Montenegro Directorate for Development of Small and Medium Enterprises

STRATEGY FOR ENHANCEMENT OF COMPETITIVENESS AT THE MICRO LEVEL 2011-2015

Podgorica, June 2011.

Content:

Preamble ............................................................................................................... 3 1. Strategic objectives and vision .......................................................................... 4 1.1. Relevance with other documents ...................................................................... 6 2. Competitiveness ................................................................................................ 7 3. Analysis of Competitiveness of Montenegro – current state ............................... 8 3.1. Analysis of Competitiveness of Montenegro based on international researches ........ 8 3.1.1. Analysis of Competitiveness of Montenegro based on the Global Competitiveness Report .................................................................................... 8 3.1.2. Analysis of position of Montenegro based on the World Bank`s report „Doing Business“ .............................................................................................. 9 3.1.3. GEM researches .................................................................................... 10 3.2. Certain thematic researches in Montenegro ..................................................... 11 3.2.1. Research „Business climate of SME sector in Montenegro 2010“ ................... 11 3.2.2. Research „Business performances of companies affecting the competitiveness“ ............................................................................................ 13 3.2.3. Research – „The appraisal of competitiveness of Montenegrin enterprises based on questionnaire“ .................................................................................. 16 4. Competitiveness of Montenegro at the micro level .......................................... 18 4.1. Analysis of foreign trade exchange of Montenegro ............................................ 18 4.1.1. Volume of foreign trade exchange of Montenegro....................................... 18 4.1.2. Structure of foreign trade of Montenegro by group of goods ........................ 19 4.1.3. Structure of foreign trade exchange of Montenegro selected by countries ...... 21 4.2. SWOT analysis of Montenegrin export ............................................................. 23 4.3. Development of competitiveness factors in Montenegro ..................................... 24 4.3.1. Education as enterprises competitiveness factor ........................................ 24 4.3.2. Innovation as a factor in gaining competitive advantage ............................. 25 4.3.3. Quality as a factor of the enterprises competitiveness ................................ 26 4.3.4. Intellectual property as a factor of competitiveness ................................... 27 4.3.5. Brand as a factor of competitiveness ........................................................ 28 4.3.6. Impact of Information Technologies on competitiveness ............................. 29 5. Priorities and Activities for Enhancement of Competitiveness at the micro level .................................................................................................................... 30 5.1. Developing existing and creating new economic capacities ................................ 32 5.2. Strengthening the export performance of companies ....................................... 33 5.3. Promoting of Montenegro`s potentials ............................................................ 35 Framework Action Plan for Implementation of the Strategy for Enhancement of Competitiveness at the micro levelfor the period 2011-2015 .......................... 38

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Abbreviations Directorate for Development of Small and Medium Enterprises Ministry of Economy Ministry of Agriculture and Rural Development Ministry of Science Ministry of Foreign Trade and European Integration Investment Development Fund of Montenegro Montenegro Investment Promotion Agency Chamber of Economy of Montenegro Montenegrin Federation of Employers European Union German Association for International Cooperation Organization for Economic Cooperation and Development World Trade Organization Global Competitiveness Index Small and Medium Enterprises

Directorate for SME Development ME MARD MS MFTEI IDFMNE MIPA CEMNE MFE EU GIZ OECD WTO GCI SME

Overview of tables No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Table name

Page

Position of Montenegro in global competitiveness in comparison to countries in the region Comparative analysis 2011/2010 based on easiness of doing business Current state indicators and expectations for general businesses, export and employment Evaluation matrix of results and enterprise researches Meaning of business function levels according to Business Development Model Foreign Trade Exchange of Montenegro 2006-2010(mil. €) Top ten most frequent group of products in goods exchange of Montenegro in 2010 (mil. €) Countries with biggest turnover volume in 2010 (000 € ) Overview of goods exchange with CEFTA Agreement countries 2006 (mil €) Swot analysis of Montenegrin export

9 10 11 13 14 15 16 18 19 20

Overview of graphics No. 1. 2. 3. 4.

Graphic name

Page

Administration barriers affecting doing business Non – Administrative barriers affecting doing business Comparative analysis of appraisals from companies and interviewers Foreign Trade Exchange of Montenegro 2006-2010

12 12 14 16

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PREAMBLE Development of small and medium sized enterprises represents the basic development factor in every modern economy. Regarding market economy, Montenegro lacks the experience in private sector development in and therefore needs further necessary system to provide mechanisms and measures that will contribute to the competitiveness of small and medium enterprises, and thus increase the overall competitiveness of the Montenegrin economy. Competitiveness means the ability to achieve success in the markets in order to increase living standards over time. Countries can become more competitive by improving their achievements in a wide range of factors affecting productivity growth. This refers to innovation, creating a more favourable system environment, transfer or adoption of new technologies, education, entrepreneurship, and new businesses. For small countries such as Montenegro, competition inevitably has a dimension of export, given the limited size of the Montenegrin market. Lack of innovation in the use of new technologies and new product development, high costs, lack of information on market needs and low productivity caused by a large foreign trade deficit in Montenegro. It's kind of images of low competitiveness of domestic products for export which is insufficient. On the other hand, some of our advantages, such as macroeconomic stability, an acceptable tax system and a relatively stable banking sector, obviously are not sufficient to offset most of the competitive weaknesses. The opportunity is reflected in the ability to Montenegro in the coming years as a recognizable position in the provision of services, especially in the travel and tourism, organic food and beverages, transportation, construction and financial services. Equally important as exporting is the importing advanced technologies and knowledge that others produce more efficiently than we do. Recognize other people's success, learn and build their own competence, means to seize opportunities provided by openness. It means to become competitive. Consequently, enhancing productivity and competitiveness of small and medium enterprises, has become the most important direction for further development of Montenegrin economic policy, with emphasis on major backbone carriers and the development of Montenegro - education, systemic environment, innovation and technological development, regional development and cluster development, as growth potential would come more into play and achieve maximum effect. Bearing this in mind, the Directorate for Development of Small and Medium Enterprises has developed the Strategy for Enhancement of Competitiveness at the micro level of 2011-2015, adopted by the Council for Enhancement of Competitiveness at the micro level established by the Ministry of Economy, in November 2010. The Strategy for Enhancement of Competitiveness at the micro level is not a static document, but a dynamic, open document that will eventually change and adapt to changes in the environment, and thus influence to better address the key development issues. In the process of preparing and developing this Strategy the principle of partnership and participation was respected. This means that representatives of government and scientific institutions, business associations, and the economy are included. Also, the

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recommendations are respected and the results were presented in the study "The competitiveness of Montenegrin economy" prepared by the Ministry of Finance.

1. STRATEGIC OBJECTIVES AND VISION Taking into consideration accession of Montenegro to the European Union, to market of 500 million people which is both a challenge and responsibility, it is so clear why Europe has a great opportunity, not only as a market but as a support of Montenegrin enterprises. Reaching a certain level of international competitiveness is one of the prerequisites for admission to the EU because the state must meet the essential condition of "effective market economy and competitive enterprises capable to alive a pressure of the common market". Therefore, increased competitiveness will play a crucial role in long-term economic development of our economy and its integration into European and world economy. The competition will certainly be higher, but the market of almost half a billion people and free of customs and trade barriers will open space for better product placement. Period of accession of Montenegro to the EU will be used to develop the competitiveness of the national economy. It should be noted that states do not compete with each other, but on the market facing different competitive firms. Therefore, in the development of national competitiveness primary goal is to continuously improving long-term sustainable productivity growth of firms. State, for its part should ensure a healthy business environment and the rule of law. Montenegrin companies need to recognize export as a priority in their business and to provide the necessary conditions (quality and price of products and services, international quality standards, modern marketing policy) and response to competition on the domestic market and also the challenges of the EU single market. Mission – Improving the competitiveness factors that directly and indirectly affect the overall development of small and medium enterprises and both products and services.

Vision - Developed and competitive Montenegro’s small and medium enterprises that operate equally at the local and international market, achieve socioeconomic, sustainable development benefits and contribute to a positive trade balance of the country.

Strategy for Enhancement of Competitiveness at micro-level aims to develop the productive and export-capable small and medium enterprises that make a significant contribution to overall economic growth of Montenegro and the competitiveness of its economy, defined by the following three priorities:

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1. Development of existing and creating innovative industries/capacities  Increased final processing products  Improved productivity of enterprises through formation of clusters  Enhanced innovative activities of small and medium enterprises 2. Improvement of performances of export enterprise    

Education and strengthening the competence Enhanced of systems for product standardization Improved existing and creating new consulting services for export Analysis of industries in Montenegro and explore of the international market possibilities - the benchmark analysis

3. Promotion of Montenegrin potentials  Support for development of existing and new Montenegrin brands  Presentation of Montenegro's economy to international markets  Strengthening communication with the economic diplomacy and international offices in order to increase export. Monitoring and evaluation of achievement of defined specific goals for improving the competitiveness of SMEs in Montenegro will be monitored through the following indicators:  Global Competitiveness Report  

Measurement of overall global competitiveness of Montenegro in relation to other countries included in this report; Monitoring of individual indicators by pillars of competitiveness with emphasis on factors that are directly related to competitiveness of enterprises and which are identified as weaknesses: the protection of intellectual property (73), wages and productivity (63), the availability of new technologies (75), adoption of new technologies on enterprise level (92), the index of size of foreign markets (120), development of clusters (128), the development of the marketing function (64), the innovative capacity (71), consumption of enterprises on R&D (89), cooperation between universities and industry on R&D (54).  Increase in the total Montenegrin export with special reference to:

  

Increased participation of SMEs in total export to 35%1; Reduction of import coverage by export; Change in the structure of export - increasing the share of export products with higher added value.

In order to establish the necessary institutional infrastructure for the development of the competitiveness at micro-level The Council for Enhancement of Competitiveness at micro-level was established by the Ministry of Economy. The 1

Source: Strategy for Development of Small and Medium Sized Enterprises 2011-2015

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main objective of the Council is to contribute to the improvement of support to SMEs which will contribute to increasing the competitiveness of enterprises and valorise their innovative and export potentials. The Council was formed with the goal of uniting all activities in the field of competitiveness and determination of priorities by its members. This Council include representatives from the Directorate for Development of Small and Medium Enterprises, Ministry of Economy, Ministry of Agriculture, Forestry and Water Management, University of Montenegro, Montenegrin Federation of Employers, The Chamber of Economy of Montenegro, Montenegro Business Alliance and representatives of the private sector. In accordance with document "Enhancement of Competitiveness and Export – Strategic and operational plan", adopted by the Government in 2006, Department for Promotion of Competitiveness and Export was formed within the Directorate for Development of SME. The activities of the Department are aimed at supporting companies to increase competitiveness and export. Activities are essentially based on expert assistance in developing programs to improve the quality of export products, programs to enhance competition, support to create marketing plans and training programs for exporters as well as informing companies about export markets. 1.1. Relevance to other documents It must be emphasized that during Strategy creation, the principle of harmonisation with other strategic documents of Montenegro was fully respected, such as: The Strategy for Development of Small and Medium Enterprises 2011-2015 with one of the strategic objectives related to strengthening the competitiveness of small and medium-sized enterprises and promotion of entrepreneurship. Furthermore, the Strategy for Regional Development 2010-2014, the Strategy of Scientific-Research Activities of Montenegro (2008-2016), Montenegrin Agriculture and the European Union - Strategy for Development of Food Production and Rural Areas as well as documents of the European Union: European Charter for Small Enterprises and Strategy for Smart, Sustainable and Inclusive Growth – Smart Europe 2020.

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2. COMPETITIVENESS In the modern global economic conditions, the need for realization of business activities in the international market has become a key element of development in many countries. It is a necessary condition for the development of competitive capabilities of individual businesses, and industries and the national economy as a whole. Although in theory there are different views and definitions of competitiveness and their meanings, most economists agree that in assessing the 21st century life will be a period of global economic competition, thanks, above all, to the process of globalization. "International competitiveness is a condition in which the country can, under conditions of free and fair markets, produce goods and services that meet the requirements of world markets, while maintaining or increasing the real income of its citizens" (OECD). Macro competitiveness means of a competitive national economy as a whole. It refers to the ability to generate major factor income at a time when local companies are exposed to the direct impact of international competition. Micro competitiveness is a relative efficiency of companies that sell their products and services in a market where international competition is present. The competitiveness of companies is based on relative prices and quality compared to other vendors. Low operating costs (particularly labour forces) or a higher factor productivity growth are typical micro factors of comparative advantage and competitiveness. Companies that manage, with better cost control, better incentives for employees to be innovative and creative, have more opportunities to increase their productivity and contribute to the growth of an economy. Also, the strategies of companies related to product development, "breakthrough" to new foreign markets, and focus on activities that result in higher added value, are important elements in promoting export, especially to achieve higher added value of export. These are areas that are considered microeconomic because they relate to decision-making at the level of individual companies and are important for competitiveness as a whole. Other microeconomic issues important to the competitiveness of the institutions are labour market flexibility, tax policy affects saving and investment incentives, and etc. Analyzing the global trends in trade, it is possible to observe some general trends that contribute to global competitiveness: • The highest growth rates are precisely those countries that have the highest export growth • Growth in the global mobility of factors of production, which represents a potential increase of production capacity similarities around the world • The technology becomes key factor of development • As a result of technological development are becoming increasingly important industries based on knowledge. The knowledge and skills and human resources have become key elements of competitiveness. These trends indicate that these are important elements in the global economy from which it can build export competitiveness.

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3. ANALYSIS OF COMPETITIVENESS OF MONTENEGRO – current state Montenegro has been involved in international research relating to international competitiveness: the Global Competitiveness Report - Global Competitiveness Report, Doing Business - Business, measurement of entrepreneurial activity in the earth - the GEM study. Numerous studies are carried out at the national level, of which the most important research Business climate in the sector of small and medium enterprises in Montenegro undertaken for the purpose of this document Determining the business performance of companies affecting the competitiveness. So far, Montenegro has undertaken certain activities to improve its competitive position. The specific analyses were made, conducted projects in education, small and medium-sized enterprises, standards, and so on. However, these are not enough and we think that it is necessary to systematically at the level of the Government of Montenegro define the directions and activities in order to comprehensively address this problem came up. Some of the conducted analysis of competitiveness of Montenegrin economy shows that it is still based on the price range, not non-prizing competitiveness. Global trends, however, show increasing importance of non-prizing elements of competitiveness: if the products are innovative, specific for the target group of consumers, if the manufacturer and the country have a good image, if there is product quality and performance, then the expensive products are successful. Related to this there is one problem that is often overlooked - it is a relatively poor image of countries in transition and their products in international markets. Many industrial Western countries, after ten years of the transition process still continue to treat these countries as sources of cheap raw materials and labour, rather than as equal partners.2 Even the transition countries show a much higher degree of preference for the "Western" products than those from transition countries. This represents a major obstacle to increasing their international competitiveness, especially if it seeks to establish the non-prizing competition, which should be the basis of quality first, not only products but also the entire business process.

3.1. Analysis of Competitiveness of Montenegro based on international researches 3.1.1. Analysis of Competitiveness of Montenegro based on the Global Competitiveness Report From 2007, Montenegro has been included into international competitiveness base, i.e. in the development of the Global Competitiveness Report, which annually publishes "The World Economic Forum" in cooperation with Harvard University. Partner Institution from Montenegro for the preparation of this report is the Institute for Strategic Studies and Prognosis, which conducted the survey by questionnairesurvey sheets provided by the World Economic Forum.

2

Source: World Economic Forum (1999): Press Release, Internet

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In the period from 2007- 2010, according to the Global Competitiveness Report, Montenegro has improved its position by 33 places, i.e. from 82 in 2007, to 49 position in 2010. Table 1. - Position of Montenegro in global competitiveness in comparison to countries in the region Country/Year

GCI 2007-2008

GCI 2008-2009

GCI 2009-2010

GCI 20102011

Change 2007-2010

Slovenia Montenegro Croatia Serbia Bosnia&Herzegovina Macedonia Albania

39 82 57 91 106 94 109

42 65 61 85 107 89 108

37 62 72 93 109 84 96

45 49 77 79 96 88 102

-6 +33 -20 +12 +10 +6 +7

According to the Global Competitiveness Report 2010/2011, which was published in September of 2010, Montenegro is on the 49-position among the 133 countries covered by the survey. Value index of competitiveness is 4.36 of a possible 7 points. According to the report, at the ranking of global competitiveness index in 2010-2011 Montenegro is located in front of Croatia (77), Macedonia (79), Serbia (96), Albania (88) and Bosnia and Herzegovina (102). Montenegro is located in the second stage of economic development efficiency-driven stage. At this stage of development the key investment is in human resources training, acceptance of new technologies in production processes, creating quality products, creating a climate conducive to attracting foreign direct investment (reduction of customs duties, taxes, administrative procedures) and the stability of financial markets. States at this stage have already created the basic infrastructure (roads, airports, railways, telecommunications ...), built institutions, the relative macroeconomic stability and a satisfactory level of health care and primary education. 3.1.2. Analysis of position of Montenegro based on the World Bank`s report „Doing Business“3 According to World Bank report "Doing Business", Montenegro, in comparison to 2009, when it was on the 90 position, has improved the position for 24 places on the list for 2011,4 and is on the 665 position according to the ease of doing business. 3

Source: Strategy for Development of Small and Medium Sized Enterprises 2011-2015 Annual publication often has the following year in the title, in comparison to that when the report is dome. Therefore, the report for June 2009 – June 2010 is names Doing Business 2011. 4

5 General rankings published in relation to a specific year are usually revised in line with the changes in methodology. By changing the methodology, i.e. by exempting the Employment of workforce indicator, Montenegro has been adversely affected as this indicator was positively contributing towards the rank, which ultimately led to a lower position for this year. Had this indicator been taken into account, Montenegro would have achieved a progress by four positions. Thus, the analysis of the country’s progress, which takes into account changes in the specific indicators, is the relevant one.

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In the region countries, better positioned are: Macedonia (38), Slovenia (42), Bulgaria (51), and Romania (56). Out of countries in the region, worse ranked than Montenegro are: Albania (82), Croatia (84), Serbian (89), Bosnia and Herzegovina (110) and Kosovo (119). Analysis of the individual indicators show that Montenegro, for 2011, compared to the year 2010, achieved significant improvements in starting a business and crossborder trade. Improvement was achieved in the area of registering property, paying taxes while at the same level. No progress has been made in the areas of obtaining loans, issuing building permits, enforcement of contracts, closing business and investor protection. It concludes that, despite progress, critical areas remains: building permits, paying taxes, enforcing contracts, registering property. Table 2. – Comparative analysis 2011/2010 based on easiness of doing business MONTENEGRO Starting a business Issuing building permits Registering property Obtaining loans Investor protection Paying taxes Cross-border trade Contracts enforcement Closing business

DB2011 Position: 66 51 161 116 32 28 139

DB2010 Position: 65 81 157 117 30 27 139

34 135 47

50 132 44

Changes in Position: -1 +30 -4 +1 -2 -1 Without changes +16 -3 -3

3.1.3. GEM Research The particular importance for Montenegro is the writing in the Green Paper 'Entrepreneurship in Europe "in which the European Commission highlighted the importance of the following dimensions of social entrepreneurship:  Entrepreneurship helps create jobs and economic growth;  Entrepreneurship is crucial to competitiveness;  Entrepreneurship develops individual potential and  Entrepreneurship develops general social interests. Connecting to the GEM consortium and the publication of the INC in 2011, Montenegro was awarded a significant research base for improving the entrepreneurial environment and the dynamic development of small and medium enterprises. Preliminary data: GEM Survey results indicate that Montenegro was the first country in the group of countries in Eastern Europe by the so-called TEA Index which determines the percentage of the population of 18-64 years, whose entrepreneurial activity is less

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than 42 months. TEA index of Montenegro is 14.9%, and in that far ahead of Lithuania (9.7%), Turkey (8.6%), Macedonia (8%), Bosnia and Herzegovina (7.7%), Hungary (7.1%), Croatia (5.5%), Romania (4.3%) and Russia (3.9%), as a group of Eastern European countries included in the sample of 59 countries participating in the GEM project. High levels of TEA index indicate that the Montenegrin economy is a young economy, with a short history of application of the principles of entrepreneurial business. In support of this is that 62% start up entrepreneurs see opportunity as the dominant motive for doing business, while 36.9% of start up entrepreneurs need decisive motive. 3.2. Certain thematic researches in Montenegro Directorate for Development of Small and Medium Enterprises in cooperation with the German organization - GIZ have been conducting research on business environment in Montenegro from 2009. The survey is conducted to obtain information on economic trends and data on the actual effects of legal and political reforms on the SMEs. 3.2.1. Research „Business climate of SME sector in Montenegro 2010“ The Research „Business climate of SME sector in Montenegro 2010“ shows indicators of business climate in Montenegro as follows: Table 3. - Current state indicators and expectations for general businesses, export and employment6 Indicators

Business environment Current situation Expectations

Business Indicators 2009. 2010. -7.7 5.87 -4.2 -11.3

-3 14.7

Export Indicators 2009. -18.8

2010. 5.86

-24.4 -13.3

-12.4 24.1

Employment 2009.

2010.

-5.2

4.9

Indicators of the current situation and expectations is the difference percentage of companies that have responded positively to the question and those who responded negatively to the question of (positive = good or an increase, negative = bad or decline). Indicator of the business environment is the arithmetic mean of these two indicators. From the obtained indicators of business environment, we can conclude that a large number of SMEs sees the business environment as good (whether it comes to business or export) than those with the same look as bad, which is a very significant improvement over the previous year when these indicators were negative. As for the indicators of the current situation we see that 3% more SMEs see the current situation for doing business in Montenegro as poor than those who see it as good, and 12.4% more company recorded a decline in export activities than those who have recorded an increase. Although negative, these indicators are much better 6

Source: Business climate in SME sector in Montenegro, research 2010.

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than last year or the preceding survey, which also represents a significant step forward. All indicators are positive business expectations what represents rather positive attitude towards the future

Administrative barriers: The research, "The business climate in small and medium enterprises" 2010, according to the opinion of entrepreneurs, the limiting factor for business development are categorized the following administrative barriers: municipal taxes and duties - 60.4%, state duties and taxes - 53.2%, municipal inspection - 46% and too long administrative procedures - 40%.

Graphic 1. – Administrative barriers affecting doing business

Municipal duties and taxes State duties and  taxes  Municipal inspections Too long administrative procedures State inspections Procedures for issuing municipal permits

Serija 1

Procedures for issuing state permits 

Serija 2

Labour regulations  Building permits  Unclear ownership  Purchase/appropriation and transfer of … 0% 10% 20% 30% 40% 50% 60% 70%

Non -administrative barriers: This research shows that the biggest non-administrative barriers affecting doing business are: low prices and unfair competition – 57,40%, generally high labour costs – 51,30%, and difficult approach to financing – 50,20%.

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Graphic 2. – Non-administrative barriers affecting doing business

Companies involved in exporting have objections to government policy in this regard. Namely, there is no protection from unfair competition and import and export is not carried out under the same conditions. Thus, according to representatives of companies exporting, for example, for each exported item they must pay reviews, which include additional costs, but that obligation does not exist for the surrounding countries that import into Montenegro.

3.2.2.

Research „Business performances of companies affecting the competitiveness“

Directorate for Development of Small and Medium Enterprises in cooperation with the research agency "Defacto consultancy" - Podgorica, and with technical support from the German organization GIZ during December of 2010 and January 2011, conducted a survey on "Business performance of companies affecting competitiveness." The survey was conducted based on international methodology Business Development Model - BMS, developed by the Ministry of Entrepreneurship and Trade of the Republic of Ireland in order to improve the competitiveness of small and medium enterprises. This model looks at companies in six key functions / business performance, which could affect its competitiveness, namely: strategy, research and development, production, marketing and sales, human resources and finance. This survey provided data on the state of business functions / performance that affect their competitive position in the market, as well as the problems faced in the course of business which are named: non-stimulative banking sector liquidity - the

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problem of debt collection, lack of quality standards or waste already gained accreditation, too long waiting for export licenses and export and import inequality procedures, lack of protection from unfair competition, and discouraging excessive state / local tax and procedure for obtaining concessions. Companies evaluated its own business functions with a grade from 1 (worst) to 5 (best), and along, the interviewers given their ratings. If we consider self-evaluation assessment companies, we can conclude that the respondents rated the worst performance of the business finance and business performance overall situation / strategy, while the best rate the business performance of manufacturing and human resources. An interesting dimension is the research, development and design of concrete where the respondents can see that companies in Montenegro relatively few invest in this dimension, but that according to their ranking they were on a relatively high third place. A similar situation applies to human resources. In fact, most respondents do not have organized plans for the training of staff or to properly recognized human resources as a source of competitiveness, but most of them have given themselves the highest rating by this dimension.

Table 4.- Evaluation matrix of results and enterprise researches Business performances

Appraisal of self-appraisal

Appraisal of interviewers

Strategy Research and development

3.1

2.5

3.5

2.8

Production Marketing and selling

3.9

2.7

3.3

2.8

Human resources

3.8

2.9

Financing

3.0

2.3

Average

3.4

2.6

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Table 5: Meaning of business function levels according to Business Development Model Business function

Level 2

Strategy

Level 3

The company has an operational plan for the medium-term sales, export and other goals, the decision to consult external associates, and the state of assessing future environment of little importance The company is technologically competent, in its structure it has engineers and technologists, capable for further participation in national technological networks The company is familiar with standards and techniques of world producers, but do not apply them, company is ready for further improvements

Research and development

Production

Marketing and selling

The company covers one or more markets for couple of years, weaker than its competition at key markets, approached to market with planned actions The company has the strategic plan for human resource development, improves managerial skills

Human resources

Financing

The basic objective of the company is selling and profit making, business is financed at daily basis, but it is not enough for further expansion

The company is unsatisfied with achieved results, further development steps are considered

The company has a minimum capabilities to adopt to new exterior solutions, low level of new product selling The company does not have the production strategy, underdeveloped in using its capacities. The company has ISO standard. Marketing function at low level, low level of export activities

The company has human resource department, but consider it as expenditure, employees participate occasionally (rarely) seminars out of company Selling and profit are under industrial level

Graphic 3. – Comparative analysis of appraisals from companies and interviewers

4 3.7

3.6 3.3

2.9

3

2.8 2.7

2.7

2.9 2.6

2.3 Self-appraisal of companies Evaluation of interviewers

Production

Human Research resources & devel

Marketing & selling

Strategy

Financing

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3.2.3. Research – „The appraisal of competitiveness of Montenegrin enterprises based on questionnaire“ 7 Within the project "Capacity Building of the Ministry of Finance", which is implemented by the Office of the United Nations Development Programme - UNDP, a study "The competitiveness of the Montenegrin economy" was conducted. In preparing this document, which deals with the issue of competitiveness in Montenegro, different studies were used and variety of analysis of competitiveness of Montenegrin economy, statistical data, and international data. However, in addition to these sources of data and information, the most important basis for the preparation of this document is a research, structured interviews through a questionnaire, conducted among 307 of the Montenegrin companies. The questionnaire consists of eight parts that cover the following topics: (1) research and development, innovation and technology, (2) competitiveness and strategy of the company, (3) development of entrepreneurship, (4) networking, (5) Employment (6) globalization and EU enlargement, (7) SWOT analysis of companies of Montenegro's economy, and (8) strategic issues and policies relevant for Montenegro's competitiveness. The survey results reflect the opinions, suggestions and position of the Montenegrin business community about the country's competitiveness: Research and development, innovation and technology - in terms of factors that stimulate innovative activity, companies attach the greatest importance and quality requirements of foreign and local clients, as well as the capabilities of foreign suppliers and other business partners. Companies are satisfied with the general conditions that exist for research and development projects and innovative activities in Montenegro, as well as the legal framework is the basis for innovative activities and technological development. But the situation is less favorable when it comes to the actual conditions for dealing with research and development and innovative activities. This refers to the existence of specialized research facilities, the availability of researchers and technical staff to deal with innovative activities of firms, as well as the adequacy of infrastructure for research and development and innovative activities. Low level of cooperation between industry and science is one of the critical factors. Competitiveness and strategies of companies - from the total number of surveyed companies, on average, 80.5% of their sales were referred to the domestic market, and then to neighboring countries 12.1%, EU 5.3%, other countries 1.4%. As its most important competitiveness factors companies consider: product quality and reputation is built, the adjustment to market needs and specialization of knowledge and products. The least important factors of competitiveness of the company have knowledge of foreign markets, and marketing and promotional skills. Enterprise development - in this section five factors of particular importance for SMEs were analyzed: SMEs in staff capacity, access to bank loans, home equity and risk, quality of ICT infrastructure and availability of business sites that track business development. Of these five factors, the surveyed firms had the best feedback on the

7 Source: The Stydy: The Competitiveness of Montenegrin economy, Ministry of Finance of Montenegro, December 2010

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ICT infrastructure in Montenegro. Less favourable ratings were for the availability of financial resources for SME business, as bank loans, and home and venture capital. Networking - the most important source of supply for the surveyed firms are suppliers from Montenegro, followed by suppliers from neighbouring countries, EU countries and the rest of the world. Delivery dates represent the main advantage of Montenegrin suppliers, followed by price, quality and professional attitude, while the lack of products to serve local suppliers worst evaluated aspect. Employment and human resources potential - the availability of people with different skills is a significant problem for the respondent companies. The easiest way is to come up with personnel who have accounting / financial skills, followed by people with marketing, technical and managerial skills. Attracting, recruiting and retaining talent and training of employees in the companies listed are high priorities for companies. Globalisation and EU enlargement - the company believe that their competitiveness in the international / regional market increased over the past few years and are still optimistic about the future. The companies surveyed believe they are relatively well informed about the process of accession of Montenegro to the EU, also argue that foreign direct investment is an important source of the country's co6mpetitiveness and its technological progress. Strategic issues and policies relevant for Montenegro's competitiveness companies believe that the most distinctive feature of the behavior of the Government for its openness to the process of European integration, slightly below the increase competitiveness ranks among the policy priorities, and even less willingness of governments to deal with new economic challenges. Companies surveyed believe that the most important measures that related to improving education, and those related to improving infrastructure, increasing levels of R & D and innovation, improving labour market functioning and finally the introduction / strengthening of concrete policy measures related to industry / competition. Areas that promise the most to create a cluster in the Montenegrin economy are tourism and catering, agriculture, fisheries, energy, food, retail and wholesale, construction and real estate, information and communication technologies.

17

4. COMPETITIVENESS OF MONTENEGRO AT THE MICRO LEVEL Competitiveness at the micro level represents company's ability to produce products and services of appropriate quality, appropriate price at the appropriate time, i.e. to respond on the needs of consumers more efficiently than other companies. In Montenegro, there are about 99% small and medium enterprises of the total number of enterprises, employs 61,83% of the total number of employees and share 31% of total export. At the end of 2009. in Montenegro, there are 42,018 registered companies. Looking at the comparative period 2006-2009, conclusion is that the number of registered companies increased by 25,9%, the number of active copmanies increased by 32,17%, the number of employees in SMEs increased by 23,48%. Regarding the business activities, the most companies at end of 2009. is in the activity of wholesale and retail trade and repair 43,7%; real estate operations, renting 16,26% and manufacturing industry 9,55%, while at least in education 0,23%, fishing 0,18% and the production of electricity, gas and water 0,14%.8  One of the biggest problems of the economy of Montenegro is a high foreign trade deficit which is the result of: the weak competitiveness of Montenegrin economy in the international market and high import- export dependence. 4.1. Analysis of foreign trade exchange of Montenegro 4.1.1. Volume of foreign trade exchange of Montenegro According to preliminary data of Monstat total exchange trade in 2010. amounted to 1,984.9 million €, and was increased by 2,7% compared to 2009. 

A total of 330.3 million € were exported, which is 19,2% more than last year.



Total import amounted to 1,654.6 million € which is 0,02% more than in 2009.

Trade deficit amounted 1,324.3 million €, or 66,7% of total trade exchange, and the degree of coverage of import by export is 19,97%. Table 6. – Trade exchange of Montenegro for period 2006-2010.(mil.€)9

Total Export Import Deficit % coverage import by export

8 9

2006.

2007.

2008.

2009.

2010.

1.898,5

2.527,8

2.960,3

1.931,2

1.984,9

441,1

454,7

433,2

277,0

330,3

1.457,4

2.073,1

2.527,1

1.654,2

1.654,6

-1.016,3

-1.618,40

-2.094,0

-1.377,2

-1.324,3

30,26

21,93

17,14

16,75

19,97

Source: Strategy for Development of Small and Medim Sized Enterprises in Montenegro 2011-2015 Source: Statistical Office of Montenegro, www.monstat.org

18

Graphic 4. - Trade exchange of Montenegro for period 2006-2010.

3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00

Izvoz

0.00

Uvoz Deficit

-500.00 -1,000.00 -1,500.00 -2,000.00 -2,500.00 2006

Export

2007

Import

2008

2009

2010

Deficit

4.1.2. The structure of foreign trade of Montenegro by groups of goods The problem of a large deficit in trade with foreign countries is certainly a major burden for both the state and the economy. The structure of exports is a worrisome change, and without her it is difficult to influence the reduction of the deficit. Tabela 7: Deset najzastupljenijih grupa proizvoda u robnoj razmjeni Crne Gore u 2010. godini (u mil. eura)10 Name Total export

Export 330,30

% 100,0

Name Total import

Import 1.654,56

% 100.0

133,67

40,5

Mineral fuels, oils

210,82

12,7

33,37

10,1

126,74

7,7

Iron, steel

26,47

8,0

110,41

6,7

Beverages, alcohol, vinegar Wood and wooden products Boilers, machines, mech appliances Copper and cooper products Pharmaceutical products Aircrft, winged aircraft Edible fruit

20,99

6,4

Boilers, machines, mech equipment Electrical machine, mech appliances Vehicle and spare parts

96,58

5,8

16,53

5,0

60,23

3,6

13,01

3,9

54,65

3,3

8,30

2,5

Meat and other butchery products Non-organic chemical products Pharmaceutical products

52,64

3,2

6,59 5,16 4,73

2,0 1,6 1,4

Iron, steel products Furniture, bedding Beverages, alcohol, vinegar

52,55 50,31 46,51

3,2 3,0 2,8

Aluminium and alu products Mineral fuels, oils

10

Source: Statistical Officeof Monteengro, www.monstat.org

19

Intermediate goods dominate the structure of exports, i.e. lower stage processing products, mainly raw materials and intermediate goods. The structure indicates a low diversification of exports and limited to a small number of products. Of the total 81.4% of the realized export value refers to the ten groups of products (aluminum, mineral fuels, iron and steel, beverages, wood, boilers, machinery and mechanical appliances, copper, pharmaceuticals, aircraft, spacecraft and spare parts, edible fruit and nuts). All other export products account for 18.6% of the total value of exports. The range of imported products is much broader and refers mainly to consumer goods. 2010 the most frequent were mineral fuels, oils and products of their distillation with a share of 12.7% of total imports. Boilers, machinery and mechanical appliances make up 7.7% of total imports, and electrical machinery and spare parts 6.7%. The share of exports of agricultural and food products in total exports of Montenegro in 2010 decreased by 0.6% over the previous year. The increase in exports was achieved in a small number of agricultural and food products. In the production of meat and other butchery products increase of 19.8% is the result of slightly higher exports of pork and beef, with exports of dried meat, especially ham, was slightly lower than last year. Export of fruit is higher by 90% and exports € 4.7 million , sugar 10.1%, cereal-based products 91.2%, various food products 117.7% and products of vegetable and fruit 56, 1% of which is the only juice exports increased by 27.1%. The drinks group reported an increase in exports is only for export of water, soda and fruit by 37.5%. Export of wine is constantly good and slightly higher than last year. All other product groups recorded lower exports from the previous year. Total imports of agricultural products in 2010 amounted to € 405.1 million, an increase of 1.9% from the previous year. Share of agricultural imports in total imports of Montenegro is 24.5%. Observed by groups of products recorded high growth of imports recorded in: imports of live animals 34.7%, coffee, tea and spices 36.5%, poultry 17.7%, 22.9% oil seeds, waste from the food industry 15.1%, brandy 18.4%, 6.8% milk, and so on. Total exports of wood products in 2010 amounted to € 20.70 million, which is 11% higher than in the previous year. The share of these products in the total Montenegrin exports in 2010 amounted to 6.26%. In this group the biggest item is the export of wood and wood products amounted to € 16.53 million (5% of the total of exports in 2010.), which is 18.1% compared to 2009. It is important to note that the total exports of these products represent 21.3% of exports of raw materials (wood rough or roughly), which is compared to the previous year increased by 49.4%. Export of other products of wood (paper, cardboard, furniture and printed books) is much lower values. Wood and wood products accounted for 7.26% of total imports realized in 2010. The import of this group is dominated by imports of furniture, bedding and other products, amounting to € 50.31 million (3% of total Montenegrin imports) and by size of imports is in ninth place in the total Montenegrin imports. In comparison to 2009, imports of furniture were lower by 7.4%. High import an item in the import of paper, paperboard and articles of paper and board, accordin to data in 2010, 29.04

20

million was spent (1.75% of total imports) and imports of wood and wood products worth € 23.53 million.

4.1.3. Structure of foreign trade exchange of Montenegro selected by countries Merchandise trade exchange with countries in the region is increasing from year to year, as a result of the signing of CEFTA Agreement in 2006. Thus, in 2006. 51,8% of total trade has been realized with the EU countries, while the share of trade within the CEFTA region were only 33,9%. Since 2006. the gradual reduction of the EU-27 is evident and gradually increase the share of trade in CEFTA region, as well as increasing the participation of other countries, first of all China, Turkey and Japan. Countries of CEFTA region in 2009. were the main foreign trade partners of Montenegro with the share in total merchandise trade of 40,2%. In 2010. with a share of 40,3% in the total exchange of Montenegro, the CEFTA countries were in second place, after the EU-27, which again have primacy in the total exchange of 40,8%. The high increase in the share marks trade with other countries. Thus, the share of other countries in total trade exchange increased from 14,3% in 2006. to 20,7% in 2009. and 18,9% in 2010. Export of goods from Montenegro in 2010. was realized in 61 countries, out of which 88,59% of export are concentrated on 10 countries from which the most in Serbia, Greece, Italy and Hungary. At the same time, impors is realized from 169 countries of the world, out of which 72,21% of total Montenegrin import is realized from 10 countries. Table 8: The countries with the highest trade volume in 2010. (in 000 € )11 Country TOTAL

Export 330.307,94

% share 100,00

Country TOTAL

Import

% share

1.654.567,68

100,00

Serbia

74.917,20

22,68

Serbia

432.243,16

26,12

Greece

56.392,59

17,07

BiH

123.514,06

7,47

Italy

48.827,50

14,78

Germany

116.884,84

7,06

Hungary

28.960,45

8,77

Greece

115.316,30

6,97

BiH

24.108,98

7,30

Italy

99.034,31

5,99

Slovenia

20.568,01

6,23

China

88.732,47

5,36

Kosovo

18.111,32

5,48

Croatia

80.163,58

4,84

Albania

8.225,23

2,49

Slovenia

60.223,35

3,64

Holand Czech Republic

7.385,31

2,24

Austria

49.225,45

2,98

5.134,38

1,55

Brazil

29.344,67

1,77

Total 1-10

292.631,01

88,59

Total 1-10

1.194.682,24

72,21

CEFTA market, which makes 17,5 million population, then its additional advantages such as nearness and knowledge of business culture and consumer preferences, represents the main export market for Montenegrin companies. In 2010. exchanged goods with the CEFTA signatories worth 800,1 million or 3% more than last year. 11

Source: Statistical Office of Montenegro, Monstat, www.monstat.org

21

The total export to this region amounted to 130,5 million € and was higher by 2% than the previous year, which is considerably slower growth than the growth of total export. Export to this region was 39,5% of total Montenegrin export achieved in 2010. From the CEFTA region was imported 669,6 million or 40,5% of total realized import, which means that this region is a major import area for satisfiying needs of Montenegrin population. Import from this region was 3,2% higher than achieved in the previous year. In trade with CEFTA countries, Montenegro consistently achieves a deficit which in 2010. amounted 539,1 million or 3,5% more than last year. The level of coverage of import by export with this region was 19,5% and is lower by 0,2 index points from the level of coverage achieved in 2009. Table 9: Review of trade with the countries signatories of CEFTA Agreement in 2006 (mill €)12 2006 CEFTA

2007

2008

2009

2010

643,5

827,9

1.030,4

776,6

800,1

33,9

32,8

35,0

40,2

40.3

141,1

131,6

147,4

127,9

130.5

502,4

696,3

883,0

648,7

669.6

Albania

13,8

24,5

26,2

14,9

17,2

BiH

69,5

143,2

186,9

118,7

147,6

Croatia

69,2

144,6

176,3

108,6

84,2

574,1

811,7

947,0

582,8

507,2

17,6

23,1

30,8

22,0

24,3

-

5,5

18,8

17,6

19,4

0,1

-

-

-

0,1

% share Export CEFTA Improt CEFTA

in in

Country

Serbia Macedonia UNMIK/Kosovo Moldova

The most common products in export to the CEFTA countries in 2010. were: beverages, mineral fuels, electricity, wood, iron and steel, aluminum, boilers, machinery and mechanical appliances, pharmaceutical products, etc. From the CEFTA region the most imported were the following product groups: mineral fuels, oils and products of their distillation, inorganic chemical products, beverages, products of iron and steel, milk, salt, sulfur, stone cement, furniture, electrical machinery, etc. The EU market is important for exporters from Montenegro because of the favorable treatment that allows export of a large number of products without custom duty, including a large number of products whitch export is under the preferential status. Participation of SMEs in the export is still unsatisfactory. The cause of the low level of export of the Montenegrin SMEs, lies in:  insufficient compliance between its products and standards with international ISO standards and other international regulation and quality assurance (ISO, HACCP, etc.)  insufficient funding, hard export procedures, etc  At the same time, the development of business clusters as a model of 12

Source: Statistical Office of Montenegro- Monstat, www.monstat.org

22

linking companies with other partners, in order to reduce costs and modernize production, the development of innovation and enhancing competitiveness of SMEs, has not properly come to life in Montenegro which insufficiently valorize export potential of SMEs. In order that Montenegrin companies have the opportunity to "enter" into the international market and to position themselves on it, it is necessary to quickly adopt new technologies, to have accelerated the cycle of production, quality products, to be flexible in changing the company activities, to know the other markets and their demand characteristics. 4.2. SWOT analysis of Montenegrin export Table 10. – Swot analysis of Montenegrin export Strengths Natural resources: drinking water, forests, agricultural areas Tourism resources: climatic, cultural-historic, ambient Human resources: education reform conducted Geographic position Dynamic SME sector Economic development and regulations: low inflation rate, the lowest rate of income tax, VAT, preferential export regime, recording and gradual elimination of business barriers Institutional capacities: Directorate for SME Development, Investment-Development Fund, business associations (Chamber of Economy of Montenegro, Montenegrin Federation of Employers, Montenegro Business Alliance), embassies and representative offices abroad COMPETITIVENESS:  The development of existing companies with export potential, which is realized in the international market  The apperance of new export companies  Traditional and cultural linkage with countries with the largest export

Opportunities Concessions and public-private partnership for the physical infrastructure development More efficient use of natural resources with production of products with higher added value CEFTA agreement, Free Trade Agreement with the Russian Federation, the Republic of Turkey Usage of scientific potentials of the University Usage of EU funds and foreign organizations

Weaknesses Insufficient physical infrastructure: roads, railways Inadequate tourist facilities Limited availability of competitiveness factors such as innovation, technology and capital Human resources: insufficient modern knowledge and competence for export, the lack of educational programs intended to increase competitiveness, insufficient knowledge of foreign markets Economic development regulations: insufficient consumer protection in accordance with EU standards, the lack of factoring to purchase export receivables, inadequate statistical base related to export, limited funds for research and development Institutional capacities: under-developed institutions for product certification according to EU standards COMPETITIVENESS  A small number of exporters with high export potential and products with high added value  Poor knowledge of foreign markets  Enterprise insolvency  Low level of innovation in enterprises  Lack of clusters  Insufficient implementation of quality standards Threats Continuation of the economic crisis Dawdle in the process of technology and know how transfer COMPETITIVENESS:  The growth of competition producers from other countries

23

of

Usage of the experience of other countries Cooperation with the institutions from the region COMPETITIVENESS:  Integration into the EU causes increased demand for products and services  Production and export of traditional products, organic food and herbs  Creation of clusters, technology parks, incubators  Full impelementation of EU standards  Strengthening production brands and image of Montenegro



The risks that exporters are exposed

4.3. Development of competitiveness factors in Montenegro Weak competitiveness of most domestic companies and their products and services on foreign as well as on the domestic market is one of the biggest problems in the economy of Montenegro. Numerous external and internal factors affecting the competitiveness of companies of which the most important are: education, innovation, quality, intellectual property, brand development and information technology. 4.3.1. Education as competitiveness factor of the companies In Montenegro, as in all modern societies, developing and fostering a culture of lifelong learning starting from an early age is a key condition for building a knowledge society. In recent years much attention is paid to developing models for the inclusion of entrepreneurial learning and way of thinking, as horizonatalnog elements at all levels of education, which should contribute to increasing employment, creating a foundation for sustainable economic development. Since it recognized the importance of cooperation between education and business to increase employment and entrepreneurial potential of workforce, as well as to enhance competitiveness of the country's economy, Montenegro reflected this in its` national legal and policy framework. Among the main goals of the National Strategy of Employment and Human Resources Development (2007-2011) is improving the match between education and employment, which is intended to be realized through strengthening the role of social partnership in education and improved long-term planning of vocational education, in accordance with the needs of labor market. Montenegro has made considerable effort in strategic considerations and legal provisions for the re-establishment of cooperation between education and business, at the new basis. Strategy of life-long entrepreneurship learning (2008-2013) sets out clear priorities, objectives, activities and performance indicators to encourage the entrepreneurial spirit, knowledge and skills of students, starting from primary education, through general and vocational secondary and tertiary education, as well as in training "second chance" or retraining of adults. National Qualification Framework helps in understanding and comparing Montenegrin qualifications at international level which will enable better compliance of needs in the labor market and labor supply.

24

 In the future it is necessary to motivate entrepreneurs to connect with universities and research institutions in order to implement joint projects, develop new products and innovate existing ones.  All the activities of private investment in education could be followed by tax incentives.  Should strive to ensure quality education for all citizens and continue to work towards achieving the principles of life-long learning. Therefore, focus should be on acquiring knowledge, skills and competencies that will contribute to greater linking of education, science and research, on one hand, and the labor market, on the other hand, in order to qualifications gained in Montenegro help further development of society, and be recognized both at home and abroad. This creates the conditions for a healthy enhancement of competitiveness of small and medium enterprises. 4.3.2. Innovation as a factor in gaining competitive advantage Innovation is a factor of competitiveness equally important in the global and the domestic market. Country's ability to sustain economic growth and competitiveness lies in the activation of innovation and learning. Therefore, innovation represents the challenge for every business, especially for those who are exposed to international competition. Detailed consideration of the nature and key characteristics of innovation, makes conclusion that the basic philosophy behind each innovation, is linking the technical capabilities and market needs. Innovations and their impact on the economy are one of the main areas whose development is foreseen in Strategy for smart, sustainable and inclusive growthEurope 2020. Leading Strategy initiative called INNOVATION UNION - The Union of innovation (http://ec.europa.eu/research/innovation-union), contains over 30 actions to create “more jobs, improving living conditions and a better society" through innovation. It is emphasized that the growth of innovation through the application of research results is the most important factor of economic growth and competitiveness Since January 2008. Montenegro has joined the largest European fund for Science the Seventh Framework Programme for Research and Technological Development of the EU (FP7), which runs from 2007-2013 with the budget of 50,5 billion €. With this all relevant institutions have gained equal status with the EU institutions to be able to apply and participate in the realization of projects funded by this program. One of the important elements this program promotes is the involvement of SMEs in research and development and monitoring of their share in total financing. After the expiration of FP7, since January 2014. starts the program FP8 (2014-2020) with a larger budget and a focus on innovation and SME participation in projects. According to MONSTAT data in 2009. in Montenegro, a total of 26 scientific research and research and development organization is registered, which realized 14 fundamental, 32 applied and 26 developmental research working papers. 13

13

Source: Statistical Yearbook 2010., Statistical Office of Montenegro - MONSTAT, Podgorica 2010.

25

Under the new three year OECD project, Regional Competitiveness Initiative (RCI) for the Western Balkans, the Directorate has prepared a project proposal in the field of innovation "Voucher scheme for innovation". The main objective of the proposed and approved pilot project "Voucher scheme for innovation" is to encourage SMEs to develop innovation by encouraging their cooperation with the University / research institutes / consultants. The expected benefits for companies are related to the increase of profitability, better information in process of decision making, improvement and cost savings in business processes, and increase of their market share. Project implementation began in January 2011. In addition to the Directorate for Small and Medium Enterprises, the project participants and representatives from the Ministry of Economy, Ministry of Education and Science, University, Employment Agency and Montenegrin Federation of Employers.  The candidate countries and potential candidate countries are expected to contribute to achievement and realization of the objectives of the Union of innovation. National Strategy for increasing investment in research, particularly through increased investment from the business sector, are of key importance for integration into the European research area and the Union of innovation-and therefore into the EU.  The State has a strong role in fostering innovation. Montenegro can help innovative ambient in the country, following the experiences of developed countries and the EU by:    

Identify capacities to support companies in developing and testing new products or improve existing, Encourage data collection on innovation in the country and abroad and making them available to the economy, Transfer practice of developed economies in the direction of encouraging innovation: innovators affirmation, aid in the management of knowledge, encouraging culture of innovation, Develop programs to support the development and application of innovation.

4.3.3. Quality as a factor of the enterprises competitiveness International community and European Union recognize the standardization as a precondition for participation in international and European integration and the basis for the removal of technical barriers to trade, i.e. ensuring the free flow of goods and services. Standards important to the competitive advantage of companies include the standards: Quality management system ISO 9001; System of environmental management ISO 14001 and Food safety management system ISO 22000, which facilitates the application of HACCP standards, for organic products - certified Organik BIO. For British or Swiss market when exporting it is necessary to provide the FORM Certificate regardless of previously provided some of the ISO standards, while in the area of the former USSR is valid Russian GOST-R certification, and specific market of Muslim countries require prior ensure of "Halal" certificate.

26

The existing quality infrastructure in Montenegro is consisted of Institute for standardization of Montenegro, Accreditation Body of Montenegro and Bureau of Metrology. Institute for Standardization of Montenegro was founded in 2007. in order to achieve objectives of standardization and to adoptMontenegrin standards and related documents. Accreditation Body of Montenegro establishes and confirms that the organization meets the requirements for performing appropriate jobs of conformity assesement set out in relevant international standards and is competent to perform these jobs. Currently in Montenegro there are accredited the following bodies: 10 laboratories for testing, 1 calibration laboratory, 2 inspection bodies. In Montenegro, there are no certification bodies for product certification, QMS, EMS and staff. Center for Quality at the Faculty of Mechanical Engineering, established in 1996., its activity focused in three areas: quality and standards, applied computer science and industrial engineering. Within the activities related to quality and standards seminars are organized and permanent education within the School of Quality.  The new integration process of Montenegro (accession to WTO and EU) will further change the economic conditions, which will be reflected in greater liberalization and therefore require even more competitive products. This means that companies must be aware that failure to meet quality standards will be taken of the international markets. The issue of quality standards is very important for the SME sector in Montenegro and effective program to introduce quality standards available to all stakeholders in the sector is a priority. 4.3.4. Intellectual property as a factor of competitiveness Unique system of protection of intellectual property rights, from industrial property to copyright and related rights, represents the basis for creativity and innovation within the European Union. Protection of intellectual property is covered by many international conventions14, and most of them were implemented by the World Intellectual Property Organization (WIPO) and World Trade Organization (WTO). The European Union has two important bodies to carry out its mission: the Office for Harmonisation in the Internal Market (OHIM), which is responsible for the registration of Community trade marks and designs, as well as the European Patent Office (EPO). The Commission is currently conducting a campaign for the effective implementation of the Community patent system, which would be cheaper and more legaly efficient, as guarantee for the competitiveness of European industry. In order to more specific solve issues of intellectual property rights, Intellectual Property Office was established in Montenegro, which provides specific protection of 14

Paris Convention for the Protection of Industrial Property, Berne Convention for the Protection of Literary and Artistic Works, Madrid Agreement concerning the International Registration of Trademarks, Protocol to the Madrid Agreement concerning the International Registration of Trademarks, International Classification of Goods and Services - the Nice Agreement, the Hague Agreement concerning the International Deposit of Industrial Designs, Locarno Establishing an International Classification for Industrial Designs, the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement)

27

the rights of intellectual property. In addition to building the institutional framework, the necessary legislation is adopted15. Montenegro is a member of the World Intellectual Property Organization (WIPO), and also a member and signatory of numerous international agreements, treaties and conventions: the Convention of Establishing the World Intellectual Property Organization, the Hague Agreement concerning the International Deposit of Industrial Designs, Locarno agreement on establishing an International Classification of industrial design, the Nice Agreement concerning the International Classification of Goods and Services for the Registration of Trademarks, Strasbourg Agreement Concerning the International Patent Classification. Montenegro also achieves highly successful cooperation with the European Patent Organisation (EPO).  The dedication and commitments related to EU integration, imposing the need for adequate development of intellectual property rights in Montenegro, as well as getting to know the professional and general public with the rights in this area. Therefore, it should continue to work on developing and protecting intellectual property rights, raising public awareness about intellectual property issues, the harmonization of national legislation with relevant EU legislation, strengthening institutional capacities, strengthening further cooperation between institutions and organizations involved in ensuring the protection of intellectual property rights and deepening international cooperation, all in order to achieve the level of protection of intellectual property rights similar to the European Union level. 4.3.5. Brand as a factor of competitiveness In the period of globalization and the opening of Montenegro to neighboring countries, domestic producers were faced with the penetration of world brands which took some of their market share. Having in mind the necessity of achieving the necessary level of competitiveness in order to retain the existing market share and the creation of an adequate supply for the penetration to foreign markets, domestic companies must implement an appropriate marketing approach that should have focus on the brand as the primary tool of competitive struggle and differentiation. Therefore, with the development and successful management of brands, from the level of product over geographical area and the national economy, branding becomes the most important factor in achieving economic benefits and providing competitive position, both in the industry level - in the case of competitive firms, and in the level of national economies. Montenegro should develop policy of manufacturing products that will create a brand - the brand. Because of the future EU membership, our country must work to create easily recognizable image among EU member states, which may contribute to diversity of Union. On the basis of geographical location, manufacturing agricultural 15

Decree on Proclamation of the Patent Act, Trademark Act, Regulation on the procedure for trademark registration, Decree on Proclamationn of the Law on Legal Protection of Designs, Decree on the provision of the right of intellectual property rights, Regulation on the Procedure for the registration of a design, Decree on Proclamation of the Law on Geographic origin, Regulation on the Procedure of Protection of Topographies of Integrated Circuits, Regulations on the Procedure for the designation of geographical origin and the recognition of an authorized user of geographical origin, Decree on Proclamation of the Law on Protection of Topographies of Integrated Circuits, Decree on Proclamation of the Law on Copyright and Related Rights, Regulation on keeping records of copyright works and objects of related rights

28

region, the territory without genetically modified products (which are required in the world and more expensive than the other by 30-50%) Montenegro can quickly, with a few products, achieve its name as a brand, with the production and sale of healthy food. Agriculture just represents an adequate basis for profiling the entire branch to enhance competitiveness of national economy. However, the market for domestic producers apart from primary production and processing, should be directed to the products of higher level of processing and added value by which the whole national economy would be recognized. Final products of Montenegrin industry: wine "Vranac", "Niksic beer", smoked ham from Njegusi, meat, meat products, cream, cheese, olives, olive oil, fish, fish products, water, forest and other products in the future period should be focus on enhancing the competitiveness of their products in order to create new brands and improve existing. This means products must be homemade, authentic products with tradition, and the design must be improved. Also, in a few recent years, production of large trade chains with private label products - "private labels", led to the growth of small and medium sized manufacturers and exporters in developing countries. Having in mind that these companies do not have sufficient funds to enter the market by introducing new brands which have to be built from the beginning, for producers from small countries production with private labels is a good opportunity to explore new markets and customers. The implementation of the project of development of Montenegrin national brands to the application of branding and marketing in the business of economic subjects would be encouraged, as well as creating a favorable environment for: increase the number and quality and recognizable production and service brands from Montenegro, improving awareness of the importance of Montenegro's national brand as an roof brand; increase the volume of business activities, production and marketing products and services, faster economic development, increase in volume and changes in the structure of export, more effective positioning of particular brands (product, service, company) as important elements of a national brand identity of Montenegro, as well as enhancing competitiveness of entrepreneurs and small and medium enterprises. 4.3.6. Impact of Information Technologies on competitiveness In developed economies, ICT infrastructure represents the infrastructure of daily, efficient business of the state and economy and is not just as a technical support in the work, but first of all as a support to making decision based on systematically collected information. The impact of IT on competitiveness is enormous. No company can not avoid its effects and must be understood broadly in order to include information that companies create and use, same as wide range of more and more connected technologies for processing information. The development of information society in Montenegro, was recognized in 2004. when the Government of Montenegro adopted the Strategy for Information Society Development of Montenegro - the way into the knowledge society. This document covered the period of 4 years with clearly defined objectives and activities, and after expiration of that period a need to create new strategy that will trace the path for development of information society to 2013. occurred. Today, one of Montenegro's strategic priorities is reflected in the implementation of information and communication technologies in all its development strategies, because the ICT offers great opportunities and has a general influence on the national economies and global

29

competitiveness. Strategy for Information Society Development of Montenegro covers the following areas: European objectives and standards, institutional and legal framework, e-education, registries, e-Government, e-commerce and banking, ehealth, ICT infrastructure, data protection, the development of the ICT sector. At the end of 2008. first incubator in Montenegro was established in the field of information technology in order to raise the digital culture, which provides services: developing software for making web presentations, publishing of informatics magazine, providing outsourcing services, encryption / data protection, etc.  Progress of Montenegro in developing e-government (www.euprava.me) makes a significant contribution to the global trends in the field of ICT, while at the same time runs the development of IT industry in Montenegro. Therefore, the question of application of modern information and communication technologies represents a priority to development of SME sector since it indirectly affect the current and future competitiveness of this sector. 5. PRIORITIES AND ACTIVITIES FOR ENHANCEMENT OF COMPETITIVENESS AT THE MICRO LEVEL Relying on the experiences of countries that successfully promote competitiveness, and therefore the export of companies, it is needed the active participation of various stakeholders: Government, private sector and the international community. Businessmen can not stand aside since it is important to ask themselfes what is it that they could do in their enterprise to enhance their competitiveness. Passive role of the economy and the expectation that the state will be responsible for improving competitiveness and increasing export is a mistake, that was often repeated in the past and that should be avoid in the future. In the study, "The competitiveness of Montenegrin economy" specific recommendations16 for improving competitiveness are given, extracting ones related to the business sector i.e. SMEs:  Export of Montenegro is threatened due to the large focus on just a few basic products, which seems pretty vulnerable situation in relation to fluctuations in international markets. It seems that Montenegro needs to promote new export products and, therefore, to diversificate export in order to reduce its existing problems with balance of payment account.  Significant and constant participation of certain goods in the import may be a first signal of high demand for these goods. In case Montenegro has adequate resources, import of these goods could be replaced by their production in Montenegro.  Aiming at enhancing the competitiveness of enterprises, it is necessary to develop and modernize the knowledge and working capacities in the sector of small and medium enterprises.

16 Source: The study „ The Competitiveness of Montenegrin economy“ Ministry of Finance of Montenegro, December 2010.

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 There is a great problem related to a penetration in foreign markets, which is currently an obstacle for great number of companies.  In the long term, Montenegro has to pay more attention on fostering the development of new production capacities with the greater value added, as well as market research and innovation and to increase expenditure for research and development and cooperation between science and economy. 

Also, of great importance to achieve a higher level of competitiveness of Montenegrin companies is introduction of international standards of quality, since performance in foreign markets is not possible without implementing these standards. Then, connecting companies into the clusters showed as successful strategy to increase competitiveness in the international practice. Also, most companies are characterized by insufficient attention to design and brand of products as well as insufficient funds for training employees. Only a few companies allocate funds for their own research, and innovations are extremely rare. It is clear that without a fundamental change of attitude towards these problems, no matter what state do, the level of competitiveness of Montenegrin economy will remain low. This should be common task and both the state and entrepreneurs.

Based on the analysed studies and research, the following section provides an overview of the defined priorities with tasks whose realization should contribute to the general objective of creation of this document, the development of productive and export capable small and medium-sized enterprises which make a significant contribution to overall economic growth of Montenegro and competitiveness of its economy.

Development of existing and creation of innovative industries / capacities

 Greater increase in final product processing enterprises  Improving productivity and clusterization  Encouraging development of innovative activities in SMEs

Strengthen export performances of companies

 Education and strengthen of competencies  Improved system of product standardization  Improving existing and creating new advisory services for export  Analyses of business industries in Montenegro and searching for opportunities in foreign markets-benchmark analyses

Promotion of Montenegrin potentials

 Support to development of existing and new Montenegrin brands  Presentation of Montenegro’s economy in foreign markets  Improving communication with the economic diplomacy and mission offices in order to increase export

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5.1. Developing existing and creating new economic capacities Modern business is based on speed, quality, flexibility, innovation, connections and creation of a critical mass of capital and sales / service potential. This new style of business requires a team approach at local and regional level which achieves success and competitiveness in the specific business activity / sector. Since Montenegro is following the strategy of export-oriented economy, the creation of new production / service capacites, ie. organization of producers to cooperate in clusters and associations can contribute to increased product quality, easier approach to the foreign markets, and research of markets on which domestic manufacturers can become the leading players and can make a profit. This working method will enable more information, share the cost of procurement, production, marketing and placement of products through cooperation with other members.

Task 1: Increase of products of higher final processing It is evident that there is a significant linkage between import and export of products, i.e. that the largest exporters in the sector of small and medium sized enterprises at the same time have a significant share of the import of products and raw materials. One of the possible measures to reduce import dependence is developing a network of local suppliers i.e "supply chains" - chains of supply. This means that, in addition to supply the domestic market, the Montenegrin companies would be able to directly supply large regional and global companies which gain credibility, raise their market competitiveness and promote technological development. Activities:  Testing potential for business development at the local level in Montenegro  Creating and updating a database of existing and potential domestic producers  Oranisation of public campaign about the benefits of greater participation of local suppliers in the chain of final products  Design and realization of project "Chain of local suppliers”

Task 2: Enhanced productivity of companies through clusters The use of clusters as tools for the development of Montenegrin economy will enable a greater level of overall competitiveness and eliminate the problem of fragmentation of production and lack of existing production capacities. In specific branches (wood processing industry, meat industry, dairy and wine production), there is a great potential when it comes to merging in clusters. In Strategy for develepoment of Small and Medium Enterprises 2011-2015 within the operational objective of Enhancement of competitiveness and export of SMEs is one of the tasks is the Improving the potential for cluster development in Montenegro. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activities 3.4.6.1. and 3.4.6.2.), as well as through the realization of the following activities:

32

  

Creation of business plans for setting up clusters/involvement into clusters Logistic support for clusters (providing information, merging with consumers) Organization of training for cluster managers

Task 3: Enhancement of innovative activities in companies Linking education, science and research with the development of economy putting scientific capactiies in function of the country development, and represents a challenge that Montenegro is facing. Exploiting the potential of knowledge is the way that economic developmens processes may accelerate on the path to the modern and developed European Montenegro. Voucher schemes for innovation (Innovation voucher) as an instrument of state policy are becoming more attractive as a support for small and medium enterprises. Initiative "Voucher scheme for innovation" in Montenegro, is designed to encourage SME sector to use the knowledge and receive expert assistance from the research and development institutions, universities, laboratories of large companies, all aiming at development of new products, processes and services. This kind of cooperation should lead to the formation and implementation of partnership projects and the involvement of organizations from other sectors in the process of research and development (R&D), which is one of a basic precondition for building the economy capacity for innovation, and therefore the enhancing the competitiveness of Montenegrin SMEs. In Strategy for development of Small and Medium Enterprises 2011-2015 is defined operational objective: Strengthening innovation of SMEs, whose tasks are: increased investment in research and development in SMEs, strengthening links with universities and centers of excellence, strengthening the application of information-communication technologies. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activity. 3.3.), as well as through the realization of the following activities: Activities:  Conducting research on innovative activities of companies and use of consulting services  Creation of feasibility study for the implementation of the project "Voucher scheme for innovation" in Montenegro  Support the development of innovative products and branding the same

5.2. Strengthening the export performance of companies Due to the disappearance of many barriers in international trade, reducing costs in transportation and communications, all the countries and companies compete in a global market. Basis of economic development in the modern world rely on the conditions based on knowledge and developed infrastructure, highly developed technology and innovation. Develop a competitive advantage of the company is not simple. Competitiveness requires strategies based on knowledge, thorough knowledge of the consumer, cooperation between companies, export orientation and a positive constructive relationship between governments and the private sector. The impact of globalization on Montenegro imposes the need to focus on the ability of firms to create competitive and innovative products and services.

33

Task 1: Education and sthenghten of competence The acquisition of knowledge, skills and attitudes that will contribute to a stronger connection of education, science and research, on one hand, and the labor market, on the other hand, that qualifications gained in Montenegro, helped further development of society, but also were recognized in the country and abroad. In this way, the conditions for healthy raising of competitiveness are creating. There is a great need for adult education, but demand is low because companies are oriented towards the rapid return of their investments; career progressing is not based on individual merit and improving the skills does not result in necessary improving or increasing salaries for employees. In Strategy for Development of Small and Medium Sized Enterprises 2011-2015 within operational objective Enhancement of competitiveness and export of SMEs one of the tasks is education of exporters. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activity 3.4.4.1.), as well as through the realization of the following activities: Activities:  Strengthening cooperation between science and economy  Transfer of knowledge and experiences of developed countries on specific industries and markets  Raising awareness of the public about the importance of competitiveness, export, benchmarking, certification of products, target market analysis, innovation

Task 2: Improved system of product standardization Standards are a powerful tool for organizations of all sizes, because they promote innovation and increase of productivity. They enable companies to attract their customers, demonstrate leadership in the market, gain an advantage over the competition and be the best example in practice. Standardization promotes mutual cooperation, ensuring that competition is necessary for successful international trade of products and services. In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objectives Enhancement of competitiveness and export of SMEs one of the tasks of strengthening the competitiveness of SMEs. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activities. 3.4.5.6. and 3.4.5.7.), as well as through the realization of the following activities: Activities:   

Creating and updating a database of companies that implemented standards of quality Strengthening of consulting services in the field of standardization of product Realization of financial support measure for the introduction of quality standards

Task 3: Improvement of existing and creation of a new advisory services for export The development and enhancement of competitiveness of existing and potential export companies, highlight the importance of advisory support to those companies. When the activities of the company become more complex, the need for help outside the company is increasing along with all other forms of assistance that entrepreneurs seeks from banks, business associations and other

34

entities. In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objective Enhancement of competitiveness and export of SMEs one of the tasks is education and advisory services for SMEs. Therefore, the fulfillment of this task will be monitored through the realization of this strategy action plan (activity. 3.2.2.3), and by implementing the following activities: Activities:  Improving services in the Market Information Service, which provides information on export markets  Training companies on access to market information  Creating marketing plans and market research studies on the request of the company  Creating export development programs on the request of the company  Advising on product design for specific markets on the request of the company  Assisting companies in organizing performances at international fairs  Other services related to export business according to the request by the company

Task 4: Analysis of business sectors in Montenegro and reserach the opportunities in foreign markets Considering the integration process of Montenegro into the EU there is a need of greater competitiveness of companies which will be able to stand the pressure of a large market and many companies with which they have to compete in the same market. Therefore, the there is a need for local companies of determining competitiveness of individual companies and the SME sector as a whole, for what use of benchmarking is an appropriate tool. Benchmarking is a tool for continuous measurement of level of quality and services compared to competitors or companies that are recognized on the market as industry leaders all in order to identify best practices that lead to an improved business process performance, the final product, services or practice. Applying benchmarking companies will be able to better develop, monitor and evaluate business strategies and goals, identify priority actions and activities. From the carried analysis annual national benchmarking report will be created that will provide insight into the competitiveness of local SMEs by sectors, based on which will be designed proposals to improve the competitiveness of small and medium enterprises. Activities:   

Analysing the current situation and present economic policy measures in selected industries in Montenegro and comparison with the situation in EU 27 Conducting benchmarking analysis - detailed analysis of best practices examples (causeeffect) Creation of annual national benchmarking report.

5.3. Promotion of Montenegro's potential In the period of globalization and the opening of Montenegro to neighboring countries, domestic producers were faced with the penetration of world famous brands that have taken over part of their market share. Having in mind the necessity of achieving the necessary level of competitiveness in order to retain existing market share and establishing an adequate supply for the penetration of foreign markets,

35

domestic companies must implement an appropriate marketing approach that should be focused on the brand as the primary means of competitive struggle and differentiation. At the same time government has an important role in promotion, providing companies with all necessary information on target markets, customs, regulations, etc. Promotion of the economic of the country offers an excellent opportunity for the development of cooperation between companies from different countries, and at the same time represents platform for sharing ideas, as well as opportunities for attracting foreign investment and enhancing trade exchange. Task 1: Support to the development of existing and new Montenegrin brands The image of the country is an important source of competitive advantage which is arising from the excellence of products that come from a country (e.g. Swiss watches, luxury German automobiles, precise Japanese technology, French perfumes ...), superiority of knowledge in certain areas or from information from the social, political, cultural life of the country, its history, traditions, etc. Products that are already present in the market and new products are increasingly being evaluated on the basis of the country's image, which increases the role of the country's image in the process of making purchasing decisions. Developing countries tend to develop its image in order to be able to engage in international flows of business. Montenegro is among those countries. More increasingly important role has "made in" that can contribute to increase the value of an existing product in the customers minds and facilitate the way for new products to customers or vice versa. Activities: 

 

 

Creation and realization of programs for improvement of their existing brands and its recognition with local character brands into the brands of regional and international character Continued promotion of products that have the trademark "Made in Montenegro" and "Good from Montenegro” Raising awareness on intellectual property rights (patents, trademarks, designs, geographical origin) in order to attract high value investmenst and create new products and services Organizing seminars and training sessions on branding Creating a Web portal on the Montenegrin exporters and brands

Task 2: Presentation of Montenegro`s economy in international markets Quality representation in foreign markets is a precondition for the achievement of new business contacts. Attendance at selected events abroad are among the traditional and reliable ways to monitor demand and competition from abroad, and to establish new business engagements. Directorate for SME development so far has organized exhibitions abroad, where a large number of local companies had the opportunity to exhibit in the national stand of Montenegro. Since this way of presenting the local economy was very successful and useful for Montenegrin companies, the Directorate will continue with the organization of performance in international markets. Appart from the classical fair presentation, the presentations of Montenegrin companies wiil be organized at the fair, as well as meetings with potential partners. Chamber of Economy of Montenegro is realizing participation of the business at fairs throughout

36

the organization of performs in the rented stand in the form of an information bureau with posters, advertising materials and product samples, as well as representation of companies and informing them about trade fairs. In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objectives Ehnacement of competitiveness and export promotion of SMEs is one of the tasks is follow up on the activity of organization of specialized trade fairs, business meetings, trade missions. Therefore, the fulfillment of this task will be monitored through the realization of this strategy action plan (activities. 3.4.3.1, 3.4.3.2., and 3.4.3.3.), as well as through the implementation of the following activities:   

Information of companies about fairs locally and abroad and the quality assessment of products at the trade fairs Defining annual promotion plan in the national stand on international markets Organization of visit at specialized fairs

Task 3: Improving communication with the economic diplomacy and mission offices in order to increase export Economic diplomacy of Montenegro can play an important role in the promotion of Montenegrin companies abroad and their capabilities. This kind of activities will result in a greater degree of economic cooperation with foreign countries. Also, economic diplomacy can provide resources and information on foreign markets as well as contacts when entering the same. Activities:  Establishment of a database of Montenegro's most important export offer  Organization of presentation of Montenegrin export opportunities abroad  Organization of presentation of Montenegrin innovation and research opportunities for their commercialization  Identifying barriers to domestic companies in international market  Presentation of Montenegro's manufacturers in embassies in key markets

37

FRAMEWORK ACTION PLAN FOR IMPLEMENTATION OF THE STRATEGY FOR ENHANCEMENT OF COMPETITIVENESS AT THE MICRO LEVEL FOR THE PERIOD 2011-2015

38

Activity

Indicators

Source of verification

Jurisdiction

Identified existing and potential resources Created database of domestic producers

Study created

Annual report

Directorate for SME development Directorate for SME development Directorate for SME development, CEMNE Directorate for SME development

Deadline

I – Development of existing and creation of new economic capacities Task 1 : Increase of products with the higher level of final processing 1.1.

Examination of potentials for business development at the local level in Montenegro

1.2.

Establishing and updating a database of existing and potential domestic producers

1.3.

Organizing public campaign about the benefits of greater participation of local producers in the chain of final products

Realized campaign

1.4.

Creation and implementation of the project " Chain of local suppliers"

Project created

public

Annual report

Annual report

2011. 2011. 2011.-2015.

2012.-2015.

Task 2: Enhanced business productivity through clusters The Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objectives Enhancement of competitiveness and export of SMEs is one of the tasks and the Improving the potential for cluster development in Montenegro. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activities. 3.4.6.1, and 3.4.6.2.), as well as through the realization of the following activities: 2.1.

Creation of business plan for the formation of clusters / inclusion in clusters

Number of created business plans

Annual reports

2.2.

Logistical support for clusters (informing, linking with consumers)

Number of services provided

Annual reports

Directorate for SME development, local/regional business centers Directorate for SME development, local/regional

2013.-2015.

2013.-2015.

39

2.3.

Organization of training for cluster managers

Number of managers

trained

Annual reports

business centers, clusters Directorate for SME development, CEMNE, MFE

2013.-2015.

Task 3: Enhancement of innovative activities in companies In Strategy for development of Small and Medium Enterprises 2011-2015 is defined operational objective: Strengthening innovation of SMEs, whose tasks are: increased investment in research and development in SMEs, strengthening links with universities and centers of excellence, strengthening the application of information-communication technologies. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activity. 3.3.), as well as through the realization of the following activities: 3.1.

Conducting research on innovative activities companies and use of consulting services

of

Created study

research

Research study

3.2.

Creation of feasibility study for the implementation of the project "Voucher scheme for innovation" in Montenegro

Created study

feasibility

Feasibility study

3.3.

Support the development of innovative products and branding the same

Number of innovative products

Annual reports

Directorate for SME development, ME, OECD Directorate for SME development, ME, OECD Directorate for SME development

2011.

2011.

2012.-2015.

II – Strengthening the export performance of companies Task 1: Education and sthenghten of competence One of the tasks in Strategy for Development of Small and Medium Sized Enterprises 2011-2015 within operational objective Enhancement of competitiveness and export of SMEs one of the tasks is education of exporters. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activity 3.4.4.1.), as well as through the realization of the following activities: 1.1.

Strengthening economy

cooperation

between

science

and

Realized cooperation

Annual reports

Directorate for SME development,

2011.-2015.

40

1.2.

Transfer of knowledge and experiences of developed countries on specific industries and markets

Number trainigs/seminars

of

Annual reports

1.3.

Raising awareness of the public about the importance of competitiveness, export, benchmarking, certification of products, target market analysis, innovation

Number of campaign, workshops

Annual reports

MS, University Directorate for SME development Directorate for SME development, CEMNE, MFE

2011.-2015. 2011.-2015.

Task 2: Improved system of product standardization In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objectives Enhancement of competitiveness and export of SMEs one of the tasks of strengthening the competitiveness of SMEs. Therefore, the fulfillment of this task will be monitored through the implementation of this strategy action plan (activities. 3.4.5.6. and 3.4.5.7.), as well as through the realization of the following activities: 2.1. Creating and updating a database of companies that Created database Annual Directorate for 2011.-2015. implemented standards of quality reports SME development, CEMNE, MFE, Center for Quality, Institute for standardization of Montenegro 2.2. Strengthening of consulting services in the field of Number of consulting Annual Directorate for 2011.-2015. standardization of products services provided to reports SME the companies in development, Montenegro CEMNE, MFE, Center for Quality, Institute for standardization of Montenegro 2.4. Realization of financial support measure for the Number of supported Annual IDFMNE 2012.-2015. introduction of quality standards companies reports Task 3: Improvement of existing and creation of a new advisory services for export In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objective Enhancement of competitiveness and export of SMEs one of the tasks is education and advisory services for SMEs. Therefore, the fulfillment of this task will be monitored through the realization of this strategy action plan (activity. 3.2.2.3), and by implementing the following activities:

41

3.1.

Improving services in the Market Information Service, which provides information on export markets

Number of provided

service

Annual reports

Directorate for SME development

2011.-2015.

3.1.1

Raising awareness on importance of information for export business

Number of campaign, promotional material, workshops, etc.

Annual reports

2011.-2015.

3.1.2.

Establising cooperation with institutions from neighbouring countries to exchange information and linking companies

Established cooperation

Annual reports

3.1.3.

Training companies on access to market information

Number of trainings and participants

Annual reports

3.1.4.

Creation of products

Number of studies

Annual reports, studies web site Annual reports

Directorate for SME development, CEMNE, MFE Directorate for SME development, CEMNE, MFE Directorate for SME development Directorate for SME development, CEMNE Directorate for SME development Directorate for SME development Directorate for SME development Directorate for SME development, CEMNE Directorate for SME development

market

study

research

for

programs

specific

3.2.

Creating export development request of the company

on

the

Number of programs

3.3.

Creating marketing plans for particular companies

Number of marketing plans

Annual reports

3.4.

Advising on product design for specific markets on the request of the company

Number of advices

Annual reports

3.5.

Assisting companies in organizing performances at international fairs

Number of services

Annual reports

3.6.

Other services related to export business according to the request by the company

Number of requests

Annual reports

in

2011.-2015.

2011.-2015. 2011.-2015.

2011.-2015. 2011.-2015. 2011.-2015. 2011.-2015.

2011.-2015.

Task 4: Analysis of business sectors in Montenegro and reserach the opportunities in foreign markets

42

4.1.

Analysing the current situation and present economic policy measures in selected industries in Montenegro and comparison with the situation in EU 27

4.2.

Conducting benchmarking analysis - detailed analysis of best practices examples (cause-effect)

4.3.

Creation of annual national benchmarking report.

Directorate for SME development, MARD, CEMNE Directorate for SME development Directorate for SME development

2012.-2015.

Annual reports

Directorate for SME development

2011.-2015.

Press cliping

Directorate for SME development, CEMNE Directorate for SME development, CEMNE, Intellectual Property Office of Montenegro, MIPA Directorate for SME development, CEMNE, MFE,

2011.-2015.

Created comparison analyses of priority sectors with EU sectors Conducted research

Annual reports

Created report

Published report

Annual reports

2012.-2015. 2012.-2015.

III – Promotion of Montenegro's potential Task 1: Support to the development of existing and new Montenegrin brands 1.1.

Creation and improvement of recognition with brands of regional

realization of programs for their existing brands and its local character brands into the and international character

1.3.

Continued promotion of products that have the trademark "Made in Montenegro" and "Good from Montenegro

Number campaigns

1.4.

Raising awareness on intellectual property rights (patents, trademarks, designs, geographical origin) in order to attract high value investmenst and create new products and services

Realized campaign

Annual reports

1.5.

Organizing branding

Number of seminars

Annual reports

seminars

and

training

sessions

on

Created program Number of brands

of

2011.-2015.

2011.-2015.

43

1.6.

Creating a Web portal on the Montenegrin exporters and brands

Created web portal

Web portal working

Intellectual Property Office of Montenegro Directorate for SME development

2012.-2015.

Task 2: Presentation of Montenegrin`s economy in international markets In Strategy for Development of Small and Medium Enterprises 2011-2015 under the operational objectives Ehnacement of competitiveness and export promotion of SMEs is one of the tasks is follow up on the activity of organization of specialized trade fairs, business meetings, trade missions. Therefore, the fulfillment of this task will be monitored through the realization of this strategy action plan (activities. 3.4.3.1, 3.4.3.2., and 3.4.3.3.), As well as through the implementation of the following activities: 2.1.

Information of companies about fairs locally and abroad and the quality assessment of products at the trade fairs

Number of informed companies

Annual reports

2.2.

Defining annual promotion plan in the national stand on international markets

Created plan

Annual reports

2.4.

Organization of visit at specialized fairs

Organised visits

Annual reports

Directorate for SME development, CEMNE Directorate for SME development Directorate for SME development, CEMNE

2011.-2015. 2012.-2015. 2012.-2015.

Task 3: Improving communication with the economic diplomacy and mission offices in order to increase export 3.1.

Establishment of a database of Montenegro's most important export offer

List of exporters

3.2.

Organization of presentation of Montenegrin export opportunities abroad

Number presentation

of

Annual reports

3.3.

Organization of presentation of Montenegrin

Number

of

Annual

Annual reports

MFTEI, Directorate for SME development, CEMNE MFTEI, Directorate for SME development, CEMNE MFAEI, SME,

2012.-2015.

2012.-2015.

2012.-2015.

44

innovation and research opportunities for their commercialization

presentation

reports

MS

3.4.

Identifying barriers to domestic companies in international market

Number of identified barriers and efficiency of its solving

Annual reports

3.5.

Presentation of Montenegro's manufacturers in embassies in key markets

Number of visits

Annual reports

MFAEI, Directorate for SME development, ME, CEFTA, CEMNE MIAEI

2012.-2015.

2012.-2015.

45