Prime Minister Milo Djukanovic: The first principle of our economic system is openness

MILO DJUKANOVIC, PRIME MINISTER OF MONTENEGRO


Mr. Chairman,
Ladies and Gentlemen,

Let me thank Prime Minister Adrian Nastase, who has invited me to participate in this distinguished gathering. This is a topic of critical importance for the region. I will address it from Montenegros perspective.

Montenegro is the smallest country in the Balkans. We are trying to make it the biggest business platform in the region. We seek to replace physical borders by unlimited business opportunities.

We started building our own system and already in the year 2000 we had both economic and institutional sovereignty, which we have today, too, as in the union with Serbia. We have defined a strategic vision of development of Montenegro in the decades ahead. The first principle of our economic system is openness. From a business perspective it is free trade. That is why we have abolished all quotas and other quantitative restrictions, unnecessary paperwork. We have reduced tariffs to a level that is second lowest in Europe, second only to Estonia. Already in 1999 we adopted the euro in Montenegro. We did it through the Deutsche Mark and we have had the euro along with Europe since the beginning of 2002.

We are conscious that accession to the EU is not an administrative act. It is above all the proof that we are indeed ready to accept European democracy, European law, and European standards in business, education, and politics. Our reform processes are aimed at this. We insist on real changes, and not on purely paying lip service to Europe, which leaves our attitude to the EU open to different comments. We are building a system, not only political, but in the first place economic, that encourages entrepreneurship, business, investment. That is why we have started with the privatisation process. We have already privatised two thirds of our economy. Together with the EBRD we have set out to privatize the Aluminium Plant and the companies which are part of this production chain electric power company and the Bauxite and Coal mines; tender has been finalized for the privatization of the Steel Mill and announced for privatization sale of a number of hotels on the coast; for the Tobacco Industry; for the Plantations, one of the best companies in Montenegro, which produces the famous Montenegrin wines and grape brandy. The Bijela Shipyard has already been looking for a strategic partner, along with the Simo Milosevic Institute, a health tourism facility on the Adriatic Coast. We have privatised 75% of the banking sector and privatisation of the last state-owned bank is under way. The motto of our privatisation concept is: We are not selling companies We are buying good owners. We want to see best companies in Montenegro. We already have them: Belgian, Greek, Slovenian, Japanese, American, Russian, German, Slovakian, Norwegian, Italian, Serbian

We are conscious of the importance of privatisation. But even more that it is the development of a new production structure - new private companies that is important for development of a free market economy and entrepreneurial capitalism. We have about 7 thousand of them. We seek to simplify the procedure for establishing companies. In Montenegro you can set up a company with 1 euro. You can set it up electronically, from Bucharest. All the papers you need you get in one place. Civil servants do this for you. It is from business that we start the concept of the state as service of citizens. This is why we have set out to reform the public administration.

This is the essence of the programme of the new Government that I lead, whose basic document is the Economic Reform Agenda. This is one of the steps towards accomplishing our strategic vision: Montenegro as the business destination in the region. We are completely focused on making Montenegro attractive for investment. Our motto is: our key resource must be institutions, i.e. creation of a business-friendly environment.

Montenegros history was the history of a state of warriors. However, stories of historic enemies, foreign and domestic, in Montenegro belong to the past. In Montenegro today there is a growing realization that backwardness and poverty are our chief enemy. There is also a growing realization that it is business people and entrepreneurs that are the key to transition. Both transition process and our future depend on the performance of these people.

In Montenegro we have full equality of foreigners and nationals when business is concerned. The requirements for setting up a company, conditions for doing business are the same for everybody. We have no privileges for foreign investors we have them for all. Investor are investors, whether they be from Montenegro, or from abroad. If you want to buy real property in Montenegro, including land, you have the same rights I have. And the same obligations, too. In particular with regard to payment of taxes, which we are trying to reduce. We have introduced the VAT 17%; physical persons income tax 25%. Let me add that we are revoking taxation of the part of the profit that is reinvested.

The Government is not an investor, but it is creating conditions for large investments in road construction projects, water supply in the coastal region, reconstruction of the two airports, building of a tunnel. In such projects we work with the World Bank, the European Agency for Reconstruction, the EBRD. Although we are small, prospective investment is estimated at a couple of hundred million euros.

In Montenegro we guarantee a favourable climate for development of business, as well as protection of property rights and respect of contract. We believe that with such an approach we can count on the support of Europe and the entire developed world.

Thank you for your attention!
Bucharest, October 14, 2003