VZCZCXRO6156
RR RUEHPOD
DE RUEWCSF #9078 0441429
ZNR UUUUU ZZH
BT
UNCLAS SVC

SIPDIS
QQQQ
ZUI RUEHPOD0033 0441450
MESSAGE REJECTED - CONTAINS UNRECOGNIZED ORIGINATOR
-- ERRORED MESSAGE FOLLOWS --
RAAUZYUW RUEHPOD0033 0441450-UUUU--RHMCSUU.
ZNR UUUUU ZZH
R 131450Z FEB 07
FM AMEMBASSY PODGORICA
TO RUEHC/SECSTATE WASHDC
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHPOD/AMEMBASSY PODGORICA
B T

UNCLAS SECTION 01 OF 04 PODGORICA 000033 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PASS TO OPIC, EXIM, TDA AND USAID 
USDOC FOR 4232/ITA/MAC/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EINDQTRD EINV KPAO PGOV MW
SUBJECT: MONTENEGRO: ECONOMIC DEVELOPMENTS: JANUARY 2007 
 
REF: A. A) 2006 BELGRADE 1001 
 
     ¶B. B) 2005 BELGRADE 2227 
 
PODGORICA 00000033  001.3 OF 004 
 
 
INDEX: 
 
MACROECONOMICS 
 
-- GOVERNMENT REVENUES RISE IN 2006, DRIVEN BY VAT 
 
-- MONTENEGRO JOINS IMF, WORLD BANK 
 
-- WTO TO MEET ON MONTENEGROS APPLICATION 
 
-- SLIGHT INCREASE IN INDUSTRIAL PRODUCTION IN 2006 
 
-- FOREIGN TRADE DEFICIT UP SHARPLY IN 2006 
 
 
 
BUSINESS AND TOURISM: 
 
-- NIKSIC STEELWORKS NOW OWNED BY MN SPECIALTY STEELS 
 
-- SVETI STEFAN RESORT ACQUIRED BY SINGAPORES AMAN 
 
-- U.S. FUND SELLS ALL TELECOM CG SHARES 
 
-- GLOBAL STEEL HOLDINGS LOOKING AT MONTENEGRO 
 
-- STEADY TOURISM GROWTH EXPECTED 
 
 
 
PUBLIC ECONOMY: 
 
-- RESTITUTION BURDEN EXAMINED 
 
-- UNEMPLOYMENT DOWN 
 
-- REAL WAGES ROSE 15 PERCENT IN 2006 
 
-- INFLATION IN 2006 WAS 2 PERCENT 
 
 
 
T-BILLS 
 
STOCKS 
 
 
 
 
 
MACROECONOMICS 
 
 
 
GOVERNMENT REVENUES RISE IN 2006, DRIVEN BY VAT 
 
--------------------------------------------- -- 
 
 
 
¶1. THE MINISTRY OF FINANCE ANNOUNCED THAT CENTRAL GOVERNMENT 
EXPENDITURES WERE EUROS 582.3 MILLION, YIELDING A SURPLUS OF 
EUROS 34.6 MILLION. A SURPLUS OF ONE MILLION EUROS WAS PLANNED. 
RECEIPTS WERE 15 PERCENT HIGHER THAN PROJECTED, DRIVEN BY VAT 
RECEIPTS WHICH WERE 36 PERCENT HIGHER THAN IN 2005, AND 21 
PERCENT HIGHER THAN PLANNED FOR 2006 (VAT ACCOUNTS FOR 33 OF ALL 
REVENUE). 
 
 
 
MONTENEGRO JOINS IMF, WORLD BANK 
 
-------------------------------- 
 
 
 
¶2. MONTENEGRO JOINED THE INTERNATIONAL MONETARY FUND (IMF) AND 
WORLD BANK ON JANUARY 18. 
 
 
 
WTO TO MEET ON MONTENEGRO'S APPLICATION 
 
--------------------------------------- 
 
B T 
#0033 
N 
-- END OF ERRORED MESSAGE -- 
 
PODGORICA 00000033  002.3 OF 004 
 
 
 
 
¶3. THE THIRD SITTING OF THE WORLD TRADE ORGANIZATION'S (WTO) 
WORKING GROUP ON MONTENEGRO WILL BE FEBRUARY 21.  DEPUTY PRIME 
MINISTER DJUROVIC EXPECTS THAT MONTENEGRO WILL JOIN THE WTO BY 
THE END OF 2007. 
 
 
 
SLIGHT INCREASE IN INDUSTRIAL PRODUCTION IN 2006 
 
--------------------------------------------- --- 
 
 
 
¶4. THE OFFICIAL MONTENEGRO STATISTICS BUREAU (MONSTAT) REPORTED 
A ONE PERCENT INCREASE IN INDUSTRIAL PRODUCTION IN 2006. MINING 
AND QUARRYING WAS UP 2.9 PERCENT, MANUFACTURING UP JUST 0.1 
PERCENT, AND PRODUCTION OF ELECTRICITY, GAS AND WATER SUPPLY UP 
3.1 PERCENT. MANUFACTURER OF BASIC METALS (PRIMARILY ALUMINUM AT 
KAP) WAS UP 4.3 PERCENT. 
 
 
 
FOREIGN TRADE DEFICIT UP SHARPLY IN 2006 
 
---------------------------------------- 
 
 
 
¶5. MONSTAT REPORTED MONTENEGRO'S FOREIGN TRADE DEFICIT AT 800 
MILLION EUROS IN 2006, UP 65 PERCENT FROM 2005. EXPORTS OF GOODS 
COVER ONLY 37 PERCENT OF IMPORTS.  NOTE: MONTENEGRO HAS A 
SIGNIFICANT POSITIVE TRADE BALANCE IN SERVICES, DRIVEN BY THE 
TOURISM SECTOR (325 MILLION EUROS IN 2006), AND EXPERIENCED 
STRONG FOREIGN DIRECT INVESTMENT AS WELL IN 2006, AT 502 MILLION 
EUROS. END NOTE. 
 
 
 
BUSINESS AND TOURISM: 
 
 
 
NIKSIC STEELWORKS NOW OWNED BY MN SPECIALTY STEELS 
 
--------------------------------------------- ----- 
 
 
 
¶6. UK-BASED MN SPECIALTY STEELS HAS ACQUIRED THE STEELWORKS IN 
NIKSIC, PAYING EUROS 5.2 MILLION AND COMMITTING TO INVEST 
ANOTHER EUROS 14 MILLION THIS YEAR, AND EUROS 117 MILLION IN THE 
NEXT FIVE YEARS. (REF B) THE INVESTMENTS ARE GUARANTEED BY A 
BANK DEPOSIT. EMPLOYMENT WILL INITIALLY BE 1,500, RISING TO 
1,700 BY 2009. MN SPECIALTY STEELS' MANAGEMENT HAS ANNOUNCED 
PLANS TO IMPROVE AND EXPAND THE PLANT, TO PRODUCE 500,000 TO 
600,000 TONNES OF SPECIALTY STEEL FOR EXPORT ANNUALLY, COMPARED 
TO ITS CURRENT CAPACITY OF 300,000 TONNES OF ORDINARY STEEL PER 
YEAR.  NOTE: THE NIKSIC STEELWORKS WILL BECOME A MAJOR COMPONENT 
OF MONTENEGRIN GDP, IF ITS NEW OWNER HOLDS TO ITS ANNOUNCED 
PLANS. SPECIALTY STEELS SELL FOR ABOUT FIVE TIMES THE PRICE OF 
ORDINARY STEELS. END NOTE. 
 
 
 
SVETI STEFAN RESORT ACQUIRED BY SINGAPORES AMAN 
 
--------------------------------------------- --- 
 
 
 
¶7. AMAN RESORTS, BASED IN SINGAPORE, ON JANUARY 31 SIGNED A 
30-YEAR LEASE WITH THE GOVERNMENT FOR SVETI STEFAN, AN ICONIC 
COASTAL RESORT. ANNUAL LEASE PAYMENTS WILL BE 2.1 MILLION EUROS, 
AND AMAN WILL INVEST ANOTHER 40 MILLION EUROS IN IMPROVEMENTS. 
IN THE 2008 SEASON, AN OVERNIGHT STAY WILL BE US$ 1,000 PER 
NIGHT. 
 
 
 
U.S. FUND SELLS TELEKOM CG SHARES 
 
--------------------------------- 
 
 
 
B T 
#0033 
N 
-- END OF ERRORED MESSAGE -- 
 
PODGORICA 00000033  003.3 OF 004 
 
 
¶8. U.S. INVESTMENT FIRM QVT FINANCIAL HAS SOLD ITS 2.3 PERCENT 
STAKE IN LOCAL TELECOMMUNICATIONS FIRM TELEKOM CG FOR EUROS 5.5 
MILLION, OR A LITTLE MORE THAN TWICE WHAT IT HAD PAID IN 2005. 
 
 
 
GLOBAL STEEL HOLDINGS LOOKING AT MONTENEGRO 
 
------------------------------------------- 
 
 
 
¶9. PRESIDENT OF INDIA-BASED GLOBAL STEEL HOLDINGS, LAKSHMI 
MITTAL, VISITED MONTENEGRO JANUARY 24.  HE DISCUSSED POSSIBLE 
INVESTMENTS IN THE ENERGY AND TOURISM SECTORS, AS WELL AS 
OPERATIONS AT THE PORT OF BAR. THE GOM IS SEEKING TO PRIVATIZE 
THE PORT OF BAR. 
 
 
 
STEADY TOURISM GROWTH EXPECTED 
 
------------------------------ 
 
 
 
¶10. TOURISM MINISTER NENEZIC HAS PREDICTED AN EIGHT PERCENT 
INCREASE IN TOURISM INCOME IN 2007, TO EUROS 350 MILLION. THE 
NUMBER OF TOURISTS IS EXPECTED TO RISE TO 1.1 MILLION. TOURISM 
INCOME IN 2006 WAS 322.2 MILLION EUROS, WITH 952,000 VISITORS. 
 
 
 
PUBLIC ECONOMY: 
 
 
 
RESTITUTION BURDEN EXAMINED 
 
--------------------------- 
 
 
 
¶11. FINANCE MINISTER LUKSIC ESTIMATED THAT THE GOM IS POSSIBLY 
FACING AN 800 MILLION EURO LIABILITY (MORE THAN THE ANNUAL GOM 
BUDGET) STEMMING FROM ITS OBLIGATIONS TO PAY ON RESTITUTION 
BONDS GRANTED TO FORMER LANDOWNERS WHOSE PROPERTY WAS SEIZED 
AFTER WW2 BY THE TITO GOVERNMENT. THE GOM IS THEREFORE 
CONSIDERING A CAP OF 20 PERCENT ON THE VALUE OF BONDS PRESENTED 
TO GOVERNMENT FOR COLLECTION. THAT WOULD REDUCE THEIR 
LIABILITIES TO A MANAGEABLE 200 MILLION EUROS, AND YET STILL 
PROVIDE MORE COMPENSATION THAN NEIGHBORING STATES, WHICH CAPPED 
BONDS AT 10 PERCENT. LUKSIC BELIEVES THAT THE CAP, MOTIVATED BY 
GOM DISCUSSIONS WITH THE IMF, WILL NOT DISADVANTAGE CLAIMANTS 
WITH WHOM THE GOM HAS ALREADY SETTLED. (REF A) 
 
UNEMPLOYMENT DOWN 
 
----------------- 
 
 
 
¶12. ACCORDING TO THE OFFICIAL MONTENEGRO STATISTICS BUREAU 
(MONSTAT), THE UNEMPLOYMENT RATE WAS RELATIVELY STEADY AT 14.63 
PERCENT; HOWEVER, THE NUMBER OF UNEMPLOYED DECREASED BY 10,000 
TO 38,600. 
 
 
 
REAL WAGES ROSE 15 PERCENT IN 2006 
 
---------------------------------- 
 
 
 
¶13. MONSTAT REPORTED THAT THE AVERAGE MONTHLY GROSS WAGE IN 2006 
WAS EUROS 377, NET EUROS 250. NOMINAL WAGE GROWTH WAS 15 
PERCENT, AND REAL WAGE GROWTH WAS 12 PERCENT, REFLECTING A THREE 
PERCENT RISE IN THE COST OF LIVING. THE AVERAGE NET WAGE IN 
DECEMBER WAS EUROS 281. THE FOODBASKET FOR A FAMILY OF FOUR WAS 
EUROS 276 IN DECEMBER, UP 1.2 PERCENT FROM NOVEMBER. 
 
 
 
INFLATION IN 2006 WAS 2 PERCENT 
 
------------------------------- 
B T 
#0033 
N 
-- END OF ERRORED MESSAGE -- 
 
PODGORICA 00000033  004.3 OF 004 
 
 
 
 
 
¶14. INFLATION WAS 2 PERCENT IN THE BROADER MONTENEGRIN ECONOMY 
IN 2006, ACCORDING TO MONSTAT. 
 
 
 
T-BILLS 
 
 
 
¶15. ONE AUCTION OF TREASURY BILLS, WITH A TOTAL FACE VALUE OF 
EUR 0.5 MILLION, WAS HELD IN DECEMBER (NOTE: DATA LAGS BY ONE 
MONTH). THE AVERAGE INTEREST RATE AT THE AUCTIONS WAS 0.97, UP 
FROM 0.42 IN THE PREVIOUS TWO MONTHS. PARTICIPANTS AT THE 
AUCTIONS INCLUDED LOCAL BANKS. 
 
 
 
STOCKS 
 
 
 
¶16. THE NEX20 INDEX OF THE NEX MONTENEGRO STOCK EXCHANGE ENDED 
JANUARY THE YEAR UP 17.6 PERCENT, AT 21,227.46. THE MOSTE INDEX 
OF MONTENEGROBERZA WAS UP 18.1 PERCENT TO 1072.96. MAJOR 
COMPONENTS OF THE NEX20 INCLUDE THE PRIVATIZED TELEKOM CG AND 
JUGOPETROL; MAJOR COMPONENTS OF THE MOSTE INCLUDE ALUMINUM 
SMELTER KAP AND VINEYARD PLANTAZE. NOTE: THE MONTENEGRIN 
EXCHANGES ARE STILL NASCENT, AND THE LEVEL OF CAPITALIZATION 
REPRESENTED IS SMALL ALTHOUGH RISING (NEX CAPITALIZATION AT THE 
END OF 2004 WAS EUROS 495 MILLION; AT THE END OF SEPTEMBER 2006 
2005 IT WAS EUROS 1,087 MILLION. MOSTE CAPITALIZATION WAS JUST 
UNDER EUROS 2 BILLION AT THE END OF JANUARY 2007). 
BARNES 
B T 
#0033 
N 
-- END OF ERRORED MESSAGE --