Country report - 2009

This publication is product of
the Montenegrin Investment Promotion Agency (MIPA)
Country Report

Contents
Introduction............................................................................................................................... 1
1. At a Glance............................................................................................................................ 4
2. Climate - Diversity on a Small Surface Area...................................................................... 8
3. Population - Open Society With Diversified Ethnic Structure.......................................... 9
4. A Short Walk Through the History - Epic Bravery Throughout the Centuries.............. 12
5. Culture -Rich Heritage and Unique Wealth....................................................................... 14
6. Snapshot on the Government and Politics - Stable and Secure Environment.............. 17
7. Economy - Ongoing Development and Growth............................................................... 19
Monetary and Banking System................................................................................................. 21
Fiscal Policy.............................................................................................................................. 24
Capital Market.......................................................................................................................... 27
Real Estate Market................................................................................................................... 30
Employment and Labour Market............................................................................................... 32
International Trade................................................................................................................... 35
Economist Intelligence Unit - Economic Policy Outlook ........................................................... 38
8. Growth Vehicles.................................................................................................................. 39
Tourism..................................................................................................................................... 39
Telecommunications................................................................................................................. 42
Transportation And Infrastructure............................................................................................. 43
Industry..................................................................................................................................... 46
Wood Processing Industry And Forestry.................................................................................. 47
Agriculture ............................................................................................................................... 48
Economic Forecast of the Economist Intelligence Unit............................................................. 50
Economic growth...................................................................................................................... 50
Inflation..................................................................................................................................... 51
External sector.......................................................................................................................... 51
Forecast summary.................................................................................................................... 52
9. Privatization and Investments - Attractive Environment and Offer................................ 53
Major Investors......................................................................................................................... 57
Further privatization.................................................................................................................. 58
10. Quality of Life - Come and You Will Stay ....................................................................... 60
11. Major Investment Opportunities...................................................................................... 63
11.1 Tourism............................................................................................................................. 63
11.2 Infrastructure.................................................................................................................... 65
11.3 Transportation And Logistics............................................................................................ 65
11.4 Energy.............................................................................................................................. 66
11.5 Industry............................................................................................................................. 66
Dear Readers
We are pleased to offer you the second edition of “The Montenegro Country Report”.
This report is witnessing the change our country is passing through. Indeed, Montenegro
is changing significantly. And every change represents an opportunity for those who
see a bit further into the future than others.
After a whole decade of internal and external political and economic shocks, in recent
years Montenegro has undertaken an ambitious program of wide-reaching economic
reforms in an effort to promote growth and raise living standards.
Where are we standing now? For several years in a row, the growth of gross domestic
product has been significant, reaching 8.6% in 2006 and 10.7% in 2007 according to the
Monstat. For two years in a row Montenegro has recorded the highest FDI per capita in
Europe (1,100 euro). According to the Canadian Fraser Institute, Montenegro is the leader
in economic freedoms in the region with a rank of 58 out of 141, while Croatia is 90, Mace-
donia 84, Slovenia 88 and Bosnia and Hercegovina 105. Based on the Competetiveness
Report released by the World Economic Forum, Montenegro is ranked 65 in the 2008 report
based on the competetiveness index (improvement for 17 places), while Bulgaria was 76,
Serbia 85, Macedonia 89 and Bosnia and Hercegovina 107. In the latest Standard and
Poor’s report, Montenegro received the longterm BB+ and shorterm B sovereign rating as
one of the rare countries that maintained the same mark from the previous year.
Montenegro is safe and stable, with a growing trend of foreign direct investments and
economic freedoms, as well as dynamic economic development. As a consequence
the business environment climate continues to improve. It is open and by its openness
it compensates for the size of the local market. Free markets today are becoming more
attractive for investments, especially when there are not any restrictions for remit profit,
dividend or interest. Add a strong currency, as Montenegro is using the euro, and a
favorable tax climate with the lowest corporate tax rate in Europe – 9%, personal income
tax 12% and VAT of 7% and 17%. All rates are flat.
The trust we built had a significant impact on encouraging foreign firms to start business
operations in Montenegro. Over 4,500 firms from 81 countries are doing business in
Montenegro. The first mega marina on the Mediterranean is being built in Montenegro, in
beautiful Kotor Bay. Hotel brands Kempinski, Four Seasons and Hilton signed contracts,
the expression of interest by several strategic investors are assuring us that there are
plans to attract 4 billion euro until the end of 2011 and 30 billion until the end of 2030.
Global financial crises is hiting us as well. We are not an isolated island. However, we
would like to be a different and to turn the crises upsidedown and look at it not only as
a challenge, but as an opportunity as well.
We do not pretend to know everything, and we do not have the best solution for all
the problems that will arise from future economic development. However, we remain
open and ready to cooperate with you and to search jointly for long term cooperation,
particularly if you are looking at Montenegro as a regional business center.

Montenegro Country Report 2009 Montenegro Country Report 2009

Constitutional name
Location
Time zone
Climate
Population
Area
Territorial division
Capital (population)
Old Royal Capital (population)
Political system
President of the Republic
Prime minister
President of the Parliament
GDP (mil €)
Real GDP Growth Rate
GDP per capita
FDI per capita
Unemployment rate
Corporate tax
Personal Income tax
VAT
Currency
Number of Airports
Main port
Visa regime
Montenegro
South Eastern Europe
GMT + 1
Continental, Mediterranean and Mountain
620,145 (Census, 2003)
13,812 km²
21 municipality
Podgorica (169,132)
Cetinje (18,482)
Parliamentary Democracy
Mr. Filip Vujanovic
Mr. Milo Djukanovic
Mr. Ranko Krivokapic
2,807.9 (2007)
2,328.2 (I-IX 2008)
3,338.0 (2008)
10.7% (2007) 8.0% (I-IX 2008) 8.1% (2008)
4,484 € (2007)
1,093 € (2007)
11.92 (2007) 10.90 (2008)
Flat - 9%
Flat – 12%
17% and 7% (tourism)
EUR
2 (Podgorica and Tivat)
Port of Bar
None
Source: MONSTAT
Source: Secretariat for Development of Montenegro-estimation
Source: Economic Policy for 2009, Govermennt of Montenegro –estimation
based on 9 months of 2008
Source:Economic Policy for 2009, Govermennt of Montenegro –estimation
based on 9 months of 2008
Besides the above mentioned economic issues, Montenegro joined NATO’s Partnership
for Peace program in December 2006 and hopes to achieve further integration at the
next NATO summit. Montenegro signed the Stabilization and Association Agreement
with the EU in October 2007 and submited an application for member country at the
end of 2008.
We hope that in your search for more in-depth information about Montenegro, you
will find this report useful. If we achieve only that goal, we would be happy in making
another step in the right direction.
Dr Petar Ivanovic
CEO, Montenegrin Investment Promotion Agency


1. At a Glance
Beauty in the Heart of The Mediterranean
Montenegro is a Mediterranean country, located in Southeastern Europe. It is bordered
with Italy on the south (sea border), Croatia on the west, Bosnia and Herzegovina on the
northwest, Serbia on the northeast, Kosovo on the east and Albania on the southeast.
The capital and the largest city is Podgorica, while Cetinje represents the old royal
capital and former seat of the throne.
Not only does Montenegro have excellent
sea connectivity with all the Mediterranean
countries, and with the rest of the World,
but it is quite close to all major European
centers.
Montenegro’s natural wealth is very diverse,
offering a unique blend of mountain and
sea splendor. On one side, the seaside of
Montenegro is recognized for its beautiful
fjord of Boka, attractive islands, numerous
bays and pure water, while on the other side
you can find mountains with beautiful lakes, deep canyons with attractive scenery, wild
rivers, undiscovered and mysterious caves, all that surrounded with untouched nature.
That is the reason why we refer to Montenegro as a country of beauty, some say wild
beauty. And that is not all: Montenegrin Sea and mountain beauties are situated very
close to each other, enabling us to enjoy them almost simultaneously.
Being a country full of natural wealth, Montenegro has four national parks: Lovcen,
Biogradska Gora, Durmitor and Skadar Lake and several regional nature parks. Further-
more, it has to be pointed out that Prokletije Mountain Massif has an excellent chance
to become a national park or even a “Park of peace” in the near future. Currently, with
6% of its territory under national parks Montenegro is the leader in the World.
Montenegro’s rich natural seaside offering includes the Bay of Kotor, St. Stefan and
Ulcinj, each having its unique splendor and beauty, representing a trademark of Mon-
tenegrin tourism.
The Bay of Kotor is the only fjord in this
part of the world. It consists of four smaller
bays: Herceg Novi, Kotor, Risan and Tivat.
The uniqueness of the nature, along with
huge cultural heritage of Kotor and Risan,
make the Bay of Kotor a unique place to
visit. In fact, Risan is the ancient capital of
Queen Teuta, queen of Illyrs, and Kotor is
an old town that, thanks to its historical and
cultural significance, has been protected by
UNESCO as a part of the world’s cultural
heritage.
Sveti Stefan was inhabited in the 15th cen-
tury as a fisherman’s village. In the 1950s,
the last residents of the village were evicted,
and Sveti Stefan was transformed into a
luxury town-hotel. It is the most exclusive
resort on Montenegro’s coast. Sveti Stefan
is, in a way, a Montenegrin trade mark as
probably the most photographed place in
Montenegro.
Ulcinj is a city famous for its tradition and
tales about pirates. There is a legend that
even the famous Miguel Servantes was a
pirate’s prisoner in Ulcinj. Maybe he even
wrote some of his books there. Ulcinj com-
Unexplored Montenegro
“This is not without good reason. Montenegro’s long political isolation and extraordinarily
rich ecological endowment have helped to make the tiny nation one of the most
genuine, beautiful and best preserved in Europe. Among its bragging points are
Europe’s deepest canyon, its largest bird sanctuary, its southernmost fjord and the
last of its virgin forests. More than a third of Montenegro is forested, and much of the
country’s mountainous surface is dotted with historical towns, fortresses, monasteries
and Ottoman-era mosques. Added to all of this is the 290 kilometre stretch of Riviera
along the Adriatic Sea.
Montenegro’s coast is the undeniable draw for the majority of the tourists visiting the
country. Located south of the same stretch of beachfront as the pricier and overcrowded
Dalmatian coast in Croatia, the area has experienced a major spillover effect, as tourists
and real estate prospectors have poured in looking for fresh new deals.”
The National, 4 June 2008


bines one of the most beautiful old towns and the longest beach on the Adriatic coast
– Velika plaza, 13 km, in one place. Having in mind that Velika plaza, along with Ada
Bojana, the island created by the river delta of Bojana River, has still to be developed in
order to exploit its huge potential, it is likely to expect that Ulcinj will very soon become
one of the hottest spots on the Mediterranean.
Having all this in mind, as well as the fact that along the Montenegrin seaside lie towns
such as: Budva, the pearl of the Mediterranean, with its beautifull old town and splen-
did sand beaches, along with a lot of ongoing and future investment projects; Tivat,
which will very soon become the hot spot for mega yachts thanks to the project called
Porto Montenegro; and other beautiful small towns and places, such as Petrovac and
Buljarice, which have still to be fully exploited, it is clear that Montenegro has a very
rich tourism offering.
The Mountain Lovćen rises from the borders of the Adriatic basin, closing the long and
twisting bays of Boka Bay and making the hinterland to the coastal town of Kotor. The
mountain has two imposing peaks, Štirovnik (1,749 m) and Jezerski vrh (1,657 m).
There are 1,158 plant species on Lovćen, out of which four are endemic. The National
Park Lovcen encompasses the central and the highest part of Lovcen mountain massif
and covers an area of 62.20 km².
Biogradska gora is located between the rivers Tara and Lim, in the middle of the
mountain Bjelasica. The Park is 54 km² in area and surrounded with mountains whose
tops are over 2,000 m high. The thing that makes Biogradska Gora unique is the 16
km² of virgin forest, Biogradska Gora, in whose very heart lies Biogradsko Lake, the
largest glacier lake in this National park. Biogradska gora is one of three remaining
such type of forests in Europe and it has the character of a closely protected area.
In fact it is under UNESCO’s protection – “Men and biosphere” program. The Park
is renowned as a unique geomorphological region and as such is very attractive for
scientific research.
The Durmitor National Park includes the
massif of Durmitor, the canyons of Tara,
Sušica and Draga rivers and the higher part
of the canyon plateau Komarnica, covering
the area of 390 km². It was inscribed on the
World Heritage List in 1980. One of the most
prominent attractions of Durmitor mountain
are 18 glacial lakes, called hills eyes, the
best known being Crno Lake. Apart from
that, National park Durmitor features the
biggest mountain peak of Montenegro,
Bobotov kuk with its 2,525 m height. Tara
River Canyon constitutes an integral part
of the National park Durmitor. It is 78 km
long and 1,300m deep at its deepest point,
being the second biggest canyon in the
world, just after the Colorado canyon. Be-
cause of its pureness it’s called the “tear
of Europe”.
Skadar lake, with a surface area from 370 to 530 km² (depending on the water level) is
the largest lake in the Balkan Peninsula and the second largest in Europe. Two thirds
of the lake belongs to Montenegro. It is one of the largest bird reserves in Europe, hav-
ing 270 bird species, among which are some of the last pelicans in Europe, and thus
popular with birdwachers. In 1996, by the Ramsar Convention on Wetlands, Skadar
lake was included in the Ramsar list of wetlands of international importance. In addition,
the level of the lake is 6 m below the surface of the Adriatic sea.


2. Climate
Diversity on a small surface area
The geographical location of Montenegro, along with a diversity of natural wealth on a
relatively small surface area, gave Montenegro various kinds of different climates with
noticeable differences. Consequently, we have to distinguish the coast, the central plain
and the mountain area with respect to their climate characteristics
.
The coast enjoys a Mediterranean climate, with long dry summers and short mild win-
ters. Average July maximum temperatures are around 28ºC with a high approaching
30ºC; average annual sunshine is over 2,500 hours with a summer average of 300+
hours per month, or 10 hours a day. Winter averages are 12.5ºC and 5.5ºC. November
is generally the wettest month.
The central plain is colder in the winter and warmer in the summer compared to the
coast. Podgorica averages a January temperature of 5ºC and a July temperature of
26.5ºC. The maximum can reach up to 43ºC and the minimum -10ºC.
The mountain climate is sub-alpine with cold snowy winters, and moderate summers
averaging 270 hours of sunshine per month. Winter maximum temperatures are around
3ºC and minimums around -6ºC. In the summer months it goes from 23ºC to 9ºC.
Montenegro is indexed on the Koppen scale (based on temperature and precipitation)
as a Bs Climate. The B refers to a hot dry climate and the little S refers to dry seasons in
the summer with more then 70% of the precipitation that falls in the winter. Montenegro
has on average 180 sunny days.
It is worth mentioning that Cetinje and Krivosije represent the city and the settlement
with the highest level of rain in Europe on average.
5 www.discover-montenegro.com
3. Population
Open Society With Diversified Ethnic Structure
Based on 2003 census Montenegro has 620,145 citizens. The most populated cities in
Montenegro are: Podgorica (169,132 citizens), Niksic (75,289) and Bijelo Polje (50,284).
As presented data shows, 27% of the total population lives in Podgorica. Furthermore
this situation is a result of a high level of migration into the capital city of Montenegro,
which is evidenced based on official statistics and this process still continues.
The most important figures of population are given in the following table:
Total population 620,145
• Male 305,225
• Female 314,920
Number of females per 1000 males 1,031.76
Number of households 180,517
Number of person per 1 household 3.43
Population per 1 km2
44.9
Natural increase 1,563
Average age of population 35.9
Population in abroad (%) 7.86
Life expectancy at birth 73.1
Literacy rate 97.5
Source: MONSTAT
The key dynamic characteristic of the Montenegrin population from 1991 to 2003 are
the changes in the age structure, which is driving the Montenegrin population to further
ageing of the overall population.
0
5
10
15
20
25
30
jan feb mar apr may jun jul aug sep oct nov dec
Average temperatures in Montenegro
Hours of Sunshine Sea Temperature CAir Temperature Max C Air Temperature Min C


Comparing the two last censuses, the share of population aged over 65 increased from
8.23% (1991) to 11.96% (2003), the share of the working age population (from 15 to 64
years) increased from 65.48% (1991) to 66.59% in 2003, while the share of population
below 14 years of age decreased from 25.28% (1991) to 20.55% (2003). Analogous
with that, the index of dependency of older persons increased to 17.96
. This situation
is especially met in the north region of Montenegro, which is the result of the migration
of the working age population.
The Index of dependency enables an analysis of the age structure of the population
with a specific emphasis on the relative ratio of “dependent-non-productive” groups and
“productive” groups. Indicators are based on the division of population into three age
categories: children (0-14), working age population (15-64) and the elderly population
(65+). Shares of these categories according to census 1991 and 2003 are given on
the following graphs.
Source: MONSTAT,
census 1991 and 2003
One of the most important characteristics of the Montenegrin population is the diversi-
fied ethnic structure. Major ethnic groups who live in Montenegro, according to the 2003
census are: Montenegrins, Serbs, Bosniacs, Albanians, Muslims and Croats. Their
structure is given on the following graph:
Source: MONSTAT
With the new 2007 Constitution, the Montenegrin language became Montenegro’s
Index of dependency of elderly represents the number of elderly population to thousand working age population.
Age structure 1991
0-14 years 25.28%
Unknown 1.01%
65 and over 8.23%
15-64 years 65.48%
Age structure 2003
0-14 years 20.55%
Unknown 0.89%
65 and over 11.96%
15-64 years 66.59%
primary official language. Next to it, Serbian, Albanian, Bosnian and Croatian are rec-
ognized in usage. Citizens who speak Montenegrin, Serbian, Bosnian, or Croatian can
easy understand each others.
Most Montenegrin inhabitants are Orthodox Christians. Apart from them, there is a size-
able number of Sunni Muslims that maintain their own Islamic Community of Montenegro
and also a small Roman Catholic population.
Croats, 1.10%
Muslims, 3.97%
Albanians, 5.03%
Bosnians, 7.77%
Serbs, 31.99%
Montenegrins,
43.16%
Others, 6.26%
Romany, 0.42%
Yugoslavs, 0.30%
Etnich groups
10 11

4. A short walk through the history
Epic Bravery Throughout the Centuries
The first recorded settlers of present-day Montenegro were the Illyrians. In the 9th cen-
tury AD the Romans conquered the region of present-day Montenegro, while the Slavs
massively colonized the area in the 5th and 6th centuries, forming a semi-independent
principality, Doclea.
By the end of the 12th
century, Montenegro, under the name Zeta, was governed by
the Nemanjic dynasty. After the Serbian Empire collapsed in the second half of the 14th
century, Balsics came to prominence by expanding their power in the region.
In the second half of the 15th
century, Montenegro was ruled by another noble family
from Zeta, the Crnojevic, under whose reign Montenegro became the last free monarchy
of the Balkans, finally falling to the Ottomans in 1499, who annexed it to the „sanjak“
of Skadar.
In the 16th
century, Montenegro developed a form of special
and unique autonomy within the Ottoman Empire. Neverthe-
less the Montenegrins refused to accept Ottoman reign and
in the 17th
century raised numerous rebellions, culminating
with the Ottoman defeat in the Great Turkish War at the end
of that century. In the 18th century, Montenegro became a
theocracy, led by the dynasty Petrovic established by Danilo
Petrovic (1697-1735). The first step towards establishment
of the modern state institutions was made in 1713 through
establishment of the 12 member Council.
Under Nicholas I, Montenegro vastly advanced and enlarged
several times during the wars with Turks and achieved recogni-
tion of independence in 1878. It happened on July, 13th 1878
at the Peace Congress in Berlin, where Montenegro became
the 27th
internationally accepted country of the world.
Modernization of the state followed, culminating with the
draft of a Constitution in 1905, while in 1910 Montenegro be-
came a Kingdom. During the Balkan wars in 1912 and 1913
Ottomans lost all lands in the Balkans. During World War I
in 1914, Montenegro sided with Serbia against the Central
Powers, suffering a full scale defeat to Austria-Hungary in early 1916. In 1918 the Allies
liberated Montenegro.
In 1922, Montenegro formally became the Zeta Area of the Kingdom of Serbs, Croats
and Slovenes, and in 1929 it became a part of a larger Zeta Banate of the Kingdom of
Yugoslavia.
In World War II, Yugoslavia was invaded by the Axis forces in 1941. Montenegro was
liberated by partisans in 1944 and became a constituent republic of the Socialist Federal
Republic of Yugoslavia (SFRY). Its capital renamed to Titograd in honor of Partisan
leader and SFRY president Josip Broz Tito. More and more autonomy was established,
until the Socialist Republic of Montenegro ratified a new constitution in 1974. After the
dissolution of the SFRY in 1992, Montenegro remained part of a smaller Federal Re-
public of Yugoslavia along with Serbia.
In 1996, the Government of Montenegro led by Milo Djukanovic severed ties between
Montenegro and the Serbian regime, which was at that time under Milošević. Monte-
negro formed its own economic policy and adopted the German Mark as its currency
(November 1999). It has since adopted the Euro (in 2002), though it is not formally part
of the Eurozone currency union. Subsequent governments of Montenegro carried out
pro-independence policies.
In 2002, Serbia and Montenegro came to a new agreement regarding continued coop-
eration and entered into negotiations regarding the future status of the Federal Republic
of Yugoslavia. In 2003, the Yugoslav federation was replaced by a union named Serbia
and Montenegro. A possible referendum on Montenegrin independence was postponed
for a minimum of three years. However, that only postponed the inevitable and Monte-
negro regained its independence on 21st
May 2006.
Revival of independency gave a strong impulse to the democratic and economic de-
velopment of Montenegro. After a very short period our country has become a member
of international organisations and institutions, created diplomatic relations with many
countries and made important steps on its way toward euroatlantic integrations. Positive
results on that plan as well as activities on the process of strenghtening institutional
capacities have achieved satisfaction both through the signing of the Stabilisation and
Association Agreement and involving Montenegro in intensive dialog with NATO. Also,
Montengro submitted application for EU membership.
12 13

5. Culture
Rich Heritage and Unique Wealth
The culture of Montenegro is as fascinating as its history and geographical position
suggests. It has been shaped by a variety of influences throughout history. The Ortho-
dox, Slavonic, Central European, Islamic, and seafaring Adriatic cultures, such as the
Republic of Venice, have been the most important influences in recent centuries.
As a result of those influences, Montenegro has many significant cultural and historical
sites, including heritage sites from the pre-Romanesque, Gothic and Baroque periods.
The Byzantine influence in architecture and in religious artwork is especially apparent in
the country’s interior. Byzantines, Romans and Turks have left a significant heritage in
architecture because their cultural influence was strong even after they were gone from
this area. As a result many beautiful cultural monuments were made under their influence,
Ostrog Monastery, Cetinje Monastery, Cathedral of Saint Tryphon, Gospa od Skrpjela
(Our Lady of the Rocks) and Mosque of Hussein-pasha, being only some of them.
Montenegro’s capital Podgorica and the former royal capital of Cetinje are the two most
important centers of culture and the arts in the country. Additionally, the ancient city of
Kotor is listed on the UNESCO World Heritage sites. In fact, the Montenegrin coastal
region is especially well known for its cultural and religious monuments.
It is worth pointing out that the first state-
owned printing press (Printing House of
Crnojevići) was located in Cetinje in 1494,
where the first South Slavic book was print-
ed in the same year (Oktoih). Moreover, it
is very interesting that many Montenegrin
rulers were writers and poets, especially
those from Petrovic dynasty – Petar I, Petar
II and king Nikola. The most famous among
them was Petar II Petrović Njegoš.
On the substratum of traditional oral folk
epic poetry, Petar II Petrovic Njegos cre-
ated his own expression. His epic Gorski
Vijenac (The Mountain Wreath), written
in the Montenegrin vernacular, presents
the central point of the Montenegrin cul-
ture, for many even surpassing the bible
in importance. However, Petar II Petrovic
Njegos’ masterpiece was Luca mikrokozma,
a philosophic book in which he presented
all the geniality of his mind.
Besides the review of the cultural treasures of Montenegro, it is very important to men-
tion current cultural events.
The cultural offering of Montenegro in the last year was equally present in all cultural
and art segments: literature, fine arts, theatre, music. The most important events that
marked the previous year are: the Exibition of Petar Lubarda on Cetinje, the Festival
of International Alternative Theatre (FIAT), the establishment of the Montenegrin Sym-
phony Orcestra, etc.
Among the most significant cultural events in the
last year is the founding of Montenegrin Theatre
Festival. Montenegro has nine theatres. Last year in
Montenegro were performed 275 professional plays
and 252 plays as a part of a children’s repertoire.
Apart from theatre performances, the significant
cultural events take different manifestations:
Bokeljska night - which for citizens of Kotor and
guests represents a significant celebration, an
opportunity to present local cuisine and to enjoy
a fiesta under masks until late in the night.
The Mimosa Festival is a celebration honoring flow-
ers, a tradition for over 40 years. It is a celebration
which was founded and continues to live on the
principles of carnival traditions, once very typical
for this region, and which is accentuated by young
Herceg Novi majorettes and the city band. There
are many tourist, entertainment, cultural, sports
and other programs within the Festival.
International music festival Suncane skale (Sunny
Stairs) in Herceg Novi is the most important music
festival in Montenegro – an entertainment-musi-
cal festival gathering national and international
performers.
Budva Music Festival – The Song of the Mediterranean is a festival where for several
nights Montenegrin and foreign performers present their compositions to the audience.
In the entertainment part of the festival the biggest stars from the region and also the
European scene perform.
International fashion festival in Kotor lasts for several days and it gathers fashion design-
ers from Montenegro, from the surrounding region and from abroad. The most frequent
however are distinguished Italian and French designers and their newest creations (Dior,
DG, Pal Zileri, Prada, Armani, Ferre, Versace, etc.).
14 15

It is also necessary to mention the following events: Tivat Cultural Summer, the Book
Fair, The Book Square – Herceg Novi, Boka night, the Guitar Art Summer Fest (GASF)
– Herceg Novi, the Festival of the international alternative theaters (FIAT is a the-
ater spectacle which attracts alternative troupes mostly from the region.) - Podgorica,
Theater city - Budva, Cetinje biennial (manifestation has turned into an International
biennial of modern fine art.), the Herceg Novi Film Festival (one of the biggest and most
appreciated domestic film festivals during which the achievements from the domain of
domestic films are displayed).
The next table shows some important indicators of the cultural life in Montenegro:
INDICATOR 2007
Books published 1,231
Number of performances (professional theatre) 275
Number of performances (theatre for children) 252
Number of performances (amateur theater) 15
Scientifically and professionally libraries 20
Public libraries 23
Number of museum 22
Number of cinemas 11
Newspapers 87
Television stations 22
Radio stations 55
Source: Central National Library of Montenegro, Ministry of Culture, Sports and Media, MONSTAT
6. Snapshot on the government and politics
Stable and Secure Environment
Montenegro is an independent and sovereign country, defined as a “Civic, democratic,
ecological state and state of social justice, based on the reign of Law” . It proclaimed its
new Constitution on 22nd
October 2007. The ruling party in Montenegro, ever since the
multi-party system was introduced, is the Democratic Party of Socialists of Montenegro
(DPS), in coalition with the smaller Social Democratic Party of Montenegro (SDP).
The Montenegrin Parliament passes all laws in Montenegro, ratifies international trea-
ties, appoints the Prime Minister, ministers, and
justices of all courts, adopts the budget and performs
other duties as established by the Constitution. The
Parliament can pass a vote of no-confidence on the
Government by a majority of the members. It contains
81 seats. The current president of the Parliament is
Ranko Krivokapić (SDP).
The Government of the Republic of Montenegro is
composed of the Prime Minister, the Deputy Prime
Minister for European Integration, Deputy Prime Minister for Economic Policy and
Minister of Informatics society, Deputy Prime Minister and Minister of Finance as well
as the following ministers:
• The Minister of Maritime Affairs , Transportation and Telecommunications,
• The Minister of Tourism and Environmental Protection
• The Minister of Foreign Affairs
• The Minister of Culture, Sports and Media
• The Minister of Defense
• The Minister of Agriculture, Forestry and Water Management
• The Minister of Justice
• The Minister of Education and Science
• The Minister of Interior Affairs and Public Administration
• The Minister for Economic Development
• The Minister for Human and Minority Rights Protection
• The Minister of Health, Labour and Social Welfare
The current Prime Minister of Montenegro is Milo Đukanović (DPS).
According to the Montenegrin Constitution the President of Montenegro is elected for a
period of five years through direct elections. The President represents the republic in the
country and abroad, promulgates laws by ordinance, calls elections for the Parliament,
proposes candidates for the Prime Minister, president and justices of the Constitutional
Court to the Parliament, proposes to the Parliament calling of a referendum, grants
amnesty for criminal offences prescribed by the national law, confers decoration and
16 17

7. Economy
Ongoing Development and Growth
The economy continued to expand in 2008. The major trends: high GDP growth, budget
surplus, a record inflow of foreign direct investments, an increase in the number of persons
employed as well as the very dynamic development of the banking system. Montenegro
became a full member of the International Monetary Fund and the World Bank in 2007.
Thanks to all the positive institutional and structural changes, the overall economic ac-
tivity has been growing since 2003. Significantly high GDP growth rates were achieved
in 2006 and 2007 of (8.6% in 2006 and 10.7% in 2007). According to the assessment
of the Secretariat for the Development of Montenegro, in the first nine months of 2008 the
GDP achived a value of EUR 2,328.2
million, which represents a real growth of 8% in
comparison with the same period of the previous year. Next year will be a challenge, since
after five years of high growth, it is expected to slow down. According to the Ministry of
Finance, there are two scenarios which relate to growth of the economy during 2009. The
first, is a „realistic“ scenario predicting a growth of GDP at 5% and the second, a „crisis“
scenario predicting growth of about 2.5%.
Source: MONSTAT, Secretariat for Development of Montenegro
Evidenced GDP growth, as well as the amount of GDP per capita, is one of the highest
in region that is presented on the following graph
:
Source: MONSTAT, Statistical Office of the Rebublic of Slovenia,
Croatian National Bank, Statistical Office of the Rebublic of Serbia, FIPA
Estimation of Secretariat for Development of Montenegro
GDP growth and GDP per capita are for 2007. Data for Serbia and Bosnia Herzegovina are preliminary data.
awards, and performs all other duties in accordance with the Constitution. He is also
a member of the Supreme Defence Council. The current President of Montenegro is
Filip Vujanović (DPS). The latest parliamentary elections were held on September 10th
2006, while the new pre-term election for members of the Parliament of Montenegro is
scheduled for March 29th
2009.
Political outlook
The government has the overriding goal of advancing EU and NATO integration ...
The government will probably submit its EU membership application before the end
of the year. If it does so, Montenegro might be awarded candidate status during the
forecast period. However, progress on formal EU membership negotiations could
be delayed by a number of factors, not least the souring of the overall mood within
the EU regarding further enlargement following Irish voters’ rejection of the Lisbon
treaty in June 2008.
Economist Intelligence Unit, September 2008
2007
2.5
4.4 4.2
8.6
10.7
8
0
2
4
6
8
10
12
2003 2004 2005 2006 I-IX 2008
17076
8452
4484 3945 3412
0
5000
10000
15000
20000
Slovenia
C
roatia
M
ontenegro
Serbia
Bosnia

H
erzegovina
GDP per capita (€)
10,7
8,7
8
6,8
5,6
0
2
4
6
8
10
12
Montenegro Serbia Bosnia
Herzegovina
Slovenia Croatia
GDP growth (%)
18 19

SWOT analysis presented a description of the Montenegrin economic environment:
Strengths: Weaknesses:
• Safety and stability (political and
macroeconomic);
• Euro as official currency;
• Tax regime;
• National treatment of foreign investors;
• Regionally competitive financial risk;
• Developed telecommunication infrastructure;
• Relatively high-educated young labour force;
• Free access to EU markets, FTA zones as well
as to Russian market (only 1% of the custom
evidence);
• Achieved level of privatization (80%), economic
reforms and newly-created institutions;
• Accelerated development of the capital market
and restructured and privatized banking sector;
• The shortest period in the region for company
registration;
• Free transfer of reinvested profit and payments
abroad;
• Utilization of tax reliefs and concessions;
• Customs exemptions for investments in goods
imported as investors’ deposits;
• Insufficiently developed infrastructure;
• Implementation gap while enforcing key laws in
the area of investment policy, property relations
and spatial planning documents;
• Regional development gaps particularly in the
road infrastructure;
• Size of the local market (if seen as an
independent market);
• Inflexible labour market;
• Relatively expensive general labour force
(benchmark SEE region);
• Administrative barriers - long-lasting procedures
at the local level for obtaining construction
permits, procedure for land use change,
undefined offer of industrial land;
• Insufficiently developed sectoral technological
basis;
• Inadequate level of new technology in different
industry sectors;
Opportunities: Challenge:
• Montenegro as a platform for regional business.
• Commitment of the Government to push for
further economic development;
• Reform of education in accordance with the
needs of developing sectors in Montenegro;
• Further improvement of the labour legislation;
• Planned development of the infrastructure;
• Further liberalization of the fiscal system;
• Further strengthening of the banking sector and
financial intermediaries;
• Avoidance of double taxation;
• Free trade zones in the Port of Bar (firms are
exempted from paying corporate taxes).
• Exemptions from paying profit tax (in the three-
year period) for establishment of legal entities in
the less-developed municipalities (manufacture);
• Speedy privatization of the energy sector and its
further development;
• “War in fiscal incentive measures” among
countries in the SEE region;
• Implementation gap;
• Level of transparency and efficiency of the
administrative system;
• Slow-pace reforms in the area labour legislation;
• Low level of reinvestments and potential outflow
of foreign capital through transfer prices and
repatriation of profit;
• Inflexibility of the labour market (slow pre-
qualification, additional education programmes,
compliance of education programmes with
investors’ needs).
Monetary and Banking System
The annual inflation rate amounted to 7.2%, measured by the cost-of-living index (aver-
age January-December 2008 in comparison to January-December 2008). The reasons
for this high inflation are both internal and external. The most important external reasons
are connected with the increase in oil and food prices on the world markets. On the
one hand, the internal reasons are the result of removing price disparities (increases
in electric power prices and fixed telephone service charges), and on the other, the im-
mediate consequence of significantly increased aggregate demand. It should be also
taken into account that anti-monopolistic policy still does not function satisfactorily.
However, it should be also borne in mind that the inflation rate was on the increase in
almost all countries in 2008, both developed and in transition.
Source: MONSTAT, EBRD
I have visited every municipality in Montenegro and have met literally thousands of people. I have dis-
covered that there is a wealth of investment opportunity here. . .These include the development of very
attractive and unique sites such as Ada Bojana, Velika Plaza, Valdanos and so on. Additionally there
are several important state-owned companies that have yet to be privatized which also will serve as
opportunities to bring foreign investors to Montenegro. I also see the possibility that many large inter-
national companies that are looking to expand their business interests into the Western Balkan region
could find Montenegro attractive because of its competitive corporate tax structure.
Roderick Moore, Ambassador of USA to Montenegro,
Montenegro Business Outlook #26, September, 2008
Strong performance in recent years, but slowdown ahead
Montenegro has made significant progress in overhauling its economy. The last five years have seen
inflation performance improved through the adoption of the euro as sole legal tender; banking sector
restructuring; significant privatization; strengthened market infrastructure; and progress in fiscal con-
solidation. These efforts have been rewarded by strong foreign investor interest, particularly in tourism,
construction, and banking. Credit growth has soared, stimulated by surging deposits and keen competition
in the largely foreign owned banking sector. Demand has boomed, supported by credit, increased wealth
from real estate sales to foreign investors, and expectations of continued strong economic growth. As
a result, GDP, employment and wages have grown strongly, while the registered unemployment rate
has halved from 20 percent in 2005 to under 11 percent recently.
A sharp deceleration in growth is expected in the near term as the global outlook dims. With limited bank
financing from parents because of global financial turmoil and a reduced risk appetite, credit growth is
expected to decline to low single digits at best in 2009. Global recession is also likely to have an adverse
impact on tourism, FDI, and confidence. In addition, falling aluminum prices have depressed production
and generated losses in the aluminum company. Thus, we project that GDP growth will decline to around
2 percent in both 2009 and 2010, albeit with a substantial margin of uncertainty around this forecast.
Downside risks include the possibility of sharp increases in bad loans-particularly those related to the
real estate sector-and disruption in banks foreign financing. On the other hand, upside risks include the
possibility of larger than expected FDI, as in a small economy like Montenegro a few large projects can
make a significant difference.
International Monetary Fund, 2008 Article IV Consultation,
Preliminary Conclusions of the Mission, December 16, 2008
Annual Inflation Rate (%)
4,5
5,4 5,6
4,6
8,1
6,2
1,5
2,4
2,8
7,7
5,3
7,2
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
2003 2004 2005 2006 2007 2008
South-Eastern Europe Montenegro
20 21

According to Monstat, annual inflation was 6.9% in 2008, calculated based on the CPI
index. The first inflation rate measured by CPI was published in July of 2008. This is
the internationality comparable index used by the Europen Union, which will also be
used in the forthcoming period as the main inflation indicator.
Monetary development in 2008 took place during the financial world crises. The three
quarters of 2008 was characterized by:
• More moderate credit activities according to the limits predicted by measurements
of the Central Bank;
• In additional to the slowing down of credit growth, deposits increased slower than
credits during the eight months of 2008
• Insignificant oscillation of the interest rate. Stagnation or mild growth of the lend-
ing interest rates are expected, contributed to by the pressure on the increase
of the reference interest rate by the European Central Bank. In regard to the
deposit interest rate, a mild growth is expected primarily due to an increase in
competitiveness on the banking sector.
The following table shows some other significant monetary indicators of the Montenegrin
banking system:
Description/Period
2007 IX 2007 IX 2008
IX 2008
XII 2007
IX 2008
IX 2007
EUR million in % in %
Money supply M21 2,728.2 2,500.4 2,968.0 +8.8 +18.7
Banks` assets 2,976.4 2,532.2 3,515.3 +18.0 +38.7
Total loans 2,246.6 1,811.0 2,852.3 +27.0 +57.5
Corporate loans 1,364.4 1,085.8 1,687.4 +23.7 +55.4
Household loans 795.0 651.0 1,049.4 +32.1 +61.2
Total deposits 2,091.1 1,820.0 2,326.0 +11.2 +27.8
Corporate deposits 643.5 551.7 641.6 -3.3 +16.3
Household deposits 1,019.3 923.0 1,114.1 +9.9 +20.7
Allocated reserve requirements 259 256.5 287.5 +11.0 +12.1
Source: Central Bank
At the end of the third quarter, the banks` assets amounted to almost EUR 3,509.7 mil-
lion, which is 38.7% higher than in the same period or 18% higher compared with eight
months of last year. Deposits exceeded the amount of EUR 2,325.9 million, which is
27.9 % higher than in same period last year.
In addition to an unsatisfactory loan/deposit ratio and maturity mismatch, the banking
sector is characterized by liquidity and safety, as well as a high level of performing as-
sets. The maturity structure of deposits improved but it is still not satisfactory.
Total money in circulation (Monetary aggregate M21) amounted to EUR 2,968 million
at the end of September. For the first eight months, it increased by 8.8%, while the an-
nual growth amounted to 18.7%.
According to the main liquidity indicators, during the first eight months of 2008 the
banks regularly settled their current liabilities and maintained their liquidity above the
prescribed minimum. Total banks’ assets available for payments were EUR 453 million,
while the average realized payment was EUR 46.4 million. On the basis of development
in available funds and effected payments, which were constantly lower than the avail-
able funds for payments, the average surplus was EUR 406.6 million.
The three quarters of 2008 were characterized by a more moderate growth in all bank
loans as a result of the Central Bank credit limits measures. At the end of September
total loans amounted to EUR 2,852.3, which is 27% higher than at the previous year-
end, while the annual amount increased to 81%.
Credit growth slowed in the eight months of 2008. compared to the same period of the
previous one, affecting all sector. The following graph shows the structure of loans by
activities and percents at the end of September 2008:
22 23

The most important part of the Montenegrin
Fiscal Policy is the development of a tax
system based on low tax rates, a broad tax
base and a minimum of tax excluding entities.
In that sense a lot of effort has been given
to developing such a tax system, which is in
line with a fully operational market economy.
These efforts started in 2001, and since then
Montenegro has made an important step to-
ward meeting the EU standards in this field,
as well as becoming competitive with other regional markets. In fact, 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. That can
be seen by looking the following graph:
Source: MIPA based on IPA countries statistics
Moreover, the VAT rate amounts to 17%, with the implementation of the rate of 7% on
some categories of products and services. Again, it can be argued that Montenegrin
VAT is very competitive with respect to other regional countries as can be seen from
the following graph:
Finally, according to gov-
ernment projections the
planned personal income
tax rate for 2010 should be
equal to the corporate in-
come tax rate, or 9%, which
is lower than on any other
regional market. In 2008
the personal income tax
rate was 15% but in 2009
it was reduced to 12% and
it will be 9% in 2010.
Source: worldwide-tax.com
Total bank deposits amounted to EUR
2,325.9 million at the end September, reach-
ing an amount which is 11.2% higher than
end of previous year, while 27.8% higher
than same period of previous year. Of the
total amount on deposit, 8.3% related to
non-interest deposits, while 91.7% referred
to interest bearing deposits. In additional
to the reduction in credit growth, deposits
increased slower than credits during the eight months of 2008. Observed by sector
more deposits are from households – 47.9% and it is not satisfactory as it indicates less
diversification, and thus larger exposure of banks to certain sectors.
The following graph shows the structure of deposits by activities at the end of Sep-
tember 2008:
Fiscal policy
Fiscal policy in 2007 was implemented in accordance with the Economic policy objec-
tives and represents a continuation of the policy from previous years. High growth in
current budgetary revenues was recorded every month as a result of enhanced indus-
trial and economic activity, efficient payment of tax obligations, as well as improved
financial discipline. All of this produced a budgetary surplus and enabled the financing
of budgetary expenditure from real sources. Furthermore, satisfying all obligations to
international financial institutions on a regular basis was made possible, as well. This
trend continued in 2008.
9 10 10 10 10
16 16
20 20
22
0
5
10
15
20
25
M
ontenegro
M
acedonia
Serbia
Bosnia

H
erzegovina
Bulgaria
R
om
ania
H
ungary
C
roatia
Albania
Slovenia
Corporate Income Tax (%)
24 25

2. Dependence on a movement to the world aluminum market.
3. International marketing of tourist services, and Montenegro as a touristic destina-
tion, is very exposed to external influences.
4. Additional funding for infrastructure projects, especially the highway Bar-Boljare.
5. Increasing pressure on the state budget for a download of obligation in the EU
process.
The Ministry of Finance, working with the Central Bank, developed two macroeconomic
scenarios in accordance with two fiscal scenarios. Depending on the varients in growth
rates, the scenarios provide a different estimation of the sustainable budget deficit and
the financing of consumption. Based on the “realistic” scenario, the deficit in 2009 will be
2.40% of GDP, in 2010 1.2% of GDP and 2011, the budget deficit will be 0.6%. Based
on the “crisis” scenario, the deficit in 2009 will be 2.44%, in 2010 1.64% of GDP and
2011, the budget deficit will be 0.71%.
Capital Market
The year 2008 has been the hardest year in the short history of the Montenegrin capital
market. This is more obvious if we compare it with the previous year, which was the
most prosperous. This situation is a consequence of the simultaneous influences of
political and economic factors. The first half of 2008 was predominantly characterized
by political influence whilst the global financial crisis affected the second half of year.
The turnover of the Montenegrin exchanges in 2008 amounted to EUR 160 million,
which is 4.5 time lower than the turnover seen during 2007. During the last year, 83,348
transactions were concluded. The average monthly turnover amounted to EUR 13.3
million, while on average 6,945 transactions were carried out on a monthly basis.
In the total turnover structure, compa-
nies’ shares accounted for 70.4% of
the total turnover, followed by Invest-
ment Funds shares at 17.3%, while
turnover in various bonds amounted
to 12.3%. Compared to the previous
years, Investment Funds shares and
shares turnover decreased, while
the number of bonds increased. As
a matter of fact, Investment Funds
shares trading recorded a decline
of 80.3%, while the trading of bonds
increased by 18.5% in comparison
with the previous year. Shares turn-
over amounted to EUR 112.9 million
and was 30.5% lower than in the
previous year.
According to the data from the Ministry of Finance, the current total budgetary revenues
amounted to EUR 1,340.02 million in 2007, or 47.72% of the estimated GDP for 2007.
Public spending in 2007 amounted to EUR 1,161.77 million, or 41.37% of GDP. The
total participation of the current public expenditure in 2007 was EUR 974.51 million,
which was 37.70% of GDP for 2007.
The period 2007-2008 was characterized by a high level of budget and public revenue,
the service of all legal and budgetary commitments, the surplus over the established
public expenses and an increase in public sector deposits. At the same time, there was a
significant increase in public sector expenditures caused by increased costs for pensions,
significant investment in the infrastructure and increased earnings in the public sector.
The summary of planned and realized budgetary revenues and expenditures of the
public sector in the period 2007-2008 is shown in the following table:
Description Actual 2007 Plan 2008 Projection 2008
mill %GDP mill %GDP mill %GDP
Curent revenues 1,340.02 47.72% 1,374.00 41.16% 1,533.11 45.93%
Consolidated public consuption 1,161.77 41.73% 1,373.64 41.15% 1,485.35 44.50%
Curent public consuption 974.51 34.70% 1,103.64 33.06% 1,178.18 35.30%
Surplus/deficit 178.25 6.35% 0.37 0.01% 47.76 1.43%
Increase/Decrease of deposit 124.57 4.4% 100 3% 103.69 3.11%
Source: Ministry of Finance
The budget surplus in the first six months of 2008 was EUR 78.1 million. Despite this
sustainable surplus, we should be careful since any more significant reduction in imports
might have an adverse effect on the budget in the upcoming period. The public debt
remains sustainable for a long period. The total public debt amounted to 31.6% of GDP
and the external debt was some 16.3% of GDP.
It can be observed that the primary budget achieved a surplus of EUR 178.3 million
in 2007. The budget surplus/deficit for the period 2002-2008, as well as the projected
surplus for 2008 is shown in the following table:
Description/Period 2003 2004 2005 2006 2007
Projection
2008
Budget Deficit/Surplus (mil euros) -45.9 -32.8 -30.1 85.1 168.4 47.76
% Participation in GDP -3.04 -1.96 -1.66 4.50 7.35 1.43
Source: Ministry of Finance
Montenegro faced the same fiscal risks as in the previous period, with increased signifi-
cance because of the deepening financial crisis. Several of the most important are:
1. Overindulgent dependence on budget revenues from source that rely on imports
– to the valued added tax, excise, taxes in international taxes and custom. Source: Montenegro Stock Exchange, Nex Montenegro
26 27

Source: Montenegro Stock Exchange, Nex Montengro
At year-end, the capitalization of the Nex Montenegro stock exchange amounted to
EUR 1.42 billion, while the Montenegro stock exchange capitalization was EUR 2.25
billion. In comparison with the previous year-end, capitalization decrease of 60.3%
was recorded on the Nex Montenegro stock exchange, and 39.0% on the Montenegro
stock exchange.
The Montenegro capital market
experienced a huge growth in
the period from September 2005
– September 2007. In fact, all
regional markets experienced
growth, but Montenegro was the
market with the highest growth
rate (595.63%)
However, even though the Mon-
tenegrin capital market suffered
losses starting from the last quar-
ter of 2007, as most other countries in the world did thanks to the financial crisis that is
ongoing for some time now, it has a huge potential for development.
Changes in turnover structure (2008, 2007, 2006 and 2005)
Turnover structure
Year Shares Investment Fund’s shares Bonds
2008 70.4% 17.3% 12.3%
2007 78.4% 19.2% 2.3%
2006 81.0% 13.9% 5.1%
2005 82.4% 9.5% 8.1%
Source: Montenegro Stock Exchange, Nex Monteengro
All three indexes
Name of the index MOSTE NEX20 NEX PIF
As of December 31, 2008 469.53 10,002.93 5,844.64
Absolute change in 2008 -1,00 -146.72 331.80
Percentage change (comparing to December 12, 2007) 77,1% -70.7% -85.1%
Max. Value 1,613.0 33,210.71 37,667.18
Min. Value 305.6 7,052.32 3,736.10
Source: Montenegro Stock Exchange, Nex Monteengro
NEX20 and NEX PIF recorded significant growth in 2007. The MOSTE index increased
by 77.1%, the NEX20 index by 89.3%, while the NEX PIF index increased by 120.8%
compared to the end of the previous year. From the beginning of 2008 all three indices
(MOSTE, NEX20, NEX PIF), which represent both stock exchanges, went down by
71.1%, 70.7% and 85.1%.
28 29

Operational conditions on the Montenegrin exchanges significantly improved at the end
of 2007 and beginning of 2008. Some earlier identified shortcomings were eliminated. For
example, in order to provide confidentiality and better protection of clients from frauds,
the Central Depository Agency introduced PIN codes in 2007. The exchanges enabled
investors to have access to the current price of any particular security via SMS. For the
purpose of reaching a higher degree of operational transparency, the data on web-sites
of exchanges started to be updated regularly, their quality improved and an overview of
„real time“- trade is made possible. Greater competition among the brokerage houses
led to an improvement in their services and of their standards of operations. A high
degree of access to historical data (prices and turnover) is now possible for all users.
Important clients can now obtain various analyses of companies’ operations (technical
and functional) as well. The balance sheets and cash flows of companies are analyzed
in more detail for the first time. On the basis of these analyses, investors are now able
to make better decisions on whether a certain share is under or overvalued, and to
protect themselves from various risks.
Several indicators show that interest in the Montenegrin capital market has good pros-
pects in the upcoming period. These indicators are:
• Establishment of the open investment funds and analysis of the possibilities for the
transformation of the existing closed investment funds into open investment funds.
• Development of custody affairs in order to make our market visible for foreign investors.
• Development of pension funds and channeling private savings into the capital market.
Real Estate Market
In the period after obtaining independence, Montenegro has become a very attractive real
estate market for both domestic and foreign investors. This is confirmed by a significant
influx in the real estate market. A stable macroeconomic situation, continued improvement
of credit ratings, favorable tax systems, simplification of business procedures, and progress
in processes of integration (EU and NATO), additionally strengthens the attractiveness of
the Montenegrin real estate market. This is especially significant for investors who regard
Montenegro as a possible starting point for future activities in the region.
Growth prices in the real estate market and the attractiveness of this sector are evi-
denced also in the region. The real estate market in the area of southeastern Europe
is expanding and represents a profitable
venture. The presence of foreign invest-
ment funds that recognize this region as
an attractive destination for investments is
growing stronger. The real estate market of
Montenegro, Croatia, Macedonia, Serbia,
Bulgaria, Romania and other countries in
the region has been the focus of foreign
investors’ attention in recent years. Char-
acteristic of countries such as Bulgaria and
Romania is that investment funds do not
often invest directly in real estate but in the stocks of enterprises that are constructing
them, and which are in demand on the local stock markets. Regional attractiveness for
foreign investors began as the result of a number of different factors including popula-
tion, as more than one hundred million people live in this region. For countries such as
Montenegro and Croatia, their attractive coastal and mountain areas have great influ-
ence. On the other hand, in less developed countries of the region, a great percentage
of people live in inadequate buildings and need to move to apartments, which leads to
a growth of demand in the market. However, it should be kept in mind that despite the
strong development of the real estate market, it is still not stable
.
Analysis of the historical data of real estate
prices for the Montenegrin coast shows
that immediately after independence was
achieved (May 2006), in relation to 2005,
real estate prices grew by about 130% on
average per square meter (flats, houses,
land and business real estates)10
. In this
period, the most interesting growth was
in the southern part of Montenegro, while
in the following period the greater scope
of real estate trade is expected to occur
in the north of the state. The real estate
offering in Montenegro is available on-line
and via printed publications of numerous foreign agencies, where the results of their
research can be found, analysis and advice for investments as well as a prognosis for
the following year. In that sense, for example, the British real estate agency „For you
property partners” rates Montenegro among the five destinations with the most inter-
esting real estate. For example, if we look at the trend of real estate price increases,
take the situation in the smallest town in Boka – Tivat – we will see that there is a real
estate price increase of over 98% over a one year period, and that currently 1m2
of a
flat is sold for 2.500 to 4.000 EUR11
.
The next table shows the prices on the Montenegrin real estate market in some of the
largest towns:
Podgorica Plot €/m2 Flat €/m2 Business premises €/ m2
Podgorica 50-1000 1400-3500 2000-5000
Niksic 30-250 600-1200 800-2000
Bijelo Polje 10-30 400-1000
Bar 200-500 2500-3500 3000-4500
Budva 500-1200 4500-7000 4000-8000
Source: Research of CEED Consulting, December of 2007
Source: Real estate market in Montenegro: Trends and expectations by CEED
10 Source: Real estate market in Montenegro: Trends and expectations by CEED
11 Source: Real estate market in Montenegro: Trends and expectations by CEED, May 2007.
30 31

According to data from the state Real Estate Agency, foreigners own only 1.393% land
in Montenegro, despite the recent expansion of the real estate trade. If we exclude
owners from the former republics of SFRJ from that category, this percentage is only
0.047. The largest amount of real estate owned by foreign persons is in Budva, Tivat,
Herceg-Novi and Kotor. Besides the coastal municipalities, foreigners own real estate in
Kolašin, Cetinje and Žabljak. Foreigners are owners of 8.49% of condominium proper-
ties, from which 7.18% relate to citizens from the former republics of SFRY. Most foreign
owners have condominium properties in Budva, and statistics indicate that within that
municipality, foreigners own one in four flats.
The value of construction works completed in the three quarters of 2008 amounted to
EUR 209.8 million, being 62.5% higher in relation to the same period. According to the
Monstat data, the value of new contracts on buildings amounted to EUR 66.7 million,
being 100.4% higher in relation to the same period. A new law was adopted on spatial
planning and buildings which included the Law on Land Construction, the Law on Spatial
Planning and Spatial Planning Building Inspection. This new law provides the stability
of conditions for construction and a simplification of procedures related to construction
of objects that should encourage new investment.
The new situation regarding the financial market and world crisis will have a negative
impact on the real estate market in Montenegro:
1. Decreased trend of credit offers for real estate projects;
2. Observing the large number of construction objects already underway and the
fact that most construction companies are highly indebted, some companies
could have problems with the repayments of their loans;
3. Lower number of foreigners interested in real estate;
4. Lower availability of housing loans.
Employment and Labour Market
In comparison to the countries in the region Montenegro has a highly educated labor
force, which was described by foreign experts as an important strategic advantage
(depending on the proper adaptation of the current school system to the future needs
of the economic structure of Montenegro, this advantage can be recognized by foreign
investors as part of the image of Montenegro)12
.
Education structure of the active population is as follows13
:
Without education 4.30%
Has not completed primary school 9.64%
Primary school 22.95%
High school 48.22%
Associate college (two years) 5.04%
Faculty 7.51%
Postgraduate, doctoral studies 0.23%
Unknown 2.11%
Source: Ministry of Education and Science
12 Source: Foreign direct investment incentives strategy of Montenegro, p. 25,
13 Data from 2006.
In order to improve its education system, Montenegro signed the Bologna Declaration.
By signing the Bologna Declaration, Montenegro undertook the obligation to become
a member of the uniform European system of higher education. The first generation
of students enrolled in accordance with the Bologna system in the academic year
2004/2005. The main point of this reform is to improve the educational and qualifica-
tion structure of the labor force and to systematically increase the percentage of young
people with higher education.
The second characteristic that attracts special attention is the price competitiveness
of labor in Montenegro. Observing the total operational costs of wages in the region14
,
Montenegro has a relatively cheaper labor force in comparison with Slovenia and
Croatia but also more expensive in comparison with Serbia, Bosnia and Hercegovina
and Macedonia. If we make a comparison with the countries in the European Union,
Montenegro is very cheap and it is one of the most important advantages of the invest-
ment ambient of Montenegro. However, the labor market in Montenegro is competitive
from the aspect of the level of education and price competitiveness.
Source: Statistical offices and central banks of the above mentioned countries
The increase in economic activities in the last several years had a positive impact on the
labor market flows. The unemployment rate (percentage share of unemployed persons
in the active population) is decreasing continuously and fairly fast: from 2003, which
was 22.59%, to 11.92% in 200715
.
In the first nine months of 2008 the number of employees was 165,314 on average, which
is 6.1% higher compared to the average number of employees in the same period of the
previous year. The largest growth was registered in the construction sector at 34.1%, ho-
tels and restaurants at 30%, fishery at 16.2%, financial intermediation at 11.9%, transport,
warehousing and communications at 11.8%, production of electricity, gas and water supply
at 8.8%. A decline in the number of employees was registered in the manufacturing industry
sector by 5.9% and the mining and quarrying sector by 1.6%.
The number of registered unemployed persons in the first nine months of 2008 was 29,861
on average, or 15.5% less than in the same period of the previous year. According to data of
14 Average wages in the former Yugoslav countries, August 2008
15 Source:Employment Bureau
32 33

the Employment Agency, in September 28,276 persons looking for employment were regis-
tered, while in October there were 28,666 registered. The lowest unemployment rate of 10.6%
was recorded in August of the current year. On the records of the Employment Agency there
were 27,954 registered unemployed persons. In October the rate of 10.85% was recorded.
The constant decline in the number of unemployed persons or the increase in the number of
employees is the consequence of the positive developments on the labour market.
The following graphs show the decreasing trend in the unemployment rate and the
comparison of unemployment rates in the region16
:
Some main characteristics of unemployment
which present current situation and trends
are as follows:
• The youth unemployment rate is rap-
idly decreasing from 40.0% in 2003, to
30.1% in 2004, 28.4% in 2005, 20.3% in
2006, while on March 14, 2007 youth un-
employment rate amounted to 19.3%17.
The problem of unemployment among
youth in Montenegro is not so significant and dominating. The share of youth unemploy-
ment is decreasing. Young people are easily finding jobs, since the employers are more
prone to employing younger than older workers.
• The share of females among the unemployed is constantly decreasing: from 56.83%18
in 2003, to 45.6% in 2006 and to 36.7% in 2007.
• The structure of the unemployed by age is as follows: 38.7% of unemployed persons
are up to 24 years of age, while 18.7% are those aged between 25 and 49, 10.0%
makes age group 50-64, and 0.0% is in the group over 65 years.
• The incidence of long-term unemployment is 55.7%, the National Employment Strategy for
Montenegro anticipates a decrease of long-term unemployment to 45% up to 2010.
• The labor market in Montenegro is characterized by an increased engagement of nonresi-
dent persons. In 2008 in Montenegro, 57,208 nonresident workers were engaged, which
is an increase of 45.73% in comparison with the same period of the previous year.
• Besides the economic growth, an active policy of employment, implemented by
the Government of Montenegro and Employment Agency of Montenegro in the last
16 Data for the projection of unemployment rates in 2008 is based on nine months of 2008; Source: Economic Policy of Montenegro
for 2009, Government of Montenegro. Data for comparison of unemployment rates in the region is from 2007.
17 EAM: Statistical reports, 2007
18 Source: Goverement of Montenegro: National Employment Strategy for Montenegro 2007-2010, Podgorica 2007.
several years, also had a positive impact on the decrease of unemployment. It has
been implemented through various programs such as: the program of support to
entrepreneurship and self-employment, the program for employment of apprentices,
the program of chances for young people, various public works, co-financing of exist-
ing jobs19 etc.
The new Labor Law was adopted in August 2008, and it presents a more improved version
than the previous Law. The new Labor Law will enable greater freedom to employers in
negotiating employment relations and greater flexibility of the labor market in general but
while on the other hand, facilitate the loss of security for employees by a better provision
of unemployment benefits and effective assistance in seeking new employment. The new
Labor Law will provide: hire and dismissal of employees according to market request; de-
creased protection of employees, which has an influence on the increase of labor market
flexibility; introduction of the concept of a minimum wage; the creation of a different rela-
tionship toward the work and business obligation.
International trade
The main characteristics of the balance of payments in the first nine months of 2008
were a high inflow of direct foreign investments, record inflows of revenues from tour-
ism, high imports and a current account deficit. According to the preliminary data, in
first nine months of 2008, the current account deficit amounted to EUR 640.4 million or
27.5% of GDP. The coverage of the foreign trade deficit by surpluses in other current
account sub-balances was 40.9%, some 24 percentage points less than in the same
period of 2007.
Structure of visible export by products in the period January-September 2008, EUR thousand
Description Value Share in %
Aluminium and product of aluminium 155,025.49 39.90
Iron and steel 70,095.96 18.04
Mineral fuels, mineral oils and product of their distillation, bitumen material,
mineral waxes
31,272.81 8.05
Beverages and vinegar 16,182.57 4.16
Product of iron and steel 16,126.66 4.15
Pharmaceutical product 14,251.15 3.67
Wood and related products; wood coal 11,053.32 2.84
Fruits, including granular fruits, citrus fruit or cantaloupe and watermelon 10,178.07 2.62
Nuclear reactors, boilers, machines and mehanic devices and their components 9,029.20 2.32
Source: MONSTAT
19 Assistance of the government to employers for preservation of existing jobs.
34 35

Structure of visible import by products in the period January-September 2008,
EUR thousand
Description Value Share in %
Reactors, boilers, machines and mechanical equipment and theirs com-
ponets
160,801.46 10.85
Vehicles, excluding rail and tram vehicles and theirs components and
equipment
152,779.32 10.31
Electrical machines and equipment and their components; machines for
recording and reproducing, TV apparatus for recording and reproduction
picture and sound
109,144.57 7.37
Mineral fuels, mineral oils and products of their distillation, bitumen mate-
rial, mineral waxes
85,212.27 5.75
Iron and steel 78,634.65 5.31
Products of iron and steel 75,267.56 5.08
Furniture, linen, mattresses, pillows and related products, lamps and other
fluorescent items, etc
66,320.83 4.48
Source: MONSTAT
A very successful tourist sea-
son and accelerated growth
in turnover in the area of
telecommunications contrib-
uted to a surplus amount-
ing to EUR 399.3 million.
The total volume of services
amounted to EUR 931.4 mil-
lion, or 24.2% more than in
the same period of 2007.
Examined by quarters, the
volume of services relied
on the tourist season and
the largest growth was re-
corded in the third quarter.
Revenues from services in first nine months of 2008 amounted to EUR 665.3 million
and increased by 12% compared to the same period the previous year. The largest
revenues were recorded in the travel sector - EUR 492.5 million, then transport - EUR
67.7 million, construction services - EUR 40.3 million and other business services -
EUR 30.2 million. Expenditures from services amounted to EUR 266 million, which is
an increase of 70.9% compared to 2007 and is the result of increases in expenditures
in the area of other business services, transport, construction services and personal,
cultural and recreational services. Observing the structure, the largest expenditures were
recorded in the field of other business services, amounting to EUR 72.1 million20
.
20 Source: Chief Economist Quartely Report (Third quarter 2008)
In addition, Montenegro signed a trade agreement with the Russia Federation according
to which all exports from Montenegro to Russia are subject to 1% customs evidence
and no taxes or duties.
Free Trade Agreement in the South-East European Region
(CEFTA)
CEFTA is the trade agreement signed between Albania, Bosnia and Herzegovina,
Macedonia, Moldavia, Croatia, Serbia, UNMIK- on behalf of Kosovo, and Metohija
and Montenegro. The agreement came into force on 22 November 2007 in all
signatory countries. The main objectives of the agreement are the consolidation
of trade liberalisation within the unique system, an improvement in investments
and direct investments conditions, visible and services and trade liberalisation, the
provision of equal conditions for competitiveness and the protection of intellectual
property. The Free Trade Agreement defines this unique free trade zone in South-
East Europe and is based on the European Union rules and the provisions of the
World Trade Organization.
36 37

Economist Intelligence Unit
- Economic policy outlook
Policy trends -The immediate policy challenge is to try to control rising inflationary pres-
sures, or at least to lessen the impact of higher food and fuel prices. This goal could lead
the government to consider targeted subsidies for certain consumers, or restrictions on
agricultural exports. Other measures could include the running of larger than planned
budget surpluses, and more urgent structural reforms to boost export competitiveness
amid rising labour costs. The pace of privatization will be an important indicator of the
authorities’ willingness to carry out reforms over the forecast period.
The government will also focus on upgrading the transport infrastructure, improving
electricity supplies and encouraging further investment in tourism, which will be an
important source of economic growth and foreign exchange over the forecast period.
Montenegro has recently liberalized its already relatively open foreign-trade regime by
joining the Central European Free Trade Agreement (CEFTA) in 2007 and implement-
ing the trade-related provisions of the SAA with the EU from January 1st
2008. Foreign
trade will become more free still in 2009-10 as a result of the country’s efforts to join
the World Trade Organization (WTO).
Fiscal policy - In 2007 the budget recorded a much larger than forecast surplus,
equivalent to an estimated 8.1% of GDP, as strong economic expansion led to higher
than expected tax receipts. This trend continued in the first half of 2008, as strong retail
sales led to buoyant revenue from the value-added tax (VAT), the single largest source
of budget income. We expect that the budget will continue to show sizeable annual
surpluses in 2009-10. The authorities plan a further reduction in the rate of personal
income tax, from 15% currently to 12% in 2009; another cut, to 9%, in 2010 will equalize
the rate with the rate levied on corporate income.
Monetary policy - The adaptation of the euro as legal tender in Montenegro means
that the Central Bank of Montenegro cannot influence the money supply, which is deter-
mined by flows on the balance of payments. This puts a greater burden on fiscal policy
in responding to economic shocks. The Central Bank will focus primarily on supervising
rapid growth in commercial bank lending, which is raising concerns about the banks’
ability to assess risk. The Central Bank introduced a range of measures, with effect
from January 1st
2008, aimed at slowing year-on-year credit growth, which exceeded
180% in October 2007. These measures include limits on banks’ annual credit growth,
higher solvency ratios and a tighter loan classification. Lending growth is slowing, but
was still 75% year-on-year in July, and the Central Bank may consider further tightening
measures should the current-account deficit fail to narrow significantly during 2008.
8. Growth Vechicles
Montenegro is a country of diversified possibilities and thanks to that one of the newest
hot spots in Europe. A key reason for growth possibilities is a very competitive institu-
tional framework. Today’s comparative advantage does not rely on natural resources
but first of all on the institutional and business environment framework and knowledge.
Although no one knows and can’t predict which sector will be attractive for investments,
some of them have already been singled out. Tourism, agriculture, energy, and the wood
processing industry are sectors with significant growth potential in Montenegro.
Tourism
In the relatively small area of Montenegro, nature has produced unique contrasts: the
quality and diversity of its natural and anthropological values makes Montenegro one
of the most attractive regions in the Mediterranean. Over a span of only 100 km in a
straight line, three natural environments are distinguishable: the seaside, the karts field
zone and the high mountain region.
Thus, the tourist has the possibility of taking a swim in the lakes or in the sea, rafting
down the river and skiing on the mountain slopes - all in one day. The tourist accom-
modation capacities are 150,000 beds, of which 37,000 are in basic-type facilities
(hotels, motels, pensions, tourist village). On Montenegro’s seaside (the coastline of
293 km) there are numerous sand and pebble beaches – 117 in total, 73 km length of
which sand beaches make 33 km.
38 39

Tourism remains the branch with the most dynamic development and it also affects the
accelerated growth of other related branches. Tourism development is very important,
for it largely influences the development of transportation, telecommunication, food-
processing and the furniture industry, as well as a whole set of other branches. The
tourism industry in Montenegro recorded of increase for the fifth year in a row, and a
positive trend is certainly the fact that the average number of tourist overnight stays
increased. The number of tourists who visited Montenegro in 2008 and the number
of recorded overnights were respectively 4.8% and 6.8% higher than in 2007. For the
first time since 1989, more than a million tourists (1.13 million) visited Montenegro in
2007, while a record number since 1989 were recorded in 2008. In comparison with
the previous year the number of foreign tourists increased by 4.7%, while the number
of domestic tourists increased by 4.9%. Foreign tourists represented 86.8%, while
domestic tourists represented 13.2% of the tourism total.
Source: MONSTAT
According to the economic policy for 200821
, anticipated revenues from tourism will be
approximately EUR 613 million, which is 5% more than in the year 2007. Having in mind
the expected impact of the financial crisis in the region, it is predicted that the physical
parameter of turnover in tourism will be at the previous year’s level.
In 2009, activities in the area of tourism will be directed toward the creation of a rec-
ognizable Montenegro as a Mediterranean destination, whereby the key importance
will be the increase of a quality tourism offering in the littoral area by developing high
quality tourism resorts and improving the quality of existing ones. At the same time
activities are being carried out within the overall sustainable development concept,
based on the nature oriented tourism that represents a development opportunity, in
particular in the segment of valorization of tourism potentials of the hinterlands and the
mountain region.
21 Source: Economic Policy of Montenegro for 2009, Government of Montenegro
“Montenegro is small in area, but its comparative natural advantages, its richness in
cultural and historical sights and others features, make it one of the most attractive
receptive tourist destinations.”
“A marked disproportion in the physical distribution of the accommodation results
in that numerous, highly attractive, ecologically appealing and very demanded tour-
ist potentials be on the margins of development and present a good ground for
international investments.”
The United Stated Agency for International Development (USAID)
40 41

Telecommunications
Development of the telecommunication market in Montenegro is very similar to other
developing countries in the region. The most important indicators show positive trends
in comparison with previous years.
• The population is more knowledgeable about ICT implementation;
• Usage of PCs among companies in Montenegro is increasing;
• Number of PCs in households is increasing;
• Number of households with Internet connection is increasing;
• 3G system is developed in the area of mobile telephones;
• Competition among operators of mobile telephones is growing.
The telecommunication sector is 100% private. There are two fixed phone providers
(T-Mobile and M:tel, Serbian-Dutch Consortium) as well as three mobile phone opera-
tors (Norwegian Telenor, German T-Com and M:tel).
The network is 100% digitized, with a fiber-optic
base. There are two international switches that
have been working as transit switches. These
are used for the transition of traffic from the local
switches that are placed in other Montenegrin
municipalities. Complete communication between
switching capacities is organized by using solely
fiber-optic cable that guarantees high quality
communication.
Data which demonstrated the high level of development in the telecommunication sec-
tor is showed on next table:
INDICATOR
Telecommunication network: Number of fixed-line users (000) 176
Fixed lines penetration (%) 28.4
ADSL Providers 2
Number of WIMAX licensed providers 4
Mobile phone providers 3
Mobile phone penetration ( %) 168.7
Mobile phone users 1,045,981
Households with PC (% of homes) 47
Internet penetration (%) 38.31
Licensed Internet providers 13
Licensed Internet providers (active) 5
Source: ISSP, Agency for Telecommunication
Montenegro has a significant potential for ICT sector investments. This is especially
true for the Internet service area, which will be developing very fast with the increase
of the educational level of Montenegrin citizens.
At this point there are fifteen licensed Internet Service Providers in Montenegro, only
four of which are currently operating and those are: T-Com Montenegro, MontSky, M-tel
and MNNews. The largest two are: T-Com Montenegro and Montsky.
Transportation and Infrastructure
Montenegro is connected to the world through road, railway, maritime and air transpor-
tation. In recent years, Montenegro has invested significantly in the road infrastructure,
in order to enable faster, safer and more pleasant travel into the country.
The network of roads in Montenegro is around 7,000 km, out of which 1,850 km relate to
main and regional roads, whereas 5,150 km relate to local and non-categorized roads.
About 92% of the regional and main roads are paved with asphalt, as well as around
50% of local and non-categorized roads. The density of the main and regional roads
is 13km/100km2
. There are 312 bridges and 136 tunnels thereon. More than 2/3 of the
regional and main roads are more than 25 years old. The main problem of Montenegro
42 43

road network is the non-existence of highways. Therefore the Ministry of Transportation
launched a tender for the construction of the South-North corridor of the highway and
is currently preparing the necessary documentation for the West-East corridor.
Montenegro has two airports in Podgorica
(the capital city) and in Tivat (the city on
the sea side). The Airport in Podgorica
was fully reconstructed in 2006. The air-
ports’ modernizations improved the quality
of services for passengers and planes, as
well as the level of security and safety at
the Podgorica and Tivat airports.
The Montenegro railway network is 250 km long and is single track, electrified and
normal gauge. The track links the Port of Bar to Podgorica then Bijelo-Polje (and then
up to Belgrade, the capital of Serbia) and Podgorica to Nikšić, with a link to Albania via
Tuzi. Both tracks are for passengers and cargo transport (currently the Podgorica to
Nikisic track is in the process of restructuring).
In Montenegro there are 4 passengers and cargo transports ports, namely Bar, Herceg
Novi, Tivat, and Zelenika. The most important port is the port of Bar with 95% of the
share in passenger and freight transport. Its capacity is from 14 to 20 boats depending
on the both type and size. The Zelenika harbor (with 270 m and 92 m in depth) is used
only for cargo transport, with selling and warehousing the main activities. The Kotor
harbour consists of the Kotor bay with the operative coast of 216m in length and 3 to
12.8 m in depth, Lipici terminal with a 75 m long operative coast and the small harbour
of Bigovo, located on the open sea.
In the first nine months of 2008 an increase in the transport of passengers was recorded,
air transport by 10.2% and railway transport by 9.5% (measured by passengers’ kilo-
meters). Road transport showed a decline at 13.7% in comparison to the same period
of 2007. The most important reason for the increased frequency in air transport is the
establishment of new regular air routes (Zagreb and London) and a successful summer
tourist season. On the other hand, the increase in railway and decrease in road transport
can be explained as the reorientation of passengers away from road transport, due to
the unfinished works on reconstruction of certain roads and the recovery of damaged
parts on certain routes until the summer season.
The scope of operations in the Montenegrin transportation sectors is shown in the next table:
INDICATOR 2007
RAILWAY TRANSPORT
Passengers (in thousands) 1,188.2
Passenger kilometres (in thousands) 124,500
Goods in thousands tones 1,761.3
Tonne-kilometres in thousands 184,957
Length of railway network (lines in operation, km, 000)22
0.250
LOCAL TRANSPORT
Passengers in thousands 1,491
AIR TRANSPORT
Transport of passengers 1,034,031
Air plane traffic 8996
Transport of goods in tonnes 1,320
ROAD TRANSPORT
Passengers in thousands 5,738
Passenger kilometres in thousands 141,247
Bus kilometres in thousands 17630
Goods in thousands tonnes 2,131
Tonne-kilometres in thousands 91,786
Truck kilometres in thousands 16,269
MARINE TRANSPORT – transport of goods
Transport of goods in thousands tonnes 785
Tonne miles in millions 409
MARINE TRANSPORT
Total turnover (tonnes) 2,071,310
Internal turnover (tonnes) 1,825
Export (tonnes) 791,509
Import (tonnes) 1,280,327
Source: MONSTAT, Railways of Montenegro
The condition of the transportation infrastructure cannot be assessed as satisfactory.
Since the transportation infrastructure and its organization contribute to the effective
use of the economic potential in Montenegro, and transportation itself has a significant
share of total GDP, a set of activities were undertaken in order to improve the relevant
segments of the overall transportation. Namely, a cooperation agreement was signed
with the World Bank and the approach of implementing the projects for motorway con-
struction in three stages in Montenegro was accepted.
44 45

The planned improvement of the Road Infrastructure for 2009 are shown in next table
as a Capital budget for 2009 through the Directorate of Transportation22
Description million EUR
Directorate of Transportation 94,6
Road Risan-Grahovo-Žabljak 5,5
Mantainance of State Roads 22,0
Reconstruction of Road Boan-Bukovica 1,5
Projecting the Adriatic-Ionian highway 1,0
Salvation of bottlenecks in transportation network 23,4
Third bar on the main roads 7,0
Project preparation of Highway Bar - Boljare, part Mateševo -Andrijevica 23,5
Mantainance of railway infrastructure 9,7
Recategorisation of roads and building crossroads 1,0
The primary planned investments in infrastructure for the next period as defined by
Ministry for Martime Affairs, Transportation and Telecommunication are:
Project Time of realization Value of investment
Reconstruction of railway Bar-Boljare 4 years 33.000.000
Reconstruction of railway Podgorica-Niksic 3.5 years 57.000.000€
Reconstruction of infrastructural objects in the Port of Bar 8 years 34.700.000€
Construction of the highway Podgorica-Matesevo 5 years 235.000.000€
Start function of the airport in Berane 2.5 years 22.000.000
Source: Ministry for Martime Affairs, Transportation and Telecommunicatio
Industry
Over the last 50 years, the industry has been
the chief carrier of the economic development
of Montenegro. In that period, the growth of the
power industry, metallurgy (steel and aluminum),
and transportation infrastructure became the
basis for the overall development.
Three major industrial sectors are the manufac-
turing sector, the utilities sector (electricity, gas
and water), and the mining sector. Production
within the “manufacturing sector” represents
76.4%23
of the total industrial production.
22 Source:Economic and Fiscal Programme of Montenegro for 2008-2011, Ministry of Finance
23 Data is for 2007; Source: MONSTAT
Industrial production in Montenegro decreased by 2% for the period of January – De-
cember 2008 compared to the same period the previous year. Observed by sector, there
was an increase of 31.9% in the electricity, gas and water sector and 17.7% in the mining
and quarrying sector, while the manufacturing industry registered a production fall by
11.3%. Production decline was largely due to the decline of the manufacture of basic
metals and metal products by 12.9%, which has an overall production share of 48.9%.
The decrease in overall industry production is due to a great extent to the decreased
production of the Aluminium Plant of Podgorica, as it holds 45% of the total Montene-
grin industry output, which is primarily caused by the global economic problems and a
dramatic decline in the price of aluminum on the international steel market.
The energy system of Montenegro represents a small system with 285,000 users, with
demand of around 4500 GWh. From year to year a deficit of electricity is evidenced
in Montenegro and this problem should be solved with the privatization of The Power
Company of Montenegro. One of the most important industrial producers - The Power
Company of Montenegro, produces approximately 20% of the total industrial production
in Montenegro. The majority of electricity in Montenegro is produced in: Pljevlja Thermo
Power Plant, Perucica Hydro Plant and Piva Hydro Plant. The total actual production
of the three plants was 20% above the planned level. The total actual production of the
two hydro plants was 715,043 MWh, or 71.2% of the total executed electricity produc-
tion. The remaining production came from the thermal plant Pljevlja.24
Montenegro has good preconditions for the development of hydro and thermal-electrical
plants, as well as the potential for some new types of production such as solar energy and
wind energy. Only 17% of Montenegro’s potential has been developed, while the consump-
tion of electricity is at a higher level than production, which means that there are great
opportunities for new energy sources. In addition, an important factor for the development
of this sector is Montenegro’s highly developed transmission and distribution network.
Wood Processing Industry and Forestry
The wood processing industry, together with forestry, represents a significant economic activity
in Montenegro, though more as a potential than by the current performance. The raw materi-
als and considerable capacities constitute a good basis for a much larger level of production,
as well as a greater share in the total domestic product, export and employment.
24 Data is from the first quarter of 2006; Source: MONET 23 Institute for Strategic Studies and Prognoses
46 47

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