View Full Version : Will Montenegro Be the "Hong Kong of Europe"?

Thursday, March 3rd, 2005, 09:15 PM
Motivated by jurisdictional competition, Montenegro is seeking to become a free-market haven. Not surprisingly, the European Union is hindering economic liberalization – as is explained by the nation's Deputy Finance Minister in the Wall Street Journal:

Montenegro adopted the euro as the country's legal tender and thereby minimized the inflation taxation of its citizens. Without that step, the central bank in Montenegro, dealing with a transitional economy with weak institutions, would have been under constant pressure to print money. The adoption of the new tax law will introduce one of the lowest corporate tax rates in Europe: a mere 9%.

Capital exchange restrictions have been eliminated and the repatriation of profits made by foreign investors in Montenegro is free. Interest rates are market determined and more than 99% of the prices are freely set. Treating foreign investors just like domestic ones, enjoying the same rights and legal protections, is intrinsic to Montenegro's privatisation, investment and business regulations. In order to encourage new business development, the required starting capital for a limited liability company has been reduced to EU1. The aluminium industry, which accounts for 60% of total exports, is in the process of being privatised. The tender for Telekom Crna Gore, the national fixed-line operator, is also already underway.

As anywhere else in the world, the most vigorous objections to the implementation of economic freedom in Montenegro come from rent-seeking groups, monopolists, and people that benefit from state redistribution. But Montenegro also has to overcome a barrier that is peculiar to its political situation. As one of the basic preconditions for signing the Association and Stabilization Agreement with the EU, Brussels insisted on the "harmonization" of economic systems between Serbia and Montenegro.

Given the fact that Montenegro wants to develop an open and service-oriented economy while Serbia wants to protect its agriculture and inherited heavy industries, the harmonization of these systems is more than just problematic.

Source: Freebooter.com (http://freebooter.com)