina Village, the

luxurious 5-star hotel The Chedi, the marina for sailing boats and yachts, four natural sand beaches, a one-of-a-kind gastronomic and shopping experience and lifestyle events, all come together to form the striking identity of Luštica Bay and its life as it should be.

BUSINESS

NIKOLA ROVČANIN ELEKTROPRIVREDA CRNE GORE CEO

Investment Is A Key

EPCG STANDARD

EPCG’s strategic orientation is founded on the notion that harmonising with world trends represents the foundation of continued survival and development in the decades ahead. That’s why it invests in people, green energy, new technologies and capacities, the maintenance and optimal use of resources and digital transformation

PCG has taken serious strides in the energy transition process and is developing several projects that the future of the company and Montenegro’s economic stability will depend on - reveals EPCG CEO Nikola Rovčanin for CorD Magazine, before announcing some of the projects being developed. There’s been talk over recent months about “energy security”, “energy diversification”, “energy poverty”, “expensive electricity as a generator of inflation” etc. How do you view all of these issues?

- We’ve been facing a dramatic rise in electricity prices since the middle of last year, while the current geopolitical situation is causing unrest everywhere, and particularly in smaller economic systems that are highly dependent on flows emanating from the centre of events, making them unable to influence many factors. In parallel with this, very clear directives exist with regard to the obligation of each European country to direct its economy towards transitioning in the field of energy, which – viewed from an environmental perspective – is undoubtedly justified. However, implementing this process requires both time and assistance from the state,

as well as favourable international political and economic conditions. Could one say that investment is a key word for you at EPCG during this period?

- We are witnessing the fact that energy sector transformation is a global phenomenon, which left us with a very simple choice: either we expect things to sort themselves out, lulled into a false sense of security by the company’s importance to Montenegro, and thus risk the collapse of operations; or we engage available human and technical resources and create new ones to get to grips with contemporary challenges and preserve the company’s might and relevance. With this in mind, it is definitely justified to assess investment as a key reference for EPCG at this juncture. The indicators to date are very encouraging. The positive age structure of employees enables us to look to the future with optimism, and our commitment to invest in renewable energy sources certainly requires additional training in the use of modern technologies. It is our wish to position the company as a key point of Montenegro’s development, to attract new

people and repatriate some of the experts who previously left the country and built careers with serious international corporations. Your priority is to establish a synergistic relationship between energy needs and environmental requirements. What are you currently doing on that front?

- We are currently preparing to start work on the project “Solari 3000+ & 500+”, for households and businesses. The projections were that 3,000 households would enter the programme, but we ended up with 15,000 applications, which is why we’re already considering launching the “Solari 5,000+” project and, in cooperation with the state, “Solari 10,000+”, which shows the high level of awareness among citizens regarding the importance of energy transition. Our expert teams are working on the projects of WPP Gvozd, HPP Komarnica, SPP Slano, SPP Slano Dam and SPP Vrtac Dam, which should lead to us constructing new power plants after four decades of stagnation. The end result should see EPCG strengthened, not only as a company that has successfully completed the transition process, but also as a reference point for the entire Montenegrin economy. MONTENEGRO BUSINESS SECTOR 2022

32 | MONTENEGRO BUSINESS SECTOR 2022

MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

Market Demands Are The

MOST IMPORTANT GUIDE PROKOPIJE PERIĆ CEO, PLUS D.O.O.

Plus d.o.o. Podgorica is a major importer of consumer goods on the Montenegrin market. Its products span from healthy food, through cosmetics, personal care and household chemicals, to household products. According to official reports, it accounts for more than 45% of sales of imported cigarettes and is the absolute leader in the tobacco products category

he basic principles of our business are effective and efficient distribution, the synergy of international products, successful launches, excellent cooperation with retail and customer satisfaction and trust - explains Mr Perić, emphasising that its staff give the company its greatest advantage over competitors

■ Your company is a leader in successful business and knowledge, but also in the way it does business. What are the basic principles of your business? Are all these great results based on them?

- Caring for our partners and staff, stable company development and profit growth, 34 | MONTENEGRO BUSINESS SECTOR 2022

and active contribution and support to developing the community are our basic postulates. We believe that only in this way can we be sure of always moving forward. Our company is an important importer of consumer goods on the Montenegrin market. We do business in a large number of categories, from healthy food, through cosmetics and personal care products, to household chemicals and household products. The basic principles of our business are effective and efficient distribution, synergy of international products, successful launches, excellent cooperation with retail and customer satisfaction and trust. With a diverse offering, the number of customers is increasing day by day, and so we are expanding our range. Bearing in mind that Montenegro is a tourist destination, we listen to the needs of the market, both in and out of season. A great sales team, with suggestions and criticism, is an important compass for us.

- The Montenegrin market is much smaller than others in the region, but it is incomparably more complex. Both domestic consumers and tourists visiting Montenegro have very high expectations, especially in terms of the quality of the products they buy every day. Considering the geography of Montenegro, as well as the tourist season, distribution is extremely demanding, which stretches our logistics capacity. Our priority is high quality brands, including Sobranie, Winston, Una, Esse, L’Oreal, Zewa, Garnier, Libresse, Philips, Durukan, Hausbrandt, Ronnefeldt, Pago, B52 and many others that quickly gain regular and loyal consumers. I would also like to mention the category of smokeless tobacco products, where we were pioneers on the Montenegrin market with NUSO products and ISMOD devices, and relatively quickly showed great potential in this category.

■ The Montenegrin market is small,

nance and competitive advantage by your wide range of consumer goods?

but specific, among other things because it needs to meet the needs of the local population, but also tourists from all over the world. What else distinguishes it?

■ Can you explain your market domi- Our company really has by far the most diverse range of products in a large number of categories, but we are constantly working to further expand it and launch

new products. As I mentioned before, we also have a great distribution network, but I think that our staff give us the biggest advantage over the competition. We believe that the right knowledge and professional development are a sure way to improve the business system, which is why we regularly organise constant training and seminars. Such human resource management encourages dedication and job satisfaction, which enables greater productivity. By constantly developing appropriate skills and competencies, the staff can exceed not only their own goals, but also the company's. We are focused on energy, adaptability, communication, commitment to the client, precision in our work and the team spirit. We can additionally boast of an excellent vehicle fleet, 4,000m2 of modern facilities for storing and dispatchng goods, 1,500m2 of office space and a cold store of 500m2.

rival of elite clientele affect your business? Does that encourage you to focus on high quality premium products?

- The opening of luxury facilities definitely affects the arrival of a clientele that is willing to spend more, which is very important to us given the strategy of our company, which focuses on top quality products. All this requires additional efforts to understand the needs of these consumers, but we are here to listen carefully and meet the demands of the market.

Our greatest success is certainly the sale of cigarette brands, in which we are constantly growing and which has resulted in JTI becoming the company with the largest share of cigarette sales in Montenegro, with a total market share exceeding 33%. In the meantime, in cooperation with the Sarajevo Tobacco Factory, FDS, we have developed our own UNA Slims brand, which in 18 months of distribution has reached a market share of over 12%. The great FDS team, with their enormous experience and expertise, have helped us produce and create a strong and recognis-

■ Are you satisfied with the speed of development and expansion of your HORECA division?

- Thanks to our energy, knowledge, experience and suppliers, we have become a long-term strategic partner that has increased its market share and become one of the highest quality suppliers in the HORECA segment in Montenegro. We have positioned ourselves as the highest quality supplier to HORECA facilities, able to provide a fast and high-quality service and meet the different requirements of our customers, ready to quickly adapt to new trends and requirements on the HORECA market. The basis of our success in this business segment lies in good organisation, technical and logistical support, well-selected staff, excellent distribution, a system that guarantees reliable and timely servicing of all our clients on the principle of 'today for today'. We offer an essential range necessary for the functioning of hospitality facilities, an efficient distribution system, experience and knowledge, and - in coordination with our marketing team - we provide clients with many promotional activities, through tastings and promotions, to designed interactions. ■ How much does the opening of luxury tourist facilities and the ar-

Both local consumers and tourists visiting Montenegro have very high expectations, especially in terms of the quality of the products they buy every day The distribution channel for hotels and hospitality facilities for elite clientele strives to meet the requirements of our customers in the best possible way from day to day, and to offer them a full range. I think it is very important that we are able to provide a fast and high-quality service, and to adapt to new trends. ■ You have always had great ambitions and always managed to fulfil them. Can you share with us some of your short and long term plans?

- Years of work, dedication and desire have led us to our ultimate goal - of becoming an absolute leader, because our ambitions are very realistic.

able brand. Our plans are always big. One of them is to maintain our leading position, together with JTI, in the coming years and increase our market share, but also to conquer a large part of the market in the slim cigarette segment with UNA Slims and try to expand this brand to the markets of the region. This year we are boldly embarking on the distribution of beer, because we have signed a long-term agreement on business cooperation with the Banja Luka Brewery and their NEKTAR beer brand. The beer segment in Montenegro is extremely demanding and competitive, but I am convinced that we have a team of people capable of handling stiff challenges. MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

Cooperating With Government To Find

THE BEST ANSWERS TO CHALLENGES NINA DRAKIĆ PH.D., PRESIDENT OF THE CHAMBER OF ECONOMY OF MONTENEGRO

The key issues for maintaining macroeconomic stability at this juncture are inflation and the stability of public finances. Apart from that, the pandemic highlighted the problem – first identified many years earlier – of the unfavourable structure of the Montenegrin economy, forcing the country to consider diversifying the economy

r Nina Drakić, President of the Chamber of Economy of Montenegro, took on this position at a moment when global trends are very unfavourable to the economies of the countries of the region. Inflation and public finance stability, transitioning to a circular economy and digitalisation represent some of the most important topics that are being dealt with by the Chamber in an attempt to enable its members to gain appropriate working conditions and to convey to the Government the most important economic proposals for creating a favourable business climate.

■ How can the Chamber help businesspeople overcome these challenges?

- The challenges faced by the world’s population and economy over the past two years have undoubtedly led to change in models of behaviour and doing business. The abil36 | MONTENEGRO BUSINESS SECTOR 2022

ity to adapt to the new circumstances has been largely dependent on the state of the economies of each individual country during the pre-crisis period. One could say that, with us in the Western Balkans, apart from labour market disturbances and disruptions to flows of goods and services, we’ve also seen a slowdown in the dynamics of the European integration process. The Montenegrin business community displayed a certain degree of resilience and a high degree of social responsibility. Many managed to survive with the support of the Chamber, as their association engaged on working bodies tasked with shaping government measures to support the economy. As an association that’s been uniting the national economy for almost a century, the Chamber has a set of defined services that help our members raise their level of competitiveness. The Chamber and the executive

government are also natural partners, and through this framework – with the suggestions and proposals of our membership base – we work on the creating of a predictable and favourable environment for investing and doing business. Support in the digital transformation process, along with the implementation of educational activities that enable our members and their employees to harmonise their knowhow and competencies with new business trends, are part of our daily work. The members of the Chamber recognise the particular importance of activities directed towards the promoting of domestic products, with the aim of reducing the country’s dependence on imports and increasing sales of high-quality goods, primarily agricultural goods, via the tourist offer. In addition to the aforementioned, the Chamber devotes great attention to the internationalisation of the

TURNAROUND

CHALLENGES

PARTNERSHIP

Post-pandemic recovery provides a unique opportunity to direct the country towards green technologies, digitalisation and smart specialisation

With us in the Western Balkans, apart from labour market disturbances and disruptions to flows of goods and services, we’ve also seen a slowdown in the dynamics of the European integration process

The Chamber and the executive government are natural partners… We achieve good cooperation with the Government and I expect that to continue in the future

rural development are allocated through the Agrarian Budget (€50.9 million) and the IPARD programme. Apart from tangible financial support, the Government will help businesses overcome the problems of the rising production input costs that they face through its recently adopted excise policy measures (reducing excise duty on fuel) and its tax policy (reducing VAT on flour, oil and salt).

with the energy crisis, have only led to the intensifying of inflationary pressures that will impact negatively on both businesses and households. The economy is facing rising production costs and the slower implementation of investment, while rising inflation has a particularly negative impact on citizens’ living standards. That’s why we must strengthen the competitiveness of domestic producers and consider the need to form commodity reserves, in order for businesses and citizens to be able to more easily handle any future price fluctuations. The pandemic highlighted the problem – first identified many years earlier – of the unfavourable structure of the Montenegrin economy. As such, diversifying the economy is a prerequisite for strengthening and increasing the economy’s general resilience against any kind of external shock. The greatest sustainable growth potential has been recognised in the agriculture, energy, tourism and ICT sectors, as well as in turning to green ways of doing business.

economy. Through the significant number of business meetings and fair appearances that we organise throughout the year, as well as by providing opportunities offered through EU projects, we help our members establish cooperation with foreign companies. ■ How is your cooperation with the Government of Montenegro and to what extent is the government's current programme aimed at supporting companies?

- Institutional cooperation between the Government and the Chamber of Economy is reflected in the creation and nurturing of a high-quality business environment, as a prerequisite to strengthen the competitiveness of domestic companies. The Chamber participates in the preparation of draft laws and other regulations, and also proposes the adoption of programmes and measures for the Government to support the economy, as well as proposing criteria for their implementation. We achieve good cooperation with the Government and I expect that to continue in the future. The economy this year has at its disposal funds from the Programme for Improving the Competitiveness of the Economy for 2022, the implementation of which is aimed at further encouraging investment, the digital transformation of business, the transition from a linear economy model to a circular one, the introduction of international business standards, strengthening internationalisation and support for business start-ups. This programme, worth a total of 5.2 million euros, encompasses support for improving competitiveness, developing the processing industry and developing and promoting craftsmanship. Moreover, funding has been allocated – through various programmes – to improve energy efficiency, increase the use of renewable energy sources and reduce the impact of climate change and decarbonisation. Support funding for agriculture and

■ What would be your most important advice to the government when it comes to maintaining macroeconomic stability and supporting economic growth?

- The key issues for maintaining macroeconomic stability at this juncture are inflation and the stability of public finances. The crisis of the pandemic, worsened by the war in Ukraine, sparked inflation. Rising food prices on markets around the world, falling supplies of certain primary food products and raw materials, coupled

The main drivers of economic growth over the next medium-term period will be a strong tourism sector, energy, agricultural production, the processing industry and innovative activities based on accelerated digitalisation and IT sector growth

MONTENEGRO BUSINESS SECTOR 2022

Due to the tourism sector’s importance and multiplier effect on other industries, it is necessary to work on expanding and innovating the tourist offer, making it more competitive and attractive for investment, providing high quality for each individual guest. Activities should also be directed towards attracting higher numbers of tourists beyond the period of the main tourist season, as well as attracting tourists from new markets. Likewise, the digital transformation of society and increasing innovativeness of micro, small and medium-sized enterprises provide opportunities to further diversify the economy and improve the quality of its position on the international market. Adequate infrastructure is an essential precondition for the development of every economy, and there’s ample room to act in this segment. When it comes to transport infrastructure, that means continuing the construction of the Bar-Boljari highway, but the Adriatic-Ionian expressway is no less important, and is simultaneously also a bypass around major coastal cities. This will provide additional impetus to the further development of tourism and transport, and thus all other associated areas. ■ Montenegro owes its economic growth to the inflow of foreign direct investment to a large extent. How much have domestic companies become part of the story of economic growth and investment?

- Foreign investment continues to be one of the drivers of Montenegro’s economic growth and development. Inflows averaged 16.5% of GDP over the previous five years, equating to 1,117 euros per capita. Post-pandemic recovery provides a unique opportunity to direct the country towards green technologies, digitalisation and smart specialisation, which will secure stable growth and sustainable public finances. Alongside FDI, an extremely important role is also played by domestic investments, especially “green” ones, which require an efficient and transparent regulatory environment, but also an adequate tax policy for this area. ■ if we exclude current global challenges, what are the most important topics for the Chamber in 2022?

- The focus of our work during this year is on the internationalisation of business operations, the implementation of international projects 38 | MONTENEGRO BUSINESS SECTOR 2022

- Representing and heading an institution like the Chamber of Economy is both an honour and a great responsibility for me. The fact that I’m the first woman to head this institution makes me proud and motivates me to contribute to improving its work and position as much as possible. Various research projects and analyses on the state of gender equality show that women have a worse position than men on the labour market, especially when it comes to the availability of management functions, and particularly in the area of self-employment. Nonetheless, despite the gap between men and women in the business environment existing, it is narrowing. This is a long-term process, the success of which – apart from shifting consciousness and overcoming gender stereotypes – also requires the creation of conditions and the implementation of programmes and activities that will contribute to women’s economic empowerment. ■ You are simultaneously also the first doctor of science to hold this function and the youngest presi-

Our members are focused on the promoting of domestic products, with the aim of reducing the country’s dependence on imports and increasing sales of high-quality goods, primarily agricultural goods, via the tourist offer and education, while digitalisation and the greening of the economy have a particularly important place. The plan is to more intensively promote the economy with a special emphasis on domestic products and values. The modernisation of the Chamber’s work, which is underway, implies the improving of services, i.e., making a set of services in digital form available to the economy. Apart from improving our services and increasing the efficiency of our communication with members, we will thus also contribute to the process of digitalising the economy. ■ You are the first woman to head this most influential of business associations, which has been bringing the entire Montenegrin economy together for 94 years. Does this mean that times have changed and there are now more women among company owners and managers in Montenegro?

dent to take on the post. Could you tell us how important the topics of education and youth employment are for the Chamber, in light of the digital transition of the Montenegrin economy?

- The Chamber is an important partner in building the education system and ensuring it functions. The contribution we provide to harmonising the offer of schools with the needs of the labour market is continuous. Apart from the Chamber’s professional services, businesspeople are also directly involved in this process. Our association also devotes great attention to connecting higher education and scientific research institutions with the economy, with the aim of strengthening innovativeness and competitiveness, especially among micro companies and SMEs. We are also committed to implementing activities related to the process of lifelong learning and the economic empowerment of women and the youth.

BUSINESS

PORTO MONTENEGRO

A Life LESS ORDINARY Founded some 15 years ago by a consortium of visionary developers, Porto Montenegro is set in the spectacularly beautiful Bay of Kotor on Montenegro’s Adriatic coast. From its historic origins as a naval base, it has been transformed into an exquisite waterfront destination, with low-rise apartment buildings, tree-lined pedestrian boulevards and an array of chic boutiques, restaurants and cafes surrounding a breath-taking superyacht marina

hat began life as the best-kept secret among yachting aficionados is no longer so secret, with sophisticated travellers adding Montenegro to their list of must-see destinations. With few exceptions, they immediately fall in love with this place, seduced by its natural beauty and the warm welcome they receive. For a significant number, that love-atfirst-sight feeling has translated into a decision to buy a home in Porto Montenegro – whether as a seasonal hideaway or a permanent base – secure in the knowledge that its world-class amenities make it a sound investment, in both financial and quality-of-life terms. While some homebuyers are content to wait for the 2023 completion of the new Boka Place neighbourhood, others fulfil their urge to move immediately by buying into one of Porto Montenegro’s recently completed buildings, where a limited number of residences remain available. Set directly on the quayside, the Regent Pool Club Residences comprise two wings – Baia and Aqua. Designed in sleek, contemporary style and linked at podium level by an expansive terrace with swimming pools, these residences feature light-filled interior spaces and sweeping views of the sea or mountains. Owners have access to all services and amenities of the five-star Regent Porto Montenegro and can benefit from the hotel’s optional rental pool programme. Just a few steps back from the waterfront, the Elena Residences represent a sophisticated addition to Porto Montenegro, with wellplanned interiors featuring expansive terraces and beautiful views of the sea or mountains. Owners are offered a comprehensive menu of services, including the option of interior design and furnishing solutions, as well as access to Porto Montenegro’s well-established M Residences rental management service. As with Regent Pool Club Residences, buyers

As an added attraction for buyers, Porto Montenegro offers an exclusive staged payment plan for its residences. As a rare opportunity to own luxury real estate under incredibly convenient conditions, these payment plans and benefits are only available until 31st May 2022 also automatically receive membership in the exclusive Owners’ Club, with its dedicated lifestyle team and portfolio of special privileges. We are thrilled to this year be able to tell you more about the village’s new jewel, Boka Place: representing a rare opportunity to create an easy-going yet elegant lifestyle, become part of the vibrant and welcoming community that’s already well established in Porto Montenegro, and make a sound investment. Set for completion in 2023, this lively, top-of-the-line urban neighbourhood has been designed for year-round living, with a focus on wellbeing and fitness. It features a wide variety of residences, high-quality retail outlets, extravagant eateries, a new flagship SIRO hotel and a plethora of entertainment activities for families, couples and friends. With its distinctive

style and privileged position, Boka Place also presents an excellent investment opportunity, in terms of both capital appreciation and the option to benefit from a well-established and proven rental management programme. As an added attraction for buyers, Porto Montenegro offers an exclusive staged payment plan for its residences. As a rare opportunity to own luxury real estate under incredibly convenient conditions, these payment plans and benefits are only available until 31st May 2022. It’s very easy to fall under the Bay of Kotor’s spell: it has a special, indefinable magic that extends beyond its spectacular natural surroundings – a serenity that’s increasingly valuable in today’s world, yet ever harder to find. And that makes it hard to resist the prospect of making a home in Porto Montenegro. MONTENEGRO BUSINESS SECTOR 2022

INTERVIEW

Good Partner To The

NEW GOVERNMENT CHRISTOPH SCHOEN PRESIDENT OF THE MONTENEGRIN FOREIGN INVESTORS' COUNCIL - MFIC

The latest MFIC White Book recorded considerable progress in many aspects of reforms. Now that a new window of opportunity for EU enlargement is opening up, all stakeholders must invest their energy in further improving the business climate – encompassing everything from the rule of law to neglected areas of the labour market and employment, real estate development and taxation 40 | MONTENEGRO BUSINESS SECTOR 2022

REFORMS

TOURISM

We expect a continuation of the reforms that have been launched, all in the best interest of the economic growth and development of Montenegro, and ultimately of all citizens and the economy

Montenegro is among the world’s 20 countries that are most dependent on tourism… and we do expect the tourism sector to remain the main engine of growth in the future

olitical instability negatively affects the economic and social environment, says Montenegrin Foreign Investors' Council (MFIC) President Christoph Schoen. That’s why investors seek politically stable environments and predictable conditions for doing business. The route to achieving this scenario leads through joint work and constructive dialogue among the government and relevant actors in society. The latest MFIC White Book’s Ease of Doing Business Index suggests that considerable progress has been achieved on this path since the previous edition was published.

nications and ICT. The tourism and trade industries recorded the highest increase, by 0.8 points, followed by

operations over the long run, so any policy change must be timely if it is to respect the principles of predictability and the good practice of public-private dialogue. According to the findings of the White Book, the rule of law, business environment predictability and discipline in the systematic and strict collection of taxes are of outmost importance to ensuring fair working conditions. ■ Along with changes in the global context, Montenegro has also been undergoing its own political changes. Were you in a position to participate actively and contribute to the economic reform process?

■ According to the latest MFIC

- MFIC is an active member of the Competitiveness Council of Montenegro, as the main advisory body in the field of improving the business environment. During the previous period, we focused on the implementing of our members’

White Book, the Ease of Doing Business Index improved considerably in 2021. What contributed the most to these results?

- The MFIC Index for 2021 was 7, which is the highest since it was launched in 2011 (on a scale from 1 to 10, with 1 representing the worst rating and 10 the best). The result achieved in 2021 shows significant growth compared to 2020, when the index stood at 6.4. It is interesting that the 2021 Index is 0.1 points higher than the 2019 Index, which was considered the best year with regard to many segments. The Index increase of 0.6 is the highest annual increase to date and represents the optimistic perception of foreign investors who arrived after the year 2020 – the year marked by the Covid-19 pandemic and its major negative impact on the country's economy. In contrast to previous years, 2021 saw an increase in all individual industrial indices, which is understandable given the high total increase of the MFIC Index. The biggest index result, of 7.7, was recorded in telecommu-

INVESTMENTS The pandemic did not disrupt the plans of MFIC member companies, which continued to invest in Montenegro and will have invested a total of 1.5 billion euros in the 2020-2022 period

Only agreement to a state-level economic strategy leads to a win-win situation for all stakeholders and society as a whole the transportation/logistics industry’s increase of 0.6 points, the banking/ finance sector’s increase of 0.4 points and the 0.3 points increase of manufacturing/energy. ■ What are the essential preconditions to sustain these results in today’s very complex economic situation?

- In order to improve the business environment in Montenegro, it is particularly important to conduct an active dialogue with the Government in the direction of understanding the needs of the economy, especially in the context of policy changes. Companies plan their

recommendations, while our committees closely monitored changes to the regulatory framework governing their sectors and proposed improvement initiatives in areas of importance to the businesses of our member companies. Implementing economic and regulatory reforms is only the first step in that direction, while the geopolitical situation creates a window of opportunity for Montenegro to accelerate its progress towards EU accession. The second step, which is equally important for the foreign investor community, is to strengthen relevant institutions to properly enforce regulations and monitor the legal framework, and MONTENEGRO BUSINESS SECTOR 2022

to provide a predictable and reliable environment for foreign investment. ■ Foreign investors strongly supported the Montenegrin economy’s recovery during the Covid-19 pandemic by investing continu-

completing projects that have already started and improving existing business processes. According to the investment plans of our member companies, the largest investments were expected in the tourism sectors and total approximately 640 million euros.

tral and Western European markets. Our marketing and promotional activities thus need to intensify to attract tourists from those countries. There is also the Government’s message that the tourism sector can count on strong state support and that the Credit Guarantee Fund will support the tourism sector financially. ■ The crises management of the Government and the CBCG during the previous period was highly professional, effective and strong enough to support the recovery. What do you expect from them now? - Close and constant communication with the Government and public administration remains an important task of MFIC in helping its members develop and improve their businesses in Montenegro and supporting the transformation of the entire Montenegrin economy into a modern, diverse and competitive foreign investment destination. Generally speaking, we look forward to cooperating with the new Government and continuing our open and constructive dialogue. We expect a continuation of the reforms that have been launched, all in the best interest of the economic growth and development of Montenegro, and ultimately of all citizens and the economy.

The Ease of Doing Business Index increase of 0.6 is the highest annual increase to date and represents the optimistic perception of foreign investors who arrived after the year 2020 – the year marked by the Covid-19 pandemic and its major negative impact on the country's economy ously, particularly in the tourism sector. Would you expect this trend to survive the new threats facing the tourism sector?

- The pandemic did not disrupt our plans and our member companies continued to invest in Montenegro, and with the realisation of those planned investments – as already announced – investments will have amounted to 1.5 billion euros in the 2020-2022 period. These are planned long-term investments aimed at 42 | MONTENEGRO BUSINESS SECTOR 2022

Montenegro is among the world’s 20 countries that are most dependent on tourism. This sector accounts for a quarter of Montenegro’s GDP and employs around a third of the country’s workforce. We do expect the tourism sector to remain the main engine of growth in the future. When it comes to the upcoming tourist season, we have to find alternatives to the Russian and Ukrainian markets, which can be done by focusing on Cen-

■ You are quoted as saying that “every crisis also has opportunities”. What do you see as the window of opportunity for Montenegro and MFIC member companies? - The further development of the Montenegrin economy and society implies digitalisation, as a development and transformation policy, and we expect digital transformation to be one of the key policies of the Government in the period ahead. Successful digital transformation represents a great opportunity for the economy, as demonstrated by the examples of other small countries and the countries of the region. Montenegrin Foreign Investors' Council will be a partner to the new Government in all these activities.

MONTENEGRO BUSINESS SECTOR 2022

BUSINESS

PORTONOVI

An Unspoilt ADRIATIC ESCAPE Portonovi is an idyllic Mediterranean-style village set amidst the wild beauty of Montenegro’s Bay of Kotor. Located at the entrance to the famous bay, Portonovi is surrounded by verdant, rolling hills, sapphire waters and sculpted, emerald mountains coastline and azure waters of the Adriatic. Portonovi offers the best of what comprises a premium coastal lifestyle. A multitude of finedining restaurants offering exotic cuisine and authentic flavours, wellness facilities, a beach club, bars and coffee shops, boutique shops, an art gallery and much more. It is also home to the first One&Only outpost on European shores - One&Only Portonovi, created exclusively to serve the needs of ultra-luxury travel seekers. A special pearl in One&Only Portonovi’s offer is a collaboration with Chenot Espace, a pioneering health and wellness spa that focuses special attention on health and wellbeing. The Portonovi Marina has a berth capacity for 238 yachts of up to 120 metres in length and a variety of entry points. It serves as an inviting stop-off point for those wishing to explore the

prawling across an area of 26 hectares, encompassing 1.8km of coastline, the Portonovi resort comprising 218 luxurious residences for sale (105 of which are available to rent), including 10 One&Only Private Homes - the first ever branded residences in Montenegro - the world-class Portonovi Marina, and a destination hotel from One&Only. If you are seeking the very best of Mediterranean, Montenegrin and Venetian influences, Portonovi Village residences can give you that unique feeling. Surrounded by trees and heavy with the scent of flowers, these residences form a natural neighbourhood located just minutes from the water, at the heart of the Portonovi community. Residences range from one-bedroom apartments to duplex townhouses and standalone villas, including private gardens and pools. The Marina Residences stand just metres from the Marina and close to the central square. These finely crafted studios, one-, two-, threeand four-bedroom apartments combine modern design with touches of the local and authentic heritage architecture of the Bay of Kotor. Giving these residences special charm is the fact that

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each balcony and terrace provides spectacular vistas overlooking Portonovi Marina. At the top of the Marina Residences, the striking Sky Villas are located. These three- and four-bedroom duplex penthouses spread across two floors and come with private elevator access and private 26-32m2 infinity pools. Lastly, an exclusive collection of 10 One&Only Private Homes gives you a unique opportunity to enjoy limited-edition real estate boasting splendid views across the mountainous

Mediterranean or sail off to the most desirable European and world destinations. Portonovi is much more than simply a luxury resort. This is a living village, a thriving community and a place where like-minded people gather to enjoy a life rich in adventure and experience the melting pot of cultures. Make sure you experience it yourself – visit the Portonovi website and choose your new home away from home, or make a reservation and enjoy the Mediterranean spirit year-round.

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TOURISM

CETINJE - ROYAL CAPITAL OF MONTENEGRO As the old royal capital of Montenegro, Cetinje has an elegance to it that makes the city worth a visit to explore the heritage

CETINJE MONASTERY

etinje was founded in the 15th century and became the centre of Montenegrin culture. Its fortunes rose and fell for hundreds of years, but from the 1800s a lot of effort was put into the architecture and grandeur of the city. It officially became the capital of an independent Montenegro in 1878. It was after the Second World War, in 1946, that the capital was moved from Cetinje to Podgorica (then known as Titograd) and placed under communist rule. The old royal capital was left with just 9,000 residents. Visiting it today, it feels like not much has changed since then. The population

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has grown slightly, to about 14,000 residents, but the buildings and streets don’t look too different. The political capital may have moved, but culture and history are harder to migrate. Cetinje has been preserved almost in the exact state in which it was left. The city is not very big and you can walk the streets yourself and explore the various things to do in Cetinje, though if you'd like to learn more about it there is a city tour led by a local guide. Alternatively, you can combine a visit to Cetinje and Lovcen National Park with this tour from the coast. As you might expect from the old capital of Montenegro, there are lots of things to do in Cetinje. CETINJE MONASTERY The most important sight in Cetinje is the Cetinje Monastery, also known as the Monastery of Saint Peter. Cetinje Monastery was built in 1484 by Ivan Crnojevic, a duke who moved his capital to Cetinje because it was easier to defend (effectively founding the city), but the buildings have nonetheless been destroyed and rebuilt several times over the centuries. One of Montenegro’s most significant sights, viewed as a symbol of the country’s spirituality, it holds the relics of one of Montenegro’s great historical rulers: St Peter of Cetinje, whose name is now associated with the monastery. You can visit Cetinje Monastery and see the modest church at its centre, as well as the various artworks throughout the complex. The tombs and other graves of Montenegrin leaders are also here. And you’ll find a little museum that gives you some more information about the monastery's significance.

BILLIARD PALACE

CETINJE TOWN

THE NATIONAL MUSEUM OF MONTENEGRO The National Museum of Montenegro encompasses four different locations, some of which have more than one institution within them. NATIONAL MUSEUM OF MONTENEGRO Although this building situated opposite the monastery is usually just called the

CETINJE TOWN

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KING NIKOLA'S PALACE IN CETINJE

National Museum of Montenegro, it actually houses several different parts of the institution, including art galleries. You’ll get to see an interesting collection of artworks and learn a bit more about the cultural heritage of the country if you visit all the different parts of the building. NJEGOŠ MUSEUM BILJARDA (BILLIARD PALACE) Although in a separate building, the Njegoš Museum Biljarda is also part

KING NIKOLA'S PALACE IN CETINJE (INTERIOR)

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ETHNOGRAPHIC MUSEUM

of the National Museum of Montenegro. The building was the residence of famous Montenegrin poet, bishop and leader Peter II Petrović Njegoš. The museum displays his personal belongings and furniture, which is probably more of interest to locals. What is rather cool, though, is the enormous map relief of Montenegro created in 1917 that is now housed here. MUSEUM OF KING NIKOLA Across the street from the Billiard Palace is another part of the National Museum of Montenegro – the Museum of King Nikola. This palace was home to the last royal ruler of Montenegro, King Nikola, after whom it is now named. Construction of the palace was completed in 1867 and it gives you a good impression of how the country’s elite lived in the 19th century. You’ll need to do a guided tour of the palace, which is a combination of museum exhibitions and recreated rooms.

ROYAL THEATER

ETHNOGRAPHIC MUSEUM OF MONTENEGRO This final part of the National Museum of Montenegro is just across the road from the Museum of King Nikola. It’s called the Ethnographic Museum and has a collection of items related to the folk history of the country. OTHER THINGS TO DO IN CETINJE Aside from the monastery and the museums, there are quite a few other things to do in Cetinje. The city is full of small attractions that you can visit to easily fill much of the day. As you walk the streets, you’ll see old embassies with their faded elegance, as well as other grand houses. But be sure to be on the look out for these particular landmarks: Blue Palace The Castle Church Monument to Ivan Crnojević Royal Theatre Zetski Dom Vlaška Church And, of course, you can just spend some time enjoying Cetinje's main street, Njegoseva ulica [Njegoš's Street]. Much of it is pedestrianised and there are lovely

NATIONAL MUSEUM OF MONTENEGRO

little cafes and restaurants where you can take a break and watch life in Cetinje pass you by. Although Cetinje is not too far from the country's coastal tourist centres, it seems that not many people bother to leave the water and make the journey inland to see this veritable time capsule of history. It’s not that surprising, I suppose. After all, most of the people on the beach are from Montenegro or nearby countries and they’ve seen

enough examples of power shifting between cities, countries and leaders in their lifetimes. But for a foreigner, it’s an interesting glimpse of what Balkan life was like before the outbreak of World War I and the game of thrones that lasted in this region for almost a hundred years. The architecture is the most striking thing about Cetinje, and it doesn’t take too long to walk through the city and see it all for yourself. By Michael Turtle MONTENEGRO BUSINESS SECTOR 2022

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MONTENEGRO BUSINESS SECTOR 2022

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Montenegro Business Sector 2022

Articles inside

CETINJE - ROYAL CAPITAL OF MONTENEGRO

AN UNSPOILT ADRIATIC ESCAPE

GOOD PARTNER TO THE NEW GOVERNMENT

COOPERATING WITH GOVERNMENT TO FIND THE BEST ANSWERS TO CHALLENGES

MARKET DEMANDS ARE THE MOST IMPORTANT GUIDE

A LIFE LESS ORDINARY

INVESTMENT IS A KEY EPCG STANDARD

A PLACE TO BELONG

WE MUST NURTURE THE STRENGTHS

NO EASY ANSWERS

PARTNERSHIP FOR THE FUTURE

SOLIDARITY IS ESSENTIAL IN OVERCOMING THE CHALLENGES WE FACE

EVERY CRISIS ACCENTUATES RISKS

MONTENEGRO IS ON THE TAXI-DRONE MAP

A GREAT LEAP FORWARD

RUNWAYS READY FOR TOURISTS FROM THE WHOLE WORLD