Transcript Sectors at risk in Montenegro

Ethics in society at all levels: political, civil
society, media and business
Sectors at risk in Montenegro
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General economic context and status
 Several structural weaknesses
 Lack of diversification of exports (aluminium, steels and
fuel – 70% of total sales abroad)
 Major bottlenecks persists in the energy sector
 The business climate remains difficult
 The employment market lacks flexibility
 Companies under control of a single investor represent
30% of GDP
 Further privatisations are planned: Bar harbour, railway
company, Montenegro Airlines, the postal service
 Major investments in infrastructure are scheduled
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General economic context and status (2)
 The main driver for the economy – tourism development
 Montenegro is one of the friendliest countries in Europe
for the funding of companies by domestic or foreign
actors; the corporate tax is the lowest in Europe
 Recent boom in construction and real estate sector
 FDI is focused mainly on property land and tourism
 Growing environmental pressures (solid waste
management)
 Reduction the threat of uncontrolled construction
 Challenging issue: sustainable economic growth
 Capacity building and ownership
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Challenges ...
 The main concern of EU, as well as of other main
international stakeholders, is the prevalence of corruption
and organised crime with regional and wider implications,
the weak governance as well as the strong, wellconnected shadow economy.
 Looking at recent experiences from Romania and
Bulgaria, simply enacting legislation as a means to
appease the West partners wil not be sufficient
 Continuing monitoring will require sound reforms
 “Threats v capabilities” argumentation
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EU Enlargement Strategy Paper
October 2009
 The continuation of structural reforms is key for further
improving competitiveness (economic crisis)
 Demonstration of concrete results regarding
consolidation of the rule of law, particularly
 on judicial reform and
 the fight against corruption
 Strengthening administrative and enforcement
capacity
 Public support is crucial
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Drivers for corruption
 Montenegro shares many aspects of corruption with other
neighbour post-communist states of the region:
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Legacy of large, non-competitive bureacraties
Underdevelopped market economy
Scarcity of resources
Lack of a system of checks and balances
 Country-specific factors:
 A short experience state able to exert full administrative authority
 A ruling party being in power, albeit with internal transformations
(1989-1990 and 1997), for 60 years
 A small population – familly and social relations arising for persons
in key leadership positions (statistically probable)
 The legacy and close relationship with Serbia has marginalised
certain institutions (statistics, education, donors funding,
embassies, brain drain, etc.)
Source: Corruption in Montenegro 2007, CMI
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Sectors at risk in Montenegro?
 Construction and Spacial Planning
 Energy
 Hotel Business
 Licensing
 Privatisation
 Taxation and Tax collection
 Customs
 Public procurement etc.
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Investment-related legal framework in Montenegro
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Law on Waters (May 2007)
Law on Environment (August 2008)
Law on Physical Planning and Construction (August 2008)
Law on Concessions (January 2009)
Law on Exploration and Exploitation of Oil and Gas (under
process)
 Energy Law (under process)
 Law on Energy Efficiency (under process)
 Law on Strategic Environmental Impact Assessment (2005, applied
from January 2008)
 Law on Environmental Impact Assessment (2005, applied from
January 2008)
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Construction and Spacial Planning
 High level of illegal settlements
 e.g. In Podgorica, there are four large informal settlements; coastal area also
 This is a typical example (not only in Montenegro but also in neighbour countries) of
wide risks of administrative corruption, mismanagement and abuses
 1997-2007 – over 80% of informal objects have been built; 20.000 in Podgorica
 Deterioration of areas under special legal protection
 Week-end residences or settlements in the national park of Durmitor, Skadar lake
 Commercial and touristic settlements in the coastal area
 Typical risks and mismanagement
 Weak spacial planning instruments (lack of updated plans...)
 Enforcement weaknesses:
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Absence or inadequate inspection controls
Complicated and long procedures to obtain pemits
Inadequate, partial or selective application of the legal framework
Lack of competence and negligent performance
Level of transparency and quality of information
Source: Eyes Wide Shut, Mans, 2007
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Construction and Spacial Planning (2)
 Influence of investors towards decision-makers
 Process and outcomes of the Spatial Plan of Montenegro until 2020 (adopted by the
Parliament in March 2008)
 Management of natural resources
 Effects on sustainable development objectives
 Concerns by media, civil society and international experts
 Questionable development permissions
 Conservation of areas under special legal protection
 National Parks: Durmitor, Biogradska gora, Lovcen, Skadarsko (Shkoder) lake
 Other monuments of nature (seaside, country), special natural sites etc.
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Energy
 Legal context and future challenges:
 Need to make significant progress in the transposition of EU
Directives in this area
 New Energy law needed
 New Energy Efficiency law needed
 National Energy Development Strategy until 2025 – adopted in
December 2007
 Objective of ecological state
 Balance between energy development and environmental
protection
 Restructuring and strengthening long-term energy supply
 Private sector investment in energy sector (PPPs)
 Restructuration of state assets and capacities
 Improving governance and supply of services
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Energy (2)
 Permanent concerns for major decision-making processes:
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Clarity
Justification
Public consultation and debate
Consideration of public interest
 Experiences in neighbour countries
 Underestimation of energy consumption needs in order to create
the conditions for emergent energy purchases during the winter
months under sharply higher prices
 Past investigations and criminal charges against energy
management officials
 Past case of massive fraud and mismanagement in a neighbour
electricity company to the benefit of intermediaires (supplier
companies)
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Energy (3)
Montenegrin context
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Lack of transparency for privatisations and concessions
Repeated interest among decision-makers in energy
Energy deficits
Ongoing procedures on the construction of a series of
dams with uncertain long-term economic benefits and
serious ecological consequences
 Critics and concerns related to business lobbies
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Local governance
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complicated procedures and regulations
high cost services
bad attitude of clerks towards service beneficiaries
non-transparency
it was revealed through a research titled “Integrity and Capacity
Assessment of the Local Self Governance in Montenegro”, conducted by
the Center for Economic Development and Entrepreneurship (CEED) for
the needs of the Directorate for Anticorruption Initiative (DACI) and UNDP
Montenegro.
Key recommendations from the Research:
 a) educational campaigns for citizens;
 b) further professionalize clerks in regard to their relations with service
beneficiaries;
 c) simplify procedures for issuing building permits; c) better control the
efficiency of clerks; and to
 d) publicly announce and prosecute the corruption cases discovered.
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Bussiness environment - Licensing
Particular difficulties in:
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Land registration
Municipal plannning
Licensing and permits
Transparency and accountability of land administration institutions
Complicated solutions with involvement of many institutions
Large discretionary powers
System or sytems currently present major rent seeking opportunities.
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Where is it easiest doing business in South East
Europe?
1.
Bitola, Macedonia, FYR (easiest)
12. Pristina, Kosovo
2.
Zrenjanin, Serbia
13. Belgrade, Serbia
3.
Shkodra, Albania
14. Vranje, Serbia
4.
Pljevlje, Montenegro
15. Varazdin, Croatia
5.
Krusevac, Serbia
16. Sibenik, Croatia
6.
Vlora, Albania
17. Niksic, Montenegro
7.
Osijek, Croatia
18. Podgorica, Montenegro
8.
Prizren, Kosovo
19. Zagreb, Croatia
9.
Skopje, Macedonia, FYR
20. Banja Luka, Bosnia and Herzegovina
10. Uzice, Serbia
21. Sarajevo, Bosnia and Herzegovina
11. Tirana, Albania
22. Mostar, Bosnia and Herzegovina
Source: Doing Business in South East Europe 2008
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Thank you for your attention
Questions - Discussion
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