Institutional Analysis: Political, Economic, Technological and Legal Environment in relation to Corruption and Government Interference
The report aims at providing an insight into international business management of Telstra that is planning for an expansion in Montenegro. Telstra is the largest telecommunications company in Australia that operates and builds telecommunications network and ensures marketing of mobile, voice, internet access and similar other services and products (telstra.com.au 2018). The company has its headquarters in Melbourne Australia and accounted for revenue generation of AUS $27.1 billion in the year 2016 with a net profit of about AUS$ 5.8 billion. Telstra originated with the Australia Post as Postmaster General’s department. It totally privatized and through a change program became increasingly customer focused under David Thodey, the CEO.
Political, Economic, Technological and Legal Environment in relation to Corruption and Government Interference
The political environment of Montenegro has been quite weak post the communist transition. Democratic Party of the Socialist (DPS) has ruled the country (Mochtak 2015). The office was however taken over Luksic in the year 2010 followed by the resignation of the Milo Djukanovic who had been a leader of the prolonged period. Luksic not only lacked the charisma and the authority but he also became a puppet in the hands of Milo Djukanovic who maintained influence despite his formal absence. In addition to the pro-Serbian parties, the opposition now included NGOs, media and the intellectuals seeking investigations into the privatizations, freedom of the Speech and the end of the nepotism in the public administration. The trouble of the government further intensified due to lack of clarity of the members of Social Democratic Party (SDP) that always tried to maintain its image. Montenegro had three of the biggest opposition parties that include the Socialist People’s Party (SNP), Movement for the Changes (PZP) and New Serbian Democracy (NOVA) ( Bieber 2013). Although the three party stood in coalition for the betterment of the country but they shared a complex relationship. The NOVA and PZP cooperated closely and criticized rule of the DPS.
The Montenegro economy has been in the path of the expansion with enhanced focus on attracting the foreign investment (Radovic, Zugic and Milovic 2013). The government privatized the financial sector and the aluminum complex that has been the dominant contributors of Montenegro economy. The present legal structure provided similar treatment to the domestic and the foreign capital. In addition, a business takes close to thirteen days on the average compared to the world average that stands at 38 days. This puts forward a highly conductive business environment of Montenegro. Largely the market forces have determined prices in the Montenegrin economy. However, the government exerted influence over the price of some of the commodities that includes utility, transport and energy through the state owned enterprise. The government undertakes huge investment within the economy. As per the Index of Economic Freedom in the year 2010, the spending of the government including consumption and transfer payments had been close to 39 percent of the GDP in the nation(Papavassiliou 2014). In spite of the persistent efforts, the economic growth of Montenegro had been slower in comparison to the anticipation due to the corruption and hidden bureaucracy within the system. The economic growths were hindered by unemployment and regional disparities. The global financial crisis also had an impact on Montenegro’s economy due to the decline in the aluminum exports.
Business Opportunities
Despite the incentives and the subsidies of Montenegro, the country had been far behind the developed countries in relation to its technological capacity (Cetkovic et al. 2015). Then Ministry of Science and the government of Montenegro made conscious efforts in enhancing the level of investment in the research particularly the private sector. There have also been intense measures for investments in the public sector through enhancement of the private- public partnership. The country not only adopted a newer strategy on innovative activity but also adopted the law on the innovation of activities in the year 2016. The law not only governed the organizations but also the conditions and manner of financing the innovation activities.
Growing Industries and Local Business Trends
Montenegro has immense natural resources chiefly comprising of bauxite and aluminum (Rajovi? and Bulatovi? 2013). This in addition to the adequate supplies of water and agricultural climate results in thriving industrial sector in Montenegro. The establishment of bauxite-alumina-aluminum industry has been one of the key contributors of nation’s economy since World War II. Over the last five decades, the industrial sectors of Montenegro have acted as the corner stone of nation’s development. The key industries of the nation include steel, aluminum, transport and power infrastructure (Bogetic, Pejovic and Osorio-Rodarte 2013). The industry sectors of Montenegro possess a capacity of producing over 100,000 tons of aluminum, 1,000,000 tons of bauxite and generate power close to 3 billion Kwh per annum (Jorge and Hertwich 2014). Closer to 90 percent of the total produce is exported and it helps the country in earning a huge foreign exchange. The other significant contributors of the industrial sector of Montenegro includes wood processing, chemical, textile, footwear and leather, household appliances, building trade and construction. In addition, the industrial sectors of the country constitute various processing units that are supportive of the agricultural sector of the nation. This includes the flourmills, fish processing plants, wine and the brewery cellar.
Montenegro has been part of Federal Republic of Yugoslavia (FRY) until the year 2006 and had been a weak economy because of the constant wars within the region (Edmunds 2013). However, rapid modernization of the industrial sectors of Montenegro along with the adequate amount of government investment is expected to transform the Montenegrin economy into competitive global market. Presently, the industrial sectors attract huge private investment due to the country’s support towards business friendly investment. Besides, Montenegro has the lowest rate of corporate tax in the European region that is close to 9 percent in the year 2008. As per the reports of the industry, close to over 85 percent of capital value of the Montenegro companies within the industrial sector were privatized by middle of 2009.
Montenegro offers the same right to the foreign country as the national companies and the foreign investors remain free in transferring assets, funds and other goods including the dividend and the profit. The Australian products or services having a market in the target country would be power transmission, telecom, power, petroleum, mobile, airline, bauxite, winery and supermarkets.
Australian Products or Services having Market in Target Country
In the year 2017, Montenegro shipped close to US$ 420.9 million goods with the dollar amount showing 18.8 percent increase between the year 2016 and 2017. The most valued exports of the country includes aluminum concentrates and ores, sawn wood, electrical energy, zinc, wine and the refined petroleum oils (Kellman and Shachmurove 2013)
Tourism defined close to 20 percent of the GDP since the country has spectacular mountains and 300 km coastline in north. The sale of the state owned land led to the trigger in the wave of foreign investment (Draskovic 2013). In terms of Infrastructure, the country plans to upgrade the major rail and the road networks along with an expansion of the air transport system. The government also constructed a national highway in the country that helped in connecting the northern portion of country with Serbia. In addition, the government also builds electric transmission cable underwater till Italy for exporting renewable energy to the Western Europe. Besides, there also exist several ongoing projects across the country that includes a thermal plant in Pljevlja and varied hydro projects.
Informal Norms in Society Affect day to day Role
Montenegro had a diverse and pluralistic culture as put forward by history and the geographical position. The culture has drawn its influences primarily from the Christianity, Islam, Ancient Rome, Serbian Empire, Byzantine Empire, Republic of Venice, Ottoman Empire, Yugoslavia, Austria and Hungary (Burri 2013). The authorities of Montenegro found that culture plays an important role in developing the strategic documents and is a vital contributor of national economy. Orthodox Christianity has been the dominant religion form in Montenegro along with considerable number of Catholic and Islam Christianity and the language spoken is Montenegrin.
In Montenegro people are employed depending on either an indefinite contract of employment or full time based on the fixed term basis (Barak 2016). There also employment that does not show in the official records. In the past years, there has been an increase in employment of the private companies with a decrease in employment of the private sector. In Montenegro, employment is led by three key sectors that include maritime, tourism, manufacturing and offshore jobs.
A motivated workforce refers to highly productive staffs that enable the company in achieving the goals. In Montenegro staffs are motivated through not only salary bonuses but also through the prevention of discrimination and promotion of equality. Promotion of employees is undertaken based on the qualities and the efforts employed in reaching the business goals.
In Montenegro procedures, cost and time for starting business is minimum. Formalities related to building of warehouse and safety and control mechanisms needs fulfillment. The country also focuses on the transparency of the tariff for getting connected to reliable electric supply (Scalera and Uruchi 2015). Registration of property and availability of credit in Montenegro is through the credit information system and movable collateral laws. The country also ensures protection of shareholder’s right in relation to corporate governance and party related transactions. In terms of tax payment, Montenegro makes sure that contribution rate and the total tax of the firm must comply with not only the post filling process and the tax regulations. Trading across the borders depends on the cost and the time. Mostly, the products having comparative advantage are exported while auto parts are imported.
Products and Services Exported from Target Country
These include (Selmer and Lauring 2015):
- They must possess intellectual qualities: This implies that they must build business and technical skills for adapting them to the local markets. It also implies possessing industry knowledge and should be aware of the competitors and the market. Expatriates should also possess management and leadership qualities. In order to understand the business needs the expats should have a grasp of local language.
- They must possess psychological qualities: Although it is very difficult in quantifying the knowledge based qualities but the expats must possess such qualities in determining success. These include resilience, flexibility ensuring open mindedness and a readiness for change, organization qualities and patience.
- They must also possess social qualities: This means that the expat employee should be able to quickly build an effective working relationship. This is determined through a drive for communication and broad based sociability. Therefore, relationships are important for getting work done and ensuring success of assignment at the business level.
The economy of Montenegro had been successful in past five years with steady rise of the GDP and transition of the economy into the market system. Therefore it is recommended that businesses have ample opportunities for investment in the country. After independence, the state had also looked forward in privatizing companies especially in the fields of telecommunication, oil and banking. Therefore, it is also recommended that business will gain advantage due to the presence of rich land and growing economy of Montenegro. Businesses will gain from the substantial reforms and the business friendly environment put forward by the government in Montenegro. The country also offers an ease of doing business and ranks 46th amongst the 189 economies across the world. It is also ideal place of doing business due to the membership of the country with World Trade Organization (WTO). Companies will also gain business opportunities as the country’s tax regime has also been quite favorable with the professional corporate tax being 9 percent along with other exemptions. Business opportunities are also strife within the country as the government offers equal treatment to the local and the foreign companies. Besides, foreign investors can invest within any industry and allowed free transfer of the financial assets including the dividends and the profits.
Conclusion
On a concluding note, it can said that with time Montenegro is flourishing as an economy that offers potential investors as well the companies not only a business friendly ambience but also legal protection and lower tax burden. The report focused on political, economic, technological and legal factors of Montenegro in relevance to corruption and the ways of dealing with the government interference thereby discussing the impacts on the business opportunities. There are also discussions on business opportunities with focus on the trends of the local business. The report also draws attention towards the cultural dimensions, religion, beliefs and religion of the country. The report also gives an idea about the skills and abilities an expatriate must possess to be successful and the possible business opportunities.
References:
Barak, M.E.M., 2016. Managing diversity: Toward a globally inclusive workplace. Sage Publications.
Bieber, F., 2013. The party system of Montenegro. In Party politics in the Western Balkans (pp. 139-150). Routledge.
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Burri, M., 2013. The UNESCO Convention on Cultural Diversity: An appraisal five years after its entry into force. International journal of cultural property, 20(4), pp.357-380.
?etkovi?, J., Ruteši?, S., Žarkovi?, M., Kneževi?, M. and Vatin, N., 2015. Primary directions and advancements in competitiveness of montenegrin construction sector. Procedia Engineering, 117, pp.775-785.
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telstra.com.au 2018. [online] Available at: https://www.telstra.com.au/aboutus [Accessed 17 Nov. 2018].
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