State-owned enterprises are important economic actors and can enhance economic activity and competitiveness if a level playing field with private companies is ensured. This chapter, along three sub-dimensions, explores the importance of implementing policy, institutional and legal frameworks that contribute to competitive neutrality between private firms and state‑owned enterprises. The first sub-dimension, efficiency and performance through improved governance, assesses clarity of the ownership policy and the board nomination framework, including independent and professional boards, and privatisation practices. The second sub-dimension, transparency and accountability, focuses on the financial and non-financial reporting and audit practices, including anti‑corruption integrity measures and protection of minority shareholders. The third sub-dimension, ensuring a level playing field, explores the discrepancies in the legal and regulatory treatment of SOEs compared to private businesses, and the financing conditions of SOEs.
Western Balkans Competitiveness Outlook 2024: Montenegro
6. State-owned enterprises
Abstract
Key findings
Montenegro scores in line with the Western Balkans’ regional average on the overall state-owned enterprise (SOE) policy dimension (Table 6.1). Compared to its regional peers, it performs slightly above average with respect to the level playing field, reflecting among others its high degree of SOE corporatisation. However, Montenegro’s SOE governance practices still lag behind international good practice in a number of areas, including the absence of a state ownership policy to harmonise and professionalise ownership practices across a dispersed portfolio; weaknesses in SOE board independence; and shortcomings in transparency by SOEs on their non-financial performance and by the state on the performance of the SOE portfolio as a whole. A nascent SOE reform programme adopted in 2023 foresees reforms to bring Montenegro’s ownership practices in line with international good practices, including through stronger central oversight of SOEs and enhanced qualifications criteria for SOE boards and management. This reform programme has not significantly affected Montenegro’s scores in this dimension since its implementation has not begun in earnest.
Table 6.1. Montenegro’s scores for state-owned enterprises
The key findings are:
Montenegro’s approximately 50 centrally-owned SOEs operate in a mostly decentralised manner without a clear ownership policy to professionalise practices across the state administration. Earlier efforts to improve SOE governance and monitoring, such as the establishment of a company to monitor SOEs’ performance or the publication of financial reports on the SOEs in the Ministry of Capital Investments’ portfolio, have stalled or been rolled back.
SOE board nominations in Montenegro are not competitive or open to the public and are not subject to formal qualifications criteria, although politicians are barred from serving on SOE boards. The absence of general independence requirements for SOE boards, together with the fact that the state bypasses boards in some SOEs to directly appoint the Chief Executive Officer (CEO), constitute significant weaknesses that prevent SOE boards from performing their good-practice role of supervising management and shielding corporate decisions from political interference.
Some targeted measures have been implemented to combat corruption risk in SOEs, such as the development of integrity plans by the majority of SOEs by end-2023. However, broader weaknesses in SOEs’ supervision arrangements – including their unclear objectives, limited central monitoring of their activities, and insufficient independence of SOEs’ boards of directors – constitute foundational shortcomings that exacerbate corruption risks.
SOEs are generally subject to high standards of financial reporting, although not all SOEs are required to undergo an external commercial audit of their financial statements. Shortcomings persist in SOEs’ non-financial reporting and the transparency of the state as shareholder; the authorities do not publish an aggregate report on SOEs.
Concerning the level playing field with private companies, the vast majority of SOEs are incorporated as joint-stock or limited liability companies in line with good practice – only 3 SOEs have the special legal form of “public enterprise”. Many SOEs do not achieve significant rates of return or are loss-making, pointing to structural issues that hamper efficient resource allocation and ultimately distort the level playing field.
State of play and key developments
The central government of Montenegro is the majority or full owner of approximately 50 SOEs (or up to 58 according to data gathered by non-governmental sources), which together employ 12 371 people accounting for 4% of total national employment as of end-2022.1 Approximately half of these SOEs include non-state shareholders. SOEs in Montenegro are present in many structurally important sectors, including energy production and distribution, railway transport and postal services. The electricity and gas sector accounts for the majority of SOEs’ value (47%) and 28% of SOEs’ employment, followed by transportation (23% of all SOEs by value and 27% by employment) and other activities (14% by value and 15% by employment) (Figure 6.1). The “other activities” sector comprises 20 companies often operating in less “traditional” sectors for state ownership, including for example 9 SOEs operating in the hotels and accommodation sector, together employing 662 people. Primary sector SOEs are also important, accounting for 13% of all Montenegrin SOEs by both employment and value, and comprising three SOEs engaged respectively in mining, grape production and other agricultural production.
Figure 6.1. Distribution of employment and value of centrally owned SOEs by economic sector in Montenegro (2022)
Sectoral shares in value and employment are expressed in percentages
Notes: The SOE value denotes the book value of shareholders' equity. The finance, health and social services, manufacturing and real estate sectors are not represented in the figure, owing to the near-absence of SOEs operating in these sectors (although one SOE classified under the “other activities” sector does provide some health-related services).
Source: OECD calculations based on information provided by the authorities of Montenegro for the Competitiveness Outlook assessment.
The largest individual SOE employers in Montenegro are: the electricity transmission company CEDIS (1 623 employees); the electricity and gas producer Elektroprivreda Crne Gore (1 109 employees); the postal services operator Pošta Crne Gore (1 103 employees); the lignite mining company Rudnik Uglja AD Pljevlja (966); Airports of Montenegro/Aerodromi Crne Gore, which operates the airports in Podgorica and Tivat (885); the railway infrastructure company Željeznička Infrastructura Crne Gore A.D (779); and the national radio and television broadcaster (746). In addition to the railway infrastructure company, the central government also owns three separate railway companies managing, respectively, passenger transport, cargo transport and the maintenance of rolling stock (carriages).
According to data provided by the authorities in the context of this assessment, nearly half of the state’s portfolio (23 SOEs) reported positive returns on equity in 2022, with the remainder reporting zero or negative returns. SOEs’ frequent underperformance is exacerbated by the fact that for the majority of them the state does not set quantifiable performance objectives. In some cases, SOE losses may indicate public-service obligations that are subsidised from commercial revenues, but the authorities have not undertaken to establish a clear overview of the costs and funding arrangements related to such non-commercial objectives.
Sub-dimension 5.1: Efficiency and performance through improved governance
Concerning the clarification of ownership policy and rationales, Montenegro does not have a state ownership policy that defines the overall rationales for state ownership or the roles and responsibilities of the institutions responsible for state ownership. The rationales for state ownership in some individual enterprises can often be implicitly gleaned from sectoral legislation, but there remain many SOEs operating in less “traditional” sectors for state ownership, such as the hotel industry, in which the rationales for maintaining state ownership are not clear.
In April 2023, the government adopted a decision to establish a working group tasked with developing a strategic framework for state-owned enterprise management. The working group’s planned activities include an analysis of SOEs’ legal and regulatory framework and comparison with EU practices, followed by legislative reform to bring Montenegro’s state ownership framework in line with international good practices (Government of Montenegro, 2024[1]). At the time of writing the working group had not yet commenced its SOE-related work, but the authorities announced their ambition to undertake related legislative reforms in 2024.
Montenegro has predominantly decentralised state ownership arrangements, with a mix of ministries, state funds and other institutions holding ownership shares in state-owned enterprises. Montenegro differs from most other economies with decentralised ownership arrangements in that state shares in many SOEs are not held by a single public institution, but often by the state as a whole – which exercises ownership rights either by whole-of-government decisions or by delegated authority to sectoral ministries – together with one or more state funds. According to an external review of the public ownership structure of 26 state-owned joint-stock companies published by the non-governmental Institut Alternativa, in 2021, 21 of the reviewed companies had at least 2 public shareholders, while 16 had at least 3 public shareholders (Institut Alternativa, 2021[2]). In most of these companies, the largest public shareholder was the “state”, while the other shareholders were the Employment Bureau and/or the Pension and Disability Insurance (PDI) Fund. Other state funds with shareholdings in SOEs include the Investment and Development Fund, the Republic Health Fund and the Compensation Fund. The state as a whole generally exercises its ownership rights through delegated powers assigned to sectoral ministries, but some decisions, such as board nominations, are made by a whole-of-government vote. Among the sectoral ministries with delegated ownership responsibilities, the Ministry of Capital Investments holds the largest number of SOEs in its portfolio (21), followed by the Ministry of Economic Development (11 SOEs). Complementing the role of these sectoral ministries, the Ministry of Finance often plays a role in SOE oversight by approving SOEs’ financial plans, in addition to having its “own” portfolio of three SOEs.
In the context of these decentralised ownership arrangements, Montenegro has in the recent past taken some steps to further professionalise state ownership practices, in particular for the 21 SOEs under the purview of the Ministry of Capital Investments, which does not perform sectoral regulatory functions that could conflict with its shareholding objectives. In 2021, a Department for Corporate Governance Improvement was established within the Ministry of Capital Investments and undertook some preliminary steps to improve monitoring of SOEs. In its founding year, it notably published quarterly reports on the operations of SOEs in its portfolio as well as detailed information on individual SOEs, including links to their financial reports and corporate statutes (Ministry of Capital Investments of Montenegro, 2021[3]). However, no more recent financial information has been published by the Ministry since then, pointing to a one-off, or stalled, effort at greater transparency.
Other, earlier steps to improve SOE monitoring have similarly come to a halt. For example, in July 2022, Montenegro Works, a company that had been tasked with analysing SOEs’ financial performance and advising the government on the development of policies to improve SOE efficiency, was liquidated less than a year after its establishment. The authorities report that the company was not financially sustainable and have opted to explore a different model of SOE monitoring, involving the aforementioned development of a new strategic framework for SOE oversight coupled with legislative reforms. Together, these elements point to SOE reform initiatives which, although positive, lack the institutional permanence to endure changes in the political cycle. As highlighted in a recent report by the European Bank for Reconstruction and Development (EBRD), the majority of SOEs in Montenegro continue to operate without uniform supervision or policies (EBRD, 2022[4]). This being said, it should be noted that the Ministry of Finance recently established a Division for Fiscal Risks, which is responsible for monitoring and managing SOEs’ potential impact on the state budget. The Division gathers and publishes information on SOEs’ liquidity, profitability and solvency ratios.
Montenegro currently does not have a robust board nomination framework applicable specifically to SOEs. The authorities have not developed any specific SOE board member qualifications criteria or elaborated a uniform process by which shareholding institutions are expected to nominate or appoint SOE board members. SOE board member recruitment processes are not competitive or publicly announced. The main document establishing related requirements is the general companies law (the Law on Business Organisations), but this is applicable to all companies and does not prescribe how state shareholding institutions should select or vet board nominees. The companies law establishes only very basic requirements that an individual must meet in order to serve on a board, such as not having served as the auditor of the firm and not having been convicted of a crime. Plans to develop clearer qualifications criteria for SOE board members have been announced by the aforementioned working group, with the authorities reporting their intention to address issues related to non-transparent and politically influenced SOE board nomination processes.
Efforts to promote independent and professional boards of SOEs in Montenegro have been similarly limited. The legal framework allows for a patchwork of different rules regarding both the responsibilities and the required composition of SOE boards of directors. In many cases, board responsibilities are weak compared to those of the state, making it difficult for them to fulfil their good-practice roles of supervising management and shielding enterprises from political interference. For example, according to a review of the articles of association of 14 Montenegrin SOEs, in 5 of these SOEs the state shareholding entity as identified in the founding legislation – and not the board of directors – is granted the authority to appoint the CEO, depriving the board of one of its crucial good-practice supervisory functions (Institut Alternativa, 2021[2]). Concerning board composition, Montenegrin SOEs are frequently perceived to be politically affiliated, despite rules in the Law on the Prevention of Corruption barring certain high-level politicians from serving as SOE board members or CEOs (Institut Alternativa, 2021[2]).2 There are no general requirements for SOE boards to include a minimum number of independent directors, and the authorities report that most SOE boards do not include independent directors. This being said, amendments to the general companies law adopted in 2020 introduced a new requirement that the boards of all joint-stock companies (including those owned by the state) must comprise at least three members and that one‑third of the board must be independent. For joint-stock companies that are listed on the stock exchange, the board must comprise at least five members, of which two-fifths must be independent. These new rules can introduce greater professional independence to the boards of at least some SOEs.
Concerning privatisation practices, Montenegro’s Privatisation and Capital Projects Council is responsible for overseeing and ensuring implementation of all privatisation processes in Montenegro. Because the Council is tasked with overseeing privatisation processes in the national interest and informing the public of its decisions, its existence can be considered to constitute a measure to ensure that privatisations are undertaken transparently and in the public interest. Members of the Council are appointed by the government for a four-year mandate. The Council, which is chaired by the prime minister and comprises representatives of relevant ministries, trade unions and state funds, adopts yearly privatisation plans and submits them to the Cabinet for adoption. In practice, these privatisation plans are generally shared with the public via a press release following the Council’s meetings (and prior to their adoption by the Cabinet), although the Law on Privatisation does not explicitly require such public transparency. At the end of 2022, the Council announced its proposal to move forward with plans to sell off the state’s shares in the health Institute "Dr Simo Milošević" LLC Igalo and with the privatisation of five other SOEs. Separately, the privatisations of SOEs facing bankruptcy are overseen by the commercial courts, in line with the Law on Insolvency. Privatisations in Montenegro have historically been subject to some criticism alleging that they lacked transparency and ultimately benefited private investors more than the state or its citizens. Such criticisms were highlighted in a 2015 report by the NGO MANS, alleging that during a wave of privatisations commenced in the early 2000s, many SOEs were sold at less than their true market value and in some cases benefited from significant state investments prior to their sale, which ultimately drained public finances with little public benefit (MANS, 2015[5]).
Sub-dimension 5.2: Transparency and accountability
The state has not elaborated financial and non-financial reporting requirements that are specific to SOEs, but since the vast majority are incorporated as limited liability or joint-stock companies, they are subject to the same basic financial reporting requirements as private companies. These include the requirement to submit annual financial statements to the central registry. Company financial statements must be prepared in accordance with international accounting and financial reporting standards, according to the Law on Accounting and Auditing. Requirements and practices for SOE non-financial disclosures are limited in Montenegro, but companies with over 500 employees are required by applicable legislation to prepare annual non-financial reports. Most SOEs are not required to publish sustainability reports, but Montenegro’s state-owned electricity producer – which is perhaps the SOE with the largest potential carbon footprint – does report on its environmental protection efforts in its annual reports.
Concerning reporting by the state shareholder, Montenegro does not publish an aggregate report on the activities and performance of SOEs. As mentioned earlier, in 2021 the Ministry of Capital Investments published quarterly aggregate reports, including key financial performance data, on the 21 enterprises in its portfolio (Ministry of Capital Investments of Montenegro, 2021[3]). However, this was an ad hoc initiative that has not been repeated since. The 2024-26 Economic Reform Programme (ERP) foresees the establishment of a public registry of SOEs over the course of 2024 (Government of Montenegro, 2024[1]).
Requirements for SOEs’ auditing practices vary depending on their legal form and size. Applicable legislation establishes that certain categories of SOEs are required to have their financial reports audited by an external audit firm. This includes notably all joint-stock companies and all limited liability companies that exceed a certain size threshold. However, certain categories of SOEs do not fulfil the requirements necessitating an external audit, for example medium-sized limited liability companies. According to non-governmental monitoring, 21 SOEs – albeit including those held at the sub-national level – are not required by applicable legislation to have their financial statements audited by an external auditor (Institut Alternativa, 2021[2]). While the Law on Audit requires all public-interest companies to undergo such an audit, the Law on Accounting does not explicitly define SOEs as public-interest entities. In addition to external financial statement audits, SOEs can also be subject to ad hoc audits undertaken by the State Audit Institution. Earlier, such audits focused on the extension of state guarantees to certain SOEs and concluded that the guarantees had been extended without sufficient justification, leading to significant fiscal risk.3
Some efforts have been taken to implement targeted anti-corruption and integrity measures in SOEs. These include requirements first introduced in 2016 that SOEs undertake corruption-risk assessments and submit integrity plans (taking into account the conclusions of the corruption-risk assessments), as well as subsequent yearly reports on implementation, to the Agency for the Prevention of Corruption. At the end of 2019, 52 SOEs had adopted an integrity plan and submitted it to the agency, while by the end of 2023 this number had increased to 60 companies. The Agency for the Prevention of Corruption regularly monitors implementation of integrity plans and shares its insights on related shortcomings in publicly available reports. It also offers training on the development and implementation of integrity plans to concerned enterprises and institutions, which 34 SOE representatives attended in 2022. Additionally, the authorities report that during the two-year period from 2020 to 2021, more than half of SOEs surveyed by the Agency on Prevention of Corruption organised or participated in training on ethics, integrity and anti-corruption. Concerning legislation related to the reporting of corrupt practices, SOEs explicitly fall under the scope of the Law on Prevention of Corruption, which contains provisions to protect whistleblowers. As is the case in many Western Balkan economies, shortcomings in SOEs’ ownership and corporate governance arrangements – including insufficient central monitoring of SOEs, unclear objectives by the state shareholder and insufficient board independence – constitute broader foundational weaknesses in the anti-corruption and integrity framework in the SOE sector.
The protection of minority shareholders is a high-priority issue for state ownership in Montenegro, given that half of all SOEs include non-state shareholders in their ownership structure. Minority shareholders in Montenegro have sound basic legal protections as well as some additional shareholder rights to facilitate their participation in corporate decision making. For example, shareholders with at least 5% of share capital have the right to call a general meeting, to add items to the agenda and to nominate board members. External assessments have nonetheless pointed to minority shareholders’ limited engagement in corporate decision making in practice (see, for example, (EBRD, 2017[6])).
Sub-dimension 5.3: Ensuring a level playing field
Concerning SOEs’ legal and regulatory treatment, the vast majority of SOEs in Montenegro are incorporated as limited liability or joint-stock companies and thus operate primarily according to the general companies law, in line with good practice. Currently only three SOEs operate under the separate legal form of “public enterprise”: Morsko dobro, responsible for managing coastal zones in Montenegro; National Parks of Montenegro; and the state radio and television broadcaster RTCG. These three enterprises are subject to the Law on Realisation of Public Interest in Public Enterprises and Public Institutions, which accords the state certain exceptional powers, such as the right to dismiss the board and the CEO before the end of their terms subject to certain conditions. Such dismissals are notably allowed in the presence of operational issues that lead to an interruption in services, or the non-respect of applicable legislation or statutes. The limited number of SOEs with this separate legal form reflects a decision by the Montenegrin authorities, implemented in 2010 by legal amendments (among others, revoking the Law on Public Enterprises), to transform all “public enterprises” into companies operating under the general companies law. Despite this positive trend toward levelling the playing field in Montenegro, external assessments point to other sources of legal differences applicable to Montenegrin SOEs: the aforementioned analysis by the Institut Alternativa points out that for some SOEs beyond the three public enterprises, the articles of association accord the government several significant corporate powers, such as the right to appoint directors, manage assets and take out loans (Institut Alternativa, 2021[2]). Such provisions are not in line with good corporate-governance standards, which call for independent and professional boards of directors to oversee management in the interests of the company and its shareholders. Creating a channel for political influence over corporate objectives may distort the level playing field with private companies that operate under purely commercial objectives.
Regarding SOE financing conditions, explicit state guarantees on SOE loans are prevalent in Montenegro, reaching an estimated EUR 515 million in 2020 (Institut Alternativa, 2021[2]). The conditions of state loan guarantees to SOEs were last subject to an audit by the State Audit Institution in 2013, which found that guarantees issued to SOEs in 2010 and 2011 were accorded without a detailed assessment of the SOEs’ financial situation or commercial viability (Institut Alternativa, 2021[2]). Under EU state aid rules, state support to SOEs is restricted, prohibiting any forms of state aid that could confer an advantage on the company and distort competition. As an EU candidate country, Montenegro will be required to comply with these rules, which should make SOE financing conditions more market-consistent going forward. The Agency for Protection of Competition is mandated to enforce state aid rules in Montenegro. It notably opened a case against the state-owned Montenegrin Airlines in 2019 for direct grants issued to the company without prior approval from the regulator. This signals that the agency is not unduly excluding SOEs from the scope of its enforcement activities. A more fundamental issue affecting SOE financing conditions in Montenegro is that, according to the authorities, many SOEs in Montenegro either do not achieve significant rates of return or are outright loss-making. This points to potential structural issues that may hamper efficient resource allocation in the market, ultimately distorting the level playing field.
Overview of implementation of Competitiveness Outlook 2021 recommendations
Montenegro’s ERP for the period 2024-26 foresees the establishment of a new strategic framework for monitoring SOEs, involving an alignment of SOE governance and oversight arrangements with OECD good practices, including strengthened qualifications criteria for SOE boards and management (Government of Montenegro, 2024[1]). However, at the time of writing, this undertaking was in the very early stages of implementation and therefore has had very limited impact on Montenegro’s assessed progress in implementing OECD state ownership Recommendations (Table 6.2). As mentioned previously, there is also evidence that earlier efforts to improve the monitoring and/or transparency of SOEs have either stalled or backtracked. This includes the July 2022 liquidation of the SOE Montenegro Works, which was created in August 2021 to monitor SOEs’ financial performance, as well as the discontinuation of online publication of SOE financial statements by the Ministry of Capital Investments.
Table 6.2. Montenegro’s progress on past recommendations for state-owned enterprises
The way forward for ownership and governance of state-owned enterprises
Once implemented, Montenegro's plans to develop a strategic framework for SOE governance, in line with OECD good practices, could go a long way towards implementing many of the recommendations set forth in the previous Competitiveness Outlook assessment. At the time of writing, these plans were too nascent to assess their content or degree of implementation. The CO 2021 policy Recommendations remain therefore largely relevant today. These recommendations, with some elements added to fine-tune them, are as follows:
Develop a state ownership policy and introduce more centralised SOE ownership and monitoring arrangements. The authorities should ensure that the different state actors exercising ownership rights operate under a unified ownership policy, which the announced plans to develop a strategic framework for SOE management aim to achieve. The working group tasked with leading this work should ensure that its analysis also looks at the role of state funds in SOE shareholding decisions and how state shareholding structures affect efficiency and value‑creation in the state-owned enterprise sector. Taking into account the important potential role of some SOEs in contributing to the low-carbon transition – in particular the state-owned electricity producer – the authorities should ensure that any sustainability-related commitments applicable to the broader economy are adequately communicated as shareholder expectations and integrated by SOE boards into SOE-related policies and practices.4 Finally, the authorities should also consider establishing a centralised state ownership entity to monitor SOE performance and contribute to more harmonised ownership practices across the state portfolio. Box 6.1 highlights the recent experience of Bulgaria in establishing such an institution under the Council of Ministers, as a successor to the Agency for Privatisation and Post-Privatisation Control.
Improve the process for setting objectives and monitoring their fulfilment. There is scope to strengthen the state’s role in setting performance targets for SOEs and monitoring their achievement. The state should also produce an aggregate report presenting information on the performance of the state’s portfolio. The 2021 aggregate reports produced by the Ministry of Capital Investments for the SOEs in its portfolio could serve as inspiration for a more expansive report including all SOEs. Such a performance-monitoring and reporting function could be usefully undertaken by a new SOE ownership co-ordination and monitoring entity.
Box 6.1. Establishing a central state ownership co-ordination and monitoring agency: The recent experience of Bulgaria
Bulgaria’s Agency for Public Enterprises and Control was created as a successor to the Agency for Privatisation and Post-Privatisation Control, with a mandate to continue carrying out privatisations but also to undertake several additional SOE monitoring and ownership responsibilities through legislation passed in October 2019. Like most Western Balkan economies, Bulgaria has predominantly decentralised ownership arrangements over its 265 SOEs, with several line ministries responsible for acting as state shareholder in distinct SOE portfolios. The new Agency contributes to better central monitoring of SOE performance, together with improved accountability through its regular publication of performance data on SOEs. As an entity that is not tasked with sectoral policy or regulatory functions (as line ministries are), it also contributes to a stronger separation of the state’s ownership and regulatory functions, for example through its role in contributing to certain ownership decisions such as SOE board nominations and objectives setting.
Among the Agency’s new functions are the following:
developing the state’s ownership policy, monitoring its implementation and updating it as needed
advising ownership ministries (line ministries) on the development of SOEs’ strategic goals as well as financial and non-financial key performance indicators
monitoring and preparing an annual aggregate report on SOEs’ activity
publishing up-to-date financial and non-financial information about SOEs
monitoring the selection, nomination and appointment of SOE boards and directors, according to a dedicated policy to be developed
evaluating implementation of SOEs’ business plans and preparing proposals for improvement.
The Agency’s website (with most of its resources in the Bulgarian language) provides a one-stop shop for information on SOE governance and performance in Bulgaria, including links to the state ownership policy and legislation related to SOEs; all published aggregate reports on SOEs; and a list of each ministry’s SOE portfolio together with links to individual SOEs’ annual reports and financial statements. The website also includes notices regarding ongoing SOE board member recruitment procedures, addressed to interested candidates and the general public. The website can be accessed here: https://www.appk.government.bg/bg/17.
Source: OECD description based on Republic of Bulgaria Agency for Public Enterprises and Control (2023[7]).
Ensure that the SOE board nomination process is merit-based and transparent. The state should ensure that SOE boards are equipped with qualified professionals and should minimise the risk of political board nominations. As the aforementioned working group moves forward with plans to develop an SOE board nomination process, it is important that the new procedures ensure that SOE boards of directors are equipped with a sufficient diversity of expertise, as well as independence from both political influence and corporate management, to oversee corporate decision making in the interest of the SOEs and their shareholders. In many economies with predominantly decentralised state ownership arrangements, central SOE co-ordination or monitoring entities have played a useful role in improving SOE board nomination procedures, for example by participating as voting members on dedicated interministerial commissions responsible for nominating SOE board members. In some economies, including Lithuania and the United Kingdom, SOE board nominations have benefited from the involvement of private sector recruitment agencies in the process.
Ensure that SOEs create value for all shareholders, including the state and minority non-state owners. Since the authorities have chosen to prioritise private investments in their SOE sector, they need to ensure that private capital-holders’ interests are taken into account and that SOEs create value for all shareholders. As a first step, the authorities should gather, analyse and publish performance data on the entire SOE portfolio to better inform ownership decisions.
References
[8] Balkan Insight (2021), Montenegro Arrests Ex-Minister Over Aluminium Plant Guarantees, https://balkaninsight.com/2021/04/26/montenegro-arrests-ex-minister-over-aluminium-plant-guarantees/.
[4] EBRD (2022), Montenegro Country Diagnostic: Private Investment Challenges and Opportunities, https://www.ebrd.com/montenegro-country-diagnostic.pdf.
[6] EBRD (2017), Corporate Governance in Transition Economies Montenegro Country Report, http://www.ebrd.com/what-we-do/sectors/legal-reform/corporate-governance/sector-assessment.html.
[1] Government of Montenegro (2024), Economic Reform Programme 2024-26, https://wapi.gov.me/download/97a5b5fd-9e83-4b63-82fa-c8692a242f82?version=1.0.
[2] Institut Alternativa (2021), Who Owns Our Public Enterprises in Montenegro, Institut Alternativa, https://media.institut-alternativa.org/2022/04/Cija-su-nasa-javna-preduzeca-ENG-Final.pdf.
[5] MANS (2015), Privatisation in Montenegro – Highway to destitution?, https://www.mans.co.me/en/wp-content/uploads/2014/11/CERANIC_Final_Privatisation_Montenegro.pdf.
[3] Ministry of Capital Investments of Montenegro (2021), Commercial Companies: Reports on Business Operations of Companies, https://www.gov.me/mki/privredna-drustva.
[9] OECD (2022), “Climate change and low-carbon transition policies in state-owned enterprises”, OECD Business and Finance Policy Papers, No. 5, OECD Publishing, Paris, https://doi.org/10.1787/e3f7346c-en.
[7] Republic of Bulgaria Agency for Public Enterprises and Control (2023), About Us, https://appk.government.bg/en/about-us.
Notes
← 1. The figures in this assessment are based on data gathered by the authorities of Montenegro and shared with the OECD. Separate data provided by the non-governmental Institut Alternativa differ somewhat, reporting notably that the central government owns 58 SOEs. However, the difference in scope between the two datasets does not appear to significantly impact SOEs’ assessed economic footprint; according to the alternative data, these 58 SOEs employed 11 091 people (compared with 12 371 for the 50 SOEs included in reporting by the authorities), while 27 of the 58 SOEs posted negative income in 2021, the same number that posted zero or negative returns on equity in 2021 according to the authorities.
← 2. The Law on the Prevention of Corruption allows for public officials to serve as SOE board members or CEOs, but prohibits certain categories of high-level public officials from doing so, e.g. the president of Montenegro, members of parliament and members of the government. SOEs are defined as any companies in which the state or municipal governments own at least 33% of shares.
← 3. The referenced state audit reports on guarantees extended to SOEs do not appear to be available on line but are referenced in Institut Alternativa (2021[2]) as follows: State Audit Institution of Montenegro (2013), “Audit Report on State Guaranties issued in 2010 and 2011”. In 2021, a former economy minister and 10 other former officials were arrested in relation to the guarantees accorded to the state-owned aluminium plant KAP in 2009 (Balkan Insight, 2021[8]).
← 4. For general information on the role of SOEs in the low-carbon transition and international practices for setting related objectives, see (OECD, 2022[9]).