Milutin Simović, Deputy Prime Minister Responsible for Economic Policy and the Financial System; Minister of Agriculture and Rural Development

Providing Foundations for Long-term Stable Growth

Sustainable and inclusive economic growth, which will contribute to reducing the development gap of the country compared to the EU average, and to increasing the quality of life of all citizens, is a strategic development goal of Montenegro. That’s why we’ll strengthen the country’s macroeconomic stability and work to eliminate the key obstacles to improving competitiveness

At the beginning of its mandate, the Government of Montenegro prepared and launched the implementation of its the Plan for Recovering the Budget Deficit and Public Debt, but with a parallel plan for bringing dynamism to development. Seven months later, the Fiscal Strategy until 2020 was adopted, which implied additional fiscal consolidation measures of 2.8% of GDP by 2020. “These were ambitious, but also necessary, measures that yielded encouraging results,” says Milutin Simović, Deputy Prime Minister for Economic Policy and the Financial System, and Minister of Agriculture and Rural Development. “Two years of this government’s mandate were marked by real GDP growth of 4.7% and 4.9%, which positioned us as the fastest growing economy in Southeast Europe.” In this context, says our interlocutor, it is also worth recalling the ratings of relevant international institutions, such as the World Bank and the IMF, regarding the positive effects of the Montenegrin economy. “As a result of increased economic activity, the strong inflow of foreign direct investments and consistent implementation of fiscal consolidation measures, we have continuous growth in sources of budget revenues that enabled stability in financing all current expenditures of the state.

We also have encouraging trends in 2019. Montenegro’s credit rating was upgraded last year and confirmed again in this challenging year,” says Deputy PM Simović.

How will these reforms reflect on economic growth in the next five years?

– The structural reforms that we’re implementing have the goal of improving the quality of services for citizens and businesses, which will improve the overall business environment and conditions for achieving high rates of economic growth.

In line with the demanding nature and significance of reforms, the Government has included all segments of society in open and partnerbased communication: social partners, representatives of the domestic and foreign investment community, the expert and scientific community, the civil society sector, relevant international institutions etc. We consider that such a joint effort is essential for achieving high-quality and sustainable results.

We expect the realisation of the programme of economic citizenship to contribute additionally to economic growth, which will – through new investments – bring new added value to our economy

NATO membership has brought stability that is essential for both the economy and the society as a whole. We don’t view the progress we’re achieving in the EU integration process as our obligation, but rather as the need of our society to achieve EU standards and values, which will make us a competitive member of this prestigious family of nations.

How will this growth be assisted by infrastructure investments? What are the government’s plans for the coming years?

– Without adequate infrastructure, it is impossible to achieve dynamic development. That’s why it’s significant that the government was decisive and wise in choosing to construct the highway, as the largest infrastructure project in the history of Montenegro, which will link our development potentials in the north and on the coast, whilst also connecting Montenegro with the region and the EU in a high-quality and contemporary way. We will finish the first and most demanding section next year, while we’re quickly creating the preconditions to construct the remaining sections. This also represents a significant place for international investors.

It is noteworthy that last year’s budget revenue growth of 187 million euros, which came thanks to economic growth and increased fiscal discipline, covered the annual costs of the highway’s construction, which amounted to 186 million euros.

With the laying of the undersea cable connecting Montenegro with Italy and further with the EU, the preconditions have been created for the development of the energy sector and capitalising on the natural value of huge sustainable hydro, wind and solar potential for the production of “clean” energy.

A significant need and development potential certainly lies in realising the full value of the potential of the airports of Montenegro, which should ensure our country’s better aviation links.

There is ever stronger recognition among international investors of the significant potential of the Port of Bar, as a realistic regional logistics and transport hub.

Which of the most important results in the accession negotiation process with the EU during last year and this would you single out?

– For us, the EU represents the idea of unifying Europe, which creates – on the basis of the rule of law and democracy – a promising future for all its members. We also perceive the negotiating process as a kind of guide to strengthening and accelerating reform steps, creating a society based on the rule of law, improving the quality of life of our citizens and bringing it closer to the quality of life of EU citizens.

We’ve to date opened 32 of a total of 33 negotiating chapters and provisionally closed three negotiating chapters. We expect to open the outstanding negotiation chapter, 8 – Competition, during the course of this year, given we fulfilled all the requirements for that back in 2018.

Montenegro showed in the previous period that it is ready and determined to share democratic values with EU members even in the most sensitive political areas, such as the EU’s Common Foreign and Security Policy, with which the decisions of Montenegro are fully harmonised.

I consider that we’re on the right track to fulfilling the final measures in the coming period, and in this context we expect to maintain the continuity of Montenegro’s advanced progression in the accession negotiations process.

Montenegro’s traditional products, which fuse preserved nature and modern technologies and standards, represent strong support for strengthening our tourism brand and a great chance for increased sales for producers

How does progress on EU integration reflect on the inflow of foreign investment?

– Since the restoring of independence in 2006, when we also started preparing for the process of negotiating with the EU, we’ve been carefully building a business environment and the image of a prestigious investment destination, best testifying to which are projects like Porto Montenegro, Luštica Bay, Portonovi etc. These and similar projects are the best promoters of Montenegro and the investment environment we’ve created and are continually improving. Their success is proof and guidance for an ever increasing number of world-renowned companies from almost all areas that are expressing interest in launching projects in Montenegro.

From the restoration of independence to the present day, our overall GDP and GDP per capita have doubled. Net inflows of foreign direct investments exceeding six billion euros have been realised. FDI has contributed an average of 18% to GDP annually. And we expect a significant investment cycle in the 2019-2021 period.

How have these investments impacted on changes in the structure of the economy, employment and revenue growth, and improvement of public infrastructure as a whole?

– The greatest effects of both foreign and domestic investments are visible in the sectors of tourism, energy and agriculture, which represent our comparative advantages and strategic developmental branches of the economy.

Contracted capital tourism projects worth three billion euros are being implemented in Montenegro today. With investments worth around 100 million euros in ski centres, which should be implemented by 2022, the Government launched the development of winter tourism in the North. Just the construction of the modern cable lift and associated infrastructure in Kolašin, which was made operational three months ago, led to interest being generated among investors in building more high category hotels.

We are working intensively on the realisation of projects with which we will utilise the vast potentials of renewable energy sources. We signed a contract on the construction of one of the largest solar power plants in Europe, with a capacity of 250 MW, while final preparations are underway on tender documentation for the leasing of state land at the Brajići locality for the construction of a new wind farm, and we are also considering initiatives to call a tender for the construction of a new solar power plant on Valjevo Brdo near Podgorica. It is particularly encouraging that there is also significant interest among investors for the construction of large HPPs.

In the agricultural sector over the past two years, with significant grants, we’ve seen the construction of numerous modern plants for primary production and processing that adhere to the highest standards.

In the past two years, with the aim of realising the full value of potential in agriculture, the Government has leased out 300 hectares of state-owned agricultural land. This project has resulted in new, modern production in protected areas, new olive groves, vineyards and the production of medicinal and aromatic herbs, as well as the creation of jobs. The government also intends to continue this project in the period ahead.

The development of agriculture, in conjunction with rising tourism spending, has certainty in placements and strengthens our tourism brand.

All of these investment activities have resulted in the creation of more than 15,000 new jobs in the last two years alone.

This is just one effect of dynamic economic growth. The state allocates more money for infrastructure, health and education. Compared to 2014, the capital budget has increased fivefold, and from it – alongside the highway – general road and rail infrastructure have been improved significantly. Works on national and regional roads alone are worth 132 million euros. Furthermore, new infrastructure capacities are being built in the areas of education, health, sport and culture.

Compared to 2014, the capital budget has increased fivefold … and works on national and regional roads alone are worth 132 million euros

What do you consider as being key reforms for accelerating the achieving of a European quality of life – from the current quality that’s 46% of the EU average?

– Sustainable and inclusive economic growth, which will contribute to reducing the development gap of the country compared to the EU average, and to increasing the quality of life of all citizens, is a strategic development goal of Montenegro. In order to achieve this goal, the Government of Montenegro will, in the medium-term period, implement two groups of economic policy measures. The first group refers to strengthening the country’s macroeconomic stability, fiscally and financially, while the second group of measures is directed towards the implementation of structural reforms, i.e. eliminating key obstacles to improving the country’s competitiveness and increasing potential economic growth in the medium and long term.

We are decisive in our efforts to change and improve our practises, strengthen the rule of law, advance the business environment and the policy of attracting FDI, creating new jobs, reducing unemployment, encourage entrepreneurship, strengthening our education system, raising standards and the bar on goals aimed at creating a socio-economic framework that will enable an increase in the quality of life of all our citizens.

During the past two years, Montenegro has made significant progress in terms of harmonising its agriculture sector with EU policies and standards, especially in the area of improving and affirming the quality of domestic products. What are your further plans?

– With numerous generous support measures for enhancing competitiveness from the national budget and EU pre-accession funds, projects aimed at improving the quality of production, continuous education and cooperation with agricultural producers have been implemented successfully and have yielded notable results. And here I would like to emphasise that we are achieving such results in constant open and partnership communication between the Government, valued producers and entrepreneurs and their associations, representatives of the profession and science, the civil sector and, of course, with our EU and other international partners.

We have harmonised regulations on quality with the regulations of the European Union and created institutional prerequisites for the protection of agricultural and food products. Today in Montenegro we have seven protected products: ‘Pljevaljski sir [Plevlja Cheese], ‘Crnogorski goveđi pršut’ [Montenegrin beef prosciutto], ‘Crnogorska stelja’ [Montenegrin cured mutton], ‘Durmitorski skorup’ [Durmitor milk curd] and ‘Kolašinski lisnati sir’ [Kolašin leafy cheese] are protected by the designation of origin, while ‘Njeguški prosciutto’ and ‘Montenegrin prosciutto’ are protected under geographical indications of origin.

With a combination of exceptional natural beauty and potential, an exceptional geographical position, a carefully constructed business environment and prestigious tourism brand, numerous globally recognised and successful realised projects, as well as certain swift membership in the EU, Montenegro ranks among the most desirable investment destinations.

Also testifying to this claim is last year’s ranking of Montenegro among the world’s five most attractive tourist locations, with the best potential for investment, on the list of the Financial Times’ specialised edition for FDI.

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