MINISTER OF ECONOMY VLADIMIR KAVARIC – FREE MARKET ROAD SHOW, UDG, 28.05. 2011

"First of all I would like to take this opportunity and give my regards to all participants of FMRS. Also, I would like to express my satisfaction with the title of the topic. The current moment of the crisis has been topical for our country, as well as for other European countries. Therefore, it is of great importance to take advantage of it and use it for tackling existing challenges in further economic development.

Having regard to the importance and previous productivity and efficiency of FMRS, I hope that our work and efforts from this conference will result in concrete conclusions and guidelines. They could become a good source of recommendations that governments and institutions could use for further development of free market and economic relations.

In previous years Montenegro became devoted to openness of market and private sector- driven economic growth and development. We have been introducing measures regarding the reduction of taxes and custom tariffs, proportional tax, free movement of goods and capital (there are no restrictions regarding the capital transactions), repatriation of profit is free, we have introduced euro as the monetary currency and foreigners have national treatment.

Being a small and open economy, we are particularly under the influence of changes that occur at the global economic market. As an effect the global crisis undermined positive economic progress in Montenegro. On the other hand the crisis will prove our commitments to promotion of free market as justified and inevitable condition for sustainable economic development.

Then again, the crisis has reduced the overall aggregate demand from abroad. As a consequence, it has revealed disadvantages of our economic system. In order to overcome such shortcomings, the Government of Montenegro has recognized protection of investors and development of competitive business environment as one of strategic priorities.

We have been continuously working on providing stable business environment, implementation of structural reforms and attracting new investments. The reforms are oriented to elimination of business barriers. They are being conducted in the areas of starting a business, dealing with construction permits and paying taxes. Entrepreneurs and investors will significantly benefit from them in their business operations. In the area of business registration the citizens were provided with the possibility to download a standard form for company registration from a web site. The registration procedure of taxpayers and contributions obligors has been simplified. Now we have one form instead of previous 16. This reform has consolidated the business entities registration process in two places. The entire process is being comprehended by Tax Administration. This could significanlty facilitate entry of new companies to Montenegrin market. New procedure stipulates that for the documents provided by the investor, the relevant state body or local government authority will obtain necessary approvals from the other organs ex officio. This enables investor to contact with only one authority responsible for the issuance of construction permits. At the same time, this process will shorten the deadline for acting upon the request of investors regarding the issuance of construction permits. It will also create higher efficiency of state bodies and local authorities. It is also important to point out that certain changes in the laws have been made. They are to eliminate the obligation of obtaining and providing consent of appropriate government bodies on certain documentation.

In the area of issuing construction permits, the reform of this procedure is underway. The reform aims to simplify the entire process. This is reflected in the shortening of deadlines, reducing costs for investors and achieving greater efficiency of public administration. With regards to that, set of 6 laws treating issuance of construction permits has been amended and adopted by the Parliament at the beginning of March 2011. This will lead to a significant reduction of procedures recognized by Doing Business 2011 from 14 to 2.

The second phase of the project “Consolidated collection and registration of taxes and contributions” was launched on 1 January 2011. According to the Rulebook, employers or payers of income have to submit Unified report to the competent tax authority, by the 15-th of the month for the previous accounting period (month). The report also needs to include all payments that are related to the accounting period. Also, if Report contains more than five individual calculations of taxes and contributions for the same accounting period, it can be submitted electronically. With application of the unified report, 30 incoming payment accounts for taxes and social contributions are replaced with one incoming payment account. This project will create conditions for more efficient operations of tax authorities as well as for provisions of better and less expensive services to tax payers. Our future activities will be focused on unifying the procedure of paying taxes and contributions, as well as reduction in administrative fees.

The 2010 was marked by significant regulatory activities. Such activities were aimed at reforming the existing legislation and improving the situation in certain areas. In this regard, the adoption of the Insolvency Law will further improve the bankruptcy proceedings; the Law on Enforcement Procedures will improve the efficiency of the enforcement procedure by shortening and improving the process; Law on the Central Bank of Montenegro created conditions for increasing the volume of registry coverage in order to create conditions for gathering and disseminating from a wide range of sources; the Law on Foreign Investments will further regulate the area of foreign investments in order to protect Investors in Montenegro and the Law on State Survey and Real Estate Cadastre will shorten the time and the procedures for registering property.

The efforts have been recognised also in World Bank Doing Business Report 2010. Montenegro has made progress for six places in comparison to the previous year. Based on the analysis of reforms, Montenegro has made progress in four out of ten indicators. There are improvements made in areas of starting up business, issuing of constructing licenses, taxes payment and employment. I would like to stress out, that Montenegro is particularly highly ranked in the criteria of Protection of Investors. On the basis of efficiency in implementation of reforms in this category, Montenegro is ranked as 27th World’s country. Recently enacted new Law on Foreign Investments provides improved protection of investors, as well as further elimination of administration barriers.

In the area of international trade and foreign investments we are continuously expanding the network of bilateral agreements on both economic and investment cooperation and free trade agreements. As the result of regulatory reforms, foreign trade regulations are fully compliant to EU standards and directives. Montenegro has concluded Free Trade Agreement with European Union, Turkey and Russian Federation. Negotiations for conclusion of bilateral free trade agreements with Belarus and Kazakhstan are in the final stage. Further, Montenegro is a signatory party of CEFTA 2006, regional Free Trade Agreement. Also, negotiations with EFTA countries have been initiated on 31 March this year. Therefore, by investing in Montenegro, investors will have a free access to the wide international market. Negotiations for full membership in WTO are also in the final stage.

On the other hand, the main challenges the Government will be faced with are seven criteria for initiation of negotiations on EU membership. In that regard, in February 2011, the Government adopted the Action Plan for monitoring the implementation of recommendations given by the European Commission. This will include restructuring of state budget with reduction of expenditures and increase of capital investments.

Improvement of business environment today has been widely recognized as an effective tool in further strengthening of free market institutes and for overcoming the global crisis, as well. In order to improve our long term competitiveness we have to continue with improvement of business environment, realization of structural and regulatory reforms. Improved and stable business environment is the key priority. It is also a precondition for further economic development. In addition to implementing the policy on structural reforms and improving the investment and business environment, we continuously work on development programs. Such programs are intended for development of small and medium-sized enterprises, for attracting new capital and creating conditions for realization of new investments. Their objective is also to efficiently mobilize all economic resources and enhance competition in our economy.

Let me conclude by reiterating that the crisis did not make us change our understanding of the free market. On the contrary, it has just emphasized and proved the importance of freedom in economic affairs, being a basic tool for economic prosperity.

Thank you,

And I wish you fruitful sessions and all great success on your journey. "