Market Overview

• Since becoming independent in 2006, the Government of Montenegro has adopted an investment framework to encourage growth, employment and exports. Although the continuing transition has not yet eliminated all structural barriers, the Government recognizes the need to remove impediments, reform the business environment and open the economy to foreign investors. 
• There are no distinctions made between domestic and foreign companies.  Foreign companies can own 100 percent of a domestic company, and profits and dividends can be repatriated without limitations or restrictions.
• NATO invited Montenegro to participate in its Membership Action Plan (MAP) on December 4, 2009.  The European Council’s decision in favor of visa-free travel to Schengen - Zone countries for citizens of Montenegro came into effect on December 19, 2009.
• Montenegro's application for EU membership was originally submitted on December 15, 2008.  Montenegro was formally given the status of an EU candidate country at the European Council summit in Brussels on December 17, 2010.  On December 9, 2011 the European Council decided that Montenegro could start EU accession talks in June 2012 if it shows additional progress in implementing reforms, especially regarding rule of law issues. 
• On December 17, 2011 Montenegro became the 156^th member of World Trade Organization (WTO). 
• The main incentive for U.S. investors to do business in Montenegro is the business-oriented economic system, a high level of economic freedom, stable currency, macroeconomic predictability, and protected ownership rights. The Euro has been the official means of payment in Montenegro since March 31, 2002, thus stabilizing financial flows and resulting in lower transaction costs. Ownership is protected by the Constitution and includes equal treatment of foreigners. Macroeconomic stability has also been achieved; Montenegro has the lowest corporate tax rate in the region at nine percent, the country credit rating has been evaluated at BB, and around 85 percent of government property has been privatized. Inflation in 2011 was just under three percent.
• Montenegro has made great strides in its tax policy. In April 2003, Montenegro introduced the Value Added Tax (VAT) and in January 2006, a two-tiered tax rate where the standard rate is 17 percent and a lower rate of only seven percent apply to certain services which include tourism.
• Montenegro has attracted considerable interest foreign direct investment (FDI).  According to preliminary data released by the Montenegrin Investment Promotion Agency (MIPA) FDI in 2011 reached 534 million euro, which is 23 percent lower than 2010.  Foreign direct investments per capita are 860 euro which is among the highest for countries in the region.
• Over 5,200 foreign-owned firms are registered and operating in Montenegro.  Foreign investors come from 107 countries, with no single country dominating investment.  To date the most significant investments have come from Italy, Norway, Austria, Russia, Hungary and Great Britain. 
• Geographically the largest amount of FDI (49 percent) has been concentrated in the central region of Montenegro, with 44 percent directed to the southern region and the remaining seven percent in the north.  Based on job-creating foreign investments (i.e. not including individual real estate transactions), the sectoral breakdown of FDI for 2011 is as follows: 21 percent of all investments were made in finance; 24 percent in tourism; 23 percent in manufacturing industry; 8 percent in construction; 10 percent in services; 4 percent in transportation; 2 percent in agriculture; and the remaining 8 percent in other sectors. 

Market Challenges

Private Sector Development

• Around 85 percent of the capital in Montenegrin companies has been privatized. The Privatization Council adopted a strategy for 2011 and the privatization process will be continued by publishing tenders for the following companies: Montepranzo Boka Product land holdings, Montecargo Container Terminal, Montenegro Airlines and Institute Milosevic health center.
• Development of tenders in 2012 are proposed for the following companies: Montenegro’s Post Office, Railway Transport of Montenegro, Railway Infrastructure of Montenegro, Adriatic Shipyard, Port of Bar, Pobjeda newspaper, Zora milk factory, Budvanska Riviera hotel, Ulcinjska Riviera hotel, Barska shipyard and Montenegrobonus petrol company.
• In addition, through Public Private Partnership the Government will maintain an ownership stake in the following tourism sites: Ada Bojana, Velika Plaza, Njivice, Utjeha, Buljarica, Jaz, Mediteran, Bigovo, Mamula, Rakite and Kumbor.

More information and details about all these tenders can be found in the 2013 Investment Climate Statement (PDF file, 176 KB).

Regulatory Framework

• Montenegro has made great strides amending legislation in accordance with international standards and in creating the necessary institutions for attracting investment. Implementation and enforcement of existing legislation remains will need continued improvement as the country moves towards EU accession.

Corruption

As is the case with many countries in the region, corruption remains an ongoing concern. Corruption routinely ranks high on the list of business opinion polls.

The Government's goal of integrating with European and Euro-Atlantic institutions has spurred efforts to counter corruption. In 2001, the Government established an Anti-Corruption Agency responsible for preparing anti-corruption legislation, improving the transparency of financial and business operations, coordinating activities with NGOs, and promoting awareness in combating corruption.

Over the past year, progress on combating corruption has been achieved through the passage of important legislation on public procurement, the treasury and budget system, and the courts. Implementation of these laws is now a key priority for the Government.

Market Opportunities

Tourism

• The World Travel and Tourism Council (WTTC) have estimated that Montenegro has exceptional revenue opportunities in the spheres of tourism and travel. According to their estimates, Montenegro could, in the next 10 years, become the leading economy in the region in the field of tourism and travel. WTTC has estimated that Montenegro in the next 10 years could have revenues from tourism up to 2 billion euro.

Highway

• Bar – Boljare Motorway – The Ministry of Transportation announced that the Government of Montenegro will call for another tender for the construction of Bar - Boljare Motorway.  The Bar – Boljare motorway is the Montenegrin section of a longer highway. It will be 170 km long and by far the most expensive section, with an estimated cost of around 2.7 billion euro.  The rugged mountainous terrain is an engineering challenge, with 50 tunnels and 95 bridges and viaducts planned along the section.  With the support of the European Investment Bank, the Government of Montenegro received the grant to conduct an audit of the existing studies for development of the highway in order to prepare for a new tender in 2012.  

Electric power

• The energy system of Montenegro has relatively low demand of around 4500 gigawatt hours (GWh) annually. Of the total electricity, 42 percent is consumed by the aluminum plant in Podgorica; three percent is consumed by the Niksic steel plant; and less than one percent by the Railroad of Montenegro. Household electricity consumption covers 54 percent of the demand. Around 34 percent of consumption is serviced by imports from the regional system. The majority of electricity in Montenegro is produced at the Pljevlja Thermo Power Plant, the Perucica Hydro Plant, and the Piva Hydro Plant.
• Montenegro has good potential for the development of hydro and thermal plants, as well as for solar and wind energy. As a top energy priority, the Government wants to develop the Moraca River potential through a series of four hydroelectric-power plants for a total of 238 megawatts and an annual production of 693 (GWh). Design/construction tenders for these hydro plants are expected in the near future.

Market Entry Strategy

• Montenegro has enacted specific legislation outlining guarantees and safeguards for foreign investors.
• Montenegro's Foreign Investment Law establishes the framework for investment. The law eliminates previous investment restrictions; extends national treatment to foreign investors; allows for the transfer/repatriation of profits and dividends; provides guarantees against expropriation; and allows for customs duty waivers for equipment imported as capital-in-kind.
• Agents and distributors are commonly used by foreign firms to enter the Montenegrin market.

Foreign Investment Regulation

• A foreign investor in Montenegro can be a legal entity or an individual. Both have equal rights. The term "foreign investor" applies to a company that has been founded by a foreign person in Montenegro or if a foreign legal entity invests capital greater than 25 percent of the total capital amount. Montenegrin citizens can also obtain foreign investor status if they have been living abroad for more than a year. Foreign investment can take the form of money, securities, objects, services, and asset rights.
• According to the Foreign Investment Law, foreign investors can invest with more than one investor or a combination of foreign and domestic investors. Foreign investors can acquire rights to real estate in Montenegro such as company facilities, places of business, apartments, living spaces, and land for construction. Additionally, foreign persons can claim property rights to real estate by inheritance in the same manner as domestic citizens.
• Foreign persons can freely transfer funds after fulfilling liabilities and obligations such as income tax and return of funds invested in initial capital. Transfer of funds is also possible in cases of sale of foreign currency to a registered bank, the sale of goods and services, or transfer to an account of another foreign person.
• Foreign investors in Montenegro cannot be taxed differently than domestic investors and they are obliged to insure the investment according to insurance regulations.