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Jakov Milatović, Montenegrin Minister For Economic Development

Economic Diversification Is Our Imperative

The Montenegrin economy is awaited by full recovery in the following period, on the basis of the government’s strong reform processes, new investments, economic diversification and improving living standards

Could it be said that Montenegro has returned to a sustainable economic growth path? Over the previous eleven months, according to the assessment of Montenegrin Economic Development Minister Jakov Milatović, knowledge and will proved to be the main trump cards of the Government’s efforts to raise the downed economy to its feet and rebuild it.

“It was a great challenge for the country to recover after recording a 15.3% decline in the economy, the largest decline in its history and the largest in Europe,” explains our interlocutor.

He says that, at the moment the government changed, the new government encountered macroeconomic instability and poor public finances, while the crisis additionally highlighted all the structural problems of the Montenegrin economy, such as long-term unemployment, high income inequality and import dependence.

“It was essential to make correct and timely decisions, and to take action on multiple fronts, i.e., on the consolidation of public finances, the stabilisation of the epidemiological situation and support to our citizens and businesses in combating the negative economic consequences, while simultaneously dedicating ourselves to structural reforms,” says Milatović.

“A series of timely decisions were taken with the aim of prompting the recovery of tourism, starting with the opening of borders to the other countries of the Western Balkans, promoting Montenegro on the regional and international markets, adopting health protocols, mass vaccination of the population and establishing a new national airline, all of which resulted in a season that exceeded expectations and also deserves the most credit for the general recovery of the economy. According to data from the Central Bank of Montenegro, revenues of 700 million euros were recorded in the first nine months of the year – with which the annual plan was exceeded,” says the minister in summary.

All of the aforementioned has led to an extraordinary recovery of economic activity in Montenegro, which is expected to total 12% at the annual level. “This result particularly pleases me, because – on the one hand – it illustrates our intention and seriousness in building an economically stronger Montenegro, while – on the other hand – we have exceeded expectations and the speed of economic recovery projected by the IMF in December 2020 and amounting to four per cent. Our result is as much as three times higher than their prediction,” concludes Milatović.

How would you evaluate the results of support provided to the economy? Will the Government decide to continue these measures and, if so, who will they be intended for primarily?

– The COVID crisis dealt a heavy blow to economies worldwide and all governments had to act promptly in order to accelerate the recovery of their economies. At the end of January 2021, the Government of Montenegro adopted a package of measures for the first quarter totalling 163 million euros and, at the end of April, a package of measures for the second quarter totalling 166 million euros, which created the preconditions for the recovery of the economy and support for the liquidity of enterprises and the preservation of jobs, and in particular enabled the tourism and hospitality sector to readily await the start of the tourist season. It is important to note that, when adopting these measures, we primarily listened to the needs of businesses and were in constant communication with their representatives, which ensured that we introduced high-quality measures that satisfied businesses.

Moreover, I would also like to emphasise the importance of the ‘Europe Now!’ project and the Government’s economic recovery programme, which has measures that introduce a new economic development model grounded in greater social equality, a reduced tax burden on labour, the struggle to combat the grey economy and the promotion of innovation, digitalisation and the green economy.

The Government of Montenegro will continue to monitor events at the Steelworks in continuity, and we will certainly do everything in the bounds of the legal frameworks to protect workers and their rights

In your opinion, will the measures resulting from this programme be sufficient to mitigate the impact of the crisis that occurred during the pandemic?

– The COVID-19 pandemic has led to the loss of some jobs, but also entire enterprises. Nevertheless, the majority of businesses succeeded in adapting their operations to the situation on the market and, with the help of government measures, maintain their company’s business.

The major reform project of systemic proportions that is “Europe Now!”, which is expected to be implemented at the beginning of next year, implies increasing the minimum monthly income from 250 to 450 euros, while increasing the average from the current 530 to 700 euros. This project also implies a significant reduction in the tax burden on labour, the introduction of fairer forms of taxation and a strong fight against the grey economy, especially on the labour market. These measures received unanimous support at the Social Council and also received positive assessments and a green light from our European partners.

Are there some ways in which this crisis will be easier than the previous, 2008, one? On what does that depend?

– Today’s crisis appears to be significantly more serious than the previous one, a claim that’s also supported by relevant international institutions. A special problem today is represented by supply chain disruptions, and world market prices are rising as a consequence of that, which represents an additional factor aggravating recovery. However, Montenegro has a significantly better position today than it had during last year, when the country was forecast to recover very slowly. According to projections, this year’s growth rate will exceed 13%. Additional confidence is also provided by the forecasts of the European Commission, according to which Montenegro will reach its 2019 GDP level in 2022 and will be Europe’s fastest growing economy. Offsetting a GDP decline of more than 15% in just two years would be an incredible success. We should also recall that it took significantly longer to recover after 2009’s six per cent drop in GDP.

The crisis has shown that diversification is an imperative for Montenegro. What does this mean in practical terms when it comes to the strategy for attracting foreign investment in sectors other than tourism?

– Economic diversification will definitely be an imperative for the further development of Montenegro, with a special focus to be placed on the development of sectors that better resist external circumstances. There will definitely be a focus on the ICT sector, which recorded high growth during the pandemic, energy – with the aim of improving energy efficiency and the use of renewable energy sources to achieve sustainable development – agriculture, wood processing and the processing industry as a whole, as a sector that’s very important to the overall economic development of the country, but also to the creation of conditions for balanced regional development.

What kinds of innovative capacities does Montenegro have at its disposal and where is the country’s market niche when it comes to digital transformation and inclusion in the 4.0 economy?

– When it comes to the global competitiveness index, i.e., Innovation Capacities, and according to the statistics of the World Economic Forum, Montenegro is recording progress.

At the strategic level, we’ve opted for the EU’s “recipe” of strategic planning, better known as smart specialisation. Four development niches have been identified through the Strategy and relate to sustainable agriculture and the food value chain, energy and sustainable environment, sustainable and health tourism and ICT, as a horizontal priority that serves in the function of developing the previous three (vertical) priorities.

What are the key instruments that the government intends to utilise to encourage innovation at the level of companies and start-ups?

– In recognising the importance of innovation to the overall economic development of Montenegro, the Government adopted its Innovation Programme 2021-2024, with which it created programming foundations for financing innovative programmes and projects in the coming period.

The goal of the Innovation Programme is to present all relevant innovation support programmes planned for the coming period in one place, which will enable the innovation community to more easily recognise all instruments that will be made available and directed towards the entire innovation development cycle: from initial idea to commercialisation and market entry.

Likewise, we’ve negotiated three preacceleration programmes totalling 150,000 euros, while our plan for next year includes the implementing of a project with UNOPS that should have the goal of supporting start-ups.

Furthermore, the newly established Innovation Fund of Montenegro will determine its programming lines in a special programme at the beginning of next year, and everything will be directed towards supporting businesses that conduct innovative activities or want to test their innovative ideas.

We are convinced that we will succeed in overcoming this crisis much faster than expected, and that the benefits of this growth will be much more fairly distributed and will benefit all citizens of Montenegro

There are also some long-standing challenges at the same time. What will be the fate of the Steelworks?

– I was awaited at the beginning of my term by many inherited problems, most of them urgent. And one of them was the issue of the Toščelik Steelworks.

After acquainting ourselves with the situation at the plant, the Ministry of Economic Development implemented a series of activities aimed at protecting the rights of workers, and to that end meetings were also organised with the owners of Toščelik. Production halted as of the beginning of May this year, with the workers sent home on paid leave. With the mediation of the Ministry, workers have been receiving 90 per cent of their salaries since then, instead of the originally planned 70 per cent.

During my recent visit to Turkey, I also met with the heads of Tosyali Holding, who informed me that they launched the process of selling the Steelworks in Nikšić last year, because it doesn’t fit their steelworks portfolio, and that there are two potential buyers at present. Workers will continue to receive compensation at the same level until the finalising of negotiations with interested buyers, and in that sense the workers don’t have to worry about their financial and existential future.

What is the situation like at stateowned companies and what is their place in the picture of economic diversification?

– We are witnesses to the fact that, to date, the inefficient and/or poor management of majority state-owned companies has imposed significant costs on the state. In order to prevent this long-standing practise from continuing, the Government of Montenegro adopted the Decision on the Establishment of a Limited Liability Company (LLC) called “Montenegro Works”, which will deal with monitoring and analysing the financial situation in majority state-owned companies and provide expert support in implementing reforms aimed at improving the efficiency of management. We would thereby protect the Montenegrin budget from previous negative cases, when significant revenues were lost due to the poor management of certain state-owned companies.

This is the first step in implementing the vision of domestic management of the state-owned section of the economy, and each subsequent step will head towards bringing the “Montenegro Works” project to life, and doing so for the sake of the reviving of state-owned companies.

SUCCESS

We can today talk about the stabilisation of public finances, the recovery of economic activity, the preservation of the substance of tourism and Montenegro’s return to the path of sustainable economic growth

VISION

We want young people to realise their dreams here, and not far from their homeland, and the ‘Europe Now!’ plan represents only the first step towards the realisation of this vision

DIGITALISATION

Digital transformation should enable the achieving of cutting-edge technological standards, the development of e-infrastructure and the applying of innovative ICT solutions at the state level

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