Dragica Sekulić, Montenegrin Economy Minister

The last year has been marked by the commissioning of the submarine electricity cable that connects Italy and Montenegro and represents the largest electricity infrastructure project in this part of Europe. As Minister of the Economy of Montenegro Dragica Sekulic explains, “its realisation brings electrical energy security to our country, making it a regional energy hub and representing a new form of infrastructure connections between Montenegro and the European Union.”

She continues: “we can see such integration as a common good, not only for Montenegro, but also for the entire region of the Western Balkans. This project will provide users of the Montenegrin electricity transmission system with significantly higher reliability and security in the electricity supply, enabling assumptions of better quality operations and further development.”

You’ve said that this year will be a year of strategic decision-making regarding a new partner for national electricity company EPCG. Why is the Government of Montenegro hesitating in finding a strategic partner despite no lack of interest among investors?

– It is a priority of the Government of Montenegro to finalise the complete transfer of ownership of our former partner, Italian company A2A, to the state. I would like to note here that we also aim to conduct a comprehensive analysis of the needs of EPCG, but also to provide a vision for developing the energy sector in the period ahead, and only after that will we evaluate what kind of partnership will bring the greatest benefits to the country and EPCG.

Over the course of the last 20 years, Montenegro’s strong orientation towards the services sector has attracted the largest number of investments in the financial and tourism sectors

How high are Montenegro’s capacities to produce electricity from renewable energy sources domestically?

– Currently available generation capacities that use renewable energy sources to generate electricity are: hydroelectric power plants with a total installed capacity of 682 MW, wind power plants with a total power of 118 MW and solar power plants with power of approximately 2 MW.

Montenegro’s development trend is directed towards transitioning to clean energy, in order to promote decarbonisation, renewable energy sources and energy efficiency, which will partially consolidate the path of the Western Balkans towards the European Union.

In the period covered by the Long- Term Energy Balance 2020-2022, new solar power plants are expected to enter the electricity generation system. A special contribution to the growth of solar energy production will be provided by the power plant in Briska Gora, with the first phase of the project already being commissioned, with a capacity of 50 MW. Moreover, this period is also expected to see low-power solar systems entering the system, which will be realised according to the exchange at point of connection model.

On the other hand, alongside the existing Krnovo and Možura wind farms, the Gvozd Wind Farm is expected to start operating in 2022.

With the exceptions of these big topics, what plans do you have for the energy sector in 2020?

– The Ministry of Economy’s focus in the field of electricity / energy is the decarbonisation of electricity production. We want to implement this process by developing new capacities for the production of electricity from renewable sources in two directions. The first direction is the development of so-called “large production facilities” such as the Gvozd Wind Park and the Briska Gora Solar Plant. In addition to these two projects, a tender process is underway for the selection of a lessee of state-owned land for the construction of a wind farm at the Brajići site, and by the end of this year or during the first quarter of next year we plan to announce a tender for another significant solar power plant in the location of Velje brdo, in the immediate vicinity of Podgorica. What will be particularly significant in the coming year is the completion of preparations for technical documentation that will serve as the basis for both tenders for the construction of HPP Komarnica.

The second direction in which we want to implement the production decarbonisation process is towards supporting citizens and small and medium-sized enterprises in the installing of their own production capacities at their own facilities, where they would generate electricity for their needs, through a process of exchange at the point of connection.

Under conditions of transition, small and open economic systems like Montenegro’s change their economic structure intensively

The issue of the construction of small hydroelectric power plants has become an important issue, and one could say a political issue, almost everywhere in the region. What is your stance on this?

– The policy of the Government of Montenegro to date has, through the legislative framework, enabled and promoted the launching of the most significant investment activity in the segment of electricity generation to occur in the last almost four decades. Alongside the emphasis on constructing energy facilities, a special dimension of most successfully implemented projects is represented by examples of socially responsible behaviour among investors, as proven via the implementation of a series of projects that are of interest to local communities. However, in addition to these examples, locals expressed their disagreement with the idea of using waterways for the construction of small hydro plants in a certain number of cases.

As we have pointed out on numerous occasions, the programme of incentives for the production of electricity from renewable sources has undoubtedly enabled a new wave of investment in electricity generation. In certain cases, this development concept would fall short of its goal – and that is to improve quality of life and the development of local communities, which cannot unfold in separation from the preservation of the unique nature and healthy environment of these localities.

The opposition to the construction of individual facilities among local residents is in direct conflict with the basic idea of the incentives programme for production from renewable sources – raising the quality of life and directly benefiting the local population. In accordance with basic principles in terms of improving the quality of life and developing local communities, taking care to preserve the unique nature and healthy environment, the Government of Montenegro – after considering the results of the pre-existing programme for encouraging the production of electricity from renewable sources, as well as the initial results of construction projects without financial incentives – suspended until further notice the issuance of energy permits for the construction of small hydro plants, as well as the calling of tenders for awarding concessions for the construction of small hydro plants, as of 31st December 2018.

Although it benefits from advancements in the energy sector, Montenegro’s industry is still not particularly competitive and, as shown by the latest OECD study on the export potential of the region, Montenegro has an unfavourable export structure that’s dominated by low value-added products. Why is that so?

– The Government of Montenegro has defined the Industrial Policy of Montenegro 2019-2023, as a strategic document for developing the competitiveness of the Montenegrin economy, with a focus on the industrial sector. With a population of 622,000, Montenegro is the smallest economy in the Western Balkans. Under conditions of transition, small and open economic systems like Montenegro’s change their economic structure intensively.

The signing of the CEFTA Agreement and the Stabilisation and Association Agreement with the EU, as well as WTO membership, provided additional impulses to further reforms on the liberalisation of the Montenegrin market and inclusion in trade chains regionally and globally, while the signing of numerous free trade agreements has enabled the placement of Montenegrin products on a market of over 800 million people.

Trade liberalisation has opened the domestic market up to foreign competition. The direct effect of trade liberalisation was a significant increase of imports in the early 2000s. This was further eased by capital inflows when the domestic financial market was opened to foreign banks and increased interest among foreign investors for investing in Montenegro.

Over the course of the last 20 years, Montenegro’s strong orientation towards the services sector has attracted the largest number of investments in the financial and tourism sectors. The lack of additional investment and sufficient modernisation of the industry gradually led to the exclusion of many larger industries, which also impacted on the productivity of many SMEs.

Despite the fact that increased access to credit stimulated domestic consumption and GDP growth, investments were mainly orientated towards the retail sector and services. As such, the impact on capital accumulation was modest.

There is also potential for investments in renewable energy, the construction of green buildings, sustainable organic farming – implying essential support for eco-innovation, improving energy efficiency and resource utilisation efficiency among MSMEs, and the developing of innovative entrepreneurial ventures in the areas of IT and the creative industries.

What are your considerations when it comes to boosting the competitiveness of the economy and what specific measures are you considering?

– With the aim of continuously improving activities and supporting the development of entrepreneurship and business in Montenegro, as well as the needs of the economy itself, the Ministry of Economy is implementing the Programme for Improving the Competitiveness of the Economy, through which grants worth €1,640,000 are available to entrepreneurs through subventions.

The programme has unified preexisting programmes intended for the development of entrepreneurship and the business sectors that were implemented under the framework of the ministry in previous years and defines 10 programme lines that are related to activities and measures for the realisation of financial and non-financial support to potential and existing entrepreneurs, MSMEs and large enterprises, but also clusters, with the aim of increasing competitiveness on the national and international markets, modernising industry, developing innovative potential, promoting entrepreneurship and craftsmanship, and implementing international business standards.

The success of implementing the financial support programme in 2018 is measured through an increase in the amount of support exceeding 50% (both in the number of enterprises included and the amount of funding allocated) compared to 2017. The supported companies employ more than 1,000 workers.

It is important for enterprises to recognise exports as a priority of their operations, as well as the ability to respond to competition on the domestic market and simultaneously face the challenges of the EU and NATO markets

Why is Montenegro progressing slower than expected when it comes to ascribing the value of its production potential?

– Under conditions of transition, small and open economic systems like that of Montenegro change their economic structure intensively. As such, the Montenegrin economy, with the end of the dominance of large value chains in the metal and energy sectors, is today characterised by an open, euro-focused and service-orientated economy, with a development model based on the development of tourism, growth in foreign direct investments and strengthening of the service sector.

Although significant economic progress has been achieved in recent years, the growth potential of the industrial sector has not been sufficiently valorised, and one of the key priorities in the period ahead will also be sustainably managing available resources. The fact is that Montenegro has significant and underutilised natural resources, so synchronised activities of public and private sector institutions are expected to improve the use of available raw materials significantly in the period ahead, especially through production towards higher staged of processing, the further exploitation of available raw materials etc.

In order to ensure the better valorising of comparative advantages in terms of the availability of natural resources, as well as utilising significant space to increase their useful value in accordance with the principles of sustainable development and resource efficiency, activities are being undertaken continuously in the field of the sustainable management of resources through the ascribing of value to available potentials.

You will soon present a logo and slogan for the national brand of Montenegro. For whom is the promotion of this brand intended? Who will be able to use it?

– The logo and slogan of the national brand primarily serve to encourage the building of an image of the state, or a national image among the targetted public, and it is in this sense that the newly selected visual identity of the national brand will be used. In accordance with the Law on the National Brand (Official Gazette of Montenegro 37/17), those who will be granted the right to use the logo and slogans of the national brand can include: legal entities and natural persons, state bodies, state administration bodies, competent municipal bodies, local administrative bodies, courts, public prosecutor’s offices, state-owned enterprises that perform works of public interest, diplomatic and consular missions and institutions and services founded by Montenegro, i.e. municipalities, entrepreneurs and other organisations and associations.

You stated recently that the arrival of credible U.S. investors would be of great importance to the country. What can Montenegro specifically offer to investors from that country?

– Montenegro is a secure, economically viable and politically stable country, with significant potential to continue its further economic growth. The openness of the economy is one of our key values. We are a full member of the World Trade Organization and a signatory to the CEFTA and EFTA free trade agreements. With existing trade agreements, we provide opportunities for free trade with over 800 million consumers.

Montenegro has an efficient, transparent and competitive tax system, with a corporate gains tax rate of only nine per cent, a personal income tax rate of nine per cent and 11 per cent, with a reformed banking system, the equal treatment of local and foreign investors, the euro as the official currency and a liberalised foreign trade system.

The main incentives for investors relate to direct financial incentives for new investors, tax exemptions, especially in lesser developed parts of the country, subventions on the salaries of employees in business zones, as well as fewer fees and taxes at the local level.