European Western Balkans

Calls for Montenegro to phase out its “golden passport” scheme are getting louder

Montenegro Flag; Photo: Pixabay / Sergei Petrov

Passport is a valuable thing. It can get its owner to different places. With a Montenegrin passport, for example, which is ranked 46th on the Henley Passport Index, one can travel to Schengen countries for 90 days in every 6 months without a visa. Once Montenegro, a candidate country,  becomes a member of the EU, its passport will gain even more value, as EU citizenship comes with a long list of perks and benefits, whether you are a worker or a capitalist, student or IT expert, politician or simply a wanderer wanting to travel European countries without administrative constraints.

Even though every country has rigorous requirements to be fulfilled before you are eligible to be granted its citizenship, if you have enough money laying around that you want to invest, certain countries might bend the regular migration rules to grant you their citizenship in exchange for an investment. 

Montenegro is one of those countries — in 2019, Montenegro adopted a programme for incentivizing investments by offering citizenship in return. How much money is required to get one of Montenegrin “golden passports,” as this scheme is colloquially referred to? The minimum investment threshold is 250 000 euros for underdeveloped regions and 450 000 euros for developed regions, including the coast. The investment projects need to be approved by the Government and to contribute to Montenegro’s economic development. Besides the investment, the Government also requires a 100 000 euros fee to be paid by the applicant, which will be transferred to the Fund for underdeveloped areas. 

The EU has criticized this programme for the risk it carries, even though some of its Member States maintained similar programmes, where they exchanged residence permits or even citizenship for investments. The most recent calls to phase out this scheme came in January 2023, after the Government in technical mandate led by Dritan Abazović pledged to end the economic citizenship programme by the end of 2022. Will the harder approach of the EU motivate the government to reconsider extension of the golden passport programme, or do the benefits from capital influx overweight the possible losses at this stage of Montenegro’s EU accession negotiations?

Did golden passports bring what Montenegro had hoped for?

During these three years, almost 170 investors became Montenegrin citizens after their applications were approved, while several hundred applications are still being processed, according to data Vijesti obtained from the Ministry of Internal Affairs. As Vijesti explained, this brought Montenegro over 310 million euros. About 188 million euros is currently at the separate account to which the foreigners applying for a passport transferred their money, while the rest of it has been transferred to the accounts of the state and investors who build development projects in the field of tourism. 

It seems that the economic citizenship programme managed to attract investors only to the field of tourism and that economic development of underdeveloped municipalities is not likely to be the major consequence of this programme. As Lazar Grdinić from the NGO MANS points out, one of the main issues of this programme is the fact that most of the money goes to the real estate market. One of the examples is that, since the second construction phase of Porto Montenegro was included in the List of development project, only purchasing a property here would mean fulfilling the conditions for applying for Montenegro citizenship.

“As far as economic benefits are concerned, we do have an inflow of certain capital and foreign investments, but for now it does not generate growth as it should, mostly in terms of creating new jobs,” says Grdinić. 

He explained that MANS has been following the implementation of the golden passport programme since its commencement, but points out to several issues they faced in the monitoring process. Namely, as “the procedure is still characterized by a certain level of secrecy,” the institutions do not provide access to information on the business plans for development project, neither to the reports of international agents who evaluate the candidates for citizenship. 

“In Montenegro, the program is designed in such a way that, in addition to internal checks, there are also two levels of checks — agents for brokering and international agents for assessing the suitability of candidates. However, for a country like Montenegro, there are always risks in the form of capital inflows of dubious origin, especially if we take into account that our system has shown vulnerability before, and that even before the formal introduction of the program, the country given honorary citizenships to people like Thaksin Shinawatra, Mohammad Dahlan and Wei Seng Phua,” as Grdinić points out. 

These risks are not the ones the EU is willing to take, neither from its candidate countries, neither from its Member States. This is why the previous years brought a crackdown on the economic citizenship and economic residence schemes across Europe and Montenegro hasn’t been excluded. 

Calls from the EU to end economic citizenship programme

Montenegro isn’t the only country to use this mechanism to attract the inflow of capital. Several EU countries have had citizenship or residence by investment programmes during previous years. While Bulgaria and Cyprus adopted legislation for ending their CBI by investment schemes, the EU took Malta to court over this issue. Meanwhile, 12 Member States have residence by investment programme (RBI) or the so-called “golden visas,” which do not enable the investors to gain citizenship, but permanent residence. 

In March 2022, the European Parliament adopted a resolution which highlights risks and issues posed by CBI and RBI programmes and calls upon Member States and candidates to phase out of CBI schemes, as well as to adopt more rigorous regulations for RBI schemes. The resolution points out risks posed by this programme, such as money laundering, corruption and tax evasion, but it also stresses that “the contribution of CBI/RBI schemes to the Member States’ real economy is limited in terms of job creation, innovation and growth and that considerable amounts of investment are made directly into the real estate market or into funds,” which is an issue Montenegro is facing with as well. 

Resolution also “notes that a risk stems from third countries that have CBI schemes and that benefit from visa-free travel to the Union because third-country nationals can purchase citizenship of those third countries with the sole purpose of being able to enter the Union without any additional screening” and “stresses that risks are exacerbated for Union candidate countries that have CBI/RBI schemes because the expected benefits of future Union membership and visa-free travel within the Union area may be a factor.” 

For all these reasons, the European Parliament called for the candidate countries to completely phase out of their CBI schemes and adopt strict new regulations on RBI schemes, as a part of their alignment with the accession criteria. 

Ana Pisonero Hernandez, Spokesperson of the European Commission, said in the statement to European Western Balkans that Montenegro has been “consistently advised to terminate its investor citizenship scheme” and committed to do so by the end of 2022, “because of the risks it poses, such as money laundering, tax evasion, terrorism financing, corruption and infiltration of organised crime.” She also reminds that the Commission recommended suspension of the CBI scheme “as soon as possible” in the 4th Visa Suspension Mechanism Report. 

“As a candidate country, Montenegro should refrain from any measure that could jeopardise attainment of the EU’s objectives, including when using its prerogatives to award nationality. We are closely monitoring developments which may be perceived as circumventing measures put in place under the EU’s foreign and security policy,” as Pisonero stated. 

Lazar Grdinić says that the authorities in Montenegro have at first shown understanding for EU’s concerns and promised to end the programme by the end of 2022, but later on they ignored their commitment, “possibly due to the fact that there are similar programs in certain EU member states, in addition to the obvious economic motive.” Another issue he points out to is the fact that the current Government is in technical mandate and “isn’t recognized by law or legitimized by the will of citizens, but decides exclusively at their own discretion and guided (perhaps) by the interests of others.” 

It is left to see how long will Montenegro be able to ignore the calls from the EU and the risks posed by the golden passport scheme and what will the untangling of political crisis in Montenegro mean for the prospective investors who are eyeing a Montenegrin passport together with a property on the Montenegrin coast. 

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