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Montenegrin Cabinet held thematic sitting dedicated to structural reforms in Kolašin, Montenegro’s winter tourist center.

1st day:

Opening the session, Prime Minister Milo Đukanović stressed that it is the Government’s responsibility to offer before the end of the mandate their vision of the continuation of structural reforms, with clear guidelines that will serve the future government as a starting point for achieving the strategic objective of economic and social development of Montenegro, namely the increase in the quality of life of all citizens in Montenegro. Continuation of structural reforms makes the way of the state’s functioning change, creating an institutional environment that will motivate and encourage entrepreneurship and attract knowledge and high technology through investments in order to achieve the projected average annual growth of 4 – 5%.

The document entitled “Reforms for Competitiveness – 2020″ defines the primary goal of economic development of Montenegro – increasing competitiveness of the economy and shows the way in which this can be achieved. Boosting competitiveness of the economy affects productivity growth and employment, and this can be achieved through creating an institutional framework in which the Montenegrin entrepreneurs and domestic and foreign investors generate more revenue with the creation of higher added value, thus ensuring Montenegro a good position in the international value chain. The activity rate of the workforce is projected to increase from 86% to 91% of the EU average. The employment rate in the age group 15 – 64 years is also projected to grow from 51% to 56%, which would mean 20,000 new employees and income per capita of EUR 10,000 in 2025.

Reforms for competitiveness are focused on six areas: entrepreneurship, small and medium-sized enterprises and investments; labor market, social welfare and pension system; education system; health care system; public financial management, and administration. During today’s work, it was discussed about reforms in the fields of entrepreneurship, small and medium-sized enterprises and investment, labor market, social welfare, pension and education. By the same token, on the basis of proposals from the relevant ministries, the Cabinet agreed on 6 measures for pursuing the established policies regarding the improvement of the competitiveness of the Montenegrin economy.

Today’s discussion identified the major impediments to faster development of business, such as the length of administrative procedures, lack of entrepreneurial skills, and the unavailability of the banking system in financing businesses. Measures to overcome the issues in this area are related to, inter alia, boosting efficiency in the execution of contracts, entrepreneurship development support programmes, SMEs and industry, incentives and tax breaks in tourism, incentives for direct investment, development of business zones (national and local), practical training programmes, etc. The Cabinet also supported the model of high quality tourism development, including 76 hotels of high category.

Reform of the labor market, social welfare and pension system will be implemented through the following reform measures: advancing flexibility and mobility of the labor market, elimination of fictitious employment, and the elimination abuses of the social welfare system.

The starting points in reforming the education system reform are the principle of long-term development of the economy based on knowledge and innovation, as well as the notion implying that educated workforce is a significant competitive advantage for an economy. Identification of obstacles at all levels of education defines reform measure that aims to contribute to improving the quality of education, increasing the level of competitiveness of the workforce and better employment, which will have a positive impact on GDP growth. In that context, the reform measures are focused on increasing the level of knowledge of English, upgrading high school education through the creation of specialized departments, school network optimization, harmonization of higher education with the needs of the labor market, etc.

The thematic session of the Government was organized after extensive preparations, during which the Government’s permanent working bodies in several sessions over the past two weeks considered strategic and concrete proposals which should contribute to Montenegro maintain the planned pace of development and GDP growth, and catch up with the developed economies.

2nd day:

Structural reform in the health system implies improvement of identified weak points within the system in order to achieve financially sustainable health care system, which, in addition to efficiency, provides adequate quality of service to its users. The aim of the reform is to establish a new system with a view to accomplishing economic and financial results. The measures envisaged in this area are focused on, inter alia, continued advancement of the level of expertise, better management in health care institutions, as well as the reform of the funding mechanisms.

There are two main objectives when it comes to reforming the public finance management: ensuring Montenegro’s willingness to identify, preclude and manage fiscal risks, excessive fiscal deficits and macroeconomic imbalance and structuring the public spending in such a way to stimulate economic development and ensure a better quality of life for all citizens. Key reforms set out in this document concentrates on two areas – the spending and revenue sides. With regard to the spending side, the proposed measures should ensure the limitation and responsible planning of public spending and public debt management. The reforms are directly linked to reforms in all other areas, namely education, health, labour, social welfare, pension system and administration. The aim of all these reforms is to improve the quality and efficiency of public services. Revenue side-related measures should affect the lowering of tax rates (abolition of the crisis tax on income), further simplifying the tax framework, particularly in terms of tax payment procedures, strengthening revenue institutions’ capacity, as well as linking tax and spending policies.

Strategic planning in the field of macroeconomic and fiscal policy and economic evaluation of society through economic development, investment and sustainable economic growth requires the establishment of a consistent system of public administration covering state administration, local government, public services and regulatory bodies, which is also rationalized in terms of its organization, numerically optimized and efficient. Human resource management is critical for regulatory reform, advancing the business environment and strengthening competitiveness of the Montenegrin economy. To achieve the objective of sustainable economic growth and overall progress of society requires a rational, efficient and highly motivated administration, while at the same time strengthening the system of monitoring and accountability, ranging from management level to each position in the administration.

The proposed administrative reform measures are designed to provide better organizational, functional and technical connections within and between the competent authorities, high-quality and efficient exchange of data and information, efficient procedures, thus better serving interests of companies, the Montenegrin citizens and foreigners. Concluding a two-day work, Prime Minister Djukanovic voiced pleasure with the content and quality of the discussion and agreed solutions and pointed out that the Government should focus its efforts towards achieving the reform objectives in a responsible and consistent manner.

Source: Government of Montenegro (1) (2)

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