Kieran Kelleher: How Montenegro Lost Hundreds of Millions Due to the Termination of the Economic Citizenship Program
Are you familiar with the latest recommendation by the EU Court allowing Malta to continue granting citizenship to wealthy investors? What implications could this have for Montenegro?
In principle, since this is global news, I am aware of the fact that the EU Attorney General recommended to the European Court of Justice his opinion that Malta, in the case against the EC, is acting within its rights, that is, that it’s a sovereign right of each state to determine who its citizens are. Also, I am aware that only several hundred of these cases with thorough due diligence are effective in the EU countries annually, compared to hundreds of thousands that enter the EU by other routes such as marriage, work, etc. Regarding Montenegro, I hope this might initiate the continuation of the program or some new version of it, because I am aware of how vibrant the real estate market was during its implementation.
Specifically, do you believe that considering Malta’s decision, Montenegro should reconsider relaunching its program?
Yes, most definitely – but not reconsider, insist! I think that with significant experience in public administration collected during the implementation of the Citizenship by Investment Program, now the new Government with the dynamic and internationally educated Prime Minister, can create a new program that can attract global talents, in the best possible way to support the Montenegrin economy and in a sovereign equity manner. We are certainly missing out on a key investment attraction without a program that promotes such investment in Montenegro.
When it comes to the economic development of a small country like Montenegro, given its size and population, what impact could such a program have on the country’s development? Specifically, regarding tourism and employment in the tourism sector, what benefits could arise from continuing the program in the future?
Throughout my professional career, I had a chance to live and work in a variety of countries including Australia, New Zealand, China, Sri Lanka, Indonesia, Singapore, the UK, Croatia and Montenegro. Montenegro has a unique value proposition, and I am confident that only an exclusive proposal, something like we now have in Boka Bay is the way forward for a small country like Montenegro. Still, sometimes I have a feeling that decision-makers are not always consistent in this. Often, they change rules in the middle of investment cycles which then makes investors confused. Our several decades of presence and experience in the region tell us that the CIP program that operated in Montenegro did not end before the agreed 2000 successful applications were processed, but did not commence quickly enough, due to slow bureaucracy to start the program. We know inefficiencies in government can be expensive. In this instance the country lost hundreds of millions of Euro income due to the slow implementation of the program at the outset.
Looking in from the outside, the Montenegrin CIP program was one of the most tightly controlled programs, as regards the due diligence of applicants, which we have ever seen. The end result was that the CIP program did not bring just financial benefits to the country, but the level of intellectual capital was equally impressive. Applicants were generally businesspeople, entrepreneurs, experts in IT and many have already contributed significantly to both investing and promoting Montenegro worldwide.
The failure to reach the targeted 2000 applicants was also because of significantly changing the goal posts for prospective new citizens mid-way through the rollout. This in turn seriously affected many real estate projects which would have come to the market by now – who planned the delivery of high-end hotel stock to the market, using the leaseback model as dictated by the program. It is a serious disappointment that Montenegro only achieved one project on the coast (Boka Place) that was underpinned by the program. Other projects in the pipeline and designed for the CIP product were not released before the program was terminated.
For the north of Montenegro, the repercussions from the shortfall in the originally allotted and planned number of successful applicants from 2000 as a target to just over 1000, are yet to be felt and understood as many projects, designed for CIP, were not able to realise the full benefits of the program, once the terms changed and the program terminated before the total allotment were reached. CIP product is very differently priced and designed compared to normal 2nd home product. Now the concern in the north is that the product coming to the market at a certain quality, size and price point will not be absorbed without CIP applicants and this will have implications for the market.
Regarding companies like Savills and Dreams Estate Montenegro, how beneficial was Montenegro’s previous citizenship-by-investment program for your company, and what impact did it have on your business?
Savills is the most prestigious real estate brand with our head office in London, employing over 40,000 experts across 700 offices worldwide with more than a century-long tradition – We are currently celebrating our 20th year in Montenegro, and we are a long-term provider of quality buyers of real estate in Montenegro and the region. The fantastic thing about the Citizenship by Investment Program was that it was compatible with us, i.e. it was bringing additional buyers from all over the world. The ones that were driven by the Montenegrin passport and not purely by investment. It enabled a thousand new families to purchase quality real estate in Montenegro and make a good investment. These individuals would never invest in Montenegro if it was only a pure real estate play. We recognized the very vibrant momentum during the Citizenship by Investment Program, compared to now, which is quieter, and the figures are lower. I can just imagine how much additional value, besides the EUR 500 million of direct FDI was injected into the economy because these are HNWI that stay in the best hotels, eat in the best restaurants, use a limo service etc, and represent the best possible guests for the country.
We are hopeful that the government will fully understand the benefits of reinstating a form of the CIP offer and if Malta can continue, I would ask the EU, why not Montenegro
Kieran Kelleher
Managing Director / Owner
Savills Montenegro
