The Development Bank of Montenegro should launch the operations of an export credit agency by the end of the year, in order to help Montenegrin companies export goods, services and businesses more easily, as well as to help partners (buyers) purchase Montenegrin products and services more easily and cheaply.
This is foreseen in the draft regulation on export insurance against non-market risks, which was publicly debated in December and the text of which was not commented on. The regulation enters into force on 1 January 2027, and by then the Development Bank should prepare all the prerequisites for its operation.
Similar agencies or funds for export insurance and financing exist in all countries in the region, and they have been permitted and strictly regulated by European directives since 1984. This regulation was written in accordance with those EU standards.
Import-export coverage 12 percent
In 2024, Montenegro exported goods and services worth 3,3 billion euros, of which exports of goods were worth 660 million euros, and services (mostly income from foreign tourists) were worth 2,68 billion. At the same time, imports of goods and services were worth 5,06 billion.
In the first 11 months of last year, exports of goods were worth 507 million, while imports amounted to four billion. The coverage of imports by exports was only 12,7 percent.
Montenegro briefly had a Fund for Insurance and Financing of Foreign Trade Operations (SMECA) from 2004 to 2009, and since then it has not had an institution to help exporters through financial and technical assistance.
The regulation stipulates that the Development Bank of Montenegro will also operate as the Montenegrin export credit agency on behalf of and for the account of Montenegro. It will, as stated, support export credits on behalf of the state or with its support in the form of direct loans - financing, refinancing, interest rate support, financing assistance (loans and grants), export credit insurance and other operations permitted by European directives.
The goal is to encourage exports and business abroad.
The aim of its work is the development of the domestic economy through the encouragement of exports and investments of domestic companies in foreign markets. Export credit insurance, as stated, includes insurance of repayment of loans granted by financial institutions to foreign buyers (buyer credit) and insurance of repayment of loans granted by the exporter to a foreign buyer (supplier credit).
The Regulation defines export as the sale of goods of Montenegrin origin to a debtor abroad, as well as the performance of works and/or services by a domestic exporter for a foreign client. For the purposes of the Regulation, export also includes a joint business venture abroad between a domestic exporter and a foreign legal entity, as well as “any other legal transaction whose ultimate purpose is the internationalization of the Montenegrin economy, and which is of particular importance for the Montenegrin economy and/or the economic policy of Montenegro”.
Export credit is defined as a financial arrangement in which deferred payment is agreed with a foreign buyer of exported goods, services or works over a certain period of time, either through a loan to the foreign buyer or the foreign buyer's bank (buyer's credit), or through a loan (deferred payment) to a foreign buyer granted by a domestic exporter (supplier's credit).
The regulation also defines what is considered a domestic product (minimum domestic share), service or business abroad that would be considered exportable and could benefit from benefits.
"The minimum domestic share is the smallest percentage of the value of the domestic share in the Export Contract, in the case of exports of capital goods and/or services eligible for insurance in accordance with this Regulation. As a rule, it is at least 40%, but exports of Montenegrin goods and/or services are also considered to be transactions when, due to the interest for the Montenegrin economy, the Committee for Export Insurance Affairs determines a different percentage through its recommendations, opinion or request," the Regulation states.
The Committee for Export Insurance Affairs, within the meaning of this regulation, is a working body of the Supervisory Board of the Development Bank, which will be responsible for providing recommendations, opinions and supervision over the implementation of export insurance affairs.
Insurance against non-market risks
The Agency will also deal with the insurance of export credits against non-market risks through insurance or reinsurance against commercial or political risk of non-payment of obligations under an export contract. The Regulation defines what non-market risks are.
"Non-market risks are short-term commercial and political risks towards public and private foreign buyers based outside the Member States of the European Union, i.e. outside Australia, Iceland, Japan, Canada, New Zealand, Norway, the United States of America or Switzerland, and whose duration, including the production and repayment period, does not exceed two years, and medium-term - long-term commercial and political risks towards public and private foreign buyers from each country if their duration, including the production and repayment period, lasts two years or more; i.e. all risks that the European Union determines to be non-marketable," the regulation states.
Export insurance operations, as stated, include insurance of export credits against non-market risks, as well as other operations aimed at stimulating Montenegrin exports, the competitiveness of Montenegrin economic entities and the internationalization of the Montenegrin economy.
"Beneficiaries of export insurance operations may be Montenegrin economic entities, their subsidiaries or affiliated companies abroad, financial institutions in the country and abroad, reinsurance companies in the country and abroad and other insurers. When performing export insurance operations, the insurer may reinsurance part of the risk to the private reinsurance market or with other insurers or receive reinsurance part of the risk from other insurers," the regulation states.
It also stipulates that the competent institutions of the European Union are regularly informed about the work of this export credit agency.
What can be considered an export?
The minimum domestic share in the value of that product (domestic production, domestic raw materials, processing of imported raw materials...) must be 40 percent, and this minimum value must also be the case in the case of exporting services or export jobs or works abroad as a contractor, subcontractor, partner...
"In modern practice, state export credit agencies have moved from the concept of 'made in' to the concept of 'made by', which means that the primary consideration is not whether an export good is produced in Montenegro, but whether such an export business insured on behalf of and for the account of the state contributes to the growth of the Montenegrin economy to a greater extent. This concerns the export of goods that are not largely produced in Montenegro, but involve additional knowledge; or goods are exported by businessmen who thereby generate income in Montenegro, contribute to employment and otherwise contribute to the growth of the Montenegrin economy. When insuring consumer goods, it is not customary to require a minimum domestic share (re-export can also be insured)," the regulation states.
Money for starting work from the state budget
Money for performing export insurance operations will be provided from the state budget, and will be kept in a special account of the Development Bank as the Export Insurance Fund against Non-Market Risks, and must be separate - independent of the money intended for performing the core activities of the Development Bank.
This money will be used to pay compensation, cover the costs of preventing damage and cover the costs of damage that has already occurred. The Development Bank will collect premiums and other fees that are paid into the Export Insurance Fund against non-market risks, where the money generated by recourse collection will also flow.
"If the total amount of compensation owed is greater than the amount of funds in the Export Insurance Fund against Non-Market Risks, the Government of Montenegro will, before the compensation is due, pay the difference to the account of the Export Insurance Fund against Non-Market Risks," the regulation states.
The amount of all obligations assumed for export insurance operations at the end of the year must not exceed 20 percent of the officially determined value of annual exports of goods and services in Montenegro for the last year.
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