IBDE

MONTENEGRO is situated in the Western part of the Balkan Peninsula along the Adriatic coast and possesses a beautiful coastline and an attractive tourist destination. The country borders Albania, Bosnia and Herzegovina, Croatia, Kosovo and Serbia. It is a small country with only 5,333 sq miles. It has a population of 625.000 (UN, 2010) of which 43% are Montenegrin, 32% Serbian, 8% Bosnian, 5% Albanian, and 12% (Muslims, Croats, Roma). The country has natural resources,  mainly bauxite, coal and wood, but also significant hydrological potential, and a favourable climate for agriculture and tourism.

Montenegro emerged as a sovereign state in May 2006. The Yugoslavian conflict held back Montenegro’s economic development. Montenegro’s tourism market in particular was hit hard by the conflict, dropping in the 1990s to just a fraction of its 1980s. Since its independence, Montenegro has joined numerous important international organizations such as UN (2006), EBRD (2006), IMF and World Bank (2007). In 2007 the country signed Stabilization Association Agreement with the EU and formally applied for the EU membership in December 2008. Following a positive Avis by the European Commission, Montenegro is expected to be granted a candidate status for the membership in the EU in December 2010. In December 2009, the Council of EU granted visa liberalization to Montenegrins.

Despite its small size, Montenegro is a stunningly beautiful country on the Adriatic coast that offers to foreign investors:

·         economic stability

·         free trade

·         euro currency

·         competitive tax system

·         protection for foreign investors

·         privatized banking sector

·         simple and quick registration of business

·         investment opportunities in many sectors; tourism, energy, construction, agriculture...  

Economic stability 

During the last years Montenegro has experienced economic growth by strong inflows of FDI and very high credit growth which financed a robust increase in domestic demand. For instance in the 2006 and 2007 the country achieved GDP growth rates of 8.6% and 10.7% respectively which continued strongly into 2008 with 6.9% growth.  However, the Montenegrin economy was affected by the global financial and economic crisis during 2009, GDP contracted by 4% and the budget deficit and public debt declined to 3%.  

Labour force 

Montenegro offers a highly educated and skilled work-force to foreign investors. According to Montenegrin Promotion Agency, every year, approximately 1300 students graduate from universities and colleges in Montenegro, with approximately one-third of these students graduating from technical universities The official language in Montenegro is Montenegrin but people in Montenegro speak other languages as well such as Serbian, Albanian, Bosnian, and Croatian. Foreign languages are widely spoken due to a highly developed tourism industry. 

Free Trade 

Montenegro has a liberal trade regime. Since 2000, Montenegro has signed multilateral and bilateral agreements in order to eliminate quantitative restrictions and other barriers to Montenegrin’s exports. It has signed a Free Trade Agreement (FTA) with Russia and central European countries (CEFTA). The country has also signed a cooperation agreement with the EFTA countries and Preferential Trade Agreement with the European Union. In June 2004, Montenegro passed a Free Trade Zone Law, which offers businesses benefits and exemptions from custom duties, taxies and other duties. The Port of Bar is currently the free trade zone in Montenegro

Competitive tax system

Corporate income tax is the lowest in the region at 9% and  personal income tax 12% (planned to reduce to 9%). There is no double taxation on profits paid by subsidiaries to present companies. Montenegro’s VAT rate stands at 17% whereas in some categories and services VAT applied is 7%.

Foreign Direct Investments

Since becoming independent in 2006, the government has adopted a liberal investment framework to encourage growth, employment and exports.  Following the improvements of the business environment and liberalisation FDI became a major source of investment, averaging very strong levels of over 20% of GDP since 2005. According to preliminary data from the Montenegrin Investment Promotion Agency, foreign direct investments from January through October 2009 reached $1.067 billion (€726 million), and their projection for the entire year is for total FDI figures somewhere between 950 million and 1 billion Euros, an increase of approximately 40 percent over the 2008 total. Over 4,700 foreign-owned firms are registered and operating in Montenegro; the number of registered foreign companies has doubled in past two years.  Foreign investors come from 86 countries, with no single country dominating investment.  So far, the most significant investments have come from Norway, Austria, Russia, Hungary and Great Britain.

Protection for Foreign Investors

The Montenegrin Law on Foreign Investment is based on the national treatment principle, so there are no distinctions made between domestic and foreign companies.  Foreign investors can establish a company and invest in it in the same manner and under the same conditions which apply to domestic persons. The same regulations are applied to both domestic and foreign investors, and there are no other regulations which might deprive a foreign investor of any rights or limit such rights. According to Doing Business 2011 data for Montenegro in terms of protection of foreign investors, Montenegro is ranked on the 28^th place of the 183 countries.

Euro currency 

Since 2002, Montenegro uses the euro as legal tender, thus offering foreign investors a stable macroeconomic environment. The use of EURO as its official currency has contributed to low inflation rates (averaging 3.6% up to 2007).

Simple and quick registration of business

According to Doing Business 2011 data for Montenegro shows that Montenegro has eliminated several procedures for business start-up by introducing a single registration for submission to the tax administration. Thus, starting s business in Montenegro takes only 7 procedures and 10 days. 

Banking sector

The banking sector in Montenegro is completely privatized. There are eleven banks operating in the country, and all of them are in private ownership with the share of foreign capital exceeding 80%; two are locally-owned while the other nine are part of international banks. 

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