Pytheas Montenegro Report 2011


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July 2011 Report on Investing in Montenegro, from Pytheas Investors Service Ltd.

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Pytheas Montenegro Report 2011

  1. 1. Investing in Montenegro,the pearl of the Adriatic. July 2011 Version 04 Copyright © 2011 Pytheas Limited July 2011 1
  2. 2. “At the moment of the creation of our planet, the most beautifulmerging of land and sea occurred at the Montenegrin seaside...when the pearls of nature were sworn, an abundance of them werestrewn all over this area…” Lord ByronFrom the top of Mount Lovćen: “Am I in Paradise or on the Moon?!” Bernard Shaw Copyright © 2011 Pytheas Limited July 2011 2
  3. 3. Copyright © 2011 Pytheas Limited July 2011 3
  4. 4. Map of Montenegro Copyright © 2011 Pytheas Limited July 2011 4
  5. 5. Location & National Symbols Flag Coat of Arms Copyright © 2011 Pytheas Limited July 2011 5
  6. 6. It is Pytheas opinion that Montenegro could become the business bridge of Europe across the Adriatic, both a business hub and an economic gateway; an exclusive destination for Europeans andother nationals that seek to invest in a holiday, a retirement home or an investment home! Copyright © 2011 Pytheas Limited July 2011 6
  7. 7. Why Montenegro■ At the borders of the old and new ■ Liberal trade regime; Europe; ■ Customs exemptions for■ An EU candidate state; investments in goods imported as■ The Euro (€) has been its official investors’ deposits; currency since 2001; ■ Free access to EU markets;■ Political stability; ■ FTA zones and also to the■ Reformed according to the EU Russian market (only 1% of the legal framework for investment; custom evidence);■ Relatively developed ■ The quality and diversity of its telecommunication infrastructure; natural and anthropological■ One of the most competitive values, makes it a most attractive corporate tax regimes in Europe; tourist and permanent living destination;■ No restrictions on profit, dividend ■ Land laws that give foreign or interest; investors equal status with local■ Significant tax reliefs and ones, i.e. with full deeds and titles concessions; to land and real estate. Copyright © 2011 Pytheas Limited July 2011 7
  8. 8. Slide(s)About Montenegro Geography 9 - 10 Demographics 11 - 12 Government 13 - 14 Climate 15 Ports 16 Yachting Marinas 17 Nature beyond conception 18 - 33 History and culture 34 - 42 Copyright © 2011 Pytheas Limited July 2011 8
  9. 9. Geography■ Montenegro is a smaller, predominantly mountainous state in southwest Balkans (Southeastern Europe).■ It borders Croatia and Bosnia and Herzegovina to the northwest, Serbia to the northeast, Albania to the south and the Adriatic Sea (across Italy) to the west.■ The length of its borders are 614 km; with, Croatia 14 km, Bosnia and Herzegovina 225 km, Serbia 203 km and Albania 172 km.■ The length of the coastline is 293,5 km with 56.9 km of beaches and 16.1 km of island coast. Copyright © 2011 Pytheas Limited July 2011 9
  10. 10. Geography (continued) ■ Its surface area is 13,812 km² (Sicily is 25,460 km² and Cyprus is 9,251 km²). ■ By its geographical position, it belongs to Southern Europe. ■ The two furthermost points of the country are only 190 km apart in a straight line, but between them the northbound air streams of Africa meet the southbound from the Polar circle. ■ The distance between capital Podgorica and Rome is around 500 km by air, from Paris and Berlin it is around 1,500 km, from Moscow almost 2,000 km, and 7,500 km from New York. Hotel Sveti Stefan, Sveti Stefan Copyright © 2011 Pytheas Limited July 2011 10
  11. 11. Demographics ■ The population of Montenegro is 620,029 (2011 census). ■ The capital is Podgorica (formerly Titograd) with 185,937 inhabitants, Nikšić 72,443, Bijelo Polje 46,051, Bar 42,048, Berane 33,970, Pljevlia 30,786, Herceg Novi 30,864 (2011 census) . ■ Ethnic groups: Montenegrin 45%, Serbian 29%, Bosniak 9%, Albanian 5%, other (Muslims, Croats, Roma) 12% (2011 census). ■ Population growth rate: - 0.777% (2010 est.) Montenegrins in national costumes ■ Birth rate: 11.09 births/1,000 population (2010 est.) Copyright © 2011 Pytheas Limited July 2011 11
  12. 12. Demographics (continued)■ Urban population: 63% of total population (2011).■ Rate of urbanization: - 0.8% annual rate of change (2005-10 est.).■ The official language of Montenegro is Montenegrin. It became the official language in October of 2007.■ Standard Serbian, Bosnian, Albanian, and Croatian are also spoken and are officially recognized languages.■ It is a multi-ethnic and multi- confessional community (vast majority Christian orthodox, the rest are Islamic, Roman Catholic, Majorettes in the old city of Kotor Jewish, Protestant and other).. Copyright © 2011 Pytheas Limited July 2011 12
  13. 13. Government■ Montenegro is a parliamentary representative democratic republic whereby the Prime Minister is the head of the government.■ Executive Power  Government;  The Government is appointed by majority vote of the Parliament;  The Prime Minister submits to the Parliament the Governments Program including a list of proposed ministers – the resignation of the Prime Minister will cause the fall of the Government.■ Legislative Power  Parliament (4-year term) and Government.■ Judicial Power  Independent of Executive and Legislative;  It includes a constitutional court composed of five judges with nine-year terms and a supreme court with justices that have life terms.■ The President (5-year term) is the head of state.  The President performs some executive and legislative functions in addition to ceremonial duties. Copyright © 2011 Pytheas Limited July 2011 13
  14. 14. Government (continued) ■ Igor Lukšić is the current Prime Minister of Montenegro and Head of Government. The current members of the cabinet were elected on 29 December 2010; and supported by a ruling coalition of DPS, SDP, DUA, HGI and BS. ■ Montenegro’s local government has 21 municipalities.  The municipal authorities are the Municipal Assembly and the Mayor;  The Municipal Assembly (4-year tem) is the representative body of the citizens of the Municipality;  The Mayor (4-year term) is the Map of Montenegro municipalities executive body of the municipality. Copyright © 2011 Pytheas Limited July 2011 14
  15. 15. Climate■ Montenegro has a rather diverse climate,  The South part is characterized by Mediterranean climate with long, hot and dry summers, and gentle rainy winters.  The Central and northern part is characterized by mountain climate, and  The utmost North part by continental climate, with small, considerably equilibrated quantities of rainfalls, and great daily and yearly amplitudes of temperature.■ Average temperature of the air is 27.4°C in the summer and 13.4°C in the winter; 180 average sunny days per year. At Rafailovići, Budva Copyright © 2011 Pytheas Limited July 2011 15
  16. 16. Ports ■ International Seaports  Bar;  Kotor;  Herceg Novi;  Tivat;  Zelenika. ■ International Airports  Podgorica;  Tivat. Port of Bar, a view Copyright © 2011 Pytheas Limited July 2011 16
  17. 17. Yachting Marinas ■ Yachting Marinas  Ulcinj;  Sveti Nikola, Bar;  Budva;  Herceg Novi;  Kaliman, Tivat;  Kotor;  Meljine;  Kordić, Prčanj;  Risan;  Zelenika. Mega-yacht marina (under construction), Tivat Copyright © 2011 Pytheas Limited July 2011 17
  18. 18. Nature beyond conception ■ Although small in area, nature has produced here unique contrasts that is truly beyond conception. ■ The diversity of its, geological background, areas, climate and landscape, as well as the position of Montenegro in the Balkans and on the Adriatic, provide conditions of very high biological diversity, making Montenegro one of the hot spots of European and world biodiversity. ■ The Parliament of Montenegro, in 1991, adopted the Declaration whereby Montenegro got Ada Bojana beach, Ulcinj proclaimed the first ecological state in the world. Copyright © 2011 Pytheas Limited July 2011 18
  19. 19. Nature beyond conception (continued)■ Over a span of only 100 km in a straight line, three natural environments are distinguishable: the seaside, the Karstic field zone and the high mountain region.■ A most attractive resource is the 313 km long coastline with 117 natural sandy and rocky beaches and 8 small islands – The longest beach is at Ulcinj (12 km) also the longest natural sandy beach on the Mediterranean.■ The seaside is a very narrow strip of land (2 to 10 km wide), separated from the inland by high and steep dolomite mountains of Rumija, Sutorman, Mogren beach, Budva Orjen, and Lovćen. Copyright © 2011 Pytheas Limited July 2011 19
  20. 20. Nature beyond conception (continued)■ The abundance of underwater caves, shipwrecks, cliffs and rich marine life make Montenegro a scuba diving heaven.■ The fauna of the Montenegro sea (although not yet fully investigated) includes over 300 species of algae, 40 species of sponges, 150 species of crustaceans, 340 species of mollusks, and almost 400 species of fish, with 3 species of marine turtles and 4 species of dolphins, the economically important Norway lobster and petrified sponge. Several species of whales are also occasional visitors. Shipwreck at the area of Ţanijce Copyright © 2011 Pytheas Limited July 2011 20
  21. 21. Nature beyond conception (continued) ■ With the longest fiord of South Europe, Fiord Kotor (Boka Kotorska), which is 28 km long and 30 meters deep, surrounded by mountains which are 1.900 meters above sea level – a stunning dolomite rock walled chasm with its entrance in the town of Herceg Novi, decorated with small fishing shelters, picturesque villages and islands all the way to Kotor, one of the prettiest, unspoiled existing medieval towns; founded by the ancient Greeks (named Kattaro), fortified by the Byzantines (named Askrivion), later ruled by Fiord Kotor, a view the Venetians and today a UNESCO world heritage site. Copyright © 2011 Pytheas Limited July 2011 21
  22. 22. Nature beyond conception (continued)■ Numerous caves and sinkholes, some of which are particularly beautiful (cave Lipska, cave Đalovića), while others are among the deepest in the Balkans (sink holes at Vjetrena brda in Durmitor, Duboki do in Lovćen) – characterized by an exceptionally complex and rich fauna, with many endemic and relict forms.■ There are 40 lakes in Montenegro and its rivers have still remained the purest of Europes.■ Lake Skadar, (also called Lake Scutari) can vary between 370 km2 and 530 km2, of which 2/3 is Cave Lipska, Cetinje in Montenegro and 1/3 in Copyright © 2011 Pytheas Limited July 2011 22
  23. 23. Nature beyond conception (continued) Albania. Declared a national park in 1983, is one of the largest bird reserves in Europe, having 271 bird species, among which are some of the last curly pelicans in Europe.■ The Tara is the longest river in Montenegro (150 km). The canyon of the river is about 80 km long cut between the mountains of Sinjajevina and Durmitor, the average depth is about 1,000 meters, and reaches a maximum depth of 1,600 meters which makes it the deepest and longest canyon of the world after the Grand Canyon. Lake Skadar, a view Copyright © 2011 Pytheas Limited July 2011 23
  24. 24. Nature beyond conception (continued) ■ Additional canyons include that of Morača and Cijevna rivers, Piva, Mrtvica and Komarnica and gorges such are Ibarska, Tifranska and Đalovića. ■ Eighty percent of the territory of Montenegro is comprised of forests, natural pasturelands and meadows. Notably there are more than 54 peaks higher than 1,900 meters (two at 2,522 m). ■ A total of 2,833 plant species (3,650 including subspecies), many of them unique, grow in Montenegro which makes up nearly a quarter of the entire European flora! All that in a mere Edraianthus montenegrinus, Durmitor 0.14% of the continents territory. Copyright © 2011 Pytheas Limited July 2011 24
  25. 25. Nature beyond conception (continued)■ Characteristic flora includes, the Alpine flower Edelweiss, the endemic Edraianthus montenegrinus, Edraianthus glisichi, Edraianthus pulevici, Wulfenia blecicii, Durmitor mullein, Potentilla montenegrina, Draba betriscea, and many relict glacial species.■ There are 305 protected bird species in Montenegro. Some of the rarest nesting birds include the Dalmatian Pelican, Ferruginous Duck , White Eyed Pochard, Scops owl, the Black Crowned Night Heron and the European nightjar. Potentilla montenegrina, Durmitor Copyright © 2011 Pytheas Limited July 2011 25
  26. 26. Nature beyond conception (continued)■ Other characteristic bird fauna includes, Pyrhocorax graculus, Antus pratensis, Prunella collaris, Phoenicurus ochruros, Golden Eagle, Griffon Vulture, Wall Creeper. There are also a number of glacial relicts among the bird fauna, including Snow Finch, Horned Lark and Alpine Accentor.■ With its 271 bird species, Lake Skadar is a real attraction for birdwatchers and nature lovers – since 1995 it has been a designated Wetland of International Importance by the Ramsar Convention as a habitat for water birds. Grey Heron, Lake Skadar Copyright © 2011 Pytheas Limited July 2011 26
  27. 27. Nature beyond conception (continued)■ Especially interesting bird species at Lake Skadar are the, Dalmatian Pelican colonies, Pygmy Cormorant (the biggest world colony of approximately 2,000 bird pairs), Whiskered Tern, Great Cormorant, Ferruginous Duck, White-tailed Eagle, Grey Heron.■ There are five ornithological reserves at Lake Skadar (at, Manastirska tapija, Grmozur, Omerova gorica, Crni zar, Pančevo oko), four bird-watching towers (at, Stanaj, Radus, Plavnica and Zabljacke) and several organized bird-watching tours offered by the Lake Skadar Pygmy Cormorants at Lake Skadar National Park. Copyright © 2011 Pytheas Limited July 2011 27
  28. 28. Nature beyond conception (continued) ■ Mountain forests occupy 54% of the territory, with natural forests covering about 45% of the land, making Montenegro one of the most forested countries in Europe. ■ Fir Abies alba, Spruce Picea excelsa and Mugho Pine Pinus mugo, Abieto-Picetum, Picetum abieti montenegrinum, Heldreich (Whitebark) Pine, Pine Pinus peuce are some of the coniferous species. ■ Beech Fagetum forests, Chestnut forests, Macquis and Evergreen Oak, Mountain Maple Acer heldreichii are only some of At Mrtvica Canyon the species. Copyright © 2011 Pytheas Limited July 2011 28
  29. 29. Nature beyond conception (continued)■ There is maybe no other country in Europe where the nature lover can enjoy so many activities (rafting, freshwater and deep sea fishing, climbing, hunting, hiking, caving, skiing, etc.) within a most diverse morphological environment, in an easily accessible area in terms of distance; four national parks and a number of other places of unique flora and fauna, some of which protected by UNESCO.■ The five national parks are Lake Skadar National Park, Lovćen National Park, Durmitor National Park, Biogradska Gora National Park and National Park Tara Canyon, a view Prokletije. Copyright © 2011 Pytheas Limited July 2011 29
  30. 30. Nature beyond conception (continued)■ National Park Biogradska Gora, a 5,650 ha area reserve, in the municipality of Kolašin, contains 26 different habitats of plants with 220 different plants, 150 kinds of birds and 10 kinds of mammals and 86 kinds of trees some more that 500 years old. In the waters of the Park exist three kinds of trout and 350 kinds of insects. Also large mountain slopes and tops, glacier lakes at altitude of 1,820 meters, forests, all in a most unique and complex geological and morphological environment. Biogradsko Lake, National Park Biogradska Gora Copyright © 2011 Pytheas Limited July 2011 30
  31. 31. Nature beyond conception (continued)■ National Park Durmitor is in the Northwest of Montenegro, in the municipality of Ţabljak, limited by rivers Piva and Tara between which there are 23 mountain tops over 2,300 meters of altitude; a 39,00 ha area reserve. It includes part of Tara Canyon which is 1,600 meters above river level, dense forests, 17 glacier lakes and the highest peak in the country, Bobotov Kuk at 2,522 m. Durmitor National Park boasts 1,500 kinds of flora, 314 protected animals including 163 kinds of birds. Crno Jezero (Black Lake), Durmitor Copyright © 2011 Pytheas Limited July 2011 31
  32. 32. Nature beyond conception (continued)■ National Park Lovćen is in the Southwest of Montenegro in the cliff area of Dinara Alps, a 6,220 ha area reserve. Due to the influence of two extreme climatic zones in a rather small area, Mediterranean and Continental, nature here formed a unique habitat. There are 1,158 plant species out of which four are endemic and 200 bird species. The park is dominated by mountain Lovćen and by the mausoleum of Petar II Petrović Njegoš. It has two mountain peaks, Štirovnik (1,749 m) and Jezerski Vrh (1,657 m). View of the Bay of Kotor from National Park Lovćen Copyright © 2011 Pytheas Limited July 2011 32
  33. 33. Nature beyond conception (continued)■ National Park Prokletije is in the Southeast of Montenegro. Most of the 1,052 ha reserve is within the territories of Plav and Roţaje with glacial lakes (Hridsko, Visitorsko, Ropojansko, Tatarijsko, Bjelajsko, the Vizier), larger and smaller streams, springs and rivers, underground aquifers and mountain ponds (Treskavac, Koljindarsko). There are also numerous hills, ravines, steep slopes, river valleys, alpine type and numerous peaks over 2,000 meters above sea level (at Carnation-Bjelički). Lake Hridsko, National Park Prokletije Copyright © 2011 Pytheas Limited July 2011 33
  34. 34. History and culture■ Montenegrins have accumulated a rich cultural and historical heritage, which dates from the pre-Romanesque, Gothic and Baroque periods.■ Montenegro has been influenced by both eastern and western civilizations – whether these were Greeks, Illyrians, or Romans, Byzantines, Venetian, Slavs, Austro-Hungarians or Ottomans, they all left their mark forming a most interesting multicultural society.■ The historical roots of Montenegro lie long before the arrival of the Slavs in the Balkans in the 6th and 7th century Ancient city of Dioclea, Podgorica AD. Copyright © 2011 Pytheas Limited July 2011 34
  35. 35. History and culture (continued) ■ The first recorded settlers of present-day Montenegro were Illyrians; the Illyrian Kingdom emerged during the 3rd century BC with its capital at Skadar, named Docleata. ■ Prior, during the 6th and 7th centuries BC substantial Greek colonies were established on the Montenegrin coast (Apollonia, Epidamnus, Lissus, Kattaro). ■ Celts are also known to have settled there in the 4th century BC. ■ In 9 AD the Romans (and Byzantines) conquered the region. Roman mosaics (4th century BC), Risan Copyright © 2011 Pytheas Limited July 2011 35
  36. 36. History and culture (continued)■ Slavs colonized the area after the 6th century AD, forming a semi-independent principality called Doclea, that was involved in Balkan medieval politics with ties to Rascia (Raška) and Byzantium and to a lesser extent Bulgaria.■ Doclea (or Duklja) gained its independence from the Byzantine Empire in 1042 – the Byzantine influence in art and architecture is especially felt in continental part of Montenegro.■ Over the next few decades, it expanded its territory to neighboring Rascia and Bosnia and also became recognized as Reţevići Monastery, Petrovac a kingdom. Copyright © 2011 Pytheas Limited July 2011 36
  37. 37. History and culture (continued)■ Its power started declining at the end of the 11th century and by 1186, it was conquered by Stefan Nemanja and incorporated into Serbian realm.■ The newly acquired land, then called Zeta, was governed by the Serbian Nemanjić dynasty.■ After the Serbian Empire collapsed in the second half of the 14th century, another family, the Balšićs, came to prominence.■ Coastal Montenegro from 1420 to 1797 was a province of the Venetian Republic. The Venetian territory was then centered around the area of the Bay of Ostrog Monastery, Nikšić Kotor, and included the towns of Copyright © 2011 Pytheas Limited July 2011 37
  38. 38. History and culture (continued) Kotor, Risan, Perast, Tivat, Herceg Novi, Budva, and Sutomore.■ The Montenegrin coastal region is especially known for its cultural monuments, such as the Cathedral of St. Tryphon, the basilica of St. Lucas (over 800 years), Our Lady of the Rock (Scrpjelo), the Savina Monastery and many others.■ The name "Montenegro" meaning Black Mountain was first mentioned in the 15th century.■ Montenegros resistance to Ottoman attacks (15th century), which in the end resulted in Kotor Venetian Walls, a view Copyright © 2011 Pytheas Limited July 2011 38
  39. 39. History and culture (continued) strengthening its statehood, marks this time period.■ Renowned about their bravery Montenegrins forced Giuseppe Garibaldi to state: “Montenegro undoubtedly takes one of the first places; the legendary heroism of its people brings honor to mankind”.■ The printed word in Montenegro goes way back in history. Thirty- eight years after the Gutenbergs Bible, in 1494 the first book was printed in the Crnojević printing press in Cetinje – “Oktoih”, a precondition for the future development of literature in Montenegro. First book published in the Balkans, Cetinje (1494) Copyright © 2011 Pytheas Limited July 2011 39
  40. 40. History and culture (continued)■ In the 15th century it remained the only officially unconquered and free oasis, surrounded by the powerful Ottoman empire and the Venetians.■ Montenegro was internationally recognized as a state in 1878. Its capital at the time was Cetinje.■ On 1 August 1910 during the reign of King Nikola I of the Petrović Dynasty was declared a Kingdom.■ From 1918 to 1941 it was part of the Kingdom of Yugoslavia.■ After World War II, it became one of the six republics of the Socialist Federal Republic of Hussein Pasha Mosque, Pljevlja Yugoslavia. Copyright © 2011 Pytheas Limited July 2011 40
  41. 41. History and culture (continued)■ In 1992, after the breakup of Communist Yugoslavia and the introduction of a multi-party political system, it became part of the Federal Republic of Yugoslavia (FRY).■ In 2003 the FRY was renamed to Serbia and Montenegro and officially reconstituted as a loose union.■ At a referendum held on 21 May 2006, the majority of its citizens voted for its independence.■ Today it is an independent state internationally recognized.■ UN received Montenegro as the 192nd country member on 27 July Church Gospa od Skrpjela, Perast 2006. Copyright © 2011 Pytheas Limited July 2011 41
  42. 42. History and culture (continued)■ The culture of present-day Montenegro is as pluralistic and diverse as its history and geographical position would suggest.■ A very important dimension of Montenegrin culture is the ethical ideal of “Čojstvo i Junaštvo”, roughly translated as "Humanity and Bravery“ – another result of its centuries long warrior history, it is the unwritten code of chivalry that stipulates what is required to deserve a true respect of the people. Amongst other, in the old days of battle, it resulted in Montenegrins fighting to the death as being captured was Montenegrins in national costumes, Cetinje considered the greatest shame. Copyright © 2011 Pytheas Limited July 2011 42
  43. 43. Slide(s) Slide(s)The Economy – General 44 - 57The Economy – Sectors & Bodies Banking 58 - 66  Minerals & Mining 113 - 119 Insurance 67 - 71  Agriculture & Forestry 120 - 123 Capital Market 72 - 75  Transport & Foreign Trade 76 - 82 Communications 124 - 129 Hospitality & Tourism 83 - 94  Education 130 - 133 Real Estate & Construction 95 - 104  Healthcare 134 - 137 Industrial 105 - 112  Environment 138 - 141 Copyright © 2011 Pytheas Limited July 2011 43
  44. 44. The Economy – General ■ Montenegro is a small, open, middle-income economy. Despite a medium level of wealth, the countrys economic strength is limited by the small size and concentrated nature of its economy. ■ Notably, Montenegro does not issue its own currency, but has been using the Euro as legal tender since 2002 and maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions. ■ As with other smaller economies, River Tara, a view the crisis reached the country Copyright © 2011 Pytheas Limited July 2011 44
  45. 45. The Economy – General (continued) with a lag, only starting to be felt in the last quarter of 2008. Officially the crisis fully hit Montenegro during 2009. As a Montenegro Real GDP Growth result the GDP growth rate in Year % 2009 was -5.7%. 2005 4.2■ Previously, in 2006 and 2007 the country achieved GDP growth 2006 8.6 rates of 8.6% and 10.7% 2007 10.7 respectively which continued strongly into 2008 with 6.9% 2008 6.9 growth. 2009 -5.7■ In 2007, Montenegro achieved a 2010 1.1 record fiscal surplus of more 2011 2.0* than 6% of GDP, which remained at 1% of GDP in 2008 Source: IMF, Pytheas Emerging Markets Research – positioning it at the time as one * Estimate of the fastest growing European countries. Copyright © 2011 Pytheas Limited July 2011 45
  46. 46. The Economy – General (continued)■ Since its independence in 2006, Montenegro has experienced an economic and financial roller coaster ride. The country’s abundant potential attracted large capital inflows, an increasing share of which were debt creating.■ Wealth effects made real estate lending and absorption booms mutually reinforcing, and overstretched the nascent financial sector’s ability to guard against risks. The economy began to overheat and then, as elsewhere, the inflows juddered to a halt. The result was a sharp decline in output. Šareni Pasovi, National Park Durmitor Copyright © 2011 Pytheas Limited July 2011 46
  47. 47. The Economy – General (continued) # Montenegro Macroeconomic Indicators, selected 2009 2010 2011 1 Nominal GDP (€ million) 2,981 3,023 3,111 2 GDP real growth rate (%) -5.7 1.1 2.0 3 Inflation (%) 3.4 0.5 4.0 4 Unemployment rate (%) 11.5 12.2 12.0 5 Current account balance (€ million) -896 -775 -761 6 Current account balance as % of GDP (%) -26.2 -25.6 -24.5 7 External debt (€ million) 2,781 3,000 3,089 8 External debt as % of GDP (%) 93.3 98.9 99.3 9 Net FDI, in current prices as % of GDP (%) 35.8 17.9 15.4 10 Net FDI, in current prices (€ million) 1,066 542 480 11 Gross domestic savings as % of GDP (%) -6.2 -6.7 -4.7 12 Gross national savings as % of GDP (%) -3.1 -3.6 -2.5 Source: Montenegro Ministry of Finance, CBME, MONSTAT, IMF, EUROSTAT, Pytheas Emerging Markets Research 2010 = Estimate 2011 = Projections Copyright © 2011 Pytheas Limited July 2011 47
  48. 48. The Economy – General (continued)■ Huge vulnerabilities were accumulated during the boom when the authorities did not take the opportunity to sufficiently strengthen policy buffers. With policy space exhausted at the beginning of the crisis, the authorities were forced to adopt unconventional policies to mitigate its effects.■ During the boom the Central Bank of Montenegro raised the cost of credit through higher reserve requirements and tightened supervisory and prudential standards, but credit growth was hardly dented. In the Fall of 2008, banks suffered from a simultaneous run on deposits, loss of access to financing, and deterioration in asset quality.■ The early surpluses largely reflected temporarily buoyant tax collections from high imports. Initially, they were placed in the domestic banking system, thereby enabling further credit extension. Then at the peak of the boom period, the fiscal stance relaxed (through tax cuts and public sector wage increases), leading to a structural fiscal deficit of some 6% of GDP in 2008.■ The remaining fiscal buffers were quickly exhausted in the crisis, while large loan guarantees to the aluminum and steel companies created Copyright © 2011 Pytheas Limited July 2011 48
  49. 49. The Economy – General (continued) substantial new contingent liabilities. By 2009 public and publicly guaranteed debt had risen to nearly 55% of GDP.■ Excessively restrictive employment protections and an unduly rigid centralized collective bargaining system remained in place contributing to fast wage growth, limiting the flexibility of the corporate sector, and stifling new hiring, thus raising unemployment.■ Privatization occurred later than elsewhere in Eastern Europe, and in consequence the interest of bidders was more limited. Katun Gudţaljine on Bjelasica mountain Copyright © 2011 Pytheas Limited July 2011 49
  50. 50. The Economy – General (continued)■ Privatization – The responsible body to manage, control and supply the privatization process implementation as well as to propose and coordinate all activities necessary for the capital projects application in Montenegro is the Montenegro Privatization and Capital Investment Council. Progress in large-scale privatization has been so far mixed:  The tender for the sale of a 54% stake and a 30-year concession in the port operator, Marina Bar, was concluded successfully in early 2010.  A tender for acquiring a long-term concession on the Bijela port infrastructure and the area surrounding the Bijela shipyard was launched in June 2010.  The government has also issued a tender for the privatization of the Railways Cargo Company (MonteCargo).  However, the tender for the sale of the majority stake in the port operator, Kontejnerski Terminal, failed.  Furthermore, the partial re-nationalization of the aluminum conglomerate KAP became effective in November 2009 with the state acquiring a 29% stake in the plant and a 31% stake in the related Nikšić Bauxite mine in exchange for a guarantee worth €135 million. Copyright © 2011 Pytheas Limited July 2011 50
  51. 51. The Economy – General (continued)  HTP “Budvanska Riviera“ AD Budva, In September 2009 the Government transferred an 18.3% stake in EPCG, the state-owned vertically integrated power utility, to Italy’s AZA. The Government also signed a €720 million agreement for the construction of an undersea power transmission line with Italy. The project, which is expected to make Montenegro an important node in the regional power market, will be implemented jointly by the Italian company Terna and the recently unbundled Montenegrin transmission system operator, Prenos.  The concession agreement to construct the Bar-Boljare motorway, signed in 2009, has not yet closed and construction has been severely delayed, mainly attributed to the failure of the first-ranked bidder to provide all the required documents and the length of the negotiations.■ As per the relevant Government plan, the following companies are to be privatized within 2011:  “Montepranzo“ Boka – Produkt AD Tivat,  “Montenegro Airlines” AD Podgorica, and  “Institute Dr. Simo Milošević” AD Igalo . Copyright © 2011 Pytheas Limited July 2011 51
  52. 52. The Economy – General (continued)■ Additional tenders (date has not yet been defined) shall be also published for:  Railway Transport of Montenegro AD Podgorica,  Railway infrastructure of Montenegro AD Podgorica,  Adriatic Shipyard AD Bijela,  Port of Bar AD Bar,  “Pobjeda“ AD,  “Zora” AD Berane,  HTP “Ulcinjska Riviera” AD Ulcinj,  Ferrous Metallurgy Institute AD Nikšić,  “Barska plovidba” AD Bar, and  Montenegrobonus LLC Cetinje.■ Also within the privatization process through Public Private Partnership, investors shall be selected for the following tourism and hospitality projects: (a) Ada Bojana, (b) Velika Plaţa, (c) Njivice, (d) Utjeha, (e) Buljarica, and (f) Jaz. The same with the real property belonged to the military: (a) “Mediteran” Zabljak, (b) “Bigovo – Traste” Kotor, (c) Mamula, (d) Rakite, and (e) Kumbor. Copyright © 2011 Pytheas Limited July 2011 52
  53. 53. The Economy – General (continued) ■ The large industrial sector legacy enterprises were sold to smaller investors who lost access to new financing during the global crisis, forcing the government to retake a significant equity stake in the aluminum plant in exchange for extending loan guarantees. ■ In addition to the deposit run, the sudden stop in capital inflows also dried up financing for corporates just as the prices of their key export products began to fall sharply. With the very large contractions in industry, the decline in GDP (6%) would have been even worse but for the The old town of Budva ability of the tourism sector to mostly withstand the downturn. Copyright © 2011 Pytheas Limited July 2011 53
  54. 54. The Economy – General (continued)■ A tentative recovery is taking hold, following the global crisis that exerted heavy blows upon the economy. In 2010, a good tourism season was followed by resumed metal production, while heavy rains in the region boosted electricity production and exports. After contracting for almost two years, industry began to grow again in the second half of 2010. Nevertheless, industrial production at end-2010 was still considerably below its pre-crisis peak. Expected large-scale infrastructure foreign direct investment has so far not materialized and construction activity remains depressed. Overall 2010 GDP growth is estimated at 1.1%, keeping output below its 2008 level.■ The needed rebalancing of the economy has begun. Inflation and wage growth decelerated sharply and the current account deficit halved to around 26% of GDP in 2010. While most of the improvement was due to a weather related boost in electricity exports and rebounding metals production, the nascent adjustment in costs has also improved competitiveness. The improved fundamentals have also contributed to the September 2010 debut Eurobond issuance of €200 million, subsequent spread tightening, and a further €180 million issuance in April 2011. Copyright © 2011 Pytheas Limited July 2011 54
  55. 55. The Economy – General (continued)■ Fiscal consolidation has commenced. Reflecting mainly significant capital expenditure cuts, the 2010 fiscal deficit is estimated to have declined by 1.5% of GDP to 3.9%, though, loan guarantees of 3.6% were extended to industrial companies. Going forward, the authorities aim at balancing the budget in 2012 and achieving a sizeable surplus thereafter in order to bolster sustainability, lower financing risk, and boost the economy’s resilience to shocks. A durable fiscal adjustment should encompass both revenue and expenditure measures, especially steps to curb the public sector wage bill. An early implementation of pension reform would also strengthen the public finances, as would further efforts to avoid expenditure arrears and direct budget support to private companies.■ In the banking sector, confidence has begun to return, as evidenced by increasing deposits, though they are still below their levels in the third quarter of 2007. However, non-performing loans have not yet leveled off – stagnant lending at the current juncture primarily reflects the dearth of creditworthy projects. Copyright © 2011 Pytheas Limited July 2011 55
  56. 56. The Economy – General (continued) ■ In an effort to prevent and mitigate systemic risks in the financial system in the future and to ensure its preservation, improvement, control and stability but also for better promotion of coordination and exchange of information between authorities in the financial sector, amongst other, the Montenegrin Government established the Financial Stability Board and the European Systemic Risk Board. Along the same lines the Financial Stability Council Law was adopted. At Rijeka Crnojevića Copyright © 2011 Pytheas Limited July 2011 56
  57. 57. The Economy – General (continued)■ Although the recovery is gaining momentum, limited policy space and incomplete reforms pose risks to the outlook. Montenegro must step up efforts to reconstitute fiscal, external, and financial buffers and to address rigidities in product and labor markets.■ Noting the importance of strengthened competitiveness for securing external stability, structural reforms remain a top policy priority.■ Greater flexibility in wage setting and employment protection would support job creation in the private sector, while addressing unemployment and poverty traps would boost labor participation and market attachment.■ Improvements in the business environment and investment climate are also part of the unfinished agenda. Copyright © 2011 Pytheas Limited July 2011 57
  58. 58. Banking ■ The banking system comprises of the Central Bank of Montenegro (Centralna Banke Crne Gora), which is the regulatory and supervisory authority for the banking institutions – the banks, and the Micro-Credit Financial Institutions (MFIs). ■ According to the relevant law the main objective of the Central Bank of Montenegro is to establish and maintain a sound banking system and monetary policy, including safe and efficient payment systems. The Millenium Bridge, Podgorica Copyright © 2011 Pytheas Limited July 2011 58
  59. 59. Banking (continued) ■ The Banking sector in Montenegro Banks – Ranking by Total Assets (2009) Montenegro is completely# Name Total % privatized. There are eleven Assets banks operating in the country,1 Crnogorska Komercijalna Banka 840,732 27.8 and all of them are in private2 NLB Montenegrobanka 515,213 17.0 ownership with the share of3 Hypo-Alpe Adria Bank 507,189 16.8 foreign capital exceeding 80%;4 Prva Banka Crne Gora 367,222 12.1 three are locally-owned while the5 Podgorička Banka 240,234 7.9 other eight are part of6 Erste Bank 181,911 6.0 international banks and other entities, corporate and private.7 Atlas Banka 160,123 5.38 Hipotekarna Banka 100,103 3.3 ■ The Montenegrin banking sector was severely hit by the global9 Komercijalna Banka 71,799 2.4 financial crisis. As a result non-10 Invest Banka Montenegro 24,250 0.8 performing loans as a percent of11 First Financial Bank 16,457 0.5 gross loans increased from 3.2% Total 3,025,233 100.0 at end-2007 to 21% at end-2010.Source: Central Bank of Montenegro, Pytheas Emerging Markets Copyright © 2011 Pytheas Limited July 2011 59
  60. 60. Banking (continued) Montenegro Banks – General, Year 2009 (€000) Total Total Net Est. Foreign Ownership# Name Assets Liabilities Profit1 Atlas Banka 160,123 131,319 1,161 2002 Local (IBM Atlas Group)2 Crnogorska Komercijalna Banka 840,732 781, 637 -11,834 1997 OTP Bank (Hungary)3 Erste Bank 181,911 159,074 195 2009 Erste Bank (Austria)4 First Financial Bank 16,457 11,157 -1,706 2008 Restis Group (Greece)5 Hipotekarna Banka 100,103 79,257 1,571 1991 Foreign & local entities6 Hypo-Alpe Adria Bank 507,189 447,970 -18,315 2006 Bayern LB (Germany)7 Invest Banka Montenegro 24,250 8,758 303 1961 Local (IMB Atlas Group)8 Komercijalna Banka 71,799 50,642 1,159 2003 Komercijalna Banka (Serbia)9 NLB Montenegrobanka 515,213 479,104 1,401 1995 NLB Group (Slovenia)10 Podgorička Banka 240,234 209,525 -1,903 1906 Societe Generale (France)11 Prva Banka Crne Gora 367,222 335,054 6,339 1901 LocalSource: Central Bank of Montenegro, Pytheas Emerging Markets Research Copyright © 2011 Pytheas Limited July 2011 60
  61. 61. Banking (continued) ■ During the boom the Central Bank of Montenegro raised the Montenegro Banking Sector – Distribution of cost of credit through higher Bank Credit by Borrower (%) reserve requirements and # Borrower 2007 2008 2009 2010 tightened supervisory and 1 Private companies 60.6 59.2 56.4 54.8 prudential standards, but credit 2 Citizens 34.5 35.8 36.6 37.1 growth was hardly dented. In the Fall of 2008, banks suffered from 3 Government 1.4 1.0 1.3 2.1 a simultaneous run on deposits, 4 State-owned cos 1.0 1.0 1.9 2.7 loss of access to financing, and 5 Funds 0.6 0.4 1.2 0.1 deterioration in asset quality. 6 Banks 0.2 0.1 0.0 0.0 ■ The authorities implemented several measures to stabilize the Financial 7 Institutions 0.9 0.8 0.3 0.4 banking system, including a law 8 Credit cards 0.9 1.3 1.7 2.2 authorizing the government to provide direct support to banks in 9 Other 0.0 0.4 0.6 0.6 the form of credit lines and re- capitalization. Source: Central Bank of Montenegro, IMF Copyright © 2011 Pytheas Limited July 2011 61
  62. 62. Banking (continued) ■ The government provided such Montenegro Banking Sector – Distribution of support in two cases: Bank Credit by Economic Sector (%)  (a) a loan of €44 million for the # Sector 2007 2008 2009 2010 financially troubled Prva Banka, 1 Households 35.1 36.4 38.3 39.3 and 2 Trade 26.1 22.6 22.8 22.9  (b) a guarantee of €150 million to 3 Construction 9.0 7.2 7.8 8.1 cover KfW Bankgruppe’s and European Investment Bank’s. 4 Services, 8.6 7.7 5.9 7.4 Tourism, etc. loans to Montenegrin banks used Agriculture, for providing finance to small and 5 Hunting, Fishing 1.0 0.6 0.3 0.4 medium-sized enterprises 6 Mining, Energy 1.0 1.6 2.2 2.5 (SMEs). 7 Transport, 3.6 3.1 2.6 3.0 ■ A package of laws in the communications 8 Finance 2.8 2.5 2.4 1.7 financial sector was approved in 9 Real Estate 3.6 4.2 4.4 3.0 July 2010, including a new law on the central bank and a new10 Public services 2.9 2.0 2.6 3.1 deposit protection law.11 Other 6.3 12.1 9.1 9.0 Source: Central Bank of Montenegro, IMF Copyright © 2011 Pytheas Limited July 2011 62
  63. 63. Banking (continued)■ Stress testing results of the banking system sensitivity to crisis showed that four banks needed to provide additional capital. Another two banks performed recapitalization, although the diagnostic assessment findings and stress testing results did not point to the recapitalization need.■ Total non-performing assets of banks amounted to €509.3 million at end-2010 and made up 17.3% of total assets; showed a year-on-year increase of €164.6 million or 47.7%. Simultaneously, the share of non- performing assets to total assets grew by 5.91%.■ Liquidity of the banking sector in 2010 was satisfactory which was largely contributed to the conservative lending policy.■ Banks’ liquid assets amounted to €562.7 million at end-2010; showed an increase in one year period of €101 million or 21.92%. Liquid assets to total assets ratio amounted to 19.11% (15.26% at end-2009).■ Liquid assets to short-term liabilities grew in 2010; attributed to a significantly faster increase in liquid assets as compared to short-term liabilities of banks. Simultaneously, short-term loans to short-term liabilities ratio declined and it was 48.44% on aggregate level due to decrease in loan portfolio in the previous year. Copyright © 2011 Pytheas Limited July 2011 63
  64. 64. Banking (continued) # Montenegro Banking Sector – Selected Financial Ratios (%) 2007 2008 2009 2010 CAPITAL ADEQUACY 1 Regulatory capital as % of risk-weighted assets 17.1 15.0 15.7 15.9 2 Capital as % of assets 8.0 8.4 11.0 10.6 ASSET QUALITY 3 NPLs in % of gross loans 3.2 7.2 13.5 21.0 4 Provisions, in % of NPLs 73.6 55.6 46.3 30.7 5 Provisions, in % of total loans 2.3 4.0 6.3 6.4 6 NPLs net of provisions, in % of capital 7.9 32.0 52.5 102.8 EARNINGS AND PROFITABILITY 7 Gross profits ROAA 0.8 -0.6 -0.6 -2.7 8 Gross profits ROAE 10.5 -6.6 -6.9 -27.0 9 Net interest margin 3.0 3.8 4.9 4.910 Gross income, in % of average assets 7.0 5.1 5.3 5.4 LIQUIDITY11 Liquid assets, in % of total assets 18.1 11.2 15.3 19.112 Liquid assets, in % of short-term liabilities 32.0 20.9 25.8 32.913 Deposits, in % of assets 70.3 60.1 60.3 60.814 Loans, in % of deposits 107.4 140.5 131.4 122.9Source: Central Bank of Montenegro, IMF Copyright © 2011 Pytheas Limited July 2011 64
  65. 65. Banking (continued) ■ Total MFIs assets and liabilities amounted to €58.7 million in December 2010 – same level as it was at the beginning of 2008; Montenegro Micro-Credit Financial Institutions – General, Year 2009 (€000) annual decline in MFIs assets amounted to 22.1%. Total Total Net # Name Assets Liabilities Profit ■ At 2010 year-end, total MFI loans amounted to €43.5 million which 1 Agroinvest VFI 52,212 40,151 73 represented a year-on-year decline of 33.9%. 2 Alter Modus 16,493 11,487 289 ■ MFI granted loans for start-up of 3 Klikloan 1,745 598 -117 small entrepreneurial programs but under very unfavorable 4 Montenegro 3,194 1,908 256 conditions – MFI average Investments weighted effective interest rates 5 Ozmont 1,786 1,192 143 reached 28.0% in December 2010, while nominal interest Source: Central Bank of Montenegro rates amounted to 19.2%. Copyright © 2011 Pytheas Limited July 2011 65
  66. 66. Banking (continued) ■ Useful links (alphabetically): ► Association of Montenegrin Banks ► Chamber of Economy of Montenegro ► Central Bank of Montenegro ► MONSTAT ► Montenegrin Employers Federation ► Montenegro Deposit Protection Fund ► Montenegro Ministry of Economy ► Montenegro Ministry of Finance ► Securities & Exchange Commission Montenegro Fortress Lessendro, Lake Skadar National Park Copyright © 2011 Pytheas Limited July 2011 66
  67. 67. Insurance ■ The institution responsible for supervision and control of insurance in the country is the Insurance Supervision Agency of Montenegro (ISA), which is independent of any other governmental body. ■ The ISA supervises performance of affairs from the area of insurance, aimed at encouraging the insurance market development and ensuring adequate protection of the insured. Its basic goals are to protect the interests of the insured and related beneficiaries, and increase Old town of Kotor, a view sustainability and reliability of the insurance market. Copyright © 2011 Pytheas Limited July 2011 67
  68. 68. Insurance (continued) Montenegro Insurance Sector – Gross Premium by Company (May 2011) Non Life Insurance Life Insurance Total # Name Amount (€) % Amount (€) % Amount (€) % 1 Swiss Insurance 95,699.78 2.13 95,699.78 1.81 2 Lovćen Insurance 2,391,662.46 53.20 2,391,662.46 45.32 3 Sava Montenegro 847,464.76 18.85 847,464.76 16.06 4 Uniqa Non-Life Insurance 544,156.27 12.10 544,156.27 10.31 5 Delta Generali Insurance 616,665.87 13.72 616,665.87 11.68 6 Lovćen Life Insurance 99,291.67 12.70 99,291.67 1.88 7 Wiener Staedticshe Life Insurance 77,470.69 9.91 77,470.69 1.47 8 Uniqa Life Insurance 143,664.96 18.37 143,664.96 2.72 9 Merkur Insurance 49,655.12 6.35 49,655.12 0.9410 Grawe Insurance 384,418.59 49.16 384,418.59 7.2811 Atlas Life 9,444.76 1.21 9,444.76 0.1812 Delta Generali Life Insurance 17,995.20 2.30 17,995.20 0.34 Total 4,495,649.14 100.00 781,941.99 100.00 5,277,591.13 100.00Source: Insurance Supervision Agency of Montenegro Copyright © 2011 Pytheas Limited July 2011 68
  69. 69. Insurance (continued)■ The insurance sector in 2010 in comparison with the previous year had shrunk. However, liquidity and solvency of insurance companies are characterized as satisfactory.■ Gross insurance premium amounted to €62.8 million at end-2010 ; a 4.4% annual decline. Non-life insurance premiums were still dominant (86.5%) with a declining trend, result of non-life insurance gross premiums decline (5.4%).■ Insurance companies faced the problem of aggravated collection during this period resulting to, the reversal of a number of insurance policies, an increase in requests for insurance surrenders and a decline in the number of active insurance policies.■ Moreover, increase in competition in the insurance market during 2010 influenced a decline in concentration. Notably, three insurance companies with the highest insurance premiums had a market share of 77.5% at end-2010, a 1.4%dicline since the previous year.■ Total share capital of insurance companies amounted to €39.2 million at end-2010, an increase of 13.1% since end-2009. Copyright © 2011 Pytheas Limited July 2011 69
  70. 70. Insurance (continued)■ There was an increase of foreign capital share by 1% at end-2010 compared to the previous year.■ At end-2010, the solvency margin of insurance companies amounted to €21.8 million and guarantee reserves to €23.9 million. The guarantee reserve to solvency margin ratio amounted to 109.4% at end-2010 indicating a satisfactory solvency■ Liquidity ratio at end-2010 was to 3.5 and thus indicated that liquid funds of insurance companies were 3.5 times higher to their short term liabilities. Old town of Bar, a view Copyright © 2011 Pytheas Limited July 2011 70
  71. 71. Insurance (continued) ■ Useful links (alphabetically): ► Insurance Supervision Agency of Montenegro ► MONSTAT ► Montenegro Ministry of Finance ► National Bureau of Insurers of Montenegro Town of Cetinje, a view Copyright © 2011 Pytheas Limited July 2011 71
  72. 72. Capital Market ■ The Montenegro Stock Exchange or Montenegroberza (MNSE) was founded in 1993, and is a member of the WFE, Capital Market – Indices Growth Rates (%) FESE and FEAS. It is the sole stock exchange in Montenegro, Year Moste Nex 20 Nex PIF following the merger with the 2004 -12.3 106.9 42.9 NEX Stock Exchange. 2005 302.2 287.7 404.9 ■ Trading on the MNSE consists of 2006 98.4 84.5 119.4 short and long term securities, 2007 77.1 89.3 120.8 six investment funds, bonds, and shares from government funds 2008 -71.2 -70.7 -85.1 portfolios. The MONEX20 nad 2009 36.1 45.9 20.1 MONEXPIF are the principal 2010 -18.0 -0.5 -3.5 stock indices of the Montenegro Stock Exchange. Source: Montenegro Stock Exchange Copyright © 2011 Pytheas Limited July 2011 72
  73. 73. Capital Market (continued)■ Year 2010 was characterized by a decline of indices; the Montenegro Stock Exchange had its lowest turnover since 2004.■ Privatization and recapitalization of the Montenegrin Electric Enterprise (EPCG) led to a short-term recovery of the capital market. However, negative trends were also evident in 2010 which reflected in a further decline in the value of indices and significantly lower turnover and number of transactions; indicating that negative effects of the crisis at the Montenegrin capital market were still present.■ In addition, the highest decline in turnover in the region in 2010 was reported at the Montenegrin Stock Exchange.■ During 2010, there was a turnover of €54.8 million by all Montenegrin stock exchanges achieved through 19.8 thousand transactions. Compared to end-2009, the turnover declined by 86.5% or €351 million, while the number of deals performed declined by 66.3%.■ The average monthly turnover at end-2010 amounted to a mere €4.6 million, a significant decline compared to €33.8 million at end-2009. The largest portion of turnover was through secondary trade, while only 4.1% of turnover was reported through primary trade. Copyright © 2011 Pytheas Limited July 2011 73
  74. 74. Capital Market (continued) ■ In trade structure, the highest turnover in 2010 was from trade with company shares (61.4%), various types of bonds (25.2%), while the participation of mutual investment funds’ share in total turnover was 13.5%. Town of Ulcinj Copyright © 2011 Pytheas Limited July 2011 74
  75. 75. Capital Market (continued) ■ Useful links (alphabetically): ► Central Depository Agency of Montenegro ► MONSTAT ► Montenegro Ministry of Finance ► Montenegro Stock Exchange ► Montenegro Ministry of Finance ► NEX Montenegro ► Securities & Exchange Commission Montenegro Perast, a view Copyright © 2011 Pytheas Limited July 2011 75
  76. 76. It is Pytheas opinion that Montenegro could become the tradinggateway of the Western Balkans; with duties lower than the regional average and an economy which is amongst the most liberal of Europe and Central Asia. Copyright © 2011 Pytheas Limited July 2011 76
  77. 77. Foreign Trade■ While continuing its pursuit of WTO accession, Montenegro retains an open trade regime with low duties. Today, based on its 5% simple average MFN applied tariff, Montenegro’s economy is among the more liberal ones in Europe and Central Asia (ECA). Based on the latest MFN applied tariff, it ranks 18th out of 181 countries (where 1st is least restrictive). Similar to the majority of other countries in its comparator groups, Montenegro is more protective of its agricultural goods (11.1% tariff) than of its non-agricultural goods (4% tariff). Montenegro’s maximum MFN applied tariff, excluding alcohol and tobacco, is 79.9% which is much lower than the regional average of 159.7%. However, only 5% of its tariff lines have zero MFN duties, which again it is much lower than the regional average of 28.2%.■ Based on Montenegro’s simple average overall rest of the world tariff (including preferences) of 10.6%, the country’s exports face a less favorable trading environment than the average ECA country (9.7%). As is the case for most countries, Montenegro’s non-agricultural exports have better access to international markets (9.7% tariff) than its agricultural products (16.3% tariff). Copyright © 2011 Pytheas Limited July 2011 77
  78. 78. Foreign Trade (continued) ■ Due to its undiversified export structure (aluminum, steel, and fuel products compromise about 60% of the country’s export receipts with aluminum alone accounting to about 1/3 of the total, Montenegro is very vulnerable to swings in commodity prices. ■ It’s imports are more diversified than its exports. However, oil accounts for about 8% of total imports, and machinery and motor vehicles are also significant items in the import bill. Thus, due to high fuel prices and the need to upgrade its capital A view of Alipašini izvori, Plav stock, Montenegro has run a high import bill in recent years. Copyright © 2011 Pytheas Limited July 2011 78
  79. 79. Foreign Trade (continued) ■ Total foreign trade for 2010 was €1,987.7 million, a 2.9% increase from the previous year. Montenegro – Main Trade Partners (2010) Exports corresponded to €330.4 million (a 19.3% increase # Partners € million % compared to 2009) and imports World 978,6 100 to €1,657.3 million (a 0.2% 1 EU27 727,4 74,3 increase from the previous year). 2 China 61,1 6,2 Non-ferrous metals (€130.8 3 Brazil 54,2 5,5 million) and iron and steel (€19.4 4 Russia 50,9 5,2 million) together represented 5 Turkey 27,4 2,8 more than 45% of exports, while 6 USA 15,0 1,5 machinery and transport 7 Switzerland 11,0 1,1 equipment (€340.6 million) and 8 Egypt 8,7 0,9 food and live animals (€324.2 9 Albania 6,5 0,7 million) together represented 10 Japan 3,4 0,3 more than 40% of imports. Source: MONSTAT Copyright © 2011 Pytheas Limited July 2011 79
  80. 80. Foreign Trade (continued) ■ In exports, main foreign trade partners were,  Serbia (€74.9.million),  Greece (€56.4 million), and  Italy (€ 48.8 million). ■ In imports,  Serbia (€432.6 million),  Bosnia and Herzegovina (€432.6 million), and  Germany (€117.1 million). ■ Main regional foreign trade partners were countries members of CEFTA and the EU. Ţabljak in winter, a view Copyright © 2011 Pytheas Limited July 2011 80
  81. 81. Foreign Trade (continued) ■ Montenegro has  A CEFTA and a Free Trade agreement with Russia;  A Trade agreement with EU countries under the Autonomous Trade Preferences;  A Stabilization and Association agreement with the EU;  A Trade agreement with EFTA countries (Switzerland, Norway, Iceland, Lichtenstein);  Free Trade agreements with Albania, Serbia, Bosnia and Herzegovina, Bulgaria, Croatia, F. Y. R. Macedonia, Moldova, and Romania;  An asymmetric Free Trade agreement with Turkey. Mausoleum of Petar II Petrović Njegoš, Lovćen Copyright © 2011 Pytheas Limited July 2011 81
  82. 82. Foreign Trade (continued) ■ Useful links (alphabetically): ► MONSTAT ► Montenegro Chamber of Economy ► Montenegro Customs Administration ► Montenegro Investment Promotion Agency ► Montenegro Ministry of Economy ► Union of Free Trade Unions of Montenegro Town of Herzeg Novi, a view Copyright © 2011 Pytheas Limited July 2011 82
  83. 83. As per the latest economic impact research study from the WorldTravel & Tourism Council and Oxford Economics, Montenegro will bethe fastest growing Hospitality & Tourism economy in the world overthe next ten years with regard to Hospitality & Tourism’s contribution to GDP and employment. Copyright © 2011 Pytheas Limited July 2011 83
  84. 84. Hospitality & Tourism ■ Hospitality and Tourism is accorded the highest development priority of all industries and represents one of the most important branches of the Montenegrin economy, generating multiple effects. ■ Montenegro is small in area, but its comparative natural advantages, its richness in cultural and historical sights and others features, make it one of the most attractive receptive tourist destinations. ■ Against a backdrop of global tourism decline, Montenegro’s tourism sector continued to Old city of Kotor, a view expand in 2009 and 2010. Copyright © 2011 Pytheas Limited July 2011 84