The International Monetary Fund (IMF) believes that the rush to complete the highway from Bar to Boljari will endanger state finances, that is, fiscal sustainability, and that completing the highway through new loans would require new fiscal adjustment measures.

Work on the first section of the highway from Smokovac to Matesevo, which was due to be completed in May this year, was extended until October next year. The first stock will cost the state about 900 million without interest and exchange differences between dollars and euros. Since public debt has increased significantly due to the construction of the first section, the government has been forced to initiate fiscal adjustment measures, including wage cuts, higher excise duties and VA. The IMF estimates public debt at 88 percent of GDP at the end of 2019.

Pause

"The rush to complete the highway is likely to jeopardize fiscal sustainability. Completion of other stocks could cost an additional 25 percent of GDP. If the government decides to complete the highway between 2021 and 2026 through new loans, government debt (including guarantees) will remain above 80 percent of GDP in 2020. Without new debt, public debt could be reduced to 50 percent of GDP by 2030," the IMF estimates.

As they explain, in the case of a new loan, the return of debt to its initial level in 2030 would require a new round of fiscal adjustment of about three percentage points of GDP between 2021 and 2023. GDP is now 4.8 billion euros, so an annual "fiscal adjustment" would mean that about 140 million euros should be provided through savings or taxes.

"Completing and maintaining a new fiscal adjustment of this size would be difficult," the IMF said.

The IMF believes that further planning of the highway should be paused until a credible feasibility study is conducted that should assess the economic return relative to the construction of another section. The IMF recalls that the Montenegrin government has commissioned a new feasibility study, due to be completed next year.

“If it decides to continue the highway work, we advise the Government not to undertake further construction or financing until at least 2023 when public debt should drop, estimated at below 60 percent of GDP. The construction of the second section is likely to be cheaper (by about 300 million euros) and will provide further benefits in connection with the north and tourist areas," the IMF said.

The IMF mission advised the authorities to carefully weigh the benefits of the highway Bar-Boljare project over the alternative use of scarce public resources.

Warranty

"As the first section of total four is due to be completed by 2020, authorities are weighing options to build a second section. Past feasibility studies, completed several years ago, have estimated the low economic return of the entire highway, based on the limited potential of toll revenue in relation to costs, ”the IMF said.

This organization also points out that continuing to build a highway using the Private-Public Partnership (PPP) model could also entail significant fiscal costs.

“The government wants to investigate the PPP structure to complete the highway and avoid new loans. If a feasibility study suggests that the rest of the project is unlikely to meet the required rate of return on the private partner, it is likely to seek guarantees from the state.

The assumption of certain risks - including construction, availability and demand risks - under Eurostat rules requires that the project is recognized in the country's balance sheet, thereby achieving equal effect, as well as financing the project by a loan from the government. The need to pay the minimum guaranteed budget revenue could also impose significant expenditures due to a long concession contract, ”the IMF estimates.

Without fiscal sustainability, there is no construction of another stock

The IMF mission states that the Government has informed them that it will prudently proceed with further construction of the highway and that, by the time of the new feasibility study in 2020, it will analyze models for the construction of the second section.

"Authorities state that completing the first section is their top priority and will not start the second section if its solutions are fiscally unsustainable," the IMF said.

Text by Marija Mirjacic, on September 17th, 2019, read more at Vijesti

16 September 2019 - The University of Donja Gorica in Podgorica and Municipality of Cetinje are organizing the 24th Miločer Development Forum from 14 September to 18 September, while the main forum topic will be "Ecology: Regulation, Education, Business". The forum will gather renowned experts from all over the world.

Professor of the University of Donja Gorica and vice-president of the Association of Economists of Montenegro Zoran Đikanović on the occasion of Miločer Development Forum stated that the main goal is the promotion of the young and new ideas, reported Cafe del Montenegro.

According to him, the mission of the forum is to promote new ideas and boost the sense of future and a new thought.

"Our goal is to launch new ideas, new visions of development, new communication and to open Montenegro to the global world. The forum is testing the possibilities of the practical application of new ideas, in terms of opening new businesses or new areas of research," stated Đikanović.

When asked why they opted for the main topic of this year’s forum to be "Ecology: Regulation, Education, Business", he said that the aim of the forum is to tackle several aspects of ecology: regulation in this field as the main precondition for sustainable development, business operations in this field, especially new ideas, as well as new ideas for funding projects in the field of ecology. He also added that regulations would be regarded in the context of the European laws and Montenegro’s accession to the European Union.

"The forum represents a basis for stimulating new thoughts and ideas. It raises awareness of an individual about his/her obligation to develop himself/herself and the environment as well. The forum always gathers many young people who have the opportunity to hear a lot of new information," said Đukanović on the topic the young and their future challenges at the regional and global level.

This year’s forum has been backed by the Center for Climate Change, Natural Resources and Ecology… New business ideas will be presented as well.

"That is a newly-established and innovative center with a clear vision. They are part of the international projects provided by Germany and other European countries as well," pointed out Đukanović.

"In the part referring to business, there will be presentations of business ideas from this area, primarily ideas of the UDG students as well as the students from the University of Montenegro and those from the region. The forum will present seven business ideas in the field of ecology, and some of them have already been funded from international sources. That is why this forum differs from all the other gatherings in Montenegro and the region as well," concluded Đukanović.

Read more news about business in Montenegro at TMN's dedicated page.

15 September 2019 - The credit rating agency Standard and Poor’s recently published a new Report for Montenegro, which confirmed the previous outlook of the country that has been marked as "stable", while preserving the B + / B rating, reports Montenegrin Ministry of Finance.

Credit analysts of this agency confirmed that Montenegro is on the right track of development.

Assessing the trends in Montenegro’s economy, the Standard and Poor's emphasized the significant results achieved in the sectors of tourism and energy and the considerable inflow of Foreign Direct Investments (FDI). The strong performance of the tourism sector supported the real growth of almost 5% in 2018, which is the highest growth that Montenegro recorded in the past decade. This trend is continued in 2019 because tourist arrivals for the first six months increased by 20 % compared to the same period last year.

Significant foreign investments provide a great contribution to the rating. According to the projections of the Agency, the FDI will amount to an average of 10% of GDP per year in the next four years, and they are mainly concentrated in the real estate sector, hospitality, and the energy. The on-going projects in the hospitality sector include several high category coastal resorts and hotels for tourists with preferences in the area of mountain tourism.

At the same time, the representatives of this credit agency welcome the completion of several significant projects in the energy sector, such as the reconstruction and upgrading of power plants, the new capacities for the production of electricity and the Montenegro – Italy submarine cable that will enable Montenegro to export electricity. According to the report, the aforementioned sectors represent the base for further growth of Montenegro’s economy and the potential to boost Montenegro’s credit rating.

Furthermore, the Agency considers that the construction of the highway, as a public investment encouraged growth as well. After completion, the Government expects that the highway will connect the coast of the port of Bar and the border with Serbia, bringing together remote regions and improving road safety.

Standard and Poor's welcomes the Montenegro’s EU path as a candidate country, highlighting the important potential in the implementation of the reforms, which harmonise with the EU acquis and a large part of the population support to the EU integration, in addition to the stating that Montenegro has built relatively strong institutional frame in the regional context.

Read more about the business environment in Montenegro at TMN's dedicated page.

12 September 2019 - Montenegro will establish two centres of excellence in the field of food science and biomedicine, worth 2,5 million EUR, of which the state will co-finance 1,8 million EUR in three years.

The Government of Montenegro has adopted the Information on Support for the Establishment of New Centres of Excellence, which elaborates the results of a new competition conducted this year. The competition resulted in two very high-quality proposals, according to which the Ministry of Science will enter into funding negotiations. The total value of the two projects is about 2,5 million EUR, of which co-financing from the state budget is 1,8 million EUR for three years.

The first-ranked centre is in the field of food science called: Centre of Excellence for Digitization in the Field of Food Safety and Food Authenticity – FoodHub by Prof. dr Aleksandra Martinović, reports the PR service of the Government of Montenegro.

The second-ranked centre refers to research in biomedicine. It is headed by Dr Vjeroslava Slavić.

The main features of this instrument of support of the Ministry of Science are:

- creating strong cores of the scientific and innovation ecosystem, bringing together researchers and experts who focus on full-scale research, recruiting and scholarships for young researchers;

- creating or significantly improving products or services for a well-defined industry that can help existing Montenegrin businesses improve their international competitiveness by integrating advanced knowledge, technology and innovation into traditional sectors of the economy and

- establishing international cooperation, which is a very important factor in the operation of the centres, as they should be the hubs through which we more effectively connect with Europe and the world.

Minister of Science, Sanja Damjanović congratulated the teams of both top-ranked projects on extremely well-prepared applications, but also praised other proposals through this competition which showed that there are many quality ideas in our community, that people are willing to work on implementing complex programs that can bring visible improvement in to our society and especially to the economy, with the expectation that negotiations with the two first-ranked teams will be successfully completed by the end of this year when their realization will begin.

12 September 2019 - OSCE mission in Montenegro has donated forensic 33.700 EUR worth equipment to the Forensic Center in Danilovgrad.

Equipment includes a station for forensic analyses, licensed software for monitoring Internet evidence and access to digital devices, mobile forensic equipment for collecting evidence at the crime scene and 10 vehicle identification number devices.

After the donation contract was signed with Director of Police Department Veselin Veljović and chief of OSCE mission in Montenegro Maris Davie, the officials said that this equipment would be helpful for criminal investigations.

"The equipment will enable Forensic Center to examine digital evidence and carry out data analyses at crime scene in order to save evidence," said Davie, as Cafe del Montenegro reports.

She reminded that OSCE supported Forensic center since its formation in 2008.

"The Center has been accredited at the international level. It is a giant step forward in the fight against regional and international crime. Evidence collected in the Center will be accepted by any court," pointed out Davie.

Veljović said that this donation was very important, not only because of its value but also because it would contribute to fight against all types of crime and assist criminal police in their activities.

"Forensic Center is a very serious institution now. It meets standards of renowned forensic centers," concluded Veljović adding that OSCE is their strategic partner.

Read more news about business in Montenegro at TMN's dedicated page.