We believe that the Montenegrin economy will continue to be strongly influenced by investments in the coming years, and that the Government will have a positive impact on the development of economic activities by implementing measures to consolidate public finances, optimise public administration and implement measures recommended by the White Book
Over the course of two years, Montenegro has endured a strong economic decline and an almost equally strong economic recovery. We spoke with MFIC President and Addiko Bank Executive Director Christoph Schoen about the pandemic’s impact on foreign investors operating in Montenegro and the Montenegrin economy in general. And as our interlocutor notes, “what’s even more important is that we focused on the future steps that have to be taken if the economy is to rebound and accelerate growth. Like many other businesses throughout the globe, our companies have strongly felt the negative effects of the crisis.”
However, says Schoen, despite the adjustment of operations, MFIC members continued their planned investment cycle for the 2020- 2022 period, totalling 1.5 billion euros.
Despite the great difficulties caused by the COVID-19 pandemic continuing, as well as the pronounced problems in the connectivity of the destination (especially by air), the complete absence of visitors from certain areas (such as Russia and much of Western Europe), MFIC member companies operating in the tourism sector nonetheless recorded excellent results in all sectors. “We can therefore state with certainty that, in financial terms, 2021 was a successful year for our members. We are sure that this is the result of large investments in infrastructure and facilities in resorts, such as Porto Montenegro, Portonovi and Luštica Bay in previous years, but also the constant improvement of all services and products available within these projects,” concludes our interlocutor.
In your opinion, to what extent has the Montenegrin government managed to cope with such challenges and keep the country on the trajectory of reforms?
-The Government, in cooperation with the Central Bank of Montenegro, took appropriate and timely measures to support the business community and private individuals, in order to ease the impact of the crisis. From this perspective, I think it’s fair to say that the crisis was managed very well from the side of the Government of Montenegro and the Central Bank.
We are very active interlocutors and partners of the Government in the field of improving the business environment. I would like to remind your readers that MFIC participates in the work of the Competitiveness Council, as the main advisory body in the field of business environment improvement, and that – as a very active member in the previous period – we were focused on ensuring the implementation of White Book recommendations submitted by our members, as well as those that emerged through the work of our committees.
Reforms of the business environment in Montenegro during the coronavirus pandemic must be implemented more efficiently, in order to create a favourable business climate and enable the entire Montenegrin economy to develop and recover faster. On the other hand, the Council recognised the importance of the success of the tourist season, so we have exerted additional efforts to help organise the vaccination process within Montenegro through numerous activities. We believe that the appropriate response from the state and the tourism industry has enabled Montenegro to achieve good results from the tourist season.
The Government, in cooperation with the Central Bank of Montenegro, implemented appropriate and timely measures to support the business community and private individuals
The global experience is that, in the pandemic, those who entered the digital transformation on time could do their best to adapt. How ready was Montenegro for such a challenge?
-Digital transformation in the ICT industry around the world, and even in our country, more than in any other industry, is a constant journey and a driver of change, because innovative products and customer services are constantly being delivered and created. In addition, the situation with the coronavirus pandemic indicated that information and communication technologies represent a milestone for modernisation and the potential for the further development of all sectors in Montenegro.
Transformation requires a strategy that, like any strategy, looks at the goals, the current situation and ways to move forward on this journey in a way that makes sense and connects all the necessary elements. The basic precondition for the successful implementation of digital transformation in our country, of course, is an adequate legal framework that enables the application of the advanced solutions that are applied in the developed world. It is therefore important that the Government pays special attention to this area in the coming period.
It is very important that the Government has also recognised the importance of these processes, so it started drafting the Digital Transformation Strategy, the preparation of which includes a representative of the Montenegrin Foreign Investors’ Council. We see this as a great opportunity for Montenegro, because it provides the opportunity for small and smart systems to solve problems in their functioning in the foreseeable future and to create a chance to become competitive at the international level.
I would also like to mention that this year’s edition of the White Book contains recommendations pertaining to part of the proposed measures aimed at improving the digital transformation process, through the terminalisation of public administration via the introduction of electronic payments in the business system of public institutions in Montenegro, communication with public institutions, exchanges of data on the National Identification Number and the implementation of regulatory and technological preconditions that are required to support E2E internet sales of basic banking products.
If we look at the Ease of Doing Business Index in Montenegro, what does it tell us about changes in the business environment?
-The Ease of Doing Business Index for 2020 is 6.4 (on a scale of 1 to 10, with 1 representing the worst score and 10 the best). The result for 2020 shows a significant decline compared to 2019, which was considered a record in several segments, but also a decline compared to 2017 and 2018, when the index rating stood at 6.5. Such a significant decline in the index, by 0.5 points, has not been recorded previously, but the decline was to be expected given that 2020 was marked by the coronavirus pandemic, which had a very negative impact on the country’s economy, especially the tourism sector.
When it comes to 2020, there was an evident decline in all individual indices, which is certainly understandable given the large decline in the overall index. In this regard, the largest index in total for the year, alongside the significant decline, belongs to the telecommunications and ICT sector. Compared to 2019, the tourism sector recorded the largest decline, by as much as 0.8 points, while banking/finance fell by 0.6 points, the transport/logistics and production/energy sectors recorded a decline of 0.3 points, while trade sustained the smallest decline compared to the previous year, falling by 0.2 points.
MFIC members representing the tourism sector gave their sector a rating of 5.3, which is down 1.7 points compared to 2019 and 0.8 points compared to all members of the Council. These are also the biggest negative differences in assessments and represent an important indicator of the problems that emerged in the tourism sector during 2020.
The President of the European Commission recently said that Montenegro has made the most progress on the path to membership in the Union and that Brussels encourages the country’s authorities to implement further reforms. To what extent has Montenegro managed to maintain the pace of European integration under these difficult conditions?
-If we look at the last EC Report for Montenegro for 2021, Montenegro has not made progress in the area of “Justice”, under Chapter 23, during the past year. Horizontally, only “limited progress” has been made in as many as 30 chapters, while “good progress” has been achieved in only two chapters – “Public Procurement” and “Food Safety, Veterinary and Phytosanitary Supervision” – and there has been no progress in the domain of “Traffic”.
The average assessment of progress for Montenegro this year is the lowest of the last six years and amounts to 3.03. For comparison, the average assessment of this progress in 2015 was 3.15, and in 2020 it stood at 3.18. On the other hand, the average readiness assessment, which includes an assessment of the overall situation in the areas covered by individual chapters, is the highest to date, amounting to 3.11 points.
Further attention should be paid to implementing reform processes in the sectors analysed in the White Book that our members rated as low (labour market and employment, real estate development, taxation/contributions, corporate governance, rule of law) in order to improve the business environment, attract foreign investment and create conditions to improve the economic standing of all Montenegrin citizens.
Further attention should be paid to implementing reform processes in the sectors analysed in the White Book that our members rated as low, such as the labour market and employment, real estate development, taxation/contributions, corporate governance and the rule of law
In which reform areas does the MFIC have expertise that could assist the government at this specific time?
-Innovation and digitalisation in all areas are key components of economic development. I believe that we can join forces in this area, because all our members have leaders and experts who can primarily assist the public administration.
It is through the initiative sent to the Competitiveness Council, and with the support of the Ministry of Finance and the Secretariat of the Competitiveness Council, that we are working intensively on the implementation of defined proposals for eliminating barriers to the development of e-services in the banking and telecommunications services sectors. The interdepartmental working group, composed of representatives of MFIC, the Ministry of Finance, the Central Bank of Montenegro, the Interior Ministry, the Tax Administration, the Police Administration and the Association of Banks, together with MFIC member companies, prepared an Action Plan with established dynamics for implementing recommendations. Of a total of nine activities, two have already been implemented, while the realisation of the others is underway.
How would you assess the quality of cooperation between the business community and the government from the perspective of MFIC, especially in the working groups that include your members?
-It is of the utmost importance that all business associations in Montenegro cooperate not only with each other, but also foster strong and timely communication and cooperation with the Government, and the situation with the coronavirus pandemic required a joint response and synergistic action.
MFIC traditionally has good cooperation with all other business associations in Montenegro. There are many potential areas and ideas for cooperation, and we recognise the launch of the Digital Coalition, in cooperation with the Government and business associations, as a significant initiative.
I believe that it won’t only be important for us to expand our business, but also for the small Montenegrin economy that is recovering from the crisis
Through its active participation in the recently formed Working Group for Tourism, MFIC will exert every effort to create the conditions for more efficient business in the tourism sector
Innovation and digitalisation in all areas are key components of economic development. All our members have leaders and experts who can primarily assist the public administration