'We still believe in EU, it is very, very important for Montenegro'
The deputy prime minister for economic policy and financial systems of Montenegro since 2006, Vujica Lazovic has moved into this political role backed by a PhD in economics. Excerpts from the interview.business Updated: Jan 09, 2012 21:10 IST
The deputy prime minister for economic policy and financial systems of Montenegro since 2006, Vujica Lazovic has moved into this political role backed by a PhD in economics. Hugely accessible --- all I had to do was drop a mail that I was coming to this 13,812 sq km nation, about the size of Nagaland --- Lazovic was undeterred by the rather persistent questioning on how the government is building a nation. He teaches economics at the State University of Montenegro. His favourite economists? A long pause, then: "Initially it was (John Maynard) Keynes but now it's Paul Krugman."
Excerpts from an interview:
As a young country, how are you coping with nation building?
Montenegro is a young and an old country. We were an independent country 1,000 years ago, but we had a referendum in 2006 and have regained our independence. We are a small country, small and beautiful country --- you can see it all around. This is our advantage and at the same time our disadvantage. Because if you hold natural resources, people approach it differently. They think we have these beautiful natural resources and so we don't need to work hard --- this is a classical economic lesson. But now we have a new economic situation because we have privatised 85% of our economy. This will be good for our economic development, for example in the tourism sector like hotels and services.
Like this hotel Maestral we're in?
Yes. Earlier, this was not a good hotel. It was only two stars, now it is four stars and is a modern resort.
So, where does Montenegro stand in the global economy?
We want to develop services. We want to develop tourism, high quality tourism. Our coastline is nearly 300 km which is not enough for mass tourism; it is good for high quality tourism. We want to develop education. We want to prepare a package of offers for agriculture.
You have applied for membership of the European Union (EU). Isn't the timing a little off?
This is very, very important for Montenegro --- for three reasons. First, Montenegro has shown economic growth in the crisis time. Last year, our GDP rose by 2.5%. This year, we predict 2.5-3.0%. In 2008 too we had economic growth. We are a small, open economy and it was a very dangerous time but our policies saved the economy and industries.
The second point is that we have political stability. It is not turbulent, which is a good sign for potential investors. We have a very attractive fiscal and economic system. Our corporate tax rate is only 9%. Other taxes are also low.
The third point is that Montenegro has very good relationships with the entire neighbourhood. This is very important for the Balkan region. We are seen to be providing stability to the whole region.
But why are you interested in joining the EU? The Euro is collapsing. Your currency is the Euro, even though you are not allowed to use it. So, the money supply to Montenegro is out of your control.
We opened the process many years before the crisis. European integration is a philosophy, it is a question of adopting standards. It is important to us to use European funds to develop our infrastructure. We can't build high quality tourism if we don't have high quality infrastructure.
But why Europe? One country after another is imploding.
We still believe in EU. Yes, EU has problem now. But I hope Germany, France and England will find a solution. This is not a project of yesterday, this is a project of 15 years ago. My friend and advisor, an academic from the US, asks the same question --- you are a beautiful small country, why are you joining the EU when there is potential bankruptcy ahead, they will corner you.
Yes, that's all correct. It will be a big cost on a young nation.
But it's our approach now. If we come across a problem, we'll find a solution.
Sorry to push you, but I don't understand this approach. Why is Montenegro jumping into the fire?
See, the steps to joining the EU are all very good, things we want. The steps of joining are very interesting for us. We reorganise our judiciary system, that's good. We reorganise our educational system for European standards, that's also good. We develop information society, that's also good. We try to organise our state administration and make it more efficient, that's also good.
So, whether you finally join or not is irrelevant.
So, what should an Indian tourist look for when coming here? The flights are very expensive, it is so far away, access is low. It is a beautiful country that's very difficult to reach. Nobody even knows such a country exists.
You are absolutely right. It is very important that people from India visit Montenegro for tourism. It will be nice if an Indian companies cooperate with our National tourism organization. This will be an area for our negotiation with Indian government. If we find some economic solution, it will be very interesting.
How will you change that? The tickets, for instance, are so expensive.
The first solution is to prepare some special agreement.
Let me rephrase the question. It's such a lovely weather but your beaches are empty.
In the past we had the summer season only for three or four months, from June through September. But this year we have good weather. For the past 100 days, we haven't had rain. But this hotel we're sitting in is fully occupied. It is very important for us to change the thinking of our entrepreneurs who engage in the tourism business --- they must prepare a package for the whole year. We have 263 sunshine days per year. This is good for tourism and for solar energy.
What about investors, what should an Indian investor look for while investing in Montenegro?
Unfortunately, we do not have enough state communication to build our economic cooperation. But our government is now working towards establishing new communication channels with the Indian government to get investors. We have Indian investors who are interested in investing in an aluminium factory, in tourism, in coal mining, in energy sector. It's a good sign for us.
I was noticing the property developments in Budva and around. They are very haphazard. There are some which are well planned, but most are not. It seems as if the rule of law does not apply.
This is a transition time. At one point we had very active investors from Europe --- Eastern, Middle and Western. They wanted to buy land and develop building projects --- hotels and homes. But our administrative capacity was not adequate to regulate them. Now, we stop them, we forbid them. We control the entire territory and if you try to raise a building without local community or state permission, you will be arrested and jailed. It's very strict.
This is very important because the entire beauty of Montenegro rests on a good view. If you don't control this, nobody will buy.
It will stop now. We were getting more than Euro 1,000 per capita of foreign direct investment per year. Now it's under control and I hope it remains that way.
I was at Porto Montenegro yesterday and it seems to be one amazing yachting destination.
Yes, this will become the main Mediterranean berth for big yachts. That project is going to transform the whole coastline and the economy of Montenegro.
Yachting and the economy?
Yes, the very, very rich people from across the world will come here. They will use helicopters, eat organic food. They will transform our tourism. There will be employment avenues for repair, maintenance and so on. This project (Porto Montenegro) is the best promotion of our country. If the rich come to Montenegro once, they will come again and again. It is very important to be on the map of the yachting tours.
Finally, I come back to my first question. How are you building your country? Out of the blue, you have got yourself a country, you need to set up governance mechanisms --- politics, administration, judiciary. You need to look at trade, investments, human rights, ecology, climate change…everything.
It looks difficult but in fact it's not so. We have a population of 625,000 which is very small. So if we have a good vision, we can get there. What is our vision? Our vision is that by 2025, Montenegro will be a country with its main income from tourism, financial services, agriculture, education and health tourism. Most important, we are looking at energy.
What are you planning in energy?
We use only 17% of our hydro power potential. Montenegro has a lot of mountain rivers and we can put up hydro plants. We also have good reserves of oil and gas undersea. At the end of this year we will open an international tender for research in the first stage. In the second stage we will open for exploration.
But that is incompatible with high quality tourism --- this beautiful beach will turn black.
Yes, absolutely. But we will see how to prevent that. We also have a very interesting project --- an undersea cable from Montenegro to Italy, across the Adriatic Sea. Italy and other European countries are deficit in renewable energy. We are planning to become a point of regional network and transport this energy to Italy. We will also open special energy markets here. We will create capacity to collect energy from other countries like Serbia and Albania and transport this energy.
So, in a nutshell, tourism and financial services, agriculture and energy, health and education tourism is our chance to grow our economy. We have prepared a strategy and action plans. This is our chance.