Response to a so-called “analysis” by daily Vijesti and NGO MANS: “Discovering” the already known

The daily newspaper “Vijesti” published on Friday, 1 July 2016, on pages six and seven and as the main headline on the front page, content entitled “Losers squandered a billion in a decade,” authored by the “MANS and Vijesti Research Centre,” which presented a series of public data in a sensationalist manner and in such a context that would purport to prove alleged unsound spending of budgetary means.

In order to accurately inform the public, we publish facts that refute or clarify these claims.

Railway Transport of Montenegro

Vijesti and MANS:

The text contains statements that "in the last ten years" the state allocated at least 242.1 million EUR for railway companies, of which 153.9 million EUR is for capital increase and "at least 88.2 million EUR" is invested in railway infrastructure maintenance.

Facts:

All railways in the world are good in general use, what is used by citizens and businesses. All railways are largely financed through government subsidies in order to meet one of the major public interest – the public transport of passengers and goods. The question, then, is not whether the state allocates for the railway – of course it does, like every country in the world. Question is, Vijesti and MANS do not mention it although it is a public record, what has been done with that money respecting where did money go. Here is where: 43% of the railway network in Montenegro is repaired and modernized, which is a great result considering the fact that it was done in just ten years. Although there is no precise comparative data for countries in the region, given the size of the rail network of six Western Balkan countries (Montenegro, Serbia, Albania, Bosnia and Herzegovina, Macedonia and Kosovo) and current activities on the railways in these countries it is certain that the most is done in Montenegro.

We supplied new electric trains of the latest generation of which three electric trains by Spanish manufacturer "CAF" are used in local traffic since 2013 and they are used for annually transport of more than 1.2 million passengers. This investment – every citizen of Montenegro and stranger who used new trains know and see it – contributed to higher safety and comfort of passengers.

The railway Podgorica – Nikšić is repaired. The telecommand is introduced. The railway is electrified thanks to which we have 90% of electrified network. This raised the required level of safety of passengers’ transport and comfort and enabled the safe, timely and most environmentally friendly form of transport.

The state, therefore, did what was its duty – it created an environment that allows citizens and businesses the public service at reasonable terms. Is it possible to buy trains without this money? Could railways be reconstructed free of charge? The "analysis" authors could have – every citizen can – in few minutes find out on the Internet how are rail infrastructure projects financed in Europe. In Germany, just as an example, the governments of some provinces buy complete rolling stock and give it to be used by interested railway operators to satisfy the public interest.

Air transport

Vijesti and MANS:

Authors note that the state "helped" Montenegro Airlines from 2005 with 37.9 million EUR and that since the company's establishment it has invested "even 76.7 million EUR" and that the state "covers" the accumulated losses.

Facts:

Montenegrin national airline Montenegro Airlines is in a similar situation, as well as many national airlines where they compete with large, global airlines as well as so-called low-cost airlines. In ten years, which the authors "analyse", or a little more than that, several airlines only in Europe declared bankruptcy including the national airlines of Hungary (Malev – founded in 1946, stopped working in 2012), Belgium (Sabena – founded in 1923, stopped working in 2001), Bulgaria (Balkan – founded in 1947, stopped working in 2002), Greece (Olympic Airlines – founded in 1957, stopped working in 2009) and so on. Let's just mention that large Alitalia is rebranded after it went bankrupt in 2008. The state has previously ten years before bankruptcy, invested almost five billion EUR in its national airline in order to save it. Swissair went virtually bankrupt in 2002 after billions invested, but it continued to exist after a series of acquisitions now owned by Germany's Lufthansa.

Therefore, the Government of Montenegro is not doing anything illegal or unusual, but what many governments do, trying to maintain national airlines because it is in the public interest. The Government of Montenegro in 2012 adopted a restructuring programme which defines certain measures for the company. One of the measures provided for the restructuring plan of Montenegro Airlines is that the Government of Montenegro, in the event that such possibility is provided by the Law on Budget, assumes the financing of one of the four new aircraft "Embraer 195", if in the next period this proves necessary for the smooth functioning of Montenegro Airlines in the market. The amount that the Government undertook is 13.32 million EUR, and the same amount was planned for the period 2013-2015 (three years).

It should be noted that for the previous three years, 13.32 million EUR was planned by the restructuring plan, while in the same period 9,040,552.12 EUR was spent. This amount is converted into equity of the Government of Montenegro in the Company.

Furthermore, in 2011 the Government wrote off the debt of Montenegro Airlines in the amount of 3,233,336.54 EUR for the period 2002-2006.

When it comes to the debt of the company, with government guarantees, it is regularly paid by Montenegrin airline.

The number of employees has increased as a result of the company's development, which is reflected in the increase and modernisation of the fleet as well as in the development of new markets where the airline operates.

It is important to note that the Montenegro Airlines, with about 600,000 passengers, which makes up 35% of the total number of passengers on the Montenegrin airports, is one of the strongest partners of the economy in Montenegro, primarily tourism, which certainly justifies the investments of the Government of Montenegro.

Marine traffic

Vijesti and MANS:

The state has recently heavily invested in the survival of the company in the marine industry. Obligations of the Port of Bar based on foreign debts of 80.3 million EUR in 2006 are derecognised in accordance with the agreement with the Ministries of Finance and Transport and Maritime Affairs, but data from the Central Registry do not show that the state recapitalised it.

Facts:

In 2006, the state undertook obligations of the Port of Bar based on foreign debts in the amount of 80,320,335.21 EUR, under the conclusion of the Government No. 02-9267/2 as of 23 December 2005, which was caused by the decision of removal of asset from the balance sheet of Port of Bar in accordance with the Law on Marine Resources in the amount of 119,464,594.31 EUR.

When it comes to company Crnogorska plovidba, in 2012, in terms of financing purchases of ships, the Government increased its share capital by about 7.1 million EUR. In the same year it allocated additional 1.3 million EUR paid to Crnogorska plovidba, and then made transaction of this money to the account of Jugooceanija for social programme for former employees of the company.

Facts:

Crnogorska plovidba AD Kotor, in line with the conclusions of the Government of Montenegro as of 23 May 2008 and 26 June 2008, from the account in which the funds were deposited from the sale of administrative buildings of the former Jugooceanija AD Kotor, intended for the purchase of ships of Crnogorska plovidba AD Kotor, lent 1,360,500 EUR for social programme for workers of Jugooceanija AD Kotor, with the obligation to repay this amount.

Given the fact that at the time of commencement of the repayment of the first installment of loan to Exim Bank, Crnogorska plovidba did not have the entire amount, the Government adopted at the session as of 25 June 2015 a proposal for resolving the missing funds for the repayment of part of the first installment of the loan to Exim Bank, which is intended for the construction of two ships of Crnogorska plovidba AD Kotor.

The reason for the lack of these assets is conditioned by the negative trends in the maritime freight market. Ships' earnings, although in the past were at the level or above the level of average earnings of this type and size of ships, were not sufficient because there was a serious disturbance in the world market caused by the global economic crisis, which resulted in a drastic drop in freight at a level below the economic viability of the ship. In other words, the need for transportation of goods and raw materials was reduced, which means more supply than demand of shipping space, and this means that there is a surplus of ships in the world market.

Vijesti and MANS:

Uncovered loss of Montenegro Airlines at the end of 2015 amounted to 60 million EUR, of railway companies to 57.1 million, of the Coal mine to 17.2 million, of Crnogorska plovidba to ten million, of the Port of Bar to 1.6 million, and uncovered loss of Container Terminal (majority owner is Global ports) amounted to 22.9 million EUR.

Facts:

When it comes to the Port of Bar, mentioned loss is reduced value created by positive business of the Port in the last 6-7 years. Only in 2015 the Port of Bar had positive business profit of 488,697.00 EUR.

These data for Crnogorska plovidba AD are inaccurate and they amounted to 5,355,539.00 EUR, and are due to the large amount of foreign exchange losses and loan obligations towards Exim Bank.

Aluminium industry

Vijesti and MANS:

Official data show that since 2010, Aluminium Plant received state subsidies for electricity of 60 million EUR, Plant's guarantees for loans amounting to 126.2 million EUR were paid, 102 million EUR obligation toward the Government and eight million of income tax were pardoned. In addition, the Ministry of Economy in 2014 paid 5.3 million to Montenegro Bonus as a subsidy for the power supply of the Plant.

Facts:

What alleged researchers deliberately did not mention, but was repeated many times, is that the global economic crisis in the second half of 2008 and especially in 2009 brought world's producers of aluminum and steel in catastrophic position. Many companies ceased production, and all of them reduced production, some up to 60% in order to reduce losses that were inevitable in that period. The price of aluminum on the Stock Exchange in July 2008 was $ 3,375 per ton, and as early as February 2009 it dropped to $ 1,275 per ton.
Researchers of MANS and Vijesti – if they really had intention to objectively describe the situation – could easily find this information, as well as information that the American ALCOA only in the first two years of the crisis had to dismiss about 50,000 workers!

In this situation, the Government of Montenegro decided to help the Aluminium Plant Podgorica, especially if one takes into account that 2,700 jobs then were directly related to the Plant, estimating that at least as many jobs indirectly dependent on this company. Also, the Government paid attention that the Plant has business and partner relationship with Bauxite mines, Electric Power Company of Montenegro, Railway Transport of Montenegro, Port of Bar and Montenegro Bonus, and hundreds of companies, which is an important factor in the economic system of Montenegro. In addition, based on taxes and contributions, the Plant poured 12-13 million per year in the budget, and the banking system was highly depended on the Plant and private obligations of its employees.

To remind, the dilemma the Government faced was happening in 2009 when the economy of Montenegro decreased by almost six percent of GDP, when budget revenues fell by 20 percent, when the deficit exceeded 5.7 percent of GDP, and the banking system was afore the collapse. In these conditions, the Government concluded the Settlement Agreement for Aluminium Plant Podgorica and Bauxite Mines Nikšić as of 26 October 2010 and published it immediately after the conclusion, with all annexes. This also speaks of the "research" efforts of MANS, especially about its "analytical" skills.

Željezara (Montenegrin steel mill)

Vijesti and MANS:

For the rescue of Željezara, according to publicly announced data that are publicised by the media, in the last ten years the state budget allocated about 146 million EUR.

Facts:

In the case of Željezara Nikšić, the example of the alleged "research”, actually manipulation, is even more striking. Although the title of the text suggests to readers that it is alleged "billion" which again alleged "losers squandered in a decade", the text referred to the privatisation of Željezara Nikšić since 2004, which is much more than a "decade". Therefore, objective and accurate information to the public does not matter if "researchers" of MANS lack money to fill billion prepared for bombastic title. Credit funds that the state covered with the guarantee of 33 million EUR were used for the payment of workers' wages, severance pay, payment of suppliers, electricity, equipment and raw materials and raw materials for production; investment in new equipment; performing and construction works and the installation of new equipment and the like. Certainly, everyone that considered it was unnecessary to give a guarantee for these purposes, had the ability to react in real time.

The statement that the Government of Montenegro was buying "social peace" in Željezara is not true. This is confirmed by all the social programmes of the state-owned enterprises for which the Government of Montenegro provided funds for retirement benefits for those who lost their jobs, as well as the means for connecting the years of service for those who acquired the conditions for retirement.

This is all over the world called: responsible social policy of the state or government to provide workers.

Conclusion

The yesterday published alleged "analysis" of the MANS and Vijesti Research Center, titled "Losers squandered a billion in a decade ", is neither a "research" and even less "analysis", especially if one takes into account that the topic of privatisation and restructuring of these companies was in the public eye so many times, fulfilling all the obligations of the state of Montenegro, since the publication of the privatisation contract, from documents on the allocation of official state aid to the balance sheets of the companies. Moreover, the Government not only published all the information (and many others), but the Government's representatives every week for years inform the public directly at the press conference after the Cabinet session when every journalist has the right to ask any question that, of course, is being answered.

From the above it is clear that the alleged "research" and "analysis" is nothing more than an attempt to justify donor funding, through adjustment of data published numerous times in order to discredit the Government of Montenegro. It seems that only donors do not see this. This is confirmed by all aforementioned examples. Not only that all the information given in the text is published by the Government of Montenegro, but the application for state aid for these companies was sent to Brussels.

Therefore, in cases where the Government of Montenegro helped companies by providing the state aid, all the binding rules of European agenda were respected.

The Government of Montenegro is genuinely committed to the partnership with the media and civil society in all areas, believing that true investigative journalism and serious analysis of NGOs is in the interest of the society as an important stimulus for the government to correct its shortcomings. Such Government's approach requires, however, a minimum of seriousness from the partners. This text which attempts to present the alleged "discovery" and "analysis" of what is already known and has been discovered by the Government itself and carefully analysed in the Government, the Assembly, union organisations, the media, NGOs, and in the professional community, therefore, does not compromise the Government of Montenegro, which was obviously a goal, but, the facts showed, it compromises the authors.

MINISTRY OF ECONOMY
MINISTRY OF TRANSPORT AND MARITIME AFFAIRS
PUBLIC RELATIONS SERVICE OF THE GOVERNMENT OF MONTENEGRO