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 -------------- ¶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 -------------- ¶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 -------------- -------------- ¶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 PODGORICA 00000126 002 OF 003 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 -------------- ¶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 -------------- -------------- ¶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 -------------- ¶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 PODGORICA 00000126 003 OF 003 remaining privatizations set to be announced. MOORE