Foreign direct investment (FDI) in Montenegro

FDI in Figures

Montenegro has the potential to become a magnet for investment thanks to its business-focused economic system and low corporate tax rate. According to UNCTAD’s World Investment Report 2024, total FDI inflows reached USD 526 million in 2023, down by 40% year-on-year. At the end of the same period, the stock of FDI was estimated at USD 6 billion, around 81.9% of the country’s GDP. According to the Central Bank of Montenegro, total FDI inflows from the restoration of independence in 2006 to 31 December 2023 reached EUR 13.8 billion. Between 2019 and 2023, FDI inflows totalled EUR 4.38 billion. Of this, EUR 859.9 million was invested in domestic companies and banks, EUR 1.7 billion came as intercompany debt, EUR 1.48 billion was directed to the real estate sector, and EUR 296.9 million went to other sectors. The main investing countries were Russia (13.7%), Serbia (9.2%), Switzerland (7.9%), Azerbaijan (7%), Germany (6.2%), and the UAE (5.5%). According to preliminary data by the Central Bank, the total net FDI inflow reached USD 532 million in 2024, up by 13% y-o-y. Investments in companies and banks rose by 20% to EUR 114 million, while real estate investments decreased by 1.7% to EUR 455 million. FDI inflows from intercompany lending increased by 9.8% to EUR 291 million. Meanwhile, total FDI outflows dropped by 6.7% to nearly EUR 400 million.

The country offers great economic freedom and monetary stability. Domestic and foreign companies enjoy equal treatment in Montenegro. Foreign companies can own 100% of a domestic company, and their profits and dividends can be repatriated without limitations or restrictions. Furthermore, Montenegro does not have foreign investment screening (although authorities are working to establish one). Nevertheless, corruption, the politicization of justice, organized crime, an approximate and unreliable land registry, and sluggish bureaucracy are obstacles to FDIs. The Privatization and Capital Investment Council is the governmental institution that manages, controls, and implements the privatization process in the country, which already involved almost 90% of formerly state-owned enterprises. Some initiatives have been taken to improve the business environment such as the establishment of the Credit Guarantee Fund to foster credit lines for banks. The country has implemented dedicated legislation providing guarantees and safeguards for foreign investors. Additionally, it adopted over 20 other laws related to business, all aligned with EU standards. Montenegro ranks 65th among the 133 economies on the Global Innovation Index 2024 and 67th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Montenegro

Strong Points

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

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

Weak Points

Montenegro's weak points impeding FDI include:

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

Government Measures to Motivate or Restrict FDI

In Montenegro, private ownership is protected by the Constitution and includes equal treatment of foreigners.
Montenegro has a favorable tax regime with the lowest corporate tax rate in the region at nine percent.
Foreign investors can participate in local privatization processes and can own land in Montenegro generally on the same terms as locals. Expropriation of property can only occur for a "compelling public purpose” and compensation must be made at fair market value. There has been no known expropriation of foreign investments in Montenegro. International arbitration is allowed in commercial disputes involving foreign investors.

Registration procedures have been simplified to such an extent that it is possible to complete all registration processes online. In addition, bankruptcy laws have been streamlined to make it easier to liquidate a company; accounting standards have been brought up to international norms; and custom regulations have been simplified. There are no mandated performance requirements.

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

Bilateral investment conventions signed by Montenegro

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