REPORT ON CHAPTER 20 – ENTERPRISE AND INDUSTRIAL POLICY FROM THE ASPECTS OF NEGOTIATIONS OF MONTENEGRO WITH THE EU

General information about the Working Group

Working Group for Chapter 20 was formed in September 20th 2012 and consists of 46 members from various departments of the state administration and civil sector. Competent authority for Chapter 20 is the Ministry of Economy. The screening process for this Chapter was completed in November 28th 2012 at the bilateral screening meeting where the Montenegrin delegation presented the compliance of Montenegrin legislation with the EU acquis. After submitted negotiating position, Montenegro opened the negotiation Chapter 20at the Intergovernmental Conference in Brussels, in December 18th 2013.

The European Commissionassessed, in its Screening report, that Montenegro has achieved a satisfactory level of compliance with the EU acquis in the field of enterprise and industrial policy.

About Chapter 20 - Enterprise and Industrial Policy

The EU acquis under enterprise and industrial policy chapter consists of policy principles and instruments that are based on communications, recommendations, and conclusions of the Council. Chapter 20also comprisespolicy instruments, including financial support and regulatory measures, as well as sectoral policies. The EU enterprise and industrial policy is strongly driven by the ‘Europe 2020’ strategy.

This Chapter covers the following areas: Industrial policy; Small and medium-sized enterprises (SME) and enterprise policy; Innovation Policy; The EU Programmes; Banking and Finance; Directive on combating late payment in commercial transactions; Tourism industry; Construction; Steel, metals and other materials; Wood industry; Air and maritime industries.

Activities for improvement of policies

SME

Small and medium-sized enterprises (SME) comprise about 99% of the total number of enterprises and participate with about 67% in the total employment. According to data from national statistical office Monstat, there were 22,313 SMEs in Montenegro in 2012. Of this number, 98.86% are small, while 1.14% are medium-sized enterprises. SME share in total exports for the year 2012 was 45.04%.

In There is no particular law on SMEs in Montenegro, but the issues in this area are regulated by the following system laws and bylaws:

•Law on Companies;

•Law on Accounting and Auditing

•Decree on more detailed criteria, conditions and manner for granting state aid

The public hearing on the Draft Law on Accounting, which will define the classification of SMEs according to the average number of employees, total annual revenue and total assets, is in the procedure (Directive 34/2013EU).

In the previous period SME definition was included in the Law on Accounting and Auditing, in accordance with the earlier definition of SMEs in the EU.

Creating of policy for entrepreneurship and SME development, in the Government of Montenegro, is entrusted to the Ministry of Economy, i.e. the Directorate for Development of SMEs, which is an integral part of the Ministry. In 2011, the Government of Montenegro adopted the Strategy for Development of SMEs 2011-2015, and it regularly adopts annual Action plans for implementation of the Strategy. In addition to the Directorate, line ministries, public and private institutions and organizations, business associations, representatives of civil society and international organizations that have their headquarters in Montenegro, participate in the development and implementation of measures.

Montenegro implements the most important document of the European policy in the field of small enterprises - the Small Business Act (SBA). In this regard, the Montenegrin SME policy aligns with EU policy. The next progress report in line with SBA indicators will be developed in 2015.

An Agreementbetween the EuropeanUnion and Montenegroon the participationof MontenegroinCOSMEprogramme -the Competitiveness of Enterprises and Small and Medium-sized Enterprises(2014-2020), was signed in June25th2014.Within theCOSMEprogramme, at the beginning of June, an applicationfora new projectEEN-EnterpriseEuropeNetwork was submitted,whichincludes an Implementationstrategy 2015-2020, as well as theWork Programme2015/2016.

In 2013/2014, the progress in the field of small and medium-sized enterprises has been achieved in the following segments:

Strategic documents and action plans -Action plans for the 2014 have been adopted; Strategies for the development of small and medium-sized enterprises and Strategies for encouraging competitiveness at the micro level 2011 - 2015. The first draft of the Strategy for Lifelong Entrepreneurial Learning 2015-2019 has been done and activities on the Strategy for Development of Women's Entrepreneurship 2015-2020 have begun.

Institutional infrastructure and advisory services to support SMEs–within the IPA 2011 programme, the project „Establishment of Regional Business Center and Incubator for North-East Montenegro“ is in the process of implementation forestablishment ofan office of the Regional Business Centre in 5 municipalities of northern Montenegro and incubator based in Berane.Establishment of a pilot project on line SME portal for the municipality of Bijelo Polje is in the progress.

SME competitiveness and internationalization - The Programmefor encouraging the development of clusters in Montenegro by the end of 2016 is in the process of implementation. During 2013/2014, 6 Public callshave been realized and funds for 6 clusters have been approved in the total amount of grants of 45,000€. Third Public call in 2014 is in progress. TheProgrammefor increase of the regional and local competitiveness through harmonization with the requirements of international standards of operations for the period 2014-2016enables approval of grants with the aim of complying with the requirements of international standards for obtaining of the accreditation for conformity assessment, as well as for the implementation of standards/recertification.In 2014, one Public call has been realized and funds for one applicant have beenapproved in the amount of maximum 5.000€. The realization of the second Public call is in progress.

Activities of internationalization (connection and cooperation) and strengthening of the innovation of SMEs in Montenegro and the EU via the Enterprise Europe Network is carried out continually.

Entrepreneurial learning programmes and mentoring services - in terms of entrepreneurial learning the greatest progress has been achieved in the area of primary and secondary vocational education. Instruction for implementation of entrepreneurial learning through mandatory curricula in elementary schools has been made, link has been created and trainings for teachers and students have been organized. In secondary vocational education the subject Entrepreneurship is introduced in all areas of work as mandatory or optional professional and theoretical subject, 70 training enterprises have been established in 15 secondary vocational schools and 4 training enterprises at the Faculty of Economics.At the higher education institutions in Montenegro, the subject Entrepreneurship exists in all universities within the study programmes with business orientation, both in undergraduate and postgraduate studies. The National Partnership for Entrepreneurial Learning regularly organizes meetings and roundtables, which represents an opportunity to share experiences on how the different partners are involved in the implementation and development of entrepreneurial competences.

In 2014, a working group has been formed and technical support provided by the ETF for the Strategy for Lifelong Entrepreneurial Learning 2015-2019. A public hearing on the draft Strategy is in the progress and its adoption is planned by the end of 2014.

A model of providing services to SMEs is extended by introducing mentoring in the form of direct work with the company, by solving problems and planning future operations, in cooperation with the Japan International Cooperation Agency - JICA.

Women’s entrepreneurship - Several thematic meetings on the topic of women's entrepreneurship have been organized, focus groups with entrepreneurs and representatives of institutions/organizations have been hold and drafting of the Strategy for Development of Women's Entrepreneurship 2015-2020 have begun. The adoption of the Strategy is planned by the end of 2014.

Support for beginners in business - start up - two business incubators are operative: Business Start-up Centar Bar and D.o.o. Inventivnost Podgorica. The extension of the incubator infrastructure is planned by the approved grant within the IPA 2011 programme for the establishment of incubator in Berane. Financial support for start-ups and new businesses has been provided. Support services for start-ups areprovided also through virtual enterprises and by organizing trainings.

Financial support to the sector of small and medium-sized enterprises- in 2013.Investment and Development Fund (IDF) has granted 171 loans in the total amount of 37.3 million Euros.(Of this amount, 119 loans were granted to the SME sector - 31.7 million Euros). During 2013, 75 loans were granted from EIB funds or 21.9 million Euros (included in previously granted loans). In 2014, (as of 25/11), IDF has granted 253 loans in the total amount of 34.6 million Euros. (Of this amount, 135 loans were granted to the SME sector, or 31.7 million Euros). During 2014, 63 loans were granted from EIB funds in the total amount of 20 million Euros (included in previously granted loans).

Through the instrument of factoring, in 2013, 22 arrangementswere approved, as well asthe purchase of receivables in the total amount of 28.10 millionEuros. In 2014, factoring agreements were concluded with 26 companies for whichthe limits were approved in the total amount of 17,090 million Euros, as well as the purchase of receivables in the amount of 24.483,499 million Euros.

In 2013, Employment Agency financed 75 loans in the total amount of 0.45 million Euros intended for the opening of 91 new jobs. In the period from 01/01 until 25/11/2014,9 projects were financedin the total amount of 65,000 Eurosintended for the opening of 13 new jobs.

In terms ofimproving the business environment, the Council for improving business environment, regulatory and structural reforms and the Ministryof Finance,in cooperationwith the line ministriesand the private sector, continuedwiththe implementation ofmeasures in allareas of economicsystems inorder to createmore favourable conditionsforbusiness operations.Within activitiesfor improvement ofthe business environment,it was continued with an implementationof initiatedactivitiesin the followingareas:

  • Inorder to simplifythe processof obtaininga building permit, in cooperationwith local self-governments,animplementation ofone -stop shopwas continued at the locallevel;
  • In terms ofanalysis ofRegulatory Impact Assessment(RIA)–from the formalintroductionofRIAinto theMontenegrin regulatory systemin January 1st2012 untilthe end ofOctober 2014, the Ministry of Finance provided more than 700opinions on proposedlegislation andaccompanyingReports onconductedanalysisof impact assessmentin terms ofimplications for thebusiness environmentand the impacton the state budget;
  • Activities on the project Regulatory Guillotine were continued. The Action Plan for implementation of the Regulatory Guillotine recommendations, which includes the 1872 recommendations, was adopted in May 2012, with the period of implementation of given recommendations from2012 until 2015. As of the third quarter of 2014, since the adoption of the Action Plan (May 17th2012),from 1,446 accepted recommendations, 987 were implemented, i.e. the degree of implementation is 68.3%. In 2015, in accordance with the revised Action Plan (adopted by the Government in September 12th2013), 172 recommendations will be implemented, while 50 recommendations will be implemented in 2016 and 7 recommendations in 2017;
  • An implementation of activities within the three-phase project "Podgorica Approach" is continued, where the first phase related to the work on pilot projects in cooperation with banks, in order to test the approach to a number of non-performing loans. Thisphaseis carried outinthe first quarter of2013.The second phaseis envisaged to becompletedby preparinga proposalto amend theregulatory framework, through the adoptionof a special law(lexspecalis) that would enablefaster and moreeffective implementationof the restructuringof non-performingloanson a voluntarybasis. In this regard, the Ministry of Finance, in cooperation with the Central Bank of Montenegro and the World Bank, prepared a Proposal of the Law on consensual financial restructuring of debts to financial institutions which aims to encourage the recovery of debtors or users of mortgage loans in financial difficulties by restructuring debts, preserving the stability of the financial system and providing access to new means of financing for stimulation of economic recovery and growth. This Proposal of the Law was adopted by the Government of Montenegro in July 10th 2014 and submitted to Parliament for deliberation. The third phase of the project "Podgorica approach", after the adoption of the Law by the Parliament, will refer to the beginning of the implementation of the voluntary restructuring of loans and it will include activities relating to the loans given to the business sector and population.

2011/7/EU Directive on combating late payment in commercial transactions

Directive on combating late payment in commercial transactions is the only part of so-called "hard" law of the European Union which belongs to this Chapter and which will have to be transposed into Montenegrin legislation through appropriate laws and bylaws. The aim of adoption of the Directive was preventing of delays in payments in commercial transactions, irrespective of whether the contracting parties belong to the private or public sector and to ensure the proper and efficient functioning of the internal market. Also, one of the objectives of the Directive is the protection of the "weaker" side of private commercial (business) contracts, i.e. toprohibit abuse of freedom of contract to the disadvantage of the creditor,especially in the legal position of small and medium-sized enterprises.

The Parliament of Montenegro adopted the Law on the terms for settlement of financial liabilities,in June 19th 2014, which needs to be fully aligned with Directive 2011/7/EU by the date of accession.

INDUSTRIAL POLICY

In terms of industrial policy, in order to further adjust to the demands of the European Union, the Ministry of Economy has started the preparation of a comprehensive Industrial policy which is reflected in the strengthening of administrative capacities for the development and implementation of Industrial policy, which envisages as key results: the preparation and adoption of a comprehensive Industrial policy with the Action Plan with provided system for monitoring of achieved results and assessing of needs for development of capacities and recommendation for implementation and monitoring of the policy.

Ashort-term project is granted from reservefundsof IPA2012/2013for provision ofexpert assistancein the creation ofIndustrialpolicy.Duringthe one-yearproject duration, a three-memberexpert teamwill be responsiblefor supportingthe development ofIndustrial policydocumentof Montenegro until2020, while theentire processwill be coordinated by the Ministryof Economy. Given the complexityof the whole developmentprocess of a proactive,integratedIndustrial policy andcoordinationof numerouspolicies, an inter-ministerialWorkingTeam was formed for thecoordination and implementation ofthe Industrialpolicyof Montenegro until2020. The aim of forming a Working Team is to ensure the preparation and implementation of Industrial policy of Montenegro in accordance with norms and principles of EU Industrial policy, with the Action Plan, providing the mechanism for implementation and monitoring of the policy, as well as thesystem for monitoring of achieved results. Also, according to the Terms of reference, the emphasis is on strengthening of the administrative capacities of institutions responsible for the preparation and implementation of the Industrial policy of Montenegro and onestablishment ofrelevant links between the Industrial policy and support from EU funds.

The project started with the implementation in October 6th2014. An initial phaseis completed, during which the management and coordination of the project were discussed, on-line system for project management was established in order to provide transparent access to the implementation of the project and to encourage interactive participation. In addition, an assessment of existing measures and programmes is finished, as well as of existing donor initiatives, relevant to the Industrial policy.

Areview of existing strategic documents in Montenegro, relevant for development of the Industrial policy of Montenegro until 2020, has been analysed,as well as a summary of the key elements of EU Industrial policy, with special reference to the legal characteristics of EU Industrial policy, the connection with the Europe 2020 Strategy, the relevance of EU financial instruments and programmes, etc.

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