Two-day Economic Conference Montenegro 2016 “Development perspectives of the Western Balkans“, which the Chamber of Economy of Montenegro (CEM) organized in cooperation with the German Committee on Eastern European Economic Relations, took place at the Splendid hotel on 27th and 28th October.
The most important regional economic event, which took place for the sixth time in Budva brought together 500 participants – representatives of governments, the business community and experts from the Balkans and Germany. It also caused great media attention. Business meetings organized this year provided an additional value to the Conference.
Let us remind, annual economic conferences, organized by the Chamber of Economy of Montenegro, have became very important since the Berlin Conference in 2014, when this event was included in the Final Declaration of the prime ministers of the Western Balkans and the EU. Therefore, at this year’s Summit in Paris, held on the 4th July, the Economic Conference Montenegro 2016 was announced as a follow-up of the Summit on Berlin process at the level of the economy.
The President of Montenegro Mr. Filip Vujanovic had an opening address at the Conference, while the keynote speaker on the second day was the Prime Minister Mr. Milo Djukanovic, who discussed the economic trends during the decade of restored independence as well as the regional perspectives with the President of the Chamber of Economy of Montenegro Mr. Velimir Mijuskovic.
The ministers of economy of the Western Balkans, presidents of the chambers of commerce/economy, entrepreneurs from the country, region and EU countries, prominent economic theorists as well as representatives of international financial organizations were the panellists during the two-day event. They discussed the results and expectations of the Berlin process, economic perspectives of the region, expectations and experiences of investors at the Western Balkans, structural reforms, energy industry, transport infrastructure, education and creative economy.
The presentation of the SME Excellent and German initiative on finding partners in the Western Balkans were held at the sidelines of this event.
Mijuskovic: European level hard to reach without rapid growth
The President of the Chamber of Economy of Montenegro has reminded that in 2014 this event was recognized as one of the annual conferences on the Western Balkans, which defined the Berlin process.
– Development perspectives of the Western Balkans are the key topic of this year’s conference. Each country in the Region has determined their future towards the EU. It is not a goal itself, but adopting European standards which are necessary precondition for reaching European quality of life and standards. Some of our countries have already become EU members. The others are in different stages of accession process, but are committed to meeting this goal despite the complex moment the EU is facing, says Mr. Mijuskovic.
Prior to formal political integration in the EU, it is very important to undertake intensive measures, which will provide and speed up the economic development of the Western Balkans, he believes.
The economic development dynamic of the countries in the region varies, he adds, but they have not even reached 40% of European level of development. During the last decade the average growth rate in the region was estimated at 1,4%, while in the European Union it amounted to 1%.
– This clearly indicates that unless the Region speeds up the growth, the European level will remain hard to reach. More investments and increase of private consumption are among the main growth drivers. Competitiveness of our economies is advancing at certain pace, but it is still far from the desired level. The recovery has resulted in further job creation in private sector, but the unemployment rate remains still very high. Despite the progress in fiscal consolidation, high level of public debt is still the problem and key impediment to the economic development, he says.
The President of the CEM has emphasized that the foreign trade imbalance as well as the growing share of public debt in GDP remain challenges in the most of our countries. The European Union, he says, recognizes regional economic cooperation as a precondition for strengthening our economies. This is why it supports the projects regarding their connecting.
– This involves the construction of modern and high-quality infrastructure, which will provide better valorisation of all measures brought by our governments in order to reach undisturbed flow of people, goods and capital. However, the construction of infrastructure is not a goal itself, since it is useless without necessary legal and technical requirements and anything else which ensures its full and efficient use, says Mr. Mijuskovic.
He has reminded that big projects in infrastructure, tourism and energy sectors have started or are being agreed, which need to contribute to greater capacity utilization, growth of employment and overall economy.
– It is estimated that in the next five years the investments in the energy sector will amount to 1,5 billion EUR, 2 billion EUR will be invested in transport infrastructure, while more than five billion EUR will be invested in tourism capacities, he says.
President of the CEM expects that the share of information and experiences at the Conference as well as the meetings of the entrepreneurs will provide useful contribution towards the realization of positive economic perspectives of the Western Balkans.
Executive director of the German Committee on Eastern European Economic Relations Mr. Michael Harms has reminded the Berlin process aims at promoting cooperation between the Western Balkans and European Union and strengthening regional cooperation, which is the process enhancing conferences such as this one in Montenegro.
– Our common goal is to strengthen the entire region between the Adriatic and the Danube as a major regional investment location. Its greatest strength is that it continues to maintain a diverse range of economic ties, despite all difficulties. We can and must use this strength in order to overcome the region’s weakness: the relatively small size of the individual markets. With 620,000 inhabitants Montenegro is the smallest country in the region. However through close economic cooperation with others, it can make far better use of its great strengths, for example tourism. The prospects of becoming part of the world’s largest economic region make your countries interesting investment locations, says Mr. Harms.
He has pointed out that the region carries out more than half of foreign trade with the EU. In 2015 the value of goods traded between Germany and the Balkans, including Croatia, was 11.7 billion EUR, which increased by more than 15 percent compared to the previous year. The positive trend continues. According to the trade figures for the first eight months of 2016 evaluated by the German Committee on Eastern European Economic Relations, bilateral trade with Serbia has grown by 12 percent, with Croatia by 13 percent, with Macedonia by 16 percent, with Kosovo by 20 percent, with Albania by 54 percent and with Montenegro by 78 percent.
– Experience shows that in the long term, an increase in trade is accompanied by an increase in German direct investment in the region, says Mr. Harms.
According to him, German companies are known for conducting a thorough assessment before making an investment decision. Reliable framework conditions, transparent bureaucratic processes, freedom from corruption are decisive preconditions which need to be taken into consideration. However, once a decision has been made on an investment location, German companies are reliable partners and employers.
He says that a multitude of topics will be discussed at the Conference especially emphasizing the importance of those related to the professional training. He reminds that the German Committee on Eastern European Economic Relations has set important accents on this issue through the Zoran Djindjic scholarship programme of German industry. In cooperation with the Federal Ministry for Economic Development and Cooperation as well as the Zoran Djindjic Foundation, 600 scholarship holders, including the 2016 generation, have completed internships in German companies so far.
– Your companies can also profit directly from this program, since within it you will find employees with excellent training and international business contacts. The central topic of the Conference is also the promotion of small and medium-sized enterprises, which form the backbone of a solid, sustainable economic development. A dialogue between the presidents of the Western Balkan chambers of commerce is also very important, since together we can do a great deal for our companies to establish new cooperation, concludes Mr. Harms.
Deputy Director General for European policies in the German Federal Ministry for Economic Affairs and Energy Mr. Andreas Obersteller has said that this year’s conference will deepen the cooperation between this country and the Region focusing on specific projects.
He has said that this year’s foreign trade of Germany and the Western Balkan countries (including Slovenia and Croatia) will post new record highs. For the past seven months it has already exceeded the total amount from 2010 (14.5 billion EUR).
– We believe that strategic infrastructure projects are a great opportunity to lay the basis for long-term cooperation between Germany and this region. We also believe that increasing export capacities at the Balkans will contribute to its welfare and prosperity. Germany supports these processes at three levels – through organizing Berlin process, promoting international trade and investment activities in the region, as well as measures of enhancing bilateral trade in sectors such as health care and energy efficiency, he says.
All these activities have been carried out in order to contribute to stable and predictable business environment and protect German companies against the risk.
– It is up to companies to decide whether they want to invest and create jobs. This is why it is so important for the partner countries to create an attractive investment environment. Therefore I am particularly satisfied to have the opportunity to promote business potentials of the Western Balkans among German entrepreneurs, says Mr. Obersteller, adding that the German companies are particularly interested in long-term cooperation in energy industry (in terms of Trans-Adriatic Pipeline and the planned interconnectors), environment protection, infrastructure and tourism.
According to him, this cooperation may be improved, which the Federal German Chamber provides key support to. He emphasizes the support of this country to the integration processes of the Region.
– Germany will support the countries of the Western Balkans as they continue on their way towards the EU. It will do so as a friend, but also with a helping critical eye, he says, adding that this country welcomes the progress in regional cooperation which enhances the Berlin process.
He has also pointed out the interest of Germany in development of dual vocational education which will provide quality work force to the investors.
-Vocational education is investment in future in any way, he believes.
Mr. Obersteller invites the participants to attend the conference in Berlin on the 16th December 2016 to mark the 10th anniversary of CEFTA, thus highlighting the importance made by the free trade zone to the development of our regional cooperation.
– Rest assured that the German Government will continue to focus on our relations with the Western Balkans. We want to support your countries’ development and have a share in it, he concludes.
Cooperation among states, political stability and economic reforms are necessary preconditions for the investment growth of the Western Balkans, says the Deputy Prime Minister Mr. Vujica Lazovic adding that the economic model needs to be based on the import and investment growth.
He has said that the countries of the Balkans firmly follow the path of the European integration, but also that the EU supports the development of the Region through funds and other ways of investments in infrastructure projects.
– Joint actions and accepting the fact that the market of the Western Balkans is more attractive as regional rather than market closed by national borders, are the first steps in order to have successful investments, says Mr Lazovic.
He adds that the Western Balkans, as a part of the Mediterranean, has always interesting trade hub to other countries.
– Cooperation among states, political stability and economic reforms are necessary preconditions for the investment growth at the Western Balkans. We need the economic model based on the import and investment growth. Reforms in the rule of law are essential in order to make the capital safe i.e. to attract sound investments. Montenegro and other countries have made a great progress in promoting legal order, but plenty of challenges lie ahead of us, says Mr. Lazovic.
Montenegro is open to any form of productive cooperation in the Region, he concludes.
– Our perspective is optimistic, since our economic growth rate is among the highest in Europe. We know that we can achieve more. It is up to us to conduct structural reforms and carry out sustainable policy of public finances, says Deputy Prime Minister.
President of Montenegro Mr. Filip Vujanovic
Berlin process provides development opportunity
The President of Montenegro Mr. FIlip Vujanovic says that the Conference in Budva provides an opportunity to further promote the values of the Berlin process for development of the Western Balkans.
– First of all I express satisfaction with the organization of this important Conference which once again confirms the high value of the CEM activities and its contribution to promotion of economic development of Montenegro. I pay special respect to co-organizer the German Committee on Eastern-European Economic Relations. The selection of the topic “Development perspectives of the Western Balkans” as well as its panels along with the participation of eminent experts provide a guarantee to the success of this Conference – he said.
According to him, Montenegro has recognized Berlin process as its clear development opportunity, since it contributes to the improvement in infrastructure and better exploitation of resources through the energy industry.
– Project preparation of further improvement of rail and energy infrastructure has provided donations through the Western Balkan Investment Framework (WBIF) for the reconstruction of section of the railroad Belgrade-Bar, through Montenegro, and the continued construction of 400kV Pljevlja-Visegrad-Bajina Basta transmission line. Valorising its energy potentials and high level of energy networking with Italy via the undersea cable Montenegro becomes an energy hub for transporting electricity from the Western Balkans to Italy and Western Europe market, says Mr. Vujanovic.
He presented the progress of our country in Euro-Atlantic integrations. He emphasizes that Montenegro is rapidly approaching the full membership in the NATO, and that 11 countries ratified the Protocol. He adds that other countries are very likely to do the same by the middle of next year. The path to the EU is open and Montenegro is the leader of this process in the Western Balkans. He also spoke on economic trends since the restoration of independence, saying that it has been characterized by dynamic economic growth. Foreign direct investment of 7,3 billion EUR, which is the highest amount in Europe, contributed to this.
– Montenegro achieved all this thanks to its natural resources, geographical position but also the government policy which created favourable business environment, says Mr. Vujanovic.
He concludes that the results achieved in the last decade, showed through macroeconomic indicators, clearly confirm the dynamic development.
– The importance of trade in economic growth and development of our region should be pointed out. The transformation of international economic relations of Montenegro has been provided by, among other things, our joining the WTO in 2012. Montenegro supports the accession process of our neighboring countries to this organization. Through the WTO system and multilateral trade rules, we provide a number of advantages including the Trade Facilitation Agreement which aims to simplifying customs procedures, reducing the costs and intensifying cross-border trade cooperation. During the presidency of CEFTA this year and based on the conclusions of the Berlin process, Montenegro is committed to encouraging the provision of conditions for signing the CEFTA Trade Facilitation Agreement – he said.
He has expressed gratitude towards the CEM for providing promotion and development of economy and connecting the Region via this Conference.
Ministers of economy: It is time to develop deeper cooperation
The ministers of economy/infrastructure presented to the economic and wider community results and expectations of the Berlin process, promoted and initiated by the German Chancellor Ms. Angela Merkel in 204, since the Balkan countries face many complex challenges on their way to EU.
The moderator was Mr. Michael Harms, executive director of the German Committee on Eastern European Economic Relations.
Ms. Milva Ekonomi, minister of economy of Albania says that small economies of the Western Balkans cannot make significant progresses without cooperation and integration processes.
– It is high time to develop deeper cooperation in the region in order to join the European Union. We need to focus on the greater connecting of energy potentials, transport infrastructure but knowledge as well. We also need to make tourism a kind of communication form between our countries. States must do everything to enhance these processes, says Ms. Ekonomi, emphasizing the significance of CEFTA for these processes.
She has advocated harmonizing the policies of state aid, intellectual property, public procurement, as prescribed by the EU, and providing free movement of staff which can contribute to strengthening trade relations.
Montenegrin minister of economy Mr. Vladimir Kavaric has said that integrations are main expectations from the Berlin process.
– There are no self-sufficient economies and this is especially true for our small economies at the Western Balkans. If you ask me what the concrete results are, I can say that the Berlin process contributed to connecting the region through infrastructure – he says.
He has added that the undersea cable between Montenegro and Italy, for which the European Commission allocated the grant of 25 million EUR for the purpose of extending this project as well as the reconstruction of the Belgrade-Bar railway, construction of the Adriatic-Ionian pipeline etc. contribute to stronger regional connection.
– We are not competitors with each other. We need to join hands in order to compete at third markets. We need to reduce taxes, remove customs and non-customs barriers. All requirements of the European Commission may be carried out without creating new barriers in the Region, says Mr. Kavaric.
Line minister in the Government of Serbia Mr. Goran Knezevic has reminded of the initial scepticism of the part of this country’s public towards the Berlin process due to bad historical heritage.
– However, we have perceived that together we can initiate big processes especially in infrastructure and become a credible interlocutor to the European Union, he says.
According to him, the next year is crucial for the progress of the Berlin process, but at the same time he warns that this period will be full of challenges due to Brexit and instability in the neighboring countries of the European Union.
– As a regional artist says I hope that we spent all the ammunition at the Western Balkans, and that we will develop business environment and overall stability in a spirit of peace, says Mr. Knezevic.
Mr. Mato Franjicevic, Deputy Minister of Foreign Trade and Economic Relations at the Council of Ministers of Bosnia and Herzegovina, says that he is satisfied with achieved results, since the regional cooperation has been intensified through trade facilitation, which the CEFTA gives a special contribution to. He expressed hope that its final protocols, which will allow the full implementation of free trade in the region since 2018, will be adopted in December.
– For Bosnia and Herzegovina it is very important that we initialled the Stabilisation and Association Agreement. The whole process has a number of positive effects and affects the consolidation of the economic but also the political opportunities in the country – he said.
Chambers: Speed up investments, modernize the economy
The national chambers of commerce in the region may be main implementation structures for carrying out economic policies in the region, where it is still necessary to conduct certain reforms. This message was sent by their representatives on the panel at the Economic Conference.
They spoke on the economic perspectives of the region through the discussion led by Mr. Alan Richard, special representative for economic diplomacy in the Balkans of the Republic of France.
He has pointed out that there is a clear economic perspective of the Western Balkans, and it is evident that the budgetary and fiscal issues are moving into right direction. France supports European manner of the Western Balkans development, since this region has significantly improved through Europe.
– The pressing need of all countries in this region lies in speeding up investments which will contribute to modernisation of the economy. France is interested in offering technology and innovation to these countries and affecting the change of economic picture in the region, says Mr. Richard.
According to him, it is necessary to reform the administration and legal framework in order to facilitate international business partnerships. These improvements are necessary to each country which has been engaged in it due to the EU accession.
– The chambers of commerce need to be drivers of the improvement of business environment. The human resources in this region are capable to develop business, while the EU will provide financial support to the projects regarding their further education, he says.
President of the Union of the Chambers of Commerce and Industry of Albania Ms. Ines Mucostepa has said that the chambers need to work together on improvement of business, investment climate and competitiveness of economies as well as enhancing new common projects.
– We are looking forward to common infrastructure projects connecting the region, such as Nis-Pristina-Tirana highway which is very important for the investments as well as the staff, she says.
Mr. Velimir Mijuskovic, President of the Chamber of Economy of Montenegro, has reminded that the chambers have worked on connecting the countries in the Region even when the politicians did not provide the support. In that period they had the support from the chambers of commerce of developed countries, first of all Germany which supported the establishment of the Association of Balkan Chambers, providing guidelines on business operation in market economy and services which they would offer to their members.
The processes of market integration in the region have been continued by the CEFTA, he has reminded.
– The economy is aware that we can hardly be competitive at the EU market unless we cooperate. On the basis of the Berlin process our associations established the Western Balkans Chamber Investment Forum, which would monitor carrying out the projects and analyzed the way of our companies’ involvement in their realization. We believe that this process will continue to exist and that as business communities we will be more involved in it, says the President of the CEM.
Representative of the Croatian Chamber of Economy Mr. Zelimir Kramaric believes that these associations need to focus on specific projects such as chamber digitalization network in order to inform their members and connect with business entities in the EU.
– Knowledge and competencies are especially essential for the economy, so I believe that we need to share models of strengthening vocational education patterned after Germany, Austria and Switzerland in order to be quickly involved into chains of high added value, says Mr. Kramaric.
He has stated that it is necessary to invest more in innovation, research and development and that the chambers must provide the support to this process together.
– If we do not develop new services, we cannot be competitive at the market, he says and adds that the voice of the chambers should be more heard by the governments, which need to understand the key role of theses associations in carrying out the economic policies.
Mr. Safet Gërxhaliu, president of the Kosova Chamber of Commerce thinks that the region has no perspective while there is corruption.
Mr. Branko Azeski, president of the Economic Chamber of Macedonia countered to the views of the speakers saying that the Western Balkans has no perspective due to corruption.
– The corruption is the reason for economic stagnation and arises from the judicial systems of our countries, says Mr. Azeski, indentifying problems in the customs services as well.
He has invited the EU to assist in combating the corruption providing experts who will contribute to it.
– There is no qualified labour force. High quality employees have left the country. We cannot find employees and therefore we can get nowhere. I wonder how the companies on the Balkans survive. We should give a medal to each of them, says Mr. Azeski.
He says that Berlin process is a last hope to all countries in the region.
– I would urge that if chambers may make such a turn, the politicians should also deal with it a little bit. More business less history, says Mr. Azeski.
Mr. Safet Gërxhaliu, president of the Kosova Chamber of Commerce thinks it is necessary to turn to the future not the past.
– If you listen to the politicians, they will talk about the events in the past. Business and chambers of commerce talk about present situation, situation in the next 5 or 15 years. We turn to the future, not to the past, says Mr. Gerxhaliu.
He says chambers of commerce of the countries in the Region are 50 steps ahead of the politics.
– Greater involvement of the politics leads to creating barriers in the economy which prevent growth and future, adds Mr. Gerxhaliu.
Unemployment and low economic growth are the common issues of the countries in the region, he says.
– We need to work together and eliminate barriers. At the Balkans political integrations are more discussed and we need to find the ways to discuss the integrations in terms of economy, says Mr. Gerxhaliu.
He has added that dialog and partnership among countries need to be fostered.
The president of the Chamber of Commerce and Industry of Serbia Mr. Marko Cadez has said that if the region wants to survive, it needs to find common response to some issues, which cannot be done without political elite in countries and Europe.
– We expect our governments to discuss more on the issues regarding solving some problems. We work and cooperate on a daily basis in order to connect our economies, says Mr. Cadez.
He adds that for the first time the chambers are working on creating a common service which would connect the small and medium-sized enterprises with the financial institutions.
The president of the Chamber of Commerce and Industry of Slovenia Mr. Marjan Mackosek says that the economy has done a lot for the politics in the region and that it is high time for the politics to pay off the debt.
– It is necessary to put pressure on politics to find the strength and overcome all these problems which were the result of history and we need to turn to the future, considers Mr. Mackosek.
As he says, chambers of commerce are the evidence how it should be done.
– The politics should not favour one or two sectors of the economy, it must create such conditions so that anyone who has ideas, innovation and other skills can work, says Mr. Mackosek.
Economic structural reforms for the EU integrations
Structural reforms are extremely important for European integrations and they cannot be conducted in a short period of time. It was said at the panel during which this topic was discussed.
– Structural reforms are becoming a part of preparation for the economic policy management control, says PhD Ms. Gordana Djurovic from the Faculty of Economy in Podgorica.
She has added that the Western Balkan countries are the buyers’ market rather than market of goods and services producers. Therefore they must have the annual growth rate of 4 to 6 percent in order to get closer to the EU membership.
When it comes to Montenegro, trends during the last ten years bring optimism, but only indebtness does not follow these trends, since it exceeded the Maastricht criteria.
– It is interesting that Montenegro has the largest trade deficit and the largest inflow of foreign direct investments and it is our responsibility to deal more with increase of competitiveness and export, says Mr. Djurovic.
Structural reforms include, among other things, public debt and finance management. Ms. Djurovic says that reforms in agriculture and tourism should be mentioned as well.
Mr. Aleksandar Vlahovic, president of the Serbian Association of Economist presented the aspect of fiscal consolidation as a precondition for successful structural reforms.
– The problem is that we are implementing structural reforms when the inflow of foreign direct investment is less than in the first decade of the 21st century. We missed the opportunity to do it earlier and thus create conditions for a sustainable economy – he said.
According to him, the growth of all Western Balkan countries is based on public, rather than private expenditure, while the share in services sector is much larger in relation to others.
– According to business conditions our region is at the medium level, while in terms of competitiveness it is among the last countries. This is how we are perceived by the others, says Mr. Vlahovic.
In Serbia, he has added, the positive economic trends continue in 2016 as well, current account deficit has been covered by foreign investment, with a drop in unemployment, which allow initiation of structural reforms. He concludes that structural reforms can have a negative impact on growth in terms of the fiscal deficit.
President of the Croatian Association of Economists Mr. Ljubo Jurcic wishes the Western Balkan countries to become part of the EU family soon. However he points to the fact that nobody else will solve problems to these countries nor encourage their development, but they have to do this by themselves.
– After 1990 Europe is united by the capital which is characterized only by profit and there is no solidarity. The countries should work together to develop infrastructure, not to be competitors – said Jurcic.
This country, in his opinion, has stagnated since joining the EU.
– When it entered the EU, Croatia did not change the economic and industrial structure, but we also have not made a new one, he says.
He believes that the infrastructure is only a semi-finished product and countries in the Region should focus more on making the final ones.
The representative of KfW Development Bank Mr. Kirk Mildner, director of Department for Municipal Infrastructure and Transport for Southeast Europe and Turkey, spoke about their significant investments in the Region, especially before the outbreak of the crisis.
– The problem of these countries lies in insufficient dealing with the structural reforms, professional training and realization of projects in manufacturing, he said.
He says that the region should continue with fiscal reform in order to achieve long-term economic growth.
– Growth of over two percent speaks about the potential of the area, but it is not enough – concludes Mr. Mildner.
Mr. Miguel Morgado, Director for Adriatic Sea, EIB has reminded that this financial institution through its activities seeks to improve economic activity, health and social care, ICT and other industries.
– It is essential for good investments to be consistent with the guidelines of the European Commission, such as large infrastructural projects which are ahead of the region – he said.
Investors seek sustainability, predictability, stability
Investors expect each country to provide sustainable, predictable and risk-free investment environment. They seek unbiased judiciary system and dedicated politicians who understand the significance of business for the national welfare, this was the message of the panel “Region and foreign investments”.
Mr. Martin Knapp, executive director at the AHK Serbia, Albania and Montenegro moderated this panel.
– State can do a lot on the stability of the business environment, because in such an environment banks offer loans on favourable terms. With its advice it can help raise the level of competitiveness of the business ventures, and also contributes to this through providing adequate municipal and other infrastructure – said Mr. Klaus M. Steinmaurer, Vice President for International Affairs at Deutsche Telekom.
He notes that during the Conference so far the cooperation, road and energy infrastructure were highlighted, but no one has mentioned information infrastructure, which contributes to the overall economic development and is essential for attracting new investments.
– We would like to participate in the development of the Western Balkans and contribute to it through new investment. We noticed a number of opportunities, but they require certain infrastructure investments as well, he said.
European Bank for Reconstruction and Development states that our region is an interesting investment area and it would like to be present in the forthcoming period as well. Representative of this institution Mr. Peter Tabak, associate director and lead regional economist for Croatia, Russia, Serbia and Slovenia has reminded that their annual investments amounted to 10 million EUR per year, offering loans to the private sector under the more favourable terms than development banks in this part of Europe, but also technical and advisory support.
– We are very strongly committed to supporting small and medium-sized enterprises as a key element of each economy development, says Mr. Tabak and urges each country in the Region to start fiscal consolidation.
Mr. Ronald Seeliger, vice-president for the SEE at Stada Arzneimittel AG and CEO of Hemofarm Group has spoken on the positive experiences regarding investments in our region. This pharmaceutical giant in the Balkans employs about 2,500 people.
– We are planning additional investments in new plants in this area. We are looking for location and high-quality staff. We express our satisfaction with the expertise of employees who are working with us and we have not regretted at one point due to the investment in the Balkans – says Mr. Seeliger.
Ms. Snjezana Köpruner, CEO at the GS Maschinenfabrik Travnik and president of the German Bosnian Business Association spoke on specifics of her company which was privatized in a way that employees got 25 percent of ownership, which, as she says, influenced them to become drivers of a number of positive processes.
– We got German buyers who share their considerable knowledge and contributed to our success, she says.
Mr. Juerg Steffen, director of Henley & Partners Group, spoke of the services of obtaining permanent residence and citizenship to investors, which they provide.
– Very quickly, in a year or two investors at the Western Balkans will also be able to obtain citizenship for a certain amount of investment. In Cyprus, for example, it is an investment of 50,000 EUR in real estate, somewhere else it is a purchase of government bonds – he explains.
Prime Minister Mr. Milo Djukanovic
European development path has no alternative
European development path of Montenegro and the Western Balkans has no alternative. The EU integration of the Region depends primarily on Europe awareness of the problems it faces and readiness to fight for its own system of values and global competitiveness. The future of Europe lies in the further uniting and strengthening the European idea. European architecture showed weakness, but giving up the idea would be a disaster for everyone due to loss of competitiveness. This is stated by the Prime Minister Mr. Milo Djukanovic in a discussion with the President of the Chamber of Economy of Montenegro Mr. Velimir Mijuskovic.
He has said that recent election did not only decide who will be in power, but a struggle for the European perspective of the Western Balkans took place then.
– This has been a brutal effort to collapse the European system of values at the Balkans and pull the wool over our eyes as it was the case throughout previous century, says Mr. Djukanovic.
Thanks to accepting precisely this system of value, the citizens of Montenegro have got the country closer to NATO and the EU membership, changing the way of thinking and living their lives according to European standards, he believes.
He has emphasized that our country is a leader of the Euro-Atlantic integration in the Balkans. During ten years of restoration of independence it became the most developed economy which is indicated by all parameters. GDP per capita has increased from 3,500 to nearly 6,000 EUR, wages have nominally risen by 77 percent, pensions by 100 percent, 35,000 jobs were created and unemployment rate was reduced.
– However, this regional leader has a GDP per capita of 6,000 EUR, while the European is estimated at 28.7 thousand EUR. This indicates the extent of falling behind the EU and how catching up with developed countries is an extremely important task for all governments in the region – said Mr. Djukanovic.
It is the fact that Montenegro has made a significant progress over the last ten years, adds Mr. Djukanovic. However, he believes that it has not reached the point in which these benefits could be enjoyed by the wide number of citizens.
– An average GDP growth was estimated at 3,2 percent, but our goal is 4 percent and more. This is very demanding, but it is also realistic when it comes to Montenegro, he says.
Development projects and investments contribute to this goal, he says. He has mentioned the construction of the highway Bar-Boljare, setting up a power cable, the construction of tourist resorts and others.
The Prime Minister says that in the forthcoming period Montenegro should focus on economic growth and achieving a higher level of competitiveness in order to make overall social progress.
Competitiveness is a key issue not only of Montenegro, but also the economies of the Western Balkans. The Prime Minister believes that competitiveness should be encouraged by commitment to structural reforms. Changes are needed in the education system as well, and all these aspects contribute to improving the environment which will attract more investments responsible for the economic development.
President of the CEM Mr. Mijuskovic says that the Berlin process, which was supposed to initiate the intensive work on infrastructure in Europe, was discussed a great deal on the conference. He asked Mr. Djukanovic how satisfied he is with the achieved results through this process.
The Prime Minister has replied that the Berlin process is valuable, and in the last two years a serious progress has been made in this regard.
– The issue of infrastructure is a major problem which cannot be solved by the local forces. This is the key to solving the problem of the economic backwardness of the Western Balkans to Europe – says Mr. Djukanovic.
The Western Balkans, he believes, must hasten to European integration, whereby the state must be the initiator to continue the process of European integration. He believes that the initiative which is finally articulated in Paris, concerning the Regional Youth Cooperation Office is very important, which should help in faster overcoming the problem of insufficient knowledge, and it is realized through the reform of education.
The Balkans will be a big construction site by 2030
By 2030 Montenegro and the Western Balkans will be a big construction site due to connection to the main, Trans-European transport network. This will result in big investment activities, it was said at the panel on transport infrastructure where a special emphasis was placed on establishing better communication and facilitating cross-border procedures in the Region.
Moderator, vice president of the CEM Mr. Stanko Zlokovic points out that transport connection in the Western Balkans is priority economic as well as political issue precisely due to connecting people and eliminating prejudices. Transport infrastructure is a precondition for development and Berlin process is evidence that Europe has recognized its importance.
Ms. Angelina Zivkovic, assistant minister of transport in the Government of Montenegro has said that insufficient quality transport infrastructure is a main barrier to the competitive development in the region.
– Construction of transport infrastructure will result in higher investments, employment, growth of living standard, she says.
Berlin process has determined the main transport corridors which will connect the Region in the future. Also the list of projects which will contribute to their realization has been harmonized as well as the soft measures which will eliminate administrative barriers.
Two corridors pass through Montenegro: Bar-Boljare highway and fast road of the Adriatic-Ionian corridor. They should be completed by 2030 as well as the modernization of the Belgrade-Bar railway corridors in line with European standards, and connecting Podgorica and Tirana by the railway, i.e. repairing this railway for the passengers, not just freight.
– Corridors through Montenegro are very important to connect the Southeast and Central Europe. Seventy local companies are engaged in the activities on the Bar Boljare highway and this means that 190 million of the value of this business will stay in our country – she said.
She pointed out that the opening chapters on transport indicate that Montenegro is the EU integration leader and positive example in the region.
Director of the Airports of Montenegro Mr. Milovan Djurickovic has spoken on important results which Montenegro achieves in terms of passengers arrivals from abroad at airports in Tivat and Podgorica.
– Each year we record an increase of 100.000 passengers. According to our plans, by 2020 there will be 2,2 million passengers, 2,8 million by 2025, and 3,5 million afterwards, he says.
In his opinion, it is absurd that Montenegro established better airlines with world destinations than with regional centres.
– We do not have airlines with Zagreb, Sarajevo or Skopje. They used to exist, but were closed due to economic reasons – he said
Moderator Mr. Zlokovic comments that it is necessary to follow the global interest which is more important than economic one, concerning the establishment of airlines between major cities in the region.
SEETO expert Ms. Sanja Dodig presented the transport observatory in Southeast Europe. She said that among the transport projects there are 90 percent of those related to road infrastructure now, but progress is evident when it comes to investment in the railways.
– The focus is now on reconstructing the railway. Currently, 21 projects in transport sector have been prepared, while 27 are in the preparation process – she said.
Mr. Olaf Schaller, regional director for Eastern Europe at the DB Engineering & Consulting GmbH has said one billion EUR will be invested in the railway transport in the next five years.
– It is our desire to bring back passengers from the roads to trains. The cheap bus service poses a problem to achieving this objective, he says.
According to him, his company has not had a representative office in Montenegro so far.
– We would like to work on projects or monitoring in your country. I think we could help in developing your railway infrastructure, added Mr. Shaller.
Mr. Robert Sever, director for Transport at the Chamber of Commerce and Industry of Slovenia spoke on challenges regarding transforming the road transport into rail transport in this country.
– Transport industry is very important in Slovenia. In 2015 its income were estimated at 4,8 billion EUR or 14,8 percent more than the average for the period 2008-2014.
However, speaking about transport industry in Slovenia we also speak about supplying not just domestic market, but also the Balkans, Central and East Europe, he clarifies.
According to him, connecting the Region is very important for all companies in transport and logistics.
– We have been transporting by railway to Belgrade and Istanbul three times a week, and I believe it is also an opportunity to connect the Port of Bar to this route, he says.
Energy industry – driver of economic development
Mr. Ivica Toljan, director for Key Account and Sale Department at the CROPEX Croatian Power Exchange has pointed out that energy is extremely important for Montenegro and the Balkans since it is a driver of overall economic development. He spoke on reforms and changes in energy system, carried out in the past decades and contributed to development of this extremely important industry.
– Electricity markets operates, we have carried out a number of projects which contributed to the modernization of this system and have an impressive development results, said Mr. Toljan.
However, he believes that we did not pay enough attention to the valorisation of renewable energy sources and these are areas we need to count on more since they deserve it.
According to Ms. Jasmine Trhulj, an energy market expert, the energy community needs to extend beyond the EU borders in order to foster trade and competition, which should contribute to competitiveness growth, environmental protection etc.
– Development process of the electricity market in the Western Balkans in the last decade is characterized by the transposition and implementation of EU legislation, but a lack of political will and readiness for cooperation are also evident, she says.
Ms. Trhulj has pointed out that the objective is to complete infrastructure connection between the Western Balkan countries. This objective will be achieved soon by infrastructure connection between Montenegro and Serbia on the one hand, and Macedonia and Albania on the other.
According to her, power exchange will be established at the Balkans soon, which is very important for the development of renewable sources. Serbia has done the most on this plan, then Montenegro and Albania. The existence of these exchanges is also important due to integration of power markets which are small and thus it would increase their competitiveness. Sooner or later, she adds, all of us will be a part of European energy market, so I recommend the countries to network.
Montenegro as part of the Balkan energy networks was discussed by PhD Mr. Mihailo Buric, University of Montenegro. He points out the key directions for covering the deficit in the domestic market, which amounts to 1.5 billion kwh/year. In his opinion, the construction of the power cable between Montenegro and Italy can greatly contribute to export and electricity production. In addition we have vast resources for the construction of small and large sources of electricity.
– Small energy sources must be complementary, we cannot close the power balance. We have huge hydro potentials, then the energy resources of sun, wind, biomass, coal and others. The small hydro power plants whose potential is 425 million kwh/year, are of current interest, said Mr. Buric.
In Montenegro wind power plants have significant prospects, those at Krnovo have been built, while wind power plants at Mozura are under the construction. We also have enormous potential in wood biomass.
– Big coal reserves from 120 to 150 million tonnes can provide operations of TPP Pljevlja, considers Mr. Buric.
He has said that we can expect to achieve great benefits from oil and gas at the annual level, and huge water resources of Tara and Komarnica can greatly increase energy effects. However, we should have the industry for this level of energy, he concludes.
Mr. Tomas Sichla, managing director at RWE Ljubljana believes that the energy market cannot be national but only regional. Mr. Andresas Cholet, head of Project Development at the WPD AG thinks that special emphasis should be placed on renewable resources, wind energy and sun. Mr. Emil Bakic, regional director at Akua Energy says that Montenegro can be a role model for the entire region regarding the valorisation of renewable energy sources. Or, for 50 to 100 years, Montenegro can become a country of renewable energy.
Development of municipal infrastructure set as a priority
The Berlin process has shown the necessity to recognize municipal projects in the Western Balkans as one of the priorities. The governments in the Region must understand that they need to engage in the construction of municipal infrastructure in the municipalities and include related programs into their financial plans, it is said at the “Municipal infrastructure” panel at the Conference.
The panel brought together international experts, representatives of municipalities, Union of Municipalities and utility companies, who pointed out that the issue regarding regulation of this segment of the infrastructure is essential for the development of each local community.
Moderator Mr. Aleksandar Bogdanovic, mayor of Cetinje and president of the Union of Municipalities of Montenegro, says that since 2006, level of recognition of Montenegro as interesting destinations for foreign investments has been clear.
This was significantly contributed by creating conditions to attract investors, not just through a competitive fiscal policy, but also the construction of infrastructure.
Mr. Kirk Mildner, director of Department for Municipal Infrastructure and Transport for Southeast Europe and Turkey at the KfWDevelopment Bank, has said that they invest 1.5 billion EUR on infrastructure construction sites in 80 cities in this area. These are mainly projects of municipal waste and waste water.
– We are very interested in investing in efficient municipal facilities with sustainable management, said Mr. Mildner.
However, it is necessary to improve the sustainability of municipal companies in the region. This might be achieved by raising the price of their services, which are very low in this region, then reducing the number of territorial organizational units or expanding the scope of activities of utility companies in several municipalities.
Ms. Heike Bughard, head of the Regional Section SEE at the German Water Partnership agrees that the prices of services pose a problem to sustainable businesses operation in the region.
– The Western Balkans is affected by the problem of finance. Service prices are very low and cannot cover the costs. Qualification of staff is also among its major problems and without adequate knowledge, you cannot conceive quality projects, apply for funds, or convey other people experiences in the right way – she said, adding that they have been present at the Balkans for a decade.
The technical director of the Water Supply and Sewerage Podgorica Mr. Filip Makrid has pointed out that municipal infrastructure is the main form of infrastructure, without which potentials cannot be achieved in any area. According to him, the Capital of Montenegro deals with two major challenges – resolving the problems related to the disposal of waste and sewage sludge.
– We built a recycling centre, a centre for filtered water will be finished soon and we will methane to meet the needs of electrical energy. Sewage sludge has been a problem in Podgorica for 38 years. Currently it is being treated through dehydration and covering with earth, which is not, however, solution to the problem. Therefore, we made the decision to burn it, and we are currently making a feasibility study of such a facility. Preliminary data suggest that this activity is estimated at cca 31 million EUR: 22.5 million for the plant and 9.2 million for incinerator. This is the cost of 165 EUR per capita – said Mr. Makrid.
The activities of the company Gradske pijace in Belgrade were presented by the director Mr. Ivan Soco. The company manages 31 market places on 165,000 square meters on restoration, activation and promotion principles. The end of the year for this company will be marked by reconstruction and investment. They finance the reconstruction of Kalinic market place as well as markets at Senjak, Palilula, Borca etc. The activities of the markets were promoted by events such as Pijacni karavan (market caravan) and Nocni market (night market), visited by 30,000 people a day.
-We want our markets to be tourist attractions – said Mr. Soco.
In further discussion, the panellists have agreed that there are opportunities to invest in municipal infrastructure through public-private partnership, but it needs to find a most appropriate mechanism for specific projects.
Education system and labour market need to be harmonized
Ms. Antje Müller, project manager of Zoran Djindjic Internship Programme of German Business for the countries of the Western Balkans, Committee on Eastern European Economic Relations has emphasized the importance of lifelong learning. This program encourages exchange and cooperation among education institutions throughout Europe, mobility of participants and experts in the education process and persons from labour market.
– In the last two decades the region has gone through the crisis which reflected on the labour market i.e. led to its changes, says Ms. Antje Mϋler.
Based on the experiences from European countries it is necessary to introduce “Dual education” i.e. education of the young through connecting educational institutions and companies as well as harmonizing the education system and labour market.
Ms. Urlike Damjanovic, senior specialist at Systems Policy Unit Operations Department at the European Training Foundation says that this association operates outside the EU and support countries which implement out social and economic reforms.
– We especially support countries which implement education reforms for the labour market needs. Countries in the region deal with the problems regarding the knowledge improvement for the labour market as well as the entrepreneurial skills necessary to the companies, considers Ms. Damjanovic.
It has been said that creating new value and acquiring useful knowledge can increase the economic growth and development. The question is what kind of knowledge is offered in the education institutions? Does inadequate education strategy result in the huge gap between the real economic and the labour market needs? Improvements and changes in the education process as well as required knowledge and skills are set as priorities.
Countries in the Region pay a lot of attention to resources, but mostly ignore human potentials, says Mr. Boris Jokic, research associate at Institute for Social Research in Zagreb.
– Although since 1990 a special attention has been paid to education, these countries have not fully mastered IT and other modern educational contents, says Mr. Jokic.
He adds that there is no comprehensive approach to education reform which reflects negatively on the economy. Leaders, managers and others do not cooperate in this direction, and there is not enough training. He has said that we have to develop and take care of a huge human potential, because without it there is no development. Successful management of human resources is one of the key factors of prosperity and can greatly affect the growth of productivity. Education reform is aimed at the development of human resources.
Work based learning is promoted at the secondary school level and it is connected with the labour market, even in high school.
Ms. Daska Domljan, program developer at the Stiftung Wissen am Werk, has pointed out that when companies are in crisis they dismiss employees first, which is not good of course.
– We are aware that satisfied and happy employees are the foundation of successful organizations and therefore professional training and education of employees are necessary and important, she said.
She added that the policy of human resource management includes motivation, education, employee satisfaction and career advancement.
Mr. Michael Landertshammer, director of Sector for Education at the Austrian Federal Economic Chamber spoke on the influence of the vocational education on the economy. Switzerland, Austria and Germany are countries with great tradition in vocational education, have the lowest number of unemployed young people and a major source of financial income.
– Chamber organizes the entire process of vocational education, does the administration, examination and certification. Companies have a great responsibility in this process. In our country 40 percent of young people attend vocational schools and it is very important for all countries to have the cooperation between researchers, academics and others – he said.
Explaining the role of WIFI International, which operates within the Austrian Federal Economic Chamber, Mr. Landertshammer points out that this institute is focused on professional education and connecting the academic and business world, and it is the field in which cooperation with other universities in the region can be established. He mentions that it cooperates with institutions in Slovakia, Serbia, Romania, Bulgaria, where numerous projects have been carried out.
– We would like to continue these activities in the Western Balkans – he concluded.
Elsa Denaj, HR Training Coordinator at the Antea Cement in Albania considers that if companies want to keep their employees, they have to work constantly on improving their skills and involve them in vocational education programs.
– Albania has been working on the development of vocational education. We have focused on improving skills because insufficiently trained students finish universities, she said.
She concludes that all depends on the person’s willingness to learn and the country tries to create an adequate framework for these very important needs.
Creative economy seeks lifelong learning
Creative economy is a topic of key importance to each of the countries of the Region. Knowledge is needed because the creative minds can come up with innovation, which is often aligned with entrepreneurship – a kind of supporting system to the economy, it was said at the last panel of this year’s Conference.
Mr. Stefan Kägebein coordinator of the Working Group Digitalization, Committee on Eastern European Economic Relations was the moderator and panellists were Mr. Uranik Begu, executive director at the Innovation Centre Kosovo, Mr. Djuro Kutlaca, director of Center for Science and Technology Development Research at the Mihailo Pupin Institute and Mr. Marko Stojovic, CT strategy and communication director at Crnogorski Telekom.
Panellists agree that certain countries of the Western Balkans have made progress in understanding the importance of the creative economy, but it is not expressed sufficiently. Creative economy as a holistic concept of development dealing with the interaction of economy, culture and technology within a globalized world can be connection to reform which leads to more relevant education based on lifelong learning and adapting to change.
Panellists emphasized the excellent cooperation with universities in this field, but also talked about the problem for preventing trained personnel from seeking professional reputation in international business environments.
– In the Region, you can see that there is a spark, a movement when it comes to new technologies and young people finishing universities and want things to change. I think this needs to be upgraded, but it takes a lot of work in education in order to achieve this – said Mr. Kägelbein.
According to Mr. Uranik Begu, it is necessary to convince the state administration to support young entrepreneurs in their business ventures.
– Infrastructure is an essential prerequisite, but also knowledge is a prerequisite for the young generation to face the new challenges of this century and the increasing demand of jobs. We should focus on creating a new model of the economy which will use the digitization opportunities, while young people should be the holders of this activity – he said.
Mr. Djuro Kutlaca believes that the message of the Conference should be: “We used to have the industry, now we do not. We used to have the knowledge, we do not have it today.” He believes that one of the causes for an economic collapse in the region lies in not recognizing the arrival of new technologies which need new industry and knowledge.
– In the context of the creative economy there is an approach which Slovenia has successfully applied, and it is a “smart specialization”, a European strategy of restructuring the industry, education and science which allows accessing structural funds. The smart specialization is the essential for decisions to be taken solely on the basis of facts.
This approach requires knowing precise abilities of an individual in order to select priorities by national consensus. The key process of the smart specialization is the one which combines higher education, science and industry to create a national innovation system. This is the creative economy – having the education to understand that universities are the only places where you are taught the fundamentals, and when you come into a company you start further education – said Mr. Kutlaca.
According to him, the first phase creative economy will be most painful for the Region, as “we need to look each other into the eyes and see what we can do and what we want.”
Mr. Marko Stojovic explains that a large number of students, primarily from Faculty of Electrical Engineering were on an internship at Crnogorski Telekom, while the company Deutsche Telekom is developing partnerships with innovators around the world as a prerequisite to keep the leading position which, he says, it takes.
– New areas needs to be won over and over again, new technologies needs to be used. Telekom is a pioneer in introducing new technologies – he said.
Closing remarks
The conclusions and recommendations of the Economic Conference Montenegro 2016 were presented by the president of the Montenegrin Association of Economists PhD Mr. Sasa Popovic. He first mentioned the development of the most important economic event during the six years of its existence, quoting press material from the first conference held in 2010.
– “Through the 22 opening statements and discussions, within the four panels, a half an hour exposure of Mr. Milo Djukanovic – impressive amount of information, analysis and research results, practical experience, forecasts, plans, intentions etc were presented.” Today, six years later, I will make a contrast to the above quote with some additional information related to the conference: “More than 50 panellists, who included high domestic and foreign state representatives, prominent businessmen, ministers, university professors and others presented their views in 9 panels, before some 500 participants attending the conference.”
Ladies and gentlemen, the organizers of the Conference, you deserve applause! – said Mr. Popovic.
He made some observations on the work of this year’s event.
– When it comes to the speed at which economic reforms are implemented – slow reforms increase political risk, while too rapid ones increase social risk.
It seems that between these two extremes the national governments of the region “drive” i.e. implement their structural reforms very carefully.
Not just transport, but also the economic policies of individual countries in the Region need “more corridors”, more wide lanes which quickly overflow integral market and this is the market of goods, services, money and capital markets, taken as a whole. Europe has always been in the same place ever since, but throughout history it has not always been as far away from us. We are Europe, we just need to confirm this fact with the projects, i.e. to bring it closer to us – he said.
Conclusions:
The vision of the Western Balkans has significantly been improved in the eyes of the European Union.
Three years following its initiation, Berlin process has been confirmed as a significant initiative for the economic integration of countries in the area of the Adriatic Sea-Danube. This process can significantly contribute to the sustainable growth of the Western Balkans, which is its original objective.
The following period will be a great challenge for the Western Balkans, due to intra-regional economic and political circumstances, as well as the serious problems facing the European Union.
Optimism in terms of the future economic growth of the Western Balkans is growing in the shadow of pessimism of political expectations in Europe.
The Western Balkans is largely integrated at the side of the problems such as the high current account deficits, high budget deficits, high external and public debts, high unemployment rate etc. However, this region falls behind with coordination in terms of looking for solutions to these problems.
Transport, energy, tourism, information technology, education and all other forms of integration within the region raise its competitiveness to a higher level.
Corruption, low level of the rule of law, the gap in the labour market in terms of lack of qualification competencies necessary to the business are the basic problems that burden the Region.
Finally, the Economic Conference organized by the Chamber of Economy of Montenegro and its partners establishes a good tradition in terms of quality discussions and efforts in searching for solutions to socio-economic development of our region.
Recommendations:
The main recommendation of the conference, referred to governments, enterprises, educational and other institutions of the Western Balkans is to keep working on further interconnection in order to achieve a higher level of economic efficiency and the competitiveness of this region.
In order to eliminate obstacles to increased competitiveness of the region it is necessary to intensify its infrastructure connections – in terms of transport, energy and telecommunications, which enables political obligation on the basis of the Berlin process.
After determining the development priorities by groups of countries, it is necessary to establish closer cooperation between the European Union and the Western Balkans in coordinating their realization.
Business-to-business approach needs be more emphasized in the agendas for the economic prosperity in the Region.
It is necessary to increase efforts to specify activities on the identified development priorities. The level of project preparation largely affects the decision on approving the projects within the Berlin process.
Chamber network digitalization is a project which should significantly connect businesses in the region. This project is in line with the Digital Agenda – one of the key EU agendas.
The business environment can be improved primarily with quality education at all levels, technology transfer, innovation and good practice.
