ECONOMY

In newly independent state, everything is for sale

PODGORICA, Montenegro (AP) – «For sale: A beer-drinking wolf:» The sign on a winding road leading from Montenegro’s capital to the spectacular Adriatic Sea coast down below illustrates how just about everything has its price in the world’s newest country. Since 2001, close to 80 percent of Montenegro’s state assets have been sold, mostly to foreigners. Two telecommunications companies, a shipyard, an aluminum factory, the only brewery, most of the hotels, capital markets and the oil import and distribution industries are already in private hands. Outsiders, particularly from Britain, are snapping up prime seaside properties, sending real estate prices soaring. The embrace of foreign investment comes as the tiny nation lobbies to join the European Union, a bid Montenegrin officials were discussing with the EU yesterday. «What is still left for grabs is some land on the coastline, the electric distribution company and the main seaport,» said Nebojsa Medojevic, an economist who leads Montenegro’s main opposition party. Montenegrin authorities say foreign capital is crucial for the country’s backward economy that suffered under wars and sanctions in the 1990s before the country declared independence from Serbia in June. The opposition, however, says the selloff is enriching the ruling elite and leaving ordinary Montenegrins with little. Medojevic and other economists say that soon Montenegro «will be owned» by a few Russian tycoons and English and Irish landlords. In the 1990s, Montenegro’s clannish society had an economy revolving almost entirely around the black market of smuggled cigarettes and gasoline. That helped people survive both international sanctions and the heavy handed rule of former Yugoslav leader Slobodan Milosevic. Critics describe the way business was done: The government slapped relatively low «taxes» on smuggled goods, and used a part to pay teachers, social workers and pensioners. The other part ended up in the pockets of government officials or their allies – making some of them millionaires. Medojevic said there’s little difference in the current «sales boom» in Montenegro. «I call it a ‘percentage’ economy,» Medojevic said. «You give me a nice percentage, and I’ll give you a good price for state property.» Montenegrin leaders vehemently deny any wrongdoing, and say the selloff creates thousands of new jobs for Montenegrins as the economy surges forward and the booming tourism industry generates employment. In one of the biggest privatizations, Norway’s Telenor invested over 90 million euros ($114 million) in one of the two previously state-owned telecom providers. Austria’s Hypo Alpe Adria Group also spent 70 million euros ($89 million) on a new bank and a leasing company. «What this country needs is foreign capital,» said Prime Minister Milo Djukanovic, defending his government’s decision to sell assets and keep the state budget afloat. Foreign investments in Montenegro grew from 175 million euros ($221 million) in 2001 to 383 million euros ($485.49 million) in 2005. Investments per capita, 620 euros ($785) in 2005, are the third in Europe after Estonia and Czech Republic, according to the latest government figures. The explosion in Montenegro’s property market started in 2001, first with Russian buyers then the British and Irish. During 2004 and 2005, many foreign property agencies sprung up on the coastline, offering «ready to rent» investments. In the past two years, property prices have risen on average by 20 percent per year, and in some exclusive locations by more than 100 percent per year, and prices are still rising, according to government figures. That is still about 30 percent cheaper than in neighboring Croatia or in the most of the Mediterranean states. Relatively low taxes – a corporate tax rate of 9 percent and personal income tax of 15 percent to 23 percent – and equal status of foreign and local buyers has been the main attraction. Companies can be set up with only 1 euro ($1.27) as the minimum starting capital with a registration fee of 10 euros ($12.68). As a result, the number of registered legal entities in Montenegro grew from 8,000 in 2001 to over 30,000 in 2006. Many Montenegrins think that now that they have voted to split from much larger Serbia in May, their tiny state of some 620,000 people could become an international business center like Switzerland or a mecca for the rich like Monaco. Its pristine mountains and stunning coastline could be enough to support its small population by building a lucrative tourism industry. But the tiny state’s roads, hotels and airports have been destroyed by years of neglect and communism, and need major foreign investment for repair. The Russian-Montenegrin Montenegro Stars hotel group has already invested 50 million euros ($63.38 million) in the five-star Splendid Hotel near the coastal resort of Budva, while Britain’s Beppler&Jacobsen spent 13 million euros ($17 million) on the luxurious Bianca Hotel & Spa in the northern Montenegrin mountains. The surge in the private property market is centered mainly on the Adriatic Sea, with mostly Russian, English and Irish buyers looking for what’s left on the 293-kilometer (182-mile) coastline that features turquoise blue sea, white pebble beaches and steep pine forest mountains. «There is no place like this in Europe, and still with affordable prices,» said Mike Jennings from London, a potential private buyer, as he toured the Drobni Pijesak beach where a foreign investor prepared to start the construction of the Princess Colony – a large complex of hotels, villas and swimming pools. Back on the road toward the capital, Astor – the beer-drinking wolf up for sale to the highest bidder – sipped Montenegrin beer poured through a metal cage into his wide open mouth with sharp white teeth. «We figured, if everything is on sale, why not our beer-drinking wolf,» said its keeper, who only gave her first name, Zorica.