According to 85 percent of business professionals, the efficiency of state administration is lacking. In 2023, 20 percent of these professionals reported experiencing bribery, while 40 percent believe bribery and corruption frequently impact their operations. A significant portion, one-third of companies, operates within the gray economy, and 70 percent of citizens have opted to purchase goods or services from unregistered providers in this gray zone due to reduced prices. Additionally, 76 percent of companies feel that vocational and higher education institutions are not adequately preparing students with the necessary skills for employment.

About 27 percent of companies indicated they have lost employees to migration abroad, while 26 percent are contending with competitive pressures from the public sector. In 2024, labor productivity in Montenegro was only 40 percent of the EU average, suggesting that without improvements in productivity, competing in the EU market will be increasingly challenging.

This information is highlighted in the Business Agenda 2025 prepared by the Employers’ Union, also known as the “Roadmap for a Competitive and Sustainable Economy Ready for the Future,” which was presented yesterday.

Long-standing Issues Identified

The Agenda outlines ten critical priorities that the business community believes are the most pressing issues, requiring urgent action from government officials along with businesses and other institutions to enhance the business climate.

These priorities include: more effective public administration, enhanced social dialogue and collective bargaining, a regulatory framework that supports development, formalizing the shadow economy, improved financing access for businesses, education and skills aligned with economic needs, fostering innovation and digital transformation, expediting the transition to a green economy, boosting productivity for heightened competitiveness, and promoting socially responsible business practices for lasting sustainability.

In 2013, the Employers’ Union presented an analysis of the “5 Business Killers,” all of which remain significant barriers to business 12 years later: inadequate regulatory frameworks, difficult access to financial resources, a substantial shadow economy, widespread corruption, and a mismatch between the education system and actual labor market needs.

“UPCG envisions the Montenegrin economy in 2030 as being stronger, more dynamic, and capable of thriving in the global marketplace. Our aspiration is for Montenegro to become a nation where businesses flourish in a supportive environment, where innovation propels advancement, and where economic growth is both inclusive and sustainable,” states the Agenda.

Achieving a Cost-effective and Efficient Administration

The Agenda underscores that developing a cost-effective, professional, and efficient public administration is a primary objective of the public administration reform strategy. However, challenges persist, including recruitment without clear criteria, non-transparent managerial selection processes, and excessive discretion in hiring lower-tier candidates.

The planned 2025 budget allocates 712 million euros for public sector wages, while the total capital budget is only 280 million euros.

“Montenegro’s public administration reform is at a pivotal point. To advance, it requires sustained political commitment, strong leadership, and unwavering accountability. A professional, non-partisan, merit-based public administration, suitably scaled to meet national needs and anchored in integrity, is vital. Transparent decision-making, robust institutional coordination, and genuine engagement with stakeholders are essential for fostering trust and building a modern, efficient public administration. Achieving these goals is crucial for Montenegro to realize its full potential, enhance its business environment, and translate reform ambitions into concrete outcomes,” the Agenda specifies.

Poorly Designed Regulations Present Challenges

The recommendation to strengthen social dialogue notes that while there are solid laws and frameworks in place, they are frequently overlooked. Important laws for both employers and workers are often introduced outside the Social Council, and consultations take place too late to influence policy effectively.

“The arbitrary decision-making prevalent in Montenegro undermines the significance of social dialogue and results in poorly crafted regulations that are hard to implement and costly for both the state and employers,” the document asserts.

Employers emphasize the need for a transparent and predictable regulatory framework, pointing out that government decisions are often made without adequate consultation and that short implementation deadlines complicate companies’ ability to comply with new regulations.

“Amendments to legislation concerning EU accession are often inconsistent, with delays in adopting secondary legislation vital for implementing primary laws,” the document explains.

Shadow Economy Constituting a Third of GDP

Employers estimate that the shadow economy accounts for approximately one-third of GDP, translating to about two and a half billion euros. This leads to substantial losses for compliant employers and deprives the state of significant tax revenues.

“Combatting the informal economy is essential to fostering a fair and competitive business environment in Montenegro. Strengthening the legal framework, enhancing the capacity of inspection services, and ensuring coordinated efforts among stakeholders are crucial measures,” the Agenda emphasizes.

The fifth priority addressed is improving access to financing for businesses, particularly small and medium-sized enterprises which struggle to secure credit. The Agenda advocates for reducing collateral requirements and expanding credit options. Notably, 89 percent of business professionals perceive interest rates as being excessively high.

Weak Digitalization and Inadequate Education Hinder Competitiveness

The MEF asserts that the Montenegrin education system fails to produce a qualified workforce, urging stronger connections between educational institutions and the needs of the economy.

They also argue that a digitally transformed, innovation-driven economy is essential, and the state must enhance its digitized services for businesses.

Despite having a solid legislative and institutional framework for green and sustainable growth, the implementation of measures is lagging, as noted in the Agenda.

To elevate productivity, the Agenda states that Montenegro cannot remain competitive with a cumbersome and ineffective public administration.

“Streamlining bureaucratic processes, embracing digital solutions, and enhancing the capacity and professionalism of public institutions can lower transaction costs for businesses and cultivate a more competitive environment,” the document recommends.

The MEF further believes in promoting a culture of responsible and ethical business practices, corporate responsibility, sustainability, and attracting investments, while reinforcing Montenegro’s role as a responsible economic actor.

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