HomeReportsBureau of Economic and Business Affairs2022 Investment Climate Statements…Montenegro

# 					2022 Investment Climate Statements: Montenegro			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment Agreements and Taxation Treaties                    -  Bilateral Taxation Treaties 
                  -  Investment Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Anti-Trust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights (IPR)                      -  Resources for Rights Holders 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange Policies 
                  -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Climate Issues 
                  -  Additional Resources 
                -  9. Corruption                    -  Resources to Report Corruption 
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for more information   

## Executive Summary

Montenegro’s economy is centered on three sectors, with the government largely focusing its efforts on developing tourism, energy, and to a lesser extent, agriculture. The tourism sector officially accounts for about 25 percent of GDP, although some analysts believe it accounts for over one-third when taking into account the grey economy. In the energy sector, the most important development project in the transmission system was the construction of a one-way underwater electricity cable to export power to Italy, which included the development of a 433-kilometer-long tunnel approximately 1,200 meters below the Adriatic Sea surface. The project cost 800 million euro and began operation in December 2019. There are several other ongoing energy projects, including the controversial ecological reconstruction of the coal-fired thermal plant in Pljevlja in partnership with China’s Dongfang Electric Corporation, as well as the development of a 55-megawatt wind power plant in Gvozd, a project supported by the European Bank for Reconstruction and Development (EBRD). The Montenegrin government also signed concession agreements for exploratory offshore oil and gas drilling, which began in March 2021, although preliminary results indicate that the drill site is not feasible for exploitation.

According to the Central Bank of Montenegro (CBCG), foreign direct investment (FDI) to Montenegro in 2021 totalled €898.4 million. Although no one source country dominates FDI, significant investments have come from Italy, Hungary, China, Russia, and Serbia, with other investments also coming from the United Arab Emirates, Azerbaijan, Turkey, and the United States. Montenegro has one of the highest public debt-to-GDP ratios in the region, currently at 83 percent. Infrastructure development remains a government priority, including the second section of Montenegro’s first highway, a project designed to better connect the more developed south with the relatively underdeveloped north of the country. The pandemic hit Montenegro’s economy hard, with the unemployment rate reaching 24 percent by the end of 2021. In addition, GDP declined by 15.3 percent in 2020, the biggest drop in Europe. The country enjoyed a strong recovery in 2021, however, with the government announcing a GDP growth rate of 14 percent for the year, one of the highest in Europe. Economic recovery will continue to face challenges, however. Developments in Ukraine and Russia, two of the Montenegro’s main sources of tourists, will threaten economic growth. An internal political crisis, after Parliament in early February 2022 passed a motion of no-confidence in the Government and subsequently removed the Parliament’s Speaker, also threatens economic stability. As of late March 2022, a caretaker Government was running the country’s day-to-day operations and ongoing negotiations to form a new Government were taking place, with the possibility of snap elections if these talks fail.

Montenegro began implementing a wide-ranging economic reform program known as Europe Now, which eliminated all individual health care contributions, almost doubled the minimum wage, increased pensions, and introduced a system of progressive taxation. As a candidate country on its path to joining the European Union (EU), Montenegro has opened all 33 negotiating chapters (and closed three). But the county’s candidacy is dependent on progress against interim benchmarks in rule of law. The European Commission’s 2021 Country Report for Montenegro termed progress in this area as “limited.” Despite regulatory improvements, corruption remains a significant concern. Montenegro joined NATO in June 2017. Montenegro has not joined the Open Balkan Initiative, previously known as “Mini-Schengen,” an initiative championed by Serbia and Albania designed to facilitate trade, services, and movement of people throughout the Western Balkans.