In the last three years, according to data from the Central Bank of Montenegro (CBCG), Serbia has been in first place in terms of foreign direct investment (FDI) inflows to Montenegro.
In the first nine months of 2024, 92 million euros were invested from that country. Last year, in 2023, Serbia was the leading investor here with 125 million, and in 2022 with 137 million investments. That year, in 2022, Serbian investments jumped sharply - by almost five times compared to 2020, when they amounted to around 27 million.
Until 2020, Russia was the leader in the inflow of FDI in Montenegro.
Experts for Center for Investigative Journalism of Montenegro (CIN-CG) they say that the increasing investment from Serbia is a consequence of traditional historical ties, but also the fact that there are more and more international investors in Serbia who invest in the region from that country.
Among some experts, there is a certain level of fear that the dominance of investments from Serbia could be a kind of strategy of official Belgrade and political aspirations to make Montenegro economically dependent on its larger neighbor. However, experts point out that the problem is not that so much money comes from Serbia, but that Montenegro does not have a planned economic development strategy, a diversified economy, that it has not started with structural reforms, reduced corruption and thereby attracted different investors.
"Economic relations between Serbia and Montenegro are historically strong. The dominance of Serbia as one of the main sources of FDI, more than half of which, 51,4 million, goes to the real estate sector, indicates the importance of this country for the Montenegrin economy," he told CIN-CG. Miloš Vuković, economic analyst.
However, Vuković claims, the trends justifiably raise questions about dependence and long-term sustainability.
"We can talk about a certain level of economic dependence of Montenegro on Serbia. Capital from Serbia dominates in real estate, where prices rise, making housing available to the local population difficult. Also, a large number of companies from Serbia market their products in Montenegro, there are also remittances and the dominance of tourists from that country, which indicate that the Montenegrin economy depends to a significant extent on the Serbian market", says Vuković and adds that all this creates the vulnerability of Montenegro. to economic and political changes in Serbia.
On the CBCG list of direct foreign investments for 2024, Serbia is followed by Russia (80 million), then Turkey (75,8 million), Germany (57 million), Switzerland (41 million). The United States of America (USA), United Arab Emirates (UAE), Cyprus, Great Britain and Croatia are also in the top ten.
A quarter of foreign investment in companies came from Serbia
The most money from Serbia this year was invested in real estate, 51,4 million, while investments in companies and banks amounted to 25,3 million.
By September of this year, around 100 million foreign investments were made in domestic companies, of which investments from Serbia were the largest and accounted for a quarter. And the investment of Russian investors in domestic companies is significant, with more than 19 million. So almost half of these investments come from Serbian and Russian capital. The investments of other countries in our companies are significantly smaller.
According to Monstat data, of the 851 branches of foreign companies operating in Montenegro, the majority are owned by Serbian citizens - 179, which is 21 percent of the total number. Last year, companies from Serbia achieved the highest turnover here in terms of countries, about 718 million euros. This is 28 percent of the total turnover of foreign branches on the Montenegrin market, which in 2023 amounted to about two and a half billion.
Those companies also employ a large number of workers. Serbian branches in Montenegro with the largest number of employees are "Idea", with 1.733 employees, "Aroma" (1.224) and M:tel - 483 employees.
According to the number of foreign branches in Montenegro, Serbia is followed by: Turkey with 83, Bosnia and Herzegovina (BiH) with 33, Slovenia and Great Britain with 32 branches each. After Serbia, companies from Switzerland - 297,4 million (11,6 percent), Slovenia - 261,3 million, UAR - 146,6 (5,7 percent) and Cyprus - 144,9 million (5,6 percent).
Serbia was dominant in the participation of foreign branches and traffic even before the political changes in 2020. According to Monstat data, in 2019, the largest number of foreign branches came from Serbia - 134 out of a total of 464 branches, which was almost 30 percent of the total number, and Serbian branches even then achieved the highest turnover of branches in foreign countries. However, it is also noticeable that the number of foreign branches in Montenegro increased significantly after 2020.
Serbia is third in order when it comes to the number of active foreign-owned business entities, with 2.140 business entities, which is 11,6 percent of the total number. The largest number of active business entities in foreign ownership, according to the country of origin, is from Turkey (27 percent) and Russia (around 23 percent).
"The fact that investments originating from Serbia are the most represented in Montenegro can be explained by the traditional ties between Montenegro and Serbia, and cultural similarities that determine investors from Serbia to invest in Montenegro," the economic analyst explains to CIN-CG Zarija Pejović.
The Montenegrin public talked about Serbia investing in state companies, such as Elektroprivreda Crne Gore (EPCG) or Luka Bar, but so far this has not happened. Serbia is not yet investing in key infrastructure projects, which could lead to a more significant impact on political conditions through economic participation.
"We can talk about political influence through investments in the case of investments in public infrastructure of strategic importance, such as energy potentials, but there are no such types of investments, that is, the sale of public property to investors from Serbia, according to my information, so far," explains Pejović.
Serbia is the first in outflows, but also in tourists and remittances
"At the same time, Serbia is the first in terms of outflows from Montenegro, which confirms that in this relationship, no economy is at a loss and/or at risk in connection with investments," the economist points out for CIN-CG Dear Kasalica.
Year after year, up to a third of the total inflows from Serbia remain in Montenegro, she explains.
Serbia is the largest foreign trade partner of Montenegro in terms of import and export, according to data from Monstat, according to which goods were imported from Serbia in the amount of 396 million euros, and 98,8 million were exported from January to July 2024.
However, exports from Montenegro are decreasing from year to year, which represents a decline in the competitiveness of Montenegro in this field as well, Fidelity Consulting warned earlier this year.
As Kasalica explains, the data confirm that in this relationship neither our nor the Serbian economy is at a loss and/or at risk in connection with investments.
"It documents a lot of good things about the Montenegrin economy: one should not ignore the persistent attractiveness and significant potential while businessmen cooperate, because the Montenegrin economy is import-dependent and export-oriented," says Kasalica.
Our tourism is quite dependent on the arrival of visitors from Serbia, but also on remittances from that country. During the past year, the most overnight stays were made by tourists from Russia (23,6 percent), followed immediately by Serbia (21,5 percent), then Bosnia and Herzegovina (8,5 percent). The number of visits by German tourists last year was slightly down compared to 2022 - 4,9 percent.
According to data from Fidelity Consulting, in 2021, the inflow in Montenegro based on remittances from natural persons amounted to 794 million dollars. The most money came from Serbia ($390 million or 54 percent of total remittances), followed by Germany ($153 million or 21 percent) and North Macedonia ($50 million or seven percent).
The CBCG told CIN-CG that they do not keep records of the inflow of remittances by country, but only the total amount.
According to data from the World Bank, Montenegro is one of the countries with the largest share of personal remittances from abroad in the gross domestic product (GDP) of 10,9 percent for 2023. Of the countries in the region, only Kosovo has a higher share of personal remittances in GDP, 17 percent. The share of remittances in Serbia's GDP is 6.
Necretins do not contribute to development
The structure of foreign direct investments (FDI) indicates a decline in investments in productive sectors. By far the largest foreign investments in Montenegro are the purchase of real estate by citizens of other countries. And the European Bank for Reconstruction and Development (EBRD) in 2021 in the Strategy for Montenegro (2021-2026) pointed out that although FDI in Montenegro per capita is large, most of it falls on real estate.
Even this year, until September, about half of the total FDI went to purchase real estate, while in 2023, of the 862,3 million invested, even more than half - 463,3 million - went to real estate. Last year, buyers from Serbia invested the most money in real estate - 78,3 million.
This is followed by investors from Russia with 55,9 million of this type of investment, from Turkey out of a total of 85,3 million, 51 million went for real estate. Of Germany's 72,8 million, more than two-thirds, over 51 million, went into real estate. Of the Ukrainian investments that began to grow after the invasion of that country, the largest part of the money, over 15 million, went into real estate.
"Investments that are present in Montenegro were, as a rule, realized in the real estate sector. Not everything went into apartments, new hotels were also built, which is positive for the development of tourism. But, again, these investments were realized where there is a 'natural rent', such as an attractive sea coast. As natural resources, such as land, are non-renewable, the question of their sustainability arises," says Pejović.
According to the net effect, the most investments are from the West
Kasalica points out that according to the net effect, i.e. the difference between outflows and inflows, the most investments are from Western and developed countries of the European Union (EU), Canada, Australia, and the USA.
The EBRD's strategy for Montenegro notes continued cooperation with the EU, including a number of instruments for accession assistance (IPA), and that the contribution of donors through mechanisms such as the Western Balkans Investment Framework (WBIF) remains of key importance.
Montenegro remains attractive, both for the EBRD and for the European Investment Bank (EIB) and the World Bank. The Abu Dhabi fund, as well as the ongoing OPEC fund, had an open door for our country, Kasalica reminds and emphasizes that these experiences should have taught the leaders of the state administration transparency and how to attract credible investors through "political, institutional and structural reforms in Montenegro ".
Without strategic changes, there is no attraction of healthy investments
CIN-CG interlocutors agree that Montenegro should diversify foreign investments and strengthen investment in the economy. Corruption and non-transparency of the government remain major obstacles. Without strategic changes, the country remains insufficiently attractive for Western capital, thereby missing an opportunity for long-term development and economic stability, Vuković states.
"Western companies are looking for stability, innovative sectors and a predictable business environment, but Montenegro mainly relies on tourism and real estate, which is not in line with their interests. The competitiveness of regional investors, such as those from Serbia, hinders the inflow of capital from the West, and the weak promotion of Montenegro as a destination further worsens the situation," explains Vuković.
He also warns of an inefficient legal system, which, along with corruption and bureaucratic obstacles, creates mistrust among investors:
"While the small size of the market and political instability further reduce the attractiveness of the country," explains Vuković.
In order to attract Western investments, Montenegro must reform the legal system, reduce administrative barriers and focus on the development of innovative sectors, such as IT and renewable energy sources, explains Vuković.
"The key to that lies in better market regulation, strengthening of legal certainty and strategic direction of investments towards sectors that contribute to long-term economic development," says Vuković.
In the Strategy for Montenegro (2021-2026), the EBRD emphasizes that Montenegro also lacks diversification of the economy, "which would move away from exclusively seasonal tourism that relies on 'sun, sand and sea'". It is also emphasized that the reform of inefficient state-owned enterprises, the principles of green economy, further work on the integration of the regional transport and energy network, and digitization with the aim of encouraging greater connectivity and creating new jobs are necessary. However, after the changes in 2020, none of the governments seriously tackled these challenges, nor did they take into account the suggestions of foreign strategic partners, such as the EU, the World Bank or the EBRD, when it comes to structural reforms in the economic sphere .
Montenegro lacks investments in the production sector, says economic analyst Zarija Pejović in an interview for CIN-CG.
"Such investments would be especially important in the north of Montenegro, where there are forest and mineral resources. Unfortunately, the state did not do enough to attract these investments," explains Pejović.
He also emphasizes that the policies that led to the deindustrialization of Montenegro, unfortunately, also result in the absence of qualified labor, which investments in the production sector could employ.
What is currently unsustainable is personal consumption as a generator of development, says Kasalica:
"Such a goal is short-term, and the national economy must be thought through developmentally for the next fifty years".
Problems and lack of transparency of the body
While a better presence of Western investors is desirable and represents an indisputable development goal, claims Kasalica, things must also be viewed through the prism of Montenegrin's negative experiences with foreign investments from developed countries. He cites examples of German investments in water treatment plants in Budva, or the affair in the Regional Waterworks regarding the investment of an Austrian company, and the unresolved affair of a number of Montenegrin institutions and foreign investors.
"Adhering to the ideal that a Western investor is better than any other investor is not a standard anywhere in the world, and it has been for decades," explains Kasalica.
"The Montenegrin politicians neither before nor after August 30 solve the basic issue of the sustainability of the Montenegrin economy, which is a self-conscious and responsible move away from non-transparency", says Kasalica.
That is why the Montenegrin economy pays a high price for a bad reputation, as well as the price of mistrust of its own population, she explains.
Ines Mrdović, from the Action for Social Justice, tells CIN-CG that the transparency of FDI has never been up to par.
It is enough to mention that we do not yet have a base of foreign investors in Montenegro", said Mrdović and added that FDI in the previous two decades did not contribute enough to the economic development of our country, which shows the poor standard and poverty in Montenegro.
Serbs interested in Montenegrin citizenship
Citizens of Serbia and Russia, which have the largest FDI in Montenegro, receive the most requests for citizenship.
According to the latest data from the MUP, citizens of Serbia were most interested in citizenship during the last two years. From January 2023 to October 31, 2024, they submitted 1.197 requests. Russian citizens follow with 928 requests. Then the most requests came from Bosnia and Herzegovina - 542, Albania - 160, Kosovo - 124. It is also interesting that 94 citizens of the United States of America requested a Montenegrin passport.
From Russia, there were the most requests and the most obtained citizenships through the Economic Citizenship Program. From 2019 to 2024, more than half of those who received citizenship were of Russian origin - 1.055 of them out of a total of 2.074, according to data from the Center for Civic Education (CGO).
Serbia is successful in attracting European investments
From 2007 to the beginning of 2024, Serbia attracted more than 46 billion euros of direct foreign investments, according to data from the National Bank of Serbia. During this year, until October, it managed to attract 3,2 billion.
Unlike Montenegro, in Serbia there are several first investors from the West, Germany is the leader, with 13,5 percent of the total inflow, followed by Italy with 11,7 percent of the total FDI, third place is shared by the USA and Russia with 10,9 each. 10,5 percent of the inflow. China, which has been Serbia's constant partner in recent years, through investments in public capital works, is in fourth place with a 8,5 percent share in FDI. France is behind China with an XNUMX percent share in FDI.
Among the foreign companies operating in Serbia are Bosch, Michelin, Siemens, ZF, Panasonic, NCR, Gazprom, Ziđin, Microsoft, Gorenje, Magna, Leoni. ", "Fiat-Chrysler", "Schneider Electric" and many others.
In the Strategy for Serbia (2023-2028), the EBRD assesses that strong FDI inflows in Serbia encourage greater exports and economic complexity, and that in Serbia, unlike Montenegro, GDP growth is based on exports, which have increased and thanks to consistently high inflows of FDI in the manufacturing sector.
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