Tajick’s Take With Stephane Tajick
A seasoned researcher on RCBI, Stephane Tajick analyzes global shifts in the investment migration industry.
In August 2017, I wrote my first article for IMI; it was on Montenegro. The country was flirting again with the idea of re-establishing citizenship by investment program, and Christian had approached me to see if I wanted to write my opinion on it.
Montenegro has always had a place in my heart. I’m “kume” [ed.: godfather] to a Montenegrin, and the country is beautiful and home to lovely people. It’s a land of friendly and hospitable giants. With a population of only half a million, it’s a country persistently punching way above its weight, as its national football team has brilliantly demonstrated over the years. It’s no accident that Montenegro was made a candidate to ascension before other, more populated, neighboring countries.
The quality of the citizenship program offered is also excellent: You are investing in the next-in-line EU member country at a reasonable price, and the jurisdiction is one of the most tax-friendly in the European continent.
That’s why, nearly two years after the program’s creation, it’s astounding to see that so few citizenships have been issued. So few, in fact, that the Montenegrin government announced last week that they would not continue the program after its sunset period. What happened? Why was a high-quality product unable to reach expected heights? There is probably more than one reason and more than one person to blame.
Let’s go back to the beginning
Montenegro ran a citizenship by investment program from 2008 to 2010. The program came into the spotlight with the Thaksin Shinawatra scandal. Skip to 2015, and Montenegro is again flirting with the idea of a citizenship by investment program. The process was halted by the resignation of the Minister in charge of developing the program under corruption charges.
- August 2017 – The succeeding Minister decides to design the program in-house.
- July 2018 – The Montenegrin government announces the CBI regulations, including investment requirements. The program would open on October 1st, 2018, and sunset after 2,000 applicants or three years.
- October 2018 – The program doesn’t open for application.
- January 2019 – Montenegro opens registration for approved intermediaries and due diligence firms, giving interested parties only 28 days to submit candidacy.
- March 2019 – Montenegro rejects all the applications from due diligence firms over inadequate filling.
- March 2019 – Montenegro approves Apex, Arton, and Henley as approved intermediaries.
- May 2019 – Montenegro picks its due diligence providers.
- May 2019 – The first hotel resort project is approved.
- October 2019 – the program is finally open, and the first application is submitted.
- November 2019 – Three more hotel projects are approved under the program, with several more expected by the end of the year.
- December 2019 – Amendments are made to approve minor dependents under the program.
- February 2020 – The first applicant is approved under the citizenship program
- June 2020 – The first approved applicant collects his Montenegro passport
- March 2021 – The government announces that it will not renew the program past its December 31st, 2021 expiration date. The program has only approved 37 candidates at this point.
Slow to start, quick to close
Now, it’s evident that the program took a long time to start and was (at least) one year late in opening. Given it had a sunset clause of three years attached to it, this was not ideal. On top of that, the decision to not renew was made ten months before the end date, leaving only one year to evaluate the program’s performance. Add to that that the program takes 5-6 months to approve applications and that the world was in the middle of the biggest pandemic in a century, and it really leaves slim pickings on which to base an evaluation.
It can obviously seem a little bit premature given the context. But it needs to be pointed out that the government now ruling Montenegro is new. Actually, until 2020, only one party had ruled Montenegro for the preceding 30 years. Not an ideal situation for the transition of power. Now, the decision can always be reversed, I imagine, and there will be strong arguments for it since you don’t want to leave all those resort projects high and dry, short of financing.
That said, the real issue for me is not with the current government or the authorized intermediaries, or the hotel projects. When the first rules came out, in 2018, two (irreconcilable) program elements caught my eye:
“Three-year sunset” and “tourism projects”.
What similar types of hotel resort projects in the Caribbean have taught us is that these projects take a few years to get off the ground and are always at risk of complications, delays, and financial issues. Not that they are bad initiatives, but it’s irrational to put a three-year sunset clause into these types of projects. At best, you reach cruising speed after three years. And, speaking as someone with a 15-year background in hospitality, it simply doesn’t make sense to ram so many resort projects into such a short period of time. You would be creating a large supply of luxury hotel rooms, without necessarily having a corresponding tourist demand. If this were a ten-year project, it would make much more sense.
Montenegro, due to its size, should have understood its limitations. You cannot invent expertise in investment migration; not even bigger countries can. Understandably, Montenegro decided to design its citizenship program in-house to protect itself against the potential of being taken advantage of.
Now that the government has declared it will not renew the citizenship program’s mandate, the question looms over the financial consequences for all those tourism developments that were counting on financing from the citizenship program. The government seems to have shown openness to attracting talent with its last declaration. Perhaps a startup visa powered by a “fund” investor visa would be an interesting alternative. The government also indicated that the “Portugal path” seems to be the preferred one, so an investor visa leading to fast-track naturalization would make a lot of sense.
That said, I would really wish Montenegro would persist with its CBI program at least until the 2,000 applicants are reached. I’m confident that if the government sends a positive signal and perhaps increases the child dependent’s age limit, the program can fill its quota in 2-3 years.