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April 2011

Business Environment in Montenegro The business environment in 2011, due to activities planned by the Government of Montenegro, will improve in several areas. Certain activities will be carried out in order to help businesses to grow further and also to minimize the effects of the economic crisis in Montenegro. • If we look at the statistics for industrial production in Montenegro in February 2011, a decline of 8.4% was recorded in comparison with the same month of the previous year, and for the period January-February 2011, a decline of 5.0% was recorded in comparison with the same period last year. If the statistics are examined on a sector by sector basis for the period January-February of this year, when compared to the same period of last year, two sectors can be seen to have recorded a growth in production: coal and stone mining increased by 16.1% and the processing industry showed an increase of 26.5%. However, during the same period, the production of electrical energy, gas and water recorded a decrease of 9.3%. A number of changes regarding the way that wages are calculated in Montenegro were implemented from 1st January 2011. Instead of the previous level of the minimum wage which was €55, a new rate for the minimum wage was introduced. The new level is €146 which is in line with the poverty rate that was calculated for Montenegro. The level for the minimum wage is calculated as follows: the wages for full time work during one month (176 hours) are calculated using the formula (wages are equal to the initial part of the wages plus a specified coefficient, depending on the level of education completed, multiplied by the calculated value of the coefficient and by the number of worked hours, and then divided by 176). The calculation value of the coefficient has been set at a level of €90. The initial part of the wage has been set at a level of €49.5 (until 30th June 2011). The average gross wage for February 2011 was €754, and the average net wage was €506. Law on foreign investment In order to further improve conditions for foreign investment, the Government of Montenegro has prepared a new Law on foreign investment, and this has been adopted by Parliament. The new Law defines the structure of foreign investment and the rights and obligations of investors, whilst also protecting and promoting issues related to foreign investment. According to the Law, a foreign investor is ‘a foreign person, both physically and legally, a company with more than 10% of foreign ownership, a company in Montenegro established by a foreigner etc. Foreign investment, according to the Law, is investment in money/capital, assets, services, property rights and shares. A foreign investor will continue to receive the same treatment as a native in Montenegro, which means that all activities can be conducted in the same way as they would be in a national company. The only limitation regarding investment in the area of military industry, is refered to foreign ligal entity in the way that it is not permitted to own more than 49% of the total assets. In order to promote foreign investment, which is contributing to the economic development of Montenegro, the Government of Montenegro will adopt a five year strategy aimed at the promotion of foreign investment. The strategy will, among other things, contain an analysis of the current conditions regarding foreign investment, an analysis of the obstacles that stand in the way of investment, along with ways of potentially removing any such obstacles, and an analysis of investment possibilities by area, field and designated market, along with possible incentives for foreign investment and other activities related to the promotion of foreign investment. Promotional work will continue to be carried out by the Montenegrin Investment Promotion Agency (MIPA). Other articles in the law relate to defining, in detail, the work of the Agency, the process of collecting statistical data about foreign investment, issues concerning the resolution of disputes, and other issues related to foreign investment. During the spring session of Parliament, a number of laws relating to the business environment were adopted. Some of these include amendments to the Laws on tax administration, administrative taxes, sea protection due to pollution from vessels, regional development, takeover of joint stock companies etc. /Some of these laws will be elaborated in the next issue of the Montenegro Business Outlook./

Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Business Statistics and Data

Business Registration Statistics (Number of registered companies in Montenegro as of 1st of April 2011)

Joint Stock Company

362

Limited Liability Company

24,447

Part of a Foreign Company

430

General Partnership

62

NGO

291

Limited Partnership

441

Entrepreneur

16,861

Institution

1,061

Other

109

Total

44,064

Tax Rates 17%, 7% and 0%

Value Added Tax Corporate profit tax

9%

Personal income tax

9%

Source: Commercial Court

Economy Statistics Selected indicators

2010

Population

2011 625,082

Real GDP (billion)

3.025

*

Real GDP growth

0.5%

*

Inflation rate (average annual CPI) I 2010/ I 2011

0.8%

1.1%

Unemployment rate III 2010/ III 2011

12.63%

12.48%

Net FDI (million) I 2010/2011

24

56.3

* No data available for this quarter Official currency

Euro

Source: Ministry of Finance, Central Bank of Montenegro, Monstat, Montenegrin Investment Promotion Agency (MIPA), Employment Agency

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