Last chance saloon for Đukanović

Andrey Petrushinin is Corporate Affairs Director, CEAC

After almost a quarter of a century in power, Montenegro’s general election this year could finally mark the downfall of Prime Minister Milo Đukanović’s government. Having barely survived a confidence vote in parliament in the wake of NATO’s invitation for the Balkan nation to join the military alliance, he has nonetheless lost the support of his coalition partner and sharply divided opinion in the country. Đukanović’s supporters consider the NATO accession talks a critical step towards the holy grail of EU membership, but the prime minister has in truth done little to install the vital root-and-branch reforms so badly needed and so longed for by his citizens.

The EU has called repeatedly for meaningful reforms to tackle the rampant corruption that infects the highest offices of the land, and to ensure the application of the rule of law and good governance. This is also what the ordinary citizens of Montenegro want – minimum standards of civil governance that will give them all a fair chance to better their lives. But Đukanović has ignored both the calls from the West and from within his own country, and has failed time and again to undertake real reforms. The prime minister has long tried to paper over the cracks, but so obvious has his mismanagement of the country become that the Organised Crime and Corruption Reporting Project named Đukanović their ‘person of the year’ for 2015. The NGO said that ‘while he casts himself as a progressive, pro-Western leader who recently helped his country join NATO and is on track to join the European Union, he has built one of the most dedicated kleptocracies and organised crime havens in the world.

The government’s corruption has impacted directly on the Central European Aluminium Company (CEAC), which invested vast sums in Montenegro’s Kombinat Aluminijuma Podgorica (KAP) aluminium plant, only for us to be illegally stripped of ownership in July 2014 by the state, without explanation or compensation. The absurdity of the situation is that Đukanović’s repeated refusal to negotiate is harming him, his country and his own chances of re-election later this year. The European Parliament was vocal in its call for the government of Montenegro ‘to reach a sustainable solution for KAP in compliance with the Stabilisation & Association Agreement, transparency and the rule of law.’ In light of Montenegro’s deteriorating public finances and the risks associated with the numerous international arbitration cases against the state, the EP resolution highlights the need for the government to return to the table.

The unresolved KAP issue – increasingly discussed in international business circles – has become a deterrent to inward investment in Montenegro. It is a perfect example of why, under Podogrica’s feeble standards of governance and rule of law, foreign companies are steering well clear of any dealings with Montenegro, for CEAC is not the only international investor that has been caught in such a situation. The case of EuroTel provides a telling example of the Montenegrin government’s pattern of behaviour. EuroTel, an Italian television broadcasting equipment supplier, was contracted by the EU to assist in the digital switchover of the Public Broadcasting Service of Montenegro (RTCG). While EuroTel did everything it was contracted to, the Montenegrin government consistently failed to collaborate with the company, leading to substantial delays. The Montenegrin government also encouraged EuroTel’s rivals to appeal the awarding of the contract to EuroTel and haul the European Commission before the European Court of Justice. The case was heard by the ECJ and the plaintiffs lost, but problems continue to bedevil the digital switchover, with the Montenegrin government continuing to imply that this is entirely the fault of EuroTel.

Regulatory predictability and the rule of law are key requirements for any business seeking foreign investment opportunities, and Montenegro’s inability to provide these is seriously damaging its international investment profile. European Commissioner Johannes Hahn has pointed out that foreign investment cannot be expected without the functioning rule of law. Earlier this month, Commissioner Hahn said that the ‘European Commission’s assessment is unfortunately that real progress on the ground remains limited, including on establishing a track record in the fight against organised crime and corruption’. He warned that Montenegro’s EU accession negotiations could be frozen if there is no visible progress on the implementation of the rule of law.

If Podgorica were to engage constructively with CEAC, the government would send a clear signal to international investors and the EU that it is committed to restoring the trust and confidence of the international business community in Montenegro. Only by adopting this modern, open and forward-looking approach can Montenegro once again start to attract top-flight international investment. Such a move would be transformative and signal that the prime minister doesn’t just care about securing photo opportunities alongside the leaders of Western powers but also cares about tackling the reforms needed to give Montenegro a real chance at finding its place among the club of democratic EU nations.

The domestic opposition has been calling for the first ‘free and fair’ elections in the history of independent Montenegro, and the mass street demonstrations at the end of last year show how widespread support for the opposition is becoming. A stronger economy that raises the living standards of every citizen is a well-tested and winning formula for any politician facing trouble at the polls. And that is something not even Đukanović can ignore in this election year.