EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 5.11.2008 
SEC(2008) 2696 
  
COMMISSION STAFF WORKING DOCUMENT 
 
MONTENEGRO 2008 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2008-2009
 
{COM(2008) 674} 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 4 
1.1. Preface................................................................................................................... ....... 4 
1.2. Context ................................................................................................................... ...... 4 
1.3. Relations between the EU and Montenegro................................................................. 5 2. Political criteria .......................................................................................................... .. 6 
2.1. Democracy and the rule of law .................................................................................... 6 2.2. Human rights and the protection of minorities .......................................................... 13 2.3. Regional issues and international obligations............................................................ 18 3. Economic criteria ....................................................................................................... 20 3.1. The existence of a functioning market economy ....................................................... 20 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 24 
4. European standards .................................................................................................... 27 4.1. Internal market ........................................................................................................... 27 
4.1.1. Free movement of goods............................................................................................ 27 4.1.2. Movement of persons, services and right of establishment ....................................... 28 
4.1.3. Free movement of capital........................................................................................... 30 4.1.4. Customs and taxation ................................................................................................. 30 4.1.5. Competition............................................................................................................. ... 31 
4.1.6. Public procurement .................................................................................................... 32  
4.1.7. Intellectual property law ............................................................................................ 32 4.1.8. Employment and social policies................................................................................. 33 4.1.9. Education and research .............................................................................................. 34 4.1.10. WTO issues ............................................................................................................. ... 36 
4.2. Sectoral policies ......................................................................................................... 36 
4.2.1. Industry and SMEs..................................................................................................... 36  
4.2.2. Agriculture and fisheries............................................................................................ 37 4.2.3. Environment............................................................................................................. .. 38 
4.2.4. Transport policy ........................................................................................................ . 39 
4.2.5. Energy .................................................................................................................. ...... 40 
EN 3   EN 4.2.6. Information society and media................................................................................... 41 
4.2.7. Financial control....................................................................................................... .. 43 
4.2.8. Statistics .............................................................................................................. ....... 43 
4.3. Justice, freedom and security ..................................................................................... 44 4.3.1. Visa, border, control, asylum and migration.............................................................. 44 4.3.2. Money laundering ...................................................................................................... 46  
4.3.3. Drugs................................................................................................................... ....... 46 
4.3.4. Police.................................................................................................................. ........ 47 
4.3.5. Fighting organised crime and terrorism ..................................................................... 47 4.3.6. Protection of personal data......................................................................................... 49 
STATISTICAL ANNEX
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
MONTENEGRO 2008 Progress Report 
1. I NTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported regularly to th e Council and the Parliament 
on progress made by the countries of the Western Balkans region. 
Following Montenegro's independence in June  2006, the Commission issu ed progress reports 
dedicated entirely to Mo ntenegro in 2006 and 2007.  
This report: – briefly describes relations betw een Montenegro and the Union; 
– analyses the political situation in Montenegro  in terms of democracy, the rule of law, 
human rights, protection of minorities and regional issues; 
– analyses the economic situation in Montenegro; 
– reviews Montenegro's capacity to implement European standards, i.e. to gradually 
approximate its legislation and policies with the acquis , in line with a Stabilisation and 
Association Agreement and the Eu ropean Partnership priorities. 
This report covers the period from late October 2007 to early Oc tober 2008. Progress is 
measured on the basis of decisions taken, legisl ation adopted and measures implemented. As a 
rule, legislation or measures which are bei ng prepared or awaiting parliamentary approval 
have not been taken into account. This approach  ensures equal treatment across all reports and 
permits an objective assessment. 
The report is based on information gath ered and analysed by the Commission. Many 
additional sources have been used, includi ng contributions from the government of 
Montenegro and from the Member St ates, European Parliament reports
1 and information from 
various international and non- governmental organisations. 
The Commission draws detailed conclusions regarding Mont enegro in its separate 
communication on enlargement2, based on the technical analysis  contained in this report. 
1.2. Context 
The EU Member States recognised the in dependence of Montenegro in June 2006. 
Montenegro is a potential candidate for EU membership. The Stabilisation and Association 
                                                 
1 The rapporteur  for Montenegro is Mr Vernola. 
2 Enlargement Strategy and Main Challenges 2008-2009. 
EN 5   EN Agreement between Montenegro and the EU  was signed in October 2007. An Interim 
Agreement was signed on the same date and entered into force in January 2008. The Commission Delegation in Montenegro ha s been operational since November 2007. 
1.3. Relations between the EU and Montenegro 
The Stabilisation and Association Agreement  (SAA) between the European Communities 
and their Member States and Montenegro a nd the Interim Agreement on trade and trade-
related matters were signed in October 2007. Th e Interim Agreement entered into force in 
January 2008. The SAA ratification process ha s been launched. By 1 October 2008 8 EU 
Member States and Montenegro had notified th eir ratification of the Agreement. Also the 
European Parliament gave its assent in December 2007. Montenegro  has now started to 
implement the Interim Agreement. Continue d attention and dedication, combined with 
allocation of the necessary administrative resources , will be necessary in order to ensure that 
Montenegro abides by all its commitments. Al so Montenegro has started implementing its 
commitments under the SAA and stepped up prep arations for full implementation of the 
Agreement once it is ratified.  
The EU is providing guidance to the Montenegri n authorities on reform  priorities via the 
European Partnership . Montenegro is in the process of implementing it. Dialogue on 
European integration issues continued in the enhanced permanent dialogue and in the bodies 
for the Interim Agreement. Where possible, th ese meetings have been merged. In January 
2008, a political dialogue  meeting was held between the EU (troika) and Montenegro.  
Following the entry into force of the agreements on visa facilitation  and readmission  in 
January 2008, the first meetings of the Joint Committees provided for in these two agreements 
were held in May 2008. The visa facilitation agre ement simplifies procedures for issuing visas 
to certain categories of citizens of Montenegr o, including students, scho lars, businesspeople, 
journalists and tourists. Under the terms of this agreement, citizens of Montenegro pay a 
reduced visa fee or receive visas free of ch arge. The agreement on readmission set out clear 
obligations and procedures for the authorities of both Montenegro and EU Member States on 
when and how to take back people who ar e illegally residing on their territories. 
Implementation of the readmission agreement is proceeding smoothly.  
Since 2007 Montenegro has been receiving pre-accession  financial assistance  under the 
Instrument for Pre-Accession Assistance (IPA) , which is being implemented by the new 
Commission Delegation in Podgor ica. The Commission Delegatio n took over responsibility 
for CARDS assistance from the European Ag ency for Reconstruction in September 2008. 
Decentralised management of EC aid is  a medium-term objective for Montenegro. 
The 2008-2010 Multi-Annual Indi cative Planning Document (MIPD) for Montenegro was 
adopted in August 2008. In 2008 a total of €32.6 million was allocated to Montenegro. The 
main focus areas are public administratio n reform, including local government, the 
environment, integrated border management, ru ral development, food safety, labour market 
reform and support for business development.  Under the IPA national programme for 2007 €1 
million was earmarked for financial support for civil society . 
Following the provisional application of Protocol 8 of the SAA in November 2007, 
Montenegro can accede to Community programmes which are open to Western Balkan countries. The Montenegrin government ha s signed Memoranda of Understanding for 
Montenegro's participation in the 7th Fram ework Programme for research, technological 
EN 6   EN development and demonstration activities and in the specific programme on entrepreneurship 
and innovation, which is part of the Competitiveness and Innovation Framework Programme 
(2007-2013).  
2. P OLITICAL CRITERIA  
This section examines the progress made by  Montenegro towards meeting the Copenhagen 
political criteria, which require stability of institutions guaranteeing democracy, the rule of 
law, human rights and respect fo r and protection of minorities.  It also monitors regional 
cooperation, good neighbourly rela tions with enlargement countries and Member States and 
compliance with international obligations, such as cooperati on with the UN International 
Criminal Tribunal for the former Yugoslavia. 
2.1. Democracy and the rule of law 
Constitution Establishment of the legal and institutional set- up required for an independent country, which 
is a key European Partnership priority, is almost complete. Ratification of the international instruments to which the State Union of Serbia and Montenegro acceded is complete. 
The Law on the implementation of the constitu tion adopted in Octobe r 2007 set a timetable 
for adoption of new laws and amendment of exis ting laws in line with the new constitution. In 
February 2008 parliament amended the implem entation law, putting back its deadlines. The 
amended deadlines have been respected on the w hole, as laws have already been adopted on 
Montenegrin citizenship, travel documents of Montenegrin citizens, residence and place of 
abode of citizens, identification cards, the Social  Council, the Judicial Council, election of the 
President of Montenegro, electoral rolls, cour ts, State administration and expropriation. The 
Laws on election of MPs, on State property a nd on minorities' rights and freedoms still need 
to be harmonised with the constitution.  
In a number of areas, there is still a need to supplement the constitution with implementing 
provisions in line with European standards. This applies in particular to  the judiciary and the 
prosecution service, where there are still ri sks of political inte rference by parliament. 
Provisions relevant to retroa ctive application of the Eur opean Convention on Human Rights 
require further elaboration. The constitutional pr ovision on “proportionate representation” of 
national minorities in public se rvices needs to be clarified. 
Parliament 
Work on strengthening political consensus, part icularly on European integration issues, has 
continued. Since January 2008 the government ha s been reporting monthly to the committee 
on international relations and European integra tion on progress in EU integration. This has 
raised the level of involvement of this  committee in the integration process. In  December 
2007 parliament unanimously adopted a Resolu tion on fulfillment of Montenegro's SAA 
obligations. Another Resolution on accelerating Montenegro's in tegration into EU and Euro-
Atlantic organisations was adopted by parl iament in early October 2008. In April 2008 
parliament established a Council for EU integr ation. This body includes representatives of 
parliament, government and civil society and is to monitor the European integration process 
in Montenegro, including implementation of the SAA.  
EN 7   EN Parliament's 2008 work plan set a timetable  for plenary sessions and sessions of the 
parliamentary committees. But this work plan has not been fully met. 114 laws have been adopted since October 2007. This intense activity stems from the need to complete the legal 
framework of the country following its independence and adoption of the new constitution and should be commended. However, parliament  has not made good use of its working bodies 
and observance of the rules of procedure rema ins problematic. Furthermore, inspection and 
control mechanisms provided in the rules of procedure are not being used appropriately. 
Parliamentary work is not yet e fficient and transparen t enough, in particular  as regards timely 
planning of items for debate and provision of documents to parliamentary committees. 
However, some efforts have been made to  increase transparency by making committee 
documents and complete transcripts of plenar y sessions available on th e internet. Individual 
and collective visits have been organised to familiarise the public with the work of parliament. 
Parliament has significantly improved its oversight  of defence and security bodies, which is a 
key priority of the European Partnership. Ho wever, there is still room for significant 
improvement of oversight over key aspects of th e action of these bodies. The supervisory role 
of parliament generally remains weak. 
The committee for international relations and Eu ropean integration remains unfocused and its 
efficiency is limited. The long controversy over the election of its chair prevented, for a 
number of months, the setting-up of the Council for EU integration . Contacts with the 
European Parliament and Council of Europe Pa rliamentary Assembly bodies remain limited. 
Strengthening of human resources  has been relatively limite d. Administrative and other 
resources required for parliament's work, includ ing expert support, remain insufficient. Plans 
are being prepared to increase staff numb ers substantially. There is no framework for 
systematic training of staff but some training  efforts have been made with the support of 
international and bilateral donors. Staff remunera tion levels have been significantly increased. 
Parliament still lacks the capacity to scrutinise adequately the compatibility of new legislation 
with EU legislation. Financial management, in cluding by parliament’s Secretariat-General, is 
still not sufficiently tr ansparent. The State Audit Instituti on has not yet conducted an audit of 
the financial operations of parliament. 
Further progress is necessary with regard to ma ture and consensual use of parliament. Debates 
on issues such as the appointment of memb ers of the council for public broadcasting, 
television coverage of parliament sessions and the text of the presidential oath have resulted 
in boycotts by opposition parties. The governi ng coalition has resp onded with expedient 
procedural and legal solutions which have sometimes polarised political positions. 
A disagreement between government and opposition on TV coverage of parliamentary 
debates resulted in a boycott of parliament by the opposition in spring 2008 which hampered 
efficient parliament work until a temporary solution was found in early October 2008.  
There has been controversy over adoption and implementation of the Law on electoral rolls. 
Implementation of the Law by municipalities has been successfully challenged in the 
administrative court by voters in some cases. Legislation on campa ign financing has still to be 
adopted. Although some temporary arrangements were put in place for the presidential 
elections, including on media coverage, there is a n eed to address these issues with a view to 
forthcoming elections. Concerning the overall el ection framework, further challenges include 
the need to ensure full separation between State and party structur es in the electoral 
administration as well as transparen cy in allocation of MPs' seats. 
EN 8   EN Overall, there have been some improvements in  the functioning of parliament. There is an 
overall commitment to working on the basis of c onsensus, in particular  on EU integration, but 
obstacles are still preventing turning this  commitment into practical implementing 
arrangements. Enhanced resources and more effective use of parliamentary committees remain necessary. 
Government 
A new government headed by Mr Djukanovic was elected by parliament in February 2008 
following the resignation of the previous Prime Minister for health reasons. There were no 
major personnel or structural changes in the new cabinet. 
A presidential election took place on 6 Apr il 2008. Mr Vujanovic was elected by absolute 
majority in the first round. The electoral cam paign was conducted in a calm atmosphere and 
in a constructive spirit. Almost all aspects of the election we re found to be in  line with OSCE 
commitments and Council of Europe st andards for democratic elections. 
The management of government bodies, includi ng ministries, remains over-centralised in 
many cases, with insufficient delegation of d ecisions. Strengthening the middle management 
staff and authority would make decision-making mo re effective. Also there are shortcomings 
in monitoring implementation of policies and laws and receiving feedback. 
The government’s work programme for 2008 focu ses on Euro-Atlantic integration and on 
creating a favourable envi ronment for rapid economic development. The government plans to 
invest significant resources in infrastructure an d to encourage private investment in tourism 
and production with the objective of improving living standards. 
The government has kept up a strong pace in adoption of new legislation. The involvement of 
stakeholders, including civil society and in ternational organisations, in developing new 
legislation has been improved by holding consu ltative meetings on a number of draft laws. 
Under the responsibility of the Deputy Prime Minister for Eur opean Integration, the improved 
structures for inter-ministerial coordina tion on EU issues, including the Commission on 
European integration and the EU units in each ministry coordina ted by the Secretariat for EU 
Integration (SEI), have begun to bear fruit. Awareness of EU integration requirements within 
the line ministries has been raised. The cont ributions by the Monten egrin authorities in 
regular meetings with the European Commi ssion under the Stabilisation and Association 
Process have become more focused. 
The government adopted a comprehensive nati onal programme for EU integration (NPI), 
covering the period 2008-2012, in June 2008. The progr amme is ambitious in that it aims to 
cover not only implementation of the SAA but also full alignment with the acquis . It includes 
projections on the numbers of staff required in State institutions and budgets for the planned 
reforms. The process of drafting the NPI involved considerable  consultation with 
stakeholders, including civil society. 
The coordinating role of the Se cretariat for EU Integration (S EI) was reinforced by internal 
reorganisation. The capacity of the SEI and EU units within th e individual ministries needs to 
be further developed as Montenegro faces mo re complex reform challenges under the SAA. 
In particular, the role of the SEI and the line ministries in checking the compatibility of new 
legislation with the acquis  has not yet been clearly define d. Capacity in ministries and 
relevant agencies to address European integrat ion issues effectively needs to be enhanced.  
EN 9   EN There is also an overall understanding of the need to consult broadly on new pieces of 
legislation and strategic documen ts. This has happened in the case of key text s adopted over 
the past, such as the NPI, the energy strategy an d the spatial plan. However, in the case of the 
last two documents, comments by experts and civi l society were not fu lly taken into account. 
Also, important new texts such as the Law on electronic communi cation were adopted 
without the necessary consultation of stakeholders. 
Regarding local government, the amended Law on financing local government increased the 
financial independence of munici palities. An action plan for lo cal government reform adopted 
in December 2007 provides for harm onisation of over thirty legisl ative acts between local and 
central government. A joint central/local govern ment commission made up of five ministers 
and four mayors was established in November 2007 to coordinate dece ntralisation activities 
and monitor implementation of the action plan.  
Overall, the government has continued to adap t to the requirements cr eated by the country’s 
independence. It has further streamlined its  European integration activities. General 
management and capacity in ministries and releva nt agencies to address European integration 
issues require further strengthening. 
Public administration 
Some progress has been made on upgrading th e country’s administrative capacity and 
proceeding with the reform of public administ ration, a key European Partnership priority. 
Consolidation of the central administration continued. It now includes 13 ministries, 14 
directorates, three secretariats, nine institutes and one agency. The Ministry of the Interior and Public Administration has taken over responsib ility for integrated border management and 
local government. The organisation of the Mi nistry of Foreign Affairs has been further 
consolidated by creating a department for the prot ection of classified information, which is in 
charge of exchanges of relevant information with NATO and the EU. 
The Law on public administration was harmonis ed with the constitution. A Law on civil 
servants and public employees, covering the st atus, responsibilities and powers of State 
officials, was adopted in July 2008. Civil serv ant salaries have been standardised and 
increased by a law adopted in May 2008. The code  of conduct, promotion and assessment of 
civil servants require further improvement. Civ il servants often perform external activities 
which may give rise to conflicts  of interest. The draft law on conflicts of interest which is 
expected to provide clarification concerning incompatible activities and to address certain loopholes has not yet been adopted. 
The human resources management (HRM) aut hority continued contributing to the overall 
management of human resources in the public administration. The HRM authority ran various 
training programmes for civil servants, set up the first phase of a central HRM information system and started establishing a central human resources regist er, with the aim of covering 
all public employees and civil servants in Mont enegro. Out of 148 training courses planned in 
2007, some 85 were carried out. Attendance at the tr aining courses is ofte n limited. In July the 
government adopted strategies for training ci vil servants and local government employees. 
Employment procedures in the public administ ration are generally tr ansparent and various 
activities have been organised to raise awareness of job oppor tunities in the public sector. 
Implementation of the civil service legislation needs to be pursued more consistently, especially concerning recruitm ent. The administrative capacity  of the central management 
EN 10   EN body, the HRM authority, needs to be strengthened, and a merit-ba sed appraisal system needs 
to be established. 
The ombudsman received 647 complaints in 2007, and around 300 more in the first eight 
months of 2008. About 60% of the complaints received have been resolved. Most of them still 
concern the work of the courts, followed by the public administratio n and the police. The 
ombudsman's recommendations are generally  followed up. The ombudsman's office was 
strengthened by creating two additional deputy posts, one on  minority rights, the other on 
children's rights. However, the Law on the ombuds man has not yet been fully aligned with the 
new constitution and the reporting from the ombu dsman office remains unfocused, limiting its 
effectiveness. 
Montenegro has expanded its network of diploma tic representations abroad. It has opened six 
permanent missions to international organisati ons, seventeen embassies  and two consulates-
general.  
Further reform is required in the fields of tr ansparency and accountabi lity, financial control, 
public procurement, budget management, mana gement of public assets and licensing 
procedures.  Further attention still needs to be paid to enhancing administrative capacity for 
law enforcement, especially as regards the fi ght against corruption a nd organised crime and 
protection of personal data. 
The use of office premises by political par ties and by the government is not yet clearly 
separated, potentially leading to a bl urring of their respective roles.  
In order to prepare fully for implementation of the SAA, Montenegro needs to continue 
upgrading its administrative capacity in the ar eas covered by the agreement, which is a key 
European Partnership priority. The necessary strengthening will require appropriate resources. 
Parliament ratified the European Charte r of Local Self-Government. Progress on 
strengthening local authorities’ administrativ e and management capacity remains slow. The 
capacity of the municipalities for financ ial management, incl uding budgeting, public 
procurement and allocation of gran ts, requires further improvement. 
Overall, progress has been made in strengthe ning the legislative framework for the public 
administration. Some progress has been made in human resources management and local 
government reform. However, lack of huma n and financial resources combined with 
structural weaknesses and corrupt ion continue to hamper the overall effectiveness of the 
public administration and, as a whole, administrative capacity remains limited. 
Judicial system 
Montenegro has made some progres s in the judicial reform pro cess, which is a key European 
Partnership priority, and has started to implement the relevant  sections of the constitution. For 
this purpose, the action plan fo r implementation of the strategy for reform of the judiciary 
(2007–2012) which was adopted in December 2007 identifies relevant measures. The Commission for implementation of this action plan was formally established in June 2008. 
Adoption of implementing legislation has star ted. Amendments to the Law on courts were 
adopted in January 2008, and amendments to th e Law on State Prosecutors in June 2008. The 
Law on the Judicial Council was adopted in Fe bruary 2008, improving the independence of 
the judiciary. The new Judicial  Council has the power to elec t, promote and dismiss judges 
EN 11   EN and to decide on disciplinary proceedings. The powers of the Judicial Council to propose and 
defend the budget of the courts have also been strengthened. In April 2008 the Judicial Council was elected and started its work, ex cept for the member who will have to be 
designated by the parliamentary opposition. The ru les of procedure of the Judicial Council 
and the Judicial Ethical Code were adopted in July 2008.  
The Ministry of Justice has been reorganised. Two sectors have been established, one on the 
judiciary, the other on execution of  criminal sanctions. Special de partments in high courts for 
combating organised crime, corruption, war cr imes and terrorism were established in 
September 2008. At the same time, the powers of  the Special Prosecuto r for organised crime 
have been extended to cover the same areas. Sa laries in the judiciar y have been increased. 
However, serious concerns regarding the independ ence of the judiciary persist. A track record 
on implementing the new laws has not yet been established and other relevant legislation, 
such as the Laws on the Constitutional Cour t and on the Prosecutori al Council, is still 
pending. The initial deadlines fo r adoption of certain laws ha ve been extended. Objective 
criteria such as professional capacity and integrity have been  developed for appointment of 
judges and prosecutors, but assessment of the exte nt to which these crite ria have been fulfilled 
remains within the sole discretion of the Ju dicial Council and the future Prosecutorial 
Council. For the prosecution service in particular , where the future council will be elected by 
parliament, the risk of political influence remains high. The division of responsibility for 
supervision of the courts between the Ministry  of Justice and the Judicial Council provided 
for in the new legislation and the participation of the Minister of Justice as a voting member 
of the Judicial Council are furt her factors putting the independ ence of the judiciary at risk. 
The efficiency of the judicial system is still low. The investigative cap acity of the prosecution 
service remains weak. In particular, mode rn investigative techniques for financial 
investigations are largely unuse d. The powers of the Special Pr osecutor's office for organised 
crime have been extended, but it does not ha ve sufficient deputy pros ecutors and staff or 
technical equipment. Preparation of the pros ecution service for its new role in leading 
criminal investigations planned under the futu re Criminal Procedure Code is lagging behind. 
Improved codes of ethics and properly struct ured initial and conti nuous training programmes 
need to be established. The capacity of the Ministry of Justice in the area of judicial 
cooperation is still weak in terms of both sk illed human resources and IT systems. The 
juvenile justice system requires more comprehensive action. 
Backlogs in civil and criminal cases have b een reduced. However, the still high number of 
pending cases and excessively lengthy procedur es continue to give cause for concern. 
Inefficient execution procedures remain part of the problem. A new law granting 
compensation to citizens whose trial has exceeded a due timeframe was adopted, but is not yet in force. There is still no clear strate gy and procedural changes are lacking.  
Criminal procedures in severa l cases of domestic war crimes are ongoing. Some progress was 
made recently, as indictments were issued agai nst suspected perpetrators in the cases of 
Morinj, Boka Bay and Kaludjerov  Laz. There has been little progress in the case of the 
deportation and disappearance of more than 80 Bosnian civilians in 1992. Nobody has been 
indicted yet for this crime. 
Overall, progress has been made  on judicial reform with the adoption of important new laws. 
Steps have been taken to prov ide the basis for judicial inde pendence, accountability and 
EN 12   EN efficient functioning of the judicial system, but they need to be further consolidated and 
completed.  
Anti-corruption policy  
There has been some progress in the fight against corruption, which is a key European 
Partnership priority. Action has mainly focu sed on tackling low-level corruption and on 
awareness-raising and training. 
The context of the fight agains t corruption is determined by the action plan against organised 
crime and corruption. Montenegro has ratified the Council of Europe Civil Law Convention 
on Corruption and the additional protocol to the Criminal Law Convention on Corruption. A new Law on financing of political partie s was adopted in July 2008. The National 
Commission for monitoring implementation of th e action plan produced its third report. An 
update of the action plan to include new meas ures and clearer indicators was adopted by the 
government in May 2008. Both an anti-corrupti on strategy at local level and a national 
training strategy for local government have been  adopted. Models for local anti-corruption 
action plans were introduced. The  Law on the salaries of State officials and civil servants 
increased public administration salaries (i ncluding for the judiciary) by up to 30%. In 
December 2007, parliament adopted a Resolu tion on the fight against corruption and 
organised crime. 
The resources of the Directorate for Anti-Corr uption Initiatives (DACI, formerly the anti-
corruption agency) have been strengthened. The DACI has carried out awareness-raising 
campaigns and a number of training courses fo r various administrative bodies. The powers of 
the specialised prosecutor's office for organi sed crime have been extended to include 
corruption cases, and the human resources of th e office have been increased. Specialised court 
units for organised crime and corruption have been set up at high court level. NGOs have 
been active in monitoring public procurement and privatisation proce dures. There has been 
some evolution in the perception of corruption . 
However, corruption continues to be a widesp read and particularly serious problem in 
Montenegro. Current legislation exhibits major weaknesses in several areas. Adoption of the 
new Law on conflicts of interest is still pe nding. The current law leaves many loopholes. In 
particular, the powers of the Commission on conf licts of interest are too limited to ensure 
proper analysis of the declarations made. Ther e are also concerns about the independence of 
this Commission. Laws concerning local se lf-government which determine powers over 
property or resources at local level have not  been adopted. Protection of whistleblowers 
remains insufficient in practise, even t hough the legal framework has been improved. 
Montenegro lacks strong and independent s upervisory and auditing authorities. Such 
authorities would be needed in order impart ially and objectively to enforce and assess 
declarations of assets and financing of political parties, but also to monitor privatisation and 
public procurement procedures and the State budget. The existing monitoring committees do not fulfil these tasks satisfactorily and the DACI plays only a limited role in this regard. Declarations of assets by political parties so fa r have been incomplete and public authorities 
were unable to enforce the law or to investig ate the data provided. This situation will only 
partially improve under the new la w. Administrative corruption at local level remains high, 
particularly in coastal areas, as a result of booming developm ent, privatisation and public 
procurement. 
EN 13   EN The investigative capacity of the law enforcement bodies re mains very limited. Conviction 
rates in corruption cases are extremely low. There is a significant lack of  expertise in modern 
financial investigations. Between January 2007 and April 2008, the Police Directorate for 
organised crime and corruption carried out onl y five financial inve stigations, excluding 
exchanges of data concerning transactions suspected of money laundering and seizure of 
proceeds. In 2007, no secret surveillance measures were used in investigations of corruption 
cases. The office of the Special Prosecutor lacks the necessary capacity in terms of staffing, 
expertise and equipment. The same applies to the special anti-corruption police task force. 
Overall, there has been some progre ss in strengthening the strategic and  administrative 
framework for combating corruption. However, th e declared commitment of the authorities to 
combat corruption has not been backed up by rigorous implementation with clear results, 
including higher conviction rates in corruption cases. Corruption continues to be widespread 
and inefficiently prosecuted, particularly  in cases of high- level corruption.  
2.2. Human rights and the protection of minorities 
Observance of international human rights law Regarding the ratification of human rights instruments,  Montenegro is a signatory or a 
party to most of the Council of Europe c onventions, including the European Convention on 
Human Rights (ECHR). Montenegro has not yet ratified the Council of Europe Convention on 
the avoidance of statelessness in relation to State succession.  
Montenegro appointed a judge to the European Court of Human Rights  in April 2008, 
which means it is now possible to handle cases which had been suspended following 
Montenegro's independence. Appointment of the government agent representing Montenegro 
before the European Court of Human Rights failed due to lack of candidates.  
Regarding  promotion and enforcement of human rights , direct implementation of 
international human rights standard s in Montenegro is restricted to application in cases of 
conflict with domestic legisla tion. The constitution does not incl ude an explicit provision that 
ratified international human rights treaties shoul d be applied in compliance with the practice 
of international bodies in charge of thei r interpretation. The Venice Commission has 
recommended that the Law on implementation of the constitution shoul d be clarified to 
guarantee retroactive application of the ECHR and should be br ought to the atte ntion of the 
courts and the public.  
The Constitutional Court will be competent for appeals on violations  of human rights and 
liberties following adoption of the Law on th e Constitutional Court in July 2008. The election 
of all Constitutional Court judge s by parliament on a proposal by the President, as provided 
for in the constitution, is not in line with the recommendations of the Venice Commission. 
The right to appeal on the basis of provision s of the European Convention on Human Rights 
concerning violations occurring prior to  Montenegro's independence needs further 
clarification. 
Overall, Montenegro has made some progre ss in improving observance of international 
human rights law. However, further efforts are necessary to improve judicial enforcement. 
EN 14   EN Civil and political rights 
Little progress has been made on prevention of torture and ill-treatment and the fight 
against  impunity . Montenegro is party to the Council of Europe Convention for the 
prevention of torture and its constitution pr ohibits torture and inhuman or degrading 
treatment. However, there are continuous allegati ons of torture and ill-treatment during arrest 
and detention. Material conditions in police detention facilities remain unsatisfactory. Internal 
investigations and criminal pr oceedings against police officers for the extortion of evidence 
and for ill-treatment and tortur e are rare. Verdicts are reached in a small number of reported 
cases and are often followed only by administrati ve warnings, suspended sentences or fines. 
In 2007 the ombudsman received a higher number of  complaints about police ill-treatment. 
The disciplinary procedure for misuse of office and exceeding official powers referred to in 
the Law on civil servants and public employees needs to be fully respected. The authorities 
need to strengthen internal control mechanisms. International standards and judicial practice 
for combating torture need to be considered by the courts. 
As regards access to justice , a Law on the protection of the ri ght to trial within a reasonable 
time was adopted. Free legal aid remains limite d. The considerable backlog of court cases 
remains an issue of concern. 
Some progress has been made regarding the  prison system.  A number of detention facilities 
have been newly constructed or refurbished, but  still need to become fully operational. 
Further training of prison staff,  including on treatment of prisone rs with special needs, would 
help improve standards. 
Clearer rules for inspection and monitoring of detention faciliti es by external bodies would 
help ensure transparency and accountability. The necessary comprehensive reform of the 
probation/parole system has not yet been conducted. Conditional sentences combined with probation have not yet been introduced as an alte rnative to imprisonment. This contributes to 
prison overcrowding. 
The accommodation for persons with mental disa bilities lacks proper financial support and 
appropriate human resources. The specific needs of drug-addicts ar e not adequately taken care 
of. 
The health system lacks capacity and its institutions are weak. It is geared to treatment and 
lacks preventive and promotion programmes. There has been a deterioration in the quality of 
services and fragmentation of services. There are also over-production of  health professionals, 
outdated curricula and inappropr iate training for nurses.  
Overall, there has been some progress in impr oving prison and detention facilities, but further 
efforts, including legislative action, are nece ssary to address the situation adequately. 
Freedom of expression continues to be a cause for concern. 
Cases of physical assaults and defamation agai nst journalists continue to be a cause for 
concern. A journalist of the daily newspaper Republika  was assaulted in November 2007 and 
a photographer from the same newspaper in June 2008. In May 2008 a journalist writing an 
article on organised crime involved in betting on sport was heavily beaten.
 The director of the 
daily Vijesti  was also assaulted. Inves tigations in such cases need to be  thorough. The number 
EN 15   EN of defamation cases against journalists and NGO activists is rising. The Law on free access to 
public information is still being implemented with mixed results. 
The Law on electronic communi cations was adopted by parlia ment on 29 July 2008 without 
public debate. It establishes a new Electronic Communications Authority . The members of the 
body's governing councils will be appointed  by the government and the regulator's 
independence is not guaranteed. Moreover, th e sensitive powers over planning, allocating, and 
monitoring the broadcasting frequency spectrum will be transferred from the independent 
Broadcasting Agency to the new Electronic Communications Authorit y. Legislation on media 
transparency remains pending. 
Regarding freedom of assembly and association , there are no restrictions to report. For 
sports events, a new Law on public gatherings and on prevention of disorderly conduct at 
sports stadiums was adopted. 
Regarding the role of civil society organisations , there have been improvements, and the 
strategy for cooperation between the government a nd NGOs is in its last consultation stage 
and will then need to be implemented. NGO ac tivities often have a high public and political 
profile. Consultation with civil society organi sations has been enhanced by the government 
office for NGOs, the office for gender equali ty and the anti-corruption commission. Civil 
society is represented in the Parliamentary C ouncil for EU Integration. However, the criteria 
for its representation will have to be clarified. 
More than 4,000 NGOs are registered with th e Ministry of the In terior and Public 
Administration, but only a much smaller numbe r are actually perf orming real NGO-type 
activities. The NGO Law was amended in Novemb er 2007 in order to regulate commercial 
activities carried out by NGOs. 43 public bodies have nom inated an NGO contact point, but 
the turnover is high, hampering communica tion with NGOs. Many NGOs remain donor-
dependent, which weakens their st rategic autonomy and generates ad hoc  donor-driven 
project activities instead.  
As regards  freedom of religion , relations between major relig ious groups (Orthodox, Islamic 
and Roman Catholic) remain satisfactory. Howeve r, there is a conti nuous conflict between 
representatives of the Serbian and Montenegrin orthodox churches  over official recognition 
and property ownership. Legislation on freedom of religion has not yet been updated in 
accordance with the relevant human rights sta ndards, including Article 9 of the European 
Convention on Human Rights and case law of the European Court of Justice. 
Economic and social rights 
Regarding the protection of women's rights  relating to domestic violence and protection of 
victims, the situation has not improved, despite  the fact that the problem is widespread. 
Domestic violence remains a cause for con cern, with every second woman experiencing 
verbal abuse and every third being exposed to physical vi olence. The number of cases 
reported to the police is small, but incr eased by 7.3% in 2008. Ther e are discrepancies 
between the number of cases of family violence reported and the number of convictions. The 
new Law on protection from violence in the family still has not been adopted. There is no financial support to organisations providing services to victims, or to the vic tims themselves. 
The institutional response to protec tion of victims of violence is  unsatisfactory and centres for 
social care still lack professionalism towards victims. 
EN 16   EN Sexual harassment, unlike domestic violence, is not specifically punished by law. Victims are 
hesitant to report harassment and there is no public discussion on the issue, allowing the 
offenders to get away unpunished. 
The legislation on gender equality does not ad equately define implementation mechanisms, 
including sanctions for breaches of the law or the principle of  equal pay. The Ministry for 
Protection of Human and Minority  Rights and the Office for Gende r Equality have prepared 
an action plan on gender equality, which wa s adopted by the government in July 2008. 
In practice little progress has been made on improving protectio n from and raising awareness 
of gender-based discrimination, in particular  on the labour market. The gender pay gap has 
even widened to 19%. Women remain underrepr esented in decision-making processes and 
leading positions both in the public administra tion and in the private sector. The number of 
women Members of Parliament remains the same (9 out of  a total of 81). 
Concerning children's rights , the government adopted a st rategy for social and child 
protection for 2008-2012 in November 2007. However,  capacity to monitor the rights of the 
child remains weak. Official sta tistics and analyses of poverty and social incl usion data are 
still inadequate. The Council for Children's Rights needs to become fully operational as the highest inter-ministerial coor dinating body for promotion and pr otection of children's rights. 
Institutionalisation, in some instances even to gether with adults, is still the dominant care 
system for children deprived of parental care and children with disabi lities. The government 
needs to give priority to alte rnative, community-based family forms of care. Social inclusion 
of Roma children and of children with disabilities remains particularly problematic. The scale of poverty combined with the lack of personal documents and civil registration and the 
unresolved legal status of Roma, Ashkali and Egyptian refugees hamper access to social 
welfare services and inte gration. The low level of enrolment in pre-schools of less than 30% 
nationally, and as low as 3% for Roma childre n, is a cause for concern, both nationally and 
for minority groups. 
Concerning socially vulnerable and/or persons with disabilities,  the government adopted a 
strategy for the integration of  persons with disabilities fo r 2008-2016 and a strategy for the 
development of social protection for the elderly for 2008-2012. Measures, including relief 
mechanisms, have been introduced to promote employment of persons  with disabilities. 
Montenegro has yet to ratify the UN Convention on the rights of persons with disabilities and 
its optional protocol. A Law on professional rehabilitation and employment of disabled 
people was passed in July 2008, but the draft law on protection of persons  with disabilities 
from discrimination has yet to be adopted.  
Regarding labour rights and trade unions,  labour rights are regula ted by the Labour Law 
adopted in July 2008. Trade unions and employers ' organisations were involved in the public 
debate on the new law. 
In the area of anti-discrimination policies,  adoption of the draft law on prohibition of 
discrimination is pending. Lesbian, gay, bise xual and transgender (LGBT) people are 
marginalised and discriminated against in M ontenegrin society due to homophobic attitudes 
and lack of legal and practical protection by  the authorities. In addition to increasing 
legislative efforts, comprehensive anti-discri mination measures covering sexual orientation 
and gender identity are needed. 
EN 17   EN Regarding property rights , restitution of property is regulated by the Law on restitution of 
confiscated property rights and compensation which came into force in August 2007. Three 
regional commissions were established in Podgorica,  Bar and Bijelo Polje to take decisions on 
restitution requests. Over 10,000 rest itution requests had been file d by the deadline at the end 
of 2007. The regional commissions have a pproved some 925 requests for monetary 
compensation and 95 requests for property restitution. Over €15 million have been paid from the Restitution Fund as monetary  compensation between estab lishment of the Fund in 2005 
and July 2008. Around 1,100 complaints against d ecisions taken have been brought to the 
attention of the second instance commission.  
Overall, there have been improvements in the area of economic and soci al rights. The rights 
of vulnerable groups, including children, have been  addressed with a number of strategies, but 
the conditions have not yet subs tantially improved in practice. 
Minority rights, cultural right s and protection of minorities 
Montenegro has made progress on protection of na tional minorities. Inter-ethnic relations are 
smooth. The constitution includes a minority rights  chapter reflecting the principles of the 
Council of Europe Framework Convention on nati onal minorities. The c onstitution guarantees 
special rights of identity protection and prohi bition of assimilation “t o minority nations and 
other minority, national and ethnic communitie s”. The government has adopted a minority 
policy strategy and a national Roma strate gy. National minority councils have been 
established and a fund for minorities (0.15% of the total current budget or approximately €1 
million) was approved by parliament. 
In March 2008 there were more than 16,000 internally displaced persons ( IDPs ) from 
Kosovo and around 8,500 displaced persons (under the government Decree on the care of 
displaced persons from 1992) from Croatia a nd from Bosnia and Herzegovina in Montenegro. 
Some 300 IDPs have already returned to Kosovo. The question of how to deal with IDPs who 
do not want to leave the country remains uns olved. Construction of accommodation facilities 
for displaced Roma from Kosovo was initiate d in early June 2008, but  further financial 
support will be needed for the planned construction of ten bu ildings. Access to identity 
documents and permanent status, education and social services for many of them remains 
problematic, as do the prospects for their inte gration or return. Mont enegro has received 15 
asylum applications since its independence and granted refugee status in one case. 
A Law on ID cards was adopted in November  2007. The government adopted a Regulation on 
the content of and manner of keeping records in  the field of asylum. Laws on citizenship and 
registers of temporary and permanent reside nce were adopted in February 2008. A Law on 
employment and work of foreigne rs was adopted in March 2008.  
Approximately 2,000 IDPs and displaced persons ha d made claims for resident status by the 
end of 2007. IDPs and displaced persons do not  enjoy the economic and social rights of 
citizenship and their socio-economic situation remains a cause for serious concern. IDPs, 
mainly Roma, Ashkali and Egyptians originatin g from Kosovo, often lack ID documents or 
birth certificates and risk stat elessness. Montenegro has yet to  ratify the Council of Europe 
Convention on the avoidance of statele ssness in relation to State succession. 
European Partnership priorities to repeal all di scriminatory provisions in  key fields affecting 
refugees and displaced persons and to provide conditions for integration of those who choose 
to remain in Montenegro ha ve not yet been fulfilled. 
EN 18   EN As regards  Roma , the government adopted a strategy for improving the status of the Roma, 
Ashkali and Egyptian population in November  2007. The authorities have set aside €400,000 
of the 2008 annual budget for its implementatio n. Under the Law on freedoms and rights of 
minorities, a Roma Council was set up in Apr il 2008. The Roma strategy amends the previous 
Decade Action Plan, which was not efficien tly implemented because of insufficient 
institutional capacity and scarce financial reso urces. Significant progre ss has been made in 
creating conditions for the part icipation of Roma in active employment policy, such as 
registration of Roma in employ ment bureaus or specific tax relief for employers. The new 
Roma strategy also intends to improve the institutional framework in the area of healthcare protection and housing.  
However, the lack of reliable data on the Roma, Ashkali and Egyptian population has a 
negative effect on the exercise  of certain rights, including use of funds from the State 
Minority Fund and awareness of the political sign ificance of this minority in general. Despite 
the above-mentioned measures, Roma conti nue to face difficult living conditions and 
discrimination, with poor access to education, soci al protection and healthcare. Most of them 
live in extreme poverty and substandard housing conditi ons. Due to widespread 
discrimination, opportunities for employment of  Roma are still minimal and unemployment 
among Roma remains over 80%.  
Illiteracy rates are reported to be 63%, and even higher among women. The specific needs of 
Roma refugees from Kosovo have yet to be addressed. No monitoring mechanism exists for 
implementation of the action plan adopted in 2005. Implementing legislat ion is necessary to 
establish implementation and monitoring capac ity, domestic ownership and adequate and 
sustainable funding. 
Overall, there has been progress on strengt hening the framework for minority protection. 
However, implementation is still lagging behind in some fields, in particular regarding the 
Roma, Ashkali and Egyptian population. The condi tions of IDPs and displaced persons 
remain a cause for serious concern. 
2.3. Regional issues and international obligations 
Cooperation with the International Criminal Tribunal fo r the former Yugoslavia (ICTY), 
a key European Partnership pr iority, is satisfactory. Agre ements for cooperation on war 
crimes cases were signed with the State prosecution services of Serbia and Croatia. Montenegro’s supreme State Prosecutor attended a regional conference on cooperation between State Prosecutors on war crimes pr osecutions, focusing on cooperation with the 
ICTY.  
In respect of the bilateral immunity agreem ent with the United States, covering US and 
Montenegrin citizens and granting exemptions from International Criminal Court (ICC)  
jurisdiction, Montenegro does not comply with the EU common positions on the integrity of the Rome Statute or with the related EU guiding prin ciples on bilateral immunity agreements. 
Montenegro needs to ali gn with the EU position. 
There have been no significant developmen ts in Montenegro to follow up the  Sarajevo 
Declaration , which aimed at finalising the regional refugee return pro cess by the end of 2006.  
Regional cooperation  and good neighbourly relations form an essential part of the process of 
Montenegro's moving towards the European Union. 
EN 19   EN Montenegro has participated in  the work of the regional fora , including in the transformation 
of the Stability Pact for South- East Europe into a more regi onally owned framework with the 
South-East European Cooperation Process (SEECP) and the Regional Cooperation Council 
(RCC). Montenegro became a member of the South-East European Cooperation Initiative 
(SECI Centre, Bucharest) in June 2008. Montenegro has been chosen to host the Regional School for Public Administration (ReSPA). Th e school will be based in Danilovgrad and 
should come into operation on 1 January 2009. Prep aratory activities were launched in April 
2008. 
A memorandum on technical cooper ation within the process of European integration was 
agreed between the countries in the region at the Milocer Conference in October 2007. In December 2007, Montenegro signed the Agreemen t on police cooperation in South-Eastern 
Europe and the Agreement on the establishment of a high-performance rail network in South-
Eastern Europe. In October 2007, Montenegro ratified the Agreement on the European 
Common Aviation Area (ECAA). Montenegro con tinued preparations to implement fully its 
obligations under the Energy Comm unity Treaty. Montenegro is participating in  the Central 
European Free Trade Agreement (CEFTA). 
Montenegro  accepted the acquis  of the Barcelona process and par ticipated in the launch of the 
"Barcelona Process: Union for the Mediterran ean" in July 2008, thus becoming a full member 
of the process.  
As regards the peaceful settlement of border disputes, a political understanding was reached 
on how to resolve the issue of the maritime border with Croatia, including the Prevlaka 
peninsula. Currently, a temporary agreement a pplies. In March 2008 the two Prime Ministers 
agreed that the issue should be settled by the International Court of Justice (ICJ). A working 
group chaired by the Prime Minister and made  up of experts in maritime law has been 
established.  No timeframe has been set for the process. 
Montenegro has continued to foster good bilateral relations with other enlargement 
countries and neighbouring Member States . 
Montenegro has established c ooperation with neighbouring countri es in areas such as border 
control, environmental protection and energy supply. Political relati ons with neighbouring 
countries are satisfactory. Montenegro is pur suing a constructive pol icy on key outstanding 
issues that are crucial for regional stability. 
Relations with Albania  have developed further. Work st arted on construction of the joint 
border crossing point at Muriqan/Sokobine. An ag reement on exchanging practical experience 
in harmonisation of legislation with the EU standards was si gned between the Ministers of 
Justice of the two countries. 
Relations with Bosnia and Herzegovina  have further intensified. Agreements have been 
signed on defence, police and cross-border coop eration and on civil protection. Montenegro 
requested Bosnia and Herzegovina  to assist it by sharing consular services and issuing 
Montenegrin visas where the country does not  have its own consul ar representations. 
Regarding relations with Croatia , a working group on outstanding issues, including property, 
chaired by the Ministers of Justice has met twi ce. Agreements on cooperation in the field of 
defence and in water management have been signed. Business relations have been enhanced. 
With regard to the open border issue, the two c ountries agreed to settle  border demarcation at 
Prevlaka through international ar bitration at the Internationa l Court of Justice. A joint 
EN 20   EN commission is being established to prepare th e legal framework. The temporary border regime 
in place continues to function smoothly. 
Montenegro recognised the independence of Kosovo3 in October 2008.  
There have been no major developments in relations with the former Yugoslav Republic of 
Macedoni а, which remain good. 
Relations with Serbia  have been advancing smoothly ove rall since independence, but they 
were adversely affected follo wing the recognition of Kosovo' s independence by Montenegro 
in October 2008 and by the subsequent reactions  of Serbia. On the basis of a bilateral 
agreement, Serbia continues to represent cer tain Montenegrin intere sts abroad, including 
issuing visas. An agreement on social security  entered into force in  January 2008. Agreements 
on cooperation on defence and culture have been  signed. Discussions on a bilateral agreement 
on citizenship between Montenegro  and Serbia started in autu mn 2007, but have not yet been 
completed. 
Relations with  Turkey  have remained good. 
Bilateral relations with the EU Member States  remain good. The EU is  Montenegro's main 
trading partner. 
Relations with Italy have continued to develop positivel y, with the negotiation of bilateral 
agreements on police and judicial cooperation. 
Overall, Montenegro has continue d to improve its integration into  regional stru ctures and its 
relations with its neighbours. Montenegro plays a moderating role in the region. The 
agreement with Croatia jointly to refer a border di spute to the International Court of Justice is 
one example of its good neighbourly relations. 
3. E CONOMIC CRITERIA  
In examining the economic developments in Montenegro, the Commission's approach was 
guided by the conclusions of the European Counc il in Copenhagen in June 1993, which stated 
that membership of the Union requires the exis tence of a functioning market economy and the 
capacity to cope with competitive pressure  and market forces within the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials Montenegro submitted its second Economic and Fiscal Programme (EFP), covering the period 
2008-2010, by the end of November 2007. The fisc al strategy of the government aims at 
capitalising the strong economic growth in order to finance measures to strengthen 
administrative capacity, invest in infrastructure and reduce the public debt. The political 
consensus on the economic reform agenda was challenged on a few occasions: at the time of adopting the Laws on ownership relations and State property, the new Law on banks and the 
amendments to the Concession Law. Overall,  the coalition government  retained political 
consensus on market-based economic policies. 
                                                
 
3 Under UNSCR 1244. 
EN 21   EN Macroeconomic stability  
Economic growth remained strong in 2007, expandi ng well above 8% in real terms, boosted 
by strong inflows of FDI and robust domestic demand. The solid  performance of the economy 
continued during the first half of 2008, with GDP growing by 8% year-on-year. Services, 
notably tourism, financial intermediation and real  estate, remained the main driver of growth, 
generating some 70% of gross value adde d (GVA). Around 20% of total growth was 
attributable to industrial output and construc tion. On the demand side, consumption remained 
solid as cumulative retail sales grew by 18% in real terms in the first eight months of 2008, 
supported by increasing household incomes. As a consequence of the robust economic growth, Montenegro's per capita  income, measured in purc hasing power standards (PPS), 
increased in 2007 to around 32% of the EU27 av erage. Overall, economic growth remained 
strong boosted by FDI and domestic demand. 
Exports of goods hardly improved in 2007, in creasing by some 2% reflecting the weak 
competitiveness of local products but also the vola tile internati onal price of aluminium, which 
accounts for almost half of total exports. FD I inflows surged by 56% in 2007 and combined 
with a robust domestic demand induced a wideni ng of the trade deficit to 55% of GDP. The 
already sizeable current account deficit fu rther expanded from 24.7% of GDP in 2006 to 
about 34% in 2007 despite the strong increase in the balance of services surplus. Meanwhile 
concurrent huge outflows, mostly due to real estate sales by forei gners, brought net FDI down 
to 22% of GDP. The coverage of the current  account gap by FDI flows decreased to 52% 
(compared with 88% in 2006). The deficit is increasingly being cove red by repatriation of 
domestic banks' net foreign assets and extern al private borrowing. St ronger than expected 
fiscal performance allowed early repayment of foreign loans bringing the public external debt 
down to 20.3% of GDP at the end of 2007. Extern al imbalances continued widening during 
the first half of 2008 as the tr ade deficit deteriorated. The st agnation on the domestic capital 
market resulted in a significant outflow of portf olio investments. The public external debt 
continued to decrease, ending on 17.5% of GDP at the end of June 2008. Overall, the current 
account deficit widened, driven by a strong infl ow of imports while its coverage by net FDI 
declined, increasing vulnerability to external shocks. 
The fast-growing economy required labour reso urces beyond the country's capacity. Market 
rigidities and lack of mobility resulted in a s hortage of seasonal worker s, notably in tourism, 
construction and agriculture. Shortages are being covered by foreign labour, mostly from 
Serbia. According to the labour force survey (ILO standard), in  the first quarter of 2008, the 
participation rate was 59.7% and the unemploym ent rate 18%. Employment growth remained 
steady during the first half of 2008, recording 6% average expa nsion year-on-year. However, 
partly due to the significant size of the informal economy, changes in registered 
unemployment may not correctly re flect the actual dynamics of the labour market. Overall, 
the unemployment rate decreased and together with the mismatch of labour skills exerted 
upward pressure on wages in both the public and private sectors. 
Montenegro unilaterally uses the euro
4 as legal tender, without participating in the euro area. 
Consequently, its monetary policy is limited to operation of liquidity management. So far, the 
international financial crisis has had only a limite d direct impact on the financial sector. Yet, 
the rising current account deficit, increasingly financed by repatriation of domestic banks 
assets abroad, has beco me a matter of concern, particul arly under current capital markets 
                                                 
4 In October 2007 the Council adopted a declaration on the de facto  use of the euro in Montenegro which 
is due to exceptional circumstances. 
EN 22   EN conditions. Also, higher risk premiums and re financing costs have already started putting 
pressure on the external side. The Montenegrin authorities have taken a series of measures, 
including higher capital adequ acy requirements for domestic ba nks, an unlimited coverage for 
deposits insurance as well as a guara ntee scheme for intra-banking lending. 
The rapid growth of bank deposits expanded the money supply5 from 74% of GDP in 2006 to 
112% in 2007, as the stock of domestic credit soared to 98% of GDP. However, restrictive 
measures introduced by the Central Bank (c redit growth ceilings and higher minimum 
solvency coefficients) succeeded in moderating th e elevated credit activity of domestic banks 
in 2008. The annual rate of lending decelerated to 25.8% during the first eight months of 2008, compared with 93% in December the pr evious year. Average annual inflation 
accelerated from 3% in 2006 to 4.3% in 2007, notab ly due to a significant increase in food 
and energy prices. Consumer prices peaked at  11.4% up year-on-year  in June 2008, slowing 
down to 9.5% in August on easing food and tran sport prices. Overal l, lending activity 
decelerated in 2008, while inflation increased sharply. 
The 2007 budget showed a very strong growth in tax revenue, resulting in a record surplus 
above 7% of GDP. Proceeds from VAT and from  personal and corporate income taxes rose 
strongly above target, reflecting the effectiveness of previous reforms of direct taxes and the 
tax-rich growth pattern. Total public spendi ng grew to 47% of GDP . Expenditure on gross 
wages expanded considerably to 14.5%, while transfers to State funds and local self-
governments increased more moderately. Th e government decided to allocate the budget 
surplus achieved up to mid-October to reducing foreign public debt by 8. 3%, raising wages of 
civil servants by 30%, and increasi ng capital expenditures to 7% of GDP. Nevertheless, at the 
end of the year the budget was still showing a strong surplus. 
The positive fiscal performance continued duri ng the first half of 2008, when a surplus of 
2.9% of annual GDP was recorded. Rapid gr owth was observed in both revenue and 
expenditure. Tax revenue expanded by 28.4% year-on- year as a result of  rising collection and 
strong proceeds. The other main developments in the 2008 budget were the 22% year-on-year 
increase in gross wages and the expansion of transfers to public  institutions. In contrast with 
previous financial years, capit al expenditure in 2008 was execu ted as planned. In July 2008 
the parliament supported the amended budget,  proposing targets 11. 4% higher for both 
revenue and expenditure, while the planned su rplus remained unchanged. Overall, buoyant 
revenues were the main driver behind the improved balances. 
The public debt continued to decrease to 30.4% of GDP in 2007 as the good fiscal outcome 
enabled several early repayments to international financial institutions. However, it expanded to 33.6% of GDP in the first half of 2008, as the share of domestic debt in the total rose. In 
particular the government recognised addi tional obligations from ongoing restitution 
procedures, old foreign currency savings depos ited in two Serbian banks, and unrecorded 
liabilities of the State funds to commercial ba nks. Overall, the public debt rose following 
recognition of domestic lia bilities from the past. 
Macroeconomic policies aiming at reducing the pub lic debt have been an appropriate mean to 
contain potential external vulnerabilities, but not sufficient given the country's use of the euro 
and the limited scope for monetary policy in struments. The debt-management policy was 
                                                
 
5 The broad money (M21) aggregate consists of deposits of banks with the Central Bank and demand and 
term deposits with banks and the Central Bank, in euro and other currencies, including deposits of the 
central government. 
EN 23   EN complemented by a reshaping of fiscal revenue,  reducing the burden of direct taxation in 
order to stimulate growth. However, the Cent ral Bank needed to im plement a restrictive 
monetary policy to bring the surge in loans extended by commercial banks (165% annual expansion in 2007) back to mo re sustainable levels in 2008. 
Interplay of market forces 
Electricity prices were further liberalised and the cross-subsidisation between the enterprise 
and household consumers was reduced. The gove rnment took measures to alleviate the 
increase in food prices. In September 2007 it in troduced a package of temporary measures to 
stimulate agricultural production by reducing VAT rates, supplying farmers with raw 
materials or increasing guaranteed prices to producers. 
The privatisation process accelerated after th e adoption of the new constitution. More than 
85% of the State-owned capital has been privatised already.  Key sectors such as banking, 
telecommunications and the metal industry have been fully privatise d. Out of 59 companies 
slated for privatisation in 2008, fewer than half display State ownership above 50%. A 
significant number have already been put up for sale over the reporting period. However, a 
few of them failed to attract investors, while in other cases the sales contracts were not concluded. Since the end of 2007, the government has announced a new type of tenders for 
developing a series of seaside locations, mostly  former military properties, into high-end 
tourist resorts under leas e conditions. Overall, th e privatisation process has further advanced, 
although the sale of a few companies fa iled for lack of investor interest. 
Market entry and exit 
In 2007 the number of companies registered  with the Commercial Court increased 
significantly. However, because the procedure to  register new companies is inexpensive, a 
number of these remain inactive after a single  operation. While busines s registration is quite 
simple and takes four days at most, starting ac tual operations may require significantly more 
time to obtain the compulsory licen ces. There is also a disparit y in requirements and the costs 
for obtaining the same business licences depe nding on each municipality. So far, most 
improvements have come from initiatives by central government or agencies, such as 
adoption of the draft law on domestic trade, which replaced the need to obtain municipal 
business licences by a declarati on by the entrepreneur of intent to launch trading activities. 
Overall, market entry procedures are improvi ng, but one-stop shops, though considered, have 
not yet been introduced. 
In 2007 the Commercial Court registered 371 ne w bankruptcy procedures, and closed 359. 
The average length depends on the legal basis applicable. Under the 2006 Law on insolvency 
of business organisations, the most comple x cases may take a maximum of one year, 
compared with up to 10 years under the previous  law. Overall, market exit delays have been 
reduced considerably by the im plementation of new legislation. 
Legal system 
The main obstacles to an effective business envi ronment remain the weak rule of law and the 
costs and delays for obtaining business licences and for property registra tion. Yet, corruption 
and criminal activities may hinder the developm ent of the formal sector and affect the 
business environment. The regulatory framework further improved with the establishment of two new institutions: a mediation centre to f acilitate simple resolution of commercial 
disputes, and a council for elimination of bus iness barriers. Overa ll, progress has been 
EN 24   EN achieved in several areas influencing the busine ss climate, but further efforts to establish a 
transparent system are needed. 
Financial sector development 
The size of the banking sector in terms of assets grew to 131% of GDP by the end of 2007, 
making it one of the major driving forces of the Montenegrin economy. The sector remained 
concentrated, with three banks holding 37% of the total capital, 64% of  the banking sector's 
assets and 73% of the total deposits. However, competition in the banking sector reduced lending rates. The average weighted effective interest rate stood at 9.1% at the end of 2007, 
while the real interest rate remained much lower, at 1.4%. In 2007, the Central Bank adopted 
a package of measures to incr ease the security  of loans, and dampen credit expansion. In 
January 2008 centralised registration of credit operations was introduced, allowing 
commercial banks to improve their risks manage ment. In February 2008 parliament adopted a 
new Law on banks, providing for more detailed  regulation of the sector with improved 
supervision of the banking system. The Law aims to bring the banking legislation closer to 
international standards, especially th e EC Capital Requirements Directives
6. The banking 
prudential indicators remained sound in 2007, a lthough positively influenced by the strong 
growth of lending. The share of non-performing loans decreased to 3.2% of total loans. The 
capital adequacy ratio declin ed to 17.1%, well above the minimum 12% required. Average 
bank profitability declined marginally.  Overall, despite the intensive lending activity, the 
stability of the banking sector has been maintained. 
The insurance industry accounts for some 2% of GDP and is primarily made up of 
compulsory insurance (i.e. for motor vehicles ) which accounts for half of total premiums, 
whereas life insurance covers just 4.5%. The sector remains highly co ncentrated, with one 
company holding a 66% market share. The leas ing sector continued to expand strongly in 
2007, increasing from 3.7% of GDP in June 2007 to  5% at the end of the year. The capital 
market comprises two stock markets. In early  2008 one of the stock exchanges launched a 
takeover bid, but failed to take control of its  rival. Eight investment funds and some 32 
brokerage companies participate in the market . A number of banks also participate in the 
capital market by founding pension funds, formi ng broker associations or performing custody 
operations. Overall, the non-bank financial sector grew rapidly, especially driven by leasing, 
while the stock markets remained volatile. 
3.2. The capacity to cope with competitiv e pressure and market forces within the 
Union 
Existence of a functioning market economy Macroeconomic stability has w eakened as external exposure increased in 2007 and the first 
half of 2008 owing to strong demand pressures revealed by rising infla tion, widening external 
imbalances and a moderately pro-cyclical fisc al stance. Nevertheless, continuation of the 
already advanced privatisation process and implementation of th e other structural reforms to 
which the government is committed are facilitati ng more efficient allocation of resources by 
market mechanisms. However, despite sign ificant progress in improving the business 
environment, weaknesses and sometimes insuffici ent resources on the part  of supervisory and 
regulatory agencies are still impeding the cons olidation of a more level playing field for 
market participants, thus providi ng leeway for informal practices. 
                                                
 
6 Directives 2006/48/EC and 2006/49/EC. 
EN 25   EN Human and physical ca pital endowment 
Enrolment in primary and secondary schools re mains high. The number of university students 
rose to 3.1% of the total population, approa ching the EU-27 average of 3.8%. Vocational 
training was reinforced thanks to cooperation with international institutions. The employment agency and the Directorate for Small and Medi um-sized Enterprises (SMEDA) continued to 
implement active measures promoting self-emp loyment and vocational training along with a 
strategy for life-long entrepreneurial learning, with special emphasis on the less developed 
northern region. A new labour law was adopted in July 2008. In September, the government 
adopted the mid-term programme for promoti on of employment and development of the 
human resources for the period up to 2011, with th e aim of creating favourable conditions for 
building a competitive and dynamic knowledge-b ased economy. The up-grading of human 
capital continued, although retraining program mes offered by the employers are not yet 
sufficiently developed.  
Capital formation increased substantially owing to very strong net FDI, bank financing to 
corporations and government capital spending. Th e restructuring of th e electricity industry, 
railways, airports and the port of Bar are underway. The telecommunications sector saw 
further development by providing alternatives to fixed telephony and offering significantly 
cheaper international calls. Mo bile telephony continued to e xpand, recording a penetration 
rate above 200% in July 2008. Ov erall, investments increased bot h in volume and quality of 
sector allocation as real estate  investments declined relative to other production activities. 
Sector and enterprise structure 
Large and enduring trade deficits reflect th e narrow production base, limited competitiveness 
of local products and strong inflows of fore ign capital. The labour structure shows a 
significant share of workers in government administrations or in public companies. This situation decreases the external competitiveness of the more productive tradable sector. Overall, with about 70% of its narrow econom y employed in services, Montenegro relies on 
upgrading the quality of its offer into the upper end of the market to improve both 
competitiveness and productivity. 
The privatisation strategies for the transpor t and energy sectors we re adopted in 2007 and 
their implementation engaged. It was decided to  restructure the national railways into two 
joint stock companies: one for transport, the other for infrastructure . In 2008 the incumbent 
power utility EPCG launched unbund ling of the company into five  separate business units to 
be integrated vertically into a single en ergy holding. Meanwhile, th e Privatisation Council 
launched recapitalisation of the company, seeking a strategic investor to provide funds for its 
development, while the government retains a 55% share. Given the complexity of the 
restructuring, the opening of the electricity market to qualified consumers
7 has been delayed 
until the end of 2008. Meanwhile, the recently established Energy Regulatory Agency has 
adopted a series of decisions to enhance the legislative framework and further develop the 
sector. 
The restructuring of the industrial port of Bar was launched with the adoption of the Law on 
ports in July 2008. The State reta ins ownership of the infrastruc ture via the port authority, 
while business activities will be  privatised as a separate po rt operating company. The first 
phase started with the selling of non-core business activities  to provide for the severance 
                                                 
7 Excepting households in the preliminary opening phase. 
EN 26   EN indemnities of redundant workers. As regards the national air carri er, the shareholders 
assembly in July 2008 decided to proceed with  privatisation by recapitalising and selling 30% 
of the company on the capital market. Overall,  restructuring of the transport and energy 
sectors advanced further,  although it remains one of the main challenges. 
The sectoral structure of the economy continue d to shift towards services, which generated 
the largest share of employment (67%); with tourism, financial intermediation and trading expanding faster. Industry account ed for 26%. Nevertheless, th e public sector, including both 
industry and services, accounts for a significant share of total employment and is also the 
sector where employment expanded fastest. Th e share of agricultural workers continued to 
decline and fell to 7%. Still, th e informal sector remains large in most areas of the economy. 
Overall, industry is giving way to more pr ofitable sectors like tour ism and construction, 
ensuring a more diversified growth path. 
SMEs are mostly geared to th e domestic market and only aro und 15% of them export outside 
the former Yugoslav territory. Companies have benefited from the surging credit activity of 
banks, with two thirds of credit s being allocated to them. However, SMEs continue to find it 
more difficult to obtain loans, given the lack of  sound financial statements or collateral, and 
are therefore resorting increasingly to leasing to acquire facilities, vehicles and equipment. In 
June 2008, the Central Bank adopted a decision  on credit guarantee services, providing the 
legal basis for establishment of  credit guarantee funds  to support SMEs acc ess to financing. 
Overall, the expansion of the SME sector cont inued, albeit at a slow pace, as the recently 
adopted government's operational plan for eliminat ing barriers to entrep reneurship is at an 
early stage of implementation. 
State influence on competitiveness 
Early in 2008 the Ministry of Finance adopted decrees on conditions for granting state 
support. State aid is primarily granted to comp anies undergoing restructuring or privatisation 
and takes the form of debt relief or severance payments to make their sale more attractive to 
potential investors. In the case of the metal sm elters, electricity subs idies running until 2011 
were also included in the privatisation deals. SMEs may benefit from aid to participate in 
international fairs, to promote competitivenes s or to improve managerial skills. But public 
support cannot be granted to SMEs dealing w ith shipbuilding, agriculture and fisheries. 
Overall, the amount allocated in the governme nt budget for direct su bsidies remains very 
small. 
Economic integration with the EU  
The trade component of the Stabilisation and A ssociation Agreement entered into force by 
virtue of an Interim Agreement on 1 Ja nuary 2008. Montenegro remains a very open 
economy, with total trade in goods and services  above 150% of GDP. In 2007 the services 
sector became the major source of export reve nue due to the performance of the tourism 
industry, which recorded higher revenue than  the traditional metals trade. The main 
destination for domestic producers goods remains the EU, which took 65% of total exports in 
June 2008, followed by the CEFTA countries (3 3%). In the case of imports, 50% of 
Montenegro's imports come from CEFTA part ners and 41% from EU countries. FDI from the 
EU totalled EUR 534 million or  53% of total inflows, follo wed by 18% from Russia and 7% 
from Switzerland. Although the share of European  investment decrease d slightly compared 
with 2006, it expanded in nominal terms by 45% year-on-year. Overall, economic integration 
with the EU remains high. 
EN 27   EN 4. E UROPEAN STANDARDS  
This section examines Montenegro's capacity gradually to approximate its legislation and 
policies to the acquis  related to the internal market, sect oral policies and justice, freedom and 
security, in line with the Stabilisation a nd Association Agreement and the European 
Partnership priorities. It also analyses Montenegro's administ rative capacity. In each sector, 
the Commission's assessment covers progres s achieved during the reporting period and 
summarises the country's overa ll level of preparations. 
4.1. Internal market 
4.1.1. Free movement of goods Some progress can be reported on standardisation . The new Law on standardisation was 
adopted in February 2008. The Institute for St andardisation of Montenegro (ISME), which 
will operate as the enquiry point for standards,  became a member of the IEC (International 
Electro-Technical Commission) and an affilia te member of the European Committee for 
Standardization (CEN). An ag reement on business and technical  cooperation was signed with 
the Institute for Standardisation of Serbia allowing the ISME to  acquire a database developed 
under the former State Union, providing a go od basis for development of Montenegrin 
standards. Technical committees on civil en gineering and electrical engineering were 
established, and other expert bodies are bei ng set up. The Institute adopted 200 Montenegrin 
standards harmonised with the Eu ropean and international sta ndards. A further 300 standards 
on the areas covered by the new approach directives were adopted in July 2008.  The Institute 
is currently operating with 10 employees, out of  a planned total of 32. Further strengthening 
of the ISME’s administrative capacity is require d with a view to national standardisation and 
to membership and representation of Montenegro  in international and European organisations 
for standardisation. 
Some progress can also be reported with conformity assessment . The Law on technical 
requirements for products and conformity assess ment and a set of implementing decrees were 
adopted in February and June 2008, including decrees on authorisation and registration of 
conformity assessment bodies and procedures an d on notification, adoptio n and registration of 
technical regulations. Following the adoption of  these by-laws, the Department for quality 
infrastructure in the Ministry for Economic De velopment, which has a staff of four, will be 
appointed to act as the enquiry point for technical regulations. 
Good progress can be reported in the field of accreditation . The Accreditation Body of 
Montenegro (ABM) started its operations in the first half of 2008, by setting up technical 
committees for testing laboratories and for cer tification bodies and also steering committees 
for accreditation and complaints. The ABM also adopted rules related to the accreditation 
procedure and has so far accredited six conformity assessment bodies. The ABM applied to become an affiliate member of European Coop eration for Accreditation (EA) in March 2008 
and signed agreements on cooperation with the accreditation bodies of the neighbouring countries. So far this year, the ABM has ta ken on three of the te n extra staff planned. 
Improving communication, cooperati on and coordination with other segments of the quality 
infrastructure and enhancing the administrative capacity of the ABM itself are preconditions for proper functioning of the quality infrastr ucture. The legal fram ework for accreditation 
activities in Montenegro ha s not yet been finalised. 
EN 28   EN Work on the legal framework for metrology is underway, but not ye t completed. The Bureau 
of Metrology became a corresponding member of  the International Organization of Legal 
Metrology (OIML). Out of the planned increas e of 34 staff members in 2008, so far the 
Bureau of Metrology has recrui ted 23. Preparation of the firs t national calibration laboratory 
for mass is underway. The Bureau has provided provi sional premises for fi ve laboratories (for 
mass, length, electrical quantities, temperature and pressure), but the conditions there are not up to the standards required for laboratories. Part of the equipment for the laboratories has 
been purchased and part taken over from the former military metrology laboratories. Adoption 
of the law on metrology, provision of adequa te premises and equipment for metrology 
laboratories and upgrading of admi nistrative capacity are requir ed before a proper metrology 
system can be set up in Montenegro.  
There has been some progress as regards market surveillance . The Law transposing the 
General Product Safety Directive was adopted in July 2008. However, its alignment with the 
acquis  has yet to be verified. By-laws, includi ng a by-law on the exchange of information on 
dangerous products within Montenegrin instit utions, and between Montenegro and the EU 
(RAPEX), have not yet been adopt ed. The administrative capacity of the Market Inspectorate 
and of other authorities carrying out market surveillance activities needs to be further 
developed, along with coordination and mutual c ooperation between these authorities. In this 
context, one is to develop a  market monitoring strategy. 
In the area of consumer protection,  progress has been made in the form of adoption of the 
national strategy for consumer protection in April 2008. The national consumer protection 
programme (NCPP) is a comprehensive framew ork for an integrated  consumer protection 
policy for the next two years. The action pla n, which is an integral part of the NCPP, 
identifies specific activities for implementation of consumer protection policy. The process of 
selecting the members of the Arbitration Board, which will be in charge of out-of-court settlement of disputes, is ongoing.  
Overall, preparations in the area of free movement of goods are moderately advanced. 
Montenegro needs to strengthen its ins titutional and administrative capacity, enhance 
cooperation between the relevant State institu tions and align the horizontal legal framework 
with Community legislation. Additional efforts are also needed to start transposing the 
product-specific acquis  into Montenegrin legislation. 
4.1.2. Movement of persons, services  and right of establishement 
Some progress has been made in the field of movement of persons  and access to the labour 
market. The Law on employment and work of fore igners was adopted in March 2008 and will 
be applied from 1 January 2009. The Law stipulat es that issuance of a temporary residence 
permit for the purpose of employment is conditi onal on previous issuance of a work permit 
for aliens. It also lays down conditions for cross-border service suppl iers, intra-corporate 
transferees, business visitors and contractua l service suppliers. The procedure for setting 
quotas for the Law on employment and work of foreigners will be laid down in the Law on 
foreigners, which is currently in parliamentary procedure. Some initial steps have been taken 
in the area of recognition of professional qualifi cations with the adoptio n of the draft law on 
national qualifications  by the government. Coordination of  social security systems is 
continuing. Bilateral agreements were signed with Hungary and Luxembourg. 
Progress has been significant on free movement of services , which  
was further liberalised in 
the framework of the ongoing negotiati ons for accession to the WTO.  
EN 29   EN There were developments in the financial sector . A new Law on banks was adopted in March 
2008, providing the legal basis for gradual transition to Basel II, but not yet fully in line with 
the acquis . A Decision on capital adequacy of banks , in accordance with the new Law on 
banks, introduced capital requirements for market , operational and other risks. Further efforts 
are needed to achieve alignment with the Capital Requirements Directive (especially 
regarding advanced approaches) and with othe r international standa rds, for example on non-
authorised acquisition of qualif ied participation in banks' capital, corporate governance, 
internal controls of banks  and enforcement powers. After the introduction of a new 
organisational structure for the Bank Superv ision Department of the Central Bank of 
Montenegro, supervisory capacity needs to be further streng thened with a focus on risk-based 
supervision, consolidated s upervision and cross-sector and international cooperation. 
The institutional framework for supervision of the non-banking financial se ctor has also been 
improved. The Agency for Insurance Supervision came into operation in January 2008. At the 
moment only five civil servan ts are employed in the Agenc y, while the Council Agency 
performs its activities on a part-time basis, as specified by the law. The priority of the Agency 
is to harmonise the operations of the existing insurance and brokerage companies and also the 
activities of insurance intermediaries and other services in the field of insurance under the 
new legislation which came into force on 1 January 2008. 
Furthermore, based on the Law on voluntary pe nsion funds, Montenegro adopted several by-
laws, such as rules on issuing operating licen ces to organisations ma naging voluntary pension 
funds and licences for establishing voluntary pe nsion funds and rules on accounting points of 
voluntary pension funds and conversion of the contributions paid into accounting points, 
which entered into force in October 2007. 
Regarding the right of establishment , in October 2007 the government adopted the 
programme to eliminate barriers to entrepre neurship development in Montenegro. An ad hoc  
Council, headed by the Prime Minister, is in  charge of strategic management of the 
programme, via annual operational plans. In  2008 the following priorities were identified: 
registration of economic enterpri ses, issuing permits for performing the work, insolvency of 
economic enterprises, registration of real estate, planning, urban planning and building 
construction, taxes, import/export and the la bour market. The Law on spatial planning and 
construction, adopted in July 2008, stipulates that  building permits should be issued within 15 
days, while the new Law on internal trade revo kes licences for trading companies. However, 
the simplification of the procedure for esta blishing a business, consisting of unifying 
collection of all taxes and contributions under a single body, has not  yet been enacted. 
Licensing requirements and costs still vary between different m unicipalities, which adds to 
the duration of procedures.  
There has been some legislative progress, with the adoption of amendments to the Company 
Law  in December 2007. Imprecision and gaps in  the law were eliminated, enabling further 
alignment with the first, second, third sixth, eleventh and twelfth Company law directives. 
The revision also increased safeguards for minor ity shareholders and stipulated that they 
should be treated in the same way as local opera tors for foreign companies and their branches 
on Montenegrin territory. 
Overall, Montenegro's preparations in the areas of movement of persons and services, 
establishment and company law have further advanced. 
EN 30   EN 4.1.3. Free movement of capital 
There has been progress in the field of free movement of capital . With a view to accession to 
the WTO, Montenegro has amended its legisl ation on foreign current and capital operations, 
revoking protective measures where there is no re ciprocity in current a nd capital transactions 
that could lead to disturbance of the monetary or financial conditions in  the country. Although 
foreign investors are free, in principle, to inve st and transfer financia l and other assets, the 
Montenegrin legislation also contains some excepti ons to that rule. Apart from the restrictions 
on production of and trade in arms and ammun ition and on activities re lated to "national 
parks", the activities of foreign investors in border districts  are subject to them participating 
in joint ventures with local operators, with a capital share not exceeding 49%. A Law on a State land survey and cadastre was adopted  in 2007. It provides the legal basis for 
determining the scope of activities in connectio n with development of state land survey and 
register in Montenegro. Parliament return ed the law on property relations for public 
discussion. 
With reference to payment systems , a new law on national pa yment operations, regulating 
transfers of funds, inter-bank tr ansfer settlements, issuance of  electronic means of payment 
and establishment and control of  payment operations has not ye t been adopted by parliament.  
A new Law on the prevention of money laundering and financing of terrorism  was adopted 
in November 2007, in line with the acquis . The law and its implementing regulations lay a 
firm foundation for implementing the SAA, in cluding by expanding and strengthening the 
Anti-Money- Laundering Directorate  in areas such as control of reporting entities, 
information technology and data import. 
Overall, some progress can be reported in the ar ea of free movement of capital, in particular 
on the legislative front. 
4.1.4. Customs and taxation 
Good progress was achieved in the area of customs  during the reporting period. Montenegrin 
customs legislation, already largely aligned with the acquis , has been further improved. 
Amendments to the Customs Law introduced the status of authorised economic operator and 
simplified customs procedures, including via foreigners' customs agents and deferred 
payments. The Decree on harmonisation of the 2008 Customs Tariff Nomenclature aligned 
the national customs tariff with the EU Combin ed Nomenclature and implemented the trade 
provisions in the IA. Amendments to the La w on administrative fees, though meeting the 
GATT Article VIII requirements, did not totally abolish customs-related fees as stipulated by the SAA and the acquis . A
 new Decree on the infringement of intellectual property rights 
harmonised the deadline for cea sing actions under the TRIPS. As of 1 January 2008 all duty-
free shops at land borders were closed. 
With reference to administrative capacit y, the customs administration prepared a practical 
guide to application of rules on preferential trade within the SAA and CEFTA Agreements. An agreement on mutual assistance in custom s matters was concluded with Slovenia in 
October 2007. Three quarters of the customs st aff have received ba sic training. Further 
training on rules of origin, va luation of imported goods and IP R protection was organised for 
both customs officers and economic  operators. The customs admi nistration currently employs 
520 civil servants, out of 669 pl anned posts; recruiting and reta ining staff is a recurring 
problem. Nevertheless it continued enhancin g its collection capacity  and collected 22.9% 
EN 31   EN more duties, VAT excises and other taxes durin g the first eight months of 2008, which made 
up 65.7% of the overall budget revenue. 
Overall, Montenegrin customs legisla tion is largely in line with the acquis . However, 
alignment is still needed, notably as regard s origin, transit procedures and valuation. 
Moreover, customs fees have to be brought into line with the Interim Agreement. The 
administrative capacity of the customs admi nistration needs stre ngthening, including by 
continuing implementation of the business strate gy, in order to ensure effective enforcement 
of the legislation. 
Some progress was made in the taxation  area. In the case of direct taxation, the first 
legislative measures were taken towards alig nment with EU legislation, in the form of 
amendments to the Law on corporate profit tax and adoption of by- laws under the Law on 
personal income tax in June 2008. Constant improvements can be reported in indirect 
taxation. Amendments to the VAT Law increased the alignment on second-hand motor vehicles and recovery of VAT in passenger tr ansport. Reduced rates on computer equipment 
and services in marinas were introdu ced, which are not in line with the acquis . 
To improve the capacity of the tax administration,  an internal audit department was created to 
monitor staff performance and uniform application of procedures. As part of the action plan to 
fight organised crime and corruption, the ta x administration concluded agreements on 
cooperation with the police and Anti-Money-La undering Directorate, bus iness associations 
and unions. Also, the Code of Et hics was adopted. Exchanges of tax information with Serbia, 
Bosnia and Herzegovina, the former Yugosla v Republic of Macedonia and Hungary were 
intensified. The Decree on fiscal  cash registers and the reco rding of sales of goods should 
help to enhance VAT collection in retail trade.  The information provided to taxpayers was 
improved by means of a tax bulle tin and electronic media. Neve rtheless, with 618 out of the 
planned complement of 744 civil servants, the main needs of the tax administration are for 
additional and long-term recruitment and also tr aining. Compared with the first eight months 
of last year, the tax administration collected  29% more taxes and contributions. For taxes 
only, the figure is even higher: 31.5%. 
Overall, alignment of the tax legislation with the acquis  has increased. Good progress has 
been achieved in modernising the tax admini stration. However, further alignment is still 
required, in particular as regard s the excise rules, zero and re duced rates of VAT and direct 
taxation. Further efforts are needed to provide adequate staffing and tr aining and to improve 
tax collection and controls, incl uding effective use of risk an alysis and computerisation. The 
fight against corruption and efforts to re duce informal economy remain a priority. 
4.1.5. Competition 
There has been some progress in the area of anti-trust . Amendments to the Law on the 
protection of competition enabled the government to establish, in November 2007, the agency for competition protection. Experts from the Depa rtment for protection of competition in the 
Ministry of Economic Developm ent were transferre d to the new author ity, which currently 
has six employees. A number of training courses and study visits  were organised for the staff 
of the authority. The operationa l independence of the agency has yet to be established. A 
strategy for competition policy was adopted by the government in June 2008.  
As regards State aid , there is some progress to report. An effective and comprehensive 
system for 
ex-ante  control is not yet in place. A genera l Law on control of State aid entered 
EN 32   EN into force in May 2007.  By-laws on the crit eria, purposes and  conditions for granting State aid 
and the methods and procedures for control and reporting were adopted in the first half of 
2008.  
A seven-member State Aid Cont rol Commission was establishe d in November 2007. It is 
authorised to approve the granting of State aid, to order recovery of unl awful State aid and to 
carry out ex-post supervision. The State Aid Contro l Commission and the State Aid 
Department, which performs administrative a nd technical tasks for the Commission, upgraded 
their capacity by means of a se ries of training events. In June 2008, the State Aid Control 
Commission adopted the annual report on State aid control, the first of this kind in 
Montenegro. 
Overall, some progress has been achieved. The agency for competition protection and the 
State Aid Control Commission were established, and their operational i ndependence will need 
to be ensured. Further strengthening of the Stat e aid framework and upgrading of the capacity 
of the State Aid Department is required. 
4.1.6. Public procurement 
Progress has been made in the public procurement  system . The competitive side of the public 
procurement market has improved, and the absen ce of any preferential treatment rules is a 
positive factor. The share of this sector in  the Montenegrin economy increased in 2007, to 
18.92% of GDP. 
The Public Procurement Law adopted in July 20 06 is a good starting poin t and is largely in 
line with the main principles of the EU public  procurement system. However, it still shows 
several areas of non-compliance with the relevant  EC directives and/or with international 
good practice, such as in the scope of utilities. 
The administrative tasks of the Public Procurem ent Agency (PPA) have been separated from 
the review of complaints conducted by the Public Procurement Commission (PPC), thus 
reducing the risk of potential conflicts of in terest. Information was made available to all 
stakeholders by publishing tenders  and selection decisions on the Directorate’s website. The 
electronic public procurement syst em has not yet been developed.  
A number of training sessions a nd study visits were organised fo r PPA and PPC staff, but the 
PPA is still in its initial st age and lacks sufficient staffing. 
Progress continued in the ar ea of public procurement. However, efforts to improve 
transparency and accountability and to align the legislation with the acquis , including on 
concessions and public-private pa rtnerships, need to be intensified, as well as capacity-
building for all involved in public procurement.  Enforcement of the legislation will depend on 
the availability of central institutional re sources for supporting and monitoring public 
procurement efficiently. 
4.1.7. Intellectual property law 
Progress has been made in the field of intellectual and industrial property rights (IPR). 
The IPR law  of the State Union will continue to a pply in Montenegro until the appropriate 
legislative framework is adopted. Amendments to the Law on administrative fees, covering 
the area of intellectual property, were adopted  in April 2008. With a view to Montenegro's 
EN 33   EN accession to the WTO, the Law on indications  of geographical origin was adopted by 
parliament in July. A draft law on patents has also been adopted by the government.  
The Montenegrin Intellectual Property Office (IPO) was offi cially opened on 28 May 2008. It 
currently employs 10 out of the 22 planned staff and has already laid the basis for 
formalisation of cooperation with other IPOs in the region. A Regulation on recognition of 
intellectual property rights was adopted in Se ptember 2007. Under this Regulation, any rights 
registered with the Union Intellectual Property Office or with the Serbian Intellectual Property 
Office and any pending applications filed with these Offices before 28 May 2008 are 
enforceable in Montenegro. Any application for IP R rights in Serbia made after that date will 
have to be re-submitted in Montenegro within six months, in order not to lose its acquired 
priority.  
Regarding enforcement, the administrative capacity of the newly established IPO needs 
further strengthening. IPR market inspectors, police officers, customs officers and employees 
of the Ministry for Economic Development a ttended a number of training seminars on 
intellectual property protection and counter feiting. At the end of 2007, the Customs 
Administration signed a Letter of Intent for Acceptance of SECURE Standards  (standards to 
be employed by customs for uniform rights en forcement), adopted by the World Customs 
Organisation (WCO) with a view to more effici ent protection of intell ectual property rights by 
customs authorities. 
Since 2002, judges from the Commercial Court in Podgorica have been participating in 
relevant seminars organised both in Montenegro and abro ad (USA, Bulgaria, former 
Yugoslav Republic of Macedonia, Bosnia and Herzegovina, Croatia, Italy and Serbia). 
The number of IPR cases filed at the Monteneg rin courts has increased, from only a few (up 
to 5 a year) to 44 in 2007. The average time per case is about six months. 
Overall, further progress still needs to be ma de on protection of inte llectual property rights, 
especially with regard to the still limited instituti onal and enforcement capacity and the low 
level of public awareness. 
4.1.8. Employment and social policies 
In the field of employment policy , a further decrease in unemployment was reported. 
Structural unemployment, une ven regional employment a nd undeclared work are still 
problems. The process of adjusting and updating instruments for the labour market analysis 
by the Employment Agency and the National Statistical Office (MONSTAT) is ongoing. 
However, there is still a need  to clarify responsibilities between the two institutions. 
A national strategy for employment and develo pment of human resources, covering the period 
2008-2011, and a related action plan for 2008-2009 have been adopted. In addition, a White Paper was issued on human resources development in Montenegro up to 2017. However, the capacity of the Ministry of Health, Labour and Social Welfare needs to be further 
strengthened with a view  to coordinating and managing implementation of the 
abovementioned strategies and action plans. 
In the area of social policies , progress has been made on the le gislative framework as regards 
labour law . The Labour Law was adopted in July  2008. It defines a single collective 
agreement for both public and private sectors, k eeps the existing level of severance payments 
of six average salaries and retains the current  365 days maternity leave. A Law on peaceful 
EN 34   EN resolution of labour disputes was adopted in December 2007. It introduces out-of-court 
settlement of labour disputes for the first time in Montenegro. The agency required for 
implementation of the Law now needs to be established. 
Substantial amendments to existing legislati on and timely adoption of the necessary by-laws 
are needed to align the legislation on health and safety at work  more closely with the acquis . 
The administrative capacity of th e Ministry of Labour and its inspection department are not 
yet strong enough and establishment of the safety  at work agency needs to be speeded up. 
Some progress has been made  in relation to tripartite  social dialogue . A Social Council was 
established in June 2008 based on the law adopte d in December 2007. It is in charge of labour 
affairs with the aim of conducting a dialogue on issues that are important for improving the 
economic and social position of employees and employers. The Council is also expected to encourage peaceful settlement  of collective labour disputes. The Council comprises 11 
representatives of the government , 11 representatives of author ised trade union organisations 
and 11 representatives of the employers’ asso ciation (Montenegrin Union of Employers). 
However, the issue of weak bipartite social dialogue remains unaddressed. All workers, with 
the exception of those employed in the Stat e administration, have the right to bargain 
collectively. Given that workers in the State ad ministration also have no  right to strike, the 
role of trade unions in the public administration can be regarded as very limited. 
In the area of  social inclusion , a strategy on  minority policy has been adopted. The 2007-2011 
strategy for reduction of poverty and social excl usion was re-focused on four fields (health, 
education, social protection a nd employment). Steps have been taken to establish a 
coordination unit to implement it. Nevertheless there is still a lack of shared analyses and cooperation between the relevant st akeholders in charge of fost ering implementation of social 
inclusion policies. 
Regarding social protection , in November 2007 the governmen t adopted a strategy for the 
development of social and child protection, a st rategy for the development of social protection 
for the elderly and a strategy for the inclusion of disabled persons in  Montenegro. All three 
cover the period 2008–2012. However, implemen tation of these strategies is weak. 
In the area of equality between women and men , a national action plan for gender equality has 
been adopted for the period 2008-2012 which cove rs eight policy areas. Little progress has 
been made on public health policy . The government began to streamline the public health 
sector, by cutting the number of  employees and restricting fr ee housing for the remaining 
staff. However, the capacity of the healthcare sy stem still does not meet the needs of the 
population, and the budgetary framewor k fails to meet all the needs.  A strike by health 
workers hindered further reforms. Some legi slation has been introduced, making progress 
towards aligning with EU health  legislation, e.g. in the field of blood quality and safety, 
tobacco control and the reporting of communicable  diseases. It has yet to be implemented.  
4.1.9. Education and research 
As regards access to 
education , primary and secondary school enrolment rates remain high. 
There are 20,000 students at the University of Montenegro, 1,600 at the private Mediterranean 
University and 988 at five newly established private faculties (the  faculty of la w, the faculty 
of international economics, finance and busine ss, and the faculty of administrative and 
European studies in Podgorica, the faculty of business management in Bar and the college of 
EN 35   EN nursing in Herceg Novi). A total of 14,760 students , or 82% of the total enrolled in the first 
year of undergraduate studies in 2006/2007, went on to the second year of studies. 
Amendments to the Law on general education and upbringing were adopted. These provide 
for education programmes tailored to minorities, establishment of primary schools by foreign 
citizens and a procedure for electing head te achers. A Law on recognition and evaluation of 
educational credentials was a dopted in January 2008. The government adopted a strategy for 
inclusive education for 2008-2016 and a strategy fo r civic education in primary and secondary 
schools for 2007-2010. 
Further steps were taken to upgrade the quali ty assurance system. The body responsible for 
quality assurance is the national council for higher education. Each individual faculty is 
responsible for permanently monitoring quality  assurance. In December 2007, the University 
of Montenegro underwent the process of re-accr editation in accordance with the guidelines on 
re-accreditation of higher educa tion institutions and study progr ammes. The nursing college 
was re-accredited in June 2008, and the Mediterranean University is  now in the process of re-
accreditation. 
Further steps have been taken to ensure alignm ent with the EU’s lifelong learning objectives 
and employment policies. A lifelong learning strategy on entrepreneur ship along with an 
action plan for its implementation were developed.  
In the area of culture, the UNESCO Conven tion on the protection and promotion of the 
diversity of cultural expressi ons was ratified in May 2008. 
As regards research , in July 2008 the government adopted a strategy for scientific and 
research activities in Montenegro for the period 2008-2010, which de fines the science and 
technology (S&T) priorities and sets out an an nual budget for research , aiming at a gradual 
increase. 
Montenegro is also actively considering how to  strengthen its national research capacity in 
terms of research infrastructure and human resources and reforming the funding of national 
research projects. 
International cooperation is being improved. A bilateral S&T agreemen t was concluded with 
Slovenia on 3 July 2008, and agreements with ot her countries (Albania, Croatia, Greece and 
Serbia) are in the pipeline. The memorandum of  understanding associati ng Montenegro to the 
Seventh EC Research Framework Programme (FP7) was signed in Brussels on 25 January 
2008 with effect from 1 January 2008. The im plementing measures (setting up national 
contact points, relations with the Board of Governors of th e Joint Research Centre, and 
nomination of observers in Pr ogramme Committees and other re search groups) were taken on 
time. Participation in FP7 has improved compared with FP6. 
The reform of the statistical system in the fiel d of science and research  and adjustment to the 
EU system is at an initial stage. The Ministry  of Education is conducti ng related activities in 
cooperation with MONSTAT. 
Overall, there has been progress in strengt hening the legal framew ork and the quality 
assurance system for education. Further progr ess is needed to implement a comprehensive 
lifelong learning policy. There has been good progr ess on research, particularly regarding 
development of a strategy and of regional and international cooperation, including with the 
EU. 
EN 36   EN 4.1.10. WTO issues 
Montenegro's accession to the WTO  has entered the final stage.  Progress was made at both 
multilateral and bilateral leve ls, including the deal reached  on 15 April 2008 with the EC. 
Further alignment of national legislation with  WTO rules was accomplished with a view to 
finalising the negotiations before end 2008.  
4.2. Sectoral policies 
4.2.1. Industry and SMEs Progress in developing SMEs  policy continued.  
Montenegro is committed to applying the Euro pean Charter for Small Enterprises and made 
further progress towards this. On 11 Oct ober 2007, the government adopted a national 
strategy for development of SMEs for 2007-2010 and a programme to eliminate barriers to 
entrepreneurial development. In April 2008, a first annual operational plan was adopted, a 
Council for elimination of barriers to busine ss was established and a dedicated SME portal 
was launched, which will become interactive in future. 
Progress on industrial policy has been limited. The sectoral analysis of the processing 
industry on the macroeconomic situation in M ontenegro was finalised, but the process of 
developing Montenegro’s overall developmen t strategy is at an initial stage.  
The new Banking Law adopted in February 2008 allowed the Cent ral Bank to adopt a 
decision on credit guarantee services, prov iding the legal basis and guidelines for 
establishment and operation of a credit guarantee  fund (CGF), which is not yet operational.  
Also, practical measures were taken to improve the export potential of SMEs in the form of 
the “Enhancement of export” credit line  and the “Cost-sharing grant scheme”. 
The government adopted a strategy for lifelong entrepreneurship learning for 2008-2013 and 
an action plan for 2008-2009. This envisages in troducing entrepreneuria l learning as a key 
skill in primary and secondary schoo ls from the 2009/2010 school year.  
Montenegro joined the entrepreneurship a nd innovation pillar of the Competitiveness and 
Innovation Programme on 3 March 2008 and will pa rticipate in the Enterprise Europe 
Network. A network of nine business centres is operating in Montenegro. The business incubator in Podgorica has not yet come into operation and no progress has been made under 
cluster policy. 
Application of the silence-is-consent principl e combined with the possibility of on-line 
applications would help to improve of th e business environment. Also, systematic 
introduction of regulatory imp act analysis is necessary.  
Overall, progress in SMEs policies can be reported, but further efforts are needed on 
harmonising and speeding up licences and permits, removing business barriers and implementing industrial policy measures (CGF, incubators and clusters).  
EN 37   EN 4.2.2. Agriculture and fisheries 
Good progress can be reported on agriculture and rural development policy. A draft law on 
agriculture and rural development and a nati onal programme for food production and rural 
development for 2009-2013 were adopted by the government in September 2008.  In addition, 
the budget allocation for agriculture and rural development was increased by 25% compared 
with 2007.  
In accordance with the strategy for the development of food production and rural areas, 
agricultural policy continued to be graduall y reformed and harmonised with the Common 
Agricultural Policy (CAP). In particular, input  support was replaced by direct payments per 
hectare of arable land; headage payments were granted to 4,400 beneficiaries; several 
thousand beneficiaries received some kind of support (for the purchase of quality seeds and 
seedlings, modernisation of greenhouses, direct  support to growers of seed potatoes and 
tobacco, etc.); and the first producers were re gistered in the organi c agriculture producer 
registry. 
The programme for the preservation and sustaina ble use of genetic resources and an action 
plan for its implementation were adopted. The La w on animal identification and registration is 
being implemented, together with registration of farm holdings practising animal husbandry.  
Support continued for constructi on of rural infrastructure, in cluding roads and water supply. 
In spite of the severe drought, there were so me positive results in terms of production, with 
exports of vegetables and certain kinds of  fruit nearly doubling, and also in terms of 
production and sales of milk and live animals. 
In July 2008, the parliament adopted the Law on geographical indications of origin, which 
stipulates that the procedure for legal protectio n of geographical indications of origin will be 
managed by the Intellectual Pr operty Office of Montenegro.  
Montenegro has joined seve ral international organisati ons, including the Food and 
Agriculture Organisation (FAO) . The procedure for becoming a member of the International 
Union for the Protection of New Plan t Varieties (UPOV) is underway.  
Two extension services were set up on liv estock selection an d plant production. 
In the area of food safety, veterinary and phytosanitary policy, some progress was made on 
legislative alignment, with th e adoption of the laws  on food safety, repro ductive material and 
forest trees, protection of plan t varieties, GMOs and the animal welfare. Montenegro has 
reached the final stage in accession to the International Union for the Protection of New 
Varieties of Plants (UPOV). Implementing regul ations have also been published regarding 
identification and registration of  bovines and registration of thei r movements. However, their 
compliance with the acquis  has not been documented and how correctly they implement it is 
uncertain. Identification of bovines has been completed, while identification of sheep and 
goats is still ongoing.  
The veterinary administration and veterinary di agnostic laboratory have been established. The 
only factor limiting meat exports from Mont enegro is the current lack of approved 
establishments. 
A national strategic plan for the fisheries  sector is being finalise d, setting objectives for the 
development of aquaculture and marine fisherie s, including scientific assessment of fish 
EN 38   EN stocks. Montenegro is actively participating in relevant international fisheries bodies, such as 
the General Fisheries Commission for the Me diterranean (GFCM) and the Scientific 
Cooperation to Support Responsible Fisheries in  the Adriatic Sea (AdriaMed). The Law on 
freshwater fisheries has been adopted, but th e law on marine fisheries has not yet been 
finalised.  
Overall, good progress can be re ported on the reform of the legislation, implementation of 
which is to be enhanced and an integrated food safety system need to be established. 
4.2.3. Environment 
Parliament has adopted a national land use plan that provides for the municipalities to take on 
the task of urban planning, for which a pilot strategic environmental assessment has been 
conducted. Development of the in frastructure envisaged under th is plan requires due attention 
in order to avoid any adverse impact on the environment.  
Progress has been made as regards horizontal legislation . Laws on environmental impact 
assessment and strategic environmental assessment have entered into force. Implementing legislation on environmental impact assessmen t has been adopted. The Ministry of Tourism 
and the Environment has been designated as th e national authority for projects related to the 
Clean Development Mechanism (CDM) under the Kyoto Protocol. Preparations for 
Montenegro to become party to the Espoo and Aarhus Conventions have advanced. 
Implementation and enforcement of the legislat ion continue to pose a significant challenge. 
Further efforts are needed in this respect, especially on cooperation with local government. 
In the area of air quality , limited progress can be reported . The Law on ambient air quality 
has entered into force. Projects on phasing out  ozone-depleting substanc es, including training 
for technical staff, have been approve d and are being implemented. Adoption of 
implementing legislation on air quality is still pending. Overal l, harmonisation with the EU 
standards in this area is at an early stage,  and significant efforts are needed to ensure 
implementation and enforcement. 
Some progress has been made in the area of waste management . A national waste 
management plan for the period 2008-2010 has been adopted. The system of permits for establishments and undertakings carrying out dis posal or recovery operations has come into 
force. A pilot project for separate collection of  certain categories of waste in municipalities 
has been launched. Preparations in this area are at an early stage. The level of alignment with 
the EU standards remains low, except for th e Waste Framework Directive and the Hazardous 
Waste Directive. The track record on implemen tation and enforcement needs to be improved.  
Limited progress can be reported on water quality . Montenegro became a contracting party 
to the Barcelona Convention. A re lated Law on the sea, along with legislation implementing 
the Law on water, have been adopted. Coordi nation between the Ministry of Agriculture, 
Forestry and Water Management and the Ministry of Tourism and the Environment needs to 
be improved. Preparations in this area are at an  early stage. The level of alignment with the 
European standards remains low. Further efforts are needed on implementation and 
enforcement.  
Some progress can be reported in the area of nature protection . A Law on nature protection 
transposing provisions of the Ha bitats and Wild Birds Directiv es was adopted in June 2008. 
Further efforts are needed as regards awareness-raising in this field. Inspection measures and 
EN 39   EN sanctions have not yet been adopted. Preparations in this area are at an early stage. The level 
of alignment has improved, but implementation and enforcement remain a challenge.  
Some progress can be reported on industrial pollution control and risk management . The 
Law on integrated pollution prevention and control (IPPC) has entered into force. 
Implementing regulations, including the inventor y of IPPC installations  and best available 
techniques, have been adopt ed. Existing installations mu st comply with the IPPC 
requirements by 2015. Preparations in  this area are at an early stage. The level of alignment 
has improved, but implementation and enforcement remain a challenge.  
Some progress can be re ported in the area of chemicals and genetically modified organisms 
(GMOs) . The laws on chemicals and on GMOs have been adopted . The competent authorities 
for GMOs have been designated and the Nationa l Biosafety Council is be ing established with 
the aim of monitoring developments in the ar ea of GMOs and providing assistance to the 
authorities involved in implementing the legisl ation in this field. Limited progress can be 
reported on the level of alignment with the European standards, but implementation and 
enforcement remain weak. Preparations in these areas are at an early stage. 
No progress can be repo rted in the area of noise  abatement .  
Progress has been made in the case of forestry , with the adoption of the national policy for 
forest and forest land management. 
The administrative capacity  of the Ministry of Touris m and the Environment (MTE) 
remains weak. Coordination between the bodies involved in environmen tal protection issues, 
particularly in inspection activ ities, needs to be significantly improved. The environmental 
protection agency is in the process of being established. The lack of implementation capacity 
at local level and poor coordi nation between central and loca l government further limit the 
enforcement capability.  
Overall, some progress has been achieved in te rms of alignment with the European standards. 
Further efforts are needed, however, partic ularly on implementation and enforcement. 
Particular attention needs to be paid to  strengthening administ rative capacity and to 
establishing effective inspection services. Further efforts should be put into raising awareness of environmental protection issues . Overall, environmental protec tion, in particular in coastal 
areas and national parks, is a cause for concern. 
4.2.4. Transport policy 
In the area of trans-European transport network  Montenegro continues to participate 
actively in implementation of the memorandum  of understanding, si gned in 2004, for the 
development of the core regional transport netw ork and in the South-East Europe Transport 
Observatory (SEETO). The mid-term priorities specified in the updated multi annual plan for 
2008–2012 are being implemented. In addition, the transport development strategy for the period 2008–2018, harmonised with the existing land use plan, was adopted in July 2008. 
However, continued cooperation in the framewor k of SEETO is required and the quality of 
the existing road infrastructure has still to be improved.  
On road transport , once the IA entered into force, Mo ntenegro took the necessary steps to 
ensure unrestricted Community transit throug h its territory. Howeve r, on 15 June 2008 
Montenegro introduced an eco-tax on foreign,  including Community, road passengers and 
cargo vehicles, whose compatibil ity to the IA provisions is under examination. Progress is 
EN 40   EN starting to be made on harmonisation of legislati on in the field of road safety and technical 
and social conditions. A series of laws are being prepared in this field, , but their finalisation 
should be speeded up. The newly adopted legi slation has to be implemented. The Law on 
ratification of the agreement on the interna tional occasional carriage of passengers by coach 
and bus – INTERBUS – was approved in July 2008. 
In the case of rail transport, the restructuring pr ocess and the divisi on of the railway 
company is progressing in accordance with th e railway restructuring strategy adopted in 
September 2007. The legislative progress on rail safe ty culminated in the adoption of the Law 
on rail transport safety in December 2007, but th e related by-laws have yet to be adopted. 
Montenegro signed an "Addendum to the memo randum of understanding on the development 
of the South-East Europe core regional transp ort network for a South-East European railway 
transport area" in December 2007, as a bold commi tment to take in coordinated steps towards 
opening its rail service market as part of a gradual process extending over several years. 
In the field of maritime transport  there is little progress to report. The Law of the sea was 
passed in December 2007 and the Law on ports in July 2008. However, the Law on maritime navigation is still being drafted a nd particular attention should be  paid to safety and security 
issues.  
No progress can be repo rted in the areas of inland waterways and combined transport . 
Concerning air transport , approximation of the laws on air traffic management has started, 
with the adoption of a civil aviation safety pr ogramme. The civil aviation safety committee is 
still to be established. The draft law on civil aviation has been drawn up. The administrative 
capacity of the relevant authorities should be fu rther built up so that they will be capable of 
enforcing the aviation acquis , as required by the ECAA Agreement .  
Overall, there has been good progr ess on liberalising road transit traffic. Restructuring of the 
railways is being implemented bu t access conditions to the railway  infrastructure are yet to be 
defined. Progress in road safety, maritime tran sport, and systemic approach to transport 
development has been limited. Substantial effo rts are required in implementing the aviation 
acquis  and establishing sufficien t administrative capacity. 
4.2.5. Energy 
Regarding oil stocks  and security of supply , work on a draft law on prospection, exploration 
and exploitation of oil and gas is still ongoing.  
Regarding the internal energy market , a national energy development strategy (NEDS) 
covering the period up to 2025 was adopted  on 13 December 2007. Although there are plans 
to open up the market gradually, no eligibilit y thresholds have been set and random requests 
by customers for other sources of supply do not  generate sufficientl y powerful momentum. 
The State electricity company, EPCG , is due to be restructured in three stages. The decision to 
unbundle the electricity power utility has been adopted. The first stage has already been 
completed with the creation of five daughter  companies. In the second stage of the 
reorganisation, an independent tr ansmission company is due to be created by the end of 2008. 
In the third stage, the remaining four co mpanies will become independent joint stock 
companies. The restructuring is envisa ged to be completed by the end of 2009. 
EN 41   EN Further examination of the compatibility of  the NEDS with the EU Water Framework 
Directive is needed. The NEDS argues that th e long-term solution to global climate change 
problems should rely on reservoir constructio n as a means of responding to ecological 
changes in watercourses.  
An action plan for energy efficiency cove ring the period 2008-2012 wa s adopted. Detailed 
plans for its implementation and an action plan for energy efficiency in the public sector are under development .  
An action plan on renewable energy  sources (RES) (prepared in response to Directive 
2001/77/EC) and an action plan for promotion of biofuels (prepared in response to Directive 
2003/30/EC) were adopted under the auspices of  the Energy Community in late July 2007. 
However, little has been done in terms of implementation. The major hurdle is that there are 
too few national and regional ag encies. Funds to promote thes e policies are al so lacking. 
Another difficulty is that, with the exception of the hydro-power sector, the RES market is 
underdeveloped and unable to attract suffi cient finances for potential projects. 
The draft law on radiation protection and nuclear safety  has not yet been adopted. It should 
be fine-tuned and harmonised with the EU dire ctives. The environmental protection agency, 
which has yet to be fully established, will be the nuclear regulatory authority. Montenegro has 
yet to accede to the Convention on nuclear safet y, as to the Joint Convention on the safety of 
spent fuel management and on the safe ty of radioactive waste management. 
Overall, there is progress to report in the energy sector, but it remains uneven. Continued 
efforts are still needed to meet the requirements of the Energy Community Treaty promptly. 
4.2.6. Information society and media 
Some progress has been made on electronic communications and information technology. 
A Law on electronic communicat ions – with the aim of transposing the 2002/2003 EU 
regulatory framework – was submitted to parliament without public discussion and adopted on 29 July 2008. It entered into force on 27 August 2008. The Law provides for the 
establishment of a new regulatory authority, which will be in charge of electronic 
communications and broadcasting (infrastructure licences and fr equencies, but not content 
regulation). The procedure for appointing the members of the board of the new regulatory 
authority (government nomination), along with the division of tasks and responsibilities 
between the new authority and the ministry and their financing, give cause for serious concern 
about the independence of th e new regulatory authority. 
The majority of the secondary legislation ba sed on the new primary law still needs to be 
drafted. The administrative capacity of the Depart ment for telecommunications policy, part of 
the Ministry of Maritime Affairs, Trans portation and Telecommuni cations, remains weak. 
There have been no changes in the level of competition on the telecommunications market. 
There are three operators on the mobile telephony market. In the field of fixed networks and 
services, the telecommunications  regulatory authority (Agent el) issued licences for the 
provision of VoIP and for fixed wireless access (FWA ). Most of the licences went to the three 
existing mobile operators and only one of them has so far launched commercial operations. In 
addition, it was announced that some State compan ies (electricity and railways) may provide 
competition in the near future. 
EN 42   EN In addition to drafting rulebooks on number portability and local loop unbundling (to be 
adopted under the new legislation), Agentel is also working on a cost model. In April 2008, 
Agentel approved a new referen ce interconnection offer (RIO). The new RIO allows a choice 
of service providers (through carrier (pre-)se lection, which was introduced by law in 2007), 
access to VoIP providers and lower interconnection charges. 
There have been some improvements in the legi slative framework for further development of 
the information society . A Law on electronic documents and laws on data confidentiality, on 
standardisation and on the reside nce register have been adop ted. Work on a new information 
society strategy is underway. Annual action plan s focus on implementation of the strategies, 
policies and legislative requirements and on set priorities. In Ma y 2008, the government 
adopted the programme for information security which will serve as the basis for development 
of the information security system. The Conditional Access Directive has yet to be transposed. 
In the area of audiovisual policy, a new Law on cinematography wa s adopted in February 
2008. The Broadcasting Agency adopted rules on the licensing procedure and conditions for 
use of licences for the distribut ion of radio and television cha nnels to end-users by means of 
public fixed telecommunication networks and satellite distribution systems. 
The Broadcasting Agency is continuing to implement a programme of checks on compliance 
with technical standards (electromagnetic co mpatibility, protection zones and corridors, 
permitted radiation in cities, technical condit ions for broadcasting radio/TV programmes, 
etc.). The deadline for harmonising the broadcaste rs' work with technical standards expired in 
April 2008. The Agency decided to revoke tw o broadcasters' rights to use allocated 
frequencies. The level of harmonisation is high,  allowing the digitalisa tion process to begin. 
The Agency adopted a digital switchover strategy in April 2008. 
The Broadcasting Agency also adopted a ru lebook on advertising and sponsorship in the 
electronic media. It includes a minimum pr oportion of European works in television 
broadcasting, in line with the European C onvention on transfrontie r television and the 
Audiovisual Media Services (AVMS) Directive. 
In response to a fourth public call for tenders, th e Agency allocated rights to broadcast radio 
signals on TV channels and frequencies for FM radio.
  
The European Convention on transfrontier te levision was ratified on 10 January 2008.  
After the country’s main telecommunications oper ator stopped collecting the licence fees for 
the public broadcaster RTCG in  August 2007, RTCG had no source  of income. An agreement 
has been negotiated with the electricity utilit y, EPCG, which started co llecting the licence fees 
together with electricity b ills as from 1 July 2008.  
Internal reorganisation of the public  service broadcas ter is ongoing.  
Diverging interpretations of the public servic e broadcasting law by the parliamentary parties 
are hindering the effectiveness and independence of the public br oadcaster’s work. A political 
dispute about the manipulation of appointment  procedures for new members of the RTCG 
Council has hampered the work of the Council.  The RTCG Council currently consists of 
seven of the envisaged eleven members.  
EN 43   EN Overall, some progress has been made on the information society and media. However, the 
progress in this sector has been called into question by the adoption of the Law on electronic 
communications, which raises concerns abou t the independence of the new Electronic 
Communications Authority. More over, the transfer of fre quency licensing to the new 
regulatory authority could have a considerable  financial impact on the Broadcasting Agency 
which has lost one of its principal sources of  funding. Further strengthening of the legislative 
framework for development of the information society is required. The effectiveness and independence of the public service broadcaster need to be ensured. 
4.2.7. Financial control 
The development of public internal financial control  (PIFC) is underway. A PIFC policy 
paper was adopted by the government in December 2007, focusing on development of financial management and control systems, func tionally independent internal audit and central 
harmonisation. The associated action plan covers the period up to 2012. 
Efforts to develop a framework law on PIFC have started, as exis ting legislation and 
implementing manuals need to be revised to  ensure consistency with the new legal 
framework.  
A Central Harmonisation Unit, containing secti ons for financial management and control and 
one for internal audit, has been set up within  the Ministry of Finance. Establishment of 
internal audit units in line Ministries is underway , in keeping with the pr inciples of the policy 
paper and the draft PIFC law.  
In the area of external audit , the country's constitution, adopted by parliament in October 
2007, includes provisions on the independence of  the State Audit Institution (SAI), which 
became a member of INTOSAI in November 2007. A rulebook on examinations to qualify as 
a State auditor has been introduced and so me members of the SAI have passed the 
examinations. Consideration should be given to drawing up a strate gic development plan. 
Developments in PIFC and exte rnal audit are at an early st age. Considerable awareness-
raising efforts and training on the new systems will be required. 
4.2.8. Statistics 
There has been limited progress on statistical infrastructure . The terms of employment in 
the statistical office (MONSTAT) improved, with an increase in salaries, but the overall resource situation and administrative capacity ar e still very weak. The problem is increasingly 
recognised by the authorities, although the appropriate measur es have yet to be taken. 
MONSTAT continues to lack pr ofessional independence, and th erefore does not comply with 
the first principle of the Europ ean Statistics Code of Practice. 
MONSTAT has improved its communication with  users by launching a us er-friendly monthly 
bulletin.  
Cooperation and coordination within the national statistical system ha ve improved to some 
extent, as MONSTAT has signed a memora ndum of understanding with the customs 
authorities. Cooperation with the Ministry of Agriculture has increase d, with preparations 
being made for an agricultural census. Developm ent of the statistical business register has 
advanced. It was used for produc tion of business statistics. 
EN 44   EN As regards classifications , compliance with EU standards remains limited. 
As regards sectoral statistics , some progress can be reported. In the case of demographic and 
social statistics, progress has been made with introduction of a continuous labour force survey 
which is published on a quarterly basis and uses the EU and International Labour 
Organisation harmonised methodology. As regard s macro economic statistics, revised GDP 
figures for 2000-2005 were published. On business st atistics, the results of the first pilot 
survey on structural business statistics ar e being analysed. Data have not yet been 
disseminated. Energy statistics we re published. Progress has also been made on external trade 
statistics, with data being transmitted to Eurostat , although the data need to be further revised.  
Overall, little progress can be reported on produc tion of statistics. The administrative capacity 
remains very weak and MONSTAT still lacks pr ofessional independence. Substantial efforts 
are needed in all areas in order to re ach a level in line with EU standards. 
4.3. Justice, freedom and security 
4.3.1. Visa, border, control, asylum and migration Progress has been achieved in the area of visa policy . The visa facilitatio n agreement between 
Montenegro and the European Community entered into force in January 2008. A visa liberalisation dialogue was initiated between  the Commission and Montenegro, and the 
Commission handed over a roadmap on visa liberalisation in May 2008. Montenegro 
provided a first report on its alignment with  the roadmap benchmarks in September 2008. 
The Law on citizenship and the Law on the regi stries of temporary and permanent residence 
of citizens were adopted in February 2008: The Law on travel documents was adopted in 
March 2008. Montenegro started issuing new biometric passports in June 2008. 
Montenegro currently has 13 diplomatic/consular  missions. Serbia's diplomatic and consular 
representations continue to provide visas for M ontenegro on the basis of a mutual agreement. 
Montenegro has also signed a similar agreement with Bulgaria. Visas are issued at the border 
only in exceptional cases of humanitarian or national interest. A sect or for migration, visas 
and readmission has been established within the Ministry of the Interior and Public 
Administration. 
However, the current visa regime is still not fully  in line with European  standards. Legislation 
on foreigners has not been adopted. Negotiatio ns on double citizenship with Serbia were 
initiated in late 2007 but have not yet been finalised. 
Montenegro partially meets its priorities in the area of visa polic y, but further work is 
required. 
As regards  border control , Montenegro has started to implement its integrated border 
management strategy and the associated action plan. For th is purpose, a cr oss-sectoral 
commission was established. Bilateral agreem ents on cross-border cooperation have been 
signed with Albania and Serbia, as have prot ocols for police cooperation with Bosnia and 
Herzegovina. The border demarcation issue with  Serbia is nevertheless still pending. The 
reconstruction of the Scepan Polje border cros sing point was completed and a start was made 
on the reconstruction of the Bozaj–Dobrakovo bor der crossing point. An  Interpol network 
base was established at Podgorica airport. 
EN 45   EN Statistics show that  there were 10,655,879 borde r crossings in 2007, whic h is an increase of 
approximately 40% compared with 2006. In 2007, 342 illegal crossings of  the borders were 
prevented after 360 in 2006. Entry to Montenegro was denied to 1,368 persons in 2007 compared with 1,485 cases in 2006.  
Staffing of the border police has almost been completed, with only 7% of the total of 1,470 
posts still vacant. Border police officers have  undergone basic police training at the police 
academy, plus various types of specialised training. Cooperation between the border police 
and the customs authorities has improved s ubstantially. A memorandu m of understanding has 
been signed between the border police, customs, tax and anti -money-laundering authorities. 
However, the new Law on State border surveill ance and its implementing legislation have not 
yet been adopted. Negotiations  on a working arrangement w ith FRONTEX have not yet 
started. Inter-agency agreements  for cooperation on border manage ment are not sufficient. No 
national coordination unit or multi-agency information centre has been established for sharing information between the various institutions in their day-to-day work and setting up an 
integrated database. Although some improveme nts have been made, currently only eight 
border crossing points have IT connections and only two have access to the Interpol database. 
Overall, Montenegro has started to address it s priorities in the area of border control. 
Some progress has been made on the establishm ent of the legal framework in the field of 
asylum , with the adoption of secondary legisl ation. The Office on Asylum and the State 
Asylum Appeal Commission, which decide in first and second instance on asylum 
applications, were established and staffed. Du ring the first six months of 2008 the Office on 
Asylum dealt with three cases: two applic ations were rejected and one approved. 
However, problems with legal aid and translations remain. The reception centre for asylum-
seekers is not finished. The ta sk of providing accommodation fo r persons seeking asylum is 
carried out by the Bureau for Refugee Care, but the resources allocated to this bureau are 
limited and its overall capacity needs to be built up. No judicial recourse against the decisions 
of the State Asylum Commission is  provided for. Overall, Monten egro has started to address 
its priorities in the area of asylum. 
As regards migration, progress has been limited. Impl ementation of the readmission 
agreement between Montenegro and the Euro pean Community has begun and Montenegro 
has negotiated, or is in the process of negotiati ng, bilateral implementation protocols on 
readmission with individual Member States. A migration management strategy was adopted 
in September 2008. The Law on the registries of temporary and permanent residence of citizens was passed in February 2008. The Law on employment and work of foreigners was 
adopted in March 2008 and maintains the existi ng system of annual quotas for granting work 
permits. 
However, the Law on foreigners has not yet been  adopted. In the absenc e of a strategy, there 
was no basis for a sustainable migration mana gement structure to regulate and monitor 
migration trends. Implementation of the new strategy will have to prove that it can fill these gaps. Montenegro does not yet have detention facilities for foreigners found to be staying 
illegally in the country. 
In Montenegro, there are still around 16,000 displaced persons from Kosovo and around 8 
500 displaced persons from Croatia and Bosnia and Herzegovina. The question of how to deal 
EN 46   EN with displaced persons who do not want to l eave the country remains unsolved. Overall, 
preparations in the area of migration remain at an early stage.  
4.3.2. Money laundering 
Some progress has been achieved in the area of money laundering. A new Law on the 
prevention of money laundering and terrorist financing was adopted  in November 2007. 
Under this new law, the list of reporting entities was extended to include, inter alia , pension 
funds, lawyers and notaries. Montenegro rati fied the Council of Europe Convention on 
laundering, search, seizure and confiscation of the proceeds from crime and on the financing 
of terrorism. A growing number of transacti ons have been reported by non-banking financial 
institutions, such as stock exchanges and the central depository agency. Memoranda of 
understanding have been concluded between the Anti-Money-Laundering Administration and 
the Police Directorate, State Prosecut or and the Customs Directorate.  
However, Montenegro's efforts to fight mone y laundering are not sufficient and need to be 
stepped up. The legal framework needs to be supplemented by adopting the requisite 
secondary legislation.  
The administration for the prevention of mone y laundering and terrorist financing was set up 
as a financial intelligen ce unit. It has no powers to conduct cr iminal investigations. It passes 
on all reports on what it considers to be suspic ious transactions to the police and the State 
Prosecutor for further investigation; clear criteria  and standard procedures for this are not yet 
in place. In 2007/2008, a total of 95 reports were produced; 54 of these were sent to the police 
and the state prosecutor on the basis that there were reasonab le grounds for suspicion of 
money laundering. There is no mechanism for following up reports on the outcome of the 
investigations. Especially in view of the increasing number of reported transactions, the 
administration needs further strengthening in the form of an increase in staff, specialised 
training and working procedures. 
The capacity of the police and the prosecution  service for investig ating cases of money 
laundering is limited. Within the Police Directorat e, there are only two persons dealing with 
the fight against money laundering and only a sm all number of money laundering cases were 
forwarded from the police to the prosecution serv ice. The prosecution service itself seriously 
lacks expertise. There is a need to strengthe n both human resources and the technical capacity 
of the staff, particularly for financial investigations. 
Closer inter-agency cooperation remains cruc ial, given the link be tween money laundering 
and other serious forms of organised crime. No  specific measures to reduce or replace cash 
transactions have been reported. Tighter contro l should be exercised over funds invested in 
the construction boom and in the real estate in dustry. Montenegro has started to address its 
priorities, but money laundering remains a serious  problem and clear determination to prevent 
and combat it is needed. 
4.3.3. Drugs 
Progress in the fight against drugs has been limited. In May 2008 the government adopted the 
national strategic res ponse to narcotics and the associated action plan for 2008–2012. Border 
police and customs officers were trained in c ontrol of precursors for narcotic drug production. 
Preventive activities have continued. 
EN 47   EN However, the law on precursors has not b een adopted. The capacity of the police is 
insufficient. The police department for the fight against drugs and smuggling, which is 
responsible for combating drug abuse, has ten po sts, of which six are vacant. The government 
agency for illicit drugs, which should be c oordinating the work of both governmental and 
non-governmental organisations on  prevention of drug abuse at national level, has not yet 
been established. Inter-agency cooperation need s to be further developed and strengthened. 
Drug transit and trafficking, in  particular by organised crim e groups, remain a matter of 
serious concern. Drug abuse and drug-related crime continue to rise. Overall, Montenegro has 
started to address its main priori ties, but further action is needed. 
4.3.4. Police 
Modest progress has been made in the area of  policing during the reporting period. A strategic 
cooperation agreement with Europol was signed in September 2008. The internal 
reorganisation process has continued. Staff received extensive training, both general and 
specific, as along with English lessons to facilitate inte rnational cooperation. 
The police academy has built up its capacity fo r training in several areas and for several 
categories of police officers, including on pub lic administration. Basic police training for 
policemen without a university  degree lasts 18 months; for policemen with a university 
degree the training period is ten months, and for those who are already working with the 
police but do not have basic police training it is  4.5 months. Expert and specialised training is 
provided for criminal and border police. 
However, the professional capacity of the poli ce - particularly as regards use of modern 
investigation and analysis techniques - shoul d be improved. Equipment and facilities, in 
particular for the organised crime department, need upgrading. The same applies to the police 
academy, in order to ensure adequate faciliti es for the various types of training to be 
conducted in-house. Internal control needs st rengthening. The overall number of policemen 
remains high. 
Small arms and light weapons are still widespread  and often put to illic it use in Montenegro, 
posing a serious problem. This has, in partic ular, a strong impact on criminal activity. In 
addition, a high level of illicit arms possession amongst the general public must be reported.  
Overall, police reform in Montenegro is moderately advanced. 
4.3.5. Fighting organised crime and terrorism 
Some progress can be repor ted in the fight against organised crime . The government adopted 
the third report on the action plan for impl ementation of the programme for fighting 
corruption and organised crime and revise d the action plan fo r 2008-2009 to include 
measurable indicators and tangible results. In 2007, the organised crime and corruption unit of 
the Police Directorate participated actively in international cooperation and carried out eight 
international police operations with partners from the region and in cooperation with the 
Special Prosecutor. Cooperation with Interpol  has been good and has contributed to an 
intensive exchange of intelligence information with other countries' services. 
Special departments in high courts for combati ng organised crime, corruption, war crimes and 
terrorism were established in September 2008. At  the same time, the powers of the Special 
Prosecutor for organised crime were extended to cover the same areas. 
EN 48   EN A rulebook on internal organisation and systematis ation of the Police Directorate was adopted 
in December 2007. In accordance with the ru lebook, 23 posts have been earmarked for the 
unit against organised crime and corruption. Th e national commission fo r the fight against 
corruption and organised crime – a tripartite b ody bringing together criminal police, courts 
and prosecution services – has been established in order to improve cooperation between law 
enforcement bodies. The national commission is  working on improving case monitoring and 
on harmonising of statistics and methods of analysis. 
However, the new Criminal Procedure Code ha s not yet been adopted. The administrative and 
judicial capacity to deal with organised crime cases remains limited. In the Police 
Directorate's organised crime unit, 20% of the allocated posts are currently vacant. The unit 
has no staff at local level. The working condit ions of this unit are inadequate and further 
upgrading of professional skills is needed, esp ecially with re spect to modern investigation 
techniques, including fina ncial investigations. 
The Special Prosecutor's Office needs further upgrading by increasing the number of deputies 
and administrative staff. Training and expertis e need to be improve d significantly, as do 
equipment and premises. Final convic tions in this area remain rare. 
A multi-agency centre for sharing information betw een relevant institutions in their day-to-
day work with the aim of setting up an integr ated data-base has not yet been established. 
Operational cooperation between law enfor cement agencies needs to be improved.  
Overall, organised crime remains a matte r of serious concern in Montenegro. 
There has been little progress in the fight against trafficking of human beings . Although, as 
a general trend, the number of persons traffick ed through South Eastern Europe is decreasing, 
Montenegro remains a transit c ountry for trafficking of women from Serbia, Kosovo, Bosnia 
and Herzegovina, Romania, Ukraine and Russia into Western Europe for commercial sexual 
exploitation. 
The Council of Europe Convention on trafficking of human beings has been ratified in July 
2008 and will enter into force on 1 November 2008. Facilities are in place to support and 
protect victims of trafficking. 
The national coordinator for the fight agains t trafficking has been active in regional 
cooperation and has continued to conduct awareness rais ing and training ac tivities, including 
on identifying potential problems a nd providing assistance to victims. 
However, investigations of cases concerning tra fficking in human beings remain rare. In 2006 
only one single case of trafficking of human be ings was investigated, and in 2007 just two. 
Montenegro should build up further its capac ity to identify victims proactively among 
vulnerable groups, to provide legal  alternatives to removing vic tims to countries where they 
face hardship, to encourage victim s to assist in the investigati on and prosecution of trafficking 
offenders and to conduct trafficking-sensitivity tr aining for the judiciar y. Overall, Montenegro 
is moderately advanced in figh ting trafficking in human beings. 
Some progress has been made with implem enting the new legislative provisions on terrorism 
and with strengthening the coordination and capacity of the relevant law enforcement 
agencies. The  Council of Europe Convention on the preven tion of terrorism has been ratified. 
However, a national strategy against te rrorism still needs to be adopted. 
EN 49   EN 4.3.6. Protection of personal data 
Progress in the area of protec tion of personal data was limited to the adoption of a new 
strategy in June 2008. A new law on protection of  personal data has not yet been adopted. 
Current legislation is not in lin e with the Personal Data Protection Directive. In the absence of 
an independent and efficient data protection supervisory authority, ex isting data protection 
rules have not been implemented. 
The situation in the area of personal data protection remains a cause  for serious concern. 
Montenegro urgently needs to ha rmonise its legislation with Comm unity rules, in particular as 
it had committed itself to do so with effect from the entry into force of the Stabilisation and Association Agreement. 
 
EN 50   EN STATISTICAL ANNEX  
STATISTICAL DATA (as of 29 September 2008)            
Montenegro            
            
Basic data Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Population (thousand) 1) 608 610 612 615 617 619 621 623 624 625 
Total area of the country (km²) 2) 13 834 13 830 13 831 13 833 13 833 13 833 13 833 13 812e 13 812 13 812p 
            
National accounts Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Gross domestic product (GDP) (million national currency) 3) : : : : : : : : : : 
GDP (million euro)  : : 1 066 1 295 1 360 1 510 1 670 1 815 2 148p : 
GDP (euro per capita)  : : 1750e 2113e 2208e 2435e 2684e 2912e 3 443p : 
GDP (in Purchasing Power Standards (PPS)  per capita)  : : : : : : : : : : 
SI: GDP (in PPS per capita, EU-25=100)  : : : : : : : : : : 
SI: Growth rate of GDP (national currency, at constant prices , % change on previous year)  : : : 1.1 1.9 2.5 4.4 4.2 8.6p : 
SI: Employment growth (national accounts, % change on previous year)  : : : : : : : : : : 
Labour productivity growth: GDP growth per person employ ed (% change on previous year)  : : : : : : : : : : 
SI: Unit labour cost growth (national accounts, % change on previous year)  : : : : : : : : : : 
SI: Labour productivity (GDP in PPS per person employed, EU-25=100)  : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture  : : 12.4 11.9 12.2 11.6 10.9 10.4 10.1p : 
Industry  : : 19.2 20.7 20.0 19.2 18.7 17.1 16.0p : 
Construction  : : 4.3 3.9 4.0 3.4 3.5 3.6 4.3p : 
Services  : : 64.1 63.4 63.8 65.8 66.9 68.9 69.5p : 
Final consumption expenditure, as a share of GDP (%)  : : 91.9 100.2 105.8 101.0 99.4 99.8 104.2p : 
Households and NPISH, as a share of GDP (%)  : : 70.0 75.0 80.9 74.2 73.1 69.9 77.2p : 
General government, as a share of GDP (%)  : : 21.9 25.2 24.9 26.8 26.3 29.9 27.0p : 
Gross fixed capital formation, as a share of GDP (%)  : : 16.9 17.5 14.6 13.3 17.0 18.0 21.9p : 
Changes in inventories, as a share of GDP (%)  : : 5.5 5.9 4.1 2.1 -0.4 -0.3 3.6p : 
Exports of goods and services, relative to GDP (%)  : : 36.8 38.4 35.4 30.6 42.0 43.6 49.4p : 
Imports of goods and services, relative to GDP (%)  : : 51.1 62.0 59.9 47.0 58.1 61.1 79.1p : 
            
Industry Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Industrial production volume index (2000=100)  105.0 96.0 100.0b 99.0 100.0 102.0 116.0 114.0 115.0 115.0 
            
Inflation rate Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Consumer price index (CPI), (total, % c hange on previous year)  : : : : : : : : : : 
            
Balance of payments Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Balance of payments: current account total (million euro)  : : : : -175 -102 -120 -154 -531 -1 008p 
Balance of payments current account: trade balance (milli on euro)  : : : : -433 -359 -416 -514 -849 -1 524 
Balance of payments current account: exports of goods (million euro)  : : : : 310 271 452 461 648 628 
 
EN 51   EN Balance of payments current account: imports of goods (million euro)  : : : : 743 630 869 974 1 498 2 152 
Balance of payments current account: net services (million euro)  : : : : 100 112 148 196 197 440 
Balance of payments current account: net in come (million euro)  : : : : 76 88 86 18 31 17 
Balance of payments current account: net current  transfers (million euro)  : : : : 83 58 62 147 90 59 
of which government transfers (million euro)  : : : : : : : 6 7 2 
Foreign Direct Investment (FDI) in the reporting economy (million euro)  : : : : 76 44 53 393 644 1 008 
            
Public finance Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
General government deficit/surplus, relati ve to GDP (%)  : : : : : : : : : : 
SI: General government debt, relative to GDP (%)  : : : : : : : : : : 
            
Financial indicators Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Gross foreign debt of the whole economy, relative to GDP (%)  : : : : : : : : : : 
Gross foreign debt of the whole economy, relative to total exports (%)  : : : : : : : : : : 
Money supply: M1 (banknotes, coins, overnight dep osits, million euro) 4) : : : : : 285 291 351 484 592 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 5) : : : : : 403 437 615 1 099 1 557 
Money supply: M3 (M2 plus marketable instrument s, million euro) 6) : : : : : 494 547 867 1 587 2 728 
Total credit by monetary financial institutions to resi dents (consolidated) (million euro)  : : : : 101 200 284 318 771 2 096 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : : : : 
Lending interest rate (one year), per annum (%)  : : : : : : : : : : 
Deposit interest rate (one year), per annum (%)  : : : : : : : : : : 
euro exchange rates: average of period - 1 euro = … nat ional currency 3) : : : : : 1.000 1.000 1.000 1.000 1.000 
Effective exchange rate index (2000=100)  : : : : : : : : : : 
Value of reserve assets (including gol d) (million euro)  : : : : 55 50 60 173 310 490 
            
External trade Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Trade balance: all goods, all partners (million euro)  : : : : : : : -514 -855 -1 535 
Value of exports: all goods, all partners (million euro)  : : : : : : : 461 627 599 
Value of imports: all goods, all partners (million euro)  : : : : : : : 974 1 483 2 134 
Terms of trade (export price index / impor t price index)  : : : : : : : : : : 
Share of exports to EU-27 countries in value of total exports (%)  : : : : : : : 53.5 62.2 59.0 
Share of imports from EU-27 countries in value of total imports (%)  : : : : : : : 45.3 45.4 43.6 
            
Demography Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Natural growth rate: natural change (births minus deaths) (p er 1000 inhabitants)  6.4 5.6 6.1 5.5 4.8 4.3 3.4 2.4 2.5 3.0 
Net migration rate: immigrants minus emigrants (per 1000 inhabitants)  : : : : : : : : : 1.2 
Infant mortality rate: deaths of children under one year of age per 1000 live births  13.9 13.4 11.1 14.6 10.8 11.0 7.8 9.5 11. 0 7.4 
Life expectancy at birth: male (years)  70.6 70.7 71.1 71.4 70.9 70.4 71.0 70.4 70.6 : 
Life expectancy at birth: female (years)  76.5 76.1 76.3 76.5 75.7 74.9 75.3 74.9 74.8 : 
            
Labour market Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%) 7) 58.9 58.5 60.4 57.1 59.1 58.9  51.7 49.9 49.0 53.0 
SI: Employment rate (15-64): share of population aged 15-64 that  is in employment (%) 7) 38.8 39.2 38.5 37.1 37.7 36.2 37.4 41. 0 41.0 43.0 
Share of male population aged 15-64 that is in employment (%) 7) 48.8 47.3 46.2 45.6 46.6 44.5 46.5 42.4 41.0 48.0 
Share of female population aged 15-64 that is in employment (%) 7) 29.1 31.4 30.6 29.0 29.0 28.1 28.8 27.6 29.0 37.0 
SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%)  : : : : : : : : : : 
 
EN 52   EN Employment by main sectors (%)                      
Agriculture 8) 2.5 2.6 3.4 3.1 3.0 1.8 10.9b 8.6 7.0 8.3 
Industry 8) 24.4 22.5 22.4 25.8 26.0 25.7 16.5b 16.3 12.4 11.3 
Construction 8) 3.2 3.0 3.5 2.1 2.1 2.0 3.4b 2.9 4.8 3.9 
Services 8) 69.8 71.8 70.8 69.1 68.8 70.6 69.2b 72.1 75.8 76.4 
SI: Unemployment rate: share of labour force that is unemployed (%)  18.5 19.3 19.3 21.2 20.7 22.7 27.7 30.3 29.6 19.3 
Share of male labour force that is unemployed (%)  : : : : : : : : : : 
Share of female labour force that is unemployed (%)  : : : : : : : : : : 
Unemployment rate of persons < 25 years: shar e of labour force aged <25 that is unemployed 
(%)  : : : : : : : : : : 
SI: Long-term unemployment rate: share of labour force t hat is long-term unemployed (%)  : : : : : : : : : : 
            
Social cohesion Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Average nominal monthly wages and salari es (national currency) 3)     92.5 107.9 149.1 173.9 195.3 213.1 246.0 338.0 
Index of real wages and salaries (index of nom inal wages and salaries divided by the CPI) 
(2000=100)  106.2 99.9 100.0 91.6 109.7 119.3 130.9 139.7 156.4 179.9 
SI: Early school-leavers: share of popul ation aged 18-24 having not completed upper 
secondary education and not currently in education or training (%)  : : : : : : : : : : 
            
Standard of living Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Number of passenger cars per 1000 population  : 184.6 185.3 161.0 166.8 171.8 176.1 190.9 : : 
Number of subscriptions to cellular mobile telephone serv ices per 1000 population  : : : 639.6 775.5 674.4 778.7 872.0 1 127.5 : 
            
Infrastructure Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Density of railway network (lines in operation, per 1000 km²)  18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 : 
Length of motorways (thousand km)  : : : : : : : : : : 
            
Innovation and research Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Spending on human resources (public expenditure on education) relative to GDP (%)  : : : : : : : : : : 
SI: Gross domestic expenditure on research & development, relative to GDP (%)  : : : : : : : : : : 
SI: Percentage of households who have Internet access at home (%)  : : : : : : : : : : 
            
Environment Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Total greenhouse gases emissions, CO2 equi valent (tons, 1990=100)  : : : : : : : : : : 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP)  : : : : : : : : : : 
SI: Share of renewable energy in electric ity consumption (%)  : : : : : : : : : : 
SI: Road freight transport as a share of total in land freight transport (modal split of freight 
transport) (%)  : : : : : : : : : : 
            
Energy Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Primary production of all energy products (thousand TOE)  4 262 4 236 4 222 3 679 4 135 4 353 4 822 4 161 4 464 3 347 
Primary production of crude oil (thousand TOE)  : : : : : : : : : : 
Primary production of hard coal and lignite (thousand TO E)  1 591 1 500 1 567 1 186 1 807 1 618 1 514 1 297 1 512 1 203 
Primary production of natural gas (thousand TOE)  : : : : : : : : : : 
Net imports of all energy products (thousand TOE)  : : : : : : : : : : 
Gross inland energy consumption (thousand TOE)  : : : : : : : : : : 
Electricity generation (thousand GWh)  2 671.0 2 736.0 2 655.0 2 493.0 2 327.0 2 735.0 3 308.0 2 864.0 2 952.0 2 144.0 
            
 
EN 53   EN  
SI: Structural Indicator  
e: estimate  f: forecast 
p: provisional  
b: break in series  1. Source: Eurostat. 
2. Total land includes: agricultural area, forests and non-agricultural land. 
3. No official national currency exis ts. Euro is the currency in use. 
4. As of 31 December. Instead of standard M1, data under nationa l definition of M0 are provided. M0 comprises banks` deposits w ith the CBM (settlement account and reserve requirement 
account) and the estimated amount of cash in circulation. M1  comprises M0, demand deposits of the non-banking sector held with banks and the CBM, in EUR and other currencies, excluding 
deposits of the Central Government. 
5. As of 31 December. Instead of standard M2, data under the national definition of M11 are provided. The monetary aggregate M1 1 comprises M1 increased by the Central Government’s demand 
deposits in EUR and other currencies. The monetary aggregate M2 in cludes M1 and the non-banking sector’s time deposits with ban ks, in EUR and other currencies, excluding deposits of the 
Central Government. 
6. As of 31 December. Instead of standard M3, data under the na tional definition of M21 are prov ided. Definition of M21 is incl uded in the previous footnote. 
7. Age group refers to persons aged 15 or more years. 
8. From 2004 onwards, a new methodology, harm onised with the EU requirements, is used.  
9. Agricultural area includes: arable l and, area under pastries, fishponds and ponds. 
10. Includes households, enter prises and cooperatives. Agriculture Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Agricultural production volume index of goods  and services (produc er prices, previous 
year=100)  99.0 106.0 95.0 107.0 106.0 101.0 104.0 99.0 102.0 : 
Total utilised agricultural area (thousand hectare) 9) 519e 518e 518e 518e 518e 518e 518e 517e 517 516 
Livestock: cattle (thousand heads, end of period) 10) 178e 180e 179e 178e 183e 175e 169e 118 115 : 
Livestock: pigs (thousand heads, end of period) 10) 23e 22e 19e 21e 22e 24e 27e 11 13 : 
Livestock: sheep and goats (thousand heads, end of period) 10) 333e 306e 293e 244e 241e 252e 254e 255 249 : 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes) 10) 177e 195e 197e 194e 198e 203e 209e 186 1 78 : 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 10) 5e 4e 3e 4e 5e 4e 3e 3e 3 : 
Crop production: sugar beet (thousand tonnes, har vested production)  : : : : : : : : : : 
Crop production: vegetables (t housand tonnes, harvested production)  : : : : : : : : : :