Christoph Schön, MFIC President – Creation Of Better Business Environment Conditions

Through active participation in Government working groups and by providing comments and suggestions to most important economic strategic documents we will work towards fulfillment of the Council’s goals

Our future priorities will be to promote Montenegro’s investment potential and to promote the interests of the international business community in Montenegro. Montenegrin Foreign Investors’ Council will continue to fully support the country’s reform process and its accession to the European Union.

Christoph Schön, MFIC President

The 11th White Book of the Foreign Investors Council was recently presented. What are the most important conclusions and messages from it?

The 2020 was characterized by enormous challenges which were directly triggered by the worldwide COVID-19 pandemic crises as well as challenges which already existed before and which sharpened during the last year. While being fully aware of economic and socio political impacts we have reinforced our commitment for active and professional support and cooperation with the Government and the administration.

MFIC Index as well the industry ratings for the 2020, have confirmed the Council’s long-standing message that serious reform processes must be continuously implemented within the analysed sectors, in order to further improve the business environment, attract foreign investments and increase the economic standard of all citizens.

Looking to the future, we need to focus on three main pillars: timely and open dialogue between all stakeholders in order to give full support to business environment improvement, focus on removing identified business barriers and harmful practices that are obstacles for the community of international investors, and last but not least, for the future prosperity and overcoming the unprecedented damage caused by the COVID-19 crisis, the polarization in so many areas of society must stop and reconciliation and reasonable cooperation must start as soon as possible.

MFIC Index as well the industry ratings for the 2020, have confirmed the Council’s long-standing message that serious reform processes must be continuously implemented

Which sectors have been most affected by the coronavirus pandemic, in addition to tourism, which has certainly fared the worst?

The result for 2020 shows a significant decrease compared to 2019 (from 6.9 to 6.4) which was the best year having in mind several factors, and a decrease compared to 2017 and 2018 as well when the Index was 6.5. Such important Index decrease by 0.5 has not been recorded so far, but it was expected bearing in mind that the year 2020 was marked by COVID-19 pandemics that had extremely negative consequences on the country’s economy.

When we talk about the industries which have been rated, the decrease of all six industries is evident, what is understandable given the overall Index decrease. Accordingly, telecommunications/ICT has decreased from 7.6 to 7, banking/finance from 7.4 to 6.8, tourism from 6.9 to 6.1, production/energy from 5.9 to 5.6, trade/retail from 6.8 to 6.6 and transportation/logistics from 6.6 to 6.3.

To evaluate individual significant categories, members analyzed the extent to which the following categories affect their business positively or negatively: labor market and employment, property development, taxation, corporate governance and rule of law.

The decrease has been recorded in three categories – property development (from 6.4 to 6.3), corporate governance (6.4 to 6) and rule of law (from 5.7 to 5.3) while increase has been recorded in other two categories – labour market and employment (from 5.7 to 5.9) and taxation (6.3 to 6.5).

Six categories additionally evaluated by the MFIC members are human capital, black market and inspections, regulations for public-private partnership, public procurement, digitalization of public services, regulations on personal data protection.

Out of these six categories, increase has been recorded in two categories – regulations for public-private partnership (from 5.7 to 5.8) and regulations on personal data protection (from 5.8 to 6). The same score was recorded for digitalization of public services (5.4), while three categories recorded a decrease – public procurement (from 5.6 to 5.2), black market and inspections (from 5.3 to 5) and human capital (from 6.3 to 6.1).

In your opinion, what else needs to be done in order to create conditions for further improvement of the business environment in Montenegro?

According to the findings of the White Book, the “rule of law” is recognized as the most challenging prerequisite for business development. A “predictable business environment”, which implies transparency in the work of state bodies, is also of crucial importance.

As a serious concern for the economic stability of the country, our members recognize the “discipline” or lack of systematic and strict tax collection. We are of the opinion that “discipline” directly affects the competitiveness of companies in the market and unfair working conditions.

The government should continue the fight against the grey economy, which requires a decisive reaction from the relevant institutions and is an important factor for fair market competition.

Finally, as I stated already in the beginning, the current polarization throughout society is counterproductive for a stable and sustainable economic development, especially looking at the scarce resources available. We are therefore supporting all initiatives which contribute to a reconciliation and which are facilitating the establishment of a common vision for all well-meaning citizens.

What do you think will be the biggest challenges that companies will face in 2021?

The corona virus pandemic has hit the entire world economy, putting a significant number of companies at risk of being forced to close their businesses. The crisis has particularly affected small and medium-sized enterprises and their employees. Almost all world governments are taking significant steps to reduce the negative impacts on businesses and their employees, but much more is needed. The biggest challenge SMEs are facing today is access to finance, which was already a challenge for many small businesses before this crisis began. On the other hand, the crisis has created potential opportunities for SMEs to develop mobile e-commerce solutions. Therefore, digitalization and use of technology can support the further development of business activities.

Our message to Montenegrin businesses, especially in small and medium businesses, would refer to, again important digital transformation of business processes, more intensive communication with state bodies through existing associations and expansion of business activities.

A “predictable business environment”, which implies transparency in the work of state bodies, is also of crucial importance

What are some of your recommendations for overcoming the crisis, who are the main stakeholders in this process and what should be done to overcome the crisis as soon as possible?

Close and continuous communication with the Government and public administration bodies remains an important tool of the Council to support our members in the development and improvement of their business operations in Montenegro. Timely dialogue in this context is essential for all stakeholders, in order to enable increased efficiency in business processes and avoid negative and harmful consequences for the entire business community. In this sense, the Competitiveness Council has a particularly important role to play.

We are committed to providing further support in order to achieve proper implementation and positive results of the implemented reforms. Due to the sensitivity of any investment to frequent changes in the legal and regulatory framework, mutual understanding and commitment is crucial for the economic progress of Montenegro in the upcoming period.

What projects will the Foreign Investors Council in Montenegro work on in the coming period?

Following the publication of the 11th edition of the White Book, which findings and recommendations have been discussed at the Competitiveness Council in April 2021, Secretariat to the Competitiveness Council gathered answers from the responsible institutions to our recommendations which will be discussed and adopted at the next session of the Competitiveness Council scheduled for the end of June. We are very much looking forward towards implementation of the recommendations which refer to transfer of the best EU and world practices into Montenegrin system.

Through the initiative submitted to the Competitiveness Council, and with the support of the Ministry of Finance and the Secretariat of the Competitiveness Council, we are working intensively on the implementation of defined proposals for measures to eliminate barriers to the development of electronic services in the banking and telecommunication sectors. An interdepartmental working group, which is being chaired by the MFIC Executive Director, prepared an Action Plan with established dynamics for implementation of submitted recommendations.

We will continue to be an active member of the Government Competitiveness Council as well as to continue to closely cooperate with EBRD Secretariat to the Competitiveness Council towards achievement of our common goals and promotion of our common interests.

Our Committees (Banking, ICT, Insurance and Regulatory Policy) will closely follow up regulatory framework changes in their sectors and propose initiatives for improvement in areas relevant for our member companies’ business operations.

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