Preparing for Prosperity: Montenegro and the Next Steps for Economic Growth

Montcarton in Montenegro already exports thousands of tons of cardboard and other paper products yearly.   But if roads in the country were better, the private enterprise could produce and export even more, says Montcarton owner Jovan Jovetic.

“I hope that in the future we will be constructing highways in Montenegro, and then the conditions will be much better in terms of the cost for transport,” he says.

In order to improve overall connectivity and increase exports in the region, as well as the global market, Montenegro needs to make exports a top priority, argues the World Bank’s latest economic memorandum  for the country.

In doing so, says the report, Montenegro should dismantle the remaining trade barriers, ensure wide export certification in the private sector, and attract export-oriented Foreign Direct Investment (FDI).

“Economic growth can be expected, as the World Bank has noted in its country economic memorandum, in human resource development, growth of domestic savings, and investments in the production intended for export,” says Ljlijana Filipovic, Vice President of Montenegro’s Chamber of Economy.

The World Bank report recommends that the boost to exports – in part through upgrades to transportation in the country – should be implemented in tandem with improved energy connectivity, including improved cost recovery and tariff structures, expanded energy efficiency measures, and broader connectivity to regional markets. This would help not only Montenegro’s traditional exports – tourism and wine – but expand exports in other goods and services.

Zorica Kovacevic says she would like to see an end to the electricity shortages and transport disruptions in the winter, which she says have caused large losses to tourism in the northern town of Kolasin where she runs an upscale ski resort, known as Bianca.

And exporter Nikola Perovic says that Plantaze – the major wine company he represents – could be doing much better if the supply of energy was less costly, roads were better, and if the government did more to encourage local production for export abroad.

“We know that Podgorica as a capital has approximately 299 sunny days and we don’t have solar energy.  There is space for improvement; Montenegro should become an exporter of energy,” he says.

Despite increases in its national income, and a notable decline in poverty, the World Bank economic report says that Montenegro’s unemployment – at 20 percent – remains very high, and that consumer debt is suppressing consumption in the country.

Such negative trends can be reversed, the report says, through the recommended improvements to Montenegro’s overall connectivity through more diversified exports, better infrastructure, and modern skills, as well as through increased flexibility in terms of implementing a flexible agenda that reduces bureaucracy and improves the investment climate, especially at the municipal level.

“It is very important to reduce red tape, reduce a bureaucratic approach, and to improve the business climate.  In that sense, we cooperate with the World Bank and the Doing Business team, and we improved in that scale,” says Milorad Katnic, Advisor for Economy and Finance to Montenegro’s Prime Minister.

The report, backed by policy advisors, says such a reduction of bureaucracy – combined with improved labor market regulations – will benefit Montenegro in terms of growth, jobs, and standards of living in the years to come.