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ISSN 1800-8739

November 2011 A QUARTELY REPORT #38

CEED Consulting

Business Environment Macroeconomic Outlook Banking Sector Privatization and Investments Capital Market Business News Economic Freedom In the Spotlight Coming Up

MBO Summary Welcome to the thirty eight edition of Montenegro Business Outlook. MBO is quarterly publication of pertinent economic indicators presenting a comprehensive view of Montenegro’s business environment. This publication is intended to serve international business people seeking investment opportunity in Montenegro. We welcome your comments.

Business environment: Real GDP growth forecasts for Montenegro amounts from 4.3% to 1.0% in 2011, and from 7.3% to 2.2% in 2012 (forecast). The decision comes in light of a grimmer picture for eurozone growth that is going to affect Montenegro’s exporters. However, the type of export can be improved by including more finished products and services and by reducing the number of semi finished products and raw materials. Furthermore, with public debt hovering towards the 45% of GDP level, we believe that countercyclical measures to sustain growth will be off the cards. Macroeconomic Outlook: The indicators in the third quarter of 2011 were as follows: monthly

inflation (CPI), in September 2011 was at the level of -0.1%. Budget revenue in August 2011 increased by 0.6% in comparison with its predicted value, and net FDI inflow during the period January-August 2011 decreased by 38,5% in comparison with the same period in 2010.Overall situation at macroeconomic level is stable even though the consequences of the crisis are still present.

Economic freedom: Doing Business report (Doing Business 2012) is made with the purpose of creating the overall review of the actual business policies regarding starting and running a business. The number of newly established businesses indicates the health of every economy. Open market and fair competition are the best judges of success in doing business, therefore creating well arranged and functional legislation environment is a crucial condition for economy development. Capital Markets: In the last couple of years, it is noticable the downward trend in volume and amount of transactions. The reasons for this can be found in slow process of privatization and lack of investment in the existing listed companies. The volume of trade in capital market during the first nine months of 2011 resulted in reduced growth in stock by 69% when compared with the same period last year. Banking sector: According to the latest report from the eighteenth meeting of the Council of

the Central Bank of Montenegro, this evident increase in bank assets along with a greater level of deposit potential was viewed as an indicator that confidence is growing in the banking system. Despite a slight improvement in assets, there were still concerns about a growing trend of overdue loans. The banking system is still taking risks with credit, due to the fact that the Montenegrin economy has not yet recovered.

Expert’s opinion: A Small Business Act for Europe “Think Small First”, Mrs. Marija Iličković, Deputy Director of the Directorate for SME development. Investment and Privatization: Process of privatization in Montenegro slowed down due to the

influence of the world crisis. However, the Government is making additional effort to promote the companies and resources in Montenegro in order to accomplish the goals made in the Privatization plan for 2011.

Kralja Nikole 27a/4, Business Center “Čelebić”, Podgorica, Montenegro Phone/Fax: +382 (0) 20 633-855, +382 (0) 20 620-611

MBO Inteview with: Mr. Andrija Radusinović, Executive director in Container Terminals and General Cargo

We introduce: Green Economy in Action, Milica Begović Radojević, Economy and Environment Team Leader in UNDP

web site: In the Spotlight: “Knowledge Factory Opened its Doors in Podgorica at the University Donja e-mail: Gorica” and “Milocer Development Forum 2011” by Ms. Sandra Tinaj, Manager of UDG

Montenegro General Info Area Position Length of border Coast line Length of beaches Climate Average temperatures of air Maximum sea temperature Average num. of sunny days Major Cities Albania Croatia


Geographic information 13,812 km² 41º52’ - 43º42’ lat., 18º26’ - 20º22’ long 614 km 293 km 73 km Mediterranean 27.4Co (summer) 13.4C o (winter) 27.1Co 240 Podgorica (Capital), Niksic, Bijelo Polje Border Crossing Bozaj Debeli brijeg


Kula,Vuče, Dračenovac, Dobrakovo,Čemerno, Ranče, Bijelo Polje

Bosnia and Herzegovina Sea border

Vilusi, Vracenovici, Scepan Polje, Metaljka ports and piers: Bar, Kotor, Budva and Zelenika

Population Population in country (2011) 625,266 Montenegrin population in foreign countries 54,816 Total population 675,027 Number of households 191,047 Source: Census 2003 Transportation Airports Podgorica and Tivat Bar (line to Italy: Bar-Bari, Bar-Ancona) and Kotor Ports (line to Italy: Kotor-Barleta) Railways Bar – Beograd and Podgorica- Niksic Total railways length 249 km Total highway lenght 5,174 km National Parks Durmitor 39,000 ha Biogradska gora 5,650 ha Lovcen 6,220 ha Prokletije 21,647 ha Skadar Lake 40,000 ha

November 2011

Business Environment in Montenegro Prepared by: Mr. Darko Konjević, Montenegro Business Alliance (MBA)

The main purpose of this issue of Business Environment is to present a statistical overview of the current situation in Montenegro regarding foreign trade, the transport sector, and the tourist sector etc. FOREIGN TRADE Total foreign trade of Montenegro for the period January-September 2011 according to the preliminary data of the Monstat was €1,695.1 million which shows growth of 16.5% related to the same period of the last year. Montenegro exported goods in the value of €331.5 million which is growth of 44.7% comparing to the last year and the import was €1,363.6 million with the growth of 11.2% comparing to the same period of the last year. Cover of the import by the export was 24.3% and it is larger then in the same period of the last year when it was 18.7%. This is a sign that export activities in Montenegro are strengthening but we still have not so good export structure. In the structure of the export the main items were ferrous metals (€167.2 million) and iron and steel (€17.9 million). In the import structure the most represented goods are meat and meat products (€53.3 million) and cereals and cereal products (€43.9 million). The main trade partners are Hungary (€64.1 million), Serbia (€60.1 million) and Greece (€36.1 million).

PRICE OF GOODS AND CONSUMER SERVICES The price of goods and personal consumer services in Montenegro increased, on average, by 0.7% in August 2011 in comparison with July 2011. Consumer prices in August 2011, when compared with August 2010, increased by 3.6%, whilst in comparison with December 2010 they were, on average, 3.0% higher. Looking at the main group of products and services that were used by consumers in August 2011, when compared with the previous month, an increase in prices was evident in the following areas: housing (4.0%), health (0.9%), food and beverages (0.4%), alcoholic beverages and tobacco (0.3%), household furnishing and equipment (0.3%), culture and leisure (0.3%), transport (0.2%), other goods and services (0.1%). Decreases in prices were recorded in the following areas: clothes and footwear (0.8%), education (0.2%). Product prices and services remained at the same average levels, as recorded in the previous month, in the following areas: communication, hotels and restaurants.

TOURIST SEASON Due to the tourist season, it is interesting to see figures regarding the transport sector. If we observe the number of passengers who used public transport in August 2011 and compare the figures with the same period last year, we can see decline in the use of road transport (12.9%), of railway transport (32%) and of city transport (2.3%). However, an increase of 5.7% was recorded in the air transport sector. Regarding the transport of goods in August, when compared with last year, the decreases were recorded in the following areas: air transport (82.5%), road transport (50%), sea transport (32.6%). A growth of 3.4% was, however, recorded in railway transport. In Montenegro, in August 2011, recorded 455,185 tourists arrivals which was 5.3% more than in August 2010. They represented a total of 3,556,078 overnight stays which was 12.2% more than in August 2010. Overnight stays made by local tourists represented 11%, while foreign tourists represented 89% of all overnight stays in August 2011. During the first eight months of this year, recorded 1,102,639 tourists arrivals, which was a 7.3% increase in comparison with the same period last year, and 7,375,387 overnight stays which was an increase of 9.5% in comparison with the same period last year.

The number of overnight stays made by local tourists decreased by 2.4%, while the number of overnight stays made by foreign tourists increased by 11.1%. Looking at the statistics for overnight stays made by foreign tourists, the majority of them were made by tourists from Serbia (27.9%), Russia (20.3%), Bosnia and Herzegovina (7.6%), Kosovo (3.4%), Ukraine (3.1%), Albania (2.3%), Poland (2.1%), and other countries. Looking at the statistics for overnight stays, by type of resort, most of them were at seaside resorts (98.8%), at mountain resorts (0.7%), and in the capital city (0.2%), rather than in other tourist venues or at other types of resorts.

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 October 2011)

Joint Stock Company


Limited Liability Company


Part of a Foreign Company


General Partnership




Limited Partnership










Tax Rates 17%, 7% and 0%

Value Added Tax Corporate profit tax


Personal income tax Source: Commercial Court


Economy Statistics Selected indicators



Population (625,082 in 2003)



Real GDP (billion)**



Real GDP growth



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



Unemployment rate VI 2010/ X 2011



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



* Preliminary data (net inflow) ** Estimates made by Ministry of Finance, September 2011 Official currency


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


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

Economic Freedom - Doing Business in Montenegro Doing Business report is developed by The World Bank and implemented by the International Financial Corporation (IFC). This report measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business reports are prepared annually and they present quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe.

This year’s Doing Business Report 2012, reported that Montenegro successfully eliminated several business start-up procedures by introducing a single registration form to be submitted to the tax authorities. Also, an amendment to Montenegro’s Law on corporate income tax removed the necessity for businesses to make advance payments and also abolished the requirement to pay construction land charges. Montenegrin customs administration simplified trade by eliminating the requirement to present terminal handling receipts for the export and import of goods. This report was approved on June 1, 2011 (except for the paying taxes indicators, which cover the period January–December 2010). Based on the data submitted in June 2011, Montenegro is still at 56th place out of 183 economies. In the area of starting business, Montenegro came 85th in 2010, while now it is ranked in 47th place, immediately ahead of Croatia (67), Serbia (92) and Bosnia and Herzegovina (162). The placement position in this area relates to the number of steps and the number of days required for obtaining a work license. Dealing with construction permits is the area in which Montenegro has the lower rang in 2011 (173th place) starting from 2009. Problems in this area are related to the cost of obtaining a permit, the procedures involved, the number of days required etc. Montenegro will have to make more reforms in this area in order to keep track of the global trends. The registration of property has also been a problematic area for Montenegro over the last few years due to lack of reforms in this area. The situation is improved slightly this year, and actual rank of Montenegro is 108th place. The placement position of Montenegro is lower than the position of surrounding countries mostly due to a larger number of procedures and higher expenses needed in order to register the property. In the area of protection of investors Montenegro is in 29th place this year. However, it was ranked in 24th place last year. Montenegro is in the better position than most countries in the region however, there is need for continuous improvement in this area in order to retain existing investors and to attract new ones. In the area of paying taxes, Montenegro is ranked in 108th place. The major problem is not the amount of taxes paid, but rather the number of days required to pay tax and also the number of payments a company is required to make during a one year period. In 2011 Montenegro made paying taxes easier and less costly for firms by abolishing a tax, reducing the social security Doing Business 2012

contribution rate and merging several returns into a single unified one. Also, an amendment to Montenegro’s corporate income tax law removed the obligation for advance payments and abolished the construction land charge. In the area of trading across borders, Montenegro is ranked in 34th place (the best rang in the region). Montenegro’s customs administration simplified trade by eliminating the requirement to present a terminal handling receipt for exporting and importing. Indicators on enforcing contracts measure the efficiency of the judicial system in resolving commercial disputes. In this area Montenegro recorded a rank as 133rd. Problems in this area relate to a number of procedures that need to be improved, namely those concerning the number of days, as well as the level of costs, when considered on the percentage basis of a claim. A procedure is defined as any interaction, required by law or commonly used in practice, between parties or between a party and a judge or court officer. This includes the steps taken towards filing and serving a case, the steps taken to go to trial and to obtain judgment, along with the steps required to enforce any judgment. The reforms are necessary in this area in order to improve the position of actual rank of Montenegro. Regarding resolving insolvency, the report studied the time, cost and outcome of insolvency proceedings involving domestic entities. During last few years no regulations have either been changed or newly adopted. There is a possibility that some new regulations will be adopted in this area, but not until January 2012. In this year’s report, Montenegro is ranked in 52nd place.

Table 1: Doing Business Rank of Montenegro (2010/2011/2012) Topic Rankings Ease of Doing Business Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency


DB 2012 Rank

DB 2011 Rank

DB 2010 Rank

56 47 173 71 108 8 29 108 34 133 52

56 46 170 68 117 8 28 125 35 134 48

71 85 160 na 131 43 27 145 47 133 44

November 2011

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

Macroeconomic Outlook GDP According to estimates made by the Ministry of Finance, the Montenegrin GDP is expected to record a growth rate of 3.5% over the next two years. GDP growth rate for the current year is projected to be 2.5%. The predicted valye until 2013, given by the Ministery of Finance and is presented in the table belowe. Table 2. Projections made by Mnistry of Finance Estimations/Projections GDP (in millions of €) GDP per capita GDP real growth (u%)

2011 3192.0 5069.9 2.5

2012 3386.0 5378.0 3.5

2013 3582.0 5689.3 3.5

Industrial Production

Employment and Wages

Industrial production recorded a fall of 6.2 % during the period January-September 2011 in comparison with the same period last year, due to a decrease of 27.8% in the energy, gas and water sectors. The mining and quarrying industries, along with the manufacturing industry sector recorded increases of 12.7 % and 9.8% respectively.

According to data provided by the Employment Agency of Montenegro, the total number of the unemployed persons recorded at the end of October was 30,062 (13,998 of which were women), while the unemployment rate was recorded at a level of 11.39%.

Graphic 1. GDP GDP (EURO million)

Budget According estimates made by the Central Bank of Montenegro in August 2011, current budget revenue amounted to €112.5 million which was 0.6% higher than predicted. Within the budget revenue structure, taxes account for the main share and represented 67.7%, followed by contributions (26.0%), fees (2.7%), other revenue (1.7%), duties (1.4%), and revenue from loan repayments (0.5%). Consolidated budget expenditure (total revenue less debt repayments) in the observed period amounted to €93.8 million (2.9% of GDP), thus showing a decrease of 6.0% comparing to the August last year. This occurred as a result of lower expenditure in the areas of pensions and disability insurance (4.1%). In August 2011, the Montenegrin budget ran a deficit of €18.6 million or 0.6% of GDP, whereas the deficit during the first eight months of the current year amounted to €42.6 million or 1.3% of GDP.

Inflation The monthly inflation rate, as measured by the Consumer Price Index (CPI), in September 2011 was at level of -0.1%. Observing inflation in January-September period 2011 and comparing it with the average level last year, the increase was mainly due to price increases in certain products/services, particulary alchoholic beverages and tobacco, and health care which recorded growth figures of 16.7% and 12.9% respectively. According to macroeconomic date in the region the inflation rate (CPI) in August 2011 was at level of 0.0 in Serbia, -0.1 in Bosnia and Hercegovina, Croatia and Macedonia, while in Albania and Montenegro was a little bit higher (0.3 and 0.7 respectively).

In September 2011 the gross average salary amounted to €712, whilst the average salary without taxes and contributions amounted to €477. During the period January-September 2011, the average salary, without taxes and contributions, showed a rise of 8.8% in comparison with the same period last year. Observed, in August, on the basis of sector averages, without taxes and contributions, the lowest salaries were recorded in the fishery sector (€152), and the highest salaries were recorded in the financial mediation sector (€821).

Foreign Direct Investments (FDI) According to preliminary data from the Central Bank of Montenegro, during the period January-August 2011, FDI inflow amounted to €313.4 million, while FDI outflow was €71.6 million. This shows a net FDI inflow of €241.8 million which represents a decrease of 38.5% in comparison with the same period in 2010, as a result of unfavourable developments in the global market and as a result of debt crises in EU countries). Observing the FDI inflow structure, the largest influx was made on the basis of investment in local companies and banks which totaled €125,0 million. Inflow in the form of intercompany debt was recorded as €66.6 million. The sale of real estate amounted to €109.1 million, while inflow resulting from the withdrawal of capital invested abroad by residents amounted to €12.8 million. Regarding the FDI outflow structure, the largest outflow was seen in the withdrawal of foreign capital from local banks and companies. This totaled €45.9 million, whereas residents` investments abroad totaled €25.7 million.

3% 3% -6% 7% 11% 9% 4% 4% 3% 2% 1%

2011** 2010* 2009* 2008* 2007* 2006* 2005* 2004* 2003* 2002* 2001* 2000*

3275 3104 2981 3085,6 2680,46 2149 1815 1669,8 1510,1 1360,4 1295,1 1065,7




GDP (real growth rate)




* MONSTAT ** Estimates made by Ministry of Finance, September 2011

Graphic 2. Inflation (CPI Index) CPI-monthly growth rate (base Ø2010) 04 03 Mar-11; 2,0

02 01

Feb-11; 1,0 Oct-10; 0,2 Dec-10; 0,1

00 Sept-10; 0,1 Nov-10; 0,2 Jan-11; 0,3 -01

Aug-11; 0,7 May-11; -0,1 July-11; -0,3 Apr-11; 0,0 Sept-11; -0,1 Jun-11; -0,5

-02 -03 -04


Graphic 3. Average salary without taxes and contributions Sept-11 Aug-11 July-11 Jun-11 May-11 Apr-11 Mart-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sept-10 Aug-10

EUR 477 EUR 475 EUR 476 EUR 475 EUR 479 EUR 473 EUR 484 EUR 506 EUR 518 EUR 515 EUR 480 EUR 477 EUR 481 EUR 504 450











Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Graphic 4. Structure of deposits, in % 40,0 40,0

Demand deposits

14,3 13,1

Up to 3 months From 3 months up to 1 year

32,9 33,3 9,7 10,4

From 1 to 3 year 3,1 3,2

Over 3 years 0,0



June 2010



Non-financial institutions

28,8 29,6 5,8 5,6 53,5 54,6

Households Non-profitable organisations

1,2 1,2




In June and July of the current year, within the deposit maturity structure, time deposits were dominant (60.0%). Within the structure of time deposits, the largest percentage represented deposits with a maturity period ranging from 3 months to 1 year (approximately 33.1%), and with a maturity period of up to 3 months (approximately 13.7%). Observed on a sector by sector basis, within the deposit structure, deposits made by individual persons were still dominant at a recorded level of about 54.0%.

Household Deposits

3,9 3,7


In June and July of the current year, within the structure of total bank assets, loans accounted for the main percentage, followed by monetary assets and deposits with depository institutions. Other assets accounted for the remainder which ranged up to approximately 7.0%. When observing data from July and comparing it with figures from June of the current year, bank assets recorded an increase in the area of financial derivatives (16.7%).

Total deposits amounted to €1,839.2 million at end-July 2011. When observing data from July and comparing to figures from June of this year, total deposits increased by 0.1%. However, in comparison with July 2010, there was an increase of 2.8%.

6,9 5,3

General Government

Total bank assets amounted to €2,898.5 million at end-July 2011, thus recording an increase at a monthly level (0.3%) and a decline when viewed at an annual level (1.5%).

July 2011

Graphic 5. Structure of deposits by sectors Financial institutions

Total Bank Assets and Liabilities

In July, within the area of bank liabilities, deposits accounted for the main share (63.5%), followed by borrowing (20.4%) and total bank capital (10.4%), whereas the remainder (6.7%) was made up of other miscellaneous items. In relation to the previous month, the area of financial derivatives recorded an increase (11.9%). Total bank capital amounted to €301.4 million at end-July 2011, thus recording a slight decline at a monthly level (1.2%) and a greater decline at an annual level (3.1%).

60,0 60,0

Time deoisits

Banking Sector


June 2011





July 2011

Graphic 6. Structure of loans, in %

Total household deposits amounted to €1,005.0 million at end-July 2011. Positive signals have come from continuous growth in the area of personal savings. Household deposits have recorded growth both at a monthly (2.3%) and at an annual level (11.9%). At end-June and end-July 2011, within the maturity structure of household deposits, time deposits were dominant, while demand deposits accounted for 32.6% (Graph 4.).

Loans V


6,10% Corporate and household loans







Banks and other financial institutions

Graphic 7. Interest rates (VI, VII) 10





June 2011

July 2011


The weighted average lending effective interest rate The weighted average deposit effective interest rate


At end-July 2011, total loans granted by banks amounted to €2,034.9 million, thus recording almost the same level as in the previous month and 7.5% less than in July 2010. This downward trend in the area of total loans was initiated in October 2008, due to deterioration being noticed in the quality of loan portfolios. The loan-to-deposit ratio amounted to 1.11 in July of the current year, which was the same as was recorded for the previous month. However, it was an improvement in comparison to July 2010 (1.28). In the structure of total disbursed loans, corporate and household loans dominated at a level of 94.0% in June and July. The remainder referred to banks, other financial institutions, public owned organizations, non-profitable organizations and others. At end-July 2011, household loans amounted to €854.530 million, recording a decline at a monthly level (0.15%) and at an annual level (2.4%).

Interest Rates In July 2011, the weighted average for the interest rate (lending) was 9.72% which was the same as it had been the previous month. The weighted average for the interest rate (deposits) was 3.16% in July 2011, which showed a month-on-month increase of 0.10 percent and a year-on year decline of 0.56 percent. Increases in interest rates are influenced by increases in interest rates in the international financial markets (Euribor and Libor), by factors such as credit demand being permanently higher than supply, and by the growth of un-qualitative assets.

November 2011

Expert’s opinion Prepared by: Marija Iličković, Deputy director in Directorate for SME development

A “Small Business Act” for Europe “Think Small First” Managing the transition towards a knowledge-based economy is a key challenge for the EU today. Success will ensure a competitive and dynamic economy with more and better jobs and a higher level of social cohesion. Our capacity to build on the growth and innovation potential of small and medium-sized enterprises (SMEs) will therefore not only be a decisive factor for the future prosperity of the EU Member States, but also for the Western Balkan countries. The EU has thus firmly placed the needs of SMEs at the heart of the Lisbon Growth and Jobs Strategy, notably since 2005, with the use of a partnership approach which has already achieved tangible results. Since the signing of the Thessalonica Declaration of June 2003, Montenegro, through the Directorate for SME Development, has participated in the implementation of the European Charter for Small Enterprises, and is one of the initiators of its application in the Western Balkan region. The Act for Small Enterprises (SBA) was politically endorsed by the EU Council of Ministers in December 2008 to ensure the full commitment of the Commission and the Member States, as well as by the Western Balkan countries. This act also ensured that its implementation would be regularly monitored. The “Small Business Act” aims to improve the overall policy approach to entrepreneurship and to irreversibly anchor the “Think Small First” principle in policy-making from regulations to public service. It also aims to promote SMEs’ growth by helping them to tackle the remaining problems which hamper their development. The following 10 principles are at the heart of the SBA: I Create an environment in which entrepreneurs and family businesses can thrive and where entrepreneurship is rewarded II Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance III Design rules according to the “Think Small First” principle IV Make public administration responsive to the needs of SMEs V Adapt public policy tools to meet SMEs’ needs: facilitate SMEs’ participation in public procurement and use it to make better State Aid opportunities for SMEs VI Facilitate SMEs’ access to finance and develop a legal and business environment that is supportive to timely payments in commercial transactions VII Help SMEs to benefit more from opportunities offered by the Single Market VIII Promote the upgrading of skills in SMEs along with all forms of innovation IX Enable SMEs to turn environmental challenges into opportunities X Encourage and support SMEs to benefit from growth in markets The report emphasizes that the most developed component in both the enterprise and industrial policies is the SME policy, which is fully in line with other SME policies in the EU. Progress can be reported in the area of enterprise and industrial policy principles. A new development strategy for 2011-2015 for small and medium-sized enterprises (SMEs), prepared in close cooperation with business representatives, was adopted by the Government in January 2011. The action plan for its implementation for the year 2011 was prepared in March and is now monitored by a coordination team that was established for this purpose. In June, the Government adopted a similar strategy which is focused on the promotion of competitiveness at a micro level during the period 2011-2015. This same strategy was previously adopted by the Council for Promotion of Competitiveness. The latter was established in November 2010 and is aimed at coordinating all relevant activities. Further action, particularly the improved coordination of various institutions and the provision of better data on the SME sector, is needed to secure the effectiveness of these strategies

There has been some progress in the area of enterprise and industrial instruments. Montenegro is continuing to participate in the Entrepreneurship and Innovation Program. The Investment and Development Fund has started its funding operations, both directly and via intermediaries, and has also started to assess possible cooperation with international financial institutions. However, it is too early to evaluate the effectiveness of its instruments The coordination of institutional support for SMEs from the Ministry of Economy, from the Directorate for the Development of SMEs (SMEDD, from regional and local centers, from the Chamber of Commerce and from other financial institutions (IDF, micro-credit providers and commercial banks) is developing but still needs to be further strengthened.

In designing and implementing the SME policy, Montenegro is applying the principles of the Small Business Act and is thus participating in the process of monitoring, led by the European Commission and the OECD. In the area of business registration, further progress has been made by implementing the 'Unified Registration of Enterprises' in tax administration. Montenegro is continuing its efforts to promote entrepreneurial education and to strengthen the technological capacity of SMEs, but further work still remains to be done.


Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Graphic 8. MONEX20

Capital Markets CAPITAL MARKETS A downward trend in volume and in market value, as has already been evident for the last few years, continued during the first nine months of 2011. The fall in the volume of trade in capital market during the first nine months of 2011 was seen primarily as a result of reduced levels of bond trading (84%) and a decrease in investment (47%). This, in turn, reduced growth levels in stock by 69% when compared with the same period last year.

Trade on the Stock Exchange

18.000 16.000

During the first nine months of 2011, the total volume of trade carried out on the Montenegrin stock exchange amounted to €41.1 million, which was 3% less than the volume of trade that was seen on the previous two stock exchanges during the first nine months of the previous year (€42.5 million). During first nine months of 2011, a total number of 10,552 transactions were completed, which was 32% less than during the same period last year.

14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 jan.11









Three types of security were traded: company shares, privatization-investment fund shares and bonds which included government bonds. During the first nine months of 2011, the greatest turnover was recorded in the area of company shares (89.2%), followed by investment funds (6.2%). The total turnover of bonds amounted to 4.6%. Taking into consideration shares from a single company, the highest monthly trade volumes during the first nine months in 2011 were reached in July, when shares of Hipotekarna Banka reached a volume of €5.43 million through 74 transactions. Other companies that performed well during the first nine months of 2011 were Prva Banka Crne Gore (€5.38 million through 74 transactions - April) and Aluminum Plant (€3.50 million through 405 transactions September).

Graphic 9. MONEXPIF 8.000 7.000 6.000 5.000 4.000

Stock Exchange Indices

3.000 2.000

The new stock exchange uses two indices: MONEKS20 and MONEKSPIF. These indices were developed from the former Montenegrin stock market indices.

1.000 0 jan.11









MONEX20 Graphic 10. Turnover structure 6,2%

The value of the Montenegro Security Exchange, MONEX20, upon which MSE’s 20 most liquid companies are traded, showed a downward trend from the beginning of 2011. The highest value that was reached by MONEX20 during the first nine months of 2011 was recorded on January 24th at a level of 15,724 points, and the lowest value was recorded on September 5th at a level of 10,224 points. Variations in the value of the index have influenced all of the changes that are demonstrated by the shares that are represented in this index, particularly those belonging to the Electric Power Company, to the Aluminum Plant and to Telekom Montenegro.



89,2% Shares

PIFs units


Graphic 11. Turnover in PIF’s 23.725.599



The value of this index showed significant fluctuations including considerable growth and also considerable dips during the first nine months of 2011. It reached its highest level on February 15th with a total of 6,673 points. It reached its lowest point on September 12th with a recorded value of 4,624 points. The index value was influenced in such a way that a similar trend was evident in all of the six privatization investment funds.


621.278 600.000


504.955 500.000



247.033 7.294.619



10.000.000 7.048.223





100.000 0

0 Atlas Mont


HLT Volume


Privatization – Investment Funds on the Stock Exchanges



MIG Shares



The total volume of trade that involved PIF shares during the first nine months of 2011 amounted to €2.53 million. This represented a drop of 47% when compared with the figures recorded during the same period in 2010 (about €4.79 million in trade volume). In total there were 2,639 transactions, and these involved a total number of 56.37 million shares taken from all six PIFs. The most actively traded shares during this period were Eurofond, whilst the least traded were MIG shares.

April 2011 2011 November

1 concern 21 target markets insurance

40 companies employees &

20,000 agents 7,500,000 customers 16,500,000 contracts

Insurance of a New generation. UNIQA Montenegro, a member of UNIQA Insurance Group, started its activities on the Montenegrin market for the first time in February 2008, following the takeover of Zepter Insurance. UNIQA Life Insurance was founded in February 2008, and UNIQA Nonlife Insurance in June 2008. These companies provide a wide range of high quality insurance products, ranging from property to car and accident insurance - thus UNIQA Life Insurance is one of the leading insurance companies on the Montenegrin insurance market. Currently, about fifthy employees and more than sixty professional sales agents secure efficient growth by achieving the goals and plans in Montenegro. Our mission is to offer solutions for our customers in the given continuously changing economic and social environment, so that they could enjoy full and safe life. In 2010 UNIQA achieved a total gross premium of 6.092.026 EUR, while in the first quarter of this year the total of about 1,4 million EUR was achieved. Comparing with 2009, UNIQA

growth rate is 75%; Montenegrin insurance market growth rate for the same period is -4,63%, which is less than in previous years. Participation of UNIQA insurance premium in the total insurance market of Montenegro increased from 6,10% in 2009 to 9,16% in 2010. UNIQA Life Insurance has a share of 15.63% in the total life insurance of Montenegrin market. UNIQA Non-life insurance has a share of 8,16%. Despite the difficulties caused by economic crisis, UNIQA recorded a significant growth of about 60% in the first quarter of 2011 over the same period in 2010; UNIQA Life Insurance achieved growth of 35%, and UNIQA non-life achieved growth of 67%. International Agency for the Evaluation of financial standing Standard & Poor’s (S&P) confirmed, on December, 2010, UNIQA Group’s financial strength rating by assigning “A” with stable outlook. Assessment of the S&P financial strength is based on standard unchanged ratings to parent companies of UNIQA Group.


UNIQA Montenegro: Branch offices

Companies: UNIQA life insurance UNIQA non-life insurance Legal type of the entity: Joint Stock insurance company Year of establishment: UNIQA life - 2008. UNIQA non-life - 2008. Owners UNIQA life: ƒ UNIQA International BeteiligungsVerwaltungs GmbH ƒ UNIQA a.d.o. Beograd Owners UNIQA non-life: ƒ UNIQA International BeteiligungsVerwaltungs GmbH ƒ UNIQA International Versicherungs Holding GmbH Executive directors: ƒ Mrs Nela Belević, UNIQA non-life ƒ Mr Željko Labović, UNIQA life Number of employees: 90 Number of branch offices: 12 Main activity: Life and non-life insurance

Address: Bulevar Svetog Petra Cetinjskog 1a/IV, 81000 Podgorica, Montenegro Phone: +382(0)20 444 700; Fax: +382(0)20 244 340; GSM: +382(0)67 201 449; E-mail:; Internet:

Accounts: UNIQA life insurance: 555-738-69 UNIQA non-life insurance: 555-1915-30


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

In the Spotlight Prepared by: Ms. Sandra Tinaj, Manager of the University of Donja Gorica (UDG)

Knowledge Factory Opened its Doors in Podgorica at the University Donja Gorica Knowledge Factory - the largest IT event in the region opened its doors in Podgorica, at the University of Donja Gorica, as the central event of the Open Science Days in Montenegro. The Knowledge Factory program consisted of one main element during the two days it was present. This included a presentation about software and hardware solutions, round table meetings, forums and discussions, as well as special programs for primary school, high school and college students. Participants were given the opportunity to demonstrate their knowledge and entertain themselves through a series of additional activities at the event, as well being able to find out more about the latest software solutions and new trends in the IT world. Knowledge Factory, the largest IT event in the region, was visited by over two thousand visitors, as well as high level representatives from the Government and from other important establishments in Montenegro. Representatives from public enterprises and private businesses, representatives from scientific and educational institutions, along with primary school, high school and college students had the opportunity to get the latest news from the dynamic IT world.

At the start of the event, participants were addressed by the Rector of the University of Donja Gorica, Veselin Vukotić, by the President of ComTrade, Veselin Jevrosimović, by the Minister of Science, Prof. Dr. Sanja Vlahović, by the Deputy Prime Minister of Montenegro for Economic Policy and by the Minister for the Development of an Information Society, Prof. Dr. Vujica Lazović. The Rector of the University of Donja Gorica, Prof. Dr. Veselin Vukotić expressed his satisfaction with the idea and with the initiative to organize the first Knowledge Factory event in Montenegro at UDG. He thinks that it created a good atmosphere and justified the purpose of promoting knowledge. He also stated that the vision of UDG was to build a new type of educational standard, innovative and research-related, that is already the norm in Europe, and should also be in Montenegro. He also sent a clear message that knowledge requires courage, passion, vision and work experience, all of which UDG reinforce and promote. He also states his belief that the result of this event will be the transfer of knowledge and sharing of values within young people all over Montenegro and in the region. The round table meeting entitled “The Place of Montenegro on the IT Map of Europe” was a central part of the first day of the event. Participants included representatives from the Ministry for Information Society and Telecommunications, from the Ministry of Science, from the Government of Montenegro, along with many other representatives from the university and from prominent IT companies in the region. A low level of investment in ICT across the region was defined as the main problem, along with the fact that money allocated for ICT is seen as a cost rather than as an investment. Software piracy was also identified as a problem, but the level of the problem has already diminished. A need for a greater number of locally developed mobile applications and software solutions was also identified. Young people in Montenegro use computers and the Internet mostly for entertainment. It is, therefore, necessary to attract them to more productive ways of using IT. The conclusion was that stronger cooperation was needed between IT companies, ministries and educational institutions, in order to create a favorable business environment which can help Montenegro to become competitive and visible on the IT map of Europe. The second day of Knowledge Factory was also full of interesting lectures and discussions which focused on the increasingly popular “cloud computing”. The President of ComTrade, Mr. Veselin Jevrosimović, spoke about the role of social networks in the modern world. The second day featured a number of business IT solutions along with presentations made by this year’s Knowledge Factory partners: HP, Microsoft, Fujitsu, Toshiba, Intel, IBM, Oracle, Cisco, Mtel, Sony, HTC, Sony Ericsson, LG, Computer Land and many others.


The main topic of the second day was a round table meeting entitled “Women in Information Technology”. Conclusions from the round table meeting were that the gender divide in ICT is not a barrier to a business success and that successful careers are available for women in this domain. The basis of success in IT is to constantly invest in knowledge and skills. Education plays a key role for every person who builds his or her career in the information sector. It is necessary at all levels, from basic to higher level education, and requires as much practice as necessary. All of those who wanted to take a break between lectures and presentations at this year`s Knowledge Factory had the opportunity to enjoy the Chill Out Zones (Facebook zone, Gaming zone, Twitter zone etc).

November 2011

In the Spotlight: Milocer Economic Forum 2011 Prepared by: Ms. Sandra Tinaj, Manager of the University of Donja Gorica (UDG) As in each and every year, prior to this one, the 2011 “Milocer Development Forum” was exceptional. It started on September 12th, when Ph.D. Professor Veselin Vukotic, Rector at UDG, and President of the Governing Board of the Montenegrin Association of Economists, stated in his opening remarks that the forum did not intend to provide solutions to the current challenges that are faced by this region, but rather aimed to provide an environment in which experts from various fields could exchange ideas, observe challenges from various perspectives, and promote a European set of values that focused on openness and freedom, along with a culture of dialogue, entrepreneurship and creativity. From September 12th to 14th 2011, the forum attracted around 500 participants which included nine panels, 63 panelists and moderators, and three lectures which were given by professors from Slovenia, Italy and Austria. Five companies and several other institutions also had the opportunity to give presentations.

“The Balkans and the EU”


When referring to experts, it is important to point out that the organizers did a great job by attracting not only regional delegates, but also international ones. Therefore, visitors who attended the 2011 “Milocer Development Forum” had the chance to listen to experts from Italy, Austria, the United States, Canada and the Middle East in addition to regional experts living and working within the area of the former Yugoslavia. All of them came together with one objective: to share ideas about “The Balkans and the EU”, which was the main topic of the forum.

Throughout the three days of the forum, these nine panels generated an infinite number of ideas and conclusions, as for exemple: observations made about the Montenegrin accession process viewed through a prism of unemployment, perceptions of the EU as a system of values, viewing a knowledge based society within the EU as an empty phrase, and looking at the role of companies as reinvesting profits into further production.

As Professor Vukotić stated, the forum itself was organized on the principles of cutting-edge organizations and on similar meetings in other places in the World and this was publicly confirmed by professors and businessmen of international standing. ‘Risky’ rules were also promoted, such as “the panel starts and ends with no delays” and “discussions last for up to 7 minutes”. These rules introduced a level of seriousness and elegance to the forum, and with this came a degree of vividness and interactivity. The forum was well covered by media from Montenegro and from surrounding countries. The topics presented at the Forum will be published in international economic magazine published in Montenegro (in English). Magazine is called “Entrepreneurial Economy” (volume XVII), and it’s distributed by UDG.

Agenda At the very beginning of the forum, the organizers introduced a special award, a plaque and cash, for any individual who, at the end of the forum on September 14th, could state that he or she had neither heard, nor learned anything new. No one applied. A nine-point agenda was introduced to give visitors an insight into various aspects of the pre-accession process to the EU, to the future of the EU and to a vision of Montenegro within the EU. The agenda included the following panel discussions: 1. Agriculture, tourism and economic development 2. Ecology and development 3. Entrepreneurship and entreprenurial ideas (student round table meeting) 4. Population and development 5. Training and development 6. Investment funds 7. The capital market in Montenegro 8. What is next on the path to the EU? – a dialogue with the Montenegrin Prime Minister, Mr. Igor Lukšić 9. Where does the EU lead us? – Jože Menciger

One of the forum panelists observed the Montenegrin accession process through a prism of unemployment. Professor Vukotić stated that unemployment was becoming a more and more dominant problem not just in Montenegro, but in the West in general, especially in the lives of people between the ages of 16 and 24. He also said that simply the fact of joining the EU would not solve this problem. However, it was an undisputed fact that the European market creates opportunities for new projets, new companies and thus new jobs. The emphasis was on an economic approach to solving the unemployment problem, primarly through eliminating barriers to business, by increasing economic freedom, and, to a lesser exent, through the redistribution and state protection of so-called national smart projects. He also said that Europe, and also the Montenegrin accession process to the EU, should be perceived as the adoption of a certain system of values and way of thinking, as a market for ideas. Discussions about the role of a company, along with the way capitalism is viewed in this part of the world, ended with the conclusion that the current perception of a company’s role, to maximize profit, was incomplete and misleading. While delivering his ideas to the audience, Professor Jože Menciger from the Faculty of Economics, Ljubljana, Slovenia, mentioned one interesting fact. He said that the concept of creating a knowledge based society, as stated in Lisabon’s strategy, 2000 - 2005, was wrong and was actually only an “empty phrase”. Professor Menciger believed that this was the case because, “Knowledge is more mobile than capital.” Thus, Europe neither produces knowledge or products today, but China does, however, because of mobility. In all, bearing in mind the history of the “Milocer Development Forum”, the number of panelists and visitors who attended, coupled with the level of their intellectual capacity, it is not surprising that the award that was offered at the start of the conference was not actually given. That is the reason why this forum has been successfully realized for the 16th time in a row.


MBO Interview with Mr. Andrija Radusinović, Container Terminals and General Cargo AD Container Terminals and General Cargo, in its role as port operator for the Port of Bar, is authorized to carry out a wide range of tasks, including the transshipment of containers, cargo and lumber. In addition to these activities, the company offers other services such as the storage of various goods and cargo, traffic mediation (logistics providers, dispatch, packaging, repackaging, sorting and measurement of goods), and the complete maintenance of containers etc.

MBO: Can you please describe, in brief, your company and its main objectives?

Mr. Andrija Radusinović, Executive director in Container Terminals and General Cargo

“The terminal area covers 52 hectares of land, and is equipped with both air land road systems, which enables us to carry out the transshipment of many different goods. Goods can be storage in our warehouse which has a capacity of 71,000 m2. The main activity of our company is to satisfy the needs of our clients effectively and efficiently, to generate profit, and to establish good business relationships.”

MBO: What are the trends of the international market and how do you keep Mr. Andrija Radusinović was pace with them?

Short biography:

born on 23rd May 1965. He graduated from School of Economics in Podgorica in the period from 1983-1987 and in the period 1988-1989 he attended the post-graduate studies in international economics, specifically international marketing. In the period from 19912011 he worked at Tobacco Company Podgorica and currently holds the position of Executive Director in Container Terminals and General Cargo, Port of Bar. He also attended a number of courses and training in area of international logistic studies. Regarding his business skills the following are recognized as priority: team work, transparency in decision-making processes and listening of market demands and trends. He speaks English and Italian.

MBO: What are your plans for the company in the near future? “Our company is committed to improving its existing services. We also aim to focus on analyzing our competition, and on reviewing both the labor market and company logistics.”


“Although the global market was badly affected by the crisis, business affairs relating to cargo shipping and the storage of goods showed good results this last year. But the figures from 2008, before the global economic crisis, are still far from being achieved at the present time. Despite the economic problems, the global trend in the cargo-shipping sector is to invest money in large vessels with a capacity of more than 10,000 TEU units. Port operators also sometimes forward activities to other regions and in this way they help to strengthen alliances with other companies. Alliances develop as associations of different companies, something that just a few years ago was unthinkable. These trends require a view of the bigger picture, with big operators in the market being carefully monitored. Our objective is ultimately to create a regional Adriatic port area that is capable of meeting global trends.”

MBO: Who are the company’s biggest competitors and what are your main advantages over them? “If you throw look at competition within the region you will see that it is still nowhere near the standard of other places in the rest of the world. This is because infrastructure projects have not yet been well developed, and they do not have logistical centers on main roads in rural areas etc. The advantages of our company, however, are: a good infrastructure, good logistical planning, an enormous capacity of storage next to the sea with the potential to upgrade if desired, and our close proximity to the city centre.” The main owner of the company is the state of Montenegro, with a total of 54.0527% of all shares. The rest of the shares (45.9473%) belong to minority shareholders. The most influential of

these owns just 2.74% of the total company shares. Despite the fact that the company has shown a lot of potential during the last 9 months, it has operated at a loss due to having to make many severance payments. The company has had to pay off a lot of debts in the recent past due to restructuring in personnel, and due to social programs for disabled workers and future pensioners.

MBO: How did the company perform during the first nine months of 2011? “The results during the last nine months were not positive because we had to invest both in new equipment and in new staff. But the company expects to put out a new tender to look for an investor that might be able to provide financial support and help the company to move forward.”

MBO: An invitation to bid for the tender to privatize the company will soon be released. What are your expectations regarding this tender? “Interest in the privatization of the company is growing. The tender documentation is expected to give a new opportunity for business in the Balkan region, and in this way we can hope to become one of the global leaders in the market. New infrastructures and road connections with Northern Europe will also additionally increase our chances. New roads to Serbia, Kosovo and Macedonia on one side, and in Bosnia and Herzegovina on the other side, will also help to open up a new chapter in the history of our company.” During the interview, Mr. Radusinović informed us about some of the obstacles his company has encountered, including: the constant need to take on board new technology, especially in the area concerning the transshipment of goods (international standards), finding ways to resolve redundancy issues for staff, and the necessity for privatization. He also stressed the need for quality logistics.

MBO: What type of business barriers do you perceive in both the Montenegrin and regional markets, and how do they affect the activities of your company? “The main problems we face area lack of dialogue and a need for further analysis of the market. Both of these factors harm our chances of gaining access to new markets. Our company is able to see upcoming obstacles before others do, due to the fact that our work is very specific and also because it is internationally oriented. Our company is currently making changes regarding the structure of the organization, with the aim of reducing the number of employees. Our experts have carried out lot of analyses, all of which have focused on market changes, especially in the Mediterranean market. Our goal is to create a fertile ground in which future investors can flourish. They will, in turn, hopefully give a new lease of life to our company both at a national and international level.”

April 2011 November

porto montenegro

Porto Montenegro is a mixed-use waterfront development that combines a state-of-the-art marina and luxury residences with restaurants, boutiques, cafÊs, a day spa and nautical museum. Sitting within the UNESCO World Heritage Bay of Kotor, surrounded by some of the deepest waters in the Mediterranean, the project is on course to become Europe’s premier super-yacht marina. This elegant collection of waterfront and village promenade homes was recently recognized as the fastest selling development in the Mediterranean. Summer 2011 saw the deliver y of two residential buildings and more than 70% of the next two buildings have already been sold. Having just launched a 64m over water pool bar named the Lido Mar, a luxury boutique hotel and nearby golf course are next in line to keep the marina in the spotlight. The 185 berths are at near-full capacity and another 450 are already on the way—150 of which are set aside for yachts over 50m in length. Port of entr y status, duty- and tax- free fuel, on-site customs and immigration, as well as full provisioning ser vices are helping to attract captains, crew and yacht owners. The luxur y waterfront residences, high security and dramatic scener y meanwhile are luring investors, homeowners and well-informed travelers, ensuring a cosmopolitan mix of people in the village all year round.

+ 3 8 2 ( 0 ) 3 2 6 6 0 9 0 0 o r i n f o @ p o r t o m o n t e n e g ro.c o m w w w. p o r t o m o n t e n e g r o . c o m


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

Privatization and Investments Even though Montenegro has a good investment climate, a series of tenders for state-owned companies recently failed partially due to negative media campaigns. Previous experiences with direct foreign investment and privatization, such as with the Aluminum Plant in Podgorica, with the Iron Plant in Nikšić and with the attempt to agree on a long-term lease for Valdanos near Ulcinj, all show that Montenegro simply has not yet managed to find reliable partners. Also it has been proven that public doesn’t fully undurstend importancy of FDI’s for country development. Despite all of these issues, the Government of Montenegro has recently released a series of tenders which are expected to be successful.

Investments Turkish Capital Entering Montenegro Airlines and Montenegro’s Airports The Montenegrin Ministry of Transport and Maritime Affairs made an announcement that the introduction of Turkish capital into Montenegro Airlines and into Montenegro’s airports is now very certain. According to the government, during a very difficult period for airline carriers, this option is a much better solution than privatizing the national airline company. A draft agreement with Turkey on improving cooperation with Montenegro is currently being prepared. The agreement will include statements that clarify that a tender has not been announced in relation to investment being made in the national airline by interested Turkish companies, but rather that the deal is a combination of commercial service contracts made with airports in Podgorica, Tivat and Berane.

Qatari Diar Plans Hilton Hotel in Montenegro The ownership of the Montenegrin “Blue Horizon” Hotel complex, which was until recently owned by the state company HTP Primorje, has been transferred to the Arab investment group, Qatari Diar. It has been announced that the new owner plans to demolish the existing hotel and build a five-star hotel as part of the Hilton hotel chain. The complete investment costs will amount to approximately € 200 million; the new complex should comprise about 170 apartments and villas, with supporting sport, recreation and entertainment facilities. The new owners are not ready to inform the public about their plans until the procedures regarding spatial planning documents have been completed.

UniCredit Wants to Operate in Montenegro Italian businessmen are interested in investing in the Port of Bar (especially in the container terminal), in renovating the railway and also possibly in participating in the project concerning the construction of the motorway between Bar and Boljare. This was announced after a meeting between the Montenegrin Minister of Finance and the Italian Ambassador in Podgorica. The Italian Ambassador also announced that the banking group UniCredit is interested in operating in Montenegro and that some of their representatives will visit the country at the end of October.

Montenegro and UAE Look to Boost Investments Prime Minister, Igor Lukšić, and UAE Economy Minister, Sultan bin Saeed Al Mansouri, said at their recent meeting that Montenegro and the United Arab Emirates seek to promote excellent political ties through several economic agreements that would boost further investment, Minister Al Mansouri underlined that Montenegro, in his view, is a unique and extraordinary country. He expressed his view that it has excellent potential for further development and added that UAE entrepreneurs, some of whom accompanied him at the meeting in Podgorica, are interested in developing further investment projects in Montenegro. PM Lukšić said that the Government of Montenegro is creating the right preconditions for new investment in Montenegro’s economy and development through reforms, infrastructure development and by building a good business environment. He also added that in addition to already successful projects in tourism, the two countries could develop good investment cooperation in the areas of agriculture, industry and banking. The two officials also discussed the need to improve transport connections between Montenegro and UAE by introducing charter-flights between Podgorica and Dubai.


November 2011

Tenders Tender for the Long-Term Lease of Lastavica Island and Mamula Fortress – Herceg Novi The Government of Montenegro announced a tender which invited experienced international investors to come forward and bid for the long-term lease of Lastavica Island and Mamula Fortress in Herceg Novi. The lease is being offered for a period of 30 years with a possible extension period of up to 90 years. Applicants must demonstrate proven financial solvency, experience in the design, construction and management of complex tourist facilities, and an interest in building up and managing this tourist resort. Bids should be submitted before the deadline date of 1600 (local time) on the 14th December, 2011.

Public Tender for the Long-Term Lease of Land for Developing a Golf Complex in Tivat Following a decision made by shareholders in Montepranzo - Bokaprodukt AD, Tivat, a joint stock company for agriculture, trade and services, the Privatization and Capital Investment Council announced a public invitation for domestic and international investors to participate an international public tender for the long-term leasing of land for a golf complex development in Tivat. Potential investors must be able to demonstrate adequate financial resources, experience in design, in construction and in the operation of large and complex resorts. At a later date it is possible that part of the associated land on which the buildings and facilities are built may be sold in accordance with the law. Bids should include plans for the construction and operation of a purpose built golf course and associated facilities (golf complex). A long-term lease is envisaged for a period of 90 years.

Public Tender for the Sale of the Company “Pobjeda” A.D. Podgorica The Tender Commission announced the initiation of a public tender process to sell 85.99% of the capital of “Pobjeda” A.D. Podgorica, expressed through a total of 3,142,950 shares. Applicants are expected to submit bids in accordance with the regulations and procedures outlined in the tender documentation. The tender deadline has been extended to December 10, 2011.

Amendment to the Tender for HTP “ULCINJSKA RIVIJERA” AD, Ulcinj The Privatization and Capital Investment Council announced an amendment to the public invitation to participate in the tender for the sale of 63.5273% of the capital of the Company HTP “ULCINJSKA RIVIJERA” AD, Ulcinj, Montenegro, expressed through 968,402 shares and a long term lease of 90 years. The lease refers to a plot of land where hotels and other HTP Ulcinjska Rivijera AD company buildings are located, along with a further plot of land that is expected to be used for the construction of tourist and other miscellaneous facilities. The amendment relates to the deadline for the submission of bids and says the following, “The bid for the tender must be submitted by 4 pm on the 4th November, 2011, at the latest.”

Tender for the Long-Term Lease of the Barracks Site, "Orjenski Battalion" in Kumbor The Tender Commission for the valuation of former military property announced a public invitation for investors to participate in an international public tender for the provision of a long-term lease at the barracks site "Orjenski Battalion" in Kumbor. Bids must be delivered to the aforementioned address no later than 1600 (local time) on the 14th December, 2011. Bids will be opened on the 15th December, 2011, starting at 1500 in the Ministry of Defense.

Tender for the Construction of Hydro Power Plants on the Morača Failed The tender for the construction of hydro power plants on the Morača River was not successful as none of the qualified bidders submitted an offer. After more than a year of waiting to establish qualifying bids for the construction of four hydropower plants, only the consortium of A2A, EPCG and Italian Enel remained in April 2011. The Montenegrin government once again extended the deadline for the submission of bids to the fall of 2011 at the request of the Italian company. Some economists highlighted the fact that the power plants could provide a significant threat to untouched natural resources.


We Introduce: Green Economy in Action Prepared by: PhD. Milica Begović Radojević, Economy and Environment Team Leader, UNDP in Montenegro

Protected Areas in an Ecological State- A Design that Looks Good, Feels Right and Works In June 2012 the governments of the world will meet in Rio de Jeneiro to agree on the steps that should be taken to make a global transition towards a green economy- a system that generates growth and reduces poverty through investment, and through the sustainable use and preservation of natural resources and ecosystem services that support life on earth as we know it. Exactly 20 years ago, in the same city, the UN Convention on Biodiversity and the UN Framework Convention on Climate Change were designed in an effort to provide a global framework for collective action towards sustainable development. The summit in Rio is likely to focus less on missed opportunities since 1992 and more on future challenges, the most troubling one being that as most of the world’s countries have seen sustained economic growth, they have correspondingly increased their GHG emissions and eco-footprint. Steve Jobs once said that design is not just about what something looks like and feels like; design is about how something works. The Ecological State Designation, which celebrates its 20th birthday this year, both looks and feels right- represents each country’s commitment to enforce the level of responsibility held by today’s generation to rationally use resources that all future generations are entitled to, and is also testament to political, economic and moral sophistication. We will not analyze how well this design has actually worked over the past 20 years; instead we will discuss how it could work in the future. We will do this by looking at the economic value of protected areas (i.e. national parks) in Montenegro. Definition of a Protected Area: A clearly defined geographical space, recognized, dedicated and managed, through legal or other effective means, to achieve the longterm conservation of nature with associated ecosystem services and cultural values. There are six categories of protected areas, all of which are dependent on a level of protection and allowed activities within protected area boundaries: Category Ia and Ib: Strict nature reserve: protected area managed mainly for science; wilderness area: protected area managed mainly for wilderness protection Category II: National park: protected area managed mainly for ecosystem conservation and recreation Category III: Natural monument or


feature: protected area managed for the conservation of specific natural features Category IV: Habitat/species management area: protected area managed mainly for conservation through management intervention Category V: Protected landscape/ seascape: protected area managed mainly for landscape/seascape conservation and recreation Category VI: Protected area with sustainable use of natural resources: protected area managed mainly for the sustainable use of natural ecosystems. In 2010 the economic contribution of PAs in Montenegro was estimated at €68 million, 2.2% of GDP or €106 per capita. This cut across various economic sectors including agriculture, infrastructure, water, energy, tourism, recreational activities, and disaster risk reduction. If divided across a broad range of target groups, the general public earned approximately €32 million from PAs: businesses and industry earned €25 million and the government about €11 million. Services from PAs had a significant multiplier effect across the economy, in that they protected sources of existing and planned hydropower plants, worth around €80 million per year in public revenue. Similarly, PAs generated the following income, through investment and spending: in the tourism sector €172 million (5.7% of DP), in gross visitor spending in excess of €220 million, in capital investment €60 million. PAs also provided support for 7,700 full time jobs. The untapped potential for green business opportunities, along with additional public income from PAs, under a more business-oriented style of management is substantial. Tourists and recreational visitors would be willing to contribute almost €19 million a year more than they are currently being charged in entry fees alone, and a further €3 million for hiking and guided tours that could be provided by the PA authorities. Due to the unavailability and/or the poor quality of some data, these estimates are extremely conservative. Despite this, however, they demonstrate that PAs can generate employment and fiscal revenue for the government, as well as sustaining income, output and consumer services across the entire economy. This is all the more striking considering that public investment in PAs in Montenegro is presently just €1800/km2. Other middle

income countries such as Hungary (€4,170/ km2) and Czech Republic (€2,890/km2) record considerably higher figures. With the current rate of investment in PAs, the quality and value of services ranging from tourism and water supply to flood protection, and from energy to agriculture are likely to decrease. Additionally, the system’s ability to provide these services will erode, and Montenegro’s economy and population will pay a price of some €30 million over the next 25 years. Alternatively, by doubling the present public investment rate of €1800 to €3,000€3,600/km2, it is likely that incremental benefits worth over €1.5 billion would be generated over the next 25 years. The total return on this, considerably higher public investment, is estimated at a ratio of almost €29 for every €1 that is invested. The message is clear, if managed in a sustainable way, protected areas will continue to yield a high return on investments, creating opportunities for new jobs and income for Montenegrin citizens. The ecological state, as a design, both feels and looks right, and if treated properly as an economic asset, the design could also work well. The system of protected areas is not an environmental issue, but rather a major economic driver, that enables small businesses and large industries to function. It also generates goods and services that can be sold on (inter) national markets, it protects critical infrastructures, helps to sustain a high quality of life, and enhances growth in the Montenegrin economy. PAs are not a luxury but an economic imperative that will enable the population of Montenegro to function, prosper and grow. If the future management of PAs continues to imply underinvestment and unsustainable management practices, this will undermine economic growth and incur a large and ever increasing cost to the Montenegrin population and economy. The following message goes out to those decision makers who design fiscal austerity measures today: Should you be thinking of cutting down on already inadequate levels of investment in the protected areas network in Montenegro? Think again. This just may be the solution you are looking for in terms of domestic job creation and income generation for the government, businesses, and non-commercial beneficiaries, i.e. your citizens.

November 2011

Business News EBRD Revised Forecast For Montenegro According to the newest forecast of European Bank for Reconstruction and Development (EBRD) growth of the Montenegrin economy this year will amount to 2.1%, which is lower than previous prediction of 2.5% made in May. However, the forecast for 2012 has not changed – Montenegro expects growth of 3%. Experts say that credit provision continues to decrease, while industrial production and exports are subject to significant fluctuations. The Bank also sees inflation in Montenegro to be at 3.4%, which is considerably higher than last year’s 0.5%. However, next year inflation will be among lowest in the region, together with Croatia and Slovenia (3.2 and 2.5% respectively).

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


Montenegro Recorded Progress On Forbes List Montenegro improved its position on this year’s Forbes list of the best countries for doing business from 59th place to 53rd. By categories, best result Montenegro has achieved in the field of investors protection making it 27th on the list of 134 countries. Such an improvement come as a result of intensive work on improving business environment, investment promotion and national treatment of foreign investors. Source: Montenegrin Investment Promotion Agency (MIPA)

Investment-Development Fund Approved 10 New Projects The Board of Directors of the Investment-Development Fund of Montenegro reached a decision on financing 10 projects in the total amount of EUR 255.695. The participation of the Fund in the financing of the mentioned number of projects amounts to EUR 237.695, while commercial banks will set aside EUR 18.000. Out of these projects, eight will be realized within MIDAS project and the Investment-Development Fund will set aside EUR 155.695 for them. Five of these projects will be realized in the underdeveloped northern part of Montenegro. Source:

Contract With The World Bank Signed

Minister of Finance of Montenegro and Director of the World Bank for South-East Europe signed a contract on a loan of USD 85 million in Washington. The main conditions for the approval of the arrangement were reaching a satisfactory level of macroeconomic stability and stabilization in the field of financial, i.e. banking system in Montenegro. Signing of the contract on the loan represents a confirmation of successful implementation of a series of reforms that will make the Montenegrin fiscal and financial system more resilient and stable for the upcoming challenges, as well as a confirmation of good cooperation between Montenegro and the World Bank. Source:

Montenegro Is Still A Competitive Destination For Investments Montenegro remains a competitive investment destination as assessed at X International Investment Forum held in September 2011 in Sochi, Russia. At the conference it was stressed that the presence of Montenegro in the forum was important because of the importance of Russia as an investment partner. In direct communication with potential investors, and the round tables that have gathered various categories of exhibitors, the current activities, especially improvements in legislation, as well as activities on the realization of investment projects in transport, utilities and the biggest Montenegrin Greenfield projects were presented. The Montenegrin delegation was headed by the Minister of Tourism and Sustainable Development Mr. Predrag Sekulić. Source:


Montenegro Top Destination For Convention Tourism One of the most famous tourism and travel portals Travel Daily News announced the list of top ten destinations for convention or MICE tourism for 2011, among which Montenegro is first ranked. In the article “Top Ten Destinations for MICE Tourism” Montenegro was described as a country on Adriatic coast, closely guarded as the greatest secret of Europe, only two-hour flight away from major European cities, which owing to intensive hotel industry development is rapidly developing as a most wanted destination in this area. Besides Montenegro the following destinations were also suggested: Croatia, South Africa, India, Turkey, Greek islands, Sardinia and Seoul in South Korea.

Presentation Of The Tourist Offer To Israel At the meeting between Montenegrin Minister of Sustainable Development and Tourism and Honorary Consul of Montenegro in Israel, Israeli business people need to be presented with the potential possibilities for investments and jobs in Montenegro. Business people from Montenegro are invited to actively participate in the international conference titled Gateway to Montenegro, which will be held in Tel Aviv at the end of November 2011. The objective of that conference is to present Montenegro to the Israeli public and the biggest businesspeople as an extremely attractive tourist and investment destination.

Montenegro On The List Of PayPal Countries PayPal is the world’s largest service provider in the field of electronic payment and a guarantee of safe transactions on the Internet. With this system, when a user stores on a global network does not have to leave personal information at various online locations where purchased. PayPal was established in 1998 and is the leading company for on line payments and money transfer. The Company has more than 100 million active accounts, is available at 190 markets and supports payment in 25 currencies. Montenegro has been included in the list of countries, which will be included in the first enlargement PayPal system. Source:

IFC Interested To Provide Support To Montenegro At the meeting between the new regional manager of the IFC for the Western Balkans Mr. Per Kjellerhaugom and Montenegro’s Minister of Finance Mr. Milorad Katnić was concluded that current cooperation IFC and Montenegro has been very successful, and that there is still space for its further improvement. In this regard, Mr. Kjellerhaug stressed the readiness and interest in IFC to support development in energy and tourism development, the areas recognized to be the perspective of Montenegrin economy. Special emphasis was given to the importance of the continuation of structural reforms and business environment improvement. The progress of Montenegro in this field has already been recognized and will be continued through development of Doing Business Report for Montenegro. Source:


November 2011

Montenegro Agrees On Free Trade Deal with Ukraine Montenegro has agreed with Ukraine to sign a free trade agreement that will break the deadlock over the accession of Montenegro to the World Trade Organization (WTO), a process that has been halt for almost three years. The two sides agreed that all outstanding issues from the WTO-accession process should be agreed upon in a bilateral agreement on free trade that would exclude concessions from the Montenegrin side other than those agreed upon in the previous negotiations. “At our last meeting in Kyiv we agreed with the Ukrainian Government that no other concessions be asked from Montenegro in the further WTOintegration process and that the interests of Ukraine and Montenegro will be regulated through a free-trade agreement,” Minister Kavarić explained. The two sides agreed to meet again in November when they will sign the Free Trade Agreement and an agreement regarding Montenegro’s WTO accession. The free trade agreement is fully in accordance with national interests, and Montenegro, committed to being an open economy, has such agreements with CEFTA, EFTA, EU, Russia, Belarus, and other countries.

Montenegro Needs to Tighten Its Belt Montenegro must bring down the fiscal deficit, the public debt and reduce dependency on foreign finance, in particular at a time when conditions on the international market are sensitive and unpredictable, concluded Finance Minister Milorad Katnic and World Bank Regional Coordinator for Southeast Europe Jane Armitage said, presenting the World Bank‘s report on strengthening public spending management in Montenegro. The collaboration with the World Bank is of great importance in advancing Montenegro’s fiscal position and creating long-term progress, which will together improve the standard of living of the majority of citizens, Katnic said. Armitage voiced support for the Minister’s plan to continue to reduce the fiscal deficit and gradually bring down the level of public debt and said the European Commission’s recent recommendation for the start of EU accession talks was a sign of international confidence in the reforms in Montenegro.

Cargo 10, the new rail operator to contribute in boosting goods transport “Cargo 10”, a joint project of the railway companies of Serbia, Slovenia and Croatia joined Bosnia and Herzegovina (BiH), Bosnia’s Republic of Srpska, and joining announced Montenegro, Bulgaria and FYR Macedonia. This company has not yet been legally established, although it’s in function from October 4th 2010, when first train with wood briquettes moved from Paraćin to Sezana in Slovenia, dedicated to the Italian market. Corporate objectives is to reduce the transport time between Ljubljana and Istanbul, which will be increased competition in relation to other transport modes, but also in relation to alternative Corridor 4, via Hungary, Romania and Bulgaria. The full effects of “Cargo 10” are expected only after the formal establishment of the company when it will be more organized access to the market. The joint company will provide customers a maximum reduction of all the formalities in the transportation of goods - border and customs formalities, the shorter retention of freight trains on the borders, and allow also that all administrative formalities, whether in terms of export, import or transit, carried out at one place.


Coming Up…

Global Entrepreneurship Week November 14-20, 2011

Global Entrepreneurship Week began life as Enterprise Week in the UK back in 2004. When news of the phenomenal success of Enterprise Week in the UK spread the globe, lots of other countries got excited about the potential of running similar initiatives in their own countries. So in 2008, Enterprise UK and the Kauffman Foundation (the world’s largest entrepreneurship foundation based in the US) founded the very first Global Entrepreneurship Week. In 2011, Youth Business International became the national host for Global Entrepreneurship Week in the UK.

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Since its inception, Global Entrepreneurship Week has spread to 115 countries, with nearly 24,000 organisations planning more than 37,000 activities. As part of Global Entrepreneurship Week 2010 in the UK, over 207,200 people attended 2,577 events, run by 983 organisations. Global Entrepreneurship Week is a worldwide movement of entrepreneurial people, with millions unleashing their enterprising talents and turning their ideas into reality. Find out what happened in previous years of Global Entrepreneurship Week. In Montenegro, the host of the GEW is the Center for entrepreneurship and economic development (CEED).

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Inauguration Conference of the European Network of Mentors for Women Entrepreneurs November 15, 2011 Warsaw

Affiliate of US Chamber of Commerce

The conference will take place on November, 15 in Warsaw, Poland. It will be organized jointly by the European Commission and the Polish Presidency of the European Union. The European Network of Mentors for Women Entrepreneurs is one of the actions proposed in the 2011 Review of the European Small Business Act and aims at promoting female entrepreneurship in Europe. The Mentors Network enforces and complements the actions to promote, support and encourage female entrepreneurship that started with the creation of the European Network of Female Entrepreneurship Ambassadors (ENFEA) in 2009. The conference will welcome 17 countries to the Mentors' Network: Albania, Belgium, Cyprus, FYROM, Greece, Hungary, Ireland, Italy, Montenegro, the Netherlands, Romania, Serbia, Slovakia, Slovenia, Spain, Turkey and the United Kingdom. The first network of mentors for women entrepreneurship in Montenegro is to be set up by the Centre of Entrepreneurship and Economic Development (CEED) and Montenegrin Chamber of Commerce, acting in partnership, with activities focusing on entrepreneurship support and private sector development.

After 15 years of experience, today CEED Consulting is the leading business consulting company in Montenegro which helps clients improve their business operations, further develop and perfect both their service and product and meet the need of their customers. We integrate our business development and project management services, providing solutions for setting up and growing your business activities in Montenegro. Focusing on customer care, our team emphasizes quality of service, which we are continually striving to improve. Loyalty and dedication transpire through our unique and professional approach to advising our clients. Implementing international standards of business practice, CEED Consulting relies on its expert knowledge of the local market to provide tailored solutions based on accurate and timely information. We are professional, flexible and different! And always dedicated to you! CEED Consulting Team


Editor in chief Ivana Božanović MBO Team Dragana Radević Mihailo Zečević Darko Konjević Vesna Bojanović Jelena Međedović Jasna Žarković Biljana Sekulić Ana Rašović ASSOCIATE Charlotte Rimmer, Editor

Front page picture: Durmitor National Park Picture made by Duško Miljanić Author of the picture: Photography provided by CSTI for project “Photography Adventure“ Printing: Montcarton, Podgorica

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