"People are broke," is the most frequent comment in the street, followed with indifferent shrug of shoulders. On the other hand, we have been exposed to a relentless onslaught by traders and economists in the media. The former explain that prices will increase, while the latter emphasize that there is no legitimate reason for such an increase.
President of the Employers' Union Ivan Mitrovic has no doubt that the increase of customs duties on 93 percent of products will increase prices of imported goods. "Prices of imported goods will increase to cover the difference between the current and future customs duties, including the VAT," he explains. Mitrovic adds that profit margins will not be reduced, because they are already miniscule. His prediction: "Traders in imported goods will have to close their stores".
Cedo Popovic, the owner of "Carina" store explains that his profit margin is close to 10 percent, but that on the other hand, the authorities charge almost 60 percent in customs duties and taxes. "The customs duty on cold cuts will now be 20 percent. Add to that the prelevman [import tax] of 20 percent, and the 17 percent VAT, it is obvious who profits the most from imports".
Member of the Governing Board of "Montenegro biznis market" Hasan Ramovic agrees with Popovic. According to Ramovic, the customs duties and taxes increase the price of imported goods by 70 percent, while the importers keep close to ten percent of the sale price. "I am confident that profit margins have never been lower," he emphasizes.
Economists advocate a reduction in profit margins and accuse trades and importers of monopoly. Professor of the Economics department of the Podgorica University Gordana Djurovic has the following advice for importers: "It is unlikely that an increase in prices will work, due to low income of most consumers". She recommends a redirection towards the Serbian market. "Besides, that was the main goal and recommendation of the EU".
Former People's Party official, and now director of the non-governmental organization Center for Research in Sociology and Economics, Predrag Drecun, claims that in the region traders and importers can count on three to five percent profit margins at most. Therefore, traders and importers, according to Drecun, could easily reduce their profit margins to the level characteristic for the region, thereby absorbing the increase in customs duties.
Andjelko Lojpur, professor at the economics department of the Podgorica University, is convinced that traders and importers will not increase prices. "If they do, that will backfire".
The essence of this back and forth is in who is going to give in first - the government of the traders and importers. Given that the government has been quiet about the issue of prelevmans [import taxes] and has allowed the economists to try to publicly convince importers to reduce their prices. Minister of Finances Miroslav Ivanisevic hasn't said anything about prelevmans ever since he started his tenure five years ago. Nor did ministers of the now defunct Ministry for Trade, Ramo Bralic and Ivan Raicevic, say anything about prelevmans.
Prelevmants, paid on imported food, take up on average eight percent of price of imported foods. The government only does not charge taxes on import of coffee, tea, spices, sea food, cattle feed, sugar, and tobacco.
Funds collected through prelevmans are supposed to be used to assist farmers in increasing their competitiveness in the market. However, the Montenegrin government has redirected these funds to pay for its excessively expensive and large state apparatus, while all farming subsidies have been abolished. The consequence is that local milk, produced in Montenegro, is more expensive than milk produced in Serbia. The bread in Montenegro is more expensive by 10 Euro cents, even though the flour is cheaper than in Serbia.
Therefore, it is not surprising that the producers unanimously welcomed the increase in customs duties. Executive director of the Berane milk farm "Zora" Gojko Babovic expects that imported milk will become more expensive, which in turn will bring local consumers back to milk produced in Montenegro. "We have always have problems with the price of imported milk. We even reduced the price of our milk twice, but the importers always went one cent lower," he explains. Director of meat processing company "Goranovic" Djordjije Goranovic, is similarly enthusiastic, especially since he does not expect that his main raw product, pork, will go up in price. "The negotiating team made sure that customs duties for those types of meat that are not produced in Montenegro, such as pork, are not increased," he explains his optimism.
Milutin Simovic, Minister for Agriculture, has also recently started attacking unfair competition from importers of food. "Enormous amounts of imported food have flooded Montenegro, while local producers were exposed to unfair competition and damping." Minister Simovic is most of all bothered by the double subsidies paid by foreign governments to their farmers. Namely, neighboring countries subsidize both their farmers and exporters. The only problem is that Montenegrin consumers haven't experienced the benefits of these double subsidies - all of them end up in the hands of privileged importers.
Those privileges are now openly criticized by Ministers Ivanivsevic and Simovic. Both of them have been members of current and previous governments, both of them participated in the introduction of import quotas, and now they denounce them as a source of monopoly.
"Many economic analysts, both in Montenegro and abroad, were justified in their criticism of import quotas," Simovic told journalists the same day Milo Djukanovic's government decided to abolish them. In that he self-servingly pointed out that "media and economic experts have fully predicted positive effects of the abolishment of import quotas". "That will significantly compensate for an increase in customs duties," he concluded.
If ministers in Filip Vujanovic's government, Bralic and Raicevic, paid attention to whom and how they were issuing import permits, Montenegro would not today have only three large scale import companies that since 1999 have been dictating food prices, even on the farmers market. That is why in the middle of the summer peppers were sold for 1 euro per kilogram.
Traders reject any thought of enjoying a monopoly. The owner of the company "Voli", Dragan Bokan, says that he has invited the market inspection to control the documentation and establish whether there has been any monopolistic behavior. "There is no similar competition in such a limited space, such as Podgorica, anywhere else in Europe," he claims and adds that even if supermarket chains from Serbia or Slovenia were to set up their stores in Montenegro that would not bring prices down. "They would be forced to buy goods from the same distributors, both in Montenegro and Slovenia, so that the prices could not be any lower".
Director of "Kontekst" Nikola Brnovic says that the prices of the Slovenian company "Era Albatros" are higher than his prices, and he is convinced that any Serbian companies that attempt to set up shop in Montenegro would end up the same. "Because of additional transportation and analysis costs".
Given all of that, it is unclear why "Point", "Montenegro Loza brandy", or "Vranac red wine Pro Corde" are cheaper in Serbia than in Montenegro, where they are produced? Why do Belgrade importers sell detergent "Ariel" at lower prices than Montenegrin importers, and why are medications in Belgrade pharmacies three times cheaper than in Montenegro? And why pork, which due to valiant efforts of the Montenegrin negotiating team was saved from increased customs duties, is fifty percent cheaper in the neighboring commonwealth member, Serbia?
The head of the non-governmental organization "Consumer protection center" Olga Nikcevic, has also struck against the importers, warning them that it would be in their interest not to increase prices, and instead increase their sales and revenues. She is counting on the foreigners, who will open a few mega markets and teach the local traders a lesson, convinced that the market is the best regulator of prices.
Once upon a time, citizens received similar advice from Ivanisevic's assistant Koviljka Mihailovic. According to Ms Mihailovic, the citizens simply just needed to stop buying bread, because the price had been increased after the introduction of the Value Added Tax (VAT), as she was convinced that that increase was "totally unrealistic". Thus, the citizens have no one to blame but themselves! The price of bread has increased again, although there is no customs duty on imported wheat, and the importer and owner of "Montemlin" Zarko Rakcevic claims that on the world market wheat is 30 percent cheaper than wheat sold in Serbia.
An average consumer in Montenegro can only feel sorry for all those who are so concerned about his or hers wellbeing. And shrug shoulders, until further notice.
Blankert kept his cool and simply reiterated that he was not talking about pressure or blackmail, but about the mantra EU officials daily keep repeating for the officials of Serbia and Montenegro: "Some solutions apply to all countries equally, and the WTO regulations are identical as well". According to Blankert, it is possible to find a solution if customs duties for one of two products were different, but 56 is too much.
Minister of Finances Miroslav Ivanisevic repeated that the problematic goods to greatest extent characterize differences in the economies of Serbia and Montenegro. "Every inhabitant of Montenegro is a consumer of those goods, while Serbia has two million farmers that need protection," he explained.
Director of the Center for International Studies of the Montenegrin University Milenko Popovic believes that a detailed analysis of expenses and results of 56 Montenegrin strategic products whose customs duties were not aligned with those of Serbia should be conducted. "Only after that is done, we can find out who really benefits and who is harmed; only such an analysis could let us conclude whether this really has to do with interests of Montenegro or certain groups."
Customs duties for import of pork, milk for infants and children food, wheat, corn, flour, soy beans, clover flour, lard, oil, margarine, sugar and oil cakes have been abolished. Quotas will be established for these goods, which means that they will be imported without customs duties until a certain quota is fulfilled, and after that everything will be taxed.
Complete Montenegrin imports are worth more than 59 million Euros. According to the Ministry of Agriculture analysis, this measure would allow importers to save 16 million Euros in customs duties.