We will continue to support the Government of Montenegro during the reform process, as we strongly believe that we will achieve much more if the public and private sectors work together. Among the most important tasks in the coming period are combatting corruption, improving the consistency and efficiency of the judicial system and continuously fighting against the grey economy

The MFIC celebrates a decade of its work in Montenegro in 2019. We discussed this important anniversary with current MFIC president Christoph Schoen, who has headed this association since 2016. This was also an opportune juncture to discuss the MFIC legacy and future plans.

Which achievements would you outline as being the most important for the development of the MFIC’s organisational capacities?

– The MFIC was established in 2009 by five companies as an association of the leading foreign investors doing business in Montenegro. We today have 40 members from different sectors and industries, and their collective turnover accounts for over 25 per cent of Montenegro’s GDP.

In order to strengthen our organisational capacities to enable the implementation and follow-up of our activities, in 2016 we decided to appoint an executive director responsible for organising the Council’s daily activities, its bodies, working committees and documentation. This resulted in the efficient implementation of our strategies and policies, the coordination and execution of all MFIC activities. In 2014 we also established the ICT Committee, while in 2017 we established the Banking Committee to enable our members to engage actively in decision making processes with the purpose of improving the transparency and predictability of the regulatory framework. The mission of the ICT Committee is to encourage innovation, economic growth and improvements in daily life for both citizens and businesses by enabling a transparent, predictable and sustainable business environment. The Banking Committee was established with the aim of providing a strong, unified voice and approach of the banks under foreign ownership that is doing business in Montenegro with the purpose of improving the business environment in the banking sector. In the near future, depending on the level of interest among our members, we are planning to establish two more committees – Regulatory Policy Committee and Committee for Combatting the Grey Economy.

As somebody who has observed the development of the organisation closely and managed its work since 2016, how would you assess the role played by the MFIC in improving the business climate in Montenegro?

– We are very pleased that the improvement of the business environment, which is necessary for rapid and sustained economic growth, continues to top the Government’s agenda. The Montenegrin Foreign Investors Council will continue to support the Government of Montenegro during the reform process further, as we believe strongly that we will achieve much more if the public and private sectors work together.

Bearing this in mind, through our active participation in the work of the Government’s Competitiveness Council – as the Government’s main advisory body in the area of improving the business environment, which is led by Prime Minister Duško Marković – our efforts are aimed at ensuring that the recommendations provided by our members through the White Book, as well as through the work of our Committees, are included in the measures to be implemented by relevant state institutions in order to advance the business climate and create the same kind of business environment conditions that our member companies enjoy in their home countries.

The MFIC today has 40 members from different sectors and industries, with their combined turnover accounting for over 25% of Montenegro’s GDP

The MFIC recently became a member of the Government’s Commission for Combatting the Grey Economy, which is led by Deputy Prime Minister Milutin Simović, to work closely with our counterparts from the Government to further combat the grey economy, especially in the areas of the labour market, tourism and construction.

Looking back on the index ratings of the nine editions of the White Book that you have produced, how would you describe the progress made by Montenegro in terms of reforms?

– When it comes to the White Book – as our most recognised annual publication, which evaluates the business environment in Montenegro from the perspective of our members who are doing business in Montenegro – we can say that the business climate in Montenegro has been improving steadily.

Taking into consideration movements on the MFIC Index (the evaluation of the ease and effectiveness of doing business in Montenegro on the basis of our members’ experiences), continuous improvement in the rating has been evident since 2011, with the exception of 2015, when a decline was recorded. The MFIC Index for 2018 amounts to 6.49 (on a scale of 1 to 10) and was the highest since the introduction of this kind of measurement in 2011.

Having this in mind, there is reason to be optimistic in terms of the improvement of economic conditions and the business climate, but further attention also needs to be paid to the implementation of reform processes within analysed sectors, in order to achieve better business environment conditions, attract foreign investment and create conditions to improve the economic standard of all citizens of Montenegro.

How well were you personally accepted by the Montenegrin government as an interlocutor with experience in the EU accession process?

-Coming from a country that joined the EU in 1994, I always strive – even in my daily work – to transfer knowledge and best practises not only to the banking sector but also to the management of the Council, in order to achieve the efficient and effective implementation of our strategies and policies. I have to say that we’ve had an exceptional relationship with our partners from the Government since I was elected MFIC President in 2016.

We believe strongly that close and continuous communication with the Government and public administration authorities remains an important tool of the Council in supporting the development of our members and enhancing their business operations in Montenegro. A timely dialogue in this context is essential for all stakeholders, which would allow them to increase efficiency in operational processes and avoid negative and harmful consequences for the entire business community.

Which areas of EU market policies would you outline as those in which Montenegro needs to move the bar to a higher level?

– When it comes to the most challenging preconditions for business development, we can say that “rule of law” has been recognised by all of our members as the most challenging prerequisite for the development of business operations. We believe that a predictable business environment, which implies the transparency of the administration’s activities, is of crucial importance.

We also see the ICT sector as having a growing potential for Montenegro and ICT solutions as a precondition for further development in all sectors. We, therefore, see digitalisation as a responsibility of both the state and the private sector, which should work together to create a sensible and smart framework that will allow digital transformation to enable the improved efficiency of government services.

Our members traditionally rate the following sectors: telecommunications/ ICT, banking/finance, tourism, production/ energy, trade/retail and transportation/logistics. In addition to those sectors, the following areas are also rated: labour market and employment, property development, taxation, corporate governance, the rule of law, the grey market and inspections, regulations on public-private partnerships, public procurement, the digitalisation of public services, regulations on personal data protection and human resources. The average rating of all these areas is between 5 and 6.5, and – on the basis of those results – we are of the view that business environment reforms in Montenegro need to be implemented more effectively, in order to create a favourable business climate and to enable the entire Montenegrin economy to grow faster. This will be achieved through a timely and open dialogue with the private sector in order to recognise its needs.

Addiko Bank Montenegro recorded its best ever business result in 2018. In 2019, we will remain focused on digitalisation and the further improvement of the client experience

To what extent is the overall macroeconomic situation conducive to growth?

– We believe that the Montenegrin economy will continue to be strongly influenced by investments in the coming years. The implementation of public finance consolidation measures will also impact positively on the development of economic activities, as will measures aimed at optimising the public sector. On the other side, a limiting factor could be the lack of diversification of the Montenegrin economy, which could reduce the full positive effects of foreign investments. The Government of Montenegro has projected that the annual real economic growth rate will be 2.8 per cent in 2019, 2.3 per cent in 2020 and 2.4 per cent in 2021. Growth in Montenegro has been particularly strong in recent years, but the outlook for 2019-21 shows a slowdown, reflecting the government’s fiscal consolidation plan in the face of high public debt. Investment growth will slow, but economic activity will continue to be supported by strong tourism inflows. Credit growth to households is likely to slow somewhat from current levels (around 12% year on year) but should remain quite robust in the next 2-3 years.

How well aligned with EU standards is the financial sector? How resilient is the banking sector today, when there are some warnings that the next global financial crisis is looming?

– Banks under majority foreign ownership are dominant in Montenegro’s banking system, comprising 74 per cent of the assets of the banking sector, according to data from the Economic Reform Programme 2019-2021.

As was stated in the latest European Commission Report, Montenegro is moderately prepared in the area of financial services. Good progress was made on legal alignment and in addressing the high level of non-performing loans. In the period ahead, attention should be paid to further alignment through the adoption of acquiscompliant legislation by introducing the best European practises to the Montenegrin banking sector.

In terms of a possible financial crisis in 2020, I believe that today we are much safer than we were in 2008. Even though progress has been evident, more needs to be done, especially in monitoring closely potential new risks that may arise from a rapidly evolving financial market. Both banks and governments need to work closely to address potential systemic risks.

How satisfied are you with the performance of your bank? How does 2019 look from your own business perspective?

– I am very happy to say that, in 2018, Addiko Bank Montenegro recorded the best business result in its history. The focus on retail customers and small and medium-sized enterprises are accompanied by innovations and digital advancements. We have for example developed an automated workflow for retail lending products, which would allow us to efficiently service our retail customers and would improve the customer experience and convenience for our clients.

In 2019 we will continue to focus on our key segments, Retail and SME clients and further improvements to deliver on our strategic goals, providing straightforward banking based on efficient processes.

With the banking sector saturated, where are new foreign investments heading?

– Further development of the Montenegrin economy is focused on three sectors: tourism, energy and agriculture. There isn’t a single country that’s dominating foreign direct investments in Montenegro but rather several markets, like surrounding countries, EU member states, as well as the United Arab Emirates, Azerbaijan, China and the United States.