Monday, April 28, 2008
Montenegro for Sale (Part II)
As Ulqin and other heavily populated Albanian towns throughout Montenegro are being snapped up by Russians and other preying tycoons, fear is echoing off the walls of Parliament in Podgorica to the point where the DPS and SDP are worried that real estate is slipping away.
Many Albanians are not ignorant to what is happening here: with cash on hand, Albanian lands are being bought off by Russians and others in a real attempt to tip the ethnic balance to the point of forced emigration. Just read between the lines in the following article and make up your own minds:
Montenegro balks at opening up real estate market
Worried that too much property will be snapped up by foreigners, Montenegrin leaders have not been able to agree on removing restrictions on the country's real estate market.
By Nedjeljko Rudovic for Southeast European Times in Podgorica -- 28/04/08
Two years after Montenegro gained independence, fears that Russians and other foreigners could buy up large amounts of land are fueling a heated debate over liberalizing real estate laws in the small Adriatic country.
The larger ruling coalition party -- Prime Minister Milo Djukanovic's Democratic Party of Socialists -- favours complete liberalisation of the real estate market. But its coalition ally, the Social Democratic Party, has joined the opposition in urging continued restrictions in order to keep the country's attractive coastline in Montenegrin hands.
Because of the quarrel over the issue, the government withdrew a bill on property rights for foreigners that had been up for discussion during parliament's spring session. Under the constitution, a two-thirds majority would be needed in order to push such legislation through.
Under current law, foreign commercial entities can purchase property in Montenegro, but individuals from abroad cannot. In actual practice, many foreigners -- usually with assistance from Montenegrin contacts -- are able to get around the limitation by registering a business, then liquidating it after they have bought the property.
A Montenegrin administrative court has ruled that "a foreign private person not pursuing an economic activity in Montenegro cannot claim ownership over land". It remains unclear, however, whether this ruling has been implemented.
Statistical data drives home the significance of the issue. During an 11-month period, 53% out of a total 900m euros in Foreign Direct Investment went towards acquisition of real estate. At the same time, capital outflows amounted to 450m euros – three thirds of that being invested in real estate.
Montenegrins who sell their inherited property appear to be buying real estate outside the country -- often in Belgrade or Novi Sad -- or simply using the proceeds for consumption, instead of for new investments that could minimize the foreign trade deficit and increase employment.
Deputy Prime Minister Gordana Djurovic, who handles international economic relations, declined to sign onto the government's proposed property law, saying it "does not envisage the conditions of reciprocity".
She put forth a similar opinion regarding a draft law on state property, arguing that coastal areas and forests ought to remain state property. "The law should instead stipulate certain special rights to utilization of these public goods through concessions, leasing, rent and similar contractual arrangements," Djurovic said.
However, Association of Lawyers Secretary-General Branislav Radulovic believes that the insistence on reciprocity is not a "particularly strong argument".
"With 13.812 sq km of territory, one would wonder whether reciprocity is sufficient to defend Montenegrin interests. With regard to Russia, for instance, this principle is perfectly senseless," Radulovic says.
"Montenegro can promote concessions as a way of attracting foreign investments, like Bulgaria did," he suggests. "Bulgaria did not sell off its property -- instead, it concluded agreements on concessions with the foreign investors allowing them to use and manage the property for 99 years. Thus it avoided losing its ownership over land, but also prevented manipulations and fictitious agreements."
The president of the Employers' Union, Predrag Mitrovic, warns that the state should be attentive to the comparative experiences of European countries and other states in the region.
"In practice, it happened that countries with so-called liberal legislation find themselves besieged by 'economic terrorism', by giving up their land for money coming from the gray and black economies abroad," he says. "Such liberal laws are particularly dangerous for small states like Montenegro and I believe the state should proceed more cautiously."
By contrast, finance ministry councilor Predrag Stamatovic argues that the state has no business limiting individuals' rights to private property, including the transference of rights to another individual.
"Who has the right to prevent further development and inflow of foreign capital?" he asks, pointing out that taxes on property transfer contributed 40m euros to the state budget last year.
During the negotiations that led to the signing of a Stabilisation and Association Agreement with the EU last year, Montenegro pledged to open its real-estate market for citizens of EU member states.
Implementation of the SAA is expected to start in 2010, after all the parliaments of all 27 EU members ratify the agreement.
Once Montenegro becomes an EU candidate, negotiations will begin on all chapters of the acquis communitaire. As it conducts an initial screening of Montenegrin laws, the European Commission will evaluate the extent of harmonization with EU criteria. Property rights for EU citizens will come under the chapters on free movement of goods and capital. These chapters have, in the past, proven among the most difficult for candidate countries that do not want to relinquish the right to manage their real estate.
For example, Croatia has not been able to conclude negotiations on the free movement of capital chapter. During the screening two years ago European Commission experts concluded Croatian legislation is not in line with European standards.
In spite of EU warnings, Croatia has been slow to adopt the substantial changes that would allow EU citizens "the necessary rights that would enable them to acquire real estate in Croatia", as the EC put it. But according to SAA and other documents, Croatia should complete the liberalisation of its real estate markets by 2009.
Citizens of Germany, Belgium, Great Britain, France, Netherlands and Spain can acquire real estate in Croatia based on reciprocity agreements. The procedure, however, can take up to two years due to administrative red tape. As a result, many would-be property owners resort to a practice similar to that found in Montenegro, establishing businesses and then acquiring real estate without restrictions.
All the new EU members tried to limit the sales of real estate to the foreigners in their negotiations with EC, whether the issues at question were the secondary residences or economically significant areas. Malta's attempt was the most successful. No person who has not lived in Malta for at least five years has the right to buy a secondary residence, and this also applies to Maltese citizens who live abroad.
Posted by Conference Organizer at 3:01 PM