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Christoph Schoen, MFIC President, CEO At Addiko Bank Montenegro

We Are Open To Cooperation

Montenegro is a good investment destination that is moving in the right direction to utilise its high potential. The challenge is the way and pace at which that potential will be used. There is a lot of room for improvement and we are aware that this is a long-term process requiring the cooperation of all stakeholders. MFIC is ready to contribute as much as possible

The Montenegrin Foreign Investment Council welcomes the efforts of the Government of Montenegro to secure a stable macroeconomic environment and improve the business climate. MFIC is ready to contribute to all those efforts, including in areas such as education, the labour market and social policy, which are of the utmost importance to Montenegrin society, says MFIC President Christoph Schoen, CEO of Addiko Bank Montenegro.

What elements of the business climate do you consider as being the most encouraging for foreign investments and where is the potential for improvement?

– First of all, let me start by stating that the members of the Foreign Investment Council believe that Montenegro is a good investment destination that is moving in the right direction to utilise its high potential. The challenge is the way and pace at which that potential will be used. Montenegro continues to rapidly progress towards the EU and will become a member of NATO this year, which will provide longterm stability and safety, as well as significant economic benefits.

In my opinion, that has to have a positive impact on the business climate, attract foreign investment and boost the economy. For Montenegro, as well as for the region, “integration” is a keyword, and foreign investors, both current and potential ones, are highly interested in these processes, in such a way that many business decisions will depend on them.

Christoph Schoen

In other words, acceding to the EU and NATO requires the adoption of a new system of values that implies the rule of law and a functioning market economy, which contribute directly to enhancing the competitiveness of an investment destination.

Understanding the need to constantly improve the business environment is recognised by the Government and appreciated by the private sector. On the other side, activities in that direction often require a more efficient approach, more training and less “bureaucratic” behaviour at all levels of public administration, in order to achieve proper implementation and positive results of reforms conducted in different sectors. Considering the importance of a predictable environment for investors, frequent changes, particularly in the legal domain, can be demanding and unattractive for investing.

It is important to mention the equal treatment of domestic and foreign investors in Montenegro, and the fact that the economy is very open to new foreign investors, as well as its pretty attractive tax system, with competitive fiscal overheads that are certainly stimulating.

There is a lot of room for improvement and we are aware that this is a longterm process that requires the cooperation of all stakeholders. The Government sets ambitious goals for reforms in areas like education, the labour market and social policy, special planning and construction, healthcare and the like, and MFIC is ready to contribute as much as possible.

To what extent is the overall macroeconomic environment conducive to foreign investments?

– It is evident that the Montenegrin Government is exerting a lot of effort in order to ensure macroeconomic stability, focusing in particular on fiscal stability by dealing with fiscal consolidation. The high unemployment rate is an issue of concern, particularly since a significant percentage of it comprises vulnerable groups. On the other side, the unemployment rate shows the need for foreign investors and the creation of new jobs, which is understood by the Government and provides one more reason for the authorities to deal seriously with the elimination of barriers to doing business.

One of the attractive macroeconomic indicators is low inflation and monetary stability, given that the country has used the euro as its official currency since 2002. Additionally, free capital flows and high foreign investments from over 100 countries, averaging around 19% of GDP in the last 10 years, places Montenegro among the countries with the highest net FDI per capita, and also sends a good message.

Acceding to the EU and NATO requires the adoption of a new system of values that implies the rule of law and a functioning market economy, which contribute directly to enhancing the competitiveness of an investment destination

How does the Council contribute to promoting Montenegro’s investment potential and supporting business development?

– The Council is a great mechanism to represent the opinions and positions of foreign investors in Montenegro, as well as being a kind of “tool” that should be used in promoting common interests when communicating with different stakeholders. As our Statute defines, our intention is to improve the investment climate and support business development in Montenegro through cooperation and dialogue with official authorities for the purpose of overcoming current and possible problems and obstacles that foreign investors (may) face, and to share the benefits and experiences of the world’s best practises and tangible tools in order to facilitate business activities.

Participating in consultations organised by state bodies and other representatives of the private sector, which relate to legal regulations, and especially regarding the preparation of comments, proposals and suggestions as part of the public consultation process, are the main contributions of our Council and our Members.

Are you satisfied with the dialogue you have with the Montenegrin Government and State institutions?

– As I mentioned previously, the Montenegrin Government understands the importance of foreign direct investment for the development of the country. This is mentioned explicitly in the main public documents, strategies, action plans, public speeches and the like. That is certainly a good base to develop a productive dialogue since both parties are willing and interested in cooperating. The MFIC communicates with state institutions via a different mechanism on different levels, most of the time successfully.

What is most important is for dialogue to continue, which I am certain it will, because apart from all the improvements we have witnessed in previous years, there is still much additional work ahead of us if we want to catch up with modern societies that have high living standards.

Which of your recommendations were addressed by the government in the previous period?

Christoph Schoen

– This year the MFIC published the seventh edition of its White Book, the publication that informs the Montenegrin public about the business environment, especially business barriers and recommendations for overcoming them and provides concrete feedback to the Government regarding regulatory and structural reforms.

Through this specific contribution, the MFIC provides the assessments and opinions of our Members regarding the country’s overall investment climate. Since we all know that the regulatory framework of any modern economy should be designed to stimulate market development, create skilled jobs, boost productivity and attract investment, the White Book deals mainly with this area.

The MFIC members listed recommendations to amend 19 regulations/laws that would improve business and further economic development (of 90+ recommendations, 64% are being considered or adopted by the Government).

What are the most important changes in the sphere of public policy that MFIC intends to pursue through this dialogue in the medium-term period?

– Considering that our members represent almost all industries, MFIC is interested in a wide range of planned reforms. Some of the areas that have been in our general focus for years, and that will surely continue to be so in the medium term, include the rule of law, and particularly property development, the labour market and employment, taxation, the banking system, corporate governance, special planning and construction, education system reform etc. These areas directly influence businesses and impact on the successfulness of our members, and we will communicate our messages regularly to interested stakeholders.

MFIC members listed recommendations in the White Book to amend 19 regulations/laws that would improve business and further economic development

How does the MFIC target new members?

– The Foreign Investors Council currently has 34 Members and is expanding constantly. Our Members are reputable and recognised companies that operate in many countries around the world. They perform a variety of business activities and it is this diversity that allows us to gain insight into almost all important business sectors in Montenegro. Our Members come from sectors and industries such as banking, insurance, telecommunications, tourism, energy, production, construction etc. They employ around 8,000 employees and account for 30% of the national GDP.

Our activities are the main reason we attract potential new members, which need to fulfil some preconditions related to the origin of capital and company reputation in order to become full Members. Our mission is not to have as many Members as possible, but rather to have ones that represent the best foreign companies in Montenegro, and which have long-term projects and plans to stay in Montenegro. Ultimately, Members need to be interested in the future development of the country and be willing to act as good examples of socially responsible businesses.

How do you assess the situation in the financial market, and specifically the banking sector?

– During the last couple of years, Montenegro has experienced a stabilisation of the banking sector and the gradual development of the capital market, thereby restoring consumer confidence in banks. 

Christoph Schoen

However, Montenegro’s banking system will not be properly consolidated without the restructuring of the real economy. As I have already stated, there is much room for improvement of the business environment, but we are aware that this is a long process that requires the cooperation of all interested parties. As one of the major foreign investors in Montenegro, our bank was recently elected to chair the MFIC, demonstrating our continued commitment to improving the local business environment. As investors, on the basis of our daily work, we see the good and bad sides of the business and the solutions offered for improvement.

As CEO of Addiko Bank, I can say that we are on the right track and are well-prepared to respond to all those challenges that the banking industry is faced with, in these times. We have established a clear vision to ensure clear, simple and direct services, so-called straightforward banking, for our clients. And next year will be dynamic and will give our all to be a bank that operates quickly and efficiently.

How likely is banking sector consolidation in Montenegro?

– We are often hearing criticisms related to the level of the interest rates and the wiliness of banks to land money. We have to admit that at least part of the problem of interest rates is reflected in the fact that there are such a number of banks on such a small market. Due to this, some kind of consolidation would be desirable, and the first signs of this development are already present. A certain number of banks are definitely necessary to maintain healthy competition, but too many banks may have the opposite effect.

This means that there is the same number of IT systems, an overlapping business network, a large number of employees in business support etc., and all of this represents a huge cost, which in the end should be covered by the prices of services and products paid to the bank by its customers.

How did Addiko Bank fare in 2016; and what are your goals in 2017?

– We are more than satisfied with the performance in 2016. Our bank went through a transformation, during which we built strong foundations and took important steps towards sustainable and profitable growth. We are continuing to focus on our mass-market proposition to individuals, as well as financing the “real economy” in terms of micro-businesses, SMEs and regional corporates. Innovation and improved technology are at the core of our strategy. We outdid our business targets in all segments, successfully reduced costs and introduced the new name.

The new Addiko brand symbolises the Group’s efforts to build a new, modern bank, with the aim of providing straightforward banking, as the founding principle on which the Group will operate – focusing on the essentials, delivering on efficiency and communicating simplicity. This is what the Addiko brand stands for, and by applying these three principles, by keeping these three promises, Addiko will deliver straightforward banking.

The new Addiko brand symbolises the Group’s efforts to build a new, modern bank, with the aim of providing straightforward banking focused on the essentials, delivering on efficiency and communicating simplicity

According to the Central Bank of Montenegro, it seems that banking activity is growing. Does this translate into more loans to the business sector?

– Competition among foreign banks to win over good corporate clients will lead to further downward pressure on interest rates in this segment. We believe that good service to clients will become increasingly important in the next few years, and thus the amount of interest in itself will not be the only determining factor for customers when it comes to choosing their banking partners. Speed and availability of banking services will make an important difference. However, it will be those banks that have the ability to improve their processes, demonstrate speed and efficiency, and find an appropriate balance between physical presence and digital offers that will be the most successful in the future.

Lending to the economy can be improved through continuously fighting against the grey economy, as well as improving financial reporting and transparency with regard to financial debt. What is specific for our bank is that the new owner Advent International and EBRD, with a long history of investing in the financial industry, is very market-orientated, and Addiko Bank is already working on principles of liberal credit policy in all aspects, the effects of which are already apparent and visible in the significantly higher credit activity of banks in 2016.

What are the most attractive products that Addiko Bank offers the business sector?

– In order to grow, companies need access to capital. We help them accomplish their goals and ambitions with our range of loan products. The most attractive products we offer the business sector are Investment loans. Financing investments helps companies implement their plans focused on business growth and development. Investment loans are provided for different purposes: purchase, construction and installation of equipment, buying other types of fixed assets, land and business premises purchases, construction of business premises for company use or for sale, renovation and expansion of existing business premises, refinancing existing arrangements… Loans are granted to all legal entities registered in Montenegro. We are focusing our energy on removing complexity for our clients, and we believe that what distinguishes our services are our faster and more efficient processes that deliver a superior customer experience.