Business clusters to increase the competitiveness of Montenegrin economy

“An initial research conducted by the UN in 5 municipalities in the Durmitor area shows how business clusters can strengthen the economy: 1356 jobs are supported by 26 clusters in tourism, agriculture and wood production, while 525 households are dependent on their operations. These data underline the need to draft a strategy in the first place as investment in a cluster of businesses, relative to a single business, which is likely to yield more efficient returns on our investment,” said Mr. Rastislav Vrbensky, UN Resident Coordinator and UNDP Resident Representative to Montenegro at a round table “Development of business clusters aimed at strengthening competitiveness and balanced regional development”.

The round table was organized jointly by the Ministry of Economy and the United Nations System in Montenegro and it brought together more than 50 representatives of national and local institutions (Ministry of Economy, Employment Agency, Investment and Development Fund, Chamber of Economy, Institute for Strategic Studies and Prognoses, Montenegrin Investment Promotion Agency, Agency for Environment Protection, municipalities, etc.), NGOs, as well as international partners.

A number of neighbouring countries and a great number of EU countries already have strategies   for development of business clusters, and their main goals are to promote clusters management policies, reduction of regional disparities and efficient use of EU funds.

“In order to reduce regional imbalances and increase competitiveness of small and medium enterprises in Montenegro, with specific focus on the north, the Government of Montenegro and 5 UN agencies (UNDP, UNIDO, UNEP, UNESCO and FAO), merged their vision, energy and funds, with the overall UN contribution of $360,000 and $544,440 from Government’s side, to start working on a strategy for sustainable economic growth in Montenegro through introduction of business clusters by the end of 2016,” said also Mr. Vrbensky.

Business clusters are usually defined as a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters should serve to increase the productivity with which companies can compete, nationally and globally. “Introduction of business clusters and their successful functioning is an important tool in creating conditions to increase the competitiveness of economy, especially in less developed parts of the country,” said Mr. Vladimir Kavarić, Minister of Economy in the Government of Montenegro.

He also explained that economic and regional policies stimulate the establishment and development of business clusters through building and advancement of the necessary infrastructure. “However, development of clusters also requires an increase in the educational level and innovations, while at the same time it contributes to the increase of employment rates and income per capita, as well as to the reduction of regional disparities,” Minister Kavarić emphasized.

ssistant to the Minister of Economy of Montenegro, Ms. Nina Vujošević said that the strategy for sustainable economic growth through introduction of business clusters will be aligned with the goals defined in the strategic development plans of municipalities, as well as with the strategic development documents of Montenegro and the EU. “Establishment of business clusters in Montenegro can be financed from internal and external sources. Internal resources are membership fees, services provided on free market, etc.. The External resources are stimuli from the state budget, donations, sponsorships, EU funds, etc. Third IPA component is of special importance, as business clusters development in Montenegro needs to be financed from it, as per the Strategic Coherence Framework and Operational Programme for regional development for the period from 2014 – 2020,” Ms. Vujošević explained.

Ms. Sanja Međedović, Manager of the joint UN Project “Strategy for Sustainable Economic Growth in Montenegro through Introduction of Clusters by the end of 2016” presented results achieved in the interim, as well as further goals of this project: “In an initial research supported by the UN on Green Jobs in Durmitor region in 2010 in five northern municipalities Pljevlja, Žabljak, Plužine, Šavnik and Mojkovac, five main areas were analyzed: human resources, environment, economic activities, traffic and public infrastructure, as well as public policies, development plans and regulations.”

She also explained that the key achievements in the first phase were: mapping of clusters in 5 municipalities; diagnostic studies of 2 sample clusters; 3 day training on cluster development; assessment of the potential and demand for traditional local products from Durmitor; study on the green potential for tourism; as well as 12 grants made available for startups (see the related video story “Limiting the effect of the economic crisis in Montenegro”).

Ms. Međedović also said that the final draft of the strategy is expected in April 2012, and that potential business clusters could be focused in three main areas: tourism, wood industry and agriculture.

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About the Joint UN Project “Strategy for Sustainable Economic Growth in Montenegro through Introduction of Clusters by the end of 2016”:
The objectives of the new “Strategy for Sustainable Economic Growth in Montenegro trough Introduction of Clusters by the end of 2016” are to: reinforce existing strategies and support mechanisms; ensure better utilization of support programmes; enhance absorption capacities for the Instrument for Pre-accession Assistance – component for Rural Development; create market linkages (north-south); support import substitution concepts; and enhance to some extent export capacities of clusters with existing potential. What this strategy does not aim to achieve is preventing migration from North to Centre/Southern regions and bring emerging agro-based farming clusters in the Northern region to larger scale export in the short run.

In terms of concrete next steps, the following will be undertaken:

  1. Cluster mapping for the whole country
  2. Ranking of identified clusters
  3. Sample diagnostic studies of 15 pilot clusters
  4. Demand assessment for local cluster products
  5. Institutional/municipal capacity assessment
  6. Policy retreat and strategy drafting

The strategy will map current production capacities and current practices in terms of resource use (energy, water, etc.), which will reflect potentials for improving efficiency and competitiveness, reducing operational costs of businesses and increasing available funds for investment. Considering that some 19% of the Montenegrin territory is under protection (both national and international regimes), the UN specifically focuses on private sector activity in protected areas where economic and environmental policy is fully aligned.

The recent research of UNDP shows that protected areas in Montenegro contributed some €106 per capita in 2010 or 2.2% of GDP, and helped sustain some 7,700 full time jobs. This reflects the alignment of environmental and economic policies- direct investment in conservation in Montenegro would yield up to €1.5 billion over next 20 years. The competitiveness of business clusters located in these protected areas, ranging from tourism to food production, will hinge on the quality of ecosystem services and pristine nature.

In more specific terms, this project is giving opportunity to better explore the impact of protected areas (existing or ones to be established) on businesses in Montenegro. In particular, this means how many producers are familiar with benefits or challenges arising from products originating from/near protected area.

Guided by the corporate UN rules on gender equality and equal opportunity approach in our development work, UN will ensure that the data collected in this Project are sex-disaggregated providing in that way the ground for better analyses and understanding of both women`s and men`s economic profiles, interests and potentials. Such analyses will directly underpin our work on economic empowerment of women and development of Revolving Trust Fund for women entrepreneurs within our Gender Programme IPA 2010.


Cluster Mapping Study for Durmitor Region, 2011

Cluster Diagnostic Study – Sawn Wood, 2011

Cluster Diagnostic Study – Organic Crop Production, 2011