Tourism Lifts Montenegro, but Unevenly

The government and private investors are benefiting from the Adriatic country's blossoming tourist industry, but locals are facing pollution and traffic

The drive south along Montenegro's cobalt blue Adriatic coastline through the burgeoning resort town of Budva will surely be a pleasant affair one day, but at the moment it's only slightly more enjoyable than Los Angeles gridlock.

Traffic is stop-and-go over the short stretch of road through town; a cacophony of drilling, hammering, and laboring diesel engines harasses the ear; the air is saturated with gas fumes and the pall of dust common to construction sites. Were it not for the views of the Adriatic Sea, breaking into the cliffs and coves along the coast with an esthetic drama approaching Dubrovnik's oft-photographed shoreline in Croatia, the trip would be insufferable.

Like much of this country of 650,000 people that voted to break with Serbia in 2006, Budva and the rest of the Montenegrin coast is under construction. Petrovac, a town of 1,400 around 25 kilometers south of Budva, has more than a dozen accommodation projects underway; the screeching of drills there is ubiquitous.

The government and private investors are sprinting to capitalize on Montenegro's little-known but plentifully endowed landscape — cascading from the snow-peaked mountains of the north through the interior's expansive canyons and lakes down to the coast — by transforming Montenegro's developing tourism industry into a world-class operation. Government officials hope this development will modernize the economy and eventually jettison a humbling distinction for Montenegro: the poorest region in the former Yugoslavia.

"The development of Velika Plaza [a beach] and other locations on the Montenegrin coast...can completely change the economic future of our country," the Tourism Ministry said in a statement recently, as quoted by AFP.

That's undoubtedly true, but there are two sides to this tourism drive — just consider the fume and dust inhalation chamber that is Budva, or the locals faced with reconciling the benefits of development with its costs.


The benefits are clear. Though it's got significant growth potential, tourism is already Montenegro's largest industry; as it develops, so will the economy — through investment, job creation, and consumption.

That dynamic is evident now. In 2007 foreign investment, much of it into tourism-related projects, jumped by 56 percent, and 19 percent more travelers came to Montenegro than a year earlier. This dual uptick was met by a 3-point drop in unemployment and 7 percent GDP growth. Today, Montenegro has one of the lowest unemployment rates and peppiest economies in the Balkans.

"In terms of growth and curbing unemployment and inflation, it's one of the success stories in the region," said Rainer Freund of the European Agency for Reconstruction's office in Podgorica, Montenegro's capital.

Locals are quick to credit tourism — though the government has done its part by opening up the economy through privatization, for instance — and emphasize that Montenegro's economic future is in the travel industry. Many Montenegrins, however, also point to drawbacks.

Inflation is a big concern. Even though the national rate was 3.5 percent in 2007, regional inflation is a different story.

Especially on the coast, locals say prices have ballooned. Milija Bozovic, a Budva tour guide, estimated he's seen a threefold increase in accommodation prices in that town since 2006. He says Montenegrins are being priced out of the market.

In the next five to 10 years, "it will only be two percent Montenegrins in Budva," Bozovic said, only half jokingly.

Many locals also lament the rising income gap between the north and south. Though the northern mountains hold tourism potential in skiing or hiking, the south is the investment nucleus of the moment. As a result, wages in coastal towns can be 30 percent higher than in the north, according to data from the European Agency for Reconstruction.

Some worry, too, about the environmental fallout of tourism-related construction and auto travel. To combat the latter, a small eco-tax on foreign vehicles is being introduced 15 June.

This appeal to environmentalism, it's worth noting, is balderdash in a country where the rare piece of trash not left by the side of the road is often burned. It's nevertheless a legitimate concern.

But the drawbacks of tourism development appear to be a necessary evil for Montenegrins. The next largest industry is aluminum production, not exactly a solid foundation for a 21st-century economy.

The key to maximizing Montenegro's tourism potential, Freund said, will be in resisting the urge to overdevelop, which could destroy the small Montenegrin coast. He said the country should focus on high-end tourism.

Hotel Splendid, just outside Budva's center, meets this model. The expansive resort and spa unfolds down the cliffs toward the Adriatic. It has more than 300 rooms, and suite prices max out at 7,000 euros a night, or nearly twice the average Montenegrin's annual income.

Hotel Splendid is exactly the kind of upscale development Montenegro should be shooting for. Unfortunately, it's a little hard to reach at the moment: traffic grinds to a halt right outside its entrance.

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