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Montenegro: Had One Rather Invest in Tourism or Industry?

Investment news, tourism. The rising popularity of Montenegro is attracting investors more and more. Business sphere investments are rather attractive in Montenegro. The most widely spread spheres of investments include construction, real estate, export and import of goods, and tourism.

Investments are characterized by high level of cost-effectiveness, especially if to consider the country’s favourable economic climate. What makes Montenegro attractive for investors?

Industry in Montenegro: what is the potential for foreign investors?

As explained by the leading expert of Masterforex-V Trading Academy Evgeny Olkhovski, current leaders of investment inflow are France and Belgium, which in 2004 suggested the country’s government to enter the EU. The owners of numerous enterprises come from these countries:
■ main industries. The key role is played by mining industry, metallurgy, light industry, agriculture, woodworking, cattle breeding, and tourism. Mining industry specializes in producing plumb, alunimium, zinc, and bauxites. The industries are based on partially updated equipment stock. There are about 50 thousand medium and large enterprises in the country; one tenth of them belongs to foreigners. In general, service sector produces over one half of the country’s GDP, and production – about one third;
■ export and import. Non-ferrous metals, clothes, local wine, and chemical products prevail in the structure of export. Moreover, the country bears the status of off-shore area. There is a lack of oil products, industrial goods, and transport means, which are imported from Germany, Russia, and Italy.

Tourism in Montenegro: perspectives of development and unique offers

Geographically, the country is located in the center of Europe. It is granted with access to sea, sunny beaches, mountains, crystal clear river water, and gorgeous undisturbed forests. The combination of natural factors in the country predetermined the development of tourist industry. Russians do not need a visa to enter the country.
■ climatic conditions. Average annual temperature amounts to +17 degrees. In winter water temperature drops to +15 degrees. Tourist season starts in May and finishes in October. There is precipitation for one third of the year; this has favourable impact on fruit and green crop growing. Clean ecology is a significant factor, which encourages foreigners to buy real property in the country;
■ tourist infrastructure. The coast of Montenegro belongs to Adriatic waters. The coast has not been fully explored, and one may find beautiful places that are untouched by human civilization. Budva is the country’s most popular resort, where the number of hotels is about 40. To compare, the number of hotels at the resorts of neighbouring countries – Italy and Croatia – is 5-10 times higher than here. Several hotel complexes under construction are financed by Russian businessmen. In the height of tourist season the number of available hotel rooms is not enough, and tourists take the opportunity of living in private houses;
■ role of tourism in country’s economy. The country’s government counts on tourism and perspectives of its development in the country. Therefore, this sphere of industry is of top priority for foreign investment attraction. Numerous tourists are attracted to Montenegro by beach-related rest, ski resorts, and rafting;
■ Montenegro tourism in numbers. The rate of tourist industry development in Montenegro brings the country to the top. The country gains the title third year in a row.

The expected rate of tourist sector increase amounts to about 10% annually:

The most popular resorts include Budva, Tivat, Kotor, and Ulcinj. The towns are provided with airports:

The popularity of Montenegro resorts among Russian tourists is growing every year, and the share of Russian tourists in the country gradually rises from 6% in 2006 to 20% in 2011.

Investment sphere: can conditions be even better?

■ role of foreign investments in the region’s development. Industrial development of Montenegro has been considerably favoured by the adoption of euro in 2002, which enabled the country to position itself as a bearer of favourable business and investment climate. In 2006 – 2009, due to attracted investments, the country managed to have the most rapidly developing economy, with the rate of growth amounting to about 9%. According to the results of 2011, Montenegro has for the 6th time in a row proved its leading position according to the correlation of the volume of attracted investments per capita.
■ factors that create favourable investment climate:
- clarity of the country’s economic policy;
- relatively low role of government in business regulation;
- free turnover of capital;
- relatively low taxation;
- low share of state property in the country’s economy;
- stable credit and financial atmosphere.

■ tax policy. Montenegro deposit interest rate is competitive in the region. Corporate profit tax is one of the lowest. VAT rate is graded for various types of goods and ranges from 7 to 17%. Moreover, investors may retranche interest from income, and dividends at a full rate;
■ protection of investment rights. Foreigners are entitled to purchase or create their own company in the territory of the country. Investor’s property right is protected by law. The size of investment capital has no bottom or top limits. Any stockholder may direct his means into any industry. He has is entitled to use frontier zones and national resources that are located in the region by the terms of long-term lease;
■ simple procedure of registration. The documents required for the opening of an enterprise are 5 in number, contrary to an average standard set of 7 – 10 documents. Registration lasts less than one week. The minimal charter capital is 1 euro. Moreover, Montenegro legislation provides a unique among EU countries opportunity for investors, namely, to legally formalize a construction project.

So where to invest?

Asking the question of the better sphere to invest one’s funds into, one can with a naked eye see the growing role of tourism. The sphere is getting more and more attractive if to consider the low share of industrial enterprises in the country’s GDP. So, what are the best spheres for investing one’s funds?
■ coastland. Analysts of Masterforex-V Trading Academy recommend investing into coastland. Every year this type of land gains in value about 10-15% due to the rise of tourist demand. Construction of a fashionable hotel brings about 50-70% of income. The number of hotels with high quality service is extremely small, and there is a lack of places for full-scale location of tourists.
■ real propertyis also attractive due to relatively low taxation in the sphere. Average income from investments into the sphere amounts to about 25%.
■ tourism. According to the expectations of world experts, the future source of income in Montenegro is tourism. Currently predicted rate of growth in the sphere amounts to one third of GDP. Last year the ratio of tourism in GDP was 17%.

According to recent news, in 2012 Montenegro won the 72nd position according to the Index of Economic Freedom among 184 participants. Other countries of the region, including Croatia, have been left behind. The victory of Montenegro has been favoured by the country’s policy of supporting the growth of private sector and by creation of favourable investment climate.

"Market Leader" and Masterforex-V Trading Academy hold a questionnaire at Forex forum for traders and investors: in your opinion, will Montenegro become the leading center of tourism?
■ yes, of course;
■ no, it will remain the way it is;
■ I am not interested in this.


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