Transcript Macroeconomic Outlook Trends and Challenges

Capital Market Development in
Montenegro
Igor Luksic
Minister of Finance
Economic Reforms
- Basic elements of concept Openness
Accepting a credible currency (EURO)
Low level of business regulation
Low level of taxation
Basic Economic Facts
GDP 2004 real growth
Budgetary deficit
Inflation rate
External public debt
Total public debt
Current account deficit
Unemployment rate
Legal tender
3,7%
2,1%
4,3%
32,7%
44,8%
9,2%
22,6%
Euro
The Growth of the GDP
GDP
2002
2003
2004
2005
1,700
–
–
–
–
1
1
1
1
301
433
535
644
mln
mln
mln
mln
€
€
€
€
In 2004 instead of projected
2.7% the real growth reached
3.7%
1,500
1,300
1,100
900
700
500
300
100
The goal for 2005 is 4.1%
-100
2002
2003
2004
2005p
The Decrease of the Budgetary Deficit
Deficit/suficit 2002-2005 p
Budgetary deficit has been
falling in line with the IMF
program
It is expected to fall to
1.6% excluding FFPL
Including FFPLs 2.9% of
the GDP
0.00
-0.50
-1.00
-1.50
2003
-1.60
-2.00
2005p
-2.10
-2.50
-3.00
-3.50
2004
-3.29
The RPI Inflation
Having euro as a strong
and stable currency drove
the inflation to single digits
In 2004 instead of
projected 4.5% inflation
was 4.3%
The goal for 2005 is 3.5%
140
120
100
80
60
40
20
0
1999
2002
2003
2004
Public Debt of Montenegro
Total public debt fell from 85.9% in 2002 to 44.8% in 2004
thanks to the rescheduled debt to the World Bank, 51%
Paris Club write-off and no committments to the London
Club of creditors
The external debt is 32.7%
Domestic debt consists of the banking loans, old savings
and T-bills
In 2004 Montenegro received for the first time in its
history the S&P credit rating BB for the long term bonds
Huge privatisation receipts will be used to repay internal
debt in order to improve credit rating and to invest in
infrastructure
Reduction in the amount of the T-bills and loans will lead to
the increase of the money supply and consequently to the
drop of the interest rates
Privatisation and FDI
After slow down in
2003 the FDIs
increase
Goal for 2005
achieved in the I
quarter following
succesful privatisation
of Telecom, KAP,
Podgoricka Bank,
Shipyard, part of the
energy sector, hotels
and so on to be
privatised this year
160
140
120
100
80
60
40
20
0
Legal Framework and Business Barriers
Business start-up fee:
– Entrepreneur (sole proprietorship) – 1 EUR
– Limited Liability Company – 1 EUR
– Shareholder’s Company – 25 000 EUR
– Bank – 5 000 000 EUR (license from Central bank of
Montenegro)
National treatment of foreign investors
Free movemnt of capital will be introduced with the new Law on
Capital transactions
Free profit repatriation
Government tries to identify and eliminate various business
barriers
Fiscal framework
VAT introduced in 2003 – 17% (basic food, books, etc.
exempted)
In 2004 PIT (now 15, 19 ad 22%) and social contributions
cut by 10%
In 2004 Corporate Income Tax cut to 9%
There are not tax payments in next cases:
- if capital profit of selling securities is reinvested in buying new
securities in period of 12 months
- if dividends and profit sharing are used for increasing fixed
capital
- for incomes on dividends and profit sharing in other companies
Challenges are further simplification of the tax system,
continual reduction of the government expenditures and tax
burden and compliance with eurozone Mastrichts criterion
Basic Legal Framework for CM in
Montenegro
Adopted:
Law on Securities,
Law on Privatization,
Law on Foreign Investments,
Business organization law,
Law on investments funds,
In preparation:
Law on voluntary pension funds
Law on takeover of joint stock companies
Achievements
It was completely implemented the electronic trading
securities system
It is almost completed institutional and normative frame
for successful functioning of capital market
It was completely implemented system of electronic
register, clearing and balancing transactions with
securities in Central Depositary Agency, which in concept
of dematerialization securities shows basic part of security
market infrastructure
Basic rights each shareholder are regulated by law
Securities Commission of the Republic of
Montenegro
Privatization funds
Central depositary
agency (CDA)
HLT
Atlas mont
Moneta
MIG
Euro fond
Trend
More than 90% of shares already registered
Companies
&
Citizens
Montenegroberza
Brokerage firms
Stock exchange
NEX Montenegro
Monte adria broker
Holder broker
CG broker
ONYX broker
Državni fondovi
Fond za razvoj
PIO
Zavod za zapošljavanje
Montenegro osiguranje
EKOS
Lovćen osiguranje
Insurance companies
Euro market banka
Hipotekarna banka
Komercijalna banka
Podgorička banka
BANKS
Ministry of finance
Auditing firms
Deloitte&Touch
Mont Rev
KPMG
Private pension
funds
Central bank of Montenegro
ZOP
Institutional framework for Capital Market in Montenegro
Achievements
From 2001. new investments inflow was over 70
million €
In 2004. realized securities turnover was over 62
million €, which is over 4.3% of realized GDP
Frozen savings bonds trading has started; average
traded price of bond was 62.27%, since the highest
price was over 90% nominal value
Education of market participants, investors, issuer
and government employees is constantly in process
Conceptual Framework for Further CM
Development
Completing of regulatory framework for
security market functioning
Regulating issuing and dealing with short term securities
- Regulating issuing and dealing with the bill
- Implementation of Law on Investment Funds
- Legally regulating dealing of Private Pension Funds
-
-
Upgrading market infrastructure, quality
and efficiency of market
Accelerating of implementation “custody” functioning
Issuing securities by real estate
Decreasing expenditures dealing on securities market
Making changes of Law on administrative procedure
Market spreading
- Trading on stocks markets in Region
- International competitiveness securities market in
Montenegro
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