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MBO Interview Could you single out one reform that has been made to the Montenegrin economic system which has resulted in positive changes that benefit national companies? Reform processes, launched by the government of Montenegro to improve the business environment, have been initiated in almost all areas of business. Within this comprehensive and complex process, I believe we should outline the positive effects that have come out of the reform of the fiscal system, and from policies aimed at reducing tax rates and other charges that are burden to business operations. Recently, tax rates on income, company profits, compulsory social security contributions and other similar taxes were reduced, and this had a beneficial effect on reducing costs in the business sector. Mr. Velimir Mijušković, President of the Chamber of Economy of Montenegro

Biography: Mr. Velimir Mijušković was born in 1950 in Danilovgrad. He graduated from the School of Economics in Podgorica. During his professional career, he was: Director of the Inspection Services of the Municipality of Danilovgrad; General Director of the Construction Department of the Municipality of Danilovgrad; General Director of the Crafts and Communal Services; General Manager of the company “Žitopromet AD Spuž”. He was Vice-President of the Montenegrin Chamber of Economy until 2008, when he was elected President. Mr. Mijušković is actively involved with the following government bodies in Montenegro:

It is well known that many countries, when confronted with the global financial crisis, have resorted to increasing the level of VAT. This did not happen in Montenegro. Consequently the level of this tax, which was already among the lowest in Europe, remained at the same level; something which I find very positive. Despite the positive changes that have resulted from the reform process, businessmen still face problems associated with complex procedures, whose scope and duration in terms of time undoubtedly remain as obstacles to business. However, when talking about the reform of the Montenegrin economic system, this process should not be limited to just a single area of procedures, as it has a much broader scope. In my opinion, Montenegro has one problem which is the cause of many others, and that’s a poor usage of the available resources. However, if we put this factor in the center of our attention, it could only be a generator of further development.

Montenegro is currently in the negotiation process for gaining accession to the European Union. How do you think this process is affecting the private sector in Montenegro? The process of negotiations regarding accession to the European Union, amongst other things, implies an acceptance of new rules that essentially harmonize national legislation with the so-called EU acquis. It is known that the EU’s goal during the process of negotiations is to encourage state candidates to complete reforms in order to improve legal and economic systems to the point where they meet the level of standards and principles embedded in the foundations of the EU.

Regarding the economy of Montenegro, this means that it will be necessary to apply such measured to all of the provisions to which the state is bound. It will also mean coping with the pressure of competition that is inherent in the demanding European ‘road’. To make deep and Privatization and Capital Investment real changes that result in qualitative steps forward for the entire unit, it is crucial to influence Council; Sustainable Development the most mobile, most adaptable and most vital segment of society - the private sector. Trends Council; Council for the Elimination of that we have learned through our experiences in human history clearly confirm that, without Business Barriers a developed private sector, we cannot aspire to enter the arena of developed countries, as will and Higher Education Council. be assumed by EU membership. Therefore, Montenegro’s ambition to integrate itself into the system must include a vision of the development of our society based on a strong private sector.

Montenegro has recently become a member of World Trade Organization (WTO). Could you highlight the main benefits of this membership for the private sector? Bearing in mind that the rules, as defined in the WTO agreements, have been applicable in our country for three years now. This dates from the time of entry into the Stabilization and Association Agreement, CEFTA and other bilateral agreements with Russia and Turkey, through which Montenegro generates over 80 percent of its foreign trade exchange; and consequently much less importance was given to WTO membership. However, it is a key steps in the process of institutional integration into the contemporary system of international economic relations. It is also an important element for supporting the process of internal economic reforms, and is also a necessary step in the process of accession to the EU. Summarizing the benefits of our membership in this organization, we should primarily keep in mind that WTO is not an institution of "free trade", but is rather a system of rules that promote open and fair competition. These guidelines must also now be adhered to by the Montenegrin economy. This includes an obligation to function using the principles of a non-discriminatory trading system; a system that regulates the rights and obligations of all its members. As a member of the WTO, each country has the assurance that its exports will be treated by the same precisely stated laws as those from other countries. Inclusion in the basic institution of a universal trading system must bring advantages to its members. With international trade functioning in a free and predictable manner, WTO represents to its members a framework for increasing the standard of living, an increased level of employment, a steady level of growth in real income along with an increase in demand, an increase in the level of production, an increase on the level of foreign trade and services, a reliable level of sustainable development, environmental protection whilst also maximizing world reserves, and a level of economic development that conforms with the needs and interests of all countries, irrespective of their different levels of development.

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February 2012

What are the main challenges that Montenegrin companies will face during the forthcoming period? Despite the results of regulatory reform and the enhancement of the business environment, many business barriers are still present; particularly in terms of slow and time-consuming procedures, especially at a local level. In addition to the challenges that the real sector has already had to face as a result of a fall in the level of industrial production, there is also the problem of a high degree of illiquidity.

Are you satisfied with the benefits gained by the Montenegrin economy to date as a result of the implementation of CEFTA? Since the agreement confirming entry into CEFTA came into force, an increase in the volume of regional trade has been recorded. The total trade exchange between Montenegro and other CEFTA countries in 2011 amounted to 43 percent. In order to protect its their own production levels, signatories occasionally resort to non-tariff barriers and hidden measures of protection. These are the greatest obstacles to realizing the full potential of the CEFTA agreement.

As a result of institutional and legislative reforms carried out by the banking sector, an environment which encourages an increase in lending has been created. However, due to an increased level of A significant step forward in improving the application for this illiquidity in the real sector, this is still well below the expected agreement was made part way through last year. At this time, level. During the current year it is also realistic to expect a Montenegro had agreed to implement a greater level of freedom slowdown in lending, difficulties in returning loans that have been with Croatia. Subsequently, a higher level of trade freedom has also taken out, higher levels of interest rates, a reduction in foreign started to be implemented with Albania. direct investments, a slowdown in the field of construction (due to a fall in demand and also in property prices), the construction of The former CEFTA agreement, which dates from the time of the tourist facilities, a slower level of growth in the number of tourists Cracow Declaration in 1992, was a successful way of adopting and lower investments in capital infrastructure projects. international business rules and resulted in EU membership for In order to trigger the economic cycle and to put immobilized funds all of its signatories. The present agreement, CEFTA 2006, has into circulation, the option of creating private-public partnerships been enriched in certain new areas, and also provides a framework to implement large investment projects in energy and tourism could for “training” in the area of implementing international standards, be very positive. A significant contribution to stimulating activity concentrating on the growth of regional trade. Breaches of the in the economy would be to give willing investors relief from taxes, agreement’s provisions, which have occasionally happened from utility fees and other similar obligations in order to develop sectors time to time, have called into question its validity. However, in which the state can see a long-term interest. lessons have been learned and ultimately the signatory parties have demonstrated their commitment and dedication to the European One of the projects that promotes Montenegrin companies ‘road’.

is called “Good from Montenegro” . Could you tell us more about this project and whether are you satisfied with the results that have been achieved?

A growing foreign trade deficit has been characteristic in Montenegro for years. We produce, among other things, food which wins numerous awards at trade fairs. Our production is certified according to international standards, but our products don’t successfully find their way to local or to foreign customers. We have noted that this is an area that requires special attention and have therefore started to work on this with a precisely defined plan. We have consequently registered the trademark "Good from Montenegro". Activities are aimed at consumers through the promotion of high quality products, services and manufacturers to effectively give products a high profile. Among other things, the Chamber of Economy of Montenegro has implemented this through training, market research, business networking, numerous business forums and participation at trade fairs. Today, 13 manufacturers who offer a total of 73 products are allowed to use the trademark. Analyses have shown that there is now a better and greater recognition of high quality local products by local consumers. The project "Good from Montenegro" has, over the course of three years, achieved a good reputation, trust and an unusually high level of support from Montenegrin citizens. The popularization and promotion of local quality products were the main objectives of the project in the last phase. The Chamber of Economy was, in this case, able to help in real terms and we are very satisfied with the results. The rest is up to the companies themselves. They should now seize the opportunity offered to them through a very positive perception of their collective trademark; a guaranteed level of quality by which some of their products are marked. When producers have completed this stage successfully in the local market, they can then turn to the foreign export market.

One of the activities carried out by the Chamber of Commerce is the staging of meetings for the Committee of Women Entrepreneurs. How do you provide support for women entrepreneurs? The development and promotion of women as entrepreneurs is supported by regular activities that are carried out by the Chamber of Economy of Montenegro. It provides support to women entrepreneurs through activities aimed at analyzing conditions and tries to find ways of improving the business environment for women entrepreneurs. It also: provides information and organizes consultations with women entrepreneurs; organizes training; facilitates workshops and round table discussions on current topics that are important for the promotion of women as entrepreneurs; encourages women entrepreneurs to network through the development of local and regional networks. The Chamber of Economy of Montenegro, together with the Center for Entrepreneurship and Economic Development, is currently implementing a project to support women in business (Womenled Business Support Program). Within this project, funded by the European Union, the first national network of mentors for women entrepreneurs in Montenegro was established, as a part of the European network which is made up of 17 countries. It aims to support and help women entrepreneurs to develop their own businesses. Even before this project was initiated, through the Association of Balkan Chambers of Commerce and the Forum of Adriatic-Ionian Chambers, the Montenegrin Chamber of Economy conducted activities to encourage women entrepreneurs. They did this by encouraging them to participate in activities associated with them concerning this same issue.

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