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Investment Climate - Real Estate and Construction

According to the Frether Institute, Montenegro ties with Mexico at number 58 in its global level of economic freedoms. At the same time. Montenegro is considered by Transparence International as 84th among 180 countries in the world for the country’s relative lack of corruption.  To put this into perspective, Russia was ranked as number 147 on the same list! These very favourable indicators are explained by Montenegro’s status as a European Union candidate, with a potential to join the EU in 2008/2009. Image

Montenegro has the lowest rates of inflation, unemployment and smallest budget deficit in the whole of the former Balkan states.  79.9% of capital held in Montenegro is private and the country now is ranked in 1st place in Europe in terms of foreign investments per capita. In 2007 alone, the influx of foreign direct capital investments into Montenegro exceeded €1 billion euros. According to recent reporting for the first half of 2008, the total sum of foreign investments was €913.90 million euros (marked at a net level of  €311.50 million euros). This rapid increase in foreign direct investment has changed the expectations of many investment analysts, who estimate that Montenegro will attract €5 billion by 2011 and €30 billion by 2030.

On a legal front an of extreme interest to investors is the new Law of Concession, shortly to take effect and eagerly anticipated to speed up administrative procedures, enhance competitiveness and increase transparency in the field of awarding concessions and contracts.  This important legislative change corresponds to the mandates of current EU-directives and encourages competitive dialog among bidders and those awarding projects. Current projects being considered as open to international bidders may be in excess of €300 million, and innovation in this area will help to create firm public procedures for awarding large infrastructure projects.
Additionally, the Government of Montenegro is actively taking part in nationwide economic growth by aggressively investing in the modernization and renovation of the country's airports, roads, border crossings and other key infrastructure stock. The Montenegrin government has already invested €250 million euros in infrastructure modernization with the goal to far exceed these figures. Agreements have been penned with the World Bank, International Monetary Fund, European Bank of Reconstruction and Development and other stake holding organizations who have invested in the modernization of Montenegro’s water-supply, public sewerage and other key systems.  Montenegrin ministers also recently signed an agreement with European Investment Bank to quickly make available a €19 million euros worth of loans given towards the urgent reconstruction of Montenegro’s railway system (€7 million),  water-supply and sewerage systems (€5 million) and power grid (€3 million).

Russia, including Norway, Great Britain, Austria, Germany and Hungary, is one of the largest global-wide investors into the Montenegrin economy.

Additionally, Germany is the biggest bilateral trade partners to Montenegro. German support has been critical as Montenegro’s Northern European partners support programs to increase power grid efficiency (e.g.. «Termoelektara» (TE), Plevlja), the country’s water-supply and other key facets of Montenegro’s infrastructure. German support since 2000  is roughly calculated to be around €170 million euros, with support in 2008 alone to be estimated at around €30 million euros. Most interestingly, Germany intends to invest heavily in the Montenegrin energy industry with up-front capital of approximately €1.4  billion euros by 2012.

Hungry is also a key investment partner in Montenegro, with current investments totaling €260 million euros.

Not to be excluded, in 2007 alone, the sum of direct investments from Russia to various sectors of  Montenegro’s economy was €200.000 euros and most recently Chinese investors have also shown extreme interest to invest in Montenegro.

Real estate and construction – a case study
More than 50% of all private capital now coming into play in Montenegro is being invested into the Real Estate sector and construction projects, both public and private in nature.

One of the biggest examples of how Russian construction companiesplay a multi-functional role in Montenegro’s economy include the «Mirax Group Corporation». Founded in 1994 by Sergey Polonsky and Arthur Kirilenko, the Miramax Group is currently building up a city-club in Budva, named «Astra Montenegro». Not limiting their plans to a prime entertainment property, their plans also involve the construction of 6,000 square meters of luxury villa space, a 30,000  square meter hotel complex that includes two 5-star hotels and a max-40 floor skyscraper and finally a 94,000 square meter zoned apartment complex with modern infrastructure and leisure capacities (fitness, SPA, and even a zoo!) The total sum of investment underway by the Miramax Group alone is assesed at over €200 million euros.

Another example of a monumental investment in Montenegro involves the complete restoration of the island of Sveti Marko, a Tivat community recently bought by Mikhail Slipenchuk who is the owner of the Metropol MosCity Group.  Sveti Marko, a beautifully proportioned and ancient island town is now being restored and plans include the building of the region’s first 7-star hotel complex.  The expected sum of investment in the Sveti Marko island project is estimated at €0.5 billion euros.

Other main investment project in the Tivat area is now being undertaken by Canadian investor Peter Munk who is developing two distinct projects: «Adriatic Marinas» and «Porto Montenegro» with total investment to potentially exceed €0.5 billion euros. These well-designed projects include the building of nearly 650 seaside boat berths for the mooring of mega yachts that exceed 25 meters in length, destined to attract stately ships from around the world.  This ambitious project will also include a modern living complex of 1000+ apartments for the passengers and crew members, a state-of-the-art golf course and a Four Seasons Hotel.  Ownership is divided with a 54% stake being held by Peter Munk himself, whilst the remaining shares are divided between Deripaska, Nataniel Rotshild, Bernard Arno (LVMH, France), Atlas Capital and Shandor Demjan («Trigranit», Hungary). The Adriatic Marinas and Porto Montenegro projects are scheduled for completion in 2010.

Other Munk investments to keep an eye on include the construction of a modern shipbuilding factory in Bijela and a new ski and health spa center in Kolashin.

Furthermore, another project with the same investment heavyweights (Munk, Deripaska, Demjan) was announced and involves the development of a prominent hotel complex in the Ulcinska Rivijera (scheduled to include at least one luxury hotel, private villas, apartments, a marina for megayachts, etc.). The expected sum of investments in this project alone is projected to be €8.3 billion euros with construction beginning in 2010 and scheduled to last 10 years or more!

Other projects underway on the Ultcinska Riviera include an interesting project by Russian tycoon Roman Abramovic who is considering the purchase of 12 km of Velikiy Plaza (known locally as the “Great Beach”).

In Brezanima near Sutomore, a large apartment complex is being constructed by the Irish-Montenegrin company  Ivan Kurtovic DOO with a scheduled investment of €25 million euros, and a completion date of 2010. This is currently the biggest investment project underway in the Bar municipality.

In Herceg-Novi a consortium is being formed between JP Vodovod i Kanalizacia and DOO Yauza DOO  (Moscow), owned by Mikhail Lifshitz. The company has already invested upwards of €60,000 euros for the revitalization of Karace and they also recently bought 2.5 hectares in Trebjesin to build artistic villas for Russian clients of prestige.

Finally, a kindly gift from one of Montenegro’s chief admirers, the newly built pedestrian bridge that crosses the Moraca river near the capital Podgorica, is a gift from the Russian capital, Moscow!

Written by:  Igor Kosić