Prime Minister's interview for the magazine Winne

Montenegro has recently established a political and economic union with Serbia. According to many analysts, including the ones from the EU and US, Montenegro has finally reached political stability and security. How do you expect this will influence FDI (Foreign Direct Investment)?

As we all know, the expected flow of investment is directly connected with stability and Montenegro was not in a position to achieve this during the last decade. Fortunately, it was the only place in the region where there was no war during the last decade, but it was not sufficient to attract foreign investors with the overall conflicts at the borders of Montenegro. Today, security and stability have been finally achieved and all the spots have been pacified. Only the Kosovo issue is still to be solved. Over the past five years, after 5 different elections, a new political stability has been reached thanks to a considerable majority. Montenegro has a new President, who is pro-European and pro-democratic.

Montenegro has everything it needs to attract foreign investments. The Government now has to demonstrate its ability to create an economic development model. After the first 100 days of Government, the policy of the Government to create an attractive business framework is based on 3 strategic documents: the Economic Reform Agenda (for the next 4 years), the Public Administration Reform, and the Educational Reform. In the medium term, we want to meet European standards.

Due to the steps our Government is taking, Montenegro is becoming part of the mainstream and the conditions are not that different from the ones in other EU countries. We want to strengthen the confidence of foreign investors through the legal system. In Montenegro, investments are safe and the ownership is protected by the Constitution. The main aim is to restore the confidence in the banking system, since the foreign currency deposits from the former Republic of Yugoslavia have not been yet restituted. The irresponsibility of commercial banks brought loss to investors, both national and international. Montenegro is strongly working to resolve the problem we have regarding patrimony, and by solving this, we are sending a message not only to foreign investors, but to Montenegrin people also. We already have an important growth in this area, concerning both banking deposits and FDI, so we are sure that future years would just further improve these two fields of the economy.

In which sectors does Montenegro offer important investment opportunities and what is your Government doing to set up an attractive business framework?

Investment opportunities in Montenegro are mainly in tourism, services, maritime economy and production of organic food. Our government is working hard on restructuring several sectors of the economy because after the Second World War we focused, as many other similar countries, on heavy industry thereby neglecting our natural resources. Now we have to strengthen our development potentials, which are natural resource based industries, such as tourism and agriculture. They give Montenegro a great opportunity to find a place in the international market and to become competitive.

How do you see Montenegro in 5/10 years?

The Economic Reform Agenda shows we have set some key objectives which we want to achieve by 2006. And when undertaking this Agenda, we have been very realistic as to its aims. The estimated GDP of Montenegro by the end of 2002 was around 1,2 billion Euros. Growth projection of GDP, as we see it, should reach 1.62 billion Euros by the end of 2006 - which means that the GDP per capita should increase from 1,800 to 2,400 Euros. We have planned to reduce inflation from 9.4% last year to 2% by the end of 2006 and to turn around the deficit in foreign payments of around 50 million Euros we had in 2002, and to achieve instead a 40 million Euros surplus by the end of 2006. We also want to increase FDI from the 75 million Euros we had in 2002 to 200 million Euros in 2006; and reduce unaccounted for economic activity from the 30% of the GDP we had in 2002 to 11% of the GDP by 2006. Naturally we want to achieve these results, but primarily I have in mind the growth of the GDP and the growth of the employment rate through a better use of our natural resources - which represent a comparative advantage for Montenegro - and by developing private business in these areas.

We have just discussed the expectations your Government has in terms of figures; but what about the status, that is to say an independent Republic of Montenegro?

More than a year ago, we proposed to Serbia a method to regulate our mutual relationship, which implied that both Serbia and Montenegro should be independent states. Serbia did not accept that proposal. EU faced the differences of opinion of Serbia and Montenegro on the subject, and insisted that we retain a single international personality for Serbia and Montenegro - with the right of Serbia and Montenegro to put to the test the mood of their citizens as to whether they want to become independent or not after three years.
Today, I am still convinced that our proposal a year ago would have been the most rational and sensible one, because it was not just another Balkan nationalistic whim. It was a rational proposal, which started from the assumption that one needed to put a logical end to the dissolution process of the former Yugoslavia, and then start building new relationships within the Western Balkans on a new basis. Despite the fact that I am still convinced of the superiority of this approach, with respect to the model that we are currently implementing, it is clear that one cannot and must not insist on his own proposal only, disregarding all the others. We were inevitably faced with a compromise, which takes into account Serbia's interests as well as international interests in this region. We are now in the initial phase of implementing the Belgrade Agreement, and the Constitutional Charter, which has been adopted on the basis of this Agreement. Such implementation is now allowing us, in a way, to push in the background the status issue and to fully concentrate on the reform agenda and on the adoption of EU standards. If, after three years, both the citizens of Montenegro and Serbia want -or if just one side wants- to put to the test the mood for independence via a Referendum, there is no doubt that in Montenegro, we will give them that opportunity. We will make sure we can, because we don't believe the International Community should be afraid that a Referendum could jeopardize the political stability. I'm convinced a Referendum is a democratic instrument for mature people and for mature nations, and Montenegrin people are mature people.

Concerning the integration into international institutions, Serbia and Montenegro became part of the Council of Europe on the 3rd of April. What does this represent for the Montenegrin aspirations towards future EU entry?

This is the first, but nevertheless, very important step. Of course, this is not just a tribute of recognition, moreover, it is an obligation. By becoming members, Serbia and Montenegro have taken over a package of obligations towards this institution. Just as the other states, after the integration, we are exposed to very strict monitoring in terms of our compliance with the obligations that we have undertaken. I think that we are successfully fulfilling our obligations towards the Council of Europe, and I hope that this circumstance, along with the successful process of stabilization and association, will be an important step for Serbia and Montenegro towards membership within the EU.

After Mass Voucher Privatization, the largest companies are still to be privatized. Which are the next ones on your schedule and what do you expect from foreign investors?

60% of the social capital in Montenegro has already been privatized. What remains are 17 companies in which the state has a major stake. And for these companies, we have prepared privatization tenders which, of course, have to be international tenders. We have adopted a privatization plan for 2003, including a strong increase of the pace in this process.

In addition to the privatization of these 17 companies under international tenders, currently looking for strategic international partners are another 270 companies in which state funds are minor shareholders. For these companies we have also accelerated the sale schedule of such minority stakes - by auctions, or by sale on the stock exchange markets - to the end of this year.

For these 17 large companies, the priority for this year is the Niksic Steel Company and I think that this tender will be announced in a month's time maximum. The Aluminium Plant of Podgorica (KAP), Tobacco industry of Podgorica, Podgorica Bank, and hotel companies in the South of Montenegro, will most probably be subjected to purchase agreements sooner than any others by the end of this year. This does not mean that we will be hesitant with the other companies. We have absolutely prepared the tender for the sale of Telecom Montenegro. But according to foreign consultants, this is not the most appropriate moment to sell the Telecom company. On the contrary, this is a very favourable moment to sell the Niksic Steel Company. After the privatization in early June this year of the tobacco industries in Serbia, it will be a very good timing for the sale of our tobacco industry too. Therefore, we shall be calling a tender depending on the assessment of our domestic and foreign consultants as to the most propitious moment on the market.

To conclude this interview, would you have a final message for the readers of L'Express, and what will be your main challenges as Prime Minister?

The main challenge is to further strengthen political and economic stability and to ensure overall stability which would allow for a more intensive presence of foreign investors. Montenegro has an excellent position in the Mediterranean area. We have very beautiful natural resources from the coasts to the mountains, which lend themselves very well to tourism development. We are working very intensively to achieve a better quality of life and European standards within a new legal, political and economic system. Moreover, we also need foreign capital along with a new quality of managerial know-how and skills for managing Montenegrin enterprises.
That is why our message to foreign investors is that by coming to Montenegro, they are coming to a part of what is the European civilization and what are European rules of conduct, all their efforts in Montenegro will be very carefully taken into account and appreciated by the government of Montenegro, and finally their investment in Montenegro will be fully protected.