MONTENEGRO INVESTMENT OPPORTUNITIES MONTENEGRO INVESTMENT OPPORTUNITIES GENERAL INFORMATION

MONTENEGRO INVESTMENT OPPORTUNITIES

MONTENEGRO INVESTMENT OPPORTUNITIES GENERAL INFORMATION Position South East Europe Area 13. 812 km 2 (13. 452 km 2 of land / 360 km 2 of sea) Administrative capital / Historical capital Podgorica / Cetinje Population 629. 603 Climate Continental, Mediterranean and mountain Territorial division 21 municipalities Political system Parliamentary democracy Official language Montenegrin Official currency Euro ( € )

MONTENEGRO INVESTMENT OPPORTUNITIES RESOURCES Agricultural land 5. 165 km 2 Total arable land 1. 899 km 2 Forests 1 ha per capita Natural lakes 40 Accumulation lakes 4 Great river potential Tara, Moraca, Piva, Cehotina, Bojana, Zeta… Minerals Bauxite, coal, minerals Road network 7. 314 km Railway network 250 km International airports Podgorica / Tivat Ports Bar, Kotor, Risan, Zelenika Power capacity Hydropower plants of Perucica and Piva and Thermoplant of Pljevlja

MONTENEGRO INVESTMENT OPPORTUNITIES MACROECONOMIC DATA 2009 2010 2011 GDP (million €) 2981. 0 3023. 0 3192. 0 GDP per capita 4, 744 4, 801 5, 070 Nominal GDP growth (in %) -3. 39 1. 41 5. 60 -5. 7 1. 1 2. 5 1. 5 0. 5 3. 0 Current public revenue 45. 39 % of GDP 43. 33 % of GDP 41. 69 % of GDP Public expenditure 51. 13 % of GDP 46. 37 % of GDP 45. 00 % of GDP Capital expenditure 8. 43 % of GDP 5. 41 % of GDP 5. 07 % of GDP Current public expenditure 42. 70 % of GDP 40. 96 % of GDP 39. 93 % of GDP Deficit / surplus of public spending -5. 65 % of GDP -3. 03 % of GDP -3. 31 % of GDP Increase / decrease in deposits 1. 99 % of GDP -2. 59 % of GDP 1. 75 % of GDP The level of public debt 38. 2 % of GDP 42. 3 % of GDP 45. 22 % of GDP Real GDP growth (in %) Inflation (in %)

MONTENEGRO INVESTMENT OPPORTUNITIES About Montenegro 1. Politically stabile 2. EU candidate country 3. Close to NATO integration 4. No open issues with neighbors 5. Member of WTO 6. Free Trade agreements with EU, CEFTA, Russia, Ukraine, …

MONTENEGRO INVESTMENT OPPORTUNITIES Foreign Investment Law NATIONAL TREATMENT Foreign investor can, at the territory of the Montenegro, establish a company and invest in a company, under procedures and conditions under which local nationals can establish companies, or invest assets in companies. There is no limit in terms of invested capital. Foreign investors are allowed to invest in any branch of industry and freely transfer of financial and other resources, including profits and dividends.

MONTENEGRO INVESTMENT OPPORTUNITIES Advantages of the establishment of production capacities in Montenegro There are benefits on the state and local level Existing tax relief on the state level: Exemption from the income tax payment • A newly-established legal entity in economically underdeveloped municipalities which performs production activity is exempted from paying income tax for the first eight years following the beginning of business operations, on the income generated by performing the business activity in the underdeveloped municipality. • A tax payer who makes a profit in a newly established business unit which performs production activity in underdeveloped municipalities is reduced the income tax for eight years proportionate to the share of the profit thus generated in the total profit of the tax payer.

MONTENEGRO INVESTMENT OPPORTUNITIES Taxation TAX RATE VAT Standard rate – 17 % Lower rate – 7 % Corporate Profit Tax Flat rate – 9 % Personal Income Tax Flat rate – 9 % Property Tax Proportional tax ranging between 0. 08 % - 0. 8 % of the immovable property’s market value

MONTENEGRO INVESTMENT OPPORTUNITIES Removing business barriers Government of Montenegro is working on removing business barriers and improving the business environment. Until now further steps have been implemented: • establishment of the one stop shop model of business registration • the set of laws is modified in order to simplify procedures for issuing construction permits • the regulation which main purpose is to increase the efficiency of cadastral authorities • expanding of credit register • simplification of employment of foreigners • introduction of RIA (Regulatory Impact Assessment) in the Montenegrin regulatory system

MONTENEGRO INVESTMENT OPPORTUNITIES STARTING BUSINESS You can set up limited liability company in Montenegro within four working days, with founding capital of one Euro, and by submitting three documents: Founding agreement, Bylaw and Form available at the web site of State register. Limited Liability Company 1. 2. 3. 4. 5. Minimum capital requirement of € 1; Founding act; Contract of decision of company’s foundation; Completed registration form; Registration fee of € 10

MONTENEGRO INVESTMENT OPPORTUNITIES FDI Montenegro offers a favorable market for investment F D I inflow in (mil €) 2006 2007 2008 2009 2010 644. 3 1007. 7 832. 1 1. 068. 4 552. 12 2011 454. 2 The structure of the total FDI inflow in the period January-November 2011 Intercompany debt 25. 5% Other 4. 3% Real estate 36. 4% Companies and banks 33. 8%

MONTENEGRO INVESTMENT OPPORTUNITIES International brands in Montenegro Energy Tourism Banks Telecommunication

MONTENEGRO INVESTMENT OPPORTUNITIES Investors from 107 countries

MONTENEGRO INVESTMENT OPPORTUNITIES FDI by origine No. State FDI inflow in € % Of total FDI 1 Italy 486. 804. 302 11. 8 2 Russia 478. 002. 577 11. 6 3 Hungary 355. 691. 493 8. 6 4 Great Britain 322. 229. 047 7. 8 5 Cyprus 309. 760. 754 7. 5 6 Switzerland 305. 170. 662 7. 4 7 Austria 298. 424. 903 7. 2 8 Serbia 159. 497. 818 3. 9 9 Germany 145. 354. 720 3. 5 10 Slovenia 683. 267 3. 5 Other 1. 118. 149. 925 27. 2 In total 4. 122. 769. 466 100

MONTENEGRO INVESTMENT OPPORTUNITIES EXISTING LARGE INVESTMENTS Elektroprivreda Crne Gore is a company carrying out activities in the area of electricity generation, transmission, distribution and supply. • 43. 7% of the shares of the company is owned by `A 2 A` from Italy, while 55% is state-owned • `A 2 A` has invested cca 400 million € • The value of the project is cca 750 million € • The project envisages the construction of new electric power system interconnection between Montenegro and Italy and includes: construction of new electric power interconnection – submarine cable with capacity 1. 000 MW

MONTENEGRO INVESTMENT OPPORTUNITIES EXISTING LARGE INVESTMENTS Peter Munk, chairman of Toronto-based mining giant Barrick Gold Corp. bought an old ship repair yard ``Arsenal`` on Montenegro's Adriatic coast, and turned it into a luxury resort. Marina services in 2010 include on-site customs and immigration, duty and taxfree fuel, single and 3 -phase electricity, wireless internet, 24 -hour security, laundry facilities and services, refuse and grey and black water disposal, full shopping including provisioning, deli and supermarkets and a Crew Club with tennis and squash courts, a fitness centre, bowling alley and internet cafe. Long-term berths from 12 to 100 meters are now available for residential property owners. Short-term, seasonal and annual berths are available for nonresidents.

MONTENEGRO INVESTMENT OPPORTUNITIES EXISTING LARGE INVESTMENTS Lustica Development AD was founded in 2008. The company is a joint venture between Orascom Development Ltd. (90%) and the government of Montenegro (10%). Development plans include: • 8 hotels (2200 keys) • 1600 apartments • 750 villas • Downtown area with all the necessary facilities (shopping, school, medical services) • 2 marinas, water sports • Conference centre • Thalasso Centre • 18 -hole golf course

MONTENEGRO INVESTMENT OPPORTUNITIES EXISTING LARGE INVESTMENTS The site incorporates two kilometres of coastline including the pink sandy beaches of Sveti Stefan, Miločer Beach and the famous Queen’s Beach. The hotel is now a 5 -star franchise hotel of the international group of Aman Resorts, and operating under a 30 year lease

MONTENEGRO INVESTMENT OPPORTUNITIES 1. Investment in industry 2. Investment in energy 3. Investment in tourism

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY STEEL WORKS NIKSIC • ZN is an electric arc furnacebased steel plant designed to make long products. • the plant differentiates itself from most regional steel mills by its significant downstream processing capabilities, which are particularly suited to the production of quality steels. • ZN’s plant also has all the machinery needed to produce rebar, and has successfully done so for a number of years.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY STEEL WORKS NIKSIC PRODUCTION RANGE • carbon steels (re bars) • high grade carbon steels • high grade low alloy steels • special carbon steels • special low alloy steels • special high alloy steels Based on crude steel produced in 2008, ZN constitutes cca. 0. 059% of the European steel market and 0. 015% of the world steel market.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY STEEL WORKS NIKSIC MELTING LINES CASTING LINES • INGOT CASTING • CONTINOUS CASTING MACHINE (CONCAST 1981) ROLLING LINES • BLOOMING ROOLING MILL(1978) • COMBINED BAR & WIRE ROD ROLLING MILL (SKET 1981) • OPEN DIE FORGING PLANT (DEMAG & THYSSENWAGNER 1992) • COLD DRAWING MILL (1978) CAPACITIES • EAF (LECTROMELT 1977) • EAF (CVS 2010) • LF (ASEA SKF 1979) • VACUUM DEGASING

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY STEEL WORKS NIKSIC • To replace old, out of date non productive technological facilities in the Melt Shop which produce high cost crude steel with new, high productive facilities which will produce and cast low cost crude steels. • To extend size and quality range of products of The combined Bar & Wire Rolling mill by updating the existing facilities and installing new technological lines. INVESTMENT The aim of modernization is:

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY STEEL WORKS NIKSIC The starting price is 15 million € Public bidding Procedure will be done on 30 th of the April 2012 INVESTMENT The new Advertisement on the sale of entire property of Zeljezara Niksic AD Niksic-in bankruptcy by means of public bidding is announced od 27 th of the March and it will last until 27 th of April

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY BUSINESS ZONES Business zones are a form of entrepreneurial infrastructure which represents a developed area in construction terms, fully equipped with utility infrastructure, intended for a coordinated and planned use by a large number of companies and entrepreneurs, where the coordinated and planned approach enables a joint use of space, utility, administrative, financial, technical and other services, thus achieving lower operating costs.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY BUSINESS ZONES Benefits for zone beneficiaries: • Faster and cheaper access to the land intended for economic activity, • Possibility of further economic and spatial development of the company, • Cheaper business operations, • Availability of other staff employed in the business zone, • Availability of different business services, • Availability of the support of the environment and other support instruments, • Possibility of faster investment, use of common infrastructure, • Developed infrastructure and better work conditions, • Use of synergy effects of integrating companies in the zone, • Increased opportunities for the establishment of new business contacts, • Cheaper or free of charge promotion of companies within the promotion of the business zone.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY BUSINESS ZONES

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN INDUSTRY BUSINESS ZONES Benefits for zone beneficiaries: • If developed in less developed Municipality there is tax exemption on corporate tax for first 8 years • Free from paying social benefits on salaries for employees • Low land infrastructure usage fee • Exemption from some local taxes

MONTENEGRO INVESTMENT OPPORTUNITIES SOLID WASTE MANAGEMENT Planning work: • Regional Landfill Construction in Niksic Municipality, for the Municipalities of Niksic, Savnik and Pluzine • Regional Landfill Construction for the Municipalities of Bijelo Polje, Kolašin and Mojkovac • Construction of the regional centre for waste management in Berane, for municipalities of Berane, Andrijevica, Plav and Rožaje • Construction of Regional centre for waste menagament in Kotor Municipality, for the Municipalities of Kotor, Tivat and Budva (Herceg Novi) • Construction of a Regional Landfill in the Municipality of Bar, for the Municipalities of Bar and Ulcinj

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN ENERGY MAOČE PROJECT The investors are expected to finance, open, exploit and perform recultivation of the coal mine ''Maoče“, and to finance, build and operate the Thermal Power Plant ''Maoče'', as a single business entity

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN ENERGY MAOČE PROJECT • The Government of Montenegro will award a 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 (2 k 250 MW), based on the current reserves of coal and thermal power plant life cycle; • The term of the concession contract is 45 years, with a possibility of extension in accordance with the law; • Concession fees for the exploitation of coal will be calculated as a percentage of revenues from the sales of electricity; • The proposed model of business operations is DBOMR (Design Build Operate Maintain Recultivate). www. maoce. info

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN ENERGY HPP KOMARNICA Possibilities for investment in two power generators of 168 MW, with annual production of 232 GWh ( 231, 8 GWh). Total investment is around 182, 8 mili l on € in 6 years.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN ENERGY SMALL HYDRO-POWER PLANTS Over the past several years there have been more intensive activities on exploring the potential for the development of small hydro power plants (up to 15 MW). Under concluded concession agreements on the basis of two tenders, it is envisaged to construct 35 small hydro power plants with total power of around 100 MW and total planned annual generation of around 300 GWh. Concessions were awarded for 25 mini hydro power plants and there also some watercourses that are subject to concessions and they have not been awarded for them yet.

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN ENERGY INCENTIVE PRICES Incentive prices for electricity produced in plants using renewable energy sources Tariff items for determining incentive prices for electricity produced in small hydropower plants

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN TOURISM THE INSTITUTE SIMO MILOSEVIC - IGALO The investment provides an opportunity to enter rapidly growing medical and hospitality market with a significant upside potential and to join a successful local team of medical professionals with a platform for future growth in specific service sector Total nominal value of the company is 59. 24 million € The state of Montenegro ownership stake for sale to investors is 56, 48% or 215, 954 shares Total site size is around 24 ha and includes: • Phase I and Phase II • Villa Galeb • Children department • Promenade location

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN TOURISM ADA BOJANA • 494 ha • 2750 meter long sandy beach • airports (85 km Podgorica / 102 km Tivat) • 90 -years lease agreement for Ada Bojana • www. ada-bojana. info VELIKA PLAZA • 13 km long and 60 -100 m wide • 1, 357 ha, of which 903 ha are owned by the state of Montenegro • 90 -years lease agreement for Velika Plaza • www. velikaplaza. info

Velika plaža and Ada Bojana • Velika plaza

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN TOURISM VALDANOS • 346 ha • 342 m long and 11 m wide sandy beach • In the locality, there around 18. 000 olive trees planted, and it represents the largest preserved olive grove in the Mediterranean MAMULA ISLAND • the fortress Mamula was built on a small rocky island Lastavica, circular in shape, some 200 m in diameter • 31, 848 m 2 • 3, 5 km away from Herceg Novi

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN TOURISM MILITARY COMPLEX IN ZABLJAK • “Mediteran” is situated in Žabljak, on the altitude of 1, 456 m above the sea • 13, 951 m 2 • 26 buildings with the overall gross surface of 1, 040 m 2 • the overall capacity of the resort is 66 beds

MONTENEGRO INVESTMENT OPPORTUNITIES INVESTMENT IN TOURISM BJELASICA AND KOMOVI SKI RESORT • Mountain centre Zarski, • Mountain centre Torine, • Mountain centre Kolasin 1450, • Mountain centre Kolasin 1600, • Mountain centre Jelovica including a golf settlement, • Mountain centre Komovi, • Eco adventure park Komovi, • Cmiljace village center. www. bjelasica komovi. com

1 2 Identified projects of mountain resorts 1 Mountain centre Zarski 2 Mountain centre Torine 3 Mountain centre Kolasin 1450 4 Mountain centre Jelovica including a golf settlement 3 4 5 5 41

MONTENEGRO INVESTMENT OPPORTUNITIES

MONTENEGRO INVESTMENT OPPORTUNITIES

MONTENEGRO INVESTMENT OPPORTUNITIES

MONTENEGRO INVESTMENT OPPORTUNITIES THANK YOU WELCOME TO MONTENEGRO