James Bond has been there, Roman Abramovich parks his yacht there, and Brad and Angelina recently paid a visit. Clearly, Montenegro is on the map – and will be even more so when the high-end Porto Montenegro marina development and the ultra-luxe village resort of Sveti Stefan open this summer. Yet for the average visitor, it is still too often a country of shabby hotels, erratic water supplies and clogged single-lane highways.

The explanation for this contrast is to be found in Montenegro’s unique development strategy, which is based on a determination to avoid the fate of other countries originally rich in natural beauty and now smothered in concrete. Ferdinand Wieland, advisor to the minister of tourism, shudders at the thought of his country going the way of the Spanish costas. “Montenegro wants to learn from all the mistakes that have been made in other destinations,” he says. “The concept of sustainability and balance of development is a key element for us.”

So how does a bankrupt, ex-communist country go about turning itself into an environmentally friendly billionaire’s playground – and in the process provide jobs and security for its citizens? The answer lies in a 10-year-old masterplan.

When Slobodan Milosevic was finally ousted in 2000 and Serbia returned to the world stage, its junior partner Montenegro was bankrupt, with its tourism industry in ruins after a decade as an international outcast. According to a study published in the following year by DEG, the private sector arm of German development agency KfW, visitor numbers had more than halved since the 1980s, barely 10% of hotel rooms were up to international standards, and the communist-era infrastructure was near collapse.

Yet the same report outlined a 20-year blueprint whereby this decrepit industry could once again become the main driver of the Montenegrin economy. Given the severe shortage of virgin coastline around the Mediterranean, DEG spotted an opportunity. From the untouched, 13km-long sandy beaches on the Albanian border to the deepwater fjord of the Bay of Kotor, with its two UNESCO World Heritage towns and dramatic mountain backdrop, Montenegro possessed all the natural assets needed to relaunch itself as a top-tier tourist destination.

The recommendations were eagerly adopted by Montenegro’s long-serving leader, Milo Ðukanović, himself a tourism graduate and an ecological enthusiast. Public consultations were held, the process of privatising the existing hotel stock was inaugurated, and development loans began to flow into infrastructure projects across the country. All that was needed was long-term investors prepared to back the vision – not easy in a world where the majority of developers are looking for quick returns from cheap apartments and mass-market hotels.

Initially progress was slow. Overseas developers were reluctant to invest while the country remained in an alliance with Serbia – but Montenegro’s declaration of independence in 2006 was the signal investors needed. One of the first to join the gold rush was Peter Munk, the Canadian-Hungarian founder of Barrick Gold, the world’s biggest gold miner.

It was his vision to turn the rusting former naval base in the Bay of Kotor into Porto Montenegro, a vast waterside development where even the largest megayachts and their crews could have a year-round base. Other high-profile backers soon followed – Oleg Deripaska, Bernard Arnault, Lord Rothschild and his son Nathaniel all signed up for the project, attracted by the promise of tax-free investment and low-cost fuel.

Four years later, following an extensive clean-up that has included razing the military buildings, retooling the shipyard across the bay for superyacht maintenance and dredging military hardware from the bottom of the fjord, Porto Montenegro is finally opening fully this summer. The first phase includes a marina for nearly 200 boats, 29 luxury residences, and a 50m overwater lido pool complete with bar, restaurant and cutting-edge DJs.

However, Porto Montenegro’s owners have, so far, resisted government urging to include big hotels, saying it would ruin the exclusive character of the development. “They want to do things more quickly,” says Oliver Corlette, managing director of the project. “They think hotels bring in high-end travellers; we tell them we’re creating a car park for floating hotels.”

For visitors who want to see the country in style but aren’t fortunate enough to have their own superyachts, this summer will also see the re-opening of Sveti Stefan. This former fishing village, set on a tiny island off the Adriatic coast, was one of the tourist jewels of communist Yugoslavia, and in its 1970s heyday attracted jet-set figures including Sophia Loren, Kirk Douglas and Princess Margaret. Now owned by Greek shipping group Restis, it has had a designer makeover and comprises 51 rooms starting at 70m2, managed by ultra-luxury Asian hotel brand Aman.

Both these projects have had to overcome huge challenges. Organising a supply chain for a country that is woefully underconnected to the rest of Europe has been far from easy. Livio Ranza, general manager of the Aman resort, says that his previous posting in Bora Bora was excellent preparation for his present post.

An even bigger issue has been the infrastructure. Just down the road from Sveti Stefan – which has its own generator – the resort town of Budva still regularly runs short on power, partly because, until now, Montenegro’s biggest earner has been the energy-hungry KAP aluminium plant in its capital, Podgorica. Similarly, the historic walled town of Kotor, among others, often suffers serious water shortages in high summer – and the country’s road and railways remain decidedly sub-standard.

Relief, however, is on the way. The European Bank for Reconstruction and Development, KfW and others have committed nearly €1bn to projects over the next 10 years, including a water pipe to the coast, waste water treatment plants, an upgrade of the power grid and a series of hydropower stations. A road linking the coast with the national park at Durmitor in the interior is due to open this year, while there are plans for a new highway to Belgrade, a scenic train route through the mountains, and bypasses for the medieval holiday towns around the Bay of Kotor.

Montenegro’s airports are also on the list for upgrading, starting with the ex-military base at Tivat that is the gateway to both Porto Montenegro and the Luštica peninsula, where Geneva-based Orascom Development will build a luxury eco-town on the model of its Red Sea flagship resort, El Gouna. The first stage of the €1.1bn project is due to open in 2013, with a marina, two high-end hotels and Montenegro’s first 18-hole golf course.

“Montenegro has huge potential to be one of the most attractive tourist destinations in Europe,” says Raymond Cron, head of European destinations at Orascom. “It can become a second Monte Carlo; it’s a small country with a population of only 650,000, but it has lots of dynamism and a lot of potential.”

Like Porto Montenegro, the Luštica project will have to conform to strict government guidelines on sustainability and low-density development. It remains to be seen whether Montenegro will be able to maintain its high standards in the future, but so far its strategy has solid backing from its most important investors.

“High-end people want a beautiful environment,” says Oliver Corlette at Porto Montenegro. “If they build on it and destroy it, people won’t come here. This is the last place in Europe that hasn’t been taken over by development and, if we manage it carefully, it can stay that way.”