Doing Business in Montenegro

Mr Milorad Katnic

Deputy Minister of Ministry of Finance

Basic Economic Facts

  2004 2005

GDP real growth 2.7% 4.1%

Budgetary deficit 2.1%  1,6%

Inflation rate 4.3% 3.5%

External public debt 32.7% 30.6%

Total public debt 44.8% 40.1%

Current account deficit 9.2% 

Unemployement rate 22.6%  21,6%

Economic Reforms- Basic elements of concept -

Openness

Accepting a credible currency (EURO)

Low level of business regulation

Low level of taxation

According to OECD, Montenegro is champion in the region for business registration

Romania

Macedonia

Montenegro

Albania

Moldova

Croatia

Bosnia and

HerzegovinaSerbia

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40

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60

70

80

0 2 4 6 8 10 12 14 16 18

Number of procedures to register a limited liability company

Number of days to register a company

Bulgaria

Bussines Regulation

Business entry: – Requared amount of capital for Limited Liability

Company is 1 € – Procedure reacquires three documents and it

takes four working days

Business exit:

– Law on Bankruptcy: maximal length of liquidation process – 8 months

Bussines Regulation

National treatment of foreign investors

Free movement of capital is introduced with the new Law on Capital transactions

Free profit repatriation

EURO is legal currency

99% of prices are freely determined

Government tries to identify and eliminate various business barriers

Tax Regulation Value Added Tax – Flat rate 17%

Personal Income Tax – progressive rate 15-22%

Corporate Income Tax – 9%

Average tariff rate approximately 6%

Challenges are further simplification of the tax system, continual reduction of the government expenditures and tax burden and compliance with eurozone Mastrichts criterion

Privatisation and FDIAfter slow down in 2003 the FDIs increase in 2004 and especialy in 2005

Goal for 2005 achieved in the I quarter with succesful privatisation of Telecom

In first nine months FDI reached 231.8 mln euro

Further privatizations in 2005: KAP, Podgoricka Bank, Shipyard, part of the energy sector, hotels and military property

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2002 2003 2004 2005p 2005 / 9

FDI

Privatisation and FDI (1)FDI in 9/2005 - economy areas

4.40

183.90

27.6016.50

Production Services Financial organizations Real estate

Privatisation and FDI (2)

• Telecommunication – 100% private ownership;• Banking – 90% private ownership;• Capital market – 100% private ownership;• Services – 100% private ownership;• Gasoline import and distribution – dominante private

ownership;• Tourism – mostly private ownership

(just a few hotels remain in majority ownership of the state);

• Industry – mostly private ownership;

Banking Sector – Positive trends

Deposits increaseDecrease of interest rateConcentrationPrivatization

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2001 2002 2003 2004 Jul-05

depoziti

Capital marketOver 151000 transactions have been made in period 2001 – 2005 with turnover of 226.4 mln €

About 110 mln € of foreign capital is invested in Montenegro by buying securities

General capitalization is 560 mln € in September 2005. which is 34%GDP

2001 10,8 € mln €

2002 14,3 € mln €

2003 43,5 € mln €

2004 42, 8 € mln €

Sep-05 114,8 mln €

TOTAL 226,4 mln €

Stock Exchange Indexes NEX 20 and NEX PIF

90013001700210025002900330037004100450049005300

"NEX 20" "NEX PIF"

MOSTE

50

80

110

140170

200

230

260

290

320

Growing sectors-Telecommunication-

Total revenue was increased for 90% in period 2001 - 2004Total revenue in 2004 reached 11% of GDP (record in the region)1.1 mobile phone per capita (8/2005)60.43 SMS per capita (8/2005)

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2001 2002 2003 2004

Number of telecommunication users

Fixed telephony users mobile telephony users internet users

Growing sectors-Tourism-

For the first eight months on 2005 Montenegro has been visited by 666.018 tourists which is 16.83% higher than in same period 2004

Total tourism revenues in the first eight months of 2005 were 21.8% higher than in same period 2004

According to the WTO latest research Montenegro is world’s fastest growing travel and tourism economy in the world

Do you need a good reason to invest in Montenegro?

1.We treat foreigners and nationals equally2.We are champions in business registration procedures: you can registera Limited Liability Company for 1 euro, within 4 working days and bysubmitting three documents.3.The Euro is our national currency.4.There are no restrictions on ability to remit profit, dividend or interest.5.We do have the lowest corporate tax rate in Europe – 9%%.6.Value added tax is one of the lowest in Europe – 17%%.at rate.7.Personal income tax is progressive with rates between 15.5 and 22.5%.8.Montenegro has access to the Adriatic Sea.9.Montenegro has over 180 sunny days per year.10.Visas are not required for Montenegro.

Welcome to Montenegro and have a

good business!

Ministry of Finance of the Republic of Montenegro81000 Podgorica, 2 Stanka Dragojevića Street

tel: +381 81 242 835; fax: +381 81 224 450; e-mail: mf@mn.yuwww.ministarstvo-finansija.vlada.cg.yu