The 20 largest state-owned enterprises in Montenegro are facing challenges in maintaining profitability and managing liquidity, with an increased risk of entering insolvency, while strengthening transparency and oversight could be key to improving their business performance, it was concluded at a roundtable organized by the Center for Economic and European Studies (CEES).

CEES presented the document “Corporate Governance and Financial Performance of Public Enterprises in Montenegro,” which analyzes the 20 largest state-owned enterprises whose assets account for approximately 90 percent of the total assets of all state-owned companies in the country. 

The analysis covered Elektroprivreda, Railway Infrastructure of Montenegro (ŽICG), Railway Transport of Montenegro (ŽPCG), the Montenegrin Electricity Distribution System (CEDIS), the Montenegrin Transmission System (CGES), Plantaže, Airports of Montenegro, the “Simo Milošević” Institute, the Budva and Ulcinj Riviera companies, the Coal Mine, the Regional Water Supply for the Montenegrin Coast, the Port of Bar, Sveti Stefan Hotels, Monteput, the Post of Montenegro, Radio and Television of Montenegro, Montenegrin and Bar Shipping Companies, as well as Montenegro Bonus.

During the event, a panel discussion was also held on the topic: “Better Oversight for Improved Performance of Public Enterprises.” A panel participant, Bojana Bošković, the State Secretary at the Ministry of Finance, pointed out an inadequate regulatory framework that has resulted in negative economic and fiscal losses for the state. As she noted, the Ministry of Finance is working on a strategy for corporate governance of state-owned enterprises.

Welcoming the state’s decision to develop a strategy, the Vice President of the Chamber of Commerce of Montenegro Dragan Kujović pointed out the necessity of adhering to two principles in the management of state-owned enterprises – that companies should be managed by experts and that they should have effective oversight and self-control mechanisms. He also emphasized that, in both public and private enterprises, it is important to separate ownership and management functions.

Assistant to the Director of the Agency for the Prevention of Corruption Boris Vukašinović He referred to the importance of implementing integrity plans in public enterprises and highlighted human resources policy as a major challenge. As he emphasized, human resource management represents the greatest risk in these enterprises, and the Agency for the Prevention of Corruption (APC) will define the area regulating their operations as one of the priority areas in its work.

The negative consequences of the absence of a unified state ownership policy toward public enterprises were addressed by a public policy researcher from the Institute Alternative. Marko SošićHe emphasized that there has been some progress in terms of transparency, but that comprehensive improvement in this area requires a centralized policy rather than fragmented actions by individual ministries.

Member of the CEES Research Team Nina Vujošević assessed that the challenges faced by public enterprises are the result of an incomplete transition, weaknesses in corporate governance, and the lack of clear procedures and objectives on the part of the state as the majority owner.

“The implementation of the OECD Guidelines on Corporate Governance, along with increased transparency and oversight, is key to improving the performance of these enterprises,” Vujošević said.

It was highlighted at the event that the analysis of the financial statements of these enterprises for 2022 showed that they face the greatest challenge in terms of profitability, i.e. an increased profitability risk. During the presentation of the analysis, it was stated that the risk of increased illiquidity, according to 2022 data, remains low, but has increased for several enterprises. The overall risk of entering insolvency across all 20 enterprises is low; however, if profitability and liquidity risks were to continue to rise, solvency indicators would also deteriorate.

From a sectoral perspective, the highest profitability risk, reflected in negative rates of return, is observed in the agriculture, forestry and fishing sectors, wholesale trade, and health and social care. At the same time, profitability risks have increased in the sectors of electricity, gas, steam and air conditioning supply, as well as transport and storage.

Najveći rizik pogoršanja likvidnosti je, kako je pokazala analiza, u preduzećima u sektorima građevinarstvo, saobraćaj i skladištenje, snabdijevanje vodom i upravljanje otpadnim vodama, vađenje ruda i kamena.

It was concluded during the event that the state should clarify its objectives in line with national strategies, establish clear criteria for the selection of boards of directors, increase transparency in financial support and transactions, as well as in remuneration for members of boards of directors. An important step would also be the establishment of a model for reporting and assessing fiscal risks at the aggregate level, which would improve the overall situation in state-owned enterprises.

The event was organized within the framework of the project Partnerships for Sustainability and Greater Accountability of Public Enterprises It is supported by the Institute Alternative through the CSO support programme within the project “Civil Society for Healthy, Effective, Sustainable and Transparent Public Enterprises (BEST SOEs)". The project is funded by the European Union and co-financed by the Ministry of Public Administration.

CENTER FOR ECONOMIC AND EUROPEAN STUDIES