| Why to enter this market? |
- Introduced the Euro as its currency
- EU accession process has started
- Increasing stability in the country
- Stable GDP growth rate
- Skilled labour
- Lowest corporate tax in Europe – 9%
|
Business and economic environment
Montenegro, the smallest of the countries created after the demise of the former Yugoslavia, offers unique opportunities, particularly in tourism, but also in agriculture, energy, banking and the metals industry. Despite the fact that the EU accession process started only recently, the currency in Montenegro is the unilaterally introduced Euro, which increases investment stability. In addition, businesses operating in the country benefit from skilled labour, relatively low employment costs and the lowest corporate tax rate in Europe: just 9%. However, for such a young country, the key task for the government over the coming years is to introduce modern, free market management rules, curb the shadow economy and to reduce the involvement of organised crime in the economy. Last, but not least, it is worthy of note that in Montenegro, a limited liability company can be started in just four days and with a minimum capital of one Euro.
The growth of Gross Domestic Product in Montenegro reached 7.1% per annum on average between 2005 and 2008, with a 6.9% increase in 2008. However, the global economic downturn affected the small Montenegrin economy, which shrank by 6.6% in 2009 and by 1.8% in 2010.The recession was fuelled in part by a slump in the tourist industry and a reduction in demand for the country’s exports. Montenegro also has the disadvantage of not having a local currency to depreciate against the Euro and thus reduce the costs of its exports.
The inflation rate recorded in Montenegro reached 4.2% in 2007 but increased to 8.5% during the following year. However, it fell to 3.4% in 2009 and -0.6% in 2010 as a result of the economic crisis. It is expected to remain around 3% in 2012 and 2013.
Unemployment, as in many other countries in the Balkans, is still very high and reached a peak of 14.7% in 2006, only to fall to an average of 10-11% in subsequent years, despite the state of affairs on the domestic market.
Goods and services imported into Montenegro in 2007 were worth EUR 2bn, whereas the flow of goods and services out of the country was valued at EUR 0.66bn. Foreign direct investment in 2009 in Montenegro was a record EUR 0.9 bn, only to fall back to EUR 0.3 bn a year later.
Most attractive areas of the economy:
- Tourism
- Agriculture
- Energy
- Banking
- Metal industry
- Food industry
The country converted its official currency to the Euro in 2002, despite the fact that it was not yet a member of the EU.
Social environment
In 2010, the population of Montenegro was 0.6m, making it the smallest of the former Yugoslavia republics and also one of the smallest nations in Europe. In terms of nationalities, the major groups are: Montenegrin 43%, Serbian 32%, Bosnian 8%, Albanian 5% and others (Muslims, Croats, Roma) 12%. With regard to education, Montenegro has only two universities and a few colleges which provide further education. Montenegrins claim affiliation with the following religious groups: Orthodox 74.2%, Muslim 17.7%, Catholic 3.5%, others 0.6%, unspecified, 3% and 1% are atheists. The average salary was EUR 609 in 2008.
According to the Transparency International Index, Montenegro is one of Europe’s most corrupt countries. The CPI (Corruption Perception Index), which reflects how society perceives the strength of the phenomenon, reached 3.7 in 2010, and the country was ranked 69th globally. Despite improvements in comparison with past years, corruption is still a major obstacle to the country’s development.
Infrastructure and technological environment
Montenegro’s research and development infrastructure is very limited, and in this field the country lags behind other former Yugoslavia countries, such as Slovenia, Croatia and Serbia, which were more industrially developed. Despite the fact that Montenegro is a small country, we expect some infrastructure to emerge as a result of further investment.
Montenegro is highly dependent in terms of energy imports. The country’s gas supplies and one-third of its electricity come from abroad. However, it is in possession of significant generation potential in terms of hydroelectric energy, which could be installed on the Piva and Zeta rivers. Current capacity in terms of electricity production installed in the area is 859 MW, of which hydroelectric facilities create 76% and the remainder 24%, comes from a single coal powered plant. In terms of fossil fuel deposits in the area, coal low in sulphate and ashes, lignite, oil and gas can be found in the country. Because of the country’s heavy dependence on foreign supplies, the government plans to add an additional 700 MW at a cost of EUR 836bn by 2025.
Interestingly, Montenegro has the highest mobile phone penetration rate in Europe, with 1.31 m users, or a penetration ratio of 211%. At the same time, internet penetration exceeds 30%.
Montenegro’s rail transport network consists of 250 km of track, of which 68% is electrified. The major road network consists of 4,927 km of paved roads and another 2,500 km of unpaved roads, but no motorways. However, because of the highly mountainous terrain, there are a large number of engineering structures.
Political environment
Montenegro is a parliamentary republic. The parliament (National Assembly) has one member for every 6,000 voters (78 MPs at present) and is elected every four years. The head of state is a President, and presidential elections take place every five years. The Prime Minister is elected by the National Assembly. The next parliamentary and presidential elections are scheduled for 2013.
Montenegro is not a member of the European Union. However, it has access to pre-accession funds which will further its development and help it to obtain full membership status.
Since 2007, Montenegro has enjoyed a free trade arrangement with the CEFTA countries (Albania, Bosnia and Herzegovina, Croatia, Serbia, Macedonia, Moldova and Kosovo), and with Russia since 2000. The majority of Montenegro’s products (agricultural items, “baby beef” products and textiles) are also admitted to the EU without quotas or custom duty.
The country is a member of all of the major international organisations, with the exception of the WTO.
General data
Area: 14,026 sq km
Population: 0.6m (2010)
Capital city: Podgorica
Languages: Montenegrin (official) 22%, Serbian 63.6%, Bosnian 5.5%, Albanian 5.3%
Ethnic groups: Montenegrins 43%, Serbians 32%, Bosnians 8%, Albanians 5%, others (Muslims, Croats, Roma (Gypsy)) 12%.
National boundaries: Albania 172 km, Bosnia and Herzegovina 225 km, Croatia 25 km, Kosovo 79 km, Serbia 124 km
Major economic indicators
| |
2007 |
2008 |
2009 |
2010 |
2011 |
| GDP (EUR bn) |
2.68 |
3.08 |
2.94 |
2.93 |
3.12 |
| Population (m) |
0.6 |
0.6 |
0.6 |
0.6 |
0.6 |
| GDP per capita (EUR) |
4766 |
5133 |
4900 |
4883 |
5200 |
| GDP (constant prices y-o-y %) |
10.7 |
6.9 |
-6.6 |
-1.8 |
4.5 |
| Exports, real, y-o-y (%) |
37 |
|
|
|
|
| Imports, real, y-o-y (%) |
55 |
|
|
|
| CPI (average, y-o-y %) |
4.2 |
8.5 |
3.4 |
-0.6 |
3 |
| Monthly wage, nominal (EUR) |
497 |
609 |
|
|
|
| Unemployment rate (%) |
11.9 |
10.7 |
11.4 |
|
| Net FDI (EUR bn) |
0.52 |
0.56 |
0.9 |
0.3 |
0.312 |
| FDI % GDP |
19.6 |
18.4 |
30.6 |
10.5 |
10.0 |
| Exchange rate to USD AVG |
0.73 |
0.68 |
0.72 |
0.75 |
0.72 |
| Exchange rate to EUR AVG |
1 |
1 |
1 |
1 |
1 |
Last update: Q1 2011
Useful data
Currency: EUR (adopted unilaterally)
Time zone: GMT +1
Area code: +382
If you would like to find out more on the Montenegro’s market opportunities please do not hesitate to contact us directly:
phone. (48 12) 292 22 50
fax (48 12) 292 22 99
e-mail: info@pmrconsulting.com
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