The Foreign Trade Law adopted in 2004 decreases barriers for doing business and executing foreign trade transactions in accordance with WTO agreements. However, the law includes some restrictive measures, such as quotas, and discretionary government intervention. Customs and tax enforcement has helped reduce illegal imports and unlicensed business activities. The retail sector was restructured as sales chains were privatized and acquired by larger groups, leading to the emergence of new private retailers in the market. Retail grocery and trade is now dominated by private regional companies such as Idea, Voli and Lakovic; Germany’s Lidl is slated to enter the market by 2024. The trade sector in Montenegro is now 100 percent privately owned. Customers are increasingly switching from local markets to modern shopping centers, newly established domestic supermarkets, and retail chains where goods are often cheaper and of better quality. The retail sector also includes kiosks, small shops, and open-air markets.
Capital goods are normally sold directly to manufacturers and businesses. When selling capital goods or machinery to businesses, a good agent with regional and domestic knowledge is essential.
Using an Agent to Sell US Products and Services
The use of agents and distributors is an important mechanism for foreign firms to enter the Montenegrin market. Many firms find it is more efficient and cheaper to hire a good local agent or distributor than to conduct direct sales or marketing.
Liquidity is a significant problem in the Montenegrin econ
omy. With some exceptions, advance payments and confirmed letters of credit by foreign banks are recommended. The U.S. Embassy’s Economic Section can provide assistance, including local company profiles that encompass a thorough background check on potential clients and representatives. These profiles include up-to-date information on potential partners, such as bank and trade references, principals, key officers and managers, product lines, number of employees, financial data, sales volume, reputation and market outlook. International consulting firms present in Montenegro, such as Deloitte, KPMG, Ernst & Young, and PWC can be helpful in establishing the credibility of a potential local partner. The American Chamber of Commerce (AmCham) is also a reliable source of information. In addition, the Chamber of Economy, the Montenegro Business Alliance, and the Montenegrin Employers’ Federation can be helpful.
- AmCham Montenegro
- Chamber of Economy of Montenegro
- Montenegro Business Alliance
- Montenegrin Employers’ Federation
Establishing an Office
The court maintains an electronic database of registered business entities, and contracts on financial leasing and pledges. The process to register a business in Montenegro takes an average of 4-5 working days. The minimum financial requirement for a Limited Liability Company (LLC) is just EUR 1 (USD 1.1), and three documents are required: a founding decision, bylaws, and a copy of the passport (if an individual is founding a company) or a registration form for the specific type of company. Samples of all documents are available for download at the CRPS website. Montenegrin law permits the establishment of six types of companies: entrepreneur, limited liability company, joint stock company, general partnership, limited partnership, and part of a foreign company. All included in the business activities need to open a bank account. Once a bank account is established, the company reports to the tax authority in order to receive a PIB (taxation identification number) and VAT (Value Added Tax) number. For classification of companies by size, based on number of employees, the government’s definition is as follows: (i) small enterprises (from one to 49 employees), (ii) medium-sized enterprises (from 50 to 249) and (iii) large enterprises (more than 250 employees).
After fulfilling all these requirements, it is necessary to open a bank account. Once a bank account is established, the company reports to the tax authority in order to receive a PIB (taxation identification number) and VAT number (value added tax).
For classification of companies by size, based on number of employees, the government’s definition is as follows: (i) small enterprises (from one to 49 employees), (ii) medium-sized enterprises (from 50 to 249) and (iii) large enterprises (more than 250 employees).
For more details, visit the U.S. Department of State Investment Climate Statement website.
The business climate is hospitable for the franchising business model in Montenegro. A few examples of successful U.S. and international brands/franchises exist in Montenegro: Coca-Cola, Pepsi, Hard Rock, Century 21, Best Western, Aman Resorts, IberoStar, Hilton, Ramada, Starwood/Marriott, and Regent Hotels. Various reports assess Montenegro as a growing market in the field of European tourism and property investment. The number of foreigners living in Montenegro and the number of tourists visiting Montenegro has increased over time, providing another target market for franchisers. There is a strong market potential for franchises in the following sectors: food and beverages, catering, cosmetics, and apparel.
There is no specific law addressing franchising in Montenegro.
Direct marketing is not well developed in Montenegro. Mail order catalogs and the sale of mailing lists remain rare. Personal presentation marketing has been employed by firms such as Avon, Oriflame, Rainbow, and Kirby with varying degrees of success. Contact information for some Montenegrin companies can be found through the following organizations: Montenegrin Investments Agency, Montenegro Business Alliance, and Montenegrin Employer’s Federation.
Joint ventures are regulated by the Foreign Investment Law of Montenegro (adopted in 2000). Montenegrin companies are typically interested in joint-venture contracts with foreign firms in which the foreign company provides capital, equipment, and merchandise, and the domestic firm provides work and warehouse space, personnel, local experience, and channels of distribution. U.S. firms considering such ventures should carefully review the viability of potential domestic partners. Past problems have included excess labor costs, overdue debts, and structural inefficiencies.
The Express Delivery segment is developed in Montenegro. Well-known companies such as DHL, UPS, and FedEx are present in the market.
Due diligence - the legal audit of companies - is performed by a number of lawyers in Montenegro and is generally consistent with international standards. Information is gathered from public books: the register of fixed assets, the court register, the statistical register, as well as from the firm itself, chambers, and the business community. The price of the service depends on the volume of work necessary to provide the information, and, in general, is lower than in the United States.