Download CRISIS WILL NOT HALT INVESTMENT Dr Igor Lukšić, Deputy Prime

MONTENEGRO
interview
CRISIS WILL NOT HALT
INVESTMENT
Dr Igor Lukšić, Deputy Prime Minister of Montenegrin Government for
magazine “Diaspora” talks about the current economic situation
A
lthough the effects of the global economic crisis spilled
over to our country, the Montenegrin Government
has undertaken appropriate measures to mitigate the
negative impact on the economy, but also aiming to attract
investment. We discussed the current economic situation with
Montenegrin Deputy Prime Minister, Dr Igor Lukšić
The impacts of economic crisis have not skipped
Montenegro, in particular in its banking sectors. What will
the Montenegrin Government do in the upcoming period to, at
least, mitigate the impact of the global financial crisis?
• Over the past period we have endeavoured to respond
to the needs of the banking sector, the economy and the citizens
and pass the best solutions and measures to mitigate the impact
of the economic crisis which are in the range of 10% GDP or
320 million euro. We responded timely by enacting the Law on
Measures to Protect the Banking System, we pumped some 90
million of the state funds into the system, we are now negotiating
with renowned international banks, the European Investment
Bank and the German Development Bank – KfW, for the
provision of credit support to the banking sector in the value of
150 million euro to be guaranteed by the Government.
These days we are preparing the implementation of a new
measure. In agreement with the Central Bank of Montenegro,
we enabled the commercial banks to use 20% of obligatory
reserves (some 40 million euro) for the purchase of treasury
bills, and in addition the 2009 Budget Law envisages the
borrowing of 75 million euro to finance budgetary spending.
We are currently negotiating with prospective partners the
provision of these funds. All these measures put together will
give an impetus to the banking sector, will improve liquidity of
the payment operations and increase the investment spending
component.
Several projects to improve road infrastructure in
Montenegro and investments in Montenegrin economy have
been envisaged. Can Montenegro expect foreign investments
for these projects?
• Speaking of road infrastructure, by far the most
significant project is the Bar-Boljare motorway. Over the past
period we have raised the interest among the international
2009
The capital increase of the EPCG was performed.
What positive impacts are expected to ensue to Montenegrin
economy?
• We have been deliberating for long the proper model
for privatisation of EPCG. We decided eventually to do so
gradually, we stipulated the terms of the tender in which in
the first stage we offered for sale 10% of shares, the issuance
of 10% of new shares, and the strategic partner is obliged to
offer to purchase the shares from minority shareholders.
We strived to come up with a model to be the driving
impulse for the overall economy and the financial system.
Moreover, the entry of another significant strategic partner
is a sign of Montenegro being an attractive and conducive
environment for investments. Given the financial crisis, this
will prove to be significant since these funds will contribute to
the improved liquidity of the banking sector and maintenance
of the economic growth we had over the past years, and for the
Right Time for Investments
Montenegrin Government intends to attract, in some
way, the capital of Montenegrin emigrants, since that would
be more than a welcome injection to overcome at least some
of the negative impacts of the global financial crisis in
Montenegrin context?
• By all means, we also endeavoured over the
past years to entice Montenegrin emigrants to invest in
Montenegrin economy. We have good examples from
some Montenegrin municipalities. Even in the context
of the global financial crisis, any support is welcome and
any investment means the support to the financial system
liquidity, development of strategic economic sectors for
Montenegro. Naturally, with intensive communication
established via our diplomatic representative offices abroad,
we endeavour to encourage as many of our emigrants as
possible to invest in Montenegro.
energy sector it will mean the decrease in losses, revitalisation
of the grid and possible new investments.
There are some ongoing strikes of the workers in Processing
of the Steel Plant, the Tobacco Company due to unpaid salaries
and other payments owed to them. What is the Government
undertaking and what does it intend to undertake to resolve the
workers problems?
• In the past and in particular at this time the
Government is taking in careful consideration the demands of
workers in the context of continuous improvement of the social
dialogue. Every grounded demand was met with our support.
Aware of the sensitivity of the socio-economic moment at
the end of the transition process, in 2008 we implemented
a comprehensive package of measures to support workers
aiming to cushion the impact of economic reforms. In case
of the above companies we have a responsible attitude, but
primarily within the legislative framework.
MONTENEGRO
financial institutions, we talked with EIB, EBRD and KfW
bank, we organised an investment conference, we invited
tenders for concessionaires obliged to find financiers. The
tender process is in progress and we are very optimistic about
this project, we expect several companies to submit their
bids.
In addition, over the past years we endeavoured to
create an environment conducive to business and encourage
investments by eliminating business barriers and by the single
digit taxes. We expect the continuation of ongoing investments
as well as the new investments in the peninsula Luštica,
Velika plaža, the capital increase of the EPCG. In addition,
the entry of the Erste Bank to Montenegrin financial market
in the situation of financial crisis is a very good indicator
that Montenegro is quite attractive to investors even in these
extraordinary global circumstances.
Montenegrin Government offered to KAP twenty million to
resolve the current problems. Is it enough for KAP to overcome
the crisis it is in? In addition, what would be the impact on
Montenegrin economy, and what on the environment in
Podgorica and its vicinity if KAP would cease its operation?
• We are witnessing the hard times of the aluminium
industry globally. There is almost no aluminium producer
currently operating without losses. This severe crisis hit
Montenegrin aluminium industry as well. The situation is
currently such that the production price is greater than the
market price.
In such changed circumstances, we are aware of the
social and economic significance of KAP for Montenegro
with a view of several large companies, primarily the
Railway, the Port of Bar, Bauxite Mines, as well as a number
of small and medium-size companies directly linked to and
dependant on the operation of this company, and we assessed
the state intervention to be necessary in order to maintain
the economic and social balance. The non-operation of the
company would have the long-term negative consequences
on the Montenegrin economy. For that reason we decided
to extend the credit support in the amount of 20 million
euro to maintain production in this factory and cover the
outstanding liabilities towards the workers and suppliers and
create the conditions for restructuring. It is our estimate that
this financial injection would help to restore the soundness
of the company and create the conditions for the continuance
of regular production. KAP shares the same destiny and
suffers the consequences of the poor state of the aluminium
industry worldwide, and thus the KAP crisis is linked with
the developments at the global stage. We believe this support
would solve some of the problems, but it is also too early to
speak of the negative scenarios, or the definite closure of
KAP. Still, in order for this arrangement to be implemented,
we need an agreement related to some issues including the
long-term vision of the company.
Miloš Krivokapić
DIASPORA of MONTENEGRO