Letter from Washington, DC

“No turning back now…”

By Scott Wayne, President, SW Associates, LLC – Sustainable Development through Tourism

Washington, DC, October 1 – “There is no turning back now, “ said Mayor Miodrag Kankaraš of Tivat. Although Mayor Kankaraš was referring to the fast growth of tourism in his town, he could have just as easily been talking about the storm of political activity that is blowing through the city.

Mayor Kankaraš arrived in Washington, DC this week with Mayor Tarzan Milošević of Bijelo Polje and Mayor Dejan Mandic of Herceg Novi for a visit sponsored by the US State Department’s International Visitor Leadership Program to learn about small town tourism and economic development in the USA.



From left to right: Mayor Milošević, Mayor Kankaraš, Scott Wayne, Mayor Mandic

The Program selected these mayors because the US Government recognizes that tourism is an important means of economic development for them and the entire country. The purpose is for the mayors to learn more about opportunities for linking economic development, local government, planning and sustainable tourism. And most of all, to learn from US best practices for managing growth and protecting their natural and cultural resources.

The mayors will also no doubt receive a crash course in Capitol Hill politics and the economic impacts of federal action and inaction on “Main Street USA,” especially the small communities all across the USA. The immediate implications for municipalities have been access to credit for financing infrastructure – thus impacting sectors such as tourism. Nobody is quite sure yet how extensive the impacts will be, but as the mayors tour the US, public finance and access to credit will be high priority issues.

I was asked by the Program to meet the mayors and discuss sustainable tourism issues and approaches to addressing the issues. Last year, I had the fortunate opportunity to serve as the tourism investment and policy advisor on two projects in Montenegro for the International Finance Corporation’s Foreign Investment Advisory Service (FIAS). While one project provided rapid assessments of tourism investment in four countries of the Western Balkans, the other project focused solely on Montenegro and tourism. The latter resulted in a FIAS report titled “The Republic of Montenegro: Improving the business environment – focus on the tourism sector. The mayors reconfirmed many of our recommendations and conclusions reached in the report.

The FIAS Report has lead to a new initiative focused on Bijelo Pole. The FIAS work was launched in 2007 at the request of Minister of Economic Development Branimir Gvozdenović who outlined three challenges for Montenegro’s economic development and requested that the FIAS team work in these areas:

• Strengthening the business enabling environment by eliminating legal and regulatory impediments to investment;

• Enhancing Montenegro’s competitiveness and attracting large investments, particularly in the tourism sector; and

• Leveraging these large investments to stimulate the growth of small and medium-size enterprises in related sectors and in this way generate growth in employment and in the overall economy.

In conducting the work, the FIAS team was impressed with Montenegro’s spectacular tourism growth. The Report stated that Montenegro seems to be well on its way to being a world class, internationally competitive tourism investment location. But the Mayors recognized that this growth could not be sustainable unless some critical issues were addressed at the national and local levels by both the public and private sectors.

“We have an acute dilemma about how to develop tourism,” said Mayor Dejan Mandic of Herceg Novi. He said that his community is faced with growing infrastructure challenges, especially with sewage, the water system, roads and transportation. Mayor Mandic was adamant that future investors will need to help finance some of this infrastructure.

Mayor Kankaraš also expressed concern about infrastructure keeping up with tourism demand. With Porto Montenegro moving forward, tourism will change Tivat. He is optimistic that it will be for the better. Mayor Kankaraš was pleased to see the regional water works project of Lake Skadar coming onstream, new sewage treatment facilities and the EU corridor projects. All of these will help Montenegro maximize the benefits of tourism and minimize the negative impacts.

For Mayor Milošević, infrastructure is also a critical issue, but more in terms of increasing access to his community and region. As the FIAS Report emphasized, 97% of the country’s tourism is concentrated on the coast. Northern Montenegro has a lot to offer, he said, but these opportunities need to be discovered and access needs to be improved. The Mayor emphasized the potential for extreme and sometimes not so extreme sports such as river rafting, climbing, hiking, and mountain biking. He favors the creation of air service to the region based on the use of 12 seat airplanes.

The Mayors are on the front lines battling the issues and, as with the FIAS team, they expressed concern that the country is at a crossroads. According to the report, Montenegro has “significant potential for generating private investment to grow the tourism and related sectors. However, realizing this potential is contingent upon Montenegro’s competitiveness as a location for investment. This competitiveness is influenced by a range of factors including the overall business enabling environment and specifically the cost and risk of doing business.

More work must be done to generate the levels of private investment that are necessary for sustained growth of tourism and indeed the overall economy. This will require a systemic approach − comprehensive, strategic, and well sequenced − to institutional and regulatory reform on the national and sub-national levels.”

Some of our main conclusions included the following, all of which would greatly help boost the sustainable development of tourism in the Mayor’s communities and all across Montenegro:

System reform
• Streamline licensing, permits and related inspections
• Develop a policy on regulatory quality
• Support ongoing sub-national competitiveness
• Collaborate with the World Bank in developing business enabling environment components of loan operations
• Help to implement the ongoing Alternative Dispute Resolution pilot project.
• Improve the Cadastre land registration, which has several fixable weaknesses including poor recording and storage of documents.
• Land restitution needs to be addressed as a priority issue.
• An improved urban planning system is immediately needed.

Investment generation
• Increase support for foreign direct investment in tourism

As Mayor Kankaraš emphasized, “There is no turning back now.” The country is on a tourism development track and needs to deal with the rapid growth as quickly as possible or Montenegro will lose the special cultural and natural assets that attract visitors.