Foreign direct investment (FDI) in Montenegro

FDI in Figures

Montenegro has the potential to become a magnet for investment because of its business-focused economic system and low corporate tax rate. According to the latest data available from the World Bank, Montenegro´s total FDI inflows reached EUR 664 million in 2021, up by 25.5% y-o-y and above the pre-COVID level. The stock of FDI was estimated at USD 6.3 billion in 2021 (around 109.4% of GDP – data UNCTAD - 2022 World Investment Report), with a per capita investment ratio among the highest in Europe. The sectors attracting most FDIs are tourism, real estate, energy, telecommunications, banking and construction. Data from the Montenegrin Investment Promotion Agency shows that the main investing countries are Russia (14.8% of inflows between 2010-20), Switzerland (6.8%), Serbia (6%), Austria (5.9%), Italy (5.9%) and the Netherlands (5.4%). According to preliminary data by the Central Bank, net FDI inflows to the country grew to USD 623 million in the first three quarters of 2022, up by 70% compared to the same period one year earlier.

The country offers great economic freedom and monetary stability. Domestic and foreign companies enjoy equal treatment in Montenegro. Foreign companies can own 100% of a domestic company, and their profits and dividends can be repatriated without limitations or restrictions. Furthermore, Montenegro does not have a foreign investment screening. Nevertheless, corruption, the politicisation of justice, organised crime, an approximate and unreliable land registry and a sluggish bureaucracy are obstacles to FDIs. The Privatization and Capital Investment Council is the governmental institution that manages, controls, and implements the privatization process in the country, which already involved almost 90% of formerly state-owned enterprises. Some initiatives have been taken to improve the business environment such as the establishment of the Credit Guarantee Fund to foster credit lines for banks. Montenegro ranks 65th out of 180 economies on the 2022 Corruption Perception Index and 77th out of 176 on the 2023 Index of Economic Freedom.

What to consider if you invest in Montenegro

Strong Points

Montenegro's key assets in terms of attracting FDI include:

- one of the most competitive tax systems in Europe (rate of 9%);
- qualified and low-cost workforce;
- touristic potential (sea, mountain, climate);
- hydroelectric potential;
- negotiations for accession to the European Union;
- good quality of education and health systems.

Weak Points

Montenegro's weak points impeding FDI include:

- small size of its domestic market;
- high dependence on tourism, construction and energy sectors;
- electricity generation largely based on subsidised coal;
- deficient road and electrical networks;
- structural unemployment (14%) and lack of qualified personnel;
- importance of ethnic voting and political blockage;
- poor business environment;
- substantial informal economy (39% of GDP) and low participation rate (54%).

Government Measures to Motivate or Restrict FDI

In Montenegro, private ownership is protected by the Constitution and includes equal treatment of foreigners.
Montenegro has a favorable tax regime with the lowest corporate tax rate in the region at nine percent.
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. 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.

To learn more you can visit the MIA website, the government agency dedicated to investment promotion.  

Bilateral investment conventions signed by Montenegro

The bilateral investments treaties signed by the Montenegro may be found on the Policy investment hub website.