1) Economic growth & development
Since the introduction of the German mark in November 1999, and later the euro in February 2002, the country has had signifcant success in creating a favorable business climate and in attracting reputable foreign investors. These have played a crucial role in signaling to the others that Montenegro is an attractive investment destination. During the three year period before the crisis, Montenegro recorded the fastest GDP growth in the region, with the average growth rate reaching 9%. A key driver of economic growth was an infux of the foreign direct investments (FDI). For fve years in a row, the country has attracted increased FDI, be-coming a leader in Europe according to the level of FDI per capita. Despite the global fnancial crisis in 2009 Montenegro recorded even higher level FDI than ever before (€1.07 billion), with a somewhat changed structure of investors‘ preferences compared with previous years and the energy sector attracting more interest.
This was possible due to the overall course of continuing economic reforms relying on: (I) openness, (II) monetary stability, i.e. the euro as a legal tender, (III) a low level of business regulation, (IV) a low level of taxation (with corporate income tax amounting to 9%, as well as personal income tax, after gradual reduction within last three years); (V) free regime of capital fows; (VI) a high level of the economy privatized (80%) or under the process of privatization. Various world rankings prove that the course of the country‘s economic reforms is a correct one: at the list of World Economic Forum, Montenegro improved in three positions and became the leader in the region, as well as according to The Heritage Foundation which measures the Economic Freedom index and has declared improvement of the country for 26 positions being ranked as 68th, ahead of Greece, Italy, and Croatia (92), Serbia (104) and Bosnia and Herzegovina (110). According to the World Bank Doing Business, Montenegro improved in six positions. Standard & Poors has given Montenegro a credit rating of BB+, confrming that Montenegro is a stable country a with somewhat fragile economy, interdependent from various factors, but with strong motivation for further reforms in accessing the European Union.
Primarily due to the contracted banking sector activity and reduced production (especially in aluminum) in 2009 Montenegrin GDP declined 4.3%, but according to the European Bank for Reconstruction and Development (EBRD) estimations still in the negative rate are smaller than in most of the countries in the region. The unemployment rate increased to 11.3% in 2010, comparing to 13% in Albania, 13.7% in Croatia, 17.4% in Serbia, 24.1% in B&H and 33.8% in Macedonia. After a surplus for three years in a row, the budget evidenced defcit in 2009 amounting to 3% of GDP, while the country kept a relatively low level of total public debt, reaching 40% of GDP at the end of 2009.
This infuenced short-term adjustments through reduced public spending and stable capital expenditures, with infrastructure in the focus.
Supplementary measures refer to the establishment of the Investment-development Fund, which should support SME development, as well as the most competitive tax system in Europe, continues to show an improvement in the business environment through cutting unnecessary regulation, and further structural re-form combining the reforms in the public administration, education and health. In line with the described structural reforms, new investments in the infrastructure, energy sector and tourism should drive the economy forward. Several important investment projects are expected in 2010 among which are: the construction of the frst highway between Bar and Boljari, development of the Lustica peninsula, the construction of hydro power plants on the river Moraca, and the completion of the St Stefan resort. In view of the already completely privatized telecommunication, banking sector, import and distribution of gasoline, services, it is expected that economic development will continue to be dynamic for years to come.
2) Strategic geographic location
About 500km from Rome, 1,500km from Paris, Berlin and about 2,000km from Moscow, Montenegro lies on the Balkan Peninsula in the very heart of Europe.
Two international airports: Podgorica and Tivat
Sea ports: Bar, Kotor, Zelenika
Ferry boat: Bar–Bari–Bar, Bar–Ancona–Bar
Total length of roads: 5.174 km
Total length of railway: 249 km
Montenegro is certainly one of the most interesting spots in the world. Even though it only covers around 14.000 km2 and it only has about 650,000 citizens, its contribution to the World cultural heritage is impressive compared to its size. Montenegro is a Southern European and a Mediterranean country. It is one of the most southern European states and it comes out on the south part of the Adriatic Sea. Its landscape combination of mountains, deep valleys, natural ice lakes, sand beaches and attractive islands is breathtaking.
Montenegro borders with Italy (on the Adriatic Sea), Serbia (to the East), Kosovo (to the East), Bosnia and Herzegovina (to the North), Albania (to the South) and Croatia (to the West). The border length is 614 km, while the coast length is 293 km. Due to its geographic location Montenegro has been and still is the meeting point of East and West. Geographic coordinates of extreme points are: North 43° 32‘ (North latitude-NL) – 18° 58‘ (East latitude – EL); South 42° 50‘ NL – 19° 22‘ EL; East 42° 53‘ NL – 20° 21‘ EL and West 42° 29‘ NL – 18° 26‘ EL. The country is located in the Middle Mediterranean or South East Europe at the Balkans. Podgorica is the modern capital, while Cetinje is an old, royal capital.
With access to the Mediterranean Sea and having the Port of Bar as its most important south Adriatic port, this is a location precondition for a prosperous life. The Port of Bar may be used as an interlinking route to Africa, the Middle East, India, Russia and Asia. Besides the Port of Bar there are three other international ports – Kotor, Risan and Zelenika. Air traffc, sea traffc and up to certain extent railroad traffc are good linking networks for the country. An additional impact on the usage of a great location will be the new highway to Serbia as well as the Adriatic-Ionic highway that passes through Montenegro. A key question of strategic location isn‘t the location per se, rather the usage of that location. We are looking at our geographic location as a base for prosperity.
3) Hub for regional business
Why can Montenegro become your regional business hub? At very least for the following reasons:
a) Currency – we are using the euro. That means there is no hidden infation and it is easy to calculate a consolidated balance sheet and income statements for your firms.
b) Openness – perhaps the most important factor of all. This country with its forward-thinking legislation and with straightforward, friendly people is very open to business with you.
c) Financial services – with 12 commercial banks, all of them private, doing business in Montenegro, the region and the rest of the world is made easy.
d) Telecommunication – excellent connections with the rest of the world via optical cables, 3G Network and a fast Internet-based service represent a good foundation for your business communications.
e) Connectivity – Flight connection: with daily fights to all regional capitals and major cities in Europe, it is easy to travel to Montenegro for business. Port of Bar: with favorable geographic position (42◦ 0` north latitude and 19◦05` east longitude), together with the railway line Belgrade-Bar and the road network represent a compatible traffc system that enables rational connections to the Port and its surrounding area.
4) Young population with multilingual talent
Young people in Montenegro today are facing problems and challenges that require new attitudes, knowledge and skills, a certain willingness to continuously learn and change, and a more rational approach to life. According to the Census 2003, out of 620,145 inhabitants, there were 143,338 between the ages of 15 and 29, which make up 23.2% of the total population. The education process of young people, regarding both foreign language learning and other forms of education, is implemented through formal, non-formal and informal education. Basic aspects of language learning for young people are a university education, education within foreign language schools and on the basis of young people‘s mobility, whether it is about educational, cultural or tourist mobility.
Knowledge of the English language is widely spread, but other languages such as French, Russian, Italian and German are studied as well in the high schools or at the university level. Beside these, according to the list of licensed educational institutions, 15 foreign language schools are currently operating in Montenegro.
The mobility of young people is a signifcant solution in learning foreign languages. Cooperation between educational institutions and relevant international ones is established at all levels, both European and world-wide on the basis of bilateral agreements. The scope and diversity of students‘ mobility is on a much higher level today than in the past few years. The mobility, primarily of students, and then of other young people was actualized through CEEPUS, TEMPUS, INTERREGA, and WUS Austria programs.
Within the activities of the Montenegrin Academy of Arts and Science, participation was at the following activities: ALLEA, EASA, EMAN, IACSEE, ISCU, CEEN. Planned activities on joint projects and study visits in 22 national Academies of Arts and Science were carried out as well.
A large degree of youth mobility is achieved by virtue of the Association for Democratic Prosperity through short-term and long-term volunteer exchanges. The Forecast Exchange Program also enhances youth mobility in Montenegro. Besides all this, the number of young people who opt for certain kinds of internships and seasonal jobs abroad is growing and one of the most popular programs of this kind is ―Work and Travel‖ USA.
In addition, Montenegro is part of The Southeastern European Era-Net, a networking project aimed at integrating EU member states and Southeast European countries in the European Research Area by linking research activities within existing national, bilateral and regional RTD programs.
5) Qualifed human resources
A qualifed workforce is a critical prerequisite for the overall economic development of Montenegro. In order to achieve a higher level of development, emphasis in the recent past was given to effcient human resource development and learning society. There are three universities (one state and two private) in Montenegro. The number of students went up 12,903 in the school year 2005/06, and to 20,409 in the school year 2008/09. At the same period the number of facul-ty graduates went up from 1,656 to 2,812.
University of Montenegro has 17 faculties: Faculty of Electrical Engineering, Mechanical Engineering, Metallurgy and Technology, Natural Sciences and Mathematics, Civil Engineering, Architecture, Economics, Law, Political Science, Medicine, Philosophy, Marine Studies, Tourism and Hotel Management, Drama, Fine Arts, Practical Physiotherapy and Music Academy.
University Donja Gorica has fve faculties: the Faculty for International Economics, Finance and Business, the Faculty of Legal Sciences, the Faculty of Information Systems and Technology, the Faculty of Arts and Humanities studies, and the Center for Foreign Languages.
University Mediteran has four faculties: the Faculty of Information Technology, the Faculty of Visual Arts, the Faculty of Foreign Languages and the Faculty of Law, as well as two schools for tourism and for business. Improvements of even general population education structure are visible. Comparedd to 1991, the percentage of population 15+ years of age without an education was reduced by half to only 4.3%,
while the percentage of the population with a high school education reached 50%. Almost 13% of those 15 years of age and older do have a high school education and a faculty degree.
Education of the workforce is oriented towards complying with the demands of modern, democratic and economically developed society and the market economy, the promotion of personal and professional development of students, and providing knowledge and skills necessary for further studies, life and work, personal interests and life-long learning, ultimately aiming for the establishment of an educational system compatible with other European systems. The improvement of work force qualifcations is not only evident in terms of the improvement of higher education, but also in terms of other forms of education, additional qualifcation, etc.. The Strategy for Adult Education serves as a good example: it was developed for the purpose of contributing to the growth of competitiveness, employment and entrepreneurship.
6) Favorable Tax Climate
The Montenegrin tax system is a fat one. Very few countries in the world have a fat system and that in itself creates a lot of advantages, simplicity above all.
In addition, all major tax rates in Montenegro are very competitive with respect to other countries in the region, and in many aspects Montenegro is working to make its tax system even more attractive. The Corporate Income Tax, which is equal to 9%, is the lowest in the region. The VAT rate amounts to 17%, with the implementation of the rate of 7% on some categories of products and services. Personal income tax is also 9%.
All investors are able to remit dividend and interest proft in the full amount, without any restrictions.
7) Pro-business government
Strong commitment to a pro-business government is clearly expressed by the improved business climate and progressively increasing FDI. According to the World Bank Doing Business 2010, Montenegro improved its position by six places and currently is ranked 71 out of 183 economies. Montenegro joined Central European Free Trade Agreement (CEFTA) in 2007. From January 2008, the country has been implementing the trade-related provisions of the Stabilization and Association Agreement (SAA) with the EU. Trade liberalization will continue in 2010-11, alongside the country‘s efforts to join the WTO.
The regulatory process in Montenegro is open and transparent. The business community is welcome to provide comments on draft legislation. Laws before the Parliament can be found on the Parliament website. Legislation, once it is passed, is published in an Offcial Gazette. All national legislation is available via the Internet in the Montenegrin language, while a majority of it is available in English as well. In addition to that, almost all major strategies adopted by the Government of Montenegro are also available in English.
All firms registered in Montenegro are under the Commercial Court‘s legal authority. The Court maintains computerized registry and provides public access to company information.
A substantial body of laws protects foreign investors. Pursuant to the Foreign Investment Law (Official Gazette of Montenegro No. 52/00), foreign investors enjoy the same legal status and have the same rights and obligations as local investors. A foreign investor may establish a company on the territory of Montenegro or invest in a company‘s assets in accordance with the same procedures and meeting the same requirements as applied for the residents. According to the Business Organization Law (Official Gazette of Montenegro, No. 17/07), foreigners can be directors and members of the board within the companies.
In accordance to the Law on Foreign Current and Capital Operations (―Official Gazette of Montenegro‖ No. 45/05, 62/08)), foreign investors in Montenegro can acquire ownership and are disposed upon means of payment denominations in currency other than euro, and to perform business and payment operations in currency other than euro.
The Labour Law was brought more in line with EU requirements: employment was made more fexible, restrictions on redundancy dismissals were eased, and the notice period for redundancy dismissals was shortened.
A Government Agency, Montenegrin Investment Promotion Agency (MIPA), is a promoter of investment projects. Among other things, MIPA assists investors in obtaining permits and licenses; helps investors in locating Greenfield and Brownfield site options according to their specific requirements; and also gives initiatives and supports cooperation with domestic supplier companies and other local partners. So far, MIPA has provided many one-stop-shop services for potential foreign investors.
8) National treatment of foreigners
Foreign investors in Montenegro are guaranteed national treatment by law. You can freely set up a new company, invest in it or buy an existing company or share of a company. Foreign persons can have property rights on movable or immovable assets and property, and have inheritance rights the same as a Montenegrin, as well as free transfer of assets and property to foreign or domestic legal and natural persons.
There is no limit on the amount of investment capital. Foreign investors are allowed to invest in any industry and freely transfer all financial and other assets, including profits and dividends. All major national and international investment insurance companies insure investment projects in Montenegro.
The only limitations are that foreign persons cannot have property rights on: natural wealth, common goods, agricultural land, forest and forest land, cultural monuments and immovable property within 1 km of the border line. However foreign person can have rights for concession, long term rent, BOT arrangements, and public-private partnership on the above mentioned categories the same as a domestic person.
9) NO VISA REGIME
For most countries, there is no visa regime in Montenegro. The nationals of the Republic of Austria, the Kingdom of Belgium, the Republic of Greece, the Kingdom of Denmark, the Republic of Estonia, the Republic of Italy, the Republic of Ireland, the Republic of Cyprus, the Republic of Lithuania, the Republic of Latvia, the Grand Duchy of Luxembourg, the Republic of Malta, the Republic of Hungary, the Federal Republic of Germany, the Republic of Poland, the Republic of Portugal, Slovak Republic, the Republic of Slovenia, the Republic of Finland, the Republic of France, the Kingdom of the Netherlands, the Czech Republic, the Kingdom of Spain, the Kingdom of Sweden and the United Kingdom of Great Britain and Ireland may enter and stay within the territory of Montenegro for up to 90 days and may be in transit over the territory of Montenegro on the basis of a valid travel document.
Also, citizens from other countries that require visas to enter Montenegro, with a valid Schengen or US visa can stay in Montenegro up to seven days. Foreign persons can request permission for temporary or permanent residence in Montenegro. Temporary permission is granted with a work permit. If the foreign person has a temporary residence in Montenegro for longer than five years, he acquires rights to obtain permanent residence status.
10) Good quality of life
Montenegro is a country of contrasts: from the mild Mediterranean to a severe mountainous climate, from fruitful plains and river valleys to high and arid mountains. On its rather small surface area, a cultural heritage originated from the time of the first human communities until the present. It is almost a privilege to be situated on the boundary of two large civilizations (eastern and western), three great religions (Orthodox, Catholic and Islamic), numerous known and unknown builders, painters and carvers, masters of sophisticated crafts, writers, transcribes and typographers, from whom we inherited the masterpieces of their hands and their spirit, sublimated nowadays into a wealthy cultural heritage.
Two UNESCO World Heritage sites are located in Montenegro: the Old Town of Kotor as a cultural heritage and Durmitor National Park as a natural heritage. Cultural life in Montenegro is quite rich. There are nine theaters (five professional) with over 250 performances per year, 42 radio stations, 19 TV stations and 20 public libraries. Year by year the number of events is increasing, including concerts of well known musicians, fashion shows, Formula One boat races, international music festivals, etc. Over 1,000 sports clubs are registered in Montenegro. The most popular sports are football, basketball, handball, volleyball, waterpool and tennis. The large number of the restaurants, coffee bars and services to support your business needs, together with 240 sunny days at the costal area, offers a strong foundation for an excellent quality of life.
11) Easy business start-up
Registering a business in Montenegro is an easy process. All companies need to be registered within the Central Registry of the Commercial Court (www.crps.me). All you need is the Founding Act, the Bylaw, a copy of the passport (in the case that you are founding a company as a natural person) or a notarized copy of your company‘s Registration Act if you decide to start a business as a legal person from another country. Minimum founding capital is 1€ and fees are 22€. The whole process is complete within 4 days and if you do not receive the registration within that time frame you are consider automatically registered.
Registration can be done in the capital, Podgorica, or in Bijelo Polje, located at the northern part of the country. Very soon we will offer online registration. You can choose to establish one of the following types of companies: Limited Liability Company, Joint Stock Company, General Partnership, Limited Partnership, Entrepreneur or a branch of a foreign company. Currently there are more than 42,000 companies registered in Montenegro, out of which over 5,000 are with foreign ownership.
After registering at the Commercial Court, the next step is registration within the Statistics Office. You need 1 day and a fee of 5€ to fnish that process.
In order to open a bank account you can choose among 11 banks operating in Montenegro. The process takes only a couple of minutes. One company can have multiple accounts in different banks.
Montenegro introduced a one stop shop system for registration within the Tax authority. With a single document, you can obtain your Tax ID Number and VAT number, as well as regulate your Health Care and Pension contribution.
For obtaining licenses for specific business activities, contact the Secretariat for Economy/Entrepreneurship within the municipality. For most activities (such as services, trade, and those that do not have an impact on general health or safety), a company need only file a one page report to the Secretariat and is considered to be licensed.
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