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USAID/Montenegro 

Operational Plan 

FY 2006 

June 13, 2006 
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Please Note: 

The attached RESULTS INFORMATION is from the FY 2006 Operational Plan and was assembled 

and analyzed by the country or USAID operating unit identified on the cover page. 

The Operational Plan is a "pre-decisional" USAID document and does not reflect results stemming 

from formal USAID review(s) of this document. 

Related document information can be obtained from: 

USAID Development Experience Clearinghouse 

8403 Colesville Road, Suite 210 

Silver Spring, MD 20910 

Telephone: (301) 562-0641 

Fax: (301) 588-7787 

Email: docorder@dec.cdie.org 

Internet: http://www.dec.org 

Portions released on or after July 1, 2006 
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Program Performance Summary FY 2005: I. Democratic Reform 

A. Country Situation: 

The government remains very stable and public opinion polls demonstrate that, even with a very difficult 

economic situation, governing institutions enjoy the confidence of close to half the voters. A notable 

event this fiscal year was the end of the opposition’s 16-month boycott of parliament in October 2004. 

With their return to parliament, although the legislative process slowed down considerably, parliamentary 

committees began for the first time to employ oversight functions and exercise their authorities. In 

October, the parliament debated and adopted a declaration on preservation of the Tara River following an 

effective NGO advocacy campaign; in May, there was a three-day debate on the issue of no-confidence 

in the government, attended for the first time by the prime minister and his entire cabinet; and in June, the 

parliament, with the votes of a majority of the opposition and the governing party, adopted a joint 

declaration on EU Integration, a precedent for consensus across party lines. 

Despite their return to parliament, the opposition parties continued to lose popularity in public opinion 

polls, and the DPS remained the most popular party in Montenegro. In FY 2005, a non-governmental 

pressure group formed by citizens, called the Group for Changes (GzP), emerged and grew rapidly in 

popularity over the year, now second only to DPS in the polls. While it is positive to see the emergence 

of a group that can challenge the dominant DPS and encourage the government’s accountability, the 

loose, undisciplined structure of GzP raises concerns about its role in the political process and its 

sustainability. 

FY 2005 was dominated by debate and polemics about the referendum on state status that the 

government plans to hold in spring 2006. Direct elections for the State Union Parliament were 

postponed, requiring an amendment to the constitutional charter with agreement that in any future 

referendum the member states would cooperate with the European Union on the conditions for its 

holding. Political parties have split into two camps that are sure to confront each other in the coming 

year. The challenge is to ensure that the confrontation is a peaceful one based on dialogue and the 

highest degree of consensus. 

Organized crime and corruption remained a serious issue for Montenegro in FY 2005, with little progress 

on solving previous assassinations, and a high police official responsible for these investigations killed. 

Although the legal framework provides the opportunity to address crime and corruption, advances in 

implementation and enforcement are essential. Montenegro’s judicial system is still the most problematic 

institution in the democracy sector. Despite the establishment of two new judicial entities - the Appellate 

and Administrative Courts - reforms of the judiciary lag behind reforms in the other two branches. The 

inability to have contract disputes tried in a timely manner or to enforce judgments continues to negatively 

impact investment. 

The central government is gradually improving its cooperation with local governments and the legal 

framework for putting into place a decentralized system of local self government in Montenegro is 

progressive; however, the pace of implementation is slow. Municipalities have issued only 18% of the 

local regulations required to implement local government laws. Local governments are over-staffed but, at 

the same time, lack the management systems and skilled personnel required to govern effectively. Local 

budgets are generally poorly controlled and implemented and local public communal service enterprises 

remain challenged by outdated infrastructure as well as poor management practices. 

In the past year significant progress was made in building public support for reforms by expanding 

opportunities for citizens to express their opinions publicly, exercise their political and economic rights 

and monitor government performance. Mobilization of various non-governmental organizations (NGOs) 

as watchdogs at both the national and local levels significantly improved citizens’ capacity to participate 

more effectively and knowledgably in political and economic processes. However, additional work is 

needed to make NGOs sustainable. On the media side, the Broadcasting Agency (BA) awarded 

frequencies to 40 radio and 16 television broadcasters under the first public tender for frequency 

allocations and rules for advertising and minimum standards for programming were adopted. The publicservice broadcaster Radio Television of Montenegro (RTCG) is unquestionably the leader in the market, 

closely followed by TV IN and the Belgrade-based TV Pink. Although strong progress has been made 
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over the past three years in implementing media reform, further improvements in business and reporting 

practices, as well as enforcement of the code of ethics for journalists, are needed to ensure sustainability 

of an independent media. 

B. U.S. Assistance Priorities: Montenegro’s reform efforts to date risk backsliding unless democratic 

institutions are strengthened and the population works to root out corruption and hold offenders 

accountable. USAID FY 2005 programs in Montenegro targeted assistance to various government 

institutions and emphasized increasing opportunities for public participation. Such activities included: 

work with the parliament to increase constituent outreach efforts and public hearings on key reform 

legislation; increasing training for judges and court administrators through a model court program to 

increase implementation of previously passed judicial reform legislation; increasing the role of NGOs in 

providing oversight of government bodies by providing sub-grants for watchdog activities; providing 

training and networking opportunities for journalists and broadcasters to improve reporting and business 

practices within the media sector; and improving the ability of political parties to communicate with the 

public. 

C. Program Performance: 

Judicial Reform and Rule of Law: The USAID-supported Judicial System Reform Program (JSRP) 

continued to provide expertise, training, and commodity assistance to improve the structure and 

operations of the judiciary, including the establishment of the Administrative Court and the Appellate 

Court, two new and vital institutions for the Montenegrin judiciary. These new institutions have reduced 

the Supreme Court caseload burden and have begun to ensure that jurisdiction conflicts are resolved 

promptly and efficiently. Assistance was also provided to the GOM to develop replicable models for 

reducing the backlog of court cases, assist in efficiently allocating administrative tasks throughout the 

court system, and strengthen overall court operations. The JSRP has been at the forefront of promoting 

progressive legal infrastructure change through a series of workshops and conferences that support both 

the drafting and implementation of civil legislation. 

Civil Society, NGOs and Small Grants: Assistance focused on strengthening NGO governance, including 

assisting the NGO sector in developing a republic-level NGO strategy to formulate its own self-regulation 

through an NGO Code of Ethical Conduct. This effort will help reform the parliamentary NGO grants 

system and formalize channels of cooperation between NGOs and government organizations. Some 

notable program successes included: two Regional Advocacy Centers increased their long-term 

sustainability through cost recovery, income generation, and/or new business development; and, four 

national-level NGOs contributed to building rule of law, succeeding to change or correct the government 

policy-making process, as well as drawing public attention to the implementation of laws through a 

significant number of watchdog projects. The NGO Sustainability Index for 2005 (preliminary results) 

improved from 4.7 in 2003 to 3.7 in 2005, with significant improvements in the areas of legal environment, 

organizational capacity, financial viability, and advocacy capacity. USAID also provided support at the 

national, regional, and local levels to assist in the development of a modern system of labor management 

relations by providing advice and assistance in establishing laws and institutions in the areas of social 

dialogue, economic transition, strategic planning and collective bargaining. Over 300 participants, 

including local labor leaders and trade union activists, were assisted in responding to the negative sideeffects in Montenegro’s transition to a free-market economy. In addition to assistance and advice to the 

National Economic and Social Council of Montenegro, 14 active local Economic and Social Councils were 

established in Montenegro. 

Media: In FY 2005 assistance focused on implementation of media reform legislation, including expert 

advice and on-the-job training provided to the leaders of the New Public Broadcasting Service for 

adoption of various programming principles. Assistance was also provided to the BA to develop a digital 

frequency plan as required by the International Telecommunications Union (ITU) for all European 

countries, and insure that the BA functioned as a neutral and professional entity. In addition, the BA 

Council set minimum standards for the advertising and sponsorship of media programs aired in 

Montenegro. Technical assistance and financial assistance was also provided to MINA (an independent 

and respected news agency) that is the source of approximately 65% of the news reported in 
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Montenegro. Advances in this sector during the past year were demonstrated by the Media Sustainability 

Index (MSI) for 2005 (preliminary results), which showed improvements in three essential key areas: the 

legal and regulatory indicator rose from 1.77 in 2001 to 2.70 in 2005 (reaching near sustainability); the 

indicator for professional journalism rose from 1.34 in 2001 to 2.20 in 2005; and the business 

management indicator rose from 1.16 in 2001 to 2.28 in 2005. 

Political Process and Election Assistance: Through a parliamentary strengthening program, the 

Parliament of Montenegro has made significant organizational and institutional steps toward revising its 

rules of procedure, computerizing legislative research methods, and supplementing meager human 

resources through a very successful student internship program. To address the challenges of a 

hierarchical, closed political system, the parliamentary program also worked to strengthen parties by 

carrying out multiparty youth leadership/training of trainers’ seminars. 

Community Revitalization: USAID's Community Revitalization through Democratic Action (CRDA) 

program is the USG's most visible program in Montenegro. By providing citizens with a means to voice 

their concerns and priorities, CRDA has motivated citizens to work together to achieve community goals 

and contributed to a strengthening of grass-roots democracy. In FY 2005, CRDA implementers executed 

25 projects within the civil works pillar. The total value of those projects was $4,649,856, of which USAID 

contributed only 38% of the total cost. During FY 2005, four energy-related projects were implemented for 

a total project value of nearly $500,000, with local counterparts contributing the rest; four transportation 

projects for a total value of $2.4 million; and, 11 school projects valued at nearly $900,000. In close 

partnership with the Ministry of Health, CRDA constructed, equipped, and launched into operation a 

Regional Women’s Reproductive Health Center for northern Montenegro. This Center also hosts victims 

of trafficking and domestic violence. The project also trained medical personnel, as the Center is 

spearheading implementation of the reproductive health component of the GOM's new health strategy. 

The CRDA program is still working with the Center on a system for successful outreach to scattered, 

largely rural communities. 

Decentralization and Local Governance: The Good Local Governance (GLG) project directed assistance 

to municipalities to establish local government structures, systems, and practices. During FY 2005, local 

assemblies in 24% of the municipalities received assistance on policy and budget setting, review, 

monitoring and evaluation. Local assemblies have been highly enthusiastic and assembly members, who 

are still elected from the party slate, are expressing a desire to be directly elected by and responsible to 

citizens. With respect to fiscal decentralization, the single largest impact has been the mobilization of the 

municipal treasury system: 81% of the municipalities have fully implemented a treasury system which 

includes formal adoption of treasury organization, procedures and software. E-banking is also underway. 

Achieving transparent operations has been facilitated by creating, equipping with software and hardware 

and training staff for treasury departments in 90% of municipalities. This has helped municipalities 

provide a transparent accounting record of budget and revenue transactions and easier management 

report generation. 

II. Economic Reform 

A. Country Situation: In FY 2005 all broad indicators of macroeconomic stability continued to improve. 

Inflation remained low and continues to fall, as did the fiscal deficit. Inflation for 2005 was well under 3% 

and the budget deficit, which as of October had fallen by over 30% from 2004, is on target to be just over 

2% of GDP. Under the modern and competitive tax system now in place, VAT accounts for over a third of 

tax revenues, consistent with EU requirements. Personal income tax rates were reduced by 10% and 

profit tax from 20% to 9%. The GOM strengthened its commitment to reduce the debt stock, continuing 

the positive trend for public debt as a share of GDP, which is on track to be 40% by the end of 2005. An 

important result of these changes for private sector growth has been the reduction of benchmark interest 

rates; T-bill rates fell sharply from 12% to 14% in late 2004 to under 3% in September 2005. Translation 

of this change into lower market interest rates has begun and will continue into 2006. The banking sector 

is increasingly well regulated according to international standards of risk-based supervision. In January 

2005 the monopoly payments system was fully dismantled and replaced by the new Inter-Bank Payment 

System (IPS). Introduction of the IPS has reduced inter-bank transfer transaction costs to a fixed tariff, 
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which has encouraged reductions in these fees. Bank deposits and levels of lending continued their 

dramatic rise: private deposits had risen by 66% as of September 30 and private borrowing by 37%. 

These positive financial sector trends were consolidated in October 2005 as the GOM successfully 

privatized the last remaining majority state-owned bank. 

In April 2005 the GOM adopted its revised Economic Reform Agenda (ERA; in English at 

www.gom.cg.yu/files/1126172740.pdf), which presents a public-policy commitment to the strategic vision 

of a liberalized, open economy with transparent and decentralized democratic institutions, laying out 

detailed and reasonably time-bound actions and outcomes through the end of 2007. It covers 18 areas for 

two broad objectives: Macroeconomic Stability and Development of Institutions to Support a Market 

Economy; and Economic Growth and Development. The ERA is increasingly used by the GOM as a key 

tool for donor coordination. Central to successful implementation of the ERA will be actions to increase 

formal private-sector employment and reduce unemployment as part of the GOM’s commitment to reduce 

the size of the “gray economy.” Although official unemployment in 2005 declined to 19% against a target 

for 2005 of 21.6%, a recent World Bank estimate suggests that "gray" sectors continue to account for 

about 30% of GDP and 27% of employment. Recent changes in tax and commercial laws support the 

trend to reduce informal sector activity and generate private sector jobs, but significant implementation 

gaps remain and key legislation changes are needed to increase labor market flexibility. For a small, open 

economy with no independent currency, managing the current account deficit (CAD) is of critical 

importance to sustain macroeconomic stability and ensure investment for growth and development. 

Montenegro’s CAD after grants was 9.3% in 2004. The large, one-time inflows of foreign direct 

investment in 2005 (e.g., the privatizations of Telekom, Kombinat Aluminijuma Podgorica [KAP], and 

Podgorickabanka alone generated over €200 million and there was a steady increase in tourist sector 

investment) ensure the impact of the CAD on macroeconomic stability will be significantly lower in 2005. 

Still, it remains a key policy parameter to be monitored. 

In addition to continuing improvements in macroeconomic stability, a large number of economic reform 

laws have been passed to reduce the barriers to starting and conducting business, notably on business 

registration, bankruptcy, collateral registration, foreign trade, mortgage, and domestic competition. 

Important legislation on consumer protection and streamlining permitting remains in the final stages of 

development. Implementation of the bankruptcy law remains mixed, with judges and administrators still 

not fully appreciating the benefits of its restructuring provisions, while training and court administrative 

support continues to help rectify this situation. Steps to enhance market performance were made with 

amendments to the Securities Law and to improve corporate governance, restructuring, and finance, by 

the new Law on Accounting and Audit, which ensures internationally recognized certification of auditors. 

B. U.S. Assistance Priorities: Although Montenegro continues to be politically and economically stable, a 

number of development challenges remain. The legislative and institutional frameworks needed to 

ensure a stable, free-market economy are not yet complete. Public opinion polls, while showing an 

increase in public confidence in the government’s performance, still flag improved living standards and 

job creation as top priorities. It is unlikely that public confidence in government institutions will increase 

significantly until the population sees tangible results in these areas. In FY 2005 USAID objectives in 

assisting Montenegro in furthering economic reforms focused on strengthening the institutional capacity 

of selected key entities such as the Ministry of Finance, Tax Administration, and Central Bank. Efforts 

focused on improving macroeconomic stability, including technical advice on economic reform legislation 

and implementation of those laws, assistance in formation of government policies that foster privatesector-led growth, water infrastructure projects to facilitate increased investment opportunities in the 

tourist sector along the coast, and local development projects to assist in income generation and the 

creation of job growth through community development. While Montenegro still has a number of issues to 

address in this sector, the government’s reforms enacted through 2005 have placed it on a solid footing in 

its efforts to compete successfully in the global economy and its long-term outlook is positive. 

C. Program Performance 

Economic Policy and Institutional Reform: USG assistance programs continued to help the GOM 

consolidate reform through improved implementation. At the Ministry of Finance all revenues now pass 
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through the central budgetary account and are subject to public disclosure. Progress continued to 

rationalize the structure of expenditures, although they remain weighted toward wages and social 

transfers. To parallel the new IPS, automated revenue accounting systems were effectively implemented 

in the main agencies that account for 98% of public revenues, with cash-based international accounting 

standards introduced for spending units and extra-budgetary funds. Analytical capacity and procedures 

were improved for budget analysis, planning and management, and revenue forecasting. The treasury put 

in place a centralized payroll system for all public-sector salaries. The Interim Debt Management 

Strategy, of critical importance to sound debt management policy in a euro-based economy, was 

approved by the GOM in August and used for re-balancing the 2005 budget and for preparing the 2006 

budget. The Institute for Strategic Studies and Prognoses, an effective local economic think-tank, 

continued to develop the research and analytical capability of young Montenegrin social scientists through 

strong policy analysis on key areas of current reform. 

Tax: Improved tax policy analysis helped to transform the tax system into a modern, competitive system, 

based on self-assessment and in line with international practice and EU standards. After the recent rate 

reductions, Montenegro has the lowest profits tax rate and simplest value added tax (VAT) in Southern 

Europe, creating a competitive tax structure to encourage business. 

Enterprise Development, Trade and Finance: The competitiveness project provided assistance to privatesector firms, business associations and government counterparts in the tourism, agriculture and wood 

sectors. Entrepreneurs and managers were assisted to improve product quality and firm operations and 

performance, in order to encourage investment and growth. Collaborative efforts among firms, business 

associations and appropriate government entities helped access new markets, increase efficiency and 

improve the business environment. A key success has resulted from support provided to the Ministry of 

Tourism on tourism development tenders, including the tender for a long-term lease for one of the most 

prestigious resorts in the republic, Sveti Stefan. Assistance provided credibility in the international 

marketplace and helped the GOM meet top industry practice, creating a strong likelihood that a lucrative 

agreement will be reached in early 2006. Assistance on this and other tenders is projected to lead to 

several hundreds of millions of dollars in investment. USAID assistance, in addition to attracting strategic 

foreign investment, offered numerous capacity-building events to raise standards for managing the needs 

of international guests, evaluate global trends in tourism and their impact on Montenegrin tourism, and 

develop tourism marketing and marketing distribution. 

Activities to strengthen effective private sector development continued with two local strategic partners--

the Center for Entrepreneurship and Economic Development (CEED) and Montenegro Business Alliance 

(MBA). The CEED Consulting fee-for-service business continued to perform well over the past year 

serving local business needs, while the CEED Services publication “Removing Barriers to Doing Business 

in Montenegro” won second place worldwide in the Free Market Solutions to Poverty Category of the 

2005 Templeton Freedom Award. The MBA continues to gain membership and has increased its 

effectiveness as a key business voice and valued partner for both parliament and the GOM in working to 

improve the business climate. Program activities also provided crucial assistance to support relevant 

GOM entities to put into place trade and foreign investment policies that will allow Montenegro to 

participate effectively in the liberalized global trade regime, as represented by the WTO. The GOM is now 

well prepared in most of the formal required communications, which should allow it to proceed smoothly 

with its accession, opened by the WTO on a separate track from Serbia in February 2005. 

After just over three years of operation, the USAID supported Opportunity Bank (OB) now has a total of 

70,980 customer relationships with economically active citizens (depositors, borrowers, guarantor 

relationships) and operates a total of 28,785 client accounts. During the life of this now-completed project, 

OB disbursed over 22,000 loans valued at over €73.3 million. During FY 2005, reflecting but outstripping 

positive general trends in the banking sector, OB saw dramatic improvement and growth in all areas. As 

of September 30, 2005, year-to-year deposit growth was over 330%; year-to-year SME loans increased 

by 68%; and non-SME loans grew by 47%. At the end of USAID’s direct role in this project, with 

completion of its agreement in September 2005, OB is able to stand on its own in a commercial setting as 

a local leader in micro-enterprise and small business banking. 
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Community Revitalization through Democratic Action-Economic Focus (CRDA-E): This year, CRDA 

programming efforts through community-driven projects demonstrated a natural progression towards local 

economic growth activities. By the end of FY 2005, CRDA-E community and sub-regional development 

councils had selected, designed and carried out 291 economic and social development projects worth 

close to $7 million, with overall USAID contributions equally matched by public, private, and community 

contributions. CRDA-E is concerned with supporting the development of new businesses and 

entrepreneurs, as well as encouraging businesses to register, thus shrinking the gray economy and 

recovering taxes to support municipal services. In just five months, approximately 110 new entrepreneurs 

out of a targeted 125 have benefited from a micro-grant award program, which distributed 81 awards to 

vulnerable households. CRDA-E is particularly focused on business and producer associations in the 

promising industry sub-sectors of agriculture and tourism. Eight CRDA/CRDA-E project activities in 

partnership with the olive growers associations on the coast of Montenegro, three completed in FY 2005, 

have brought a traditional industry back to life. 

Coastal Water and Waste Water Earmark: During FY 2005, USAID partners implemented water and 

waste water improvements in the coastal regions of Montenegro as part of a $12 million FY 2004 

Congressional earmark. The objective of these activities was to design, build, or upgrade selected water 

and wastewater infrastructure in order to improve the quantity and quality of water services, address 

public health threats faced by local residents and tourists, and reduce environmental degradation, 

particularly through shore pollution. The projects, which operated in major tourist destinations along the 

coast, have 13 activities underway, including eight municipal water network upgrades and five wastewater 

system improvements. By the end of FY 2005 the overall project was 75% complete. One major activity, 

a 2500-cubic-meter water reservoir, was delayed six months to resolve the issue of finding an acceptable 

site location, but now all activities are on schedule for full completion by the scheduled project completion 

date of March 2006. The project had already generated tangible results through these critical 

infrastructure improvements by the start of the 2005 tourist season. The number of customers receiving 

an uninterrupted supply of water was improved significantly, including many small businesses. During the 

July-August peak of the 2005 tourist season there was a significant reduction in the number of days 

during which there were interruptions of an hour or more of drinking-quality water supply in the three 

targeted municipalities. This improved water supply quality was able to support an additional 13,000 

tourists in the Budva Municipality in the 2005 season. Sewage systems in two major tourist destinations 

(Kotor and Budva) were also significantly improved, reducing waste water pump interruption by 90%. In 

previous years, such interruptions had resulted in sewage back-up, bad odors, and in some cases, 

overflow of untreated sewage onto beaches. The improvements to the water and waste water systems 

provide a solid foundation on which the GOM can build to meet its crucial, growing tourism-sector needs 

on the coast of Montenegro. 

Donor Relations: USG SEED assistance levels to Montenegro have decreased significantly from prior 

years, but USAID remains a significant donor in Montenegro. With the advent of the Stabilization and 

Association Agreement (SAA) with the EU and an expected increase in European multi- and bi-lateral 

donor assistance, overall donor assistance levels should be sufficient. USAID coordinates closely with all 

other donors in an effort to avoid duplication, leverage USG assistance, and to identify potential 

successors for assistance in areas where the USG will no longer work due to funding constraints. In 

2005 the European Agency for Reconstruction (EAR) became Montenegro’s largest donor, with its budget 

surpassing USAID’s for the first time. Its main areas of focus are: public administration reform, judiciary 

reform, integrated border management, energy and enterprise restructuring and privatization. The 

programs of the World Bank and the European Bank for Reconstruction and Development are principally 

focused on economic growth and infrastructure investments, while the International Finance Corporation 

centers on small and medium-sized enterprise development. The UNDP, with funding from the EAR, 

Germany, Canada, and the Netherlands, is working on the environment, enterprise development, and civil 

society. The Open Society Institute, the Organization for Security and Cooperation in Europe (OSCE), 

and the Council of Europe have small rule-of-law programs. Funding for humanitarian aid is much 

smaller than in previous years, with remaining programs coordinated by UNHCR. Coordination takes 

place at all levels, starting from the high-level collaborative framework of the GOM’s ERA and continuing 

through regular meetings at the technical level of program managers and assistance implementers. 

USAID participates in donor coordination bodies on infrastructure and border crossings managed by the 
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EAR; an environment coordination body managed by UNDP; and a reproductive health strategic working 

group with the World Bank and the British Department for International Development (DFID). In drafting 

their €5.5 million EU Community Assistance for Reconstruction, Development and Stabilization (CARDS) 

regional program to be implemented in 2005-2007, the European Commission coordinated with USAID to 

ensure their efforts would complement U.S. activities. 

III. Other Programs of Significance 

Anti-Trafficking: The International Office for Migration (IOM) is implementing a USAID-supported grant to 

provide institutional strengthening and operational support for a shelter for victims of trafficking in 

Podgorica managed by a local NGO. The number of foreign and Montenegrin trafficked victims identified 

and assisted through the IOM-supported shelter in the last year was 23. All of the victims were provided 

with safe and full-board accommodation; psychological, medical, legal, vocational training; transportation; 

and interpretation services. The GOM will take over the responsibility for funding the shelter in January 

2006. IOM also delivered customized reintegration assistance to national victims identified abroad or 

within Montenegro. Finally, aiming to strengthen Montenegro’s institutional capacity to identify and 

respond to specific protection and assistance needs of trafficked victims, IOM delivered joint trainings on 

protection and assistance for victims of trafficking for officials of Montenegro’s Ministry of Labor and 

Social Welfare, Ministry of Health, and Ministry of Education. 

Anti-Corruption: Identified as a significant problem in Montenegro, the Mission has made it a priority for 

future activities launched under the new strategy to specifically address in the scope of work how anticorruption issues for that sector will be addressed. Coordination with U.S. Treasury-led support to the 

Agency for Prevention of Money Laundering helped it to accede to the Egmont Group in June 2005. 

 IV. Cross-cutting Activities 

Global Development Alliances and Partnerships: Public-private partnerships were identified as a crosscutting theme in the new strategy, and the Mission is actively looking to develop partnerships with new 

local or U.S. partners that will help achieve targeted objectives. With decreased funding the Mission will 

have to reduce efforts in priority areas, and may be able to identify new local and non-traditional partners, 

including donors, to take on some of the responsibilities. USAID is developing strategies to identify nontraditional partners to leverage program funding, such as reaching out to the various Diaspora groups 

who have traditionally invested money into their former home communities and by exploring opportunities 

with the Global Development Alliance (GDA) program. The Small Enterprise Assistance Funds (SEAF) 

has established a fund with USAID support to provide equity, in combination with technical and 

managerial assistance to SMEs, in companies across a diversified range of industries. Partners include 

donors, governments, the private sector, corporations, pension funds and foundations. 

Gender: A gender assessment for Serbia and Montenegro was completed in March 2005. The 

assessment identified a number of best practices and provided recommendations for future consideration. 

In USAID’s new strategy gender is a key cross-cutting issue. As under the former strategy, gender will 

continue to be integrated and institutionalized at all stages of the Mission’s work, e.g. policy or activity 

planning, implementation, and monitoring and evaluations. 

For more information, please visit www.usaid.org.yu. 
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FY 2006 Program 

SO: 170-0131 Democratic Governance of Market Economy Strengthened 

Improve Economic Policy and the Business Environment 

Improve Economic Policy and the Business Environment ($1,149,000 AEEB, $93,515 AEEB prior year 

recoveries). USAID seeks to improve the competitive environment for private-sector activity in 

Montenegro by providing key capacity-building support at the Ministry of Finance for program budgeting, 

development of medium-term economic framework, improved Treasury function, and strengthened tax 

and customs policy. Support will be provided to the audit function at Tax Administration and to assist work 

led by the U.S. Treasury for the Agency for Prevention of Money Laundering. In addition, activities will 

work to strengthen financial-sector institutions for banking supervision and enhance commercial bank 

development, insurance regulation, and training and education for better implementation of commercial 

legislation and courts, accounting and audit, labor markets, and pension reform. Some limited support 

will be provided to other institutions to support market reforms, such as the Small and Medium Enterprise 

Development Directorate, Statistics Agency, and university-level entrepreneurship curriculum 

development. Assistance for the Regional Energy Regulatory Program will support institutional 

strengthening at the Energy Regulatory Agency of Montenegro, allowing them to take part in the program 

of information exchange and capacity building for energy regulatory authorities in Central and Eastern 

Europe and Eurasia. USAID will closely coordinate with the European Agency for Reconstruction, World 

Bank, and other bi-lateral and multi-lateral donors. Principal partners: Bearing Point, Energy Regulators 

Regional Association (ERRA) (primes). 

Strengthen the Justice Sector 

Strengthen the Justice Sector ($1,200,000 AEEB). In FY 2006, USAID will continue with technical and 

training support of Montenegro's judicial reform, laying the foundation for an independent, impartial, 

transparent judiciary that will protect the rights of physical and legal entities. Support for strengthening of 

the Judicial Training Center and the new Administrative Office will increase in an effort to assist the 

judicial system in effectively and efficiently dealing with case management systems and staff in the 

courts. In addition, assistance will be provided for legislative drafting and for effective implementation of 

the new legal framework for judicial officials, including work on a new constitution, and legal 

commentaries. Limited support will be provided for further training in court administration for all courts in 

order to enable functioning of the courts in a more transparent, open, responsive, and accountable 

manner. Principal partners: Checchi, Company Consulting, Inc. (primes). 

Strengthen the Legislative Function/Legal Framework 

Strengthen the Legislative Function/Legal Framework ($440,000 AEEB). USAID will provide technical 

and training assistance through a new Parliament Strengthening Activity, to develop a more inclusive 

internal party decision-making process, increased dialogue among party factions, and organizational 

reforms that will strengthen parliament's position and improve legislative capacity. This will be achieved 

by focusing assistance on five primary needs: more efficient legislative operations, a better developed 

committee structure, more professional staffing resources, better organized administration and strategic 

planning, and constituency outreach and representation. In addition, limited assistance will be provided 

to political parties through party clubs and party caucuses within the parliament. These improvements will 

enable parliament to become an effective third branch of Montenegro’s democratic governing system that 

advances needed reform and political stability for the benefit of all citizens. Principal partners: to be 

determined (TBD). 

FY 2007 Program 

SO: 170-0131 Democratic Governance of Market Economy Strengthened 

Improve Economic Policy and the Business Environment 
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Improve Economic Policy and the Business Environment ($2,735,000 AEEB). In FY 2007 USAID will 

provide support to the Ministry of Finance to build capacity in budgeting, develop a medium-term 

economic framework, improve Treasury function, strengthen tax and customs policy, audit function at Tax 

Administration and the Anti-money Laundering Agency work led by the U.S. Treasury. In addition, USAID 

will strengthen the financial sector institutions in the areas of banking supervision and commercial bank 

development, insurance legislation. Finally, USAID will provide training and education to improve the 

implementation of commercial legislation and courts, accounting and audit, labor markets and pension 

reform, and provide targeted support to other institutions to support market reforms. Principal partners: 

Bearing Point, ERRA (primes). 

Strengthen the Legislative Function/Legal Framework 

Strengthen the Legislative Function/Legal Framework ($1,250,000 AEEB). USAID will continue with the 

Parliament Strengthening Activity initiated in FY 2006 and focus on development of the parliament's more 

inclusive internal party decision-making process, increased dialogue among party factions, and 

organizational reforms. Some assistance may be provided to political parties through party clubs and 

collegiums, emphasizing a focus on youth and municipal-level impacts, as well as further work on the 

legal framework. Implementer: TBD. 

FY 2006 Program 

SO: 170-0132 Enterprise Growth Increased In High Potential Sectors and Municipalities 

Expand & Improve Access To Economic & Social Infrastructure 

Expand & Improve Access To Economic & Social Infrastructure ($489,750 AEEB). USAID will continue to 

promote development of and leverage funding for economic infrastructure projects through the 

Community Revitalization through Democratic Action - Economy (CRDA-E) activity in order to stimulate 

and support business development and investment. Activities will enhance successful infrastructure 

investments realized under the original CRDA project and the Coastal Development and Environment 

activity. The Good Local Governance (GLG) project will continue support for improved water company 

billing and revenue-collection, for benchmarking of municipal water company performance against 

international indicators and for completing targeted water utilities' business plans. Work in progress by 

USAID and the United States Trade and Development Agency (USTDA) should result in completion of a 

feasibility study for a revolving investment fund (RIF) to provide credits in the municipal water sector, with 

mobilization of a Development Credit Authority/Global Development Alliance to begin to design and build 

the RIF, and companion technical assistance to increase bankability of target municipal water utilities in 

key tourism locations in the Republic. Other possible donor funding mobilization is expected. Principal 

partners: International Relief and Development (IRD); The Urban Institute (UI); USTDA; DCA/GDA with 

New York State Environmental Facilities Corporation et al. 

Improve Private Sector Competitiveness 

Improve Private Sector Competitiveness ($1,769,250 AEEB). USAID will continue implementation of the 

CRDA-E project and the Private Sector Development and Competitiveness project. Activities will work 

with business associations, producer associations and private business partners to improve business 

strategies and products to expand access to the market. Activities will enhance firm and industry 

domestic/foreign export product development and promotion through improved quality standards and 

packaging, international certification, market research, marketing, branding, and customer service. 

Activities will also work with high-potential local firms to help them compete for investment. In addition to 

technical assistance and training, CRDA-E will provide strategic co-financing and co-development of 

business opportunities in the agriculture and tourism sectors through business and producer associations 

with emphasis on full-time equivalent job creation and income generation. Activities will support local 

business associations, business service providers and think-tanks to improve understanding of the 
12

requirements in a market economy and to upgrade skills. Activities seek to enhance critical input from the 

private sector to improve and institutionalize reforms in the business regulatory environment to remove 

barriers and improve competitiveness. Principal partners: International Relief and Development (IRD) 

and Booz-Allen-Hamilton (BAH). 

Support Democratic Local Government & Decentralization 

Support Democratic Local Government & Decentralization ($906,000 AEEB). USAID will support 

strengthening of municipal economic planning and development capacity through public-private Local 

Economic Development Councils, established under CRDA-E, emphasizing realization of high-potential 

municipal and regional-scale projects with opportunity for quick economic results. Efforts will also remove 

municipal barriers to business and institute incentives to attract investors. Principal partners: 

International Relief and Development (IRD) and The Urban Institute (UI). 

FY 2006 Program 

SO: 170-0211 Risk of Political Instability Reduced 

Expand & Improve Access To Economic & Social Infrastructure 

Expand & Improve Access To Economic & Social Infrastructure ($1,749,640 AEEB). In FY 2006 activities 

will seek opportunities to promote development of and leverage funding for economic infrastructure 

projects to stimulate and support business development and investment. Investments may build on the 

successful results of the original Community Revitalization through Democratic Action (CRDA) and Good 

Local Governance (GLG) activities.Cooperative Housing Foundation (CHF) (prime). 

Strengthen Civil Society 

Strengthen Civil Society ($648,000 AEEB). In FY 2006, USAID will continue to work on civil society and 

media development. Assistance will be provided for improving the legislative framework for ensuring 

long-term sustainability of the non-governmental organization (NGO) sector and public perception of 

NGOs. Also, support will be provided for development of structured systems and practices for formal 

citizen participation and advocacy associations to watchdog transparency and protection of civic rights of 

citizens. Further technical assistance and training will be provided for successful transformation of 

Montenegro Radio/Television (RTCG) into a public broadcaster, implementation of Free Access to 

Information Law, and further decriminalization of libel. Limited support will be provided for economic 

reporting training to enhance quality of business writing and training/education on professional standards. 

Limited assistance will also be provided to political parties through party clubs, collegiums, and party 

caucuses within the parliament. Finally, technical assistance and a grant for domestic election monitoring 

will be provided to a competent, well established local NGO. The political party and election assistance 

component are a part of a larger Parliamentary Strengthening Activity notified strategic objective 170-

0131. Principal partners: American ORT and National Democratic Institute (NDI). 

Support Democratic Local Government & Decentralization 

Support Democratic Local Government & Decentralization ($823,360 AEEB). In FY 2006 as one 

element of their activity, the CRDA-E North activity will continue to support strengthening of municipal 

economic planning and development capacity through Local Economic Development Councils, 

emphasizing realization of high potential municipal and regional scale projects with opportunity for quick 

economic results. In the economically depressed northern region of Montenegro, a public-private 

regional development agency is planned for launch, with multi- donor and local support, to improve the 

economic environment for development of competitive advantages of the north. Efforts will also remove 

municipal barriers to business (i.e. one stop shops) and institute incentives to attract investors, including 

from the Diaspora. Implementer: CHF (prime). 
13

FY 2007 Program 

SO: 170-0211 Risk of Political Instability Reduced 

Expand & Improve Access To Economic & Social Infrastructure 

Expand & Improve Access To Economic & Social Infrastructure ($667,000 AEEB). Building on the 

foundation work accomplished under the CRDA-E and the Private Sector Development and 

Competitiveness Project, and the Revolving Investment Fund initiative, the Mission will design a new 

activity to support local economic development to foster small business growth and enterprise growth in 

the disadvantaged populations in Montenegro. It will seek to improve municipal and regional services and 

economic infrastructure in support of businesses and expansion of employment opportunities. While it is 

envisioned that this program will concentrate the bulk of its activities in the Northern region of Montenegro 

that has been identified as the most fragile, it will seek opportunities to work in other ethnically vulnerable 

communities in the Southern region as well. Implementer: TBD. 

Strengthen Civil Society 

Strengthen Civil Society ($600,000 AEEB). USAID will continue its civil society and media development 

activity that will implement activities directed to improve NGO sustainability and the capacity of NGO’s to 

advocate and monitor on behalf of the citizens and bolster implementation of media reform and enhance 

investigative and economic reporting. 

FY 2006 Program 

SO: 170-0420 Cross-Cutting Programs 

Program Support 

Program Support ($2,500,000 AEEB, $380,495 AEEB carryover). The funds provide salary and ogistical 

support for program-funded personnel, the operational costs of the two field offices that monitor and 

manage many of USAID's programs in Montenegro, and program-related activities that affect more than 

one objective, such as assessments, activity design, evaluations, and training. USAID in Montenegro 

intends to buy into a mechanism managed by Serbia's program on the human and institutional capacitydevelopment activity in FY 2006 that will be focused primarily on participant training and upgrading 

private- and public- sector human capacity. 

FY 2007 Program 

SO: 170-0420 Cross-Cutting Programs 

Program Support 

Program Support (AEEB $1,431,000). The funds provide salary and logistical support for program-funded 

personnel, the operational costs of the two field offices that monitor and manage many of USAID's 

programs in Montenegro, and program-related activities that affect more than one objective, such as 

assessments, activity design, evaluations, and training. 
14

Results Framework 

170-0130 Accelerated Development and Growth of Private Enterprise 

Program Title: Economic Policy and Finance 

 IR 170-0131: Increased Soundness of Fiscal Management 

 IR 170-0132: Improved Functioning of Financial Markets 

 IR 170-0133: Private Enteprises Strenghtened 

 IR 170-0134: Enhanced Economic Soundness of Energy Sector 

Discussion: USAID support for IR 170-0134 ended in December 2004 and with it access to the internal 

financial data that had allowed construction of actual data for a period other than normal accounting 

period (January 1 - December 31). For comparative purposes, the following data summarize the indicator 

actual results for full calendar years 2002, 2003, and 2004 in millions of euros: 

2002 2003 2004 

25.2 9.1 12.9 

170-0131 Democratic Governance of Market Economy Strengthened 

Program Title: Economic Policy and Governance 

 IR 170-0131.1: Policy and Legal Framework for Economic Growth Improved 

 IR 170-0131.2: Government Institutions Implement Economic Framework 

 IR 170-0131.3: Government Exercises Authorities Responsively 

Discussion: This is a new SO as of FY 2006, and while preliminary discussions have been held 

regarding measurements, these indicators are subject to review and revisions as the Mission develops its 

PMP. 

170-0132 Enterprise Growth Increased In High Potential Sectors and Municipalities 

Program Title: Local Economic Growth 

 IR 170-0132.1: Improved Local Business Climate in Targeted Municipalities 

 IR 170-0132.2: Competitiveness Increased in Targeted Sectors 

Discussion: This is a new SO as of FY 2006, and while preliminary discussions have been held 

regarding measurements, these indicators are subject to review and revisions as the Mission develops its 

PMP. 

170-0200 More Effective, Responsive and Accountable Democratic Institutions 

Program Title: Democracy and Governance 

 IR 170-0201: Enhanced Capacity and Competitiveness of Independent Media 

 IR 170-0202: Strenghtened Civil Society, Political Party and Trade Union Capacity to Serve and 

Represent Citizens 

 IR 170-0203: More Effective, Independent, and Accountable Legal Institutions 

170-0210 Increased, Better Informed Citizens' Participation in Political and Economic DecisionMaking 

Program Title: Community Development and Local Governance 

 IR 170-0211: Citizens Improve theri Living Conditions through Participation in Community Development 

Activities 

 IR 170-0212: Improved Interaction Between Citizens and Local Government 
15

170-0211 Risk of Political Instability Reduced 

Program Title: Democracy and Economic Security 

 IR 170-0211.1: Improved Economic Security in Vulnerable Areas 

 IR 170-0211.2: More Inclusive Democratic Structures 

 IR 170-0211.3: Rapid and Effective Response to Crisis by Relevant Actors 

Discussion: This is a new SO as of FY 2006, and while preliminary discussions have been held 

regarding measurements, these indicators are subject to review and revisions as the Mission develops its 

PMP. 

170-0410 Special Initiatives 

Program Title: Special Initiatives 

170-0420 Cross-Cutting Programs 

Program Title: Cross-Cutting Programs