Source: Chamber of Economy of Montenegro

In cooperation with the Contracting Chamber of Commerce, Pirot District, on 26 February 2018 the Chamber of Commerce of Montenegro organized a working meeting about free zones in Montenegro and Serbia, placing a special emphasis on business operation and activities of the Pirot Free Zone. The initiative for this meeting came from the company Uniprom – KAP.

This meeting represents a continuation of multi-year successful partnership between these two associations of businessmen and has resulted in signature of the agreement on cooperation between the Chamber of Commerce of Montenegro and the Contracting Chamber of Commerce, Pirot District.

The commercial delegation from Serbia was headed by PhD Dragan Kostic, President of the Contracting Chamber of Commerce, Pirot District and the President of Free Zone Group of Serbia and the Executive Director of the Pirot Free Zone, and Milan Ristic, Director of the Free Zone Administration of the Ministry of Finance of the Republic of Serbia. Amongst others, Milan Popovic, the President of the Municipal Assembly of Pirot was also a member of the delegation.

The moderator of the meeting was Zeljko Baltic, Head of the International Cooperation Sector of the Chamber of Commerce.

The Pirot Free Zone serves as a good practice example and a successful model to attract investments. It allows efficient business operation and major savings, integrating all benefits for investments and conducting business operation at one place. It also provides all logistics services: freight forwarding, international transport, custom clearance, storage, infrastructure land, expert assistance with clearing agents. Pirot Free Zone has won four national awards “The Best from Serbia” (“Najbolje iz Srbije“), and was also ranked among the first 50 free zones in the world in the period 2012-2016.

The President of the Chamber of Commerce of Montenegro Vlastimir Golubovic has emphasized that meetings organized by chambers of commerce contribute to promotion of business relations between these two associations, to the companies and commercial development, encouraging strengthening of the overall cooperation between Montenegro and Serbia.

He has reminded that, by adopting legal regulations, the Government of Montenegro decided to make business environment more attractive to existing companies and potentially new investors. Establishment of free and business zones through special incentive measures of business policy is intended to create quality conditions for conducting business activities, which would enable achievement of benefits, reduced operating costs through tax advantages and more favorable clearance treatment, and simplified administrative procedures etc.

Having presented economic indicators for our country, the President of the Chamber, Mr. Golubovic referred to the cooperation with Serbia.

- When talking about business cooperation between Montenegro and Serbia, it should certainly be emphasized that it has been traditionally and continually successful; however, there is still a lot of room for its development and improvement in terms of both, quantity and quality –Golubovic has estimated.

He has stated that, with regard to volume of trade of goods, Serbia is the most important partner to Montenegro. In 2017, Serbia’s share in total Montenegrin export and import was 17.8% and 21.5% respectively. Trade of goods realized between Montenegro and Serbia in 2017 was EUR 561.4 million, i.e. 21.0% of total Montenegrin trade, which is 4.1% higher compared to the previous year. The value of goods imported from Serbia was EUR 495.4 million, which indicated 15.9% growth, whereas the value of Montenegro’s import was EUR 66.0 million and was 19.5% lower than in 2016.

According to the preliminary data, in 2017 Montenegro was visited by 118,055 tourists from Serbia, who made 562,346 overnight stays. From 2006 to November 2017 total investments amounted to EUR 436 million. The greatest investments were made in 2010 at the amount of EUR 81.8 million. In 2017 investment inflow from Serbia amounted to EUR 30.6 million.

- Numerous past meetings of businessmen of Montenegro and Serbia organized through our Chambers have been examples of good practice and unequivocal support to development of business cooperation of our two countries in all segments and all fields of activity, which shall undoubtedly continue to happen in the time to come – Golubovic has concluded.

PhD Dragan Kostic, President of the Chamber of Commerce, of Pirot and the President of Free Zone Group of Serbia and the Executive Director of the Pirot Free Zone has said that every country governs their free zones in their own way, and their experience in organizing these business areas will be available to Montenegro.

- Free zones are not a magical stick which swiftly brings results; however, they certainly are an efficient instrument which, if used properly, significantly contributes to business development –Kostic has said.

Presenting the Pirot Free Zone, he said that it originates from catering guild (“mehandzijski esnaf”) from 1911, and today there are 18 production facilities and 120 catering companies operating there and employing 6,000 people. Free Zone turnover in 2017 was EUR 830 million, and the export was EUR 450 million. From 2003 to 2016, the amount of EUR 456 million was invested in the Pirot Free Zone. The major companies are Tigar – a member of Michelin Group ($380 million of export in 2017), Mercatus Textile and D Company (each having $ 3.7 million export) etc.

- Small and medium sized enterprises develop around the big companies and the essence of free zones is actually creation of conditions for such development –Kostic has said.

Doing business in the Pirot Free Zone is facilitated at state and local levels, and is accompanied by swift services provided to investors that are attracted by possibility to enter the market having approximately a billion of citizens (based on the Free-Trade Agreement that Serbia signed with Russia and other countries). Value added tax in the zone is 0% , and so are the customs duties, among other things, for imported machines, equipment and construction material, and there are also numerous advantages with regard to local fees. Within the zone, there are custom's outpost, swift and efficient import and export procedures, numerous logistics services, such as transport and freight forwarding, as well as efficient administration – one stop shop.

Kostic has emphasized that a specific result from the visit to Podgorica is also defining a cooperation of one company from the Pirot Free Zone with Uniprom-KAP.

Goran Scepanovic, a General Director of the Directorate of Multilateral and Regional Trade Cooperation and International Business Relations has said that in modern business environment, development of free zones as an important business infrastructure instrument is given a growing importance.

- Free zones provide a good opportunity for incorporation and development of small and medium sized enterprises and contribute to advancement of their overall business operation. The practice has shown that countries with developed free zones make a significant inflow of foreign direct investments and new technologies, have experienced improved standard of living and increased employment, thereby developing competitive advantages, achieving faster economic development and getting involved in international courses more efficiently –Scepanovic has said.

Currently, there is one free zone of the Port of Bar functioning in Montenegro, while the start of operation of the New Tobacco Plant zone is expected quite soon, as well as establishment of Uniprom-KAP free zone.

- Recently, we have witnessed increased interest in establishment of new zones, i.e. conducting business activities within them – he has said.

He has concluded that the meeting at the Chamber may contribute to defining new mechanism for improving free zones development policy in Montenegro.

Milan Ristic, Director of the Free Zone Administration of the Ministry of Finance of the Republic of Serbia, has said that 71 manufacturing companies operate in the free zones of Serbia, which is 63 more than in 2008, while the number of employees is over 25 thousand. Today, production in free zones has increased 10 times compared to 2008. Companies operating in these zones had EUR 4.8 billion turnover in 2016. Share of free zones in Serbia’s total export is sixteen percents (in 2016, export was EUR 2.1 billion).

- EUR 200 million in average is invested in free zones every year. A great value of free zones is related to the fact that most of the companies already operating there decide to reinvest – Ristic has said.

Msc Zarija Franovic, Executive Director of the Port of Bar Ltd. (Luka Bar AD) has presented the free zone established in 2000 by this company, the Government and the Municipality. The free zone started operating in 2005, and Port of Bar is its authorized operator. Total area of the territory in which business may be conducted under the free zone regime is over 130 ha. Number of active contract on performance of business activities in the Free zone is 59 (35 with the companies having their registered seat in Montenegro, and with the 24 companies having their registered seat abroad). The fact that it encompasses the largest part of the area with developed infrastructure used by “Luka Bar“ and “Port of Adria“, makes the Free Zone specific and to a certain extent different from other continental zones. As to the manner of its operation, the free zone of the Port of Bar may be compared to the free zones in sea ports to the largest extent (for example with the Croatian ones). Franovic has pointed out that scope of benefits for users and operators of the free zone has been substantially reduced by amendments to the Law on Free Zones from 2008 and 2016.

- It is generally stated that Free Zone potentiality has not been used sufficiently and that there are several restrictions that had an adverse effect on development of business activities in the Free Zone. The most common contracts refer to handling, storage and purchase and sale of goods, and the same are implemented through usage of port resources that were there even

before establishment of free zone regime at the Port of Bar. However, absence of contracts on production activities is evident – Franovic has said.

He urged for amendments to the Law on Free Zones, which would provide additional benefits for attracting investments in that zone.

Nebojsa Dozic, Executive Director of Uniprom-KAP, has presented the company that is currently the largest producer and exporter in the country, and that cooperates with 200 local and 144 foreign companies.

Among other things, he has said that they are implementing the project of open mould ingot casting line, 30000 tons capacity, with the Turkish company Sistem Teknik, and has announced the project of steel wire rod and establishment of the free zone.

- We concluded from discussions with a great number of investors that establishment of the free zone would be an additional incentive for their entrance into our market, i.e. incentive for inflow of export-oriented direct foreign investments –Dozic has said.

According to his statement, establishment of this free zone will enable further development of Uniprom-KAP and creation of a leading industrial and logistics center which would provide its full contribution to economic sustainable development, attraction of investments, increased export, job creation and application of the most up-to-date technologies.

He has said that the representatives of this company visited the Pirot Free Zone in January this year in order to learn about management and operation thereof.

Discussion which followed afterwards was participated by representatives of the companies and local self-governments interested in initiation of free and business zones precondition for which, in their opinion, would be change of legislation, so as to provide additional facilities to investors. Representatives of competent institutions have emphasized that Montenegro, being a candidate for EU membership, is obliged to comply with legislation thereof, including the field of governing the free zones.

At the end of the meeting, Agreement on Cooperation has been signed by Vlastimir Golubovic and PhD Dragan Kostic, presidents of the chambers of commerce of Montenegro and Pirot respectively.

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