Special edition newsletter
Invest in Montenegro - A Smart Choice for Bold Visions
Arijana Nikolić Vučinić, Executive Director of the Council of Foreign Investors - A simpler, more flexible and more predictable system is the key to attracting sustainable and long-term investments
(Arijana Nikolić Vučinić)Despite the slight growth of the ease of doing business index during 2024, Montenegro still faces numerous challenges that make it difficult to attract productive and long-term investments. Key challenges, such as lack of transparency, frequent changes in legislation and low efficiency of public administration, continue to slow down the development of the business environment. Although some progress has been achieved, especially in certain regulatory segments, the decline in productive investments and stagnation in the rule of law show that more decisive action by institutions is necessary in order to make Montenegro a more competitive and attractive destination for investors.
This was assessed by the executive director of the Council of Foreign Investors in Montenegro, Arijana Nikolić Vučinić, in an interview for eKapija.
- I would like to point out that during 2024, a slight increase in the index was recorded, but unfortunately, this did not bring about a significant improvement of the business environment. The above is confirmed by the fact that for several years Montenegro has been recording less and less investment in productive investment projects, while growth is mainly present in the real estate sector. I would also like to remind you that the numerous challenges that investors have been facing for a long time are still not resolved, which makes the business environment even more difficult. Among them, insufficient transparency in the decision-making process, frequent changes in legislation that bring instability and unpredictability of the system, as well as low efficiency of public administration stand out - said Nikolić Vučinić at the beginning of the conversation for our portal.
She also reminds that foreign direct investments since the restoration of independence have strongly improved the Montenegrin business environment: through investments in technologies, the transfer of good practices, knowledge and the creation of new jobs.
- This clearly shows that Montenegro, as a small and import-oriented economy, must strive for a favorable investment environment. It is certain that our country cannot be competitive with its market size, but it can and must take advantage of its comparative advantages. A simpler, more flexible and more predictable system is the key to attracting sustainable and long-term investments.
According to the White Paper report, human capital is one of the lowest rated segments. What do you consider to be the key steps to improve the education system and reduce talent drain?
- Human capital is recognized as the basis of the development of every economy. Without a quality education system and an accessible, well-trained workforce, there is no sustainable economic growth. We also recognized this in the Foreign Investors Council, so this year, in partnership with the Chamber of Commerce of Montenegro, we organized the first conference dedicated to the development of human capital. Also, human capital is one of the segments that is recognized as a special challenge in the White Book. The key problems are the insufficiently reformed education system, which does not follow the needs of the labor market, weak alignment of knowledge and skills with the needs of the economy, especially in the area of digital competences and skills related to the green transition.
It is important not to forget that the investors, through the White Book, gave specific proposals for improvement in this area. First of all, it is necessary to ensure a greater involvement of the economy and business associations in the process of educational programs, so that they are better aligned with the real needs of the market. Also, larger investments in educational institutions are necessary, especially in the segment of technological progress.
I believe that it is extremely important to further strengthen the principle of dual education, through stronger cooperation between the economy and the educational system, so that young people gain practical knowledge and experience. When it comes to talent retention, we must create additional support and incentive programs, along with continuous investment in research, development and innovation. It is a process that requires time, but if the systemic problems are not resolved, we risk an even greater outflow of talents and more serious consequences for the overall economy of Montenegro.
The rule of law remains at the same level, with criticism of the slowness of court proceedings and selective application of laws. Where do you see room for the fastest and most effective reforms?
- I don`t have the slightest doubt that the main factor that investors are guided by when making investment decisions is precisely the security of their capital. The rule of law is a pillar of the investment environment and the first segment analyzed when planning investments. Data from the White Book for the year 2024 show stagnation, but I would like to remind you that some progress has been made in the regulatory part, which is confirmed by the receipt of IBAR, which is an important signal for investors. However, the key challenges remain the slowness of court proceedings, which significantly hampers business, as well as the selective application of the law.
I remind you that there is a clear position of investors that it is necessary to strengthen the capacity of the judiciary and, if possible, to form a special part of the judicial system that would deal with financial cases. In this way, with the engagement of competent experts, procedures would be accelerated and at the same time legal practice would be created that would be consistently applied.
It is necessary to continue the reform of the legal system - to simplify procedures, modernize legal frameworks and further harmonize laws with the practices of the European Union. That would be a strong step forward towards a more stable and predictable business environment.
(Arijana Nikolić Vučinić)The tax system, as you stated, has made some progress, but there are still serious objections. What changes would you recommend in order to make tax administration more transparent and efficient?
- Non-transparency and frequent changes in legal solutions still remain among the biggest challenges of the tax system. It is this unpredictability that creates uncertainty for the economy and makes business planning difficult.
In order to improve the tax system, it is necessary to start with strengthening human capacities. It is necessary to increase the number and expertise of tax inspectors in order to apply the legislation consistently and equally to all entities. At the same time, it is necessary to improve digital solutions in the work of inspections and develop effective platforms for reporting irregularities. This would significantly strengthen confidence in the tax system and contribute to its efficiency, and ultimately to transparency.
In the area of economic and infrastructural development, you noted growth, especially in compliance with international standards. Which infrastructure projects do you consider to be a priority for attracting foreign investment?
- We must keep in mind that for countries with similar geographical characteristics, such as Montenegro, it is especially important to provide infrastructure that enables faster transfer of goods and services, because in this way, the even development of all segments of society and economy is encouraged.
At this moment, the biggest challenge is road infrastructure. As a response to this recognized challenge, it is necessary to create a clear investment plan that will provide quality connectivity and development of all regions of our country. At the same time, it is important to work on the economic strengthening of areas that will be better connected, in order to use the new opportunities to their full capacity.
I would also like to remind you of the importance of the development of rail traffic, but also especially the air connectivity of Montenegro. As a tourist destination, our country must be much more accessible to key markets, which implies the opening of additional airlines, as well as an increase in existing airport capacities, which are currently not sufficient to meet the needs of the tourism industry.
I believe that it is equally important to prioritize the development of energy and digital infrastructure, because these segments are a prerequisite for modernizing the economy and attracting new investments.
Last year`s White Paper also introduced the green transition index. Where do you see the biggest obstacles, and where do you see a positive growth trend in this process?
- As the main challenges, investors recognized the lack of facilities for the implementation of the green transition, which was evaluated in the White Book with an average score of 3.9, as well as the low level of knowledge about this process, both among the competent institutions and among business entities. Also, the regulatory framework and the implementation of international standards and practices were evaluated worse than average.
I would also point out that the lack of skills and insufficient technological development stand out among the challenges, which are key prerequisites for a successful green transition. At the same time, there are no clearly defined measurement criteria at the state level, which slows down this process significantly, while the limited availability of financial resources is an additional obstacle to its faster implementation.
Nevertheless, the fact that certain sectors, such as tourism and energy, already recognize the importance of the green transition and offer successful examples of good practice is encouraging. This shows that there is potential and that, with the right institutional and financial framework, Montenegro can accelerate this process.
Of the 37 earlier recommendations, none was fully implemented. How does this affect investor confidence and do you expect a more active response from institutions in the coming period?
- I would like to be very clear – if Montenegro wants to improve the business environment and attract serious investments, it is necessary to remove existing barriers. Some of the recommendations from the White Paper are already being implemented, and that is good news. However, certain measures require a longer time, but it is clear that both investors and citizens expect faster reforms that will bring visible results.
Foreign investors are here, they invest and want to remain partners with Montenegro. There are positive developments, but more determination is needed to create a competitive environment that encourages investment, strengthens the economy and improves quality of life. This is particularly important in the process of European integration, where Montenegro must be prepared and aligned with European standards.
The drop in productive investments from over 35% to only 12% of total investments is particularly worrying. The return of trust is possible through the stabilization of the environment, transparent decisions and equal conditions for all. Priorities remain the rule of law, more efficient public administration, better availability of human capital and reduction of administrative barriers. That`s the only way our country can become more competitive and attract sustainable investments.
You also pointed out that in Montenegro there is no comprehensive and precise model for monitoring investments by industry. Why is it important to establish a clear classification of investments by sector, and what would establishing this model bring to investors?
- The experience of other countries shows that the segmentation of data by sector enables a clearer overview of attractive areas for foreign investors and the reasons for their attractiveness. In this way, investors get a better insight into the trends and can recognize the sectors with the greatest potential for growth and returns.
For decision-makers, this model represents a reliable basis for creating additional measures and incentives that would encourage the development of sectors of the Montenegrin economy that have significant potential, but are still not sufficiently competitive.
I would conclude that the establishment of a precise classification also contributes to greater transparency, better quality strategic planning and the adoption of policies based on real data, which would significantly strengthen the attractiveness of Montenegro for sustainable and diversified investments.
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