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August 2011

Business Environment in Montenegro It seems that the world economic crisis remains as one of the biggest barriers for the growth of Montenegrin economy. However, the Government of Montenegro keeps making and adopting the new Laws in order to reinforce the development of the economy. It is clear that the business indicators for the second quarter of 2011 have shown a slight decrease compared to the same period last year.

Looking on a sector by sector basis, during the period of January-May 2011, and in comparison with the same period last year, two sectors recorded a growth in production: coal and stone excavation increased by 7.6% and the processing industry increased by 11.4%. However, production levels in the fields of electrical energy, gas and water recorded a decline in production of 27.8 % during the observed period. Industrial production in Montenegro in May recorded a decline under all indicators: for the period January-May 2011. When compared with the same period last year, the level of decline was 9.1%, in relation to the previous month, the level of decline was 14.5%, in relation to average monthly production, as recorded during last year, the level of decline was 29.5% and in relation to the same month of 2010, the level of decline was 24.4%. The total value of the minimum consumer basket in May 2011 was €772.59 which comprised €269.64 on food and beverages, €333.97 on non food products and services and €168.98 on the imputed value of rent. At the end of May, according to data from the Central Bank of Montenegro, out of a number of 55,602 legal and physical persons

registered for doing business, 14,754 had blocked accounts. This data refers to April 2011 and shows an increase in this area of 0.82%. The total value of debt from these blocked accounts was €302,295,020.11, which was an increase of 2.48% when compared with the month of April. The Montenegrin Parliament, during this period, worked more on other laws that did not concern business. Also, during this time, a significant number of laws were prepared with the expectation of being adopted by parliament during sessions in June and July. Some amendments that were adopted during the previous period included changes to the Law on Administrative Taxes. The most important changes related to decreases in the levels of taxes for issuing ID cards, travel documents, travel papers and visas for foreigners, as well as replacing the foreign driver’s license with a domestic one, the registration of vehicles for diplomatic representatives, etc. Also, fees were cut for the notarization of contracts by the court, and also for some construction services and types of geological work. This will have a positive impact on businesses and also on foreigners who want to establish business/reside in Montenegro as some of the previous taxes/ fees were relatively unrealistic.

Law on Regional Development One crucial law for the future development of Montenegro was adopted in April by parliament. It is the Law on Regional Development which sets out the basic standards and parameters for regional development in Montenegro. Incentives for regional development in Montenegro are set in this law through the following principles: sustainability, solidarity, equal opportunity, partnership, strategic planning, joint financial resources, evaluation, independency of local governments and publicity. In order to plan development priorities and to conduct the policy of regional development a number of activities of the local authorities are being divided into regions. Regions have been designated as the Seaside Region, the

Central Region and the Northern Region of Montenegro. The law prescribes the adoption of any necessary documents for regional development, such as the Strategy of Regional Development of Montenegro, the Regional Development Strategy and the strategic plans of individual local governments. The law also states that local governments will, in future, be ranked according to their degree of development, along with their level of competitiveness. This will be interesting for businesses, as currently such data is unavailable and would be useful for investment planning amongst other things. Also, a partnership forum for regional development will be formed and will consist of various representatives from the ministries, municipalities, the business sector etc.

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 July 2011)

Joint Stock Company

361

Limited Liability Company

24,876

Part of a Foreign Company

430

General Partnership

62

NGO

293

Limited Partnership

437

Entrepreneur

17,097

Institution

1,078

Other

109

Total

44,743

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

2011

Population (625,082 in 2003)

-

625,266

Real GDP (billion)

3.025

3.192

Real GDP growth

0.5%

2.5%

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

0.8%

2.8%

Unemployment rate VI 2010/ VII 2011

12%

11,19%

Net FDI (million) I-V 2010*/ I-V 2011*

206

170

* Preliminary data Official currency

Euro

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

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