Gray economy and unfair competition, lack of labor, inadequate legal solutions, slow collection of claims and inefficient public administration are the five biggest business barriers in Montenegro, according to the research of the Chamber of Commerce (PKCG) on the business environment.
"PKCG continuously monitors and analyzes business conditions, identifies key opportunities and challenges, and based on direct communication with companies, initiates initiatives and proposes concrete measures to remove restrictions and improve the business environment," the business association told the Mina-business agency.
They added that the deterioration of economic conditions, due to the pandemic and the crisis caused by the Russian aggression against Ukraine, was the reason for a serious review of the situation and opportunities on the market, above all the analysis of the business environment, business barriers and other limitations that affect the sustainability and development of domestic companies.
PKCG conducted the survey in March, and the questionnaire included 127 questions classified into eight areas that determine business conditions in Montenegro - tax system, public procurement, labor market, infrastructure, administration, rule of law, digitization and digital transformation and access to funding sources. as well as two additional areas related to business barriers and expectations in the coming period.
The research was conducted on a representative sample of 382 companies of different sizes, from all regions and industries.
"The analysis was conceived in a way that enables the comparability of research results over the years, which makes it a suitable tool in providing support to the economy, but also to the public sector in order to improve the business climate, which is ultimately the basic prerequisite for economic growth," PKCG explained.
They added that the research results, i.e. the identified challenges, represent a significant input in defining PKCG priorities in the context of improving business conditions, but will also be an unavoidable argument that should guide decision makers when creating economic policy measures.
"The assessment of the overall state of the business environment is moderately unfavorable, 2,41, which is at the level expected by the end of this year, but also significantly worse compared to the period before the pandemic of 3,05. It is worrying that more than half of the respondents gave the two worst ratings on the question about the business environment by the end of the year", the survey showed.
Unfavorable average grades were recorded, as the results showed, in all areas and were lower than the satisfactory/moderate, i.e. average grade. Businessmen gave the lowest average score to the area of access to finance, while they gave the highest to the domain of digitization.
"Nevertheless, regardless of the fact that the average ratings by area, as well as the general average rating of the research, are at a relatively low level, which indicates the dissatisfaction of the economy with the business environment, analyzing the answers to individual questions within the mentioned areas, positive attitudes of businessmen can also be observed", they said. are from PKCG.
They announced that in the area of the tax system, the level of taxes and contributions on wages were the best rated.
"More than half of the respondents said that these rates are moderate. A positive attitude is also visible in the field of public procurement in respect of the deadline for the settlement of obligations from the state, and within the labor market, businessmen rated the knowledge and skills of employees, as well as their digital literacy, the best. Infrastructure is according to the assessment of businessmen at a moderately low level, while within it there is a slightly more positive attitude regarding water supply, internet infrastructure and the quality of electricity supply", the results of the research showed.
In the area of administration, the transparency and efficiency of customs and tax is at a slightly higher level than other state and local administrations. Also, the company registration procedure is at a satisfactory level.
"It is very important for businessmen to recognize how important digital transformation is for business growth, which is a key prerequisite for further progress in this area," said PKCG.
The general conclusion, as they stated, is that the companies are to a certain extent satisfied with certain segments within the mentioned areas, but that there is a lot of room for improving the business environment.
They announced that the tax system was evaluated by business entities with an average score of 2,22, which means that they consider fiscal and parafiscal levies to be moderately high.
"In addition to excise taxes, the economy rated the rate of value added tax (VAT) as high, while in the case of parafiscals, these are fees to executors and local fees", the analysis showed.
The average rating related to public procurement was 2,55, which is close to a satisfactory level. There is room for further improvement in the legislation in that area, as well as in the part related to the procedures and work of state bodies.
The average score for the labor market area is 2,81 and is higher than the average score for the business environment. What is recognized as a challenge is the high degree of misuse of sick leave, and the procedures and costs of registering foreigners. Also, businessmen are not satisfied with the supply of personnel on the labor market, which indicates structural unemployment, i.e. the mismatch between the labor market and the education system," said PKCG.
The average score for the area of infrastructure is 2,25 and is below the average score for the business environment.
"The quality of the railway infrastructure, the high toll through the Sozin tunnel and the price of electricity are rated worryingly low. Also, almost all other items are rated low except for water supply and the quality of the internet infrastructure. Bearing in mind the importance of tourism for our country, the imperative must be to improve aviation availability, and the establishment of direct airline lines with important emission markets", PKCG stated.
They added that public administration with an average rating of 2,59 is above the survey average. The average rating of that chapter is reduced by the businessman's attitude about the efficiency of the administration and the amount of costs associated with the procedure of collecting documents and reporting construction works, and the procedure after the completion of the building, i.e. its registration.
The survey showed that as many as 93 percent of respondents believe that administrative reform is necessary.
The average score for the rule of law area is 2,38, which indicates a moderately low level.
"The speed of solving bankruptcy proceedings, respect for intellectual property rights were rated extremely poorly, which, along with the emphasized selective application of the law, represent very important limiting factors in raising competitiveness, but also in attracting foreign investments," PKCG said.
The average rating for the area of digitization and digital transformation is 2,82 and is higher than the average rating of the business environment of 2,41, and at the same time the best rated area in the survey.
"Nevertheless, there is room for improvement when it comes to the legislative framework, the speed of the process of digital transformation of society and the participation of e-commerce in total sales," said PKCG.
Access to sources of financing for micro, small and medium-sized enterprises is still extremely inadequate, as evidenced by the fact that this area has the worst rating, with only 1,68.
"Large companies rated this area better, as well as the trade and information and communication sectors. High interest rates and collaterals for all types of loans contributed to the low average rating, with ratings lower than average, while only the rating related to the complexity of procedures and the cost of obtaining a loan is above the average for this area," PKCG's analysis showed.
The majority of respondents believe that it is necessary to create special forms of financing for risky and new loans, and to expand the choice and sources of financing. In this direction, their position is that the Guarantee Fund should be established.
PKCG announced that businessmen's expectations for this year are slightly optimistic. The main reasons for optimism are the growth of turnover, personal income, business results, investments, while the basis for negative forecasts of unfavorable conditions are the growth of costs, interest rates and inflation.
Positive expectations regarding employment are particularly important, where 41 percent of respondents expect growth, 49 percent expect the same level, and only ten percent expect a decline.
"Summarizing the results of the survey, it is clear to see the areas in which it is necessary to make an additional effort in order to improve business conditions, which will result in raising the general level of competitiveness, higher employment, and sustainable development of the economy," said PKCG.
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