TIVAT, Montenegro — A boom in luxury marina construction in the past five years is helping to clean up the environmental blight of disused naval bases and shipyards in Montenegro, the smallest of the six republics that formerly made up Yugoslavia.
While the European Union has been tightening its tax regime for yacht owners, Montenegro, a nonmember of the Union conveniently sited across the Adriatic Sea from Italy, has been wooing them with duty-free fuel, low mooring charges and low tax rates on marina real estate and services.
Much of the development has been financed by Russian investors, triggering past European Commission warnings against laundering, indignantly denied by the Kremlin. Other major investors include companies and wealthy individuals, diversifying portfolios often derived from the mining and oil industries.
Still, whatever the origins of the funds, the visible result is to breathe new life, economically and ecologically, into coastal zones that suffered degradation and neglect in the traumatic years of Yugoslavia’s disintegration.
Near the town of Tivat, on Kotor Bay, a Unesco World Heritage site, Adriatic Marinas is developing a nearly 200-acre site on the Arsenal, a naval base dating back to the Austro-Hungarian empire.
The Canadian businessman Peter Munk, founder and recently retired chairman of Barrick Gold, the world’s largest gold producer, is the chief investor in the €165 million, or $225 million, development. Other investors include Oleg Deripaska, chief executive of the Russian aluminum giant Rusal; the investment banker Lord Rothschild; the financier Nathaniel Rothschild; the Hungarian real estate developer Sandor Demjan; and Bernard Arnault, chairman of LVMH Moët Hennessy Louis Vuitton, the French luxury goods group.
Known as Porto Montenegro, the project opened in 2009 with 85 berths and now has almost 400. Behind the quayside, facilities include waterfront residences, boutiques, restaurants, a naval museum documenting the shipyard’s history, and supporting services like yacht dealers and maintenance companies.
The World Bank and the European Bank for Reconstruction and Development are also currently investing to upgrade the water, sewage, transport and electricity systems in the coastal area.
Before Porto Montenegro’s arrival, the Arsenal was an abandoned wasteland, polluted with heavy metals and nearly a century of detritus that had accumulated in the shipyard and on the sea floor, along with unexploded munitions left from World War I all the way through the wars in the Balkans, said Matt Morley, marketing manager for the project.
Managers worked with Montenegrin officials as highly placed as Vice Admiral Dragan Samardic, chief of the military’s general staff, to win their cooperation in deploying United States Navy-trained dolphins to echo-locate unexploded ordnance on the harbor floor, he said.
“Before a single foundation was poured here, we spent nearly two years and invested millions to clean up a slew of environmental and safety concerns,” Mr. Morley said, “not to mention removing an untold tonnage of 64 rusted ships, submarines — more or less the bulk of the former Yugoslavia’s naval fleet — and related shipbuilding materials, polluting the surrounding waters.”
In Kumbor, a neighboring village, Azmont Investment broke ground last year on another marina, a €500 million project called Porto Novi.
The site, a former Yugoslav military post that included nearly 5,000 army and navy personnel, was littered with asbestos-laden barracks, radar towers, crumbling concrete administrative buildings and skeletal airplane hangars.
So far, Azmont, a subsidiary of the Azerbaijan state oil company, Socar, has been demolishing the preexisting structures and clearing the site. It contracted a bomb disposal team from RPS Group, an international environmental consulting firm, to search for live munitions.
Beyond the environmental cleanup, Montenegro’s marina projects could be an enormous lift to the local economy, both during and after construction.
“This is the biggest investment in Montenegro’s history,” Milan Vajagic, the mayor of Herceg Novi, a village near the Porto Novi project, said last month. “There are over 2,000 regional workers down there clearing the site and preparing the build, and we’re only in the initial phases. We expect another 1,500 jobs at least when construction starts on the resorts, villas, and entertainment facilities.”
Some local residents say they worry that the marina projects, while lifting the overall Montenegrin economy by developing untapped real estate potential, are also pushing up the cost of living. Still, Colin Kingsmill, who moved to Montenegro from Vancouver, Canada, five years ago, said that the only dramatic shift in prices so far had been in prime real estate locations along the coast. In aggregate, Montenegro has seen no dramatic inflationary shift, he said.
“The usual suspects — waterfront view properties, proximity to things like World Heritage Sites — have all seen increases in prices,” Mr. Kingsmill said.
“However, since the economic crisis, this has not been as dramatic as when the country first became independent in 2006,” he added.
A World Bank report on Montenegro’s economic growth last year said: “Gross national income has tripled in Montenegro since 2003 — rising from $2,400 to $7,160 — and the country now has the highest per capita income among the six countries comprising South East Europe.”
On a peninsula south of the entrance to Kotor Bay, the Egyptian-owned developer Orascom, in partnership with the Montenegro government, is building a third marina village, Lustica Bay. The largest in Montenegro, covering nearly 1,700 acres of wooded waterfront bluffs, it will be built, like the Kumbor project, on an existing military barracks and lookout post.
Orascom says it will implement across-the-board certified green design standards in the development, planned to comprise 300 apartments, villas and townhouses; several hotels; leisure facilities like shops and restaurants; a 120-berth marina; and an 18-hole golf course.
Also slated for construction by Orascom is a public boardwalk along three miles of Lustica Bay’s waterfront, creating a pedestrian coastal route to attractions like shopping centers and restaurants. The civic services of a nearby village, Radovici, are being moved to the Lustica Bay site, where Orascom is building the community new schools, a post office, a fire station and a hospital.
A treatment plant, to clean and reuse millions of gallons of wastewater from the whole of the Lustica Bay area, will be used to water the landscaped parkland and the golf course.
“These projects are cleaning up our coastlines and are very important for the tourism economy for us,” Mr. Vajagic, the Herceg Novi mayor, said. “They’re opportunities our country absolutely cannot miss.”