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Montenegro, There is a lot of room for improving the business environment

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In Montenegro, a significant part of the factors that mean a good business environment has been shaken, so the economic processes are not developing in accordance with the potential it possesses, warned domestic business associations.

Representatives of those associations and business associations, which represent companies with foreign capital in Montenegro, told Pobjeda that political instability negatively affects the economic and social environment, and investors are looking for a politically stable environment and predictable business conditions.

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Business representatives believe that there is a lot of room for improving the business environment and point out that the prerequisite for this is the suppression of the gray economy and a predictable and transparent business environment, based on the rule of law and respect for legal frameworks and procedures and the equal application of the law for all.

The Council of Foreign Investors (SSI) said that a predictable business environment is one of the key prerequisites for investors, and precisely by frequent changes in regulations, procedures, conditions, tax rates and other benefits, decision makers can negatively affect the business environment and business security.

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– Political instability negatively affects the economic and social environment. Investors are looking for a politically stable environment and predictable business conditions – said SSICG.

They believe that special attention should be paid to the implementation of reform processes in the sectors analyzed by the White Paper, which their members rated as low (labor market and employment, real estate development, taxation / contributions, corporate governance, rule of law) in order to improve the business environment, attract foreign investments and created conditions for improving the economic standard of all citizens.

– In all our reports, the “rule of law” is recognized as the most challenging prerequisite for business development. A “predictable business environment”, which implies the transparency of the work of state authorities, is also of crucial importance – SSI stated.

They said that the Government should continue the fight against the gray economy, which, they say, requires a decisive reaction from the relevant institutions and is an important factor for fair market competition.

– We believe that digitization is one of the key processes that will positively affect the efficiency and professionalism of public administration, which will contribute to the reduction of corruption – said SSI.
They added that, generally speaking, they are looking forward to cooperation with the Government and the continuation of an open and constructive dialogue, and they expect the continuation of the started reforms, all in the best interest of the economic growth and development of Montenegro, and ultimately of all citizens and the economy.

– We can overcome challenges only if we work together in a constructive way. The implementation of economic and regulatory reforms is only the first step in that direction, and the geopolitical situation opens a window of opportunity for Montenegro to accelerate progress towards EU membership. We believe that there are enough mechanisms in communication with the Government to communicate constructive proposals in an appropriate manner through adequate forms of public discussion – said SSI.

The American Chamber of Commerce (AmCham) believes that there is room for improvement in the business environment.

– We constantly point out the importance of a predictable and transparent business environment, based on the rule of law and respect for legal frameworks and procedures, equal application of the law for all. If we have these conditions met, we will attract and retain renowned American as well as other foreign investors. In order to avoid unpleasant situations and far-reaching consequences for business, which result from the lack of constructive dialogue, we constantly suggest that timely and continuous communication with the private sector is necessary – AmCham announced.

They reminded that last year they signed memoranda of cooperation with the Government and relevant ministries for work on the Dialogue Governance program, precisely to encourage the timely involvement of the business community in the adoption of new and/or changes to existing regulations of importance for the business environment.

– In communication with AmCham members, we receive a large amount of information about the challenges that the business sector faces, and we continuously suggest how they can be overcome. The key barriers in business are constant and mostly relate to suppression of the gray economy, unfair competition, insufficient level of investment in the IT sector, which is our huge potential, and insufficient orientation of young people to the skills that are in demand on the labor market – stated from AmCham .

The Chamber of Commerce (PKCG) states that a stimulating business environment, which consists of a legal, regulatory, political and institutional framework for business activity, is directly related to the competitiveness of the economy, growth and development, and is a prerequisite for attracting new investments.

“Unfortunately, in Montenegro, a significant part of the factors that mean a good business environment have been shaken, so the economic processes are not developing in accordance with the potential we have,” PKCG warned.
They believe that one of the basic elements concerns a stable and predictable regulatory legal framework.

– We are witnessing frequent changes in legal solutions that are the result of non-transparent processes and are most often based on the introduction of new levies for the economy, and such an environment does not send the signal of a safe investment destination, which every businessman is looking for and expects – they said from PKCG and reminded that they are the best example and the current changes to the set of laws proposed by the Government, which, as they say, will greatly affect the economy.

The Union of Employers (UPCG) said that for years, one of the main characteristics of the business environment in Montenegro is the existence of numerous business barriers that make regular business difficult and limit the development potential of the private sector.

– Such a framework was followed by the covid pandemic, the war events in Ukraine and the unstable political and economic situation in the country, which further disrupted the entire environment and negatively affected the position and sustainability of economic entities, especially from the MSME sector. They are already so exhausted and weakened that they can hardly (or at all) carry out activities aimed at growth and development – the UPCG warned.

The representatives of UPCG added that one of the confirmations of this is the general state of the economy in which illiquidity, difficult collection of receivables, drop in income due to the reduced volume of economic activity, difficult settlement of numerous fiscal obligations, loan annuities and accompanying business costs, are precisely the measure of regular problems. That the business community faces today.

– In order to provide support to the economy and at the same time provide (higher) budget revenues, a strategically guided policy is needed to initiate processes that encourage economic activity and ensure the preservation of the stability of the economic system. It is the first prerequisite for building an environment that can be attractive for the arrival of investors and their (larger) investments – said the UPCG.

The Central Bank (CBCG) believes that the business environment in Montenegro is continuously changing under the influence of both external and internal factors.

– In general, the competitiveness of Montenegrin products is quite low, which is indicated by the high level of the foreign trade deficit. On the other hand, the business environment should be further improved, as indicated by the global competitiveness index. For further improvement of the business environment, further development and implementation of the legal framework is necessary, in accordance with EU regulations and improvement of competitiveness, while respecting the specificities of Montenegro – said the CBCG.

The President of the Montenegrin Association of Employers (CUP), Vasilije Kostić, announced that, without a doubt, a lot has been done to improve the business environment in Montenegro, but certainly not enough, despite the fact that, in a formal sense, Montenegro ranks relatively high in international institutions that that’s what they deal with.

– The reason why we are in a much better position formally than in reality, in my opinion, should be found in the fact that these rankings do not have an implementation dimension, and it is the one that speaks about the efficiency of institutions, i.e. the realization of formally granted rights – said Kostić and adds that implementation is one of the basic shortcomings of the practice, even when it comes to the business environment.

– That discrepancy between formal and real law, so characteristic of our social practice, becomes a key disadvantage when it comes to the business environment. In such a situation, you become dependent on the will of the bureaucracy, and when this is the case, then corruption is the result and a disincentive business environment – said Kostić.

He pointed out that in order to improve the business environment in Montenegro, it is first necessary to ensure that politics is in the service of economic and social development, and not the other way around.

– This would mean ensuring the creation of a healthy macroeconomic, political and legal environment, that is, institutions that will realize their role – said Kostić.

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