32

Economic Freedom- Doing Business 2013

Macroeconomic OutlookMacroeconomic OutlookEconomic Freedom

The World Bank has published its 10th Doing Business Report for 2013. The report includes a total of 185 economies, and includes two new economies, Barbados and Malta, which have been added since the last report. The World Bank Doing Business Report is one of the most comprehensive reports produced and is used by both the private sector and investors who are interested in invest-ing in a country and by governments in order to assess what reforms need to be made to improve their ranking.

Some of main findings since the first report in 2003 are:1

• Over the last 10 years, 180 econo-mies have implemented close to 2,000 business regulatory reforms, as measured by Doing Business.

• Eastern Europe and Central Asia have improved the most, overtak-ing East Asia and the Pacific as the world’s second most business-friendly region, according to Do-ing Business indicators. OECD high-income economies continue to offer the most business-friendly environment.

• Business regulatory practices have slowly converged as economies with initially poor performance records have narrowed the gap with better performers. Among the 50 economies showing the greatest improvements since 2005, the largest segment—one third— is represented by countries in Sub-Saharan Africa.

• Among the categories of business regulatory practices measured by Doing Business, there has been more convergence in those that relate to the complexity and cost of regulatory processes (business start-up, property registration, construction permitting, electric-

1 World Bank: Doing Business 2013

ity connections, tax payment and trade procedures) than in those that relate to the strength of le-gal institutions (contract enforce-ment, insolvency regimes, credit information, legal rights of bor-rowers and lenders and the pro-tection of minority shareholders).

• Two-thirds of the total number of reforms, almost 2,000, recorded by Doing Business focused on reducing the complexity and cost of regulatory processes.

• A growing body of research has tracked the effects of simpler busi-ness regulations on a range of eco-nomic outcomes, such as faster job growth and an accelerated pace of new business creation.

In this report Montenegro ranked 51st among 185 countries which represents an improvement of five places in com-parison with the report last year. This report covers ten indicators that are ranked in order and compare countries on the basis of the ease of conducting business in them. In four out of ten indicators Montenegro improved its ranking. Improvement was seen in the following areas: obtaining credit (+4 places), paying taxes (+27 places), solving illiquidity (+8 places) and in-creasing electricity supplies (+2 places).

Areas in which Montenegro fell includ-ed: starting up business (-11 places), registering property (-9 places), protect-ing investors (- 3 places) and enforcing contracts (-2 places).

During the observed period, Mon-tenegro officially recorded reforms in two areas: obtaining construction permits and obtaining credit.

In the area of obtaining credit, Montenegro established a new credit registry. The data it pro-

vides is useful to credit guarantee institutions and also helps people whose data is recorded in the sys-tem and provides them with col-lateral for other credit obligations. Montenegro ranked overall in 4th position in the report in this area.

Montenegro has made applying for construction permits less expensive by reducing the cost of pre- and post construction procedures.

Montenegro improved its position by 27 places in the area of paying taxes. This was due reforms that had been undertaken also because of the new unified registration system that re-quires a smaller number of payments and has reduced the time duration of the entire tax procedure.

Montenegro improved its position by 8 places in the area of solving il-liquidity. This was mainly due to the fact that the time period required to close a business had been reduced from 2 years to 1.4 years.

Montenegro fell by 11 places in the area of starting business despite the fact that it continued to carry out reforms in this area. This can be ex-plained by the fact that most of the countries covered by the report fo-cused their reforms in this area.

This type of report shows decision makers the path that they should follow in order to be successful in carrying out reforms in the business environment. What actually matters is that the authorities implement reforms and that businesses rank them. It is less important that in-dividual laws and regulations are adopted. During the forthcoming period Montenegro can expect to improve its position in this list, es-pecially in areas in which it pres-ently lags behind such as dealing with construction permits, enforcing contracts and registering property. The importance of this report is that competition is not restricted to neighboring countries but is with the whole world. In that sense it is important to be proactive and to keep up with reforms. We need to keep ahead of our competitors. ■

SummaryThe third quarter of 2012, at a macro-economic level, was characterized by a slight reduction in economic activity: industrial production recorded a de-cline of 7.3% in August in comparison with the average level last year. In May 2011, the Montenegrin budget recorded a deficit of €3.26 million; public debt at end - June amounted to €1,620.4 million (50% of GDP). There were no major changes in the labor market. Salaries, without taxes and contribu-tions, remained the same in August in comparison with the previous month. Unemployment was at a level of 12.48%.

***According to an analysis prepared by the Ministry of Finance, the economy was still in deficit during the first half of the year. However, according to projec-tions, it will reach an annual growth rate of 0.3%. The general situation in the real sector of the Montenegrin economy can be seen in the following basic indicators:

Real Sector Basic SectorsIndustrial production: recorded a fall of 6.6% during the period January-Au-gust 2012 in comparison with the same period last year. During the observed period, major decreases in industrial output were recorded in the areas of mining and quarrying, and electricity production (23.3% and 14.2% respec-tively). The manufacturing industry only recorded a slight fall in activity (0.7%).

Tourism: In August, 359,243 tourists came to Montenegro, of which 89.6% were foreigners (mostly from Serbian, Russia and Bosnia and Herzegovina). During the same month, 2,375,955 overnight stays were recorded. Budva, Herceg Novi and Bar hosted the highest number of visitors.

During the period January-August the number of tourists increased by 3.8% in comparison with the same period

last year, while the number of realized nights increased by 6.1%.

Construction: according to the most recent data, which refers to the sec-ond quarter of 2012, the total value of finished construction works was €60.62 million. This was 58.9% less than average last year. Anticipated new building work projects are expected to total €3.86 million, and other projects are expected to total €8.04 million.

InflationThe monthly inflation rate, measured by the Consumer Price Index (CPI), in August 2012 recorded an increase of 0.4%. The highest increases were recorded in the areas of residential water, gas and other fuels (3.2%) and transport (2.2%) due to increases in the prices of electricity, fuels and lubricants.

The annual CPI inflation level in August 2012 amounted to 4% and was above the EU27 level of 2.7%.

Employment and WagesAccording to data from the Employ-ment Agency of Montenegro, at the end of October, there were 28,966 unem-ployed persons (46.7% of which were women). Thus the unemployment rate was 12.48%.

In August 2012, the gross average salary was €716; the average salary without taxes and contributions was €480.

Higher salaries, without taxes and contributions, were recorded in the following sectors: electricity, gas steam and air conditioning (€882), finance and insurance (€859) and real estate activities (€851).

Public FinanceBudgetCurrent budget revenue in May 2012 amounted to €94.99 million, thus show-ing a decrease of 0.8% of its planned value.

Within the revenue structure, tax rev-enue accounted for the main increase

(62.4%). This was followed by revenue from contributions (33.3%), other rev-enue (2.1%), duties (1.1%), fees (0.9%), and revenue from loan repayments and assets transferred from the previous year (0.2%).

Budget expenditure totaled €98.25 mil-lion, thus showing an increase of €5.9 million in comparison with the level last year. At end - May, the budget showed a deficit of € 3.26 million.

Public debt at end - June amounted to €1,620.4 million, thus representing half the level of GDP which is within the limits set by the Maastricht criteria.

InternationalEconomic RelationsForeign Direct Investments (FDI)During the period January-August 2012, net FDI inflow amounted to €222.1 million, thus showing 10.1% y-o-y decrease.

Total FDI inflow amounted to € 301.1 million. Observing the FDI inflow structure, the largest influx was made on the basis of the sale of real estate and as a result of investment in local companies and banks (€151.5 and €47.5 million, respectively).

Total FDI outflow amounted to €79 million. This comprised residents’ in-vestments abroad (€42.3 million) and withdrawals from investments made by non-residents (€ 36.7 million).

External TradeDuring the period January-August 2012, total exports totaled €245,307.7 million, recording a decrease of 15.3% in comparison with the same peri-od last year. Total imports totaled €1,238,381.9 million, thus recording an increase of 3.9%.

Montenegro is  the most  import-dependent country when compared with Serbia, Greece and Bosnia and Herzegovina (29.3%, 8.9 and 6.6% re-spectively). However, Montenegro’s most important export markets are Serbia and Croatia (21.7% and 26.3% respectively). ■(Source: Central Bank of Montenegro, Monstat, Min-istry of Finance, Employment Agency of Montenegro)