Montenegro should protect domestic products and services, interpret European Union directives carefully and help businesses join forces before joining the bloc, Robert Rakar, president of the Primorska Chamber of Commerce in Koper, Slovenia, told a panel organised by the Chamber of Economy of Montenegro. His recommendations concern how local companies can compete in the EU market while limiting risks for the domestic economy.
The panel examined the outlook for Montenegro’s economy after EU entry. Rakar took part during a recent visit to Montenegro, drawing on Slovenia’s accession experience and its adjustment to changes in the European market. He addressed the benefits of membership as well as the business opportunities and challenges that could face Montenegro.
Market access and investment
Access to a market of 450 million people was the greatest benefit of EU membership, in Rakar’s assessment. It can create opportunities for companies to invest abroad and attract foreign investment into their home country. But his warning was that capital inflows need to be monitored, particularly in a small economy.
If foreign investors quickly take control of businesses across a country, they may influence what is produced, how it is made and in what volume. Slovenia, like other small countries, fell into a trap of receiving too much capital during the accession period. Investors generally seek to maximise profit rather than benefit the local community, Rakar cautioned.
He also warned that foreign buyers may acquire local companies to remove competition. His advice for Montenegro was to protect domestic products and not sell them to foreign investors, while setting conditions for foreign businesses that provide services in the country. Access to service markets should be reciprocal, he argued.
As an example of reciprocity, a German bus bringing pensioners to Montenegro should have to hire a Montenegrin tourist guide. A Montenegrin bus with a local guide, by contrast, would not be able to operate in the same way in Germany, in Rakar’s account. The example illustrated his call for Montenegro to consider how rules governing services apply to businesses from both countries.
Free movement without passports and borders was another key advantage he identified. Montenegro, as a tourism country, should make the most of it, taking into account tourism’s share of gross domestic product. The opportunity is especially important for the north, where Rakar estimated that only 10% to 20% of the potential is being used.
Rules and Slovenia’s adjustment
The EU largely operates through directives, Rakar noted, and Montenegro should not accept them without scrutiny. Instead, the country should interpret each directive and incorporate it into domestic law in a way that causes as little harm as possible to the local economy and citizens.
Slovenia’s experience provided a caution. It treated directives as unquestionable and implemented them 15% more than necessary, Rakar recounted, in part so politicians in Brussels would praise their application. His recommendation was to assess how rules work in the domestic economy, rather than exceed what is required.
Slovenia experienced major changes after leaving Yugoslavia and later joining the EU, but adapted and made good use of its position. Although industry has been declining generally, its share of Slovenia’s gross domestic product remains the second or third largest in the bloc, according to Rakar’s account.
It took Slovenia more than two decades after joining the EU to reach 90% of the European average for living standards. Average net pay was about 700 euros when Slovenia entered the bloc, compared with nearly 1,700 euros in the latest August figures cited at the panel. Much changed in the 22 years since accession, but Rakar believes Slovenia could have reached the European average earlier and missed many opportunities.
Slovenia was not known for finished goods, but it produced semi-finished products needed by European companies. That helped it find a position in the EU market quickly, Rakar said. Slovenian companies initially competed through price dumping, which was acceptable at the time because of the volumes involved, while wages remained relatively low.
Business scale and markets beyond Europe
More than 90% of Montenegro’s economy consists of micro, small and medium-sized enterprises. Rakar did not consider that structure a barrier to operating in the EU market. In Slovenia, 99% of companies employ up to 25 people, a pattern he described as common across the bloc.
He advised Montenegrin businesses to form consortia, cooperatives or flexible business partnerships to strengthen their negotiating position with large European companies. A medium-sized European company may have about 10,000 employees, compared with 25 at a small firm, while large companies can afford about 150 lawyers and legal advisers. Cooperation can help smaller businesses face that difference in scale, his recommendation implied.
Montenegro should not focus solely on the EU market, Rakar added, and should also look to Africa, South America and Asia. Slovenia has no shared history with many EU countries, but its historical links with some countries outside the bloc have been positive and connected to the Non-Aligned Movement.
The name of Josip Broz Tito is still remembered in Africa and can open doors there, he noted. Rakar cited that historical connection as one way Slovenia can build relations with countries beyond Europe, alongside the opportunities available through the EU market.
Some EU members believe the Balkans are ready to become part of the European family, Rakar said. He also identified a potential new market of 25 million to 30 million people in the region as one interest for the bloc in admitting new countries. Potential customers for European companies and security considerations are also part of that interest.
Rakar described the European economy as being in crisis, citing more than 100,000 job cuts in Germany’s automotive industry and further layoffs in the chemical industry. He also pointed to the challenge of young people leaving, which Slovenia and other small countries have faced. Money is no longer the only reason young people choose to leave, he said.
