Montenegro

Getting out of the Crisis: Challenges, Lessons Learned and Future Steps

Podgorica, 12 November 2010

“The state cannot count on economic growth unless it provides favourable business environment” – it was jointly concluded at the Round Table discussion on “Getting out of the Crisis: Challenges, Lessons Learned and Future Steps”, organized by the Center for Entrepreneurship and Economic Development (CEED) and UNDP Montenegro. Participants at the Round Table were representatives of the international organizations in Montenegro, state institutions, business associations, as well as representatives of Montenegrin municipalities. The discussion was preceded by presentations of two studies, prepared in cooperation between UNDP and CEED: “Doing Business on the Local Level in Municipalities of Mojkovac, Plužine, Šavnik, Žabljak and Pljevlja“ and “Impact of Crisis on Labour Market in Montenegro“.

At the opening of the Round Table Mr. Alexander Avanessov, UNDP Resident Representative/UN Resident Coordinator said: “One major lesson that stands out is that even with the crisis slowly dissipating, it is unlikely that Montenegro will see foreign investments in the amount and scope it saw after independence and, therefore, in the absence of one large engine pushing the economy forward, Montenegro ought to focus on empowering the many smaller engines- national micro, small and medium businesses that can create local demand, jobs and incomes. Future economic growth if it is to be sustainable, and if it is to provide crisis-proof shield, ought to come from inside fuelled by competitiveness, innovation and productivity of national enterprises that will operate in a business friendly environment.” Explaining the role of UNDP in the post-crisis recovery, Mr. Avanessov pointed out that UNDP would continue providing support in creating a more favourable business environment and in strengthening the growth of national small and medium enterprises.

Mr. Milorad Katnić, Deputy Minister of Finance in the Government of Montenegro said that Montenegro’s positioning as 66th in the Doing Business Report by the World Bank did not mean that the business environment was of good quality, or that it could ensure a necessary level of economic growth. “Economic growth does not depend on natural resources but on the institutions. In the next period we should work on reducing taxation in municipalities, as well as on establishing mechanisms that would facilitate the process of paying taxes. In addition to this, we should ensure that the laws restrict local governments in defining the level of taxes and fees, that they encourage competitiveness and motivate opening of new businesses, ensuring enough resources for the functioning of the Administration. The state cannot count on economic growth unless it provides favourable business environment,” Mr. Katnić concluded.
 
Mr. Vladimir Radovanić, Deputy Minister of Labour and Social Welfare in the Government of Montenegro said: “Global economic crisis had an impact on the labour market in Montenegro, especially in terms of reduction in the number of employees and their wages. Due to the crisis employers reduced the number of non-resident employees, which is confirmed in the data of the Employment Agency that issued less work permits to foreigners in the last year. This was expected, as employers opted for hiring cheaper labour force.”

Mr. Dušan Žunić, CEED Consultant, who presented results of the “Impact of Crisis on Labour Market in Montenegro” study, emphasized that: “Eight out of ten employers confirmed that economic crisis had negative impact on their businesses. Out of 40% of employers who declared that they undertook certain measures as a response to crisis, 43% of them said that they had reduced the number of employees, while 20% of them reduced wages to their employees. On the other hand, the majority of the employees (45.4%) whose wages were reduced reported that the reduction was ranging from 6 to10%.”

Mr. Darko Konjević, Executive Director of the Montenegro Business Alliance, presented the results of the study “Doing Business on the Local Level in Municipalities of Mojkovac, Plužine, Šavnik, Žabljak and Pljevlja“, which testify that despite the real wealth of natural resources, these are still poor municipalities. “The study identified that these municipalities are facing the same problems in terms of business environment, such as poor infrastructure, unemployment, black labour market, lack of spatial plans, difficulties in obtaining build permits, a great number of taxes on local level, etc.” Mr. Konjević specified.

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1. The UNDP’s role in the post-crisis recovery in Montenegro:  The study on business barriers identified the lack of local spatial plans as one of the major business barriers that on one side prevented businesses from effectively moving forward with investments and infrastructure projects and on the other reducing potential tax income to municipal budgets.  Jointly with the Ministry of Spatial Planning and Environment and the World Bank, UNDP provides assistance to 11 municipalities in the north to develop spatial and detailed urban plans.  In the next few years, UNDP will use urban planning as an entry point for realizing immense climate change mitigation potential of this sector through improvements in energy efficiency, usage of renewable energy sources, sustainable transport.  Concretely, UNDP jointly with the Ministry will work on the formalization process of informal settlements with specific focus on increasing the energy efficiency within this sector, translating this into carbon credits and catalyzing carbon finance for the Government thereby not only increasing the standards of living and relieving the pressure on ecosystems but levering improvements in a more efficient energy use for additional funding.
2. Through a $2 million program on increasing capacities and catalyzing finance for management of protected area, UNDP with the Ministry and GTZ will establish not only the first two regional parks in the country but the first marine protected area as well, in addition to supporting, financially and technically, growth of biodiversity-friendly businesses in the north.  This program is will build on the start-up model that UNDP developed jointly with the Directorate for Small and Medium Enterprises that resulted in 12 new businesses being established in the north in the fields of tourism, healthy food production and arts and crafts.  In addition to addressing regional imbalances, the program will seek to partly reverse the negative migratory trends from the north toward central and south, another business barrier identified in the study, through creation of dynamic and year-round jobs in the north.