Supporting enterprises

What is in store for Montenegrin businesses after COVID-19 pandemic hard hit the economy?

Montenegro’s economy was hit harder by the pandemic than any other European country. We asked one of the leading Business representatives from this country, Predrag Mitrovic, President of the Montenegrin Employers Federation, what they did to support companies and how the ILO has been helpful.

News | 28 July 2021

Montenegrin Employers Federation

What was the impact of the COVID-19 crisis on Montenegro’s economy and enterprises? How different is this crisis from previous recessions?

Our large tourism sector was almost entirely paralysed by the crisis with devastating knock-on effects on private consumption and investments, causing one of Europe’s steepest declines in GDP in 2020, estimated at 15.2 per cent.  The COVID-19 pandemic has hit the economy harder than the 2008 recession and we expect that we will recover slower than we did after the financial crash. As an example in January 2008, there were 8,528  legal entities and entrepreneurs with frozen accounts in our country, while at the end of April 2021, these numbers were as high as 19,193. We are extremely concerned about these figures and the potential consequences if these businesses go bankrupt. The best solution to overcome these unprecedented challenges is for social partners and government come together with a shared goal of safeguarding enterprises, employment and the economy at large. We are convinced that strong and functional social dialogue is  the key to effective and inclusive post-pandemic recovery. The new Government of Montenegro that took office amid the crisis has shown openness and readiness for dialogue with the social partners.

What have you done to support your member enterprises during COVID-19?

First of all, we intensified communication with our members and provided them with essential business advisory support and timely information on COVID-19 administrative rules and procedures. Very often, those rules were unclear or misleading.  Enterprises had difficulties in applying employment relationship regulations while their own operations were heavily disrupted. Apart from the legal advice provided, we prepared guidelines to help enterprises in managing human resources during the crisis.  Secondly, MEF concentrated on advocating for effective support measures for enterprises. The enterprise surveys that we conducted with ILO support and the constant dialogue with enterprises equipped us with data about the needs and challenges that enterprises were facing, as well as the type of support they needed to survive the crisis. We are proud of our five position papers  used for our discussions and consultations with the Government, which accepted many of the solutions that we proposed. For example, in January 2021, previously introduced measures, such as wage subsidies and deferral of income taxes and social contributions were extended, while VAT for the hospitality sector was decreased from 21% to 7%.  One last point is that in order to support our members, we wrote off the membership dues for March-May 2020. We made this decision even though MEF as an organization also had to face a difficult financial situation.

What are the key lessons learned from COVID-19 and which of those lessons will MEF take forward in the future?

I think there are three key lessons we learned from the crisis. First of all, we realized how vulnerable our economy and enterprises can be to a virus and we need to be prepared. It has become obvious that many of the challenges that existed before the crisis (for example, high share of illiquid enterprises and grey economy, among other things) have been amplified by the crisis and are making business continuity and recovery even more challenging.  Enterprises will need further support to be able to fully recover. At the same time, they need to review their business models and prepare contingency plans to get ready for future shocks. We also need to be aware of the existing structural challenges and on-going reform processes while paving the way to recovery.  The second key lesson is that we can make a difference if we are united and equipped with needed intelligence. We can influence decisions if we think big and act boldly and coherently. With relevant and timely data in our hands, we were able to support government in defining adequate support measures. We could find a compromise, even though we knew that the government was facing substantial internal and external debt. Lastly, I would like to underscore that we witnessed an appreciation for MEF and our role during the crisis.  Feedback from our members show that we were, as an organization, of high relevance to the business community, proof of which is that new employer organisations and enterprises individually joined MEF amid the crisis.

How did the ILO help your organisation? Which type of support did you find most useful?

With ILO support, we conducted two countrywide surveys, which enabled us to collect the voice of business and support our recommendations with solid evidence.  The MEF was the first organisation that came out with data at a time when there was a complete lack of data on the impact of the crisis on enterprises in Montenegro. The first rapid assessment was conducted in partnership with EBRD between March and April 2020. MEF was again the first organisation that conducted with ILO support a second assessment that tracked the evolving needs and challenges of enterprises in December 2020. The tool that the ILO made available enabled us to use the data in real time, while it was still being collected, and inform policy makers and society at large about the devastating impact the crisis was having on businesses. The data gathered through the enterprise surveys proved to be instrumental in influencing government decisions and ensuring that those decisions are the right ones.

In addition, with ILO support we developed guidelines for enterprises on managing the workplace during COVID-19 and working from home. Of particular importance for SMEs was the guidelines on business continuity and the step-by-step instructions on how to design a business continuity plan in the conditions of COVID-19. All these tools proved to be very useful and timely.