Several factors restrict tourist potential, warns IMF
06.02.2008
Montenegro has significant potential as the next top tourist destination in the world. However, some structural factors cloud the sustainability of growth over the medium term, the International Monetary Fund (IMF) warns. In the recently published documents related to periodical consultations between the IMF and the member states, the IMF states that sustained growth of tourism requires reform of the labour market to boost productivity, establishment of the rule of law and intensive government intervention to establish tourism infrastructure.
Tourism providers have cited lengthy and non-transparent procedures as a major difficulty in doing business in Montenegro. Illegal construction of low economic impact residences and secondary apartments has also become widespread, threatening to endanger the fragile ecosystem, while necessary infrastructure, such as water and electric shortages, sewage system remains underdeveloped.“ Such problems have deterred tourists and investors alike, and could pose a significant threat to the strategy of targeting high-end visitors and sustained growth,” the IMF stated in its report.
Given the numerous factors that affect Montenegro’s tourism potential, government assistance is essential at this initial stage of development. The IMF recommends that this should include policies to maximize the efficiency of air-transport operations, improve the road system, and to upgrade infrastructure, measures to raise competitiveness, strengthen human resources and liberalize labour legislation and firm action to ensure the rule of law, including urban planning.” The authorities should also actively seek to improve cross-border cooperation and take advantage of tourists visiting neighbouring countries to promote Montenegro as a twin destination,” the IMF recommends.
According to the experts, the potential of the tourism sector in Montenegro is impressive. For the fourth consecutive year, Montenegro has been ranked among the world’s top three destinations in terms of growth over the coming decade. However, because Montenegro relies heavily on imports, its tourism industry has high leakage.
Moreover there are concerns that other sectors of the economy may not be fully benefiting from spill-over effects of tourism. From the labour market perspective, tourism-related industries are increasingly relying on foreign workers to meet rising demand, partly due to insufficient skills. The country’s current labour law also stifles competitiveness and protects resident employees, making non-resident employees a much cheaper and attractive option. “This has not only contributed to a high rate of unemployment at around 18% but implies a lost opportunity to build necessary human capital,” the IMF states