After calling the elections, in August and September, the Government of Montenegro activated two projects of financial support to entrepreneurs and small and medium-sized enterprises which focus on streamlining operations and increasing employment shows the analysis of MANS Investigation Center and Vijesti The total value of the projects is €130,000.
The first project, which was announced on 12 August, at the height of the election campaign, concerns the provision of state aid to entrepreneurs, micro, small and medium enterprises in the process of modernization of the industry. The envisaged budget is €100,000. The project is implemented by the Ministry of Economy in cooperation with the Investment and Development Fund (IRF). Although it was prepared in May, the project is activated in August, after the elections were called. The notice for the allocation of €100,000 was preceded by the conclusion of the Protocol on Cooperation between the Ministry of Economy and the IDF, which was concluded in early August, also after the elections had been called.
The Ministry of Economy claims that the program for the promotion of innovation in small and medium-sized enterprises, the pilot program of support of the modernization of industry, as well as encouraging cluster development program is fully aligned with the Law on State Aid Control and the Law for 2016. They say that the public invitation was announced in August, as the Government had adopted the program in June: “After the adoption by the Government, it took time for the preparation and signing of the Protocol on Cooperation between the Ministry and the IDF, which is why the public announcement could not have been announced earlier. Furthermore, as the name of the program suggests, it is a pilot program, carried out for the first time, and the procedures require more time.”
The pilot project enables the participation of the government grant funds in the purchase of equipment for entrepreneurs, micro and small enterprises of up to 20 percent, while the state may allocate to medium-sized enterprises up to 10 percent of the funds for the purchase of equipment. The amounts of state aid vary from €5,000 to €20,000, which means that the value of a procurement may be from €25,000 to €100,000. The rest of the funds needed for the modernization of industry is funded by the IDF through credit arrangements of up to 70 percent for small and 60 percent for medium-sized companies and it is without doubt a case of granting state aid to companies in the pre-election period.
Public call for the other project was announced on 5 September and completed on October 5, only ten days before the parliamentary elections. The budget for the implementation of activities that will contribute to the improvement of innovation in the manufacturing sector is €30,000, while the maximum amount that can be granted to a single company is €2,500. The most important condition for participation in the project is that the grantee bears the costs of external consultants for the implementation of innovative activities, after which it may request the state to reimburse 50 percent of the funds spent. One of the criteria for the evaluation of applications was the change in the number of employees, which may result in cronyism.
The project was originally launched on June 25 this year, but after the funds had been granted to a single company, the call was announced again at the beginning of September. The Ministry of Economy claims that there is no question about the possible electoral malpractices. They say that during the first call, which was in force until 25 July, there were only two offers delivered, one of which was rated as positive: “Only after 15 November, when the deadline for implementation of innovative activities expires, if an activity is in accordance with the proposed one, the Ministry of Economy will allocate the funds to the company. Therefore, the reason for the announcement of two public calls is the obligation of the Ministry to implement this program, bearing in mind the fact that the funds available for co-financing in the amount of €30,000 were not spent.”
Program of cluster development
In addition to the launch of the project of modernization of industry and improving innovation in small and medium-sized enterprises, this year the Government of Montenegro expanded the support to the implementation of the Program of cluster development. Therefore, in the year of elections, the state aid for investment in tangible and intangible assets, in addition to commercial companies, could be assigned to NGOs as well. Aid to clusters provides the purchase of production equipment, as long as they commit to new hiring, which leaves room for political influence and vote-buying. This year’s budget for cluster support is €50,000.
Since its adoption in 2012, the Cluster Development Program has been conducted illegally, because the government granted subsidies to agriculture, although the Law on State Aid Control strictly emphasizes that state aid may not provide incentives for the development of agriculture and fishery. However, despite the clear legal definition, clusters have been allocated subsidies for agriculture, what the Ministry of Economy justifies by the Regulation on detailed criteria, conditions and manner for granting state aid, although this act is of lower legal force than the law.
This year’s decision to allocate funds for clusters for projects lasting from three to six months was reached in early July, so that the realization of these projects and the pre-election campaign ahead of the October elections entirely overlap. The Commission for state aid control has not replied whether they know that the Ministry of Economy has been granting subsidies for the development of clusters in agriculture for years, nor if the department has been violating the Law on State Aid. The Ministry of Economy stated that the encouraging of cluster development program was applied in accordance with the Law on Control of State and bylaws: “The program defines strategic priority areas for the allocation of subsidies, including agricultural production and processing. The Ministry has acquired all the necessary decisions of the Commission for state aid control with regard to the compliance of the program with the Law on state aid control.”
Lazar Grdinic (MANS)
Tina Popovic
This text is created with the support of the European Union and the US Embassy in Podgorica. Network for Affirmation of Non-Governmental Sector – MANS is solely responsible for the contents of this article, and the views taken herein shall not in any case be considered as those of the donors.
