ECONOMY

Montenegro set for EU talks, foreign investment

PODGORICA – The capital of Montenegro, soon to be the world’s newest independent state, has only one big-name clothing franchise and no McDonalds. But after voting to end their union with Serbia, the country’s 650,000 people hope independence will bring prosperity, with tourism to their thickly wooded mountains, rushing rivers and sparkling Adriatic coast as the main draw. «I am certain that Montenegro can be not only economically viable, but one of the most developed countries in the region,» Economy Minister Predrag Boskovic told Reuters. «Its small size is not an impediment but an advantage. Its biggest potential lies in tourism, electricity generation, forestry, the maritime sector and in the production of drinking water.» Montenegro’s gross domestic product is forecast at 1.7 billion euros in 2006, up 4.5 percent on last year. Inflation stands around 2 percent and monthly wages average 223 euros. Economists say the figures, and the country’s small size, will make it easier to woo investment, get international loans and gain swift entry into the European Union. Brussels froze talks with Serbia-Montenegro this month over Serbia’s failure to deliver war crimes fugitive Ratko Mladic to the United Nations tribunal in The Hague. Yesterday it said talks would resume with a separate Montenegro. Montenegro was a fringe travel destination up to the 1990s, when it was punished along with Serbia with sanctions for Belgrade’s role in the wars over the breakup of Yugoslavia. Racketeers took advantage of its coves to make it a haven for smuggling and stolen goods, in full knowledge of officials who took their cut of the booming black economy. A popular joke at the time said, «Come to Montenegro, your car’s already here.» When Montenegro’s government broke with Serb strongman Slobodan Milosevic in the late 1990s, it launched an aggressive privatization program that sparked accusations of corruption. «There is a lot of prejudice about Montenegro, that it’s just attracting shady capital,» said one Western banker in the region. «But there are good things happening investment-wise. There is potential in tourism, real estate and infrastructure, and if they are smart and don’t start making shady deals the Å market will open up even more.» Analysts say the government will need to open up its utilities and transport sectors to private firms. It will also need to invest in education, as most young people at present go abroad to study and often stay there. Links already weak Links between the economies of Serbia and Montenegro were already weak. They have different economic policies, laws and currencies; Montenegro uses the euro and Serbia the dinar. Scrapping the union will eliminate the costs of an extra layer of administration, although Montenegro will have to pay for a modest defense force and a diplomatic service. «The dissolution of the union would benefit both economies,» said Will Bartlett, a researcher in the development of Southeast Europe at the University of Bristol. «The improved political certainty would help attract investment, which is badly needed.» Separation would also help both countries combat the smuggling and gray economy that thrive along their internal customs border, he said, and make it easier to join the Southeast Europe free trade zone next year. Dan Serwer of the US Institute of Peace said Montenegro’s greatest challenges would be establishing and maintaining the rule of law and building up a sustainable economy. «Especially important will be the police and an independent judiciary capable of acting against corruption and smuggling,» he said. Nikola Fabris, chief economist at Montenegro’s central bank, said foreign investment reached a record 375 million euros last year and bodes well for the future. «The level of FDI per capita shows Montenegro is third in the group of transitional economies behind the Czech Republic and Estonia, and first among transitional economies that are not members of the EU,» Fabris said. The main priorities now are cutting the current account deficit and restructuring big, overstaffed enterprises that rely on old technology and lack vision. Food processing and winemaking are promising, while tourism enjoyed double-digit growth rates in the last few years, he added. For Zdravko Radulovic, one of the owners of a five-star hotel complex now being built near the coastal resort of Budva, independence means more tourists and more profits.