MONTENEGRO Negotiating Team for the Accession of Montenegro

MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 20 – Enterprise and Industrial policy Bilateral screening: Chapter 20 PRESENTATION OF MONTENEGRO Brussels, 28 November 2012

MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 20 – Enterprise and Industrial policy- Bilateral screening: Chapter 20 Presentation of Montenegro Brussels, 28 November 2012 Chapter Poglavlje 20: 25 Enterprise and. Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy in Montenegro Marko Vujović Deputy Minister Ministry of Economy marko. vujovic@mek. gov. me MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter 20: Enterprise and Industrial policy

Chapter 20: Enterprise and Industrial policy I Institutional framework Ø Industrial policy is defined as conceived effort of the state to change production structure of nation and ensure structural adjustment in changeable conditions. Ø Industrial policy and its most important parts, like e. g. Strategy of development of manufacturing industry and Sector strategies, are parts of wider economic and development policy, streaming towards further development of industry and industrial manner of production as performance in economic and non – economic sectors. Institutional framework Ø Ministry of Economy MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter 20: Enterprise and Industrial policy

Chapter 20: Enterprise and Industrial policy II Policy framework v In order to analyse relations between strategy documents and industrial policy of Montenegro, documentation basis, which includes 18 strategies and reports done in last 6 years, are shown: • Montenegro in 21 st century – in era of competitiveness • Economic policy of Montenegro for 2011 • Recommendations for Government of Montenegro for economic policy for 2011 • Economic fiscal program for period 2010 – 2013 • Strategic priorities of economic policy of Montenegro for 2012 • National strategy of sustainable development of Montenegro 2030 • Strategy of regional development of Montenegro 2010 – 2014 • Strategy of export support • Strategy of support of FDI in Montenegro MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy II Policy framework • Strategy of energy development of Montenegro until 2025 • Policy and strategy of tourism development until 2020 • Strategy of traffic development in Montenegro • Strategy of construction development in Montenegro until 2020 • National program of food production and rural areas development 2009 – 2013 • Strategy for competitiveness support on micro level 2011 – 2015 • Strategy of small and medium enterprises development 2011 – 2015 • National program for integration of Montenegro in EU for period 2008 – 2012 • Draft of Strategy of development of manufacturing industry in Montenegro 2012 - 2017 MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter. Poglavlje 20: 25 Enterprise and. Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy III Basic inputs for future Industry development Components of industry development are: • Increase of accumulation of physical capital and knowledge; • Movement of work and capital towards sectors where their usage is more effective and which are followed with increased demand; • Diversification of economic structure which influences on smaller level of exposure of trade changes and movement of demand; • Diversification with emphasis on manner of comparative and competitive advantages. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IV Present trends in industry Participation of industry production in GDP 18. 9 18 16. 4 16. 1 14. 3 13. 1 10. 8 2001 2002 2003 2004 2005 2006 MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union 2007 10. 8 2008 11. 3 2009 12. 3 2010 11. 4 2011 Chapter Poglavlje 20: 25 Enterprise and. Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IV Present trends in industry v Participation of certain categories of industry production in GDP Mining and quarring Manufacturing industry Production and supply of electricity, gas and water 11. 7 10. 4 5. 3 5. 4 1. 9 2. 2 2001 2002 8. 7 8. 8 5. 7 1. 9 2003 1. 6 2004 8. 2 4. 7 1. 4 2005 7. 7 6. 4 4. 1 5. 4 4. 2 5. 7 4. 9 1. 3 1. 2 1. 1 0. 700000001 2006 2007 MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union 2008 2009 4. 6 2010 5. 3 5. 02 2011 Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IV Present trends in industry v Comparison of manufacturing industry and all industrial production, regarding their participation in GDP, shows that some other sectors in last couple of years took significant participation in industrial production, comparing to traditional industrial sectors, e. g. metal – manufacturing sector, which is still very dominant, but slowly loses its influence because of the objective situation. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IV Present trends in industry v Participation of industry production in total employment 24. 63 23. 77 22. 41 20. 51 17. 49 14. 38 2005 2006 2007 2008 MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union 2009 2010 13. 4 2011 Chapter. Poglavlje 20: 25 Enterprise and. Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IV Present trends in industry v Participation of certain categories of industry production in total employment Mining and quarring Manufacturing industry 17. 99 Production and supply of electricity, gas and water 17. 28 16. 43 14. 64 12. 53 10. 24 3. 81 2. 83 2005 3. 73 2. 76 2006 3. 58 2. 4 2007 3. 63 2. 24 2008 MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union 3. 13 1. 82 2009 2. 7 1. 44 2010 9. 39 2. 74 1. 24 2011 Chapter 20: Poglavlje 25 Enterprise and Industrial policy Nauka i istraživanje

Chapter 20: Enterprise and Industrial policy IV Present trends in industry v From shown relevant data, it is clear that in total industrial production, participation of employees in manufacturing industry make its highest number, which makes manufacturing industry even more important factor in future development of industry in Montenegro. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy V Basic tasks of future development of industry in Montenegro Ø Future development of industry in Montenegro should focus on two main tasks: 1. Improvement of process of restructuration of Montenegrin industry and enforcement of its market competitiveness, considering the process of joining the EU; 2. Improvement of industrial development which satisfies needs of current generations, on a way that it does not endanger capability of future generations to reach their own needs, that is industrial development. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy VI Goals of future development of industry in Montenegro Ø Based on previously mentioned tasks as well as experience from other candidates and EU member countries, goals of industrial development in Montenegro can be defined: § Goals that are referred to improvement of process of restructuration of industry of Montenegro and empowerment of its market competitiveness, concerning the period of transition and joining to EU § Goals referring to creation of conditions for sustainable industrial development MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter. Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy VI Goals of future development of industry in Montenegro 1. Regarding the process of transition and joining the EU: a) creating an environment for industrial enterprises; b) empowerment of capability of international corporation of competitiveness of Montenegrin industry; c) adaptation of industry in Montenegro to business environment in industrial structures of EU. 2. Creation of conditions for sustainable industrial development a) economically justified production that is focused on growth, in order to ensure positive opportunities for future generations; b) increase of employment considering other social aspects; c) decrease of pollution and other pressure on ecological system; d) efficient usage of natural resources; protection of economic capital and its productivity. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter 20: Enterprise and Industrial policy

Chapter 20: Enterprise and Industrial policy VII Industrial policy as engine of future development Ø Important guidelines of industrial policy: 1. Industrial policy should arise from national long-term strategy of socio – economic development, manufacturing orientation and strategy of industry development; 2. Industrial policy should have importantly wider framework than public (state) intervention in industry; 3. Industrial policy has to sustain the widest national interest, which is reached with consensus of all directly interested parties; 4. Industrial policy has to flexibly formulated, with possibility of post correction from side of its actors, active participants (holders) of industrial policy. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy VII OECD suggestions for industrial policy composition As assistance to development of industrial policy, OECD suggested 10 basic goals of industrial policy: 1. Efficiency of industry; 2. Rationalization of total activities; 3. Adaptation of small and medium enterprises; 4. Structural adaptation of industry; 5. Solution of social problem, made throughout reconstruction of industry; 6. Adjustment of organizational structure of industry; 7. Creation of conditions for balanced industrial development; 8. Improvement of usage of industrial capacities: 9. Faster adaptation of industry on changeable society goals; 10. Protection of environment. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy IX Main goals of the future development of industry • Definition of industrial policy in order to help strategic industries and ways of supporting their development • Enhancing the competitiveness and export potential by accelerating privatization, attracting FDI, boosting scientific research, establishing an appropriate framework for entrepreneurship through improved management firms and improving market transparency. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter. Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

Chapter 20: Enterprise and Industrial policy X Reaching goals Regarding the recommendations of European Union, in order to create Industrial policy, Montenegro has reached further results on these fields: 1. Improvement access to finance the business - through activities of bank sector, Investment Development Fund, leasing companies and micro credit organizations; Credit lines will be created for crediting of SMEs, in order to provide start up support. 2. Competition Policy – this will be developed and reached throughout implementation of Regulatory Impact Assessment RIA, Guillotine regulatory reform and reform of Doing Business (this reform established the concept of one-stop shop, providing the easy way of gaining permits, shortening administrative procedures) MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter 20: Enterprise and Industrial policy

Chapter 20: Enterprise and Industrial policy X Reaching goals 3. Improving infrastructure – numerous project have been and it will be implemented, which have a main purpose to improve quality and efficiency of energy, transport and communication infrastructure services. Throughout project of Business zones, the infrastructure in certain municipalities will be improved and adopted for industrial usage. 4. Industrial innovation – promotion of industrial research, development of advanced manufacturing technologies, promotion and development of new business concept, such as Business zones and Clusters. a) Through development of Business Zones, Montenegro within clearly defined space, provides to investors numerous tax and administrative reliefs. b) Development of Clusters in Montenegro will contribute to balanced regional development and increase of competitiveness of SMEs. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter 20: Enterprise and Industrial policy

Chapter 20: Enterprise and Industrial policy X Reaching goals 5. Attracting FDI – Montenegro has created competitive strategies for attracting foreign investors; business ambient has a lot of relieves that provides favorable conditions for investors. 6. Support for development of SMEs. 7. Competitive tax policy and business barriers – Montenegro has the most competitive tax system in region and there is ongoing work on removing business barriers. MONTENEGRO Negotiating Team for the Accession of Montenegro to the European Union Chapter Poglavlje 20: 25 Enterprise and Nauka Industrial i istraživanje policy

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