The prolonged resolution of economic and legal cases poses the greatest challenge to the development and reinforcement of rule of law principles, which adversely impacts the investment climate.

This assertion is outlined in the recently released White Book of the Council of Foreign Investors in Montenegro (SSICG). The “White Book – Investment Climate in Montenegro 2024” is an annual report wherein the Council members evaluate the ease of doing business and the overall investment environment in the country.

For over a decade, the Council of Foreign Investors has published this white book, summarizing perceptions of the investment landscape through a standardized questionnaire assessing the Ease of Business. The findings reveal trends within the business climate while pinpointing key legislative, procedural, infrastructural, and other critical aspects of the business ecosystem. The questionnaires completed by Council members capture their evaluations based on personal experiences with the investment environment. This year’s report includes an additional indicator assessing progress in the transition to a greener economy.

The Ease of Business index for this year noted a slight growth of 6.5 after two years of stagnation. Sectoral indices display mixed results: while the manufacturing/energy and transport/logistics sectors have shown improvement, the tourism and retail sectors have seen declines. Telecommunications maintained the highest score of 7.2, while the manufacturing/energy and transport/logistics sectors marked the most significant growth compared to the previous year.

Concerning the rule of law, the rating for this index remained static at 5.

The lowest score of 3.3 in this area highlights the lengthy duration of economic and legal cases, which evidently stands as the biggest obstacle to nurturing and fortifying rule of law principles.

“The execution of proceedings, rated at 4.7, along with the inconsistent implementation of laws and regulations, points to a significant mistrust among respondents, based on their immediate experiences. The timeframes and transparency involved in obtaining licenses and permits received a marginally higher evaluation of 4.8. The non-discriminatory nature of court processes was rated at 5.2, while the procedures and administration surrounding temporary residency and work permits garnered a score of 5.9,” stated the White Book.

Significant hurdles in workforce acquisition

The score for human capital has decreased to 4.4, indicating pressing challenges in sourcing and retaining qualified talent.

“Respondents noted an insufficient link between the education system and the labor market, coupled with a lack of investment in the educational sector. Notably, the individual score for talent and human capital for the year 2024 was graded at 5.5,” the White Book elaborates.

Key concerns include a shortage of skilled labor, the emigration of talent to places offering better opportunities, and discrepancies between needed skills and available qualifications. These issues necessitate urgent attention from policymakers and enhanced collaboration between educational institutions and the industry.

The tax system shows minor improvements

The tax system in Montenegro has shown slight advancement in 2024, with a score of 5.8, reflecting a 0.2-point increase from the previous year.

“However, persistent administrative challenges and the lack of transparency in tax rate modifications remain significant barriers for businesses. Respondents specifically highlighted ineffective enforcement of legal measures and problematic conduct by tax inspectors, complicating business operations further,” said the White Book.

Economic and infrastructural development are cited as critical drivers influencing Montenegro’s long-term progression.

In 2024, a notable increase of 0.9 points was recorded in assessing developmental compliance with international standards, deemed a promising sign.

Investors stress the importance of ongoing reforms in travel and air connectivity, along with greater engagement of the business community in shaping strategic economic development decisions.

The green transition has been acknowledged as a strategic priority across all Montenegrin policies.

“Nevertheless, the effects of measures for promoting a green economy are not yet apparent, warranting further efforts to enhance the capacities of all stakeholders involved in this process,” the White Book articulates.

In recognition of the significance of this issue, this year’s edition of the White Book introduces a new index: the green transition index.

This index encompasses several essential factors: the regulatory framework supporting the green transition, the availability of subsidies for companies engaged in green initiatives, adherence to international standards and practices, and the knowledge level in this area.

In 2024, the value of the compliance index with international standards stands at 4.2.

The research also identified primary barriers hindering the green transition. Among them are the lack of incentives for implementing green initiatives, a low awareness level among authorities and economic agents regarding this process, and an inadequate regulatory framework coupled with the slow adoption of international standards and practices.

“Despite these challenges, the encouraging positive growth trend in green transition indices indicates a long path ahead towards sustainable development in alignment with European and global standards,” investors assessed.