MONTENEGRO EAGER FOR U.S. BUSINESS

UNCLAS SECTION 01 OF 03 PODGORICA 000126

SIPDIS

SENSITIVE
SIPDIS

COMMERCE FOR DAS DYCK

E.O. 12958: N/A
TAGS: PREL ECON ETRD MW
SUBJECT: MONTENEGRO EAGER FOR U.S. BUSINESS


SENSITIVE BUT UNCLASSIFIED


1. (U) Summary: PM Djukanovic and other senior GOM officials
assured visiting Commerce DAS Dyck April 4 of their eagerness to
attract U.S. trade and investment. They also described many
billions of dollars worth of infrastructure and other investment
opportunities coming available in the near future that could be
of interest to U.S. companies. Economy Minister Gvozdenovic
reiterated his plans to lead a mission to the U.S. in May to
attract U.S. business. End Summary.



Tourism Opportunities Abound

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2. (U) Tourism accounted for 22 percent of Montenegro's GDP in
2007 and looks on track to continue or even expand in terms of
importance for the overall economy in coming years. Minister of
Tourism and Environmental Protection Predrag Nenezic highlighted
upcoming greenfield investment opportunities, including six
locations on the coast -- Ada Bojana, Velika Plaza (Long Beach),
Ostrvo cvijeca (the Island of Flowers),Valdanos and Kumbor
(ex-military sites). The invitations for expression of interest
have been announced and the official tenders will likely be
released by mid-summer. Some of these projects will be enormous
in scope, with Velika Plaza potentially involving an investment
of over 10 billion. Minister Nenezic highlighted the potential
for ecotourism, noting that nearly 20 percent of the country is
protected, including four national parks with a fifth to be
created next year.



Strong Focus on Infrastructure

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3. (SBU) GoM interlocutors, including the PM, also highlighted
infrastructure projects, especially critical for the continued
growth of the tourism sector. Among the first such priorities is
a water supply project for coastal municipalities, which is
already underway with World Bank and EBRD funding and should be
completed by September 2009.




4. (SBU) Reconstruction of the railway, currently very
under-utilized, and improvement of the energy sector -- last
year the energy deficit in Montenegro was roughly 40 percent --
also topped the list of upcoming projects. The GoM plans to
develop the country's hydro potential (currently Montenegro uses
just 17 percent of its potential),and improve the current
thermo-electric plant in Pljevlja, including the construction of
a second block in that plant. Energy sector development also
will factor highly in Minister Gvozdenovic's investment trip to
the U.S. next month, which is aimed at increasing interest among
American businesses for investments in tourism and energy
projects. (Note: The econ/commercial section has been working
closely with the Ministry to support this effort. End note.)



Progress, But Still No Consensus on Highway Project

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5. (SBU) The PM has made road improvements a priority. He is
focused on two large highway projects -- the south to north
Bar-Boljarai highway, which will ultimately provide a better
road link to Belgrade, and the east-west Montenegrin segment of
the Adriatic-Ionian Highway, which will connect Croatia and
Albania through Montenegro.




6. (SBU) DAS Dyck raised Bechtel's interest in participating in
road infrastructure projects with the PM and with Transport
Minister Lompar, emphasizing Bechtel's excellent track record
with similar projects in the region. Lompar, a cautious
decision-maker, told DAS Dyck that the GoM is looking for
partner (s) for the highway project under a public-private
partnership model. He noted that the GoM is in contact with
Bechtel, but conceded that the company is not interested in the
project under the PPP model. Then, in a considerable reversal

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since we last spoke with him, Lompar said that if by October the
PPP model looked unfeasible, the GoM would look at other
options, including financing the project itself.




7. (SBU) The PM said public expectations for this project are
quite high. He recognized how difficult the project would be,
but reiterated how serious he is about making progress. (Note:
Early cost estimates predict this will be the most expensive per
kilometer road project ever competed in Europe. End note.) He
was positive about dealings with Bechtel and expressed
understanding of the benefits of their proposed plan -- namely
the speed with which they could begin construction. He told us
GoM must choose a "highly reputable" partner by this summer; if
not, he implied the GOM might consider a fast-track approach
such as that proposed by Bechtel.



Remaining Privatizations in 2008

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8. (U) GoM interloctors told DAS Dyck that although Montenegro
has privatized about 80 percent of its communist-era state-owned
companies, a few of the largest remain. The Port of Bar,
Institute Simo Milosevic (a health center in Igalo),and the
national tobacco company should all be privatized in 2008. In
some cases, the GoM is hoping to find strategic partners to
avoid completely privatizing key companies, including Montenegro
Airlines, probably the Airports (Podgorica and Tivat),and
possibly the country's electricity company, EPCG.



Continuing and Strengthening an Important Partnership

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9. (SBU) The PM Prime stressed that he sees the U.S. as a
crucial strategic partner, encompassing much more than our
already positive political relationship. He told us that he
would like to see not only increased U.S. private sector
investment, but one truly large project, significant enough that
it could pave the way for more U.S. companies to begin doing
business in Montenegro.




10. (SBU) DPM Lazovic spoke positively of U.S. investment to
date, particularly regarding those projects with which he has
been personally involved. The GoM's strategic partnership with
Microsoft has been very successful on both sides, he said.
Beyond E-governance (a project already well underway),there
will soon be a Microsoft academy established within the
University of Montenegro. Microsoft and the GoM will also open
innovation centers around the country. (Note: Most Montenegrin
schools lack computers, which means that most students get only
limited IT exposure before joining the workforce. End note.)



Comment

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11. (SBU) All meetings were positive and highlighted the GoM's
strong desire for increased American investment. Djukanovic --
known as a decision maker who gets things done -- told DAS Dyck
that the country is realizing its potential and can shoot for
some large, expensive, and previously unimaginable projects.
Stressing the GoM's need for a "strategic partner" in the
economic arena in order to continue the country's development,
he enthusiastically lobbied for this strategic partner to be
American.




12. (SBU) Although individual ministries' agendas and competing
egos sometimes get in the way, all GoM officials are bullish on
economic prospects and seemed to be more on the same page about
priorities than previously. With the "new" activist PM --
perhaps the source of this newly united economic message -- now
at the helm, the next year or should be a busy economic period
for the GoM, with numerous large greenfield tenders and the

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remaining privatizations set to be announced.
MOORE