Montenegro overview

Breathtaking natural beau

ty
Huge investment in infras
tructure
“At the moment of the creation of our
planet, the most beautiful merging of
land and sea occurred at the
Montenegrin seaside... When the pearls
of nature were sown, an abundance of
them were strewn all over this area...”
Lord Byron (1788–1824)

“With the beginnings of high-end tourism

in Montenegro, the fledgling independent
state is on the cusp of a new dawn. Now is
the time to discover its magic.”
Condé Nast Traveller magazine July 2007

“Having gained independence from Serbia

little more than a year ago, Montenegro is
confidently embracing the future, inviting
the world in, asking it to come see what it
has to offer. Right now, it seems churlish
to refuse.”
The Guardian 26th July 2007

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Montenegro
Montenegro is breathtakingly beautiful.
Preserved by its designation as the world’s
first ‘ecological state’, it boasts a coastline
293 km long, with 117 sandy beaches and coves,
the world’s second deepest canyon, acres of
protected national parks, ski resorts, lakes,
and an average 240 days of sunshine.

Montenegro is in the early stages of its tourism development, but is

already placed in the top three in the world by the World Tourism and
Bosnia and
Travel Council in terms of forecast growth in this sector over the next
Serbia
Herzegovina decade1. With a government keen to pursue the twin goals of stimulating
Pljevlja tourism growth and increasing its attractiveness as an EU candidate,
Montenegro is on the cusp of an exciting period.
Bijelo Polje
Montenegro
Berane How to get there
Niksic
Montenegro has international airports in Podgorica and Tivat but at
Dubrovnik
Herceg Novi PODGORICA
present there are no direct flights to these airports from the UK. JAT
Croatia Kotor Airlines provides flights via Belgrade. Another option is to fly to Dubrovnik
Cetinje
Airport in Croatia as it is less than 60 kilometres from Kotor. Flights from
Budva
Lake Scutari
the UK to Dubrovnik are provided by British Airways and Croatia Airlines.
Bar
Albania Looking to the future, the government is committed to improving its
Adriatic Sea Ulcinj
airport infrastructure, attracting funding from the European Investment
Bank of around €23 million to modernise the country’s two airports2.

Montenegro at a glance
Population: 620,000
Capital city: Podgorica
Climate: Mediterranean
Average temp. July: 25°C
Average temp. January: 5°C
Official currency: Euro
Coastline: 293 km
Area: 13,812 km2
Language: Montenegrin
Time zone: GMT + 1
Average days sunshine: 240 per year
Airports: Tivat, Podgorica; Dubrovnik (16 km from Montenegro border)
Flight time from Gatwick: 2 hours 40 mins to Dubrovnik

1. http://www.wttc.travel/bin/pdf/original_pdf_file/montenegroii.pdf
2. http://www.eib.org/projects/press/2005/2005-041-eib-loan-for-air-traffic-control-in-serbia-and-montenegro.htm

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Why invest in Montenegro?

Tourism leader in Europe

Montenegro’s tourism success continues to flourish.
For the fourth year running, Montenegro has featured
amongst the top three destinations in the world, in
terms of predicted growth in the sector over the next ten
years. It is bettered only by China, and is one of just two
European nations in the top ten. Over the last few years,
€350 million has been invested in the upgrading and
modernisation of hotels and facilities. Total demand in
the tourism sector is forecast to rise by 8.6% per year,
as compared to the 3.3% average in the EU overall3.

Stunning beauty –
and a landscape that restricts supply
With a coastline that is just 293 km long, and mountains The touristic island of Sveti Stefan in the Adriatic sea

that rise up almost directly from the sea, Montenegro

has a shortage of land that can be built upon. There is
limited coastal land to develop, which means that supply
of property is restricted, but its beauty creates strong
demand. In addition to its stunning coast, it is a country
of mountains, canyons and lakes, making it extremely
attractive to explore. It offers a plethora of activities
– walking, mountaineering, skiing, biking, caving,
canyon-trekking, fishing, and horse-riding. It has many
places to visit – nature reserves, historic buildings and
walled towns, ancient remains, two UNESCO World
Heritage Sites (Kotor region and Durmitor National Park)
and several islands in the gorgeous setting of the
Kotor Fjord.
An independent nation, striving to become
EU member
Montenegro voted to become independent from Serbia
in June 2006, and since then it has made great strides
towards becoming a member of many international
communities and organisations. Montenegro became
a member of the UN in June 2006. It joined the EBRD
(European Bank of Reconstruction and Development)
in September 2006, and the IMF and World Bank in
January 2007. The new state already has a relatively
open trade regime and talks on WTO (World Trade
Organisation) membership are progressing well4. In
October 2007 it signed the Stabilisation and Association
Agreement which is a vital step to becoming a candidate
for EU membership5. Becoming signatories of all these
organisations indicates that Montenegro has undertaken
the required conditions in terms of fiscal and legal
processes, and also allows access to funding and loans
for vital infrastructure improvements and projects.
EU membership benefits are well documented, and while
its accession may be several years away, the process is in
itself beneficial to the country.
Infrastructure improvements
Montenegro has been the recipient of millions of euros of
investment into its infrastructure. Their government has
acknowledged the importance of developing its transport
network to encourage further business investment and to
cope with the volume of tourist visitors to its shores. Just
a few examples of the projects under way or completed
are the building of the Sozina tunnel to link the land-
locked capital city Podrogica to the Adriatic funded by
the European Investment Bank6; upgrading the country’s
two airports; a €14 million loan from the World Bank to

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 Karuch, the old fishing settlement located on shore of Skadar lake
improve the country’s sewage system and improve its
energy network7; a project to improve the country’s rail
links both internally and to join it to the larger European
network, aiding passenger transport and cargo8. Finally,
improvements on the Montenegrin section of the Adriatic
Highway are under construction which will link the
country with Greece in the south and Italy to the north
and join with the major European arterial route E65 which
stretches across Europe as far as Sweden.
Economic growth
While Montenegro is in the early stages of its economic
development as a distinct entity from Serbia, the signs
are good. In the last two years there has been strong GDP
growth (more than 6% in 2006), coupled with low inflation
and a strong inflow of foreign direct investment (more
than US$ 1 billion over the last two years combined)9.
The country’s adoption of the euro in 2002 has helped
to stabilise the economy, and has made trading with EU
countries simpler. It has also made it easier for foreigners
to invest in property and other ventures, by removing
foreign exchange risks. Furthermore, a representative
of the IMF stated in June 2007:
“The Montenegrin economy is doing well, benefiting from
The fjord of Kotor, a UNESCO world heritage site
strong interest of foreign investors. The main challenge
is to manage the resulting boom and enhance the growth
prospects of private businesses, thereby improving the
sustainability of the current upswing.”10
Everybody’s talking
Holiday features on Montenegro have been increasingly
appearing in the press, and over the summer of 2007
favourable articles were published in The Telegraph,
Condé Nast Traveller, Financial Times, The Observer,
The Times and The Independent. Condé Nast Traveller
visited Kotor and commented: “Often described as a
fjord, it is an extraordinarily romantic place, with a ring
of rocky peaks rising steeply up from the fathomless
depths.”11 The Guardian reporter said: “I much preferred
Kotor, further along the coast, which wouldn’t look out
of place in Tuscany or Umbria.”12 Increasingly, press
attention has the effect of raising a destination’s profile,
making it a desirable place to visit. In turn this increases
demand for holiday accommodation. Reports that
Catherine Zeta Jones and Michael Douglas and Ralph
Schumacher are all house-hunting there, and that Roman
Abramovich is rumoured to be buying a large plot of land
for development, do no harm either as they enhance
Montenegro’s status as a glamorous destination.
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Why invest in Montenegro?

Attracting 5-star resorts

The WTTC states that Montenegro has been successful
in attracting high-end holiday companies, which is
excellent news for the country’s profile and reputation
as a prestigious place to visit. Luxury resort company
Aman Group is currently restoring the picturesque island
resort of Sveti Stefan and hopes to recreate its reputation
of its 1960s heyday, as the kind of place royalty and
Hollywood stars visit. Canadian entrepreneur Peter Munk
has bought land in Tivat with a view to building a luxury
marina and resort there13. The WTTC points out: “These
will help ensure increased holiday product quality, which
will enhance the Montenegrin tourism brand and result in
higher yields.”14
One of the idyllic coastlines of Montenegro

Government wary of over-development

While it would be tempting indeed for the authorities
to go on a building spree to profit from rising interest in
Montenegro, the WTTC commends them for implementing
its recommendations and not plunging into disastrous
over-development. As the first UN-designated
‘ecological state’, Montenegro seems to be taking its
responsibilities seriously. The country is planning to
expand the areas protected by national park status15,
and is attempting to encourage sustainable development,
in keeping with the surroundings and with good
eco-credentials.
Favourable tax conditions
The government has been praised for its policy of
“intelligent taxation” to attract both businesses and
individuals to invest in the country. For example, its
corporation tax is just 9% and is the lowest in the region.
Personal taxation is at a flat rate of 15% with plans to
reduce this to 12% from 2009, and 9% from 201216.
It has introduced a lower VAT for tourism (7% as
compared to the standard 17% rate), in recognition
of the importance of this sector17.

3. For the full report go to: http://www.wttc.travel/bin/pdf/original_pdf_file/montenegroii.pdf

4. http://www.ebrd.com/about/strategy/country/monte/index.htm
5. http://news.bbc.co.uk/1/hi/world/europe/7045814.stm
6. http://www.eib.org/projects/press/2004/2004-048-further-eur-144-mio-for-the-transport-sector-in-serbia-and-montenegro-.htm
7. http://seenews.com/news/latestnews/montenegrogets_19mlnworldbankloanforinfrastructure-174359/
8. http://www.ebrd.com/country/country/monte/press.htm
9. http://www.ebrd.com/about/strategy/country/monte/index.htm
10. http://www.imf.org/external/np/sec/pr/2007/pr07132.htm
11. Condé Nast Traveller magazine, July 2007.
12. http://www.guardian.co.uk/travel/2007/jul/26/montenegro.walkingholidays
13. http://observer.guardian.co.uk/world/story/0,,2126623,00.html
14. http://www.wttc.travel/bin/pdf/original_pdf_file/montenegroii.pdf
15. http://www.wttc.travel/bin/pdf/original_pdf_file/montenegroii.pdf
16. http://www.wttc.travel/bin/pdf/original_pdf_file/montenegroii.pdf
17. http://www.eubusiness.com/Montenegro/montenegro-country-profile

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Political and economic overview

Montenegro is a democratic republic, with a population Montenegro has made enormous

of just over 620,000. It is an increasingly modern society
that has embraced the euro, is busy reforming its fiscal progress in terms of its economy,
system, adopting transparent regulations in cooperation political standing and integration
with foreign organisations, while developing new business
opportunities through privatisation and the diversification into modern Europe.
of its economy18.

During the 1990s, Montenegro’s political situation was

never far from the headlines. As part of the Federal
Republic of Yugoslavia (FRY), its association with Serbia
and Kosovo left its image tarnished and its economy
in tatters. Despite the damage both financially and to
its foreign relations as a result, Montenegro has made
enormous progress in terms of its economy, political
standing and integration into modern Europe.

In May 2006 the country took a historic referendum on

whether it should formally separate from Serbia and
declare its independence. The vote was carried with a
majority of 55% and independence was declared and
internationally recognised in June of the same year.
Its assimilation in its own right into many international
organisations has increased access to funding and
loans to develop and upgrade its infrastructure, as
well as opening up its economy to foreign business
and investment.

There appears to be no shortage of political institutions,

international aid agencies or non-governmental
organisations willing and eager to provide technical
advice and support to Montenegro. These include
organisations like The European Bank for Reconstruction
and Development (EBRD)19, World Bank20, the
International Monetary Fund (IMF)21, the European
Investment Bank (EIB)22, as well as private investment
and development companies like Germany’s DEG and President Filip Vujanovic, elected 22 May 2003
KfW Bankengruppe23, who continue to support critical
infrastructure projects, all of which have an indirect,
if not direct, impact on the economy.
18. http://www.montenegro.yu/english/naslovna/index.htm and
http://www.vlada.cg.yu/eng/index.php
19. http://www.ebrd.com
20. http://www.worldbank.org
21. http://www.imf.org
22. http://www.eib.eu
23. http://www.kfw.de

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