Investment Opportunities

May 2016 MONTENEGRO

 FAST FACTS

• AREA: 13.812 km2 (360 km2 of sea)

• CAPITAL:

• OLD ROYAL CAPITAL:

• POPULATION: 620.029

• OFFICIAL CURRENCY: Euro €

• AIRPORTS: Podgorica, Tivat

• SEA PORTS: Bar, Tivat, Kotor, Zelenika MONTENEGRO

11 REASON WHY TO CHOOSE MONTENEGRO AS INVESTMENT DESTINATION : • Economically and politically stable economy • Candidate for membership in EU and NATO • Member of the World Trade Organization (WTO) • Trade agreements with CEFTA, EFTA, Russia, Turkey and Ukraine • Equal treatment for investors under the LoFI:

• No limit in terms of investing in any industry

• Free transfer of financial and other resources • Current investors from around 100 countries • Highest FDI per capita in the region • Competitive business environment • The lowest tax rates in the region • Business Zones with incentives at the local level • Financial grants by Government FDI IN MONTENEGRO

 Total inflow of FDI in Montenegro in 2015 was 757 million € - 259 million more than in 2014. By this indicator, Montenegro is still far ahead from countries in the region

 Increase of FDI – result of unique investment opportunities, positive experience of existing investors and favoruable business environment

 No domination of any foreign investor

 Major investors are from Russia, Austria, Italy, Switzerland, Cyprus, Hungary, Great Britain, Middle East...

FOREIGN DIRECT INVESTMENTS • 2000 - 10 millions € • 2009 - 1.2 billions € • 2007 - 2015 - 5.5 billions €

*source: Montenegro Central Bank and MIPA (Montenegrin Investment Promotion Agency) AUSTRIAN FDI IN MONTENEGRO

 The highest FDI inflow in 2015 - from Austria  Investment value - 260 mill €

Investments in: • Companies and Banks • Insurance companies • Construction

 In the last 15 years - Austria invested in Montenegro over 600 mill €

*source: Montenegro Central Bank DOING BUSINESS REPORT

*source: World Bank - Doing Business Raport LOW TAX RATES

Corporate profit tax (%) – MNE 9%

40 31.4 30 20 15 15 16 17 19 20 9 10 10 10 10 0

Value added tax (%) – MNE 19% 27 30 22 24 25 22 25 17 18 19 20 20 20 20 15 10 5 0 PRIORITY SECTORS FOR INVESTMENT

 Energy  Tourism  Transport TOURISM

 Tourism direct and indirect share in GDP in 2015 – 794,8 mill € (22,1 %)  Until 2026 -1.521,9 mill € is expected - (29,9% of total GDP) (source: WTTC)  Total income from tourism in 2005 was 222 mill € and in 2015 - 801.3 mill €

Montenegro is connected with 76 destinations Low-cost companies : • Rayan Air • Easy Jet • Wiz Air TOURISM THE DEVELOPMENT PATH IN THE HOTEL INDUSTRY

 ACCOMMODATION FACILITIES

• 386 hotels in Montenegro

•38% beds in high category objects (4/5 *)

• 10 high quality mixed-used resorts

•Hotel Operators (One&Only, Aman, Hilton...)

•Construction of 76 new hotels with 8 000 beds by 2024 year TOURISM ONGOING PROJECTS

 PORTO MONTENEGRO • Investment value: cca 420 mill € • Mixed used resort which includes luxury 5*hotel, restaurant, bars, cafes, galleries, nautical museum, green market, private health institutions, sports facilities established, luxury apartments • Original investor: Adriatic Marinas Ltd. and PM Securities (Barbados) INC • Investment Corporation of Dubai recently took over

 PORTONOVI/ONE & ONLY • Investor: SOCAR, Azerbaijan • Investment value: cca 500 mill € •Construction of luxury hotel with SPA and wellness center, luxury complex with 500 units and villas of the highest class, a world – class marina with a capacity of 250 berths, large number of shops, cafes and restaurants TOURISM ONGOING PROJECTS

 LUŠTICA DEVELOPMENT

• Investor: Orascom Development, Egypt and Switzerland • Investment value: cca 1.1 billion€ • Mixed use resort, includes construction of 8 hotels, golf course with 18 holes, 1,250 residential units (villas and apartments), 2 marinas and city center

 LASTAVICA ISLAND AND “MAMULA” FORTRESS – HERCEG NOVI • Investment value: cca 15 mill € • Long term use • Redevelopment of the Mamula Fortress by preserving the cultural heritage and promoting the historic character of the island • Investor: Orascom, Egypt and Switzerland TOURISM POTENTIAL INVESTMENT

 NAUTICAL TOURIST CENTER VIP MARINA - KOTOR

• Investment value: cca 90 mill € • Tender preparation in progress • land and aquatorium in Boka Bay marina - 150 berths with facilities and infrastructure, administrative building, commercial facilities, high category hotel complex

 NJIVICE HERCEG NOVI

Land of 30,597 m² and aqatorium of 7,313 m²

• Planned for marina, business or congress hotel, apartment facilities, 5000 m² beach

• Tender documentation may be purchased until 15 July 2016. TOURISM POTENTIAL INVESTMENTS

 ADA BOJANA - ULCINJ

• Investment value: cca 200 mill € • Public-private partnership - long term lease • Area of about 100 ha planned tourist complex (from about 520 ha total area of island), which includes at least one 4-5* hotel, villas and other types of residential accommodation

 VRANJINA SITE WITH LESENDRO – Skadar Lake

• Tender documentation may be purchased until 14 June 2016. • Area: 13,132 m² for feature an ecolodge tourist resort • 30 objects servicing visitors to the resort with a maximum capacity of 61 beds TOURISM POTENTIAL INVESTMENTS

 BULJARICA LOCATION

• Purchase and long-term lease up to 90 years. International tender for valorization is published.

• Location: about 18 km from Budva and at the same distance from Bar

• The entire Buljarica location covers the area of around 17,000,000 m². The subject of the sale includes immovable properties with a total area of 4,898,216 m² and the subject of long-term lease 533,956 m² and aqua space with an area of around 585,772 m²

• Beach is approximately 2,500 meters long, and around 30 meters wide

• Investment value for the immovable property: minimum 108.761.000 mill € TOURISM POTENTIAL INVESTMENTS

 SKI RESORT KOLAŠIN 1600 - KOLAŠIN

• Investment value: cca 65-75 mill € • Long term use - Call for bid submission is published • Located in the south part of the Bjelasica, surface amounts to 27,19 ha

 MEDITERAN - ŽABLJAK

• Public-private partnership • Tender documentation may be purchased until 3 June 2016 • Construction of a new tourist resort at location of former military complex in Žabljak in the area of 13.951 m² • Located in 1456 m above the sea level, in the most attractive area of national park “Durmitor” ENERGY PROJECTS

 Submarine cable • Construction of submarine cable with energy of 1.000 MW capacity between Italy and Montenegro • Investment worth more than 800 mill € (415 km long, 390km undersea and 25km of underground cable) • Project realized by TO and TERNA, Italy • Project will position Montenegro as regional energy hub, giving the investment opportunity for all region.

 II Block TPP Pjevlja

• Construction of the II Block TPP Pljevlja, installed power capacity of 250MW; total investment costs 338,5 mill € • Negotiation with potential investors in progress ENERGY PROJECTS

 Hydro Power Plant Morača • Technical Design encompases construction of 4 hydro-power plants with total installed power of some 238.4 MW and an average annual production of 721 GWh. • All technical documentation is available for investors insight. `  Hydro Power Plant Komarnica • Beside construction of HPP Morača, construction of HPP Komarnica is planned, the annual production is about 232 GWh and total installed power of 178 MW. ENERGY PROJECTS Renewable energy

Small hydropower streams Biomass potential

Planned Contracted Remained Planned Contracted Remained

132 MW 73 MW 59 MW 39,0 MW none 39,0 MW

Solar potential Wind potential

Planned Contracted Remained Planned Contracted Remained

31,5 MW none 31,5 MW 189 MW 118 MW 71 MW

 Projects under construction: • Wind farms on the site Krnovo and Mozura, total installed capacity of 120 MW • Construction of 41 small hydro power plants is given throughout 21 concession contracts; total installed capacity 72 MW ENERGY PROJECTS

 Maoče project • Concession for the exploitation of coal from the basin of Maoče and the construction of a thermal power plant of the estimated capacity of 500 MW (2k250MW), 45 years concession, with a possibility of extension up to 22,5 years • Concession fees for the exploitation of coal will be calculated as a percentage of revenues from the sales of electricity

 TAP - IAP • Construction of gas pipeline from Albania to Croatia via Montenegro and B&H • Total lenght 511 km (94 km in Montenegro) • The project will enable gasification of MNE TRANSPORT PROJECTS

 Construction of Highway Bar – Boljare • The highway Bar – Boljare is included in SEETO comprehensive regional transport network for the Western Balkan, as SEETO route 4 and it will connect Montenegro with Europe, begining from the Adriatic coast via the Capital City Podgorica, to the border with Serbia • The first Section, Smokovac-Uvac-Mateševo is currently under construction; estimated costs of this section - 809 mill € • The Project includes construction of additional sections: Mateševo–Andrijevica, Bypass around Podgorica ` (Smokovac–Tološi–), Djurmani-Farmaci and section Andrijevica-Boljare.

 Railway Line Belgrade (Vrbnica) – Bar , Reconstruction and modernization of Railway line • Modernization and reconstruction of the railway line in compliance with European and main international railway lines and achievement of interoperability of the railway lines along the Corridor X • Total lenght is 454,8 km of which 167,1km in Montenegro and 287,4km in Serbia • The value of the project is estimated in the amount of cca 250 mill € TRANSPORT PROJECTS

 Development of Airport Podgorica

• The project includes the construction of a new terminal building in capacity of 12,500 m², expansion and reconstruction of manoeuvring areas and apron, new fuel depot and parking with ground support facilities (including shelter) `

• Estimated value of this project - 95 mill € EU SUPPORT TO INFRASTRUCTURE DEVELOPMENT

 Berlin process - initiative of EU and Western Balkans Countries in 2015 focused on the need for infrastructure and economy development in the Balkan Region.  Co-financing of infrastructural investments projects within the Western Balkans Investment Framework (WBIF) implements via creation of Single Project Pipeline (SPP) at national level.  WBIF - joint fund (allocated 1 billion € for the region in period of 2014-2021) of European Commission, International Financial Institutions and bilateral donors for allocation of financial suport for infrastructural project Energy

Transport  Funds can be allocated for projects from 4 sectors: Environment

Social (Health, Justice and Education)

 The involvement of an International Financial Institutions such as EIB, EBRD, KfW, CEB, WB is a requirement. EU SUPPORT TO INFRASTRUCTURE DEVELOPMENT

 National Investment Commission (NIC) established on 19 February 2015

 Technical apparatus of National Investment Commission - Secretariat for Development Projects

 Single Project Pipeline (SPP) - adopted on 2 December 2015

 SPP • 64 projects: 10 projects in energy sector, 9 projects in transport, 30 in environment and 15 in social sector INVESTMENT INCENTIVES

BUSINESS ZONE

• A single entity within municipality that provides new investors tax and administrative incentives on state and local level, in addition to common space and infrastructure

 DECREE ON DIRECT INVESMENT INCENTIVES

• Further enhance business environment in less developed municipalities in Montenegro • Stimulation of economic growth through increased inflow of direct investments and job creation BUSINESS ZONE

 Incentives on state level • Exemption from payment of social insurance contribution on wages of employees; • Use of financial subsidies provided by the state on the basis on Decree on Direct Investments Incentives; • Possibility to release income and corporate tax if the amount of tax for the first 8 years not exceeds 200.000€; • Business incubator/technological park/IDF loan for SMEs. BUSINESS ZONE

Incentives on local level

• Reducing costs of land lease; • Reducing utility rates; • Reducing the fee for construction equipment; • Reducing of surtax on income; • Reducing the tax rate on real estate; • One stop shop DECREE ON DIRECT INVESMENTS INCENTIVES

Investors who realize their investment projects in Montenegro can receive financial incentives awarded by the Government

Manufacturing and Services - Introduction or expansion of business in various sectors Only legal entities of Both Montenegrin with a registered manufacturing and foreign legal office in Areas and services. entities can apply Montenegro can be supported for investment recipients of incentives. investment incentives Hospitality and Hotel Industry - Construction or expansion of hospitality and hotel facilities. DECREE ON DIRECT INVESMENTS INCENTIVES

In accordance with the Decree on direct investment incentives, (Official Gazette of Montenegro, no. 80/2015), criteria for applying differs depending on region in which investor is planning to invest.

CRITERIA FOR APPLYING

Podgorica and North and Central South region region (ex.Podgorica)

Minimum investment 500,000€ 250,000€ value New jobs 20 new jobs 10 new jobs (opened within 3 years) DECREE ON DIRECT INVESMENTS INCENTIVES

 Amount of direct investments incentives awarded is determined in accordance with the following criteria:

• References of the business entity • Extent of participation of other business entities from Montenegro during and after the completion of the investment project • Value of the investment project • Investment project impacts related to research and development • Investment project impacts on human resources • Investment project impacts on the environment • Volume of international turnover • Economic effects of the investment project • Investment project impacts on the regional development • Letter of intent from the local self-government DECREE ON DIRECT INVESMENTS INCENTIVES

For capital investments Newly employed person greater than 10 mill€ shall be a person that provide job creation employed for an indefinite for at least 50 new period of time on the jobs employees, incentives on which investment Amount of funds for can be awarded in the project is realized, which fostering investments amount of up to 17% of increases the number of that may be awarded are the total value of the the employees with the in range from 3.000 to investment project. beneficiary of funds in 10.000 € per a new Montenegro employee

Decree also provides for reimbursement for Awarded funds infrastructure shall be disbursed Instalments incurred for purposes in three equal must be of the Investment instalments backed up project with bank implementation. guarantee DECREE ON DIRECT INVESMENTS INCENTIVES

• Total amount of awarded funds for fostering investments cannot exceed certain percent of the investment projects value depending on the size of the business entity:

50% 60% 70%

Big Medium Small • A small business entity is a company , which has less than 50 employees and annual turnover or total annual balance sheet not exceeding 10 mill €

• A medium business entity is a company, which has from 50 to 250 employees and annual turnover not exceeding 50 mill € or total annual balance sheet not exceeding 43 mill € • A large business entity is a company, which has more than 250 employees and total annual balance sheet exceeding 43 mill € DECREE ON DIRECT INVESMENTS INCENTIVES

Second Public notice for participation in the procedure of awarding financial incentives for direct investment closed on 16th May

Next Public notice for participation in the procedure of awarding financial incentives for direct investment is expected to be announced in September 2016.

Secrtariat for Development Projects implements incentives program and provides operative suport during process of applying

Decree on Direct Incentives, Public announcement, Application Form and supporting documentation can be downloaded on web site of Secretariat for Development Projects: http://www.srp.gov.me Thank you for your attention

Secretariat for Development Projects Moskovska 2b, Podgorica tel/fax: +382 20 220 030 www.srp.gov.me