Commission staff working document - Montenegro - 2008 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement strategy and main challenges 2008-2009 {COM(2008) 674}
Date: 2008-11-05
Institutions: European Commission
Subjects: Montenegro, accession to the European Union, enlargement of the Union, pre-accession strategy, report

EN 

EN 

   EN 

 
COMMISSION OF THE EUROPEAN 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 PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2008-2009 

{COM(2008) 674} 

EN 

   EN 

 
 
  
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 4 

Preface.......................................................................................................................... 4 

Context ......................................................................................................................... 4 

Relations between the EU and Montenegro................................................................. 5 

Political criteria ............................................................................................................ 6 

Democracy and the rule of law .................................................................................... 6 

Human rights and the protection of minorities .......................................................... 13 

Regional issues and international obligations ............................................................ 18 

Economic criteria ....................................................................................................... 20 

The existence of a functioning market economy ....................................................... 20 

The capacity to cope with competitive pressure 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 

2 

   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 

3 

   EN 

COMMISSION STAFF WORKING DOCUMENT 

MONTENEGRO 2008 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and the Parliament 
on progress made by the countries of the Western Balkans region. 

Following Montenegro's independence in June 2006, the Commission issued progress reports 
dedicated entirely to Montenegro in 2006 and 2007.  

This report: 

–  briefly describes relations between 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 European Partnership priorities. 

This  report  covers  the  period  from  late  October  2007  to  early  October  2008.  Progress  is 
measured on the basis of decisions taken, legislation adopted and measures implemented. As a 
rule,  legislation  or  measures  which  are  being  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  gathered  and  analysed  by  the  Commission.  Many 
additional  sources  have  been  used,  including  contributions  from  the  government  of 
Montenegro and from the Member States, European Parliament reports1 and information from 
various international and non-governmental organisations. 

The  Commission  draws  detailed  conclusions  regarding  Montenegro  in  its  separate 
communication on enlargement2, based on the technical analysis contained in this report. 

1.2. 

Context 

The  EU  Member  States  recognised  the  independence  of  Montenegro  in  June  2006. 
Montenegro  is  a  potential  candidate  for  EU  membership.  The  Stabilisation  and  Association 

1 
2 

The rapporteur for Montenegro is Mr Vernola. 
Enlargement Strategy and Main Challenges 2008-2009. 

EN 

4 

   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 has 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  and  the  Interim  Agreement  on  trade  and  trade-
related  matters  were  signed  in  October  2007.  The  Interim  Agreement  entered  into  force  in 
January  2008.  The  SAA  ratification  process  has  been  launched.  By  1  October  2008  8  EU 
Member  States  and  Montenegro  had  notified  their  ratification  of  the  Agreement.  Also  the 
European  Parliament  gave  its  assent  in  December  2007.  Montenegro  has  now  started  to 
implement  the  Interim  Agreement.  Continued  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.  Also  Montenegro  has  started  implementing  its 
commitments  under  the  SAA  and  stepped  up  preparations  for  full  implementation  of  the 
Agreement once it is ratified.  

The  EU  is  providing  guidance  to  the  Montenegrin  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,  these  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 agreement simplifies procedures for issuing visas 
to certain categories of citizens of Montenegro, including students, scholars, businesspeople, 
journalists  and  tourists.  Under  the  terms  of  this  agreement,  citizens  of  Montenegro  pay  a 
reduced visa fee or receive visas free of charge. 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  are  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  Podgorica.  The  Commission  Delegation  took  over  responsibility 
for  CARDS  assistance  from  the  European  Agency  for  Reconstruction  in  September  2008. 
Decentralised management of EC aid is a medium-term objective for Montenegro. 

The  2008-2010  Multi-Annual  Indicative  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  administration  reform,  including  local  government,  the 
environment,  integrated  border  management,  rural  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  has  signed  Memoranda  of  Understanding  for 
Montenegro's  participation  in  the  7th  Framework  Programme  for  research,  technological 

EN 

5 

   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. 

POLITICAL 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  for  and  protection  of  minorities.  It  also  monitors  regional 
cooperation,  good  neighbourly relations with enlargement countries and Member States and 
compliance  with  international  obligations,  such  as  cooperation  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 constitution adopted in October 2007 set a timetable 
for adoption of new laws and amendment of existing laws in line with the new constitution. In 
February  2008  parliament  amended  the  implementation law,  putting back its deadlines. The 
amended deadlines have been respected on the whole, 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,  courts,  State  administration  and  expropriation.  The 
Laws on election of MPs, on State property and 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  risks  of  political  interference  by  parliament. 
Provisions relevant to retroactive application of the European Convention on Human Rights 
require further elaboration. The constitutional provision on “proportionate representation” of 
national minorities in public services needs to be clarified. 

Parliament 

Work  on  strengthening  political  consensus,  particularly  on  European  integration  issues,  has 
continued. Since January 2008 the government has been reporting monthly to the committee 
on  international  relations  and  European  integration  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  Resolution  on  fulfillment  of  Montenegro's  SAA 
obligations. Another Resolution on accelerating Montenegro's integration into EU and Euro-
Atlantic  organisations  was  adopted  by  parliament  in  early  October  2008.  In  April  2008 
parliament  established  a  Council  for  EU  integration.  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 

6 

   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  remains  problematic.  Furthermore,  inspection  and 
control  mechanisms  provided  in  the  rules  of  procedure  are  not  being  used  appropriately. 
Parliamentary work is not yet efficient and transparent 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 plenary sessions available on the 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.  However,  there  is  still  room  for  significant 
improvement of oversight over key aspects of the action of these bodies. The supervisory role 
of parliament generally remains weak. 

The committee for international relations and European 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 Parliamentary Assembly bodies remain limited. 

Strengthening  of  human  resources  has  been  relatively  limited.  Administrative  and  other 
resources required for parliament's work, including expert support, remain insufficient. Plans 
are  being  prepared  to  increase  staff  numbers  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 remuneration levels have been significantly increased. 
Parliament still lacks the capacity to scrutinise adequately the compatibility of new legislation 
with EU legislation. Financial management, including by parliament’s Secretariat-General, is 
still not sufficiently transparent. The State Audit Institution has not yet conducted an audit of 
the financial operations of parliament. 

Further progress is necessary with regard to mature and consensual use of parliament. Debates 
on  issues  such  as  the  appointment  of  members  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  governing  coalition  has  responded  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 campaign 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 need to address these issues with a view to 
forthcoming elections. Concerning the overall election framework, further challenges include 
the  need  to  ensure  full  separation  between  State  and  party  structures  in  the  electoral 
administration as well as transparency in allocation of MPs' seats. 

EN 

7 

   EN 

Overall,  there  have  been  some  improvements  in  the  functioning  of  parliament.  There  is  an 
overall commitment to working on the basis of consensus, 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  April  2008.  Mr  Vujanovic  was  elected  by  absolute 
majority in the first round. The electoral campaign was conducted in a calm atmosphere and 
in a constructive spirit. Almost all aspects of the election were found to be in line with OSCE 
commitments and Council of Europe standards for democratic elections. 

The  management  of  government  bodies,  including  ministries,  remains  over-centralised  in 
many cases, with insufficient delegation of decisions. Strengthening the middle management 
staff and authority would make decision-making more effective. Also there are shortcomings 
in monitoring implementation of policies and laws and receiving feedback. 

The  government’s  work  programme  for  2008  focuses  on  Euro-Atlantic  integration  and  on 
creating a favourable environment for rapid economic development. The government plans to 
invest  significant  resources  in  infrastructure  and  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  international  organisations,  in  developing  new 
legislation has been improved by holding consultative meetings on a number of draft laws. 

Under the responsibility of the Deputy Prime Minister for European Integration, the improved 
structures  for  inter-ministerial  coordination  on  EU  issues,  including  the  Commission  on 
European integration and the EU units in each ministry coordinated 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  contributions  by  the  Montenegrin  authorities  in 
regular  meetings  with  the  European  Commission  under  the  Stabilisation  and  Association 
Process have become more focused. 

The  government  adopted  a  comprehensive  national  programme  for  EU  integration  (NPI), 
covering the period 2008-2012, in June 2008. The programme 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 Secretariat for EU Integration (SEI) was reinforced by internal 
reorganisation. The capacity of the SEI and EU units within the individual ministries needs to 
be further developed as Montenegro faces more 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  defined.  Capacity  in  ministries  and 
relevant agencies to address European integration issues effectively needs to be enhanced.  

EN 

8 

   EN 

There  is  also  an  overall  understanding  of  the  need  to  consult  broadly  on  new  pieces  of 
legislation and strategic documents. This has happened in the case of key texts adopted over 
the past, such as the NPI, the energy strategy and the spatial plan. However, in the case of the 
last two documents, comments by experts and civil society were not fully taken into account. 
Also,  important  new  texts  such  as  the  Law  on  electronic  communication  were  adopted 
without the necessary consultation of stakeholders. 

Regarding local government, the amended Law on financing local government increased the 
financial independence of municipalities. An action plan for local government reform adopted 
in December 2007 provides for harmonisation of over thirty legislative acts between local and 
central government. A joint central/local government commission made up of five ministers 
and four mayors was established in November 2007 to coordinate decentralisation activities 
and monitor implementation of the action plan.  

Overall, the government has continued to adapt to the requirements created by the country’s 
independence.  It  has  further  streamlined  its  European  integration  activities.  General 
management and capacity in ministries and relevant agencies to address European integration 
issues require further strengthening. 

Public administration 

Some  progress  has  been  made  on  upgrading  the  country’s  administrative  capacity  and 
proceeding  with  the  reform  of  public  administration,  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  responsibility  for  integrated  border  management  and 
local  government.  The  organisation  of  the  Ministry  of  Foreign  Affairs  has  been  further 
consolidated by creating a department for the protection of classified information, which is in 
charge of exchanges of relevant information with NATO and the EU. 

The  Law  on  public  administration  was  harmonised  with  the  constitution.  A  Law  on  civil 
servants  and  public  employees,  covering  the  status,  responsibilities  and  powers  of  State 
officials,  was  adopted  in  July  2008.  Civil  servant  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.  Civil  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)  authority  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 register, with the aim of covering 
all public employees and civil servants in Montenegro. Out of 148 training courses planned in 
2007, some 85 were carried out. Attendance at the training courses is often limited. In July the 
government  adopted  strategies  for  training  civil  servants  and  local  government  employees. 
Employment  procedures  in  the  public  administration  are  generally  transparent  and  various 
activities  have  been  organised  to  raise  awareness  of  job  opportunities  in  the  public  sector. 
Implementation  of  the  civil  service  legislation  needs  to  be  pursued  more  consistently, 
especially  concerning  recruitment.  The  administrative  capacity  of  the  central  management 

EN 

9 

   EN 

body, the HRM authority, needs to be strengthened, and a merit-based 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  administration  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 ombudsman has not yet been fully aligned with the 
new constitution and the reporting from the ombudsman office remains unfocused, limiting its 
effectiveness. 

Montenegro has expanded its network of diplomatic representations abroad. It has opened six 
permanent  missions  to  international  organisations,  seventeen  embassies  and  two  consulates-
general.  

Further reform is required in the fields of transparency and accountability, financial control, 
public  procurement,  budget  management,  management  of  public  assets  and  licensing 
procedures.  Further  attention  still  needs  to  be  paid  to  enhancing  administrative  capacity  for 
law enforcement, especially as regards the fight against corruption and organised crime and 
protection of personal data. 

The  use  of  office  premises  by  political  parties  and  by  the  government  is  not  yet  clearly 
separated, potentially leading to a blurring of their respective roles.  

In  order  to  prepare  fully  for  implementation  of  the  SAA,  Montenegro  needs  to  continue 
upgrading its administrative capacity in the areas covered by the agreement, which is a key 
European Partnership priority. The necessary strengthening will require appropriate resources. 

Parliament  ratified 
the  European  Charter  of  Local  Self-Government.  Progress  on 
strengthening  local  authorities’  administrative  and  management  capacity  remains  slow.  The 
capacity  of  the  municipalities  for  financial  management,  including  budgeting,  public 
procurement and allocation of grants, requires further improvement. 

Overall,  progress  has  been  made  in  strengthening  the  legislative  framework  for  the  public 
administration.  Some  progress  has  been  made  in  human  resources  management  and  local 
government  reform.  However,  lack  of  human  and  financial  resources  combined  with 
structural  weaknesses  and  corruption  continue  to  hamper  the  overall  effectiveness  of  the 
public administration and, as a whole, administrative capacity remains limited. 

Judicial system 

Montenegro has made some progress in the judicial reform process, which is a key European 
Partnership priority, and has started to implement the relevant sections of the constitution. For 
this  purpose,  the  action  plan  for  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  started.  Amendments  to  the  Law  on  courts  were 
adopted in January 2008, and amendments to the Law on State Prosecutors in June 2008. The 
Law on the Judicial Council was adopted in February 2008, improving the independence of 
the  judiciary.  The  new  Judicial Council has the power to elect,  promote  and dismiss judges 

EN 

10 

   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,  except  for  the  member  who  will  have  to  be 
designated  by  the  parliamentary  opposition.  The  rules  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 departments in high courts for 
combating  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 
have been extended to cover the same areas. Salaries in the judiciary have been increased. 

However, serious concerns regarding the independence 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  Court  and  on  the  Prosecutorial  Council,  is  still 
pending.  The  initial  deadlines  for  adoption  of  certain  laws  have  been  extended.  Objective 
criteria  such  as  professional  capacity  and  integrity  have  been  developed  for  appointment  of 
judges and prosecutors, but assessment of the extent to which these criteria have been fulfilled 
remains  within  the  sole  discretion  of  the  Judicial  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 further factors putting the independence of the judiciary at risk. 

investigative 

The efficiency of the judicial system is still low. The investigative capacity of the prosecution 
service  remains  weak.  In  particular,  modern 
techniques  for  financial 
investigations are largely unused. The powers of the Special Prosecutor's office for organised 
crime  have  been  extended,  but  it  does  not  have  sufficient  deputy  prosecutors  and  staff  or 
technical  equipment.  Preparation  of  the  prosecution  service  for  its  new  role  in  leading 
criminal investigations planned under the future Criminal Procedure Code is lagging behind. 
Improved codes of ethics and properly structured initial and continuous 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  skilled  human  resources  and  IT  systems.  The 
juvenile justice system requires more comprehensive action. 

Backlogs  in  civil  and  criminal  cases  have  been  reduced.  However,  the  still  high  number  of 
pending  cases  and  excessively  lengthy  procedures  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 strategy and procedural changes are lacking.  

Criminal procedures in several cases of domestic war crimes are ongoing. Some progress was 
made  recently,  as  indictments  were  issued  against  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  provide  the  basis  for  judicial  independence,  accountability  and 

EN 

11 

   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  focused  on  tackling  low-level  corruption  and  on 
awareness-raising and training. 

The context of the fight against 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  parties  was  adopted  in  July  2008.  The  National 
Commission  for  monitoring  implementation  of  the action  plan  produced its  third report. An 
update of the action plan to include new measures and clearer indicators was adopted by the 
government  in  May  2008.  Both  an  anti-corruption  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  (including  for  the  judiciary)  by  up  to  30%.  In 
December  2007,  parliament  adopted  a  Resolution  on  the  fight  against  corruption  and 
organised crime. 

The  resources  of  the  Directorate  for  Anti-Corruption  Initiatives  (DACI,  formerly  the  anti-
corruption  agency)  have  been  strengthened.  The  DACI  has  carried  out  awareness-raising 
campaigns and a number of training courses for various administrative bodies. The powers of 
the  specialised  prosecutor's  office  for  organised  crime  have  been  extended  to  include 
corruption cases, and the human resources of the 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  procedures.  There  has  been 
some evolution in the perception of corruption. 

However,  corruption  continues  to  be  a  widespread  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 pending. The current law leaves many loopholes. In 
particular,  the  powers  of  the  Commission  on  conflicts  of  interest  are  too  limited  to  ensure 
proper analysis of the declarations made. There are also concerns about the independence of 
this  Commission.  Laws  concerning  local  self-government  which  determine  powers  over 
property  or  resources  at  local  level  have  not  been  adopted.  Protection  of  whistleblowers 
remains insufficient in practise, even though the legal framework has been improved. 

Montenegro  lacks  strong  and  independent  supervisory  and  auditing  authorities.  Such 
authorities  would  be  needed  in  order  impartially  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 far have been incomplete and public authorities 
were  unable  to  enforce  the  law  or  to  investigate  the  data  provided.  This  situation  will  only 
partially  improve  under  the  new  law.  Administrative  corruption  at  local  level  remains  high, 
particularly  in  coastal  areas,  as  a  result  of  booming  development,  privatisation  and  public 
procurement. 

EN 

12 

   EN 

The  investigative  capacity  of  the  law  enforcement  bodies  remains  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  only  five  financial  investigations,  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  progress  in  strengthening  the  strategic  and  administrative 
framework for combating corruption. However, the 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 conventions, 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  standards  in  Montenegro  is  restricted  to  application  in  cases  of 
conflict with domestic legislation. The constitution does not include an explicit provision that 
ratified international human rights treaties should be applied in compliance with the practice 
of  international  bodies  in  charge  of  their  interpretation.  The  Venice  Commission  has 
recommended  that  the  Law  on  implementation  of  the  constitution  should  be  clarified  to 
guarantee retroactive application of the ECHR and should be brought to the attention 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 the Constitutional Court in July 2008. The election 
of all Constitutional Court judges 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 provisions of the European Convention on Human Rights 
concerning  violations  occurring  prior 
independence  needs  further 
clarification. 

to  Montenegro's 

Overall,  Montenegro  has  made  some  progress  in  improving  observance  of  international 
human rights law. However, further efforts are necessary to improve judicial enforcement. 

EN 

13 

   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  prohibits  torture  and  inhuman  or  degrading 
treatment. However, there are continuous allegations of torture and ill-treatment during arrest 
and detention. Material conditions in police detention facilities remain unsatisfactory. Internal 
investigations  and  criminal  proceedings  against  police  officers  for  the  extortion  of  evidence 
and for ill-treatment and torture are rare. Verdicts are reached in a small number of reported 
cases and are often followed only by administrative 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 right to trial within a reasonable 
time  was  adopted.  Free  legal  aid  remains  limited.  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 prisoners with special needs, would 
help improve standards. 

Clearer  rules  for  inspection  and  monitoring  of  detention  facilities  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 alternative to imprisonment. This contributes to 
prison overcrowding. 

The  accommodation  for  persons  with  mental  disabilities  lacks  proper  financial  support  and 
appropriate human resources. The specific needs of drug-addicts are 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 inappropriate training for nurses.  

Overall, there has been some progress in improving prison and detention facilities, but further 
efforts, including legislative action, are necessary to address the situation adequately. 

Freedom of expression continues to be a cause for concern. 

Cases  of  physical  assaults  and  defamation  against  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. Investigations in such cases need to be thorough. The number 

EN 

14 

   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 communications was adopted by parliament 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, the sensitive powers over planning, allocating, and 
monitoring  the  broadcasting  frequency  spectrum  will  be  transferred  from  the  independent 
Broadcasting Agency to the new Electronic Communications Authority. 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  and  NGOs  is  in  its  last  consultation  stage 
and will then need to be implemented. NGO activities often have a high public and political 
profile.  Consultation  with  civil  society  organisations  has  been  enhanced  by  the  government 
office  for  NGOs,  the  office  for  gender  equality  and  the  anti-corruption  commission.  Civil 
society is represented in the Parliamentary Council for EU Integration. However, the criteria 
for its representation will have to be clarified. 

More  than  4,000  NGOs  are  registered  with  the  Ministry  of  the  Interior  and  Public 
Administration,  but  only  a  much  smaller  number  are  actually  performing  real  NGO-type 
activities.  The  NGO  Law  was  amended  in  November  2007  in  order  to  regulate  commercial 
activities carried out by NGOs. 43 public bodies have nominated an NGO contact point, but 
the  turnover  is  high,  hampering  communication  with  NGOs.  Many  NGOs  remain  donor-
dependent,  which  weakens  their  strategic  autonomy  and  generates  ad  hoc  donor-driven 
project activities instead.  

As regards freedom of religion, relations between major religious groups (Orthodox, Islamic 
and  Roman  Catholic)  remain  satisfactory.  However,  there  is  a  continuous  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  standards,  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  concern,  with  every  second  woman  experiencing 
verbal  abuse  and  every  third  being  exposed  to  physical  violence.  The  number  of  cases 
reported  to  the  police  is  small,  but  increased  by  7.3%  in  2008.  There  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 victims themselves. 
The institutional response to protection of victims of violence is unsatisfactory and centres for 
social care still lack professionalism towards victims. 

EN 

15 

   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  adequately  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 Gender Equality have prepared 
an action plan on gender equality, which was adopted by the government in July 2008. 

In practice little progress has been made on improving protection 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  underrepresented  in  decision-making  processes  and 
leading positions both  in the public administration 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  strategy  for  social  and  child 
protection for 2008-2012 in November 2007. However, capacity to monitor the rights of the 
child  remains  weak.  Official  statistics  and  analyses  of  poverty  and  social  inclusion  data  are 
still inadequate. The Council for Children's Rights needs to become fully operational as the 
highest inter-ministerial coordinating body for promotion and protection of children's rights. 
Institutionalisation,  in  some  instances  even  together  with  adults,  is  still  the  dominant  care 
system for children deprived of parental care and children with disabilities. The government 
needs to give priority to alternative, 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 integration. The low level of enrolment in pre-schools of less than 30% 
nationally, and as low as 3% for Roma children, 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  for  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  regulated  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,  bisexual  and  transgender  (LGBT)  people  are 
marginalised  and  discriminated  against  in  Montenegrin  society  due  to  homophobic  attitudes 
and  lack  of  legal  and  practical  protection  by  the  authorities.  In  addition  to  increasing 
legislative  efforts,  comprehensive  anti-discrimination  measures  covering  sexual  orientation 
and gender identity are needed. 

EN 

16 

   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 restitution requests had been filed by the deadline at the end 
of  2007.  The  regional  commissions  have  approved  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  establishment  of  the  Fund  in  2005 
and  July  2008.  Around  1,100  complaints  against  decisions  taken  have  been  brought  to  the 
attention of the second instance commission.  

Overall, there have been improvements in the area of economic and social rights. The rights 
of vulnerable groups, including children, have been addressed with a number of strategies, but 
the conditions have not yet substantially improved in practice. 

Minority rights, cultural rights and protection of minorities 

Montenegro has made progress on protection of national minorities. Inter-ethnic relations are 
smooth.  The  constitution  includes  a  minority  rights  chapter  reflecting  the  principles  of  the 
Council of Europe Framework Convention on national minorities. The constitution guarantees 
special  rights  of  identity  protection  and  prohibition  of  assimilation  “to  minority  nations  and 
other  minority,  national  and  ethnic  communities”.  The  government  has  adopted  a  minority 
policy  strategy  and  a  national  Roma  strategy.  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 and 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 unsolved. Construction of accommodation facilities 
for  displaced  Roma  from  Kosovo  was  initiated  in  early  June  2008,  but  further  financial 
support  will  be  needed  for  the  planned  construction  of  ten  buildings.  Access  to  identity 
documents  and  permanent  status,  education  and  social  services  for  many  of  them  remains 
problematic, as do the prospects for their integration or return. Montenegro 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  residence  were  adopted  in  February  2008.  A  Law  on 
employment and work of foreigners was adopted in March 2008.  

Approximately 2,000 IDPs and displaced persons had 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 originating from Kosovo, often lack ID documents or 
birth  certificates  and  risk  statelessness.  Montenegro  has  yet  to  ratify  the  Council  of  Europe 
Convention on the avoidance of statelessness in relation to State succession. 

European Partnership priorities to repeal all discriminatory provisions in key fields affecting 
refugees and displaced persons and to provide conditions for integration of those who choose 
to remain in Montenegro have not yet been fulfilled. 

EN 

17 

   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 implementation. Under the Law on freedoms and rights of 
minorities, a Roma Council was set up in April 2008. The Roma strategy amends the previous 
Decade  Action  Plan,  which  was  not  efficiently  implemented  because  of  insufficient 
institutional  capacity  and  scarce  financial  resources.  Significant  progress  has  been  made  in 
creating  conditions  for  the  participation  of  Roma  in  active  employment  policy,  such  as 
registration  of  Roma  in  employment  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 significance of this minority in general. Despite 
the  above-mentioned  measures,  Roma  continue  to  face  difficult  living  conditions  and 
discrimination, with poor access to education, social protection and healthcare. Most of them 
to  widespread 
live 
discrimination,  opportunities  for  employment  of  Roma  are  still  minimal  and  unemployment 
among Roma remains over 80%.  

in  extreme  poverty  and  substandard  housing  conditions.  Due 

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 legislation is necessary to 
establish  implementation  and  monitoring  capacity,  domestic  ownership  and  adequate  and 
sustainable funding. 

Overall,  there  has  been  progress  on  strengthening  the  framework  for  minority  protection. 
However,  implementation  is  still  lagging  behind  in  some  fields,  in  particular  regarding  the 
Roma,  Ashkali  and  Egyptian  population.  The  conditions  of  IDPs  and  displaced  persons 
remain a cause for serious concern. 

2.3. 

Regional issues and international obligations 

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY), 
a  key  European  Partnership  priority,  is  satisfactory.  Agreements  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  prosecutions,  focusing  on  cooperation  with  the 
ICTY.  

In  respect  of  the  bilateral  immunity  agreement  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 principles on bilateral immunity agreements. 
Montenegro needs to align with the EU position. 

There  have  been  no  significant  developments  in  Montenegro  to  follow  up  the  Sarajevo 
Declaration, which aimed at finalising the regional refugee return process 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 

18 

   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 regionally 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).  The  school  will  be  based  in  Danilovgrad  and 
should come into operation on 1 January 2009. Preparatory activities were launched in April 
2008. 

A  memorandum  on  technical  cooperation  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  Agreement  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 continued preparations to implement fully its 
obligations under the Energy Community Treaty. Montenegro is participating in the Central 
European Free Trade Agreement (CEFTA). 

Montenegro accepted the acquis of the Barcelona process and participated in the launch of the 
"Barcelona Process: Union for the Mediterranean" 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 applies. 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 cooperation with neighbouring countries in areas such as border 
control,  environmental  protection  and  energy  supply.  Political  relations  with  neighbouring 
countries  are  satisfactory.  Montenegro  is  pursuing  a  constructive  policy  on  key  outstanding 
issues that are crucial for regional stability. 

Relations  with  Albania  have  developed  further.  Work  started  on  construction  of  the  joint 
border crossing point at Muriqan/Sokobine. An agreement on exchanging practical experience 
in  harmonisation  of  legislation  with  the  EU  standards  was  signed  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 cooperation 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 consular representations. 

Regarding relations with Croatia, a working group on outstanding issues, including property, 
chaired by the Ministers of Justice has met twice. 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 countries agreed to settle border demarcation at 
Prevlaka  through  international  arbitration  at  the  International  Court  of  Justice.  A  joint 

EN 

19 

   EN 

commission is being established to prepare the 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 
Macedoniа, which remain good. 

Relations  with  Serbia  have  been  advancing  smoothly  overall  since  independence,  but  they 
were adversely affected following 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  certain  Montenegrin  interests  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 autumn 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  positively,  with  the  negotiation  of  bilateral 
agreements on police and judicial cooperation. 

Overall, Montenegro has continued to improve its integration into regional structures and its 
relations  with  its  neighbours.  Montenegro  plays  a  moderating  role  in  the  region.  The 
agreement with Croatia jointly to refer a border dispute to the International Court of Justice is 
one example of its good neighbourly relations. 

3. 

ECONOMIC CRITERIA 

In  examining  the  economic  developments  in  Montenegro,  the  Commission's  approach  was 
guided by the conclusions of the European Council in Copenhagen in June 1993, which stated 
that membership of the Union requires the existence 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  fiscal  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 

20 

   EN 

                                                 
Macroeconomic stability  

Economic growth remained strong in 2007, expanding 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  added  (GVA).  Around  20%  of  total  growth  was 
attributable to industrial output and construction. 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  purchasing  power  standards  (PPS), 
increased in 2007 to around 32% of the EU27 average. Overall, economic growth remained 
strong boosted by FDI and domestic demand. 

Exports  of  goods  hardly  improved  in  2007,  increasing  by  some  2%  reflecting  the  weak 
competitiveness of local products but also the volatile international price of aluminium, which 
accounts for almost half of total exports. FDI inflows surged by 56% in 2007 and combined 
with a robust domestic demand induced a widening of the trade deficit to 55% of GDP. The 
already  sizeable  current  account  deficit  further  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 foreigners, 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  covered  by  repatriation  of 
domestic  banks'  net  foreign  assets  and  external  private  borrowing.  Stronger  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. External imbalances continued widening during 
the first half of 2008 as the trade deficit deteriorated. The stagnation on the domestic capital 
market  resulted  in  a  significant  outflow  of  portfolio  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 inflow of imports while its coverage by net FDI 
declined, increasing vulnerability to external shocks. 

The  fast-growing  economy  required  labour  resources  beyond  the  country's  capacity.  Market 
rigidities and lack of mobility resulted in a shortage of seasonal workers, 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 unemployment rate 18%. Employment growth remained 
steady during the first half of 2008, recording 6% average expansion year-on-year. However, 
partly  due  to  the  significant  size  of  the  informal  economy,  changes  in  registered 
unemployment  may  not  correctly  reflect  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 euro4 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 limited direct impact on the financial sector. Yet, 
the  rising  current  account  deficit,  increasingly  financed  by  repatriation  of  domestic  banks 
assets  abroad,  has  become  a  matter  of  concern,  particularly  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 

21 

   EN 

                                                 
conditions.  Also,  higher  risk  premiums  and  refinancing  costs  have  already  started  putting 
pressure  on  the  external  side.  The  Montenegrin  authorities  have  taken  a  series  of  measures, 
including higher capital adequacy requirements for domestic banks, an unlimited coverage for 
deposits insurance as well as a guarantee 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  (credit  growth  ceilings  and  higher  minimum 
solvency coefficients) succeeded in moderating the 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  previous  year.  Average  annual  inflation 
accelerated from 3% in 2006 to 4.3% in 2007, notably 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  transport  prices.  Overall,  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  spending  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.  The  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 increasing 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  during  the  first  half  of  2008,  when  a  surplus  of 
2.9%  of  annual  GDP  was  recorded.  Rapid  growth  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, capital expenditure in 2008 was executed as planned. In July 2008 
the  parliament  supported  the  amended  budget,  proposing  targets  11.4%  higher  for  both 
revenue  and  expenditure,  while  the  planned  surplus  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  additional  obligations  from  ongoing  restitution 
procedures,  old  foreign  currency  savings  deposited  in  two  Serbian  banks,  and  unrecorded 
liabilities  of  the  State  funds  to  commercial  banks.  Overall,  the  public  debt  rose  following 
recognition of domestic liabilities from the past. 

Macroeconomic policies aiming at reducing the public 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  instruments.  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 

22 

   EN 

                                                 
complemented  by  a  reshaping  of  fiscal  revenue,  reducing  the  burden  of  direct  taxation  in 
order  to  stimulate  growth.  However,  the  Central  Bank  needed  to  implement  a  restrictive 
monetary  policy  to  bring  the  surge  in  loans  extended  by  commercial  banks  (165%  annual 
expansion in 2007) back to more 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  government  took  measures  to  alleviate  the 
increase in food prices. In September 2007 it introduced 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  the  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 privatised. 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 lease conditions. Overall, the privatisation process has further advanced, 
although the sale of a few companies failed 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 business registration is quite 
simple and takes four days at most, starting actual operations may require significantly more 
time to obtain the compulsory licences. There is also a disparity in requirements and the costs 
for  obtaining  the  same  business  licences  depending  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  declaration  by  the  entrepreneur  of  intent  to  launch  trading  activities. 
Overall, market entry procedures are improving, but one-stop shops, though considered, have 
not yet been introduced. 

In  2007  the  Commercial  Court  registered  371  new  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  complex  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 implementation of new legislation. 

Legal system 

The main obstacles to an effective business environment remain the weak rule of law and the 
costs and delays for obtaining business licences and for property registration. Yet, corruption 
and  criminal  activities  may  hinder  the  development  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  facilitate  simple  resolution  of  commercial 
disputes,  and  a  council  for  elimination  of  business  barriers.  Overall,  progress  has  been 

EN 

23 

   EN 

achieved  in  several  areas  influencing  the  business  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  increase  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 management. 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  the  EC  Capital  Requirements  Directives6.  The  banking 
prudential  indicators  remained  sound  in  2007,  although  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  declined  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  concentrated,  with  one 
company  holding  a  66%  market  share.  The  leasing  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, forming 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  competitive  pressure  and  market  forces  within  the 
Union 

Existence of a functioning market economy 

Macroeconomic  stability  has  weakened  as  external  exposure increased  in  2007  and  the  first 
half of 2008 owing to strong demand pressures revealed by rising inflation, widening external 
imbalances  and  a  moderately  pro-cyclical  fiscal  stance.  Nevertheless,  continuation  of  the 
already advanced privatisation process and implementation of the other structural reforms to 
which the government is committed are facilitating more efficient allocation of resources by 
market  mechanisms.  However,  despite  significant  progress  in  improving  the  business 
environment, weaknesses and sometimes insufficient resources on the part of supervisory and 
regulatory  agencies  are  still  impeding  the  consolidation  of  a  more  level  playing  field  for 
market participants, thus providing leeway for informal practices. 

6 

Directives 2006/48/EC and 2006/49/EC. 

EN 

24 

   EN 

                                                 
Human and physical capital endowment 

Enrolment in primary and secondary schools remains high. The number of university students 
rose  to  3.1%  of  the  total  population,  approaching  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 Medium-sized Enterprises (SMEDA) continued to 
implement active measures promoting self-employment 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  promotion  of  employment  and  development  of  the 
human resources for the period up to 2011, with the aim of creating favourable conditions for 
building  a  competitive  and  dynamic  knowledge-based  economy.  The  up-grading  of  human 
capital  continued,  although  retraining  programmes  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.  The  restructuring  of  the  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.  Mobile  telephony  continued  to  expand,  recording  a  penetration 
rate above 200% in July 2008. Overall, investments increased both 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 the narrow production base, limited competitiveness 
of  local  products  and  strong  inflows  of  foreign  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 economy 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  transport  and  energy  sectors  were  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 unbundling of the company into five separate business units to 
be  integrated  vertically  into  a  single  energy  holding.  Meanwhile,  the  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 consumers7 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  retains  ownership  of  the  infrastructure  via  the  port  authority, 
while  business  activities  will  be  privatised  as  a  separate  port  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 

25 

   EN 

                                                 
indemnities  of  redundant  workers.  As  regards  the  national  air  carrier,  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  continued  to  shift  towards  services,  which  generated 
the  largest  share  of  employment  (67%);  with  tourism,  financial  intermediation  and  trading 
expanding faster. Industry accounted for 26%. Nevertheless, the public sector, including both 
industry  and  services,  accounts  for  a  significant  share  of  total  employment  and  is  also  the 
sector  where  employment  expanded  fastest.  The  share  of  agricultural  workers  continued  to 
decline and fell to 7%. Still, the informal sector remains large in most areas of the economy. 
Overall,  industry  is  giving  way  to  more  profitable  sectors  like  tourism  and  construction, 
ensuring a more diversified growth path. 

SMEs are mostly geared to the domestic market and only around 15% of them export outside 
the former Yugoslav territory. Companies have benefited from the surging credit activity of 
banks, with two thirds of credits 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 access to financing. 
Overall,  the  expansion  of  the  SME  sector  continued,  albeit  at  a  slow  pace,  as  the  recently 
adopted  government's  operational  plan  for  eliminating  barriers  to  entrepreneurship  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 companies 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 smelters, electricity subsidies running until 2011 
were  also  included  in  the  privatisation  deals.  SMEs  may  benefit  from  aid  to  participate  in 
international  fairs,  to  promote  competitiveness  or  to  improve  managerial  skills.  But  public 
support  cannot  be  granted  to  SMEs  dealing  with  shipbuilding,  agriculture  and  fisheries. 
Overall,  the  amount  allocated  in  the  government  budget  for  direct  subsidies  remains  very 
small. 

Economic integration with the EU  

The  trade  component  of  the  Stabilisation  and  Association  Agreement  entered  into  force  by 
virtue  of  an  Interim  Agreement  on  1  January  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  revenue  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  (33%).  In  the  case  of  imports,  50%  of 
Montenegro's imports come from CEFTA partners and 41% from EU countries. FDI from the 
EU totalled EUR 534 million or 53% of total inflows, followed by 18% from Russia and 7% 
from  Switzerland.  Although  the  share  of  European  investment  decreased  slightly  compared 
with 2006, it expanded in nominal terms by 45% year-on-year. Overall, economic integration 
with the EU remains high. 

EN 

26 

   EN 

4. 

EUROPEAN STANDARDS 

This  section  examines  Montenegro's  capacity  gradually  to  approximate  its  legislation  and 
policies to the acquis related to the internal market, sectoral policies and justice, freedom and 
security,  in  line  with  the  Stabilisation  and  Association  Agreement  and  the  European 
Partnership  priorities.  It  also  analyses  Montenegro's  administrative  capacity.  In  each  sector, 
the  Commission's  assessment  covers  progress  achieved  during  the  reporting  period  and 
summarises the country's overall 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  Standardisation  of  Montenegro  (ISME),  which 
will  operate  as  the  enquiry  point  for  standards,  became  a  member  of  the  IEC  (International 
Electro-Technical  Commission)  and  an  affiliate  member  of  the  European  Committee  for 
Standardization (CEN). An agreement 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  good  basis  for  development  of  Montenegrin 
standards.  Technical  committees  on  civil  engineering  and  electrical  engineering  were 
established, and other expert bodies are being set up. The Institute adopted 200 Montenegrin 
standards harmonised with the European and international standards. 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 required 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 assessment 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 and on notification, adoption and registration of 
technical  regulations.  Following  the  adoption  of  these  by-laws,  the  Department  for  quality 
infrastructure in the Ministry for Economic Development, 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 certification 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 Cooperation 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  taken  on  three  of  the  ten  extra  staff  planned. 
Improving communication,  cooperation 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  infrastructure.  The  legal  framework  for  accreditation 
activities in Montenegro has not yet been finalised. 

EN 

27 

   EN 

Work on the legal framework for metrology is underway, but not yet completed. The Bureau 
of  Metrology  became  a  corresponding  member  of  the  International  Organization  of  Legal 
Metrology  (OIML).  Out  of  the  planned  increase  of  34  staff  members  in  2008,  so  far  the 
Bureau of Metrology has recruited 23. Preparation of the first national calibration laboratory 
for mass is underway. The Bureau has provided provisional premises for five 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  adequate  premises  and  equipment  for  metrology 
laboratories and upgrading of administrative capacity are required 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, including a by-law on the exchange of information on 
dangerous  products  within  Montenegrin  institutions,  and  between  Montenegro  and  the  EU 
(RAPEX), have not yet been adopted. 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 cooperation 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  framework  for  an  integrated  consumer  protection 
policy  for  the  next  two  years.  The  action  plan,  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  institutional  and  administrative  capacity,  enhance 
cooperation between the relevant State institutions 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 foreigners was adopted in March 2008 and will 
be  applied  from  1  January  2009.  The  Law  stipulates  that  issuance  of  a  temporary  residence 
permit for the purpose of employment is conditional on previous issuance of a work permit 
for  aliens.  It  also  lays  down  conditions  for  cross-border  service  suppliers,  intra-corporate 
transferees,  business  visitors  and  contractual  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 qualifications with the adoption 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 negotiations for accession to the WTO.  

EN 

28 

   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 other international standards, for example on non-
authorised  acquisition  of  qualified  participation  in  banks'  capital,  corporate  governance, 
internal  controls  of  banks  and  enforcement  powers.  After  the  introduction  of  a  new 
organisational  structure  for  the  Bank  Supervision  Department  of  the  Central  Bank  of 
Montenegro, supervisory capacity needs to be further strengthened with a focus on risk-based 
supervision, consolidated supervision and cross-sector and international cooperation. 

The institutional framework for supervision of the non-banking financial sector has also been 
improved. The Agency for Insurance Supervision came into operation in January 2008. At the 
moment  only  five  civil  servants  are  employed  in  the  Agency,  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 pension funds, Montenegro adopted several by-
laws, such as rules on issuing operating licences to organisations managing voluntary pension 
funds and licences for establishing voluntary pension 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 entrepreneurship 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 enterprises, 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  labour  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 revokes licences for trading companies. However, 
the  simplification  of  the  procedure  for  establishing  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  municipalities,  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  minority  shareholders  and  stipulated  that  they 
should be treated in the same way as local operators 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 

29 

   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 legislation on foreign current and capital operations, 
revoking protective measures where there is no reciprocity in current and capital transactions 
that could lead to disturbance of the monetary or financial conditions in the country. Although 
foreign  investors  are  free,  in  principle,  to  invest  and  transfer  financial  and  other  assets,  the 
Montenegrin legislation also contains some exceptions to that rule. Apart from the restrictions 
on  production  of  and  trade  in  arms  and  ammunition  and  on  activities  related  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 connection with development of state land survey and 
register  in  Montenegro.  Parliament  returned  the  law  on  property  relations  for  public 
discussion. 

With  reference  to  payment  systems,  a  new  law  on  national  payment  operations,  regulating 
transfers  of  funds,  inter-bank  transfer  settlements,  issuance  of  electronic  means  of  payment 
and establishment and control of payment operations has not yet 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,  including  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 area 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 Combined Nomenclature and implemented the trade 
provisions  in  the  IA.  Amendments  to  the  Law  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 ceasing actions under the TRIPS. As of 1 January 2008 all duty-
free shops at land borders were closed. 

With  reference  to  administrative  capacity,  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  customs  matters  was  concluded  with  Slovenia  in 
October  2007.  Three  quarters  of  the  customs  staff  have  received  basic  training.  Further 
training on rules of origin, valuation of imported goods and IPR protection was organised for 
both customs officers and economic operators. The customs administration currently employs 
520  civil  servants,  out  of  669  planned  posts;  recruiting  and  retaining  staff  is  a  recurring 
problem.  Nevertheless  it  continued  enhancing  its  collection  capacity  and  collected  22.9% 

EN 

30 

   EN 

more duties, VAT excises and other taxes during the first eight months of 2008, which made 
up 65.7% of the overall budget revenue. 

Overall,  Montenegrin  customs  legislation  is  largely  in  line  with  the  acquis.  However, 
alignment  is  still  needed,  notably  as  regards  origin,  transit  procedures  and  valuation. 
Moreover,  customs  fees  have  to  be  brought  into  line  with  the  Interim  Agreement.  The 
administrative  capacity  of  the  customs  administration  needs  strengthening,  including  by 
continuing implementation of the business strategy, 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  alignment  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 transport. Reduced rates on computer equipment 
and services in marinas were introduced, 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  tax  administration  concluded  agreements  on 
cooperation  with  the  police  and  Anti-Money-Laundering  Directorate,  business  associations 
and unions. Also, the Code of Ethics was adopted. Exchanges of tax information with Serbia, 
Bosnia  and  Herzegovina,  the  former  Yugoslav  Republic  of  Macedonia  and  Hungary  were 
intensified.  The  Decree  on  fiscal  cash  registers  and  the  recording  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 bulletin and electronic media. Nevertheless, 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 training. 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  administration.  However,  further  alignment  is  still 
required, in particular as regards the excise rules, zero and reduced rates of VAT and direct 
taxation. Further efforts are needed to provide adequate staffing and training and to improve 
tax collection and controls, including effective use of risk analysis and computerisation. The 
fight against corruption and efforts to reduce 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 Department for protection of competition in the 
Ministry  of  Economic  Development  were  transferred  to  the  new  authority,  which  currently 
has six employees. A number of training courses and study visits were organised for the staff 
of  the  authority.  The  operational  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 general Law on control of State aid entered 

EN 

31 

   EN 

into force in May 2007. By-laws on the criteria, 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  Control  Commission  was  established  in  November  2007.  It  is 
authorised to approve the granting of State aid, to order recovery of unlawful State aid and to 
carry  out  ex-post  supervision.  The  State  Aid  Control  Commission  and  the  State  Aid 
Department, which performs administrative and technical tasks for the Commission, upgraded 
their  capacity  by  means  of  a  series  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 independence will need 
to be ensured. Further strengthening of the State 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  absence  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 2006 is a good starting point 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 Procurement 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  interest.  Information  was  made  available  to  all 
stakeholders by publishing tenders and selection decisions on the Directorate’s website. The 
electronic public procurement system has not yet been developed.  

A number of training sessions and study visits were organised for PPA and PPC staff, but the 
PPA is still in its initial stage and lacks sufficient staffing. 

Progress  continued  in  the  area  of  public  procurement.  However,  efforts  to  improve 
transparency  and  accountability  and  to  align  the  legislation  with  the  acquis,  including  on 
concessions  and  public-private  partnerships,  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  resources  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  apply  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 

32 

   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 officially 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 September 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 IPR 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  attended  a  number  of  training  seminars  on 
intellectual  property  protection  and  counterfeiting.  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  enforcement),  adopted  by  the  World  Customs 
Organisation (WCO) with a view to more efficient protection of intellectual 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  abroad  (USA,  Bulgaria,  former 
Yugoslav Republic of Macedonia, Bosnia and Herzegovina, Croatia, Italy and Serbia). 

The number of IPR cases filed at the Montenegrin 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 made  on protection of  intellectual  property  rights, 
especially with regard to the still limited institutional 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,  uneven  regional  employment  and  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 development 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 
the 
abovementioned strategies and action plans. 

to  coordinating  and  managing 

implementation  of 

In the area of social policies, progress has been made on the legislative 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, keeps the existing level of severance payments 
of six average salaries and retains the current 365 days maternity leave. A Law on peaceful 

EN 

33 

   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 legislation 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 the 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 adopted 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 authorised trade union organisations 
and  11  representatives  of  the  employers’  association  (Montenegrin  Union  of  Employers). 
However, the issue of weak bipartite social dialogue remains unaddressed. All workers, with 
the  exception  of  those  employed  in  the  State  administration,  have  the  right  to  bargain 
collectively.  Given  that  workers  in  the  State  administration  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 exclusion was re-focused on four fields (health, 
education,  social  protection  and  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 stakeholders in charge of fostering implementation of social 
inclusion policies. 

Regarding  social  protection,  in  November  2007  the  government  adopted  a  strategy  for  the 
development of social and child protection, a strategy 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, implementation 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  covers  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  free  housing  for  the  remaining 
staff.  However,  the  capacity  of  the  healthcare  system  still  does  not  meet  the  needs  of  the 
population,  and  the  budgetary  framework  fails  to  meet  all  the  needs.  A  strike  by  health 
workers  hindered  further  reforms.  Some  legislation  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 law, the faculty 
of  international  economics,  finance  and  business,  and  the  faculty  of  administrative  and 
European studies in Podgorica, the faculty of business management in Bar and the college of 

EN 

34 

   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 teachers. A Law on recognition and evaluation of 
educational credentials was adopted in January 2008. The government adopted a strategy for 
inclusive education for 2008-2016 and a strategy for civic education in primary and secondary 
schools for 2007-2010. 

Further steps were  taken to  upgrade the quality 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-accreditation in accordance with the guidelines on 
re-accreditation of higher education institutions and study programmes.  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 alignment with the EU’s lifelong learning objectives 
and  employment  policies.  A  lifelong  learning  strategy  on  entrepreneurship  along  with  an 
action plan for its implementation were developed.  

In  the  area  of  culture,  the  UNESCO  Convention  on  the  protection  and  promotion  of  the 
diversity of cultural expressions 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  defines  the  science  and 
technology (S&T) priorities and sets out an annual 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 agreement was concluded with 
Slovenia on 3 July 2008, and agreements with other countries (Albania, Croatia, Greece and 
Serbia) are in the pipeline. The memorandum of understanding associating Montenegro to the 
Seventh  EC  Research  Framework  Programme  (FP7)  was  signed  in  Brussels  on  25  January 
2008  with  effect  from  1  January  2008.  The  implementing  measures  (setting  up  national 
contact  points,  relations  with  the  Board  of  Governors  of  the  Joint  Research  Centre,  and 
nomination of observers in Programme Committees and other research groups) were taken on 
time. Participation in FP7 has improved compared with FP6. 

The reform of the statistical system in the field of science and research and adjustment to the 
EU system is at an initial stage. The Ministry of Education is conducting related activities in 
cooperation with MONSTAT. 

Overall,  there  has  been  progress  in  strengthening  the  legal  framework  and  the  quality 
assurance  system  for  education.  Further  progress  is  needed  to  implement  a  comprehensive 
lifelong  learning  policy.  There  has  been  good  progress  on  research,  particularly  regarding 
development  of  a  strategy  and  of  regional  and  international  cooperation,  including  with  the 
EU. 

EN 

35 

   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  levels,  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 European Charter for Small Enterprises and made 
further  progress  towards  this.  On  11  October  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  business  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  Montenegro  was  finalised,  but  the  process  of 
developing Montenegro’s overall development strategy is at an initial stage.  

The  new  Banking  Law  adopted  in  February  2008  allowed  the  Central  Bank  to  adopt  a 
decision  on  credit  guarantee  services,  providing  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  introducing  entrepreneurial  learning  as  a  key 
skill in primary and secondary schools from the 2009/2010 school year.  

Montenegro  joined  the  entrepreneurship  and  innovation  pillar  of  the  Competitiveness  and 
Innovation  Programme  on  3  March  2008  and  will  participate  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  principle  combined  with  the  possibility  of  on-line 
applications  would  help  to  improve  of  the  business  environment.  Also,  systematic 
introduction of regulatory impact 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 

36 

   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  national  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  gradually  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  registered  in  the  organic  agriculture  producer 
registry. 

The  programme  for  the  preservation  and  sustainable  use  of  genetic  resources  and  an  action 
plan for its implementation were adopted. The Law on animal identification and registration is 
being implemented, together with registration of farm holdings practising animal husbandry.  

Support continued for construction of rural infrastructure, including roads and water supply. 
In spite of the severe drought, there were some 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 protection of geographical indications of origin will be 
managed by the Intellectual Property Office of Montenegro.  

Montenegro  has  joined  several  international  organisations,  including  the  Food  and 
Agriculture Organisation (FAO). The procedure for becoming a member of the International 
Union for the Protection of New Plant Varieties (UPOV) is underway.  

Two extension services were set up on livestock selection and plant production. 

In the area of food safety, veterinary and phytosanitary policy, some progress was made on 
legislative alignment, with the adoption of the laws on food safety, reproductive material and 
forest  trees,  protection  of  plant  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  regulations  have  also  been  published  regarding 
identification and registration of bovines and registration of their 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 diagnostic laboratory have been established. The 
only  factor  limiting  meat  exports  from  Montenegro  is  the  current  lack  of  approved 
establishments. 

A national strategic plan for the fisheries sector is being finalised, setting objectives for the 
development  of  aquaculture  and  marine  fisheries,  including  scientific  assessment  of  fish 

EN 

37 

   EN 

stocks. Montenegro is actively participating in relevant international fisheries bodies, such as 
the  General  Fisheries  Commission  for  the  Mediterranean  (GFCM)  and  the  Scientific 
Cooperation  to  Support  Responsible  Fisheries  in  the  Adriatic  Sea  (AdriaMed).  The  Law  on 
freshwater  fisheries  has  been  adopted,  but  the  law  on  marine  fisheries  has  not  yet  been 
finalised.  

Overall,  good  progress  can  be  reported  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 infrastructure envisaged under this 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  assessment has been adopted.  The Ministry  of Tourism 
and the Environment has been designated as the 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  legislation  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 substances, including training 
for  technical  staff,  have  been  approved  and  are  being  implemented.  Adoption  of 
implementing  legislation  on  air  quality  is  still  pending.  Overall,  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 disposal 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 the Waste Framework Directive and the Hazardous 
Waste Directive. The track record on implementation and enforcement needs to be improved.  

Limited progress can be reported on water quality. Montenegro became a contracting party 
to the Barcelona Convention. A related Law on the sea, along with legislation implementing 
the  Law  on  water,  have  been  adopted.  Coordination  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 Habitats and Wild Birds Directives was adopted in June 2008. 
Further efforts are needed as regards awareness-raising in this field. Inspection measures and 

EN 

38 

   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  inventory  of  IPPC  installations  and  best  available 
techniques,  have  been  adopted.  Existing  installations  must  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 reported 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 National Biosafety Council is being established with 
the  aim  of  monitoring  developments  in  the  area  of  GMOs  and  providing  assistance  to  the 
authorities  involved  in  implementing  the  legislation  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 reported 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  Tourism  and  the  Environment  (MTE) 
remains weak. Coordination between the bodies involved in environmental protection issues, 
particularly  in  inspection  activities,  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  coordination  between  central  and  local  government  further  limit  the 
enforcement capability.  

Overall, some progress has been achieved in terms of alignment with the European standards. 
Further  efforts  are  needed,  however,  particularly  on  implementation  and  enforcement. 
Particular  attention  needs  to  be  paid  to  strengthening  administrative  capacity  and  to 
establishing effective inspection services. Further efforts should be put into raising awareness 
of environmental protection issues. Overall, environmental protection, 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,  signed  in  2004,  for  the 
development of the core regional transport network 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  framework  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, Montenegro took the necessary steps to 
ensure  unrestricted  Community  transit  through  its  territory.  However,  on  15  June  2008 
Montenegro  introduced  an  eco-tax  on  foreign,  including  Community,  road  passengers  and 
cargo  vehicles,  whose  compatibility  to  the  IA  provisions  is  under  examination.  Progress  is 

EN 

39 

   EN 

starting  to  be  made  on  harmonisation  of  legislation  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  legislation  has  to  be  implemented.  The  Law  on 
ratification of the agreement on the international occasional carriage of passengers by coach 
and bus – INTERBUS – was approved in July 2008. 

In  the  case  of  rail  transport,  the  restructuring  process  and  the  division  of  the  railway 
company  is  progressing  in  accordance  with  the  railway  restructuring  strategy  adopted  in 
September 2007. The legislative progress on rail safety culminated in the adoption of the Law 
on  rail  transport  safety  in  December  2007,  but  the  related  by-laws  have  yet  to  be  adopted. 
Montenegro signed an "Addendum to the memorandum of understanding on the development 
of the South-East Europe core regional transport network for a South-East European railway 
transport area" in December 2007, as a bold commitment 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 and particular attention should be paid to safety and security 
issues.  

No progress can be reported 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 programme. 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 further built up so that they will be capable of 
enforcing the aviation acquis, as required by the ECAA Agreement.  

Overall, there has been good progress on liberalising road transit traffic. Restructuring of the 
railways is being implemented but access conditions to the railway infrastructure are yet to be 
defined.  Progress  in  road  safety,  maritime  transport,  and  systemic  approach  to  transport 
development  has  been  limited.  Substantial  efforts  are  required  in  implementing  the  aviation 
acquis and establishing sufficient 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 eligibility thresholds have been set and random requests 
by customers for other sources of supply do not generate sufficiently 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 transmission company is due to be created by the end of 2008. 
In  the  third  stage,  the  remaining  four  companies  will  become  independent  joint  stock 
companies. The restructuring is envisaged to be completed by the end of 2009. 

EN 

40 

   EN 

Further  examination  of  the  compatibility  of  the  NEDS  with  the  EU  Water  Framework 
Directive  is  needed.  The  NEDS  argues  that  the  long-term  solution  to  global  climate  change 
problems  should  rely  on  reservoir  construction  as  a  means  of  responding  to  ecological 
changes in watercourses.  

An  action  plan  for  energy  efficiency  covering  the  period  2008-2012  was  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  agencies.  Funds  to  promote  these  policies  are  also  lacking. 
Another  difficulty  is  that,  with  the  exception  of  the  hydro-power  sector,  the  RES  market  is 
underdeveloped and unable to attract sufficient 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 directives. 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 safety, as to the Joint Convention on the safety of 
spent fuel management and on the safety 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  communications  –  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  frequencies,  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 the new regulatory authority. 

The  majority  of  the  secondary  legislation  based  on  the  new  primary  law  still  needs  to  be 
drafted. The administrative capacity of the Department for telecommunications policy, part of 
the Ministry of Maritime Affairs, Transportation and Telecommunications, 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  (Agentel)  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 companies (electricity and railways) may provide 
competition in the near future. 

EN 

41 

   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 reference interconnection offer (RIO). The new RIO allows a choice 
of service providers (through carrier (pre-)selection, which was introduced by law in 2007), 
access to VoIP providers and lower interconnection charges. 

There have been some improvements in the legislative framework for further development of 
the information society. A Law on electronic documents and laws on data confidentiality, on 
standardisation and on the residence register have been adopted. Work on a new information 
society strategy is underway. Annual action plans focus on implementation of the strategies, 
policies  and  legislative  requirements  and  on  set  priorities.  In  May  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  was  adopted  in  February 
2008. The Broadcasting Agency adopted rules on the licensing procedure and conditions for 
use of licences for the distribution of radio and television channels 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  compatibility,  protection  zones  and  corridors, 
permitted  radiation  in  cities,  technical  conditions  for  broadcasting  radio/TV  programmes, 
etc.). The deadline for harmonising the broadcasters' work with technical standards expired in 
April  2008.  The  Agency  decided  to  revoke  two  broadcasters'  rights  to  use  allocated 
frequencies. The level of harmonisation is high, allowing the digitalisation process to begin. 
The Agency adopted a digital switchover strategy in April 2008. 

The  Broadcasting  Agency  also  adopted  a  rulebook  on  advertising  and  sponsorship  in  the 
electronic  media.  It  includes  a  minimum  proportion  of  European  works  in  television 
broadcasting,  in  line  with  the  European  Convention  on  transfrontier  television  and  the 
Audiovisual Media Services (AVMS) Directive. 

In response to a fourth public call for tenders, the Agency allocated rights to broadcast radio 
signals on TV channels and frequencies for FM radio.  

The European Convention on transfrontier television was ratified on 10 January 2008.  

After the country’s main telecommunications operator 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 utility, EPCG, which started collecting the licence fees 
together with electricity bills as from 1 July 2008.  

Internal reorganisation of the public service broadcaster is ongoing.  

Diverging interpretations of the public service broadcasting law by the parliamentary parties 
are hindering the effectiveness and independence of the public broadcaster’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 

42 

   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  about  the  independence  of  the  new  Electronic 
Communications  Authority.  Moreover,  the  transfer  of  frequency  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, functionally 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  existing  legislation  and 
implementing  manuals  need  to  be  revised  to  ensure  consistency  with  the  new  legal 
framework.  

A Central Harmonisation Unit, containing sections 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 principles 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  some  members  of  the  SAI  have  passed  the 
examinations. Consideration should be given to drawing up a strategic development plan. 

Developments  in  PIFC  and  external  audit  are  at  an  early  stage.  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 are still very weak. The problem is increasingly 
recognised  by  the  authorities,  although  the  appropriate  measures  have  yet  to  be  taken. 
MONSTAT continues to lack professional independence, and therefore does not comply with 
the first principle of the European Statistics Code of Practice. 

MONSTAT has improved its communication with users by launching a user-friendly monthly 
bulletin.  

Cooperation  and  coordination  within  the  national  statistical  system  have  improved  to  some 
extent,  as  MONSTAT  has  signed  a  memorandum  of  understanding  with  the  customs 
authorities.  Cooperation  with  the  Ministry  of  Agriculture  has  increased,  with  preparations 
being  made  for  an  agricultural  census.  Development  of  the  statistical  business  register  has 
advanced. It was used for production of business statistics. 

EN 

43 

   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  regards  macro  economic  statistics,  revised  GDP 
figures  for  2000-2005  were  published.  On  business  statistics,  the  results  of  the  first  pilot 
survey  on  structural  business  statistics  are  being  analysed.  Data  have  not  yet  been 
disseminated. Energy statistics were 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 production of statistics. The administrative capacity 
remains very weak and MONSTAT still lacks professional independence. Substantial efforts 
are needed in all areas in order to reach 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 facilitation 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 registries 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 Montenegro 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  sector  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.  Negotiations  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  policy,  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  this  purpose,  a  cross-sectoral 
commission  was  established.  Bilateral  agreements  on  cross-border  cooperation  have  been 
signed  with  Albania  and  Serbia,  as  have  protocols  for  police  cooperation  with  Bosnia  and 
Herzegovina.  The  border  demarcation  issue  with  Serbia  is  nevertheless  still  pending.  The 
reconstruction of the Scepan Polje border crossing point was completed and a start was made 
on  the  reconstruction  of  the  Bozaj–Dobrakovo  border  crossing  point.  An  Interpol  network 
base was established at Podgorica airport. 

EN 

44 

   EN 

Statistics show that there were 10,655,879 border crossings in 2007, which 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 substantially. A memorandum of understanding has 
been signed between the border police, customs, tax and anti-money-laundering authorities. 

However, the new Law on State border surveillance and its implementing legislation have not 
yet  been  adopted.  Negotiations  on  a  working  arrangement  with  FRONTEX  have  not  yet 
started. Inter-agency agreements for cooperation on border management 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  improvements  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 its priorities in the area of border control. 

Some  progress  has  been  made  on  the  establishment  of  the  legal  framework  in  the  field  of 
asylum,  with  the  adoption  of  secondary  legislation.  The  Office  on  Asylum  and  the  State 
Asylum  Appeal  Commission,  which  decide  in  first  and  second  instance  on  asylum 
applications, were established and staffed. During the first six months of 2008 the Office on 
Asylum dealt with three cases: two applications were rejected and one approved. 

However, problems with legal aid and translations remain. The reception centre for asylum-
seekers is not finished. The task of providing accommodation for 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, Montenegro has started to address 
its priorities in the area of asylum. 

As  regards  migration,  progress  has  been  limited.  Implementation  of  the  readmission 
agreement  between  Montenegro  and  the  European  Community  has  begun  and  Montenegro 
has  negotiated,  or  is  in  the  process  of  negotiating,  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 existing system of annual quotas for granting work 
permits. 

However, the Law on foreigners has not yet been adopted. In the absence of a strategy, there 
was  no  basis  for  a  sustainable  migration  management  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 

45 

   EN 

with  displaced  persons  who  do  not  want  to  leave  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  ratified  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 transactions 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 Prosecutor and the Customs Directorate.  

However,  Montenegro's  efforts  to  fight  money  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 money laundering and terrorist financing was set up 
as a financial intelligence unit. It has no powers to conduct criminal investigations. It passes 
on  all  reports  on  what  it  considers  to  be  suspicious  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  reasonable  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  investigating  cases  of  money 
laundering is limited. Within the Police Directorate, there are only two persons dealing with 
the fight against money laundering and only a small number of money laundering cases were 
forwarded from the police to the prosecution service. The prosecution service itself seriously 
lacks expertise. There is a need to strengthen both human resources and the technical capacity 
of the staff, particularly for financial investigations. 

Closer  inter-agency  cooperation  remains  crucial,  given  the  link  between  money  laundering 
and other  serious forms of organised crime. No specific measures to reduce or replace cash 
transactions  have  been  reported.  Tighter  control  should  be  exercised  over  funds  invested  in 
the  construction  boom  and  in  the  real  estate  industry.  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 response to narcotics and the associated action plan for 2008–2012. Border 
police and customs officers were trained in control of precursors for narcotic drug production. 
Preventive activities have continued. 

EN 

46 

   EN 

However,  the  law  on  precursors  has  not  been  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 posts, of which six are vacant. The government 
agency  for  illicit  drugs,  which  should  be  coordinating  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 needs to be further developed and strengthened. 

Drug  transit  and  trafficking,  in  particular  by  organised  crime  groups,  remain  a  matter  of 
serious concern. Drug abuse and drug-related crime continue to rise. Overall, Montenegro has 
started to address its main priorities, 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 international cooperation. 

The  police  academy  has  built  up  its  capacity  for  training  in  several  areas  and  for  several 
categories  of  police  officers,  including  on  public  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  police  -  particularly  as  regards  use  of  modern 
investigation  and  analysis  techniques  -  should  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  facilities  for  the  various  types  of  training  to  be 
conducted  in-house.  Internal  control  needs  strengthening.  The  overall  number  of  policemen 
remains high. 

Small arms and light weapons are still widespread and often put to illicit use in Montenegro, 
posing  a  serious  problem.  This  has,  in  particular,  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 reported in the fight against organised crime. The government adopted 
the  third  report  on  the  action  plan  for  implementation  of  the  programme  for  fighting 
corruption  and  organised  crime  and  revised  the  action  plan  for  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 combating 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 

47 

   EN 

A rulebook on internal organisation and systematisation of the Police Directorate was adopted 
in  December  2007.  In  accordance  with  the  rulebook,  23  posts  have  been  earmarked  for  the 
unit  against  organised  crime  and  corruption.  The  national  commission  for  the  fight  against 
corruption  and  organised  crime  –  a  tripartite  body  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 has 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  conditions  of  this  unit  are  inadequate  and  further 
upgrading  of  professional  skills  is  needed,  especially  with  respect  to  modern  investigation 
techniques, including financial investigations. 

The Special Prosecutor's Office needs further upgrading by increasing the number of deputies 
and  administrative  staff.  Training  and  expertise  need  to  be  improved  significantly,  as  do 
equipment and premises. Final convictions in this area remain rare. 

A  multi-agency  centre  for  sharing  information  between  relevant  institutions  in  their  day-to-
day  work  with  the  aim  of  setting  up  an  integrated  data-base  has  not  yet  been  established. 
Operational cooperation between law enforcement agencies needs to be improved.  

Overall, organised crime remains a matter 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 trafficked through South Eastern Europe is decreasing, 
Montenegro remains a transit country 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  against  trafficking  has  been  active  in  regional 
cooperation and has continued to conduct awareness raising and training activities, including 
on identifying potential problems and providing assistance to victims. 

However, investigations of cases concerning trafficking in human beings remain rare. In 2006 
only one single case of trafficking of human beings was investigated, and in 2007 just two. 
Montenegro  should  build  up  further  its  capacity  to  identify  victims  proactively  among 
vulnerable groups, to provide legal alternatives to removing victims to countries where they 
face hardship, to encourage victims to assist in the investigation and prosecution of trafficking 
offenders and to conduct trafficking-sensitivity training for the judiciary. Overall, Montenegro 
is moderately advanced in fighting trafficking in human beings. 

Some progress has been made with implementing 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 prevention of terrorism has been ratified. 
However, a national strategy against terrorism still needs to be adopted. 

EN 

48 

   EN 

4.3.6.  Protection of personal data 

Progress  in  the  area  of  protection  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 line with the Personal Data Protection Directive. In the absence of 
an  independent  and  efficient  data  protection  supervisory  authority,  existing  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 harmonise its legislation with Community 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 

49 

   EN 

STATISTICAL ANNEX 

STATISTICAL DATA (as of 29 September 2008) 
Montenegro 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
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) 
SI: Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% 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 (%) 

Note 
1) 
2) 

Note 
3) 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Households and NPISH, as a share of GDP (%) 
General government, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
SI: Consumer price index (CPI), (total, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: exports of goods (million euro) 

1998 
608 

2001 
615 
13 834  13 830  13 831  13 833  13 833  13 833  13 833 

1999 
610 

2002 
617 

2000 
612 

2003 
619 

2004 
621 

2005 
623 
13 812e 

2006 
624 
13 812 

2007 
625 
13 812p 

1998 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

1999 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
1 066 
1750e 
: 
: 
: 
: 
: 
: 
: 

12.4 
19.2 
4.3 
64.1 
91.9 
70.0 
21.9 
16.9 
5.5 
36.8 
51.1 

2001 
: 
1 295 
2113e 
: 
: 
1.1 
: 
: 
: 
: 

11.9 
20.7 
3.9 
63.4 
100.2 
75.0 
25.2 
17.5 
5.9 
38.4 
62.0 

2002 
: 
1 360 
2208e 
: 
: 
1.9 
: 
: 
: 
: 

12.2 
20.0 
4.0 
63.8 
105.8 
80.9 
24.9 
14.6 
4.1 
35.4 
59.9 

2003 
: 
1 510 
2435e 
: 
: 
2.5 
: 
: 
: 
: 

11.6 
19.2 
3.4 
65.8 
101.0 
74.2 
26.8 
13.3 
2.1 
30.6 
47.0 

2004 
: 
1 670 
2684e 
: 
: 
4.4 
: 
: 
: 
: 

10.9 
18.7 
3.5 
66.9 
99.4 
73.1 
26.3 
17.0 
-0.4 
42.0 
58.1 

2005 
: 
1 815 
2912e 
: 
: 
4.2 
: 
: 
: 
: 

10.4 
17.1 
3.6 
68.9 
99.8 
69.9 
29.9 
18.0 
-0.3 
43.6 
61.1 

2006 
: 
2 148p 
3 443p 
: 
: 
8.6p 
: 
: 
: 
: 

10.1p 
16.0p 
4.3p 
69.5p 
104.2p 
77.2p 
27.0p 
21.9p 
3.6p 
49.4p 
79.1p 

2007 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

Note 

1998 
105.0 

1999 
96.0 

2000 
100.0b 

2001 
99.0 

2002 
100.0 

2003 
102.0 

2004 
116.0 

2005 
114.0 

2006 
115.0 

2007 
115.0 

Note 

Note 

1998 
: 

1998 
: 
: 
: 

1999 
: 

1999 
: 
: 
: 

2000 
: 

2000 
: 
: 
: 

2001 
: 

2001 
: 
: 
: 

2002 
: 

2002 
-175 
-433 
310 

2003 
: 

2003 
-102 
-359 
271 

2004 
: 

2004 
-120 
-416 
452 

2005 
: 

2005 
-154 
-514 
461 

2006 
: 

2006 
-531 
-849 
648 

2007 
: 

2007 
-1 008p 
-1 524 
628 

EN 

50 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments current account: imports of goods (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 

Foreign Direct Investment (FDI) in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
SI: General government debt, relative to GDP (%) 

Financial indicators 
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 deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
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 = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Trade balance: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Value of imports: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Net migration rate: immigrants minus emigrants (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%) 

Share of male population aged 15-64 that is in employment (%) 
Share of female population aged 15-64 that is in employment (%) 

SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%) 

EN 

: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 

1998 
: 
: 

1998 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

1998 
: 
: 
: 
: 
: 
: 

1998 
6.4 
: 
13.9 
70.6 
76.5 

1998 
58.9 
38.8 
48.8 
29.1 

1999 
: 
: 

1999 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

1999 
: 
: 
: 
: 
: 
: 

1999 
5.6 
: 
13.4 
70.7 
76.1 

1999 
58.5 
39.2 
47.3 
31.4 

Note 

Note 

4) 
5) 
6) 

3) 

Note 

Note 

Note 
7) 
7) 
7) 
7) 

51 

743 
100 
76 
83 
: 
76 

2000 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 

2000 
6.1 
: 
11.1 
71.1 
76.3 

2000 
60.4 
38.5 
46.2 
30.6 

630 
112 
88 
58 
: 
44 

2001 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2001 
5.5 
: 
14.6 
71.4 
76.5 

2001 
57.1 
37.1 
45.6 
29.0 

869 
148 
86 
62 
: 
53 

2002 
: 
: 

2002 
: 
: 
: 
: 
: 
101 
: 
: 
: 
: 
: 
55 

2002 
: 
: 
: 
: 
: 
: 

2002 
4.8 
: 
10.8 
70.9 
75.7 

2002 
59.1 
37.7 
46.6 
29.0 

2003 
: 
: 

2003 
: 
: 
285 
403 
494 
200 
: 
: 
: 
1.000 
: 
50 

2003 
: 
: 
: 
: 
: 
: 

2003 
4.3 
: 
11.0 
70.4 
74.9 

2003 
58.9 
36.2 
44.5 
28.1 

: 

: 

: 

: 

: 

: 

974 
196 
18 
147 
6 
393 

2004 
: 
: 

2004 
: 
: 
291 
437 
547 
284 
: 
: 
: 
1.000 
: 
60 

2004 
: 
: 
: 
: 
: 
: 

2004 
3.4 
: 
7.8 
71.0 
75.3 

2004 
51.7 
37.4 
46.5 
28.8 

: 

1 498 
197 
31 
90 
7 
644 

2 152 
440 
17 
59 
2 
1 008 

2005 
: 
: 

2005 
: 
: 
351 
615 
867 
318 
: 
: 
: 
1.000 
: 
173 

2005 
-514 
461 
974 
: 
53.5 
45.3 

2005 
2.4 
: 
9.5 
70.4 
74.9 

2005 
49.9 
41.0 
42.4 
27.6 

: 

2006 
: 
: 

2006 
: 
: 
484 
1 099 
1 587 
771 
: 
: 
: 
1.000 
: 
310 

2006 
-855 
627 
1 483 
: 
62.2 
45.4 

2006 
2.5 
: 
11.0 
70.6 
74.8 

2006 
49.0 
41.0 
41.0 
29.0 

: 

2007 
: 
: 

2007 
: 
: 
592 
1 557 
2 728 
2 096 
: 
: 
: 
1.000 
: 
490 

2007 
-1 535 
599 
2 134 
: 
59.0 
43.6 

2007 
3.0 
1.2 
7.4 
: 
: 

2007 
53.0 
43.0 
48.0 
37.0 

: 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

SI: Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed 
(%) 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI) 
(2000=100) 
SI: Early school-leavers: share of population aged 18-24 having not completed upper 
secondary education and not currently in education or training (%) 

Standard of living 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
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 
SI: Total greenhouse gases emissions, CO2 equivalent (tons, 1990=100) 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
SI: Share of renewable energy in electricity consumption (%) 
SI: Road freight transport as a share of total inland freight transport (modal split of freight 
transport) (%) 

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
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) 

8)
8)
8)
8)

2.5 
24.4 
3.2 
69.8 

18.5 
: 
: 

: 

: 

2.6 
22.5 
3.0 
71.8 

19.3 
: 
: 

: 

: 

3.4 
22.4 
3.5 
70.8 
19.3 
: 
: 

: 

: 

3.1 
25.8 
2.1 
69.1 
21.2 
: 
: 

: 

: 

3.0 
26.0 
2.1 
68.8 
20.7 
: 
: 

: 

: 

1.8 
25.7 
2.0 
70.6 
22.7 
: 
: 

: 

: 

10.9b 
16.5b 
3.4b 
69.2b 
27.7 
: 
: 

: 

: 

8.6 
16.3 
2.9 
72.1 
30.3 
: 
: 

: 

: 

7.0 
12.4 
4.8 
75.8 
29.6 
: 
: 

: 

: 

8.3 
11.3 
3.9 
76.4 
19.3 
: 
: 

: 

: 

Note
3) 

1998 

1999 

2000 
92.5 

2001 
107.9 

2002 
149.1 

2003 
173.9 

2004 
195.3 

2005 
213.1 

2006 
246.0 

2007 
338.0 

106.2 

99.9 

100.0 

91.6 

109.7 

119.3 

130.9 

139.7 

156.4 

179.9 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

Note

Note

Note

Note

Note

1998 
: 
: 

1998 
18.1 
: 

1998 
: 
: 
: 

1998 
: 
: 
: 

: 

1998 
4 262 
: 
1 591 
: 
: 
: 

1999 
184.6 
: 

2000 
185.3 
: 

2001 
161.0 
639.6 

2002 
166.8 
775.5 

2003 
171.8 
674.4 

2004 
176.1 
778.7 

2005 
190.9 
872.0 

2006 
: 
1 127.5 

1999 
18.1 
: 

1999 
: 
: 
: 

1999 
: 
: 
: 

: 

1999 
4 236 
: 
1 500 
: 
: 
: 

2000 
18.1 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 

: 

2000 
4 222 
: 
1 567 
: 
: 
: 

2001 
18.1 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 

: 

2001 
3 679 
: 
1 186 
: 
: 
: 

2002 
18.1 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 

: 

2002 
4 135 
: 
1 807 
: 
: 
: 

2003 
18.1 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 

: 

2003 
4 353 
: 
1 618 
: 
: 
: 

2004 
18.1 
: 

2004 
: 
: 
: 

2004 
: 
: 
: 

: 

2004 
4 822 
: 
1 514 
: 
: 
: 

2005 
18.1 
: 

2005 
: 
: 
: 

2005 
: 
: 
: 

: 

2005 
4 161 
: 
1 297 
: 
: 
: 

2006 
18.1 
: 

2006 
: 
: 
: 

2006 
: 
: 
: 

: 

2006 
4 464 
: 
1 512 
: 
: 
: 

2007 
: 
: 

2007 
: 
: 

2007 
: 
: 
: 

2007 
: 
: 
: 

: 

2007 
3 347 
: 
1 203 
: 
: 
: 

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 

52 

EN 

 
  
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture 
Agricultural production volume index of goods and services (producer prices, previous 
year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 

Note 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

99.0 

106.0 

95.0 

107.0 

106.0 

101.0 

104.0 

99.0 

102.0 

: 

9) 
10) 
10) 
10) 
10) 
10) 

519e 
178e 
23e 
333e 
177e 
5e 
: 
: 

518e 
180e 
22e 
306e 
195e 
4e 
: 
: 

518e 
179e 
19e 
293e 
197e 
3e 
: 
: 

518e 
178e 
21e 
244e 
194e 
4e 
: 
: 

518e 
183e 
22e 
241e 
198e 
5e 
: 
: 

518e 
175e 
24e 
252e 
203e 
4e 
: 
: 

518e 
169e 
27e 
254e 
209e 
3e 
: 
: 

517e 
118 
11 
255 
186 
3e 
: 
: 

517 
115 
13 
249 
178 
3 
: 
: 

516 
: 
: 
: 
: 
: 
: 
: 

SI: Structural Indicator  
e: estimate  
f: forecast 
p: provisional  
b: break in series  
1. 
2. 
3. 
4. 

Source: Eurostat. 
Total land includes: agricultural area, forests and non-agricultural land. 
No official national currency exists. Euro is the currency in use. 
As  of  31  December.  Instead  of  standard  M1,  data  under  national  definition  of  M0  are  provided.  M0  comprises  banks`  deposits  with  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. 
As of 31 December. Instead of standard M2, data under the national definition of M11 are provided. The monetary aggregate M11 comprises M1 increased by the Central Government’s demand 
deposits in EUR and other currencies. The monetary aggregate M2 includes M1 and the non-banking sector’s time deposits with banks, in EUR and other currencies, excluding deposits of the 
Central Government. 
As of 31 December. Instead of standard M3, data under the national definition of M21 are provided. Definition of M21 is included in the previous footnote. 
Age group refers to persons aged 15 or more years. 
From 2004 onwards, a new methodology, harmonised with the EU requirements, is used.  
Agricultural area includes: arable land, area under pastries, fishponds and ponds. 
Includes households, enterprises and cooperatives. 

5. 

6. 
7. 
8. 
9. 
10. 

EN 

53 

EN