April 2011

A QUARTELY REPORT #36

CEED Consulting

Business EnvironmentMacroeconomic OutlookBanking SectorPrivatization and InvestmentsCapital MarketBusiness NewsEconomic FreedomIn the SpotlightComing Up

ISSN 1800-8739

2

GeoGraphic information

Area 13,812 km²Position 41º52’ - 43º42’ lat., 18º26’ - 20º22’ longLength of border 614 kmCoast line 293 kmLength of beaches 73 kmClimate MediterraneanAverage temperatures of air 27.4Co (summer) 13.4C o (winter)

Maximum sea temperature 27.1Co

Average num. of sunny days 240Major Cities Podgorica (Capital), Niksic, Bijelo Polje

Border crossinG

Albania Bozaj Croatia Debeli brijeg

Serbia Kula,Vuče, Dračenovac, Dobrakovo,Čemerno, Ranče, Bijelo Polje

Bosnia and Herzegovina Vilusi, Vracenovici, Scepan Polje, MetaljkaSea border ports and piers: Bar, Kotor, Budva and Zelenika

monteneGro General info

MBO SummaryWelcome

to the thirty sixth edition of montenegro Business outlook.

mBo is quarterly publication of pertinent economic indicators presenting a

comprehensive view of montenegro’s

business environment. This publication is

intended to serve international business people seeking

investment opportunity in montenegro.

We welcome your comments.

population

Population in country 620,211Montenegrin population in foreign countries 54,816Total population 675,027Number of households 191,047Source: Census 2003

transportation

Airports Podgorica and Tivat

Ports Bar (line to Italy: Bar-Bari, Bar-Ancona) and Kotor (line to Italy: Kotor-Barleta)

Railways Bar – Beograd and Podgorica- NiksicTotal railways length 249 kmTotal highway lenght 5,174 km

national parks

Durmitor 39,000 haBiogradska gora 5,650 haLovcen 6,220 haProkletije 21,647 haSkadar Lake 40,000 ha

Kralja Nikole 27a/4, Business Center “Čelebić”,

Podgorica, Montenegro Phone/Fax: +382 (0) 20 633-855,

+382 (0) 20 620-611

web site: www.ceed-consulting.com e-mail: info@ceed-consulting.com

Business environment: Montenegro has adopted a new Law on foreign investment that will provide better protection for investors, and it will also promote future investment activities in Montenegro. Efforts are also being made to improve the collection of statistical data. All of this should improve the position of Montenegro in this part of Europe.

Macroeconomic Outlook: During the first quarter of 2011, the situation was encouraging at a macroeconomic level. Projections regarding the GDP growth rate are positive, taking into account the fact that the projected GDP growth rate in Montenegro is expected to be the highest in the region. Regardring the labour market, positive trends can be seen at present related to increases in wages. Monthly inflation rate in January-February measured by CPI recorded increase of 1.0%, and the net inflow of FDI amounted €56.3 million in January 2011.

Economic freedom: Montenegro was ranked as 66th in the last report for economic freedom published by the Heritage Foundation. In this issue of MBO we have presented the results of the top reformers in the area of economic freedom in order to see what steps Montenegro should now take to further develop its concept of economic freedom.

Capital Markets: First two months of 2011 have shown the drop of activities on Stock Exchange of Montenegro. The total volume of trade decreased by 30% in comparison with the last two months of 2010 when Montenegro had two separated capital markets. Three types of securities were mostly traded: company shares, privatization-investment fund shares and bonds which included government bonds. The trade of PIF shares decreased by 15% when compared with the same period in 2010.

Banking sector: According to the latest report by the Governor of the Central Bank, the banking system in Montenegro is stabilizing. The key risk during the forth coming period is credit risk, although bank managers are reprograming loan portfolios. The situation in the banking system, in terms of solvency and liquidity is satisfactory. Caution is still exercised regarding approving new bank loans. The total capital held by banks in January 2011 fell by 3.2% in comparison with December 2010.

Expert’s opinion: Banking sector is for about to be stable.

Investment and Privatization: According to the Privatization plan 2011, adopted on March 24, 2011, companies that have been incorporated into previous privatization plans are once again expected to be offered up for sale.

In this issue of Montenegro Business Outlook we introduce you with the investment potential of Montenegro and the actual efforts of Montenegrin Investment Promotion Agency (MIPA) to position Montenegro on the EU market. For that reason we have interviewed Mr. Petar Ivanovic, CEO of MIPA and discussed about the chances for our country to became more attractive to foreign investors. Investment potential of Montenegro was our Spotlight topic where you can find global look on the natural wealth of our country.

Having in mind the EU Strategy until 2020 we published interview with Mr. José María Roger, President of Fersa Energías Renovables, S.A. Mr. Roger is the foreign investor interested in building the first wind power plants in Montenegro. Our country has shown improvement in promoting the renewable energy sources. The importance of these sources of energy is briefly presented under the topic We introduce.

3

April 2011

The business environment in 2011, due to activities planned by the Government of Montenegro, will improve in several areas. Certain activities will be carried out in order to help businesses to grow further and also to minimize the effects of the economic crisis in Montenegro.

If we look at the statistics for industrial production in Montenegro in February 2011, • a decline of 8.4% was recorded in comparison with the same month of the previous year, and for the period January-February 2011, a decline of 5.0% was recorded in comparison with the same period last year. If the statistics are examined on a sector by sector basis for the period January-February of this year, when compared to the same period of last year, two sectors can be seen to have recorded a growth in production: coal and stone mining increased by 16.1% and the processing industry showed an increase of 26.5%. However, during the same period, the production of electrical energy, gas and water recorded a decrease of 9.3%.

A number of changes regarding the way that wages are calculated in Montenegro were implemented from 1st January 2011. Instead of the previous level of the minimum wage which was €55, a new rate for the minimum wage was introduced. The new level is €146 which is in line with the poverty rate that was calculated for Montenegro. The level for the minimum wage is calculated as follows: the wages for full time work during one month (176 hours) are calculated using the formula (wages are equal to the initial part of the wages plus a specified coefficient, depending on the level of education completed, multiplied by the calculated value of the coefficient and by the number of worked hours, and then divided by 176). The calculation value of the coefficient has been set at a level of €90. The initial part of the wage has been set at a level of €49.5 (until 30th June 2011). The average gross wage for February 2011 was €754, and the average net wage was €506.

LAW On FOREIgn InvEStMEnt

In order to further improve conditions for foreign investment, the Government of Montenegro has prepared a new Law on foreign investment, and this has been adopted by Parliament. The new Law defines the structure of foreign investment and the rights and obligations of investors, whilst also protecting and promoting issues related to foreign investment.

In order to promote foreign investment, which is contributing to the economic development of Montenegro, the Government of Montenegro will adopt a five year strategy aimed at the promotion of foreign investment. The strategy will, among other things, contain an analysis of the current conditions regarding foreign investment, an analysis of the obstacles that stand in the way of investment, along with ways of potentially removing any such obstacles, and an analysis of investment possibilities by area, field and designated market, along with possible incentives for foreign investment and other activities related to the promotion of foreign investment. Promotional work will continue to be carried out by the Montenegrin Investment Promotion Agency (MIPA). Other articles in the law relate to defining, in detail, the work of the Agency, the process of collecting statistical data about foreign investment, issues concerning the resolution of disputes, and other issues related to foreign investment.

During the spring session of Parliament, a number of laws relating to the business environment were adopted. Some of these include amendments to the Laws on tax administration, administrative taxes, sea protection due to pollution from vessels, regional development, takeover of joint stock companies etc. /Some of these laws will be elaborated in the next issue of the Montenegro Business Outlook./

economy statistics

Source: Ministry of Finance, Central Bank of Montenegro, Monstat, Montenegrin Investment Promotion Agency (MIPA), Employment Agency

Business Registration Statistics (Number of registered companies in Montenegro as of 1st of April 2011)

Joint Stock Company 362Limited Liability Company 24,447

Part of a Foreign Company 430

General Partnership 62NGO 291Limited Partnership 441Entrepreneur 16,861Institution 1,061Other 109Total 44,064

Tax RatesValue Added Tax 17%, 7%

and 0%Corporate profit tax 9%Personal income tax 9%

Business Environment in Montenegro Business EnvironmentMacroeconomic OutlookCapital MarketBanking SectorPrivatization and InvestmentsEconomic FreedomBusiness newsIn the SpotlightComing up...

Selected indicators 2010 2011

Population 625,082

Real GDP (billion) 3.025 *

Real GDP growth 0.5% *Inflation rate

(average annual CPI) I 2010/ I 2011

0.8% 1.1%

Unemployment rate III 2010/ III 2011 12.63% 12.48%

Net FDI (million) I 2010/2011 24 56.3

* No data available for this quarter

Official currency Euro

Business statistics and data

Source: Commercial Court

According to the Law, a foreign investor is ‘a foreign person, both physically and legally, a company with more than 10% of foreign ownership, a company in Montenegro established by a foreigner etc. Foreign investment, according to the Law, is investment in money/capital, assets, services, property rights and shares. A foreign investor will continue to receive the same treatment as a native in Montenegro, which means that all activities can be conducted in the same way as they would be in a national company. The only limitation regarding investment in the area of military industry, is refered to foreign ligal entity in the way that it is not permitted to own more than 49% of the total assets.

4

In this issue we will cover Hong Kong, the top performer for the last couple of years in different areas, and will compare it with Montenegro. Hong Kong’s economic freedom score is 89.7, making its economy the freest in the 2011 index. Its overall score has not changed since last year, but it did experience a small decline in its score in the areas of government spending and labor freedom which were offset by improvements in the areas of fiscal freedom, monetary freedom, and freedom from corruption. Hong Kong is ranked 1st out of 41 countries in the Asia–Pacific region.

Business freedom (Montenegro ranked 66th, Hong Kong 3rd). Business freedom in Hong Kong is well protected within an efficient and regulatory framework. Transparency encourages entrepreneurship, and the overall environment is conducive to the formation and operation of start-up businesses in various sectors of the economy.

Trade freedom (Montenegro ranked 53rd, Hong Kong 1st). Hong Kong’s weighted average tariff rate was 0% in 2009. Restrictive pharmaceutical regulations, market access restrictions for some services, and food and energy labeling regulations add to the cost of trade. Ten points were deducted from Hong Kong’s trade freedom score to account for non-tariff barriers.

Fiscal freedom (Montenegro ranked 24th, Hong Kong 13th). Hong Kong’s effective tax rates are among the lowest in the world. Individuals are taxed either progressively, between 2 percent and 17 percent on income adjusted by deductions and allowances, or at a flat 15 percent of gross income, depending on which liability is lower. The top corporate income tax rate is 16.5 percent. Unincorporated businesses enjoy a lower rate of 15 percent. Excise duties on beer and wine were removed in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 13 percent.

Government spending (Montenegro ranked 160th, Hong Kong 20th). In the most recent year, total government expenditure, including consumption and transfer payments, amounted to 18.6 percent of GDP. Sound fiscal management has helped Hong Kong to weather the global downturn. Altogether, discretionary stimulus measures taken since 2008 total an estimated 5 percent of GDP. The government has tried to maintain a balanced budget.

Monetary freedom (Montenegro ranked 82nd, Hong Kong 30th). Inflation has been low, averaging at 1.6 percent between 2007 and 2009. Since the Hong Kong dollar maintains a fixed exchange rate with the U.S. dollar, interest rates and currency movements follow trends in the United States. Hong Kong has efficient clearing and settlement systems. The government regulates the prices of public transport and electricity and some residential rents. Five points were deducted from Hong Kong’s monetary freedom score to account for measures that distort domestic prices.

Investment freedom (Montenegro ranked 75th, Hong Kong 2nd). Foreign capital receives domestic treatment, and foreign investment is strongly encouraged.

There are no limits on foreign ownership, nor are there any screenings or special approval procedures to set up a foreign firm except for in certain legal services and in broadcasting, where foreign entities may not own any more than 49 percent of local stations. There are no controls or requirements on current transfers, access to foreign exchange, or repatriation of profits. Bureaucracy is efficient and transparent.

Financial freedom (Montenegro ranked 70th, Hong Kong 1st). Hong Kong’s financial regulatory and legal environment focuses on ensuring transparency and enforcing prudent minimum standards. Overall, the system has weathered the global financial turmoil quite well, and the banking sector remains well capitalized.

Hong Kong has further solidified its competitive status as a dynamic international financial center. In terms of initial public offerings, it topped other competing global financial hubs for the second year in a row in 2010. Banks are overseen by the independent Hong Kong Monetary Authority. Credit is allocated on market terms. There are no restrictions on foreign banks, which are treated the same as domestic institutions. The Hong Kong Stock Exchange remains one of the world’s most capitalized and vibrant.

Property rights (Montenegro ranked 73rd, Hong Kong 2nd). Contracts are strongly protected. Hong Kong’s legal system is based on common law, and its constitution strongly supports private property and freedom of exchange. Despite government public awareness campaigns, pirated and counterfeit products such as CDs, DVDs, software, and designer apparel are sold openly, and pressure has been building for changes in the Copyright Ordinance. The government controls all land and, through public auctions, grants renewable leases that are valid up to 2047.

Freedom from corruption (Montenegro ranked 79th, Hong Kong 12th). Corruption is perceived as minimal. Hong Kong ranks 12th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2009. Giving or accepting a bribe is a criminal act.

Labor freedom (Montenegro ranked 4th, Hong Kong 17th). The labor market is supported by flexible labor regulations and a highly motivated workforce. The labor Law is strictly enforced but not burdensome. The non-salary cost of employing a worker is low, and regulations on work hours are flexible. Hong Kong’s first minimum wage law was passed in July 2010 and is expected to come into effect in 2011.

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Capital MarketBanking Sector

Privatization and InvestmentsEconomic Freedom

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Economic Freedom of the World

In last edition of the Montenegro Business Outlook (MBO) magazine we presented the basic results from the 2011 Economic Freedom in the World report, published by the Heritage Foundation and the Wall Street Journal. Our report focused of the result obtained by Montenegro. In the last report, Montenegro’s economic freedom score was 62.5, making its economy the 76th freest in the 2011 index. The score was 1.1 points lower than last year, primarily because of an explosive level of growth in government spending. A Montenegro rank 34th out of 43 countries in the European region, and its overall score is above the world average.

5

April 2011

Inflation Annual inflation rate, measured by the Consumer Price Index (CPI), in January-February 2011, was at level of 1.5%, while monthly rate recorded an increase of 1.0% . Observing the inflation in February 2010, and comparing with average level last year, rise was mostly due to price increases of certain products/services, particulary alchoholic beverages and tobacco and health care which recorded growth figures of of 10.1% and 9.4%, respectively. Source: Monstat

Industrial ProductionIndustrial production recorded a growth of 5 % during the period January-February 2011 in comparison with the same period last year. During the observed period, only the electricity, gas and water sectors recorded decreases of 9.3%. The mining and quarrying industries, along with the manufacturing industry sector recorded increases (16.1% and 26.5% respectively). Source: Monstat

BudgetAccording to preliminary data from the Ministry of Finance, in February 2011, primary budget revenue amounted to €72.7 million and budget expenditure during the observed period amounted to €93.2 million, thus showing a budget deficit of €20.5 million. Budget revenue decreased by 8.1 % in comparison with its planned value, while budget expenditure increased by 8.9%.

During the observed period, in the budget revenue structure, tax based revenue represented the main share, totaling €68.7 million; however, non-tax based revenue amounted to €4.0 million. In the structure of tax based revenue, taxes amounted to €45.24 million, and contributions amounted to €23.49 million.

Budget expenditure recorded growth mainly due to increased spending on rights in the areas of pensions and disability insurance. In the budget expenditure structure, spending for gross earnings represented the main share, totaling €30.3 million. This was followed by spending for pensions which amounted to €29.4 million and transfers to institutions which amounted to €6 million. Source: The Ministry of Finance

GDPAccording to estimations made by IMF for 2011, the Montenegrin GDP is expected to record a level of growth rate of 4.5%, which is predicted to be the higest GDP growth rate in the region, and higher, even, than in other EU countries. According to predictions by the same institution, the GDP growth rate is expected to be 3.2% in Albania, while in Serbia, Macedonia, and Bosnia and Hercegovina it is expected to be at a level of 3%. Regarding projections at an EU level, according to Eurostat statistics, the GDP growth rate in the EU is expected to be 1.7%. Source: Eurostat http://epp.eurostat.ec.europa.eu

Employment and WagesAccording to data provided by the Employment Agency of Montenegro, the unemployment level recorded at the end of March was 32,949 (of which 14,853 were women). Unemployment was recorded at a level of 12.48% during this period, thus being at almost the same level this year as it was last year (12.63%). In February 2011, the gross average salary amounted to €754, whilst the average salary without taxes and contributions amounted to €506. Observed by activity sector, average salaries without taxes and contributions in February were the lowest in the fishery sector (€293), while the highest salaries were recorded in the financial mediation sector (€894). In January-February 2011, average salary without taxes and contributions showed a rise of 9.4% in comparison with the same period last year. Source: Monstat, The Employment Agency of Montenegro

Macroeconomic Outlook

Graphic 1. Budget revenue and State Funds structure

Graphic 2. CPI-monthly growth rate

Feb-10, 0.1

Mart-10, 0.5

Apr-10, 0.6

May-10, 0.5

Jun-10, 0.1

July-10, 0.3

Aug-10, 0.4 Sept-10, 0.5

Oct-10, 0.8

Nov-10, 1.0

Dec-10, 1.1

Jan-11, 0.7

Feb-11, 1.0

00

00

00

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01

01

01

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62.2%

32.3%

1.6%1.6% 2.0% 0.3%

Taxes

Contributions

Duties

Fees

Other revenues

Receipts from the repayment of loans

Graphic 3. Net salary by sectors in February 2011

foreiGn direct investments (fdi)

According to the preliminary data from the Montenegrin Investment Promotion Agency, total FDI inflow in the first quarter of 2011 amounted to 129 million euro. That shows that FDI inflow are at about the same level as in the first quarter of 2010.

Economic Freedom of the World Business EnvironmentMacroeconomic OutlookCapital MarketBanking SectorPrivatization and InvestmentsEconomic FreedomBusiness newsIn the SpotlightComing up...

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Net salary by sectors-January 2011 Growth rate (January 2011/January 2010)

6

Total Bank Assets and Liabilities Total bank assets amounted to €2,944.0 million at end-December 2010, 0.7% lower than at end-November 2010. In December 2010, within the total structure of bank assets, net loans accounted for the main share (70.1%), followed by monetary assets and deposits with depository institutions (21.4%) and other bank assets (6.6%), while other miscellaneous assets accounted for the remaining (1.9%). When compared with November 2010, bank assets recorded an increase in monetary assets and deposits with depository institutions (3.5%).

When observing data regarding bank assets for November and comparing it with October 2010, increases in the following items can be seen: monetary assets and deposits with depository institutions (5.1%) and other bank assets (6.2%). Provisions were also made for losses in other assets. In December 2010, in the area of bank liabilities, deposits accounted for the main share (60.8%), followed by borrowing (23.7%) and total bank capital (10.6%). The remainder (4.9%) was other miscellaneous liabilities. Regarding last month, the only increase was recorded in the area of capital (0.1%). Observing data from November and comparing with October, increases were recorded in all liabilities.

Total bank capital amounted to €312.9 million at end-December 2010, while at end-November 2010 it amounted to €312,6. At end-November 2010, total bank capital was 5.9% higher than it had beenin October 2009.

LoansAt end-December 2010, total loans granted by banks amounted to €2,208.9 million. Compared with November 2010, a decline of 0.8% was recorded. A decline (1.3%) in the total number of loans can also be seen when comparing data from November 2010 with figures from October 2010 ones. The loan-to-deposit ratio was 1.23 in December 2010, thus showing an improvement in relation to the previous month when it was 1.24. Compared with October, when it was 1.26, the loan-to-deposit ratio improved in November 2010. The loan/deposit-plus-borrowings ratio was 0.888 at end-December 2010, while at end-November 2010 it was 0.887. The loan-to-deposit ratio was 0.98 at end-October 2010. In the structure of total disbursed loans, corporate and household loans were dominant and represented 94.2% in December, while in November they accounted for 93.9%. There mainder referred to banks, other financial institutions, public owned organisations, non-profitable organisations and others. In December 2010, corporate loans amounted to €1,273.7 million, while household loans amounted to €863.6 million.

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Banking Sector

Table 1. Lending interest rates, period-end (%)

Graphic 4. Structure of deposits by sectors, period-end, in %

Graphic 5. Structure of deposits, period-end, in %

DepositsTotal deposits amounted to €1,790.4 million at end-December 2010, and remained the same as in the previous month. At end-November 2010, in comparison with the previous month, total deposits increased by 0.2%. In December and November 2010, within the deposit maturity structure, time deposits were dominant (59,0%; 60,2% respectively).

In the structure of time deposits, the largest share was recorded by deposits with a maturity period from 3 months to 1 year (12.10 - 35,2%; 11.10 – 35,9%) and those with a maturity period of up to 3 months (12.10-12,5%, 11.10 – 13,0%).

* Observed by sector in the area of deposits, those made by Montenegrin inhabitants were still dominant and make about 50.0% of the total amount.

41,4%

58,6%

18,0%

29,3%

9,8%

1,5%

39,8%

60,2%

13,0%

35,9%

9,2%

2,1%

41,0%

59,0%

12,5%

35,2%

9,2%

2,1%

0 20 40 60

Demand deposits

Time deoisits

Up to 3 months

From 3 months up to 1 year

From 1 to 3 year

Over 3 years

X 10 XI 10 XII 10

8.8%

34.8%

6.5%

48.5%

1.3%

0.1%

6.5%

28.8%

6.8%

52.5%

1.3%

4.1%

6.4%

27.9%

6.9%

53.2%

1.4%

4.3%

0 10 20 30 40 50 60

Financial institutions

Non-financial institutions

General Government

Households

Non-profitable organisations

Other

X 10 XI 10 XII 10

Household depositsTotal household deposits amounted to €951.7 million at end-December 2010. In relation to the previous month they recorded a growth of 1.3%. During the period October-November 2010, total household deposits increased by 1.7%. At end-December and end-November 2010, in the maturity structure of household deposits, time deposits were dominant with recorded levels of 66.9% (12.10) and 67.8% (11.10). Demand deposits accounted for 33.1% (12.10) and 32.2% (11.10).

Average lending interest rates Household loans

Period X 10 XI 10 XII 10

Nominal lending interest rate 9.75% 9.71% 9.69%

Lending effective interest rate

10.50% 10.45% 10.43%

Average lending interest rates

Loans granted to legal persons

Nominal lending interest rate 8.50% 8.50% 8.53%

Lending effective interest rate

9.02% 9.02% 9.12%

Source: Bulletin of Central Bank of Montenegro (Janury 2011, December 2010, November 2010)

7

April 2011

Every country that implements a monetary strategy that prevents a national bank from pursuing discretionary monetary policy (such as currency board arrangements within an official euroisation/within the accession process to the EU, as is the case with Montenegro), is bound to consider potential arrangements with international monetary institutions such as the IMF or the World Bank as possible exit strategies in case of severe financial or macroeconomic imbalances (e.g. the Vienna Initiative).

Recommendations made in Article IV by the IMF Mission, during their regular visits, have always been considered to be both objective and unbiased assessments of the Montenegrin economy, including the banking system. Their recommendations, in the context of the creation of a supervisory institutional framework, have always been considered by the Central Bank of Montenegro as being important and as giving valuable ‘added value’. It is felt that their comments have had a significant impact and have helped to create higher standards in our supervision practices, equal in value to monetary policy adjustments. ...After the recent crisis period, some banks recorded a decline in deposits and a certain loss in confidence. This was despite the fact that they were heavily supported by their parent banks and that the Central Bank, together with the Ministry of Finance, used a very broad range of instruments to decrease level of liquidation. Consequently, the following dilemma emerged: what have we learned from the crisis; and what should our next steps be in order to strengthen our banking system to make it more resilient to external shocks? A straightforward answer implies that we have to pay additional attention to certain

risks that were overlooked during the period of unsustainable boom in the Montenegrineconomy (2005 to 2007). However, it should be stressed that the Central Bank only had limited means available at the time to prevent a strong growth in credit during this period. Additionally, this was not followed by a proportionately strong growth in deposits (which was accompanied by huge FDI inflows and a nominal growth in wages). In this respect, prudent measures (credit growth hard anchoring during 2008) introduced by the Central Bank appear to have been the most efficient instrument in preventing further growth, albeit with a delayed effect.

Three years later, the outcome reflected in growing NPLs, provision levels, financial performance and the decreased lending activity of banks are all still very evident. However, a lesson has been learned from the crisis and it has consequently changed the vision and activities of the Central Bank. It has become more forward-looking, yet at the same time it has become more conservative and risk-sensitive in its approach to supervision in the banking system. ...The banking system of Montenegro consists of 11 banks, and these are predominantly foreign-owned. I would like to point out the conclusions made by the IMF Mission that visited Podgorica at the beginning of March this year. Representatives from IMF accentuated the fact that owing to the authorities’ timely and appropriate actions, in addition to extended support provided by their parent banks, confidence in the banking sector had been restored. This can be seen in a renewed increase in deposits. Deposits, however, remain below levels recorded in the third quarter of 2007 and NPLs have still not leveled off.

The next steps in the process should focus on a full restoration of security throughout the system in order to allow for renewed lending growth once the credit demand for quality projects has returned. Stagnant lending, at present, reflects a dearth of such projects and any efforts to force credit growth would be ill-advised. I personally believe that the root of the problem lies somewhere in between the two. It is commonly known that banks and the real sector work on the principle of connected vessels. Therefore, a problem which occurs in one sector will sooner or later be reflected in both sectors. The question is how to reconcile these issues.

It is important to stress that the Central Bank of Montenegro has a limited ability to provide additional liquidity to the banking system. This is due to the fact that potential integration within EU is preventing it from taking more vigorous measures such as QE or active repo operations, some of the instruments that were widely used by various national banks during the financial crisis. Thus, the issue arises of a potential relative role for fiscal revenue. This could ensure potential additional funds for resolving any possible liquidity or solvency problems in the banking system. It could be argued that the accumulation of fiscal reserves through fiscal consolidation would provide additional confidence in the banking sector; nevertheless the primary task of the Central Bank remains to aggressively safeguard the banking system. This should thus prevent any increase in potential risk within the system that could trigger the need to use any fiscal sources. However, despite this, it is obvious that the preservation of a sound, financially stable environment requires strong involvement from all of the stakeholders (supervisory authorities as well as government institutions) who should be on the same, challenging mission - to preserve risk-free financial markets. ...Furthermore, the Central Bank of Montenegro and its new management team will be uncompromising and rigid when it comes to weaknesses in the system. It will demonstrate that there will not be any preferential treatment within the system, whilst also engaging its full capacity to deal with impending changes in regulations. At the same time, it will continue to cope well with frequent and risk-based on-site inspections coupled with fast follow-ups. In addition, it will assess and implement adequate solvency and liquidity buffers. The bank’s main objective is to be one step ahead of potential developments and to prevent any potential risk related to either liquidity or solvency within the banking sector. Recently, more secure banks have started to relax their regulations (this was not case at the beginning).

It is also worth mentioning that we, the Central Bank of Montenegro, are working on the introduction of the IFRS system, and expect this to be in place no later than mid- of 2012.This will definitely make it easier for banks as they will no longer have to undergo two or more audits as they used to, due to discrepancies in financial reporting.

Expert’s opinion: Banking sector is for about to be stable

Dr Velibor Milošević, Vice-Governor of the Central Bank of Montenegro

“

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8

The one and only stock exchange in Montenegro started to operate in January 2011 after a technical merger with the Nex Stock Exchange and the Montenegro Stock Exchange at the end of December 2010. Following this event, the NEX Stock Exchange ceased to exist as a legal entity.

tRAdE On tHE StOCK ExCHAngE

During the first two months of 2011, the total volume of trade carried out on the Montenegrin stock exchange amounted to €6.7 million, which was 30% less than the volume of trade that had been seen on the previous two stock exchanges during the first two months (€9.5 million). During first two months of 2011, a total number of 2,710 transactions were completed.

Three types of security were traded: company shares, privatization-investment fund shares and bonds which included government bonds. During the first two months of 2011, the greatest turnover was recorded in the area of company shares (85.2%), while the total turnover in investment funds, as bonds, amounted to 7.4%. Taking into consideration shares from a single company, the highest monthly trade volumes during the first two months in 2011 were reached in January when Jugopetrol Kotor’s shares reached a total of €1.14 million through 69 transactions, and again in February when Telekom Montenegro achieved a total of €0.81 million in trade volume through 144 transactions.

StOCK ExCHAngE IndICES

The new stock exchange uses the two indices MONEX20 and MONEXPIF. These indices were developed from the former Montenegrin stock market indices.

MOnEx20

The value of the Montenegro Security Exchange, MONEX20, upon which MSE’s 20 most liquid companies are traded, showed a downward trend from the beginning of 2011. The highest value that was reached by MONEX20 during the first two months of 2011 was recorded on January 24th at a level of 15,724 points, and the lowest value was recorded on February 28th at a level of 13,821 points. Variations in the index value have influenced all of the changes shown by the shares represented in this index, particularly those belonging to the Electric Power Company and to Telekom Montenegro. MOnExPIF

The value of this index showed significant fluctuations including considerable growth and also considerable dips during the first two months of 2011. It reached its highest level on February 15th with a total of 6,673 points. The lowest point was recorded on February 1st with a value of 5,796 points. The index value was influenced in such a way that a similar trend was evident in all of the six privatization investment funds.

Privatization – Investment Funds on the Stock Exchange

The total volume of trade that involved PIF shares during the first two months in 2011 amounted to €0.49 million. This represented a drop of 15% when compared with the figures recorded during the same period in 2010 (about €0.58 million in trade volume). In total there were 518 transactions, and these involved a total number of 9.0 million shares taken from all six PIFs. The most actively traded shares during this period were Moneta, whilst the least traded were MIG shares.

Capital MarketsBusiness EnvironmentMacroeconomic Outlook

Capital MarketBanking Sector

Privatization and InvestmentsEconomic Freedom

Business newsIn the Spotlight

Coming up...

Graphic 7. MONEXPIF

Graphic 6. MONEX20

Graphic 9. Turnover and number of PIFs shares

11,500

12,000

12,500

13,000

13,500

14,000

14,500

15,000

15,500

16,000

Jan-11 Feb-11 Mar-11

5,200

5,400

5,600

5,800

6,000

6,200

6,400

6,600

6,800

Jan-11 Feb-11 Mar-11

55,784 58,665

42,313

54,325

148,511

133,864

748,003

1,985,4291,641,372

691,300

2,014,6401,943,640

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Atlas Mont Eurofond HLT MIG Moneta Trend

Volume Shares

6,882

3,717 3,9364,275

5,571

8,123

2,490

3,161

4,361

6,040

4,260

6,036

4,095

2,609

1,365

2,2762,461

1,963

1,5891,426

1,2651,432

1,625

1,736 1,511

2,420

1,263

1,447

0

500

1,000

1,500

2,000

2,500

3,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11

Volume Transactions

Graphic 10. Volume of trade and number of transactions

Graphic 8. Turnover structure

85.3%

7.4%7.4%

Shares PIFs units Bonds

9

April 2011April 2011

Companies:UNIQA life insuranceUNIQA non-life insurance

Legal type of the entity:Joint Stock insurance company

Year of establishment:UNIQA life - 2008.UNIQA non-life - 2008.

Owners UNIQA life: � UNIQA International Beteiligungs-Verwaltungs GmbH � UNIQA a.d.o. Beograd

Owners UNIQA non-life: � UNIQA International Beteiligungs- Verwaltungs GmbH � UNIQA International Versicherungs Holding GmbH

Executive directors: �Mrs Nela Belević, UNIQA non-life �Mr Željko Labović, UNIQA life

Number of employees: 90 Number of branch offices: 11 Main activity: Life and non-life insurance

Accounts:UNIQA life insurance: 555-738-69UNIQA non-life insurance: 555-1915-30

Address:Bulevar Svetog Petra Cetinjskog 1aEuro Point building, 4th floor81000 PodgoricaMontenegro

Phone: +382 (0)20 444 700Fax: +382 (0) 20 244 340GSM: +382 (0) 67 201 449E-mail: info@uniqa.meInternet: www.uniqa.me

NEW FROM UNIQAHealth&Happiness - Voluntary Health InsuranceVoluntary Health Insurance is designed for all our clients (0-60 years old) in order to avoid unpleasant surprises and unexpected hospital expenses. Depending on which package you choose, Voluntary Health Insurance will cover:

� Daily compensation fee for hospital stay, � Fixed compensation fee for bone fracture, � Fixed compensation fee for surgery.

You can choose to make contract and pay premium monthly, quarterly, semi- annual and annually. Benefits of Voluntary Health Insurance:

� Payment of agreed compensation fee for hospital stay and treatment up to 365 days in one year. � Payment of agreed compensation fee if insured incident happens abroad. � Payment of agreed compensation fee for stay and treatment in rehabilitation centers. � Payment of agreed compensation fee for child birth.

Beside Basic Package, Health&Happiness has 2 more by which you will have not only Daily compensation fee for hospital stay but as well compensation fee for bone fracture and surgery. Special offer:

� For family insurance, discount of 5% on total premium. � Be one step ahead and insure your employees – group discount of 10% to 20%.

UNIQA AT A GLANCE

UNIQA Montenegro, a member of UNIQA Insurance Group, started its activities on the Montenegrin market for the first time in February 2008, following the takeover of Zepter Insurance. UNIQA Life Insurance was founded in February 2008, and UNIQA Non life Insurance in June 2008. These companies provide a wide range of high quality insurance products, ranging from property to car and accident insurance - thus UNIQA Life Insurance is one of the leading insurance companies on the Montenegrin insurance market. UNIQA employees and professional sales agents secure efficient growth by achieving the goals and plans in Montenegro. UNIQA mission is to offer solutions for customers in the given continuously changing economic and social environment, so that they could enjoy full and safe life.

Insurance of a New generation.

UNIQA Montenegro:Branch offices

1 group; 21 insurance markets; 40 insurance companies; 22,000 employees & agents; 7,400,000 customers; 15,300,000 contracts

10

MBO Interview with Mr. Petar ivanović, Ceo of the Montenegrin investMent ProMotion agenCy MBO: Can you explain to our readers what MIPA is and what its role is?

The Montenegrin Investment Promotion Agency - MIPA is a national agency that promotes foreign investment and facilitates economic development in Montenegro. It was set up in 2005 and serves as a platform for marketing foreign direct investment opportunities on behalf of the Montenegrin government. MIPA’s mission is to create partnerships with various stakeholders: foreign and domestic investors, the public and private sectors, international organizations and private individuals. Ultimately, through economic development, MIPA aims to improve the quality of life for all Montenegrin citizens.

MIPA has a variety of roles. It works on presenting Montenegro’s specific industrial and other concrete advantages to investors. It also conducts promotional activities aimed at target markets, and generally tries to improving the country’s image. Within this field, it coordinates and implements strategies designed to attract foreign investment, and fine-tunes individual strategies for certain industries. MIPA also provides professional services to foreign investors and helps to develop public-private partnerships. Finally, it supports initiatives aimed at developing investment, tries to stimulate green-field opportunities and works on increasing Montenegro’s competitiveness as an investment destination.

MBO: There are many investment promotion agencies throughout the world. Is MIPA different in any way?

You are right; there are more than 10,000 economic development agencies in the world today, all competing for the same projects. Almost 200 countries are currently trying to attract FDIs. However, there are still only a limited number of productive, strategic and visionary investments. MIPA is trying to attract the attention of investors for such projects in Montenegro. At the same time, Montenegro is rapidly changing and is fast becoming the business platform of the Western Balkans. It has many projects that are under way, a record of consistent and strong economic development, its currency is the euro, it boasts competitive labor costs, has close proximity and access to the south east European market and offers emerging private universities and lifestyle advantages. Altogether, Montenegro is becoming a new business and living destination.

I believe that MIPA is unique as it represents a good mixture of entrepreneurial approach, initiative and excellent communication along with a business mindset and work ethic that is easily understood by foreign investors. MIPA’s board also has strong support from the highest government officials including the prime minister and other key ministers.

MBO: Do you believe that you are on the right track and what are the main obstacles to further increasing FDI in Montenegro?

The only way to see that we are doing our job well is to analyze the results that have been achieved. Since MIPA was established, foreign direct investment in Montenegro has grown each year, as have the number of registered foreign companies. The latter is very important, as typically, in countries in transition, large FDIs are concentrated in just a few companies. More and more foreign investors are cooperating with MIPA through the ‘After Care Program’, which shows that investors are not abandoned and that long-term cooperation is crucial for both sides. Also, present investors often operate as a bridge to new ones, and their opinions matter.

Therefore, I would say that we are on the right track. However, we should always target higher goals. As for obstacles, we have to understand that every country in transition is not only a challenge for development, but also an opportunity for investors. It is all about the ratio between the risk and the reward. As for the obstacles that exist in Montenegro, they include issues such as labor law, the size of the market, the need to further strengthen the rule of law and administrative procedures. However, these obstacles are smaller in Montenegro than in neighboring countries.

On the other hand, Montenegro already uses the euro as its currency, has a flat rate tax system with the lowest rates in the region (both corporate and personal income tax are 9%), treats foreigners as nationals, allow the repatriation of profit and most importantly offers a lot of business opportunities. As we continue, step by step, to work on removing the existing barriers, investors can focus on the opportunities that are available. Further proof that we are on the right track came just a few days ago when Montenegro was granted long-term Bb stable rating by Moody.

Prof. dr Petar Ivanović is a CEO of the Montenegrin Investment Promotion Agency and the professor at private university UDG. During 2009-10 he worked as the Chief Economic Adviser to the Prime Minister of Montenegro. Up-to-date he managed more than 40 international projects, including those in Afghanistan and on Kosovo, and over 100 surveys and projects in Montenegro. He participated at over 80 international conferences and at majority of them presented papers or delivered speeches. He owns a certificate to trade futures. Ivanović is honorary citizen of the Indianapolis, Indiana and member of the Mont Pelerin Society and the Philadelphia Society. He is on the List of Experts of The Heritage Foundation. He has published two books, a textbook and more than hundred economic papers. In the period 2005-09 he served as the president of Montenegrin Tennis Association.

Prof. dr Petar Ivanović, CEO of the Montenegrin Investment Promotion

Agency (MIPA)

Short biography:

MBO: What are MIPA’s plans in 2011?

As always, to do what is necessary to attract as many foreign investors as possible, and to promote the country as the most competitive investment destination.

11

April 2011

MBO: What are the areas and industries that are of greatest interest to foreign investors?

Recently, the greatest interest in Montenegro is as a hub for regional business. Stability and safety, the openness of our economy, access to regional markets, free trade and special trade agreements, such as the one with the Russian Federation, low inflation and the euro are attractive incentives for anyone thinking about the Western Balkans or South East Europe as a location for business. As for specific sectors, there is interest in the areas of energy, finance and insurance, tourism, the service industry, the development of infrastructure. Most recently interest has been shown in the areas of industry, construction and trade.

MBO: MIPA was one of the organizers of the recent US-Balkan Business Summit in Baltimore in the USA. What was the main idea behind the organization of this summit?

Its main goal was to present the Western Balkans as a region that is large enough to attract big US firms. The importance of this event was that it showed that Western Balkan countries can work together. The presence of two presidents and a number of high governmental officials sent a clear message to any US investors that might be interested in the region as a whole that it is ready for another wave of economic development, and that the political obstacles that existed in the past no longer exist. It is time for economic revitalization. Additionally, this event also showed that there are some Western Balkan companies that are big enough to be interested in the US market for export. It was an important first step, but many more still need to be made in the future.

MBO: Do you have a promotional plan for the rest of the year?

We are trying to maximize the small funds we posses to promote investment as much as possible. As well as attending MIPIM in Cannes (the largest real estate fair in the World) and the Business Summit in Baltimore, MIPA was present at several events throughout the region: the Brown Forum in Dubrovnik, the 2nd International Business Forum in Sarajevo and various other business events in Zagreb and Ljubljana. Together with the Ministry of Sustainable Development, we will make a presentation about investment opportunities in Milan in June, and in Munich in October. We will also make presentations in Paris in May and in Hong Kong in November

with the Ministry of Economy. It is very likely that, supported by interested investors and partner organizations, MIPA will also manage to conduct business forums in Rome, London, Moscow and Madrid. With such diversification we are trying to show how open we are to attract investors from different part of the globe, which is crucial for further economic development. Although forums and events are very important, they are not the only promotional tools. Publications and web sites are also very important. Therefore, MIPA will update all of its publications and will also prepare new ones. It will also further extend its web site which has, particularly over recent months, recorded a significant growth in visitors.

MBO: Recently MIPA organized a meeting between a group of twenty new foreign investors and the prime minister of Montenegro. How would you evaluate success of this meeting?

The fact that there was a group of twenty new investors who were all interested in completely new projects in Montenegro is the best example of interest that we can give. It also reflects very positively on MIPA’s capacities. The meeting was not formal, but was very focused and pragmatic. For example, US Bechtel, supported by JP Morgan, the US EXIM Bank and OPIC, clearly presented its interest in developing the first highway in Montenegro. Marsh, the world’s leading insurance broker, is interested in expanding its activities to Montenegro. The Spanish company Fersa is ready to invest in the first wind farm, while another Spanish company, Assignia, is ready to invest in infrastructure development, particularly railroad reconstruction. Martifer Solar from Portugal is interested in investing in the first solar plant, while Eco Oil is interested in setting up a company that will ensure the permanent cleanliness of Boka Bay, which is under UNESCO protection. The NBGI Private Equity Fund is ready to support medium size projects in Montenegro, and Engel and Volkers are looking for partners in the area of real estate development. Turkish Global Investment expressed interest in the privatization of certain port facilities, while the French company Segemcom has already decided to open a representative office in Montenegro.

This indeed is MIPA’s job: to bring investors to Montenegro and to put them in contact with the relevant governmental institutions that have a mandate to make decisions about such projects. It would be shame to lose any of those opportunities.

MBO: You mentioned a highway. Bearing in mind the strong impact of such a project on the Montenegrin economy, do you believe that its construction will start this year?

MIPA doesn’t have a role in deciding who will be awarded the government contract. Such a role lies in the hands of the Ministry of Transport. I can only note that, for several years, we have talked about two different models for infrastructure development. The Ministry advocates a PPP model, but MIPA advocates stage-by-stage development. We are not such a big country and the whole highway system in Montenegro is only around 350 km in total. That is less, for example, than the distance between Zagreb and Split. It is pity that we have wasted over four years waiting for the completion of a PPP tender which has achieved no results. Meanwhile, we could at least have completed part of the highway.

MBO: Recently, the parliament of Montenegro adopted a new Law on foreign investment. What are the main amendments that have been made?

The new law further defines the national treatment that foreign companies in Montenegro will receive, except in two areas: (a) the production and trade of military equipment and (b) development of cross border zones. MIPA is recognized as key institution for the promotion of investment, and for encouraging cooperation between investors, the state and local authorities. MIPA is authorized to generate statistics on foreign investment and investors, to collect any necessary data and to provide various analyses in the area of FDI, to prepare investment promotion strategies and to modify promotional plans, etc. In addition, beside its board, MIPA now has a council which is headed by the prime minister. This is in charge of ensuring the harmonization of various country strategies.

Jovana Tomasevica 2A, 81000 Podgorica, Montenegro

Phone/fax: (+382 20) 203-141, 203-140 Web: www.mipa.co.me

e-mail: info@mipa.co.me

12

Agriculture and forestry Agriculture – As a part of a national Strategy of sustainable development in Montenegro, a special emphasis has been put on agriculture and tourism.

Business EnvironmentMacroeconomic Outlook

Capital MarketBanking Sector

Privatization and InvestmentsEconomic Freedom

Business newsIn the Spotlight

Coming up...

In the Spotlight

Investment potential of MontenegroWith its unique natural resources and geographical position, Montenegro is an attractive area, and is suitable for the development of numerous types of industrial activities. The major sectors that could be developed, and that have available natural resources, are currently characterized by alow level of achievement in comparison to their overall potential. The following sectors have much potential that is presently not being exploited: mineral resources, agriculture and forestry, tourism and energy.

Montenegro is rich in reserves of raw minerals. Previous research has shown that there are 28 types of minerals present in Montenegro but that only 15 of them are being exploited.

Exploitation of mineral resources

- The most significant mineral resources are:

Coal and mikrolignit• - mikrolignit was found throughout the length of the river Ćehotina with reserves of 232.54 million tons.Coal, brown coal• - coal reservs were discovered in the valley of the river Lim and in the beds of Berane and Polić Lakes. In the Lim river valley, the reserves of brown coal amount to 30 million tons, with a potential total amount of up to 100 million tons.Oil and gas• – regarding oil and gas, research was carried out for both the land and coastal areas of Montenegro. Previous research pointed out the potential of the land, particularly in coastal areas where it is estimated that there are about 12.5 billion tons of coal.Red bauxite• – deposits of red bauxite have been foundat over 90 sites in Montenegro. The largest and richest sites are in Visoki Krš and in the Adriatic-Ionian area. Research has identified reserves of red bauxite that have a total capacity of 96,244,000 tons.Lead and zinc• - deposits of lead and zinc are located in the north and north-east of Montenegro. Previous studies have shown that the capacity of lead and zinc reserves are somewhere in the region of 46.83 million tons.

- Architectural and building stone (decorative stone)– significant reserves of architectural and building stone have been foundin 20 locations, and lesser amounts are known to be present at an additional 25 sites. These sites include the following: Zeta valley has reserves of 1.5 million m3; the area surrounding the municipality Kolašin has over 2 million m3; Andrijevica has over 2 million m3; part of the municipality of Nikšić (Lipovo) has about 2 million m3; the coastal area of Boka (Gornja Lastva has reserves of 714,000 m3); Kamenjari and Đurići together have over 6 million m3; Luštica has reserves of around 400,000 m3); in the municipality of Bar, Crmnica has reserves of around 460,000 m3; and in the Ulcinj area there are reserves of rigid totalling around 1,000,000 m3. The total reserves of ornamental stone in Montenegro amount to approximately 15 million m3, with an estimated capacity of 50,000,000 m3.

Building stone - there are limitless quantities of building stone in Montenegro, and such stone can be found in most municipalities.

- Today, Montenegro operates 17 quarries, of which 12 are located in coastal regions:

Volujica Goran, Velji Zabio, Možura, Orlovo, Borik II, Darza, Ristova Ponta, Haj-Nehaj, Velja Spilja, Oblatno, Platac, Lješevići, Gajevi, Podi. In the central region there are the following quarries: Midova Kosa and Budoš. Finally, in the northern region there are the following quarries: Kaluđerski Laz, Bušnje and Štitarica. Total reserves are estimated at around 38 million tons.

Gravel and sand• - gravel and sand are excavated from a number of sites in the municipalities of Žabljak, Plužine, Šavnik, Nikšić, as well as in Grahovo, Dragaljsko, from the Zeta and Bjelopavlići plains and the river beds of the Morača, Tara, Lim and Ćehotina rivers.Brick clay• – the largest resorces of clay are located in the Ćehotina riverbed, in them unicipality of Pljevlja (dozens millions of tons) and in the river Lim, namely at Jasikovac (1.3 million tons). Also, there are additional deposits in the municipalities of Kolašin, Bijelo Polje, Spuž, Tivat and Ulcinj. The overall deposits of brick clay are around 15 million tons. Cement marl• - cement marl is located in the Ćehotina river bed, around Pljevlja (deposits of around 93 million tons), the Lim river bed, in Bjelopavlići (about 30 million tons) and in the Crmnica and Ulcinj areas (about 20 million tons). Sea salt• - (60% chlorine and 40% natrium) is extracted from sea water only at the Solana Bajo Sekulić in the municipality of Ulcinj.Underground water• (fresh, mineral and thermal waters) – fresh subterranean water is only bottled from two sources (Gornja Bukovica and Gornja Plašnica). However, activities aimed at using this water have been planned in eight other locations. There is only one known source of thermal water in Montenegro and that is in the river canyon, Komarnica. Mineral waters• sources exist in the Lim and Ibar rivers as well as on the Montenegrin coast. Only mineral water from Bijelo Polje (Čeoče) is currently bottled.

13

April 2011

In the Spotlight

TourismInvestment potential in the coastal region is primarily based on the repurposing of existing military complexes, the development of accommodation for future tourists, and the development of health and nautical tourism.

Energy resources

The energy sector is recognized as one of the driving forces of the Montenegrin economy. - The Montenegrin Energy Development Strategy to 2025 defines the best solutions for building hydropower plants at the following locations: Morača river (Andrijevo, Raslovići, Milunovići and Zlatica) and Komarnica. Additional research is still required in the Piva river area and for the area around Bilećko lake. Suitable sites for small hydropower plants, with a capacity of up to 10MW, have been more clearly defined in documentation which is in accordance with the guide lines of the Spatial Plan of Montenegro. The activities that are planned for these plants are described in the Energy Development Strategy for the Development of Mini Hydropower Plants. According to estimates, Montenegro uses only 17% of its existing potential, which means that there is a considerable room for improvement in this sector.

- If we look at the way production is orientated, on a region by region basis in Montenegro, we can highlight the following facts:

Coastal region • – agricultural activities and the production of citrus fruits, vegetables, olives, herbs, and planting seeds of subtropical crops are dominant in the coastal region. There are about 11,900 ha of land available for intensive agriculture, of which 8,900 ha are in the areas of Vladimir and Ulcinj. There are also around 3,000 ha in parts of Grbaljsko, Mrčevo and Tivat.

The central region• – production is a dominant activity in this region, especially the production of continental fruits and vegetables, nursery materials, flowers, greenhouse produce and the collection of medicinal herbs and wild fruits. About 40,500 ha of land are available for intensive production. This includes the Zeta-Bjelopavlići valley, about 33,000 ha, and Župa and Grahovo, about 7,500 ha in the Nikšić municipality.

The production of milk, meat, potatoes, wool, fish farming and the gathering of berries are dominant in the northern region.

There are about 47,000 ha of high quality land available for the purposes of intensive agricultural production.

Regarding other agricultural production (healthy food and organic production), land is available in the upper area of the Tara river, in Polimlje, in Plav – Gusinje and in the Ibar and Ćehotina valleys.Forests and forest land - cover an area of about 738,000 ha, or about 53.4% of the total area of Montenegro. Forest vegetation accounts for 622,000 ha, including up to 45% of non-forested area. The total volume of wood in all of Montenegro’s forests is 72.8 million m3, of which conifers cover 40% and broad leaves cover 60% of the area. About 67% of all forests and forest lands are state - owned. Their basic purpose is commercial usage (79%). The annual allowable cut in all forests, based on current planning documents, is approximately 800,000 m3. The current capacity of commercial forests is approximately 65%. The structure of forests in the northern area is very favorable (high forest in this region accounts for 65%). These are the best and the most productive forest eco system sand are also the important source of raw materials. The northern (continental) forests area cover the territories of the municipalities of Plav, Andrijevica, Berane, Rožaje, Bijelo Polje, Mojkovac, Kolašin, Nikšić, Šavnik, Plužine, Pljevlja and Žabljak.

- In order to create new tourist areas in the future, the repurposing of industrial and military bases is essential. these locations include:

Kumbor, Remontni Zavod, a complex in the municipality of Tivat,Luštica,Pristan, Rt Trašte next to Bigovo, Ostrvo Cvijeća, Platamune, Maljevik-Crni Rt, Luka Bar, Volujica, Valdanos, Karaula on the Bojana river , Mamula, lower and upper Arzu, Ada Bojana, UlcinjSolana, the export-plants at Risan, the workshop and warehouse in Zelenika etc.Bearing in mind the development of tourist accommodation, a focus should be put on the following places: Herceg Novi, Tivat, Kotor, Budva, Bar and Ulcinj.Nautical tourism – it is planned that the following marine locations will be developed for nautical tourism, with a specific emphasis on their future purpose: equipping the existing marinas based in Kotor, Tivat, Bar and Budva; improving marinas for repairs in Bar and Tivat; creating standard marinas in Rt Kobila, Liman in the municipality of Ulcinj, Bigovo, Kumbor, Bonici and in the port of Zelenika, and creating specialized marines in Ada Bojana, Buljarica, Crnojevića river and Virpazar.

- The central and northern region relates primarily to the development of mountain tourism. the development of mountain tourism and tourist areas is different in differentareas of this region:

In the Durmitor and Sinjajevina mountain are as there is the potential to improve ski tourism. In the Bjelasica and Komovi mountain areas, development could be improved by introducing various “wellness” programs, ski tourism, walking and hiking, etc. In Prokletije, there is the potential to improve existing ski tourism. The mountains in the area of the Morača river will become more attractive in the future as a result of a new highway, improvements in the infrastructure and the realisation of hydropower potential from the Morača river. The Tara and Ćehotina river areas both have potential for skiing and summer mountain tourism. In the coastal mountain are as there is potential for upgrading spa tourism by including walking, hiking, mountain biking, and skiing.

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Romanians Interested in Cableway Construction The Ambassador of Romania in Montenegro, Mr. Mihailo Florović expressed a particular interest in the Kotor-Cetinje cableway construction project during talks with the mayor of Cetinje, Mr. Aleksandar Bogdanović. Mr. Bogdanović informed the Romanian ambassador about activities that take place in the small royal capital as well as about various planned investments. He said that the key priority at the present time was to reduce unemployment, primarily through tourism and small-scale economy development. The ambassador, Mr. Florović announced the arrival of a representatives of Romanian Chamber of Commerce in Montenegro by June. He also said that, on this occasion, opportunities for investment in Montenegro would be considered. Source: www.seenews.com

Annex Agreed for the HTP ‘Boka’ Sale Agreement

At its second session, the Council for Privatization and Capital Projects agreed the draft for an annex to the sale agreement for 59.5% of the shares of HTP "Boka" in Herceg Novi. This agreement defines new deadlines for the implementation of the investment, a new investment program and new guarantees regarding the execution of obligations. For the purpose of securing this new agreement, the investor will also be required to pay an additional €10 million to the Government of Montenegro.

Altcom Interested in the Construction of a Bypass in Montenegro

The Ukrainian financial and industrial group, Altcom, has shown interest in a €40 million ($53 million) project for the construction of a bypass in Montenegro’s Adriatic resort of Budva. A visiting delegation of Altcom representatives visited the site for the planned bypass project, along with another site at Kotor. The statement said that Altcom builds and revamps railways, airports, stadiums, tunnels, bridges and underground networks. The company already owns two granite mines and two brick factories.

Montenegrin Municipality of Berane is going to Start Talks with Turkish Limark on Airport Revival

The Montenegrin Municipality of Berane will soon start talks with Turkish Limak Holding on a project regarding the revival of its airport, said the mayor of Berane, Vuka Golubovic. “We soon expect to start negotiations with Limark representatives about this project that will be implemented through public-private partnership“ said Mr. Golubović. Another Turkish company, Turkmall, has also shown interest in the project. Neither of the two companies, however, has yet filed bids to tender for the reconstruction of the airport. The invitation to tender was opened at the end of last year. Berane is one of four Montenegrin airports that feature a paved runway and one of three to have a terminal building. It was built in the 1960s and was mainly used by the flag carrier of the former Yugoslav federation, JAT. Also, its main purpose was to service flights to Belgrade in Serbia and to Ljubljana in Slovenia.

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Tenders

Tender for HPP on the Morača river Extended - An Extra Five Months for Bids

The government’s Commission for Economic Policy and Financial System has accepted a proposal to extend the deadline for the submission of bids for building hydro power plants on the Morača River to 30th September, 2011. The Italian companies, Enel and A2A, both of which are in consortium with the state power company (EPCG) have informed the Montenegrin Ministry of Economy that they were unable to submit their bids by the initial 15th April deadline, and need at least an extra three months in order to complete them. ENEL and A2A are participating jointly in putting forward a bid to tender with the Montenegrin power monopoly EPCG. They now remain the only interested companies after the short listed candidates, the Chinese company Sinohydro Corporation and the Austrian company Strabag, withdrew from the competition for this project at the end of last year. The HPP system on the Morača River includes the building of four hydro power plants that should have the average annual production capacity of 690 GW.

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April 2011

Montenegro Cancels Montecargo Tender

Montenegro’s Privatisation Council decided to cancel its invitation to tender for 85.45% of the rail transport company Montecargo after sale talks with the Romanian consortium Grampet collapsed. The Council and the sole bidder, Grampet, did not manage to reach an agreement on the sale contract. The tender process for Montecargo opened in late 2009. Grampet initially offered €1.65 million ($2.3 million) for the majority stake and later raised its offer to €4.6 million. Montecargo achieved a profit of €1.5 million last year, when its revenue rose by half to €10 million. It did not, however, specify whether the figure referred to net or to gross profit. The volume of cargo which the company transported last year rose by 43% to 1.2 million tonnes.

Invitation to Tender for Ulcinj Riviera and for the Long-term Lease of Montepranzo-Bokaprodukt to be Put Forward The Tender Commission for Tourism has decided to invite tenders at the sale of 63% of HTP Ucinjska Rivijera and for the long-term lease of a plot of land owned by the agricultural company Montepranzo-Bokaprodukt, on which a golf course will be developed. The invitation for tenders to bid will be put out no later than 30th April. Montenegro decided to cancel tenders for the sale of a 75% stake in Montepranzo-Bokaprodukt after failing to reach an agreement with the second-ranked bidder, a consortium led by Atlas Group. Previously, the tender was launched in 2007 and Netherlands-based Limon Investments Limited was picked as the best bidder after filing the highest bid of €48.3 million ($46.4 million). Limon Investments Limited, however, failed to provide guarantees for its pledged investment of €205 million and the government then started to engage in talks with a second bidder. Montepranzo-Bokaprodukt’s main asset comprises over two million square meters of land in the municipalities of Tivat and Kotor, on the Adriatic coast, and includes some 800,000 square meters that are located near Tivat airport.

Sole Bid for Wireless Internet Project in Montenegro

Austrian EOSS has filed a sole bid to tender for the implementation of a project that aims to boost Montenegro’s wireless Internet network. Two other companies bought tender documents – Crnogorski Telekom, part of Hungary’s Magyar Telekom group, and the Croatian state-owned telecommunications equipment provider OiV. The tender deadline, which was extended twice, closed on 31st March. Montenegro’s wireless project is part of the government’s initiative to increase Internet penetration across the country. The chosen strategic investor in Montenegro’s wireless network partnership will be responsible for the preparation of technical documentation for all aspects of the project. The chosen partner will also have to provide all the necessary equipment, devices and software, as well as being responsible for installation, maintenance and monitoring, and management during all phases of the project implementation and realisation.

EPCG Puts Out Tender for 329.380 MWh Electricity Supply

The Montenegrin power monopoly, Elektroprivreda Crne Gore (EPCG), put out a bid for tenders for the purchase of 329,380 megawatt hours (MWh). This is expected to partially cover the country’s power needs during the second half of 2011. Candidates

can submit bids for one or more batches, or for the entire volume of electricity required. Montenegro, which has an installed power capacity of 868 MW, suffers from constant power shortages and is increasing its volume of electricity imports on an annual basis. Almost two-thirds of its electricity output comes from two big hydro power stations, Perućica and Piva, and around one-third is generated by its sole thermal power plant, TE Pljevlja.

Montenegro Likely to Call New Tender for the Lease of Valdanos Resort Montenegro is expected to put out a new bid for tenders for a 30-year lease of the Valdanos resort. This is expected by the end of April, following the Tender Commission’s declaration that it had been unsuccessful in its previous attempt to find a lessee. After considering a letter received by its chosen candidate, the British company, Cubus Lux, the Tender Commission decided to announce that the tender had been unsuccessful. It will recommend to the Privatization Council that it should open a new tender procedure by the end of April. In November 2010, Montenegro said that it had plans to lease Valdanos to Cubus Lux which had offered to invest at least €222.5 million ($308 million) in an exclusive four and five-star tourist complex.

In a recent letter to the Teneer Commission, however, Cubus Lux said that unsolved property issues required it to review the potential risks in the investment. The company also said that it was particularly concerned by the fact that the Government had insisted on receiving a bank guarantee before the legally prescribed deadline. Cubux Lux will not easily give up on the Valdanos project as it has already invested “three years and a big amount of money” in the project prepatarion, said Cubus Lux’s financial director, Steve McCann.

Montenegro Once Again to Seek Advisor for Oil/Gas Concession

Montenegro will soon repeat its tender to find a consultant for an oil and gas concession after having cancelled the initial one. The government decided to cancel the tender as none of the bidders had met all of the formal requirements. According to various announcements, the invitation to put forward a tender will be repeated very soon. Montenegro launched a public procurement procedure to find an advisor for the concession in December 2010. It is said that the estimated value of the contract, including value added tax, was around €0.4 ($557.000).

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The company was founded in Spain, in 2000, as a renewable energy producer, and is the first independent Spanish wind energy player to be listed on both the Spanish and European Stock Exchanges. Mr. Roger is also on the board of directors in most of the group’s subsidiary companies. He was awarded a business studies degree at Barcelona University and started his professional career in the sports market. In 1982 he founded Roha Sports, S.A., a Spanish company which specialises in the distribution of sports equipment. Continuing with his enterprising profile, in 1984, he started the company Balance Squash Raquets, S.A., and in 1989 Sports & Contact, S.A. and Texacom, S.A. All of these are sales leaders in Spain in the manufacture, design, importation and marketing of sports equipment. From 1989 to 1997 he also worked in real state. He founded Inpro Group, S.L., a real state investment company with projects in Barcelona and Tarragona, and was also involved in Hafria, S.A., a company operating in Palma de Mallorca. In 1995 he joined the Danish Multinational called Neg Micon as Managing Director. This company is a world leader in the manufacture, installation and development of wind projects. During the period 1995-1999, Mr. Roger was on the board of directors for several companies operating wind farms and was also President of Ute Union Fenosa Ingneieria - Neg Micon. Currently, in addition to being the Chairman of Fersa, he additionally holds directorship positions in Truck Wash Europa, S.L. and is the Chairman of Real Wind, S.L., an investment company which specialises in business properties and energy opportunities across the world.

About FERSA: Fersa, his most recent and ambitious project, focuses mainly on the development, operation and ownership of wind, solar PV and biomass assets. This company holds an attractive portfolio of assets that are under construction, including an internationally diversified pipeline which provides considerable growth potential. Fersa has an installed capacity of 217.3MW that was distributed between Spain, France, Poland and India up to December 2010. It also has a total of 253.77MW in a pre-assignment registry for certain special regime installations in Spain.

MBO: Fersa started its activities in Montenegro four years ago. What was your motivation to start a business in Montenegro?

With a long background in business, I saw that Montenegro offers good possibilities to develop good business in energy, especially wind energy. Also I had the opportunity to contact the right people. They knew what foreign investment means for the Montenegrin economy and were very pleased to give us all the support we needed. This is the most important point when you want to invest and develop a business abroad; you basically need to be supported by the government in that place.

MBO: How would you describe cooperation from Montenegrin state institutions so far?

As I have already said, cooperation from Montenegrin state institutions was essential and has been a positive experience for Fersa. We could not have made any plans to develop wind energy in this country without their help. In particular, we have developed a good level of communication with the Montenegrin Investment Promotion Agency (MIPA) and with the Ministry of Economy. Both of these institutions have been involved since the beginning of the process and we developed a good professional relationship.

MBO: When do you expect to start the construction of the first wind power plant in Ulcinj and what is your biggest challenge for the project?

If all of the administrative procedures have been completed by the government in July we expect to be able to start work in the first quarter of 2012. The biggest challenge in the project will be to get all of the project finance requirements ready by that date.

MBO: What is your opinion of the current situation regarding the energy sector in the Western Balkans and in Montenegro?

I think it has improved a lot, but I still think that there is a lot more to do. It is important to draw up a plan in order to identify areas of growth, and to aim for a good mix of energy in order to reach the desired goal. Moreover, it is important not to forget about the electrical infrastructure in each country and to remember the systems that connect the area. Both of these are very important points; these two factors together will ensure that the energy sector has sufficient capacity for the region.

MBO: How do you see the future trend of usage of renewable energy, particularly in the light of recent difficulties caused by the earthquakes in Japan regarding nuclear energy? Unfortunately I think it is very sad that we have to wait for tragedies like the earthquake in Japan to make us all think and be aware that there are other ways of achieving progress without having to sacrifice our natural resources. It is very common to read about renewable energy and that it is the way forward, the future. There is no doubt that this is not just the future but also the present. In Spain, for example, we produce more than 26% of the total energy required through renewable energy sources.

MBO: Do you have any other plans to expand in this region, or perhaps to expand further into other sectors in Montenegro?

We are ready to continue developing renewable energy in Montenegro. We have a good knowledge of the country and a very good relationship with the administration and the government, so it will be a pleasure to find new opportunities for investment in Montenegro. Fersa only can invest in the energy sector, but I am sure that the fact that it is now a listed company has created waves in other sectors. I think we are a good ambassador for Montenegro and are also a perfect example for other Spanish companies in that they will see that this country has opened its arms to welcome us. Fersa and I, personally, are very proud to be, metaphorically, making a bridge and to be guiding other Spanish investors to Montenegro. We have been working to support and help the opening of the new MIPA office in Spain, and are also aiming to give our assistance in bringing more investors form Spain to Montenegro and vice-versa.

Mr. José María Roger, President of Fersa Energías Renovables, S.A.

MBO Interview with Mr. José María roger, President of fersa energías renovables, s.a.

Short biography:

17

April 2011

Facts about renewable and non-renewable energy

sources

Today, the world consumes about 15 terawatts (TW) of energy on an annual basis. Recently, however, estimates suggest that by 2030 this level of consumption will have doubled and that by the end of 2050 it may even have tripled. Indicators of the world’s current energy sources are still discouraging in terms of renewable energy sources. According to data issued by the International Energy Agency (IAE) for 2007, oil accounted for 37.3% of the world’s energy consumption, coal represented 25.3% and gas 23.3%. Nuclear energy accounted for 5.7%, while biomass supported 3.8% of the world’s energy needs and hydro energy provided 3.2%. Solar energy sources represented only 0.5%, wind power 0.3% and geothermal sources and bio fuel accounted for 0.2% respectively of the world’s total energy sources. Excluding nuclear power from this calculation, less than 10% of all global energy needs are generated from renewable energy sources. Fossil fuels still represent the highest percentage of the total global consumption. The demand for oil increased to 84.7 million barrels (per day) in 2008, while the IAE estimates that it will continue to increase to a level of 105 million barrels per day in 2030. Compared with the current level of consumption, which will certainly grow in the future, this assessment shows that existing oil reserves will probably last for about forty years and that reserves of gas will last slightly longer, for around sixty years. These assessments indicate that it is critical that we should turn to renewable energy sources.

We Introduce RENEWABLE ENERGY: IMPORTANCE AND APPLICABILITYIssues related to energy, especially those relating to renewable energy sources are of vital importance not only because of the current environmental situation and rising crude oil prices, but also because of the increasing demand for energy. We are becoming more and more aware of the fact that is necessary to replace traditional fossil fuels with environmentally acceptable alternatives. What contributes to this situation is the fact that the combustion of fossil fuels (coal, oil and natural gas) releases large amounts of carbon dioxide and other greenhouse gases into the atmosphere. Global warming is also a major issue. Therefore, most countries tend to focus their future activities on the development of renewable energy sources. An additional reason for this is raising oil prices and a reduction in the number of oil wells. This indicates that countries are running out of fossil fuel supplies. For these reasons, a number of countries are increasingly relying on renewable energy sources (sun, wind, geothermal springs, sea currents and waves, biomass, etc.).

Renewable energy is generated from natural sources (such as sunlight, wind, rain, sea waves and geothermal sources) and can constantly be naturally replenished. In its various forms, it is obtained directly from the sun or from heat generated deep down in the Earth. The advantage of such sources is that they cannot be used up, but will be regenerated after a certain time. Also, they play a significant role in reducing carbon dioxide emissions and thus contribute to lessening the country’s dependence on imports of oil, gas and electricity. The use of renewable energy sources affects a country’s efficient use of its own potential in energy generation, reduces “greenhouse gases” and emissions, helps to develop local industry and creates new jobs. To this end, renewable energy sources are often seen as playing a critical role in the electro-energy system and also provide the basis for a country’s development.

One of the major “obstacles” regarding the use of renewable energy sources is its relatively low price and also the fact that fossil fuels are easy to use. However, over recent years, we have become much more aware of abrupt increases in oil prices and the harmful effects non-renewable energy sources make on the environment. A good example is the fact that the Sun “gives” the Earth 15 thousand times more energy than we as humans can use in terms of energy consumption. It is widely known that the biggest oil reserves are located in politically unstable parts of the world, so it is always good to have an alternative. The percentage usage of renewable energy sources should be significantly increased as non-renewable energy sources are shrinking and their harmful effects are becoming increasingly evident.

The basic types of renewable energy are “traditional renewable energy sources” such as biomass and hydropower sources. “New renewable energy sources" include solar energy, wind energy, geothermal energy, etc. 18% of the world’s total energy is generated from renewable energy sources (2006). However, the major part of this represents the traditional use of biomass energy for cooking and heating (13%), hydropower plants produced 3% and “new renewable energy sources” produced just 2% of the world’s total energy. The European Union (EU) set an ambitious goal of increasing the usage of renewable energy sources to 20% by 2020. The effects of the current financial crisis in the EU indicate that this will be hard to achieve.

In 2005 Montenegro became a member of the Energy Community Treaty, and committed itself to harmonizing the energy sector and regulating legal frameworks in acordance with the “Acquis communautaire”. In order to be in line with the obligations of the Energy Community, the government of Montenegro adopted a law on energy in May 2010. This law is harmonized with the relevant EU directives, for example EU directive 2009/28 EC for renewable energy. During 2011, in accordance with the law on energy, the new regulatory framework which defines the rules and obligations of stakeholders in the field of renewable energy will be adopted.

Also, there are plans to adopt the Renewable Energy Use and Development Program, which defines the development dynamics in this area in accordance with the Energy Community requirements and also with the strategic goals of Montenegro.

Renewable energy: assessment of the current situation in the world and in Montenegro

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Mr. Jose Manuelo Barroso and Delegation of EU visited University Donja Gorica (UDG)

The President of the European Commission, Jose Manuel Barroso and the European Commissioner for Enlargement, Stefan Fule, together with a ten-member delegation visited University of Donja Gorica on 8th April, 2011. This visit is a huge incentive to development, and even greater recognition. They said that Montenegro is on a good way, but it has to give the European Union concrete results in the field of the rule of the law and independence of justice, as well as in the fight against organized crime and corruption. It was also pointed out that Montenegro made progress in fulfilling the recommendations of the European Commission for receiving the date of the negotiations.

In addition, Mr. Barroso met with the Mr. Filip Vujanović, President of Montenegro; Mr. Igor Lukšić, Prime Minister and with Mr. Ranko Krivokapić, President of the Montenegrin Parliament.

The International Conference on trade and investment held in Dubrovnik The two-day international conference, The Brown Forum, on the improvement of investment in Southeast Europe started in Dubrovnik on 6th April 2011 with the participation of officials and businessmen from the region and the United States, Austria, Hungary and Italy. At the economic conference, more than 200 representatives of state institutions, American companies and companies in the region discussed the improvement of investment in the Southeast Europe and the creation of regional business partnerships and American companies. Among the best known U.S. companies whose representatives participated were the following: Bechtel (Bechtel), Coca-Cola (Coca-Cola), General Electric (GE), Hewlett-Packard (Hewlett-Packard) Ai-Bi-EM (IBM), Microsoft (Microsoft) and others. Montenegrin minister of economy with colleagues from Croatia, Slovenia, Serbia and Macedonia participated in the panel on overcoming barriers to regional trade and investment. Montenegro was recognized as one of the most investment destinations in the region, given the continuous inflow of direct foreign investment despite the global economic situation.

Montenegro’s Credit Rating Improved

Moody’s Investors Service has changed the outlook on Montenegro’s Ba3 Government bond ratings to stable from negative and has affirmed the rating at its current level. The outlooks on the Baa1 foreign currency bond ceiling and the B1 foreign currency deposit ceiling were also changed to stable from negative. Moody’s decision to move the outlook to stable from negative was prompted by the rating agency’s assessment that the Montenegrin government is addressing the key risks that triggered the negative outlook in April 2009. In particular, Moody’s noted improvements in the following areas:

(1) The Government has started to reverse the significant fiscal deterioration it experienced in 2008/09, as reflected by a lower-than-planned 2010 budget deficit.(2) The economy is showing signs of a gradual recovery. In 2010, real GDP growth was positive compared with earlier expectations of a second year of recession after the steep decline in 2009. (3) The situation of the banking sector is stabilizing. Liquidity in the banking sector has improved, with retail deposits in particular flowing back into the system.

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Growth Trends in the Transport Sector

During 2010, the total turnover in Montenegrin ports grew by 18.7%. Export trade increased by 36.1% while imports decreased by 3.7%. More than 42% of all cargo was transported by rail in Montenegro, but there were also 11.4% fewer passengers in comparison with 2009. At the same time, an increase of 26% was recorded in passenger transport and an increase of 46.1% in the transport of cargo. More than 12.3% of passengers and more than 6.7% of cargo were transported by road. The postal system, however, recorded a slight fall of 3.7% in volume (packages and letters).

EUR 875,000 Approved for 11 Projects

The Board of Directors for the Investment-Development Fund of Montenegro reached a decision regarding the financing of 11 projects aimed at small and medium-sized companies. Total funding of €875,000 was agreed. Ten out of three leven projects will be implemented through a direct loan arrangement with the Investment-Development Fund, and one will operate with warranties and with the assistance of certain commercial banks.Regarding the sector structure for approved loans, projects in the fields of tourism and catering, production, agriculture and food production dominate and account for more than 90% of the total number of approved projects.

Biggest Exports to Italy, Biggest Imports from Serbia

Montenegro’s total trade volume with the rest of the world, during the first two months of 2011, reached €272 million, which was an increase of 27.7% in comparison with the same period last year. The main foreign trade export partners were Italy with €15.6 million, Serbia with €14.7 million and Hungary with €8.6 million. The main foreign trade import partners were Serbia with €55.5 million, Bosnia and Herzegovina with €16.7 million and Greece with €15.3 million. The highest level of foreign trade was achieved with the signatories of the CEFTA Agreement and with the European Union.

19

April 2011

EUR 37 million for the Renovation of Sveti Stefan

An agreement regarding support for the renovation project for the Sveti Stefan Hotel and for the construction of the Kraljičina Plaza Hotel was signed by the Minister of Sustainable Development and Tourism and by representatives of the Budvanska Rivijera, including companies from the Miločer Hotel Group,

Adriatic Properties, Aidway Investments Limited, General Hotel Menagament Limited, Aman resorts Management B.V. and the European Bank for Reconstruction and Development.This financial arrangement implies that €37 million will definitely be available for the realization of work on these hotels.

Great Interest in Apartments in Luxurious Marina

The interest of buyers in housing units at the luxurious marina, Porto Montenegro in Tivat, has exceeded all expectations. The complex is being built at a former military shipyard by the Canadian billionaire Peter Munk. The construction of the fourth facility has now started, and

preparations to start with the fifth areal ready in progress. The prices of around a hundred apartments range from €180.000 to €1.8 million. Most of the buyers are from Great Britain, Russia, Austria, Germany and Switzerland. Canadian businessman, stated that elite tourism, sailing and marinas in the Adriatic and the Mediterranean have an excellent future. He pointed out that Montenegro’s advantage in yachting tourism is due to the fact that traditional destinations for this form of tourism are over crowded and that prices are generally too high.

Negotiations With Low-Cost Carriers

With the establishment of low-cost airline carriers, tourists and Montenegrin citizens would have the opportunity of travelling from Montenegro to European destinations at considerably lower prices. This was stated in preliminary negotiations between the working team of the government of

Montenegro, including representatives from the Ministry of Sustainable Development and Tourism, the Ministry of Transport and Maritime Affairs, the public company Airports of Montenegro and the National Tourism Organization, and the management of Ryanair and Wizz Air.

The Sarajevo Business Forum 2011

The Second International Investment Conference titled „Sarajevo Business Forum 2011“ was held in Sarajevo from 6th to 8th April. It promoted 153 projects worth €14.7 billion. Most projects came from tourism sector, total of 46, and their value amounts to €528 million. Infrastructure sector promoted

31 projects worth €8.98 billion, 30 projects from energy sector worth €4.83 billion and 26 agriculture projects worth €339 million. Nine projects worth €18.56 million represented wood industry, financial segment had eight projects worth €33 million and three projects came from education sector worth €10.18 million.

Montenegro and Belgrade on top of list of tourist destinations

Montenegro and Belgrade stand on the top of a list of 11 tourist destinations not to miss in 2011. The list has been published in the tourism section of the Milan-based economic daily Il Sole 24 Ore.

Belgrade follows Montenegro on the list of the most popular tourist destinations in the world to visit in 2011, where the Serbian capital and Montenegro having been presented in the Italian newspaper as the world’s most attractive destinations when it comes to partying.

Il Sole 24 Ore points out the Belgrade Design Week, which should be held on May 26-28, and its accompanying events, as one of the most important international festivals, well worth traveling to Belgrade.

Montenegro Sold €180 Million Eurobonds

Montenegro has successfully placed a five-year Eurobond issue worth €180 million ($256 million) – the Ministry of Finance said. This transaction was preceded by a three-day road show with visits to London, Geneva, Zurich, Frankfurt and Vienna, where representatives of the Ministry of Finance and the Central Bank met with a number of investors and presented economic and fiscal indicators on Montenegro. The issued bonds carry an annual fixed coupon of 7.25%.

Montenegro, as last time, attracted a large number of investors. The fresh Eurobond issue was more than twice oversubscribed. A total of 67 investors from 21 countries became bondholders. The issue’s lead managers were JP Morgan and HSBC, while London-based Linklaters acted as legal advisors. The Montenegrin government will use the bond proceeds to finance capital spending and refinance debt.

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Front page picture: National park Biogradska Gora,

Municipality Kolašin, Montenegro

Author of the picture:Mr. Lazar Pejović

Photography provided by CSTI for project “Photography Adventure“

Printing: Montcarton, Podgorica

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After 15 years of experience, today CEED Consulting is the leading business consulting company in Montenegro which helps clients improve their business operations, further develop and perfect both their service and product and meet the need of their customers. We integrate our business development and project management services, providing solutions for setting up and growing your business activities in Montenegro. Focusing on customer care, our team emphasizes quality of service, which we are continually striving to improve. Loyalty and dedication transpire through our unique and professional approach to advising our clients.Implementing international standards of business practice, CEED Consulting relies on its expert knowledge of the local market to provide tailored solutions based on accurate and timely information.

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ASSOCIAtECharlotte Rimmer, Editor

Boat Show from 27 April in Budva

Nautic Show Boat Show – exibition of equipment for sports, camping and recreation will take place from 27th April to 1st May in Budva's marina. Exhibitors will exibit under favorable terms in the form of discount in relation to the number of boats, size of exhibition space and stand, as well as for advance payments. The organizer of the Fair said the worst period for nautical sector has passed and it is expected that the Fair is to annoounce the successful nautical season.

Seminars for Entrepreneurs in Podgorica

The Center for Entrepreneurship and Economic Development (CEED) from Podgorica in the cooperation with International Finance Corporation (IFC) will organize a series of practical seminars consisting of three modules: Risk Management, Cost reduction and Cash Flow Management, Legal Options for Companies Unable to Meet Current Debt. The main objective is to assist small and medium-sized enterprises in Montenegro in dealing with key issues thy are facing during the current crisis by providing them with practical information, strategies and tools. More than 30 of them have been organised across the region so far.

Regional CEED Conference19th-20th May, 2011 in Slovenia

The fifth Regional CEED conference „Business Games Changers and What you Need to Know“ will be held in Bled, Slovenia from 19th-20th May, 2011. Each year CEED brings together over 150 fast growth entrepreneurs from Southeast Europe to inspire, give a fresh view, and offer regional business networking opportunities. Also, they would share their views on new business models, changing markets, technologies and how they are readying their businesses for new opportunities. Investors will present their view on what’s “hot” in today’s markets and where Southeast Europe’s entrepreneurs are best positioned to play.

Exhibition on Smart Grid Technologies24th-26th May, 2011 in Paris The first event of its kind, SG PARIS 2011 exhibition and conference discusses current developments in the world of energy and of IT and telecoms technologies: the emergence of intelligent networks. It is designed for principal actors in the market: electricity providers, networks managers, IT companies, Telecom operators, institutions, representatives of trade associations, manufacturers, industry consumers, etc. The organizer of the event is Sagemcom - a French high technology group, active globally and aims to become a world leader in broadband terminals, convergence and energy solutions.