1. Openness To, and Restrictions Upon, Foreign Investment
Policies towards Foreign Direct Investment
Montenegro regained its independence in 2006, and, since then, the country has adopted an investment framework that in principle encourages growth, employment, and exports. Montenegro, however, is still in the process of establishing a liberal business climate that fosters foreign investment and local production. The country remains dependent on imports from neighboring countries despite its significant potential in some areas of agriculture and food production. Although the continuing political transition has not yet eliminated all structural barriers, the government generally recognizes the need to remove impediments in order to remain competitive, reform the business environment, open the economy to foreign investors, and attract further FDI.
In general, there are no distinctions made between domestic and foreign-owned companies. Foreign companies can own 100 percent of a domestic company, and profits and dividends can be repatriated without limitations or restrictions. Foreign investors can participate in local privatization processes and can own land in Montenegro generally on the same terms as locals. Expropriation of property can only occur for a “compelling public purpose” and compensation must be made at fair market value. There has been no known expropriation of foreign investments in Montenegro, however long-standing property restitution cases dating back to WWII remain unresolved. International arbitration is allowed in commercial disputes involving foreign investors.
Registration procedures have been simplified to such an extent that it is possible to complete all registration processes online. In addition, bankruptcy laws have been streamlined to make it easier to liquidate a company; accounting standards have been brought up to international norms; and custom regulations have been simplified. There are no mandated performance requirements.
Montenegro has enacted specific legislation outlining guarantees and safeguards for foreign investors. Montenegro has also adopted more than 20 other business-related laws, all in accordance with EU standards. The main laws that regulate foreign investment in Montenegro are: the Foreign Investment Law; the Enterprise Law; the Insolvency Law; the Law on Fiduciary Transfer of Property Rights; the Accounting Law; the Law on Capital and Current Transactions; the Foreign Trade Law; the Customs Law; the Law on Free Zones; the Labor Law; the Securities Law; the Concession Law, and the set of laws regulating tax policy. Montenegro has taken significant steps in both amending investment-related legislation in accordance with global standards and creating necessary institutions for attracting investments. However, as is the case with other transition countries, implementation and enforcement of existing legislation remains weak and inconsistent.
While Montenegro has taken steps to make the country more open for foreign investment, some deficiencies still exist. The absence of fully developed legal institutions has fostered corruption and weak controls over conflicts of interest. The judiciary is still slow to adjudicate cases, and court decisions are not always consistently reasoned or enforced. Montenegro’s significant grey economy impacts its open market, negatively affecting businesses operating in accordance with the law. Favorable tax policies established at the national level are often cancelled out with taxes introduced by different municipalities on the local level.
To better promote investment and foster economic development, the government adopted in December 2019 a new Law on Public Private Partnerships and established the Montenegrin Investment Agency (MIA), merging the Montenegrin Investment Promotion Agency (MIPA) and the Secretariat for Development Projects. The MIA seeks to promote Montenegro as a competitive investment destination by facilitating investment projects in the country. Together with the Privatization and Capital Investment Council, MIA promotes investment opportunities in various sectors of the Montenegrin economy, primarily focusing on the tourism, energy, technology, and agricultural sectors. These two institutions will maintain an ongoing dialogue with investors already present in Montenegro and, at the same time, seek to promote future projects and attract new investors to do business in Montenegro. More information available at http://www.mia.gov.me.
Limits on Foreign Control and Right to Private Ownership and Establishment
Montenegro’s Foreign Investment Law, which was adopted by the Parliament in 2011, establishes the framework for investment in Montenegro. The law eliminates previous investment restrictions, extends national treatment to foreign investors, allows for the transfer and repatriation of profits and dividends, provides guarantees against expropriation, and allows for customs duty waivers for equipment imported as capital-in-kind. There are no limits on foreign control and right to private ownership or on establishing companies in Montenegro. There are no institutional barriers to foreign investors, including U.S. businesses, and there is no screening mechanism for inbound foreign investment.
Other Investment Policy Reviews
The WTO secretariat conducted its first review of Montenegrin trade policies and practices in April 2018 (https://www.wto.org/english/tratop_e/tpr_e/tp469_e.htm).
The Central Register of the Commercial Court (CRPS) is responsible for business registration procedures (www.crps.me). The court maintains an electronic database of registered business entities, and contracts on financial leasing and pledges. The process to register a business in Montenegro takes an average of 4-5 working days. The minimum financial requirement for a Limited Liability Company (LLC) is just EUR 1 (USD 1.2), and three documents are required: a founding decision, bylaws, and a copy of the passport (if an individual is founding a company) or a registration form for the specific type of company. Samples of all documents are available for download at the CRPS website. Montenegrin law permits the establishment of six types of companies: entrepreneur, limited liability company, joint stock company, general partnership, limited partnership, and part of a foreign company. All included in the business activities need to open a bank account. Once a bank account is established, the company reports to the tax authority in order to receive a PIB (taxation identification number) and VAT number (Value Added Tax). For classification of companies by size, based on number of employees, the government’s definition is as follows: (i) small enterprises (from one to 49 employees), (ii) medium-sized enterprises (from 50 to 249) and (iii) large enterprises (more than 250 employees).
While the Montenegrin government is very active in attracting and inviting foreign investors to do business in Montenegro, the government is not as dedicated to promoting outward investments. There are no government restrictions to domestic investors for their investments abroad.
2. Bilateral Investment Agreements and Taxation Treaties
Montenegro has signed the Central European Free Trade Agreement (CEFTA) in July 2007. The agreement has been signed by seven countries (Albania, North Macedonia, Moldova, Montenegro, UNMIK/Kosovo, Serbia, and Bosnia and Herzegovina). A free trade agreement was signed with Turkey in 2008 and has been in force since March 2010. Montenegro had a free trade agreement with Russia, but the agreement is not currently in force. Free trade agreements with Kazakhstan and Belarus, which formed a customs union together with Russia, are also currently not in force. A free trade agreement between Montenegro and Ukraine was signed in November 2011.
A Free Trade Agreement (FTA) with the European Free Trade Association (EFTA) countries (Switzerland, Norway, Iceland, and Liechtenstein) was signed in November 2011. Although the four EFTA countries are small, they are the world leaders in several sectors vital to the global economy. Liechtenstein and Switzerland are internationally renowned financial centers and hosts to major companies and multinationals, while Iceland and Norway have highly developed fish production, metal production, and maritime transport sectors. More information available at http://www.mek.gov.me/en/WTO/LIBRARY/free_trade?alphabet=lat.
Montenegro has not signed a Bilateral Investment Treaty (BIT) with the United States. The United States restored Normal Trade Relations (Most-Favored Nation status) to Montenegro in December 2003. This status provides improved access to the U.S. market for goods exported from Montenegro. Montenegro has also been designated as a beneficiary developing country under the U.S. Generalized System of Preferences (GSP) program which expired on January 1, 2021. As a result Montenegrin imports entering the United States that were eligible for duty free treatment under GSP up to December 31, 2020 (jewelry, ores, stones and various agricultural products) are now subject to regular duties.
Bilateral Taxation Treaties
Montenegro does not have a double taxation treaty with the United States. On March 1, 2018, Montenegro’s Parliament approved the Foreign Account Tax Compliance Act (FATCA) agreement between the governments of Montenegro and the United States. Implementation of FATCA will help the countries better track and report tax evasion.
The country has signed 46 taxation treaties with various countries on income and property, which regulate double taxation. Presently, 44 of those treaties are in force, specifically with Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Italy, Ireland, India, Korea, Kuwait, Latvia, Macedonia, Malaysia, Moldova, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and the United Arab Emirates. Treaties with Spain and Qatar are pending.
Investment treaties seek to ensure a stable framework for investment and better use of economic resources. They define the conditions for investments, allowing free transfer of funds, the right of subrogation, compensation in the event of expropriation and settlement of disputes between investors and countries, including the settlement of disputes between the countries themselves.
Montenegro has 23 BITs in force with the following countries: Austria, Czech Republic, Finland, Denmark, Malta, France, Germany, Poland, Greece, Netherlands, Spain, Cyprus, Lithuania, Slovakia, Romania, the Republic of Serbia, Qatar, North Macedonia, Azerbaijan, the United Arab Emirates, Moldova, Israel, and Switzerland. Additional information can be found at http://www.mek.gov.me/sto/biblioteka/ts_ostali/sporazumi_o_zastiti.
6. Financial Sector
Capital Markets and Portfolio Investment
The banking sector in Montenegro is fully privatized with 12 privately owned banks operating in the country. The banking sector operates under market terms. Foreign investors are able to get credit on the local market, and they have access to a variety of credit instruments since the majority of the banks in Montenegro belong to international banking chains.
The largest foreign investor-banks are OTP (Hungary) operating as CKB in Montenegro, Erste Bank (Austria) and NLB (Slovenia). The remaining, smaller foreign banks do not belong to large international groups. A new set of banking laws have been adopted and some of the existing laws have been amended to improve regulation of the banking sector, provide a higher level of depositor safety, and increase trust in the banking sector itself. The Law on the Protection of Deposits has been adopted to bring local legislation on protecting deposits up to European standards. In accordance with the law, a fund for protecting deposits has been established and deposits are guaranteed up to the amount of EUR 50,000 (approximately USD 55,556).
Until 2010, Montenegro had two stock exchanges. After a successful merger (in 2010), only one stock exchange operates on the capital market under the name of Montenegro Stock Exchange (MSE). In December 2013, the Istanbul Stock Exchange purchased 24.38 percent of the MSE (www.montenegroberza.com). Three types of securities are traded: shares of companies, shares of investment funds, and bonds (old currency savings bonds, pension fund bonds, and bonds from restitution.) The MSE is organized on the principle of member firms, which trade in their own names and for their own account (dealers) in the name and for the account of their clients (brokers). Members of the MSE can be a legal entity registered as a broker under the Law on Securities provided they meet conditions laid down by the Statute of the Stock Exchange. In addition, members may include banks and insurance companies, once approved by the Commission for Securities to perform stock exchange trade. MSE currently has 11 stock brokers.
Money and Banking System
According to Central Bank of Montenegro, the banking sector remained solvent and liquid, with a share of 5.5 percent of non-performing loans. In 2020, lending activity grew by 3.2 percent in relation to the end of 2019 while the interest rate dropped to 5.84 percent as a result of increased competition.
Montenegro is one of a few countries that does not belong to the Euro zone but uses the Euro as its official currency (without any formal agreement). Since its authority is limited in monetary policies, the Central Bank, in its role as the state’s fiscal agent, has focused on control of the banking system and maintenance of the payment system. The Central Bank also regulates the process for establishing a bank. A bank can be founded as a joint-stock company and acquire the status of a legal entity by registering in the court register. An application for registration in the court register must be submitted 60 days from when the bank is first licensed.
Foreign Exchange and Remittances
Foreign Exchange Policies
The Foreign Investment Law guarantees the right to transfer and repatriate profits in Montenegro. Montenegro uses the Euro as its domestic currency. There are no other limitations placed on the transfer of foreign currency.
There are no difficulties in the free transfer of funds exercised on the basis of profit, repayment of resources, or residual assets. The Central Bank of Montenegro publishes statistics on remittances as a proportion of GDP, with the latest data available indicating that in 2018 remittances accounted for approximately 10 percent of GDP.
Sovereign Wealth Funds
There are no sovereign wealth funds in Montenegro.
8. Responsible Business Conduct
While there are several good examples of companies undertaking responsible business conduct (RBC) in Montenegro, practices are still developing and are not adopted evenly across the private sector. The government, together with various business organizations, non-governmental organizations, and the international community, organizes events in order to promote and encourage RBC. Since last year, efforts have focused on introducing the RBC concept in the education system. The promotion of RBC through the media has also been used as an effective tool as the media can play a pivotal role in raising awareness about RBC initiatives.
The concept of corporate social responsibility (a term that preceded RBC) features regularly on the agenda of many companies in Montenegro. The most recent survey showed that large private companies and associations are, indeed, more engaged in RBC activities, whereas small companies cited the lack of knowledge about RBC and the lack of support and interest from clients as the main reasons for not participating.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
- North Korea Sanctions & Enforcement Actions Advisory
Department of Labor
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source||USG or international statistical source||USG or International
Source of Data: BEA;
IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (M USD)||2018||USD 5,504||2019||USD 5,543||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source||USG or international statistical source||USG or International
Source of data: BEA;
IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country (M USD, stock positions)||2018||$ 5 million||2019||$5 million||BEA data available at
|Host country’s FDI in the United States (M USD, stock positions)||2018||N/A||2019||N/A||BEA data available at
|Total inbound stock of FDI as % host GDP||2018||6.1||2019||8.3||UNCTAD data available at
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||5,443||100%||Total Outward||N/A||N/A|
|Republic of Serbia||316||5.6|
|United Arab Emirates||278||5.1%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.