COMMISSION STAFF WORKING PAPER MONTENEGRO 2011 PROGRESS REPORT
Date: 2011-10-12
Institutions: European Commission
Subjects: Community acquis, Montenegro, accession criteria, accession negotiations, pre-accession aid

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
SEC(2011) 1204 final 

COMMISSION STAFF WORKING PAPER 

MONTENEGRO 2011 PROGRESS REPORT 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Enlargement Strategy and Main Challenges 2011-2012 

{COM(2011) 666 final} 
{SEC(2011) 1200 final} 
{SEC(2011) 1201 final} 
{SEC(2011) 1202 final} 
{SEC(2011) 1203 final} 
{SEC(2011) 1205 final} 
{SEC(2011) 1206 final} 
{SEC(2011) 1207 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

Introduction .................................................................................................................. 3 

Preface.......................................................................................................................... 3 

Context ......................................................................................................................... 3 

Relations between the EU and Montenegro................................................................. 4 

Political criteria ............................................................................................................ 5 

Democracy and the rule of law .................................................................................... 5 

Human rights and the protection of minorities .......................................................... 15 

Regional issues and international obligations ............................................................ 21 

Economic criteria ....................................................................................................... 23 

The existence of a functioning market economy ....................................................... 23 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 27 

Ability to assume the obligations of membership...................................................... 30 

Chapter 1: Free movement of goods .......................................................................... 30 

Chapter 2: Freedom of movement for workers .......................................................... 32 

Chapter 3: Right of establishment and freedom to provide services ......................... 33 

Chapter 4: Free movement of capital ......................................................................... 34 

Chapter 5: Public procurement................................................................................... 35 

Chapter 6: Company law............................................................................................ 37 

Chapter 7: Intellectual property law........................................................................... 38 

Chapter 8: Competition policy ................................................................................... 39 

Chapter 9: Financial Services..................................................................................... 40 

4.10.  Chapter 10: Information society and media ............................................................... 41 

4.11.  Chapter 11: Agriculture and rural development......................................................... 43 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 43 

4.13.  Chapter 13: Fisheries.................................................................................................. 44 

4.14.  Chapter 14: Transport policy ..................................................................................... 45 

4.15.  Chapter 15: Energy .................................................................................................... 47 

4.16.  Chapter 16: Taxation.................................................................................................. 48 

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4.17.  Chapter 17: Economic and Monetary policy ............................................................. 49 

4.18.  Chapter 18: Statistics.................................................................................................. 50 

4.19.  Chapter 19: Social policy and employment ............................................................... 51 

4.20.  Chapter 20: Enterprise and industrial policy.............................................................. 53 

4.21.  Chapter 21: Trans European Networks ...................................................................... 54 

4.22.  Chapter 22: Regional policy and coordination of structural instruments .................. 55 

4.23.  Chapter 23: Judiciary and fundamental rights ........................................................... 56 

4.24.  Chapter 24: Justice, freedom and security ................................................................. 60 

4.25.  Chapter 25: Science and research .............................................................................. 65 

4.26.  Chapter 26: Education and culture............................................................................. 66 

4.27.  Chapter 27: Environment ........................................................................................... 67 

4.28.  Chapter 28: Consumer and health protection............................................................. 69 

4.29.  Chapter 29: Customs Union ....................................................................................... 71 

4.30.  Chapter 30: External relations.................................................................................... 72 

4.31.  Chapter 31: Foreign, Security and Defence Policy.................................................... 72 

4.32.  Chapter 32: Financial control..................................................................................... 73 

4.33.  Chapter 33: Financial and budgetary provisions........................................................ 74 

Statistical Annex ...................................................................................................................... 76 

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1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
progress  made  by  the  countries  of  the  Western  Balkans  region.  This  is  the  first  report  on 
Montenegro's  progress  since  the  Commission  published  its  Opinion  on  the  country's 
application  for  membership  of  the  European  Union  in  November  2010  and  the  European 
Council granted Montenegro candidate status in December 2010. 

This report on progress made by Montenegro on preparing for EU membership: 

–  briefly describes relations between Montenegro and the Union; 

–  analyses the situation in Montenegro in terms of the political criteria for membership; 

–  analyses the situation in Montenegro on the basis of the economic criteria for membership; 

–  reviews  developments  as  regards  Montenegro's  capacity  to  assume  the  obligations  of 
membership, that is the acquis expressed in the Treaties, the secondary legislation and the 
policies of the Union. 

This report covers the period from October 2010 to September 2011. 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 sources 
have been used, including contributions from the government of Montenegro, the EU Member 
States,  European  Parliament  reports1  and  information  from  various  international  and  non-
governmental organisations. 

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

1.2. 

Context 

The Stabilisation and Association Agreement between Montenegro and the EU was signed in 
October 2007 and entered into force in May 2010. 

Montenegro presented its application for membership of the European Union on 15 December 
2008.  Following  a  request  by  the  Council,  the  Commission  submitted  its  Opinion  on 
Montenegro's  application  in  November  2010.  In  December  2010,  the  European  Council 
granted  Montenegro  candidate  country  status.  In  its  conclusions,  the  Council  noted  that  the 
opening  of  accession  negotiations  will  be  considered  by  the  European  Council,  in  line  with 
established  practice,  once  the  Commission  has  assessed  that  the  country  has  achieved  the 
necessary degree of compliance with the membership criteria and, in particular, has met the 

1 
2 

The rapporteur for Montenegro is Mr Charles Tannock. 
Enlargement Strategy and Main Challenges 2011-2012 - COM(2011) 666.  

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key priorities set out in the Commission's Opinion3. The Council invited the Commission to 
focus its 2011 progress report on implementation of these key priorities in particular.  

1.3. 

Relations between the EU and Montenegro 

Montenegro is participating in the Stabilisation and Association Process. 

Overall,  Montenegro  continued  to  implement  its  obligations  under  the  Stabilisation  and 
Association Agreement (SAA) smoothly.  

The  political  and  economic  dialogue  between  the  EU  and  Montenegro  has  continued, 
notably  within  the  SAA  bodies.  The  Stabilisation  and  Association  Committee  met  in  May 
2011  and  the  Stabilisation  and  Association  Council  in  June  2011.  Seven  sub-committee 
meetings have been held since October 2010. In June 2011, the Stabilisation and Association 
Council decided to establish two Joint Consultative Committees as fora for dialogue between 
the EU Committee of the Regions (CoR) and Montenegro's local authorities on the one hand 
and between the European Economic and Social Committee (EESC) and social and economic 
stakeholders in the country on the other. Montenegro participated for the first time (including 
by  submitting  a  pre-accession  economic  programme)  in  the  multilateral  economic  dialogue 
between the Commission, EU Member States and candidate countries in the context of the EU 
fiscal  surveillance  procedure,  including  by  attending  a  meeting  at  ministerial  level  in  May 
2011.  

The EU maintains a dialogue with the authorities and provides guidance on reform priorities. 
Progress on reforms is encouraged and monitored by the SAA bodies. Following the release 
of the Commission Opinion in November 2010, the Commission has held an intense dialogue 
with Montenegro with a view to monitoring implementation of the key priorities set out in the 
Opinion. The government adopted an action plan to address the key priorities which, overall, 
has been implemented consistently and systematically. Furthermore, Montenegro is currently 
preparing  an  updated  version  of  its  National  Programme  for  Integration,  the  country's 
programme for the adoption of the acquis.  

Visa liberalisation for Montenegrin citizens travelling to the Schengen area has been in force 
since 19 December 2009. Implementation of the visa-free regime has been smooth so far. To 
ensure  the  continued  implementation  of  the  commitments,  a  post  visa  liberalisation 
monitoring mechanism was established in view of increased numbers of asylum seekers from 
the region. The Commission presented its first monitoring report to the European Parliament 
and the Council in June 2011. An agreement on readmission between the European Union and 
Montenegro has been in force since January 2008. 

The EU provides financial assistance to Montenegro under the Instrument for Pre-accession 
Assistance  (IPA).  For  the  period  2007-2013,  IPA  allocations  to  Montenegro  total  €  235.2 
million. The IPA allocation for 2011 is € 34.1 million. The 2011-2013 Multiannual Indicative 
Planning Document (MIPD) for Montenegro was presented to the IPA Committee in March 
2011.  The  main  sectors  for  EU  support  during  this  period  will  be  justice  and  home  affairs, 

3 

The  key  priorities  concern  the  following  areas:  legislative  framework  for  elections  and  Parliament's 
legislative  and  oversight  role;  public  administration  reform;  judicial  reform;  fight  against  corruption; 
fight against organised crime; media freedom and cooperation with civil society; implementation of the 
anti-discrimination  framework  and  the  situation  of  displaced  persons.  For  the  full  text  of  the  key 
priorities, please see COM (2010) 670. 

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public administration, the environment and climate change, transport, social development and 
agriculture  and  rural  development.  Assistance  is  also  being  provided  to  help  the  country 
prepare for decentralised management of the IPA programme. Montenegro benefits also from 
regional and horizontal IPA programmes. It is participating in four cross-border cooperation 
programmes with neighbouring Western Balkan countries and a fifth, with Kosovo4, is under 
preparation.  Montenegro  is  also  participating  in  the  transnational  cooperation  programmes 
under  the  European  Regional  Development  Fund  and  in  the  IPA  Adriatic  cross-border 
programme with Member States.  

EU  financial  support  has  been  provided  for  development  of  civil  society  under  the  Civil 
Society Facility.  

The IPA programme is currently managed by the EU Delegation in Podgorica. Montenegro's 
preparations for transfer of management of component I of the IPA programme from the EU 
to the national authorities have further advanced.  

Montenegro  is  participating  in  the  following  EU  programmes:  the  Seventh  Research 
Framework Programme; the Entrepreneurship and Innovation Programme and the Information 
Communication  Technologies  Policy  Support  Programme,  both  under  the  Competitiveness 
and Innovation Framework Programme, Culture and Customs 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 International Criminal 
Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Establishment  of  the  legal  and  institutional  set-up  required  for  an  independent  country  is 
complete. The political consensus on State-building has been further consolidated.  

Parliament 

As  regards  the  legislative  framework  for  elections,  one  of  the  key  priorities  set  out  in  the 
Opinion,  amendments  to  the  Law  on  election  of  municipal  councillors  and  members  of 
parliament  were  adopted  by  a  two-thirds  majority  in  parliament  in  September  2011,  thus 
harmonising  it  with  the  Constitution  and  addressing  the  main  OSCE/ODIHR  and  Venice 
Commission recommendations on elections. These amendments implement the constitutional 
commitment to authentic representation of minorities by introducing a system of affirmative 
action for representation in parliamentary elections extended to all minorities. They improve 
the technical side of voting and offer better safeguards for equality of votes. 

The powers of the State Election Commission and the system of appointments of its members 
have been further clarified and political representation of opposition parties in local election 

4 

Under UNSCR 1244/1999 

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commissions has been strengthened. The law also provides for establishing a secretariat of the 
State  Election  Commission  to  assist  in  administration  of  elections,  as  recommended  by  the 
Venice Commission and the OSCE/ODIHR. Issues related to the allocation of mandates have 
been clarified and transparency has been introduced in the publication of results. Exit polls are 
explicitly allowed. Provisions on media and the prohibition to use State resources for electoral 
campaigning have been strengthened. 

These legal advances need to be complemented in the future as regards a number of pending 
OSCE/ODIHR  and  Venice  Commission  recommendations,  in  particular  those  related  to  the 
dissolution of coalitions and their funding obligations, and the extension of the mandate of the 
Central Election Commission to municipal elections. The issue of the constitutional two-year 
residency  requirement  before  citizens  can  obtain  the  right  to  vote  (while  reduced  to  six 
months  for  local  elections)  remains  unaddressed  for  national  elections.  Although  the  new 
provisions provide for 30% of female candidates on the candidate list, gender equality is still 
not guaranteed in practice as the law does not stipulate that candidates of each gender should 
be  ranked  high  enough  on  the  list  to  have  a  realistic  opportunity  for  being  allocated  a 
mandate. 

Mechanisms  to  ensure  transparency,  accountability  and  control  of  financing  of  election 
campaigns  have  been  enhanced  by  a  new  Law  on  financing  of  political  parties.  Significant 
efforts will be needed to implement it fully, following its entry into force in January 2012. 

With regard to parliament's legislative and oversight role, another key priority set out in the 
Opinion, parliament has continued its intensive legislative activity. Its administrative capacity 
to  support  parliamentary  committees  has  been  strengthened,  in  particular  the  International 
Relations and European Integration Committee, which is in charge of coordinating relations 
with  the  EU  and  making  sure  that  new  legislation  is  compatible  with  the  EU  acquis.  Since 
February  2011,  the  secretary  of  each  parliamentary  committee  prepares  a  report  on  each 
proposed draft law with the aim of streamlining discussions and adoption. The technical and 
documentary  support  provided  by 
the  research  department  has  been  considerably 
strengthened.  Most  parliamentary  committees  have  adopted  an  annual  work  plan  and 
parliament's  internal  document  management  procedures  have  been  improved.  European 
integration  is  a  key  priority  for  parliamentary  work  and  consensus  between  parliamentary 
parties  on  EU-related  matters  remains  high.  The  National  Council  for  European  Integration 
(NCEI)  held  a  conference  on  the  seven  key  priority  areas  identified  in  the  Opinion  in  May 
2011,  providing  a  forum  for  discussion  between  parliamentary  political  forces,  the 
government  and  other  stakeholders.  However,  the  NCEI's  work  and  administrative  capacity 
remain  uneven.  Its  role  in  Montenegro's  EU  integration  process  still  needs  to  be  further 
clarified and developed. 

Parliament's  role  of  oversight  and  control  of  the  government  has  been  strengthened,  in 
particular  in  the  areas  of  security  and  defence.  A  number  of  hearings,  including  a  control 
hearing,  were  held.  The  number  of  parliamentary  questions  increased.  Measures  have  been 
taken to improve transparency and interaction with civil society.  

However, parliament is not yet using the full array of oversight tools. In oversight hearings, 
parliamentary  committees  do  not  systematically  adopt  conclusions  and  follow-up  is  limited. 
Parliament's rules of procedure have not been changed to make it easier for opposition parties 
to  initiate  oversight  proceedings.  In  the  case  of  oversight  of  anti-corruption  activities,  the 
members  of  the  national  branch  of  the  global  organisation  of  parliamentarians  against 
corruption  were  appointed  in  July  2011,  as  provided  for  in  a  2007  parliament  resolution. 

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However, no special committee of inquiry has been established. Parliament's cooperation with 
civil society needs to be further enhanced. 

The role of the Parliamentary Committee for International Relations and European Integration 
is often limited to formal checks of the statement of compatibility of new legislation with the 
EU  acquis  provided  by  the  government.  No  further  compatibility  checks  take  place.  The 
administrative  capacity  of  parliament  –  albeit strengthened  –  remains  weak  and  needs  to  be 
further  consolidated.  Parliament's  capacity  to  ensure  high-quality  legislation  in  general 
remains limited and needs to be enhanced. All parliamentary committees still lack sufficient 
qualified staff. 

Efforts  to  strengthen  parliament's  administrative  and  expert  capacity  and  to  upgrade  its 
administration have continued. Staff numbers increased from 73 in December 2010 to 90 in 
May  2011.  A  large  number  of  training  sessions  have  been  provided  for  staff.  However, 
administrative capacity and other resources required for professional, efficient and transparent 
work by parliament, including expert support for committees, are limited overall. The lack of 
office space and technical equipment persists, including for Members of Parliament. Financial 
and  other  constraints  need  to  be  addressed.  Training  of  existing  staff  and  recruitment  of 
qualified new staff are to be pursued. 

Overall,  the  legislative  and  institutional  framework  for  elections  has  been  considerably 
enhanced,  in  line  with  the  recommendations  made  by  the  Venice  Commission  and 
OSCE/ODIHR.  Parliament's  functioning  has  further 
improved.  Consensus  between 
parliamentary  parties  on  EU-related  matters  remains  high.  Progress  has  been  made  on 
strengthening parliament's legislative and oversight functions, by means of stronger support to 
parliamentary  committees,  better  planning  of  parliamentary  work  and  closer  oversight, 
notably in the areas of defence and security. However, further sustainable efforts are needed 
to  consolidate  parliament's  legislative  and  oversight  role  and  to  enhance  its  administrative 
capacity. Parliament's capacity and means to scrutinise draft legislation against the EU acquis 
need  to  be  upgraded.  The  role  of  the  National  Council  for  European  Integration  in 
Montenegro's  EU  integration  process  remains  to  be  further  developed.  Parliament's 
cooperation with civil society is to be further enhanced. 

Government  

On  21  December  2010,  then  Prime  Minister  Milo  Đukanović  resigned  from  office.  On 
31 December,  parliament  approved  the  new  government  led  by  Prime  Minister  Igor  Lukšić, 
formed by the same coalition as the outgoing government. It has two Deputy Prime Ministers 
and 15 ministers, one of whom is female. 

A number of changes were made to the structure of the government. The Ministry for Foreign 
Affairs  and  European  Integration  took  over  coordination  of  European  integration  from  the 
stand-alone Ministry for European Integration, which was abolished.  

The  main  priorities  of  the  government  remain  European  integration  and  economic  reform, 
while action has also been taken to strengthen the partnership and  consultation mechanisms 
with  the  various  stakeholders,  including  civil  society.  In  February  2011,  following 
consultations  with  a  broad  range  of  stakeholders,  the  government  adopted  an  action  plan 
addressing the key priorities set out in the Commission Opinion. Overall, this action plan has 
been implemented consistently and systematically. Responsibility for overall coordination of 
implementation of the action plan lies with the Prime Minister, while the Ministry for Foreign 

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Affairs  and  European  Integration  provides  technical  support  and  prepares  regular  oral  and 
written progress reports to the government.  

Due  to  the  focus  on  the  key  priorities,  progress  in  other  areas  of  European  integration 
remained uneven. While results remain satisfactory, the abolition of the stand-alone Ministry 
for European Integration has had a negative effect on the administrative capacity involved in 
coordination of European integration, which needs to be substantially strengthened.  

With  regard  to  local  self-government,  amendments  to  the  Law  on  local  finances  and  to  the 
Law  on  property  tax  were  adopted  in  December  2010  and  entered  into  force  on  1  January 
2011. In October 2010, Montenegro ratified the additional protocol to the European Charter of 
Local Self-Government on the right to participate in the affairs of a local authority. In June 
2011,  the  Government  adopted  the  2011-2016  development  strategy  for  inter-municipal 
cooperation in Montenegro, together with the 2011-2013 Action Plan for its implementation. 
However, enactment of the Law on territorial organisation and of amendments to the sectoral 
laws is still pending. 

Overall, with the new government in office, government coordination and policy-making has 
further  improved,  particularly  the  quality  of  consultations  with  civil  society.  However,  the 
overall  capacity  of  ministries  to  produce  high-quality  legislation  and  impact  assessments 
remains  limited.  The  administrative  capacity  involved  in  coordination  of  European 
integration,  including  financial  assistance,  remains  weak  and  needs  to  be  substantially 
strengthened. Legislative amendments with a view to establishing a transparent, efficient and 
accountable administration at local level are still pending. 

Public administration  

One of the main government activities in the reporting period was to complete essential steps 
in public administration reform, a key priority set out in the Opinion.  

The  Public  Administration  Reform  Strategy  for  2011-2016,  with  the  accompanying  action 
plan  (AURUM),  was  adopted  by  the  government  in  March  2011.  The  strategy  includes 
introducing European standards covering recruitment and promotion and measures to increase 
the  efficiency  of  the  State  administration.  It  also  envisages  an  overall  reduction  of 
employment in the public sector; yet, it does not specify how this would be achieved without 
affecting the performance and efficiency of services. Some measures have already been taken 
to introduce economies of scale and integrate bodies whose activities have been disparate and 
uncoordinated (e.g. the various State inspection services).  

Some important steps forward have been taken to reform the legal framework governing the 
civil  service,  in  particular  by  adopting  two  essential  pieces  of  legislation:  the  Law  on  civil 
servants and State employees and the Law on general administrative procedure.  

Amendments to the Law on general administrative procedure were enacted by the parliament 
in June 2011. These amendments constitute a first step towards the reform of administrative 
procedures. Work has been launched to prepare a comprehensive reform with a view to laying 
the  foundations  for  a  modern,  citizen-oriented  administration.  To  this  end,  in  July  the 
government  adopted  a  policy  paper,  containing  the  main  principles  and  elements  for  a  new 
law  on  administrative  procedures  in  line  with  European  values,  legislation  and  practice.  It 
simplifies  processes  in  public  administration  in  line  with  the  principles  of  efficiency  and 

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effectiveness, enforcing transparency and objectivity, accessibility to citizens and NGOs and 
openness to the use of modern information and communication technologies.  

A  new  Law  on  civil  servants  and  State  employees,  based  on  the  principles  of  merit-based 
recruitment and promotion, was adopted by the parliament in July 2011. It lays down the main 
foundations  for  the  establishment  of  a  de-politicised  and  professional  public  administration 
acting effectively and impartially. It improves protection of persons who report possible cases 
of corruption (whistleblowers) and prescribe the obligation to adopt plans of integrity in the 
public sector. The law will start applying in January 2013 after the end of a transition period. 
Preparations for its application are under way. In July the parliament adopted amendments to 
the  Law  on  salaries  of  civil  servants  and  state  employees,  which  provides  for  a  transparent 
salary system for employees financed from the State budget.  

In a further positive development, amendments to the Law on public administration, enacted 
by parliament in July, envisage streamlining of the existing fragmented public administration 
structure,  enforcing  accountability  and  improving  the  implementation  of  long-term  reform 
plans.  The  introduction  of  the  functions  of  State  secretaries  and  Directors  general  splits 
clearly the political and the administrative levels in ministries.  

In April 2011, the government adopted a revised rulebook on the internal organisation and job 
descriptions of the  Human  Resources Management Authority (HRMA).  Its legal mandate is 
further  enhanced  by  the  new  Law  on  civil  servants  and  State  employees,  which  a  gives  the 
HRMA  a  stronger  role  in  monitoring  implementation  of  civil  service  legislation  and 
developing policies for human resources management.  

The capacity of the State Audit Institution (SAI) has been strengthened but it needs to recruit 
more  auditors  to  enhance  its  capacity  to  perform  audits;  also,  its  managerial  and 
administrative autonomy has to be enhanced. The principles of sound financial management 
in  the  public  administration  have  been  reinforced  by  the  Law  on  public  internal  financial 
control adopted in March 2011. (See also Chapter 32 - Financial control.) 

Key  e-government  legislation  has  been  put  in  place  and  campaigns  to  promote  it  were 
launched  by  the  new  Information  Society  Ministry.  The  relevant  parts  of  the  Strategy  for 
Development of the Information Society for 2009-2013 are being implemented and this needs 
to continue.  

Cooperation between the Ombudsman, government and civil society has been tightened. His 
influence  has  increased  substantially  and  in  the  vast  majority  of  cases  the  Ombudsman's 
recommendations are followed by the relevant institutions, albeit with significant delays. The 
current financial and human resources of the Ombudsman's Office are not sufficient to carry 
out all its tasks efficiently. The new Law on the Ombudsman was adopted in July.  

Overall, Montenegro has taken important steps to address the main challenges posed by the 
public  administration  reform.  The  Government  adopted  and  started  to  implement  a  public 
administration reform strategy. An improved legal framework in the area of civil service and 
state  administration  aiming  at  efficiency,  de-politicisation  and  merit-based  recruitment  has 
been  adopted.  Legislation  regulating  administrative  procedures  has  been  amended  and  a 
further  comprehensive  reform  has  been  launched.  The  HRMA  has  been  strengthened. 
Preparations for implementation of the adopted legislation have to be stepped up and focus on 
enforcing  de-politicisation,  professionalism  and  effectiveness  and  impartiality  of  the 
administration, including through merit-based recruitment and promotion. The capacity of the 

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Ombudsman and of the State Audit Institution needs to be further enhanced. Implementation 
of  the  Public  Administration  Reform  Strategy  needs  to  take  due  account  of  the  need  to 
rationalise  administrative  structures  and  strengthen  administrative  capacity,  notably  in  areas 
related  to  European  integration,  while  ensuring  the  financial  sustainability  of  public 
administration. 

Civilian oversight of the security forces 

Parliament  adopted  a  new  Law  on  parliamentary  oversight  in  the  fields  of  security  and 
defence, which provided additional clarity regarding parliament's role in civilian oversight by 
defining the obligations of all parties involved.  

Judicial system (See also Chapter 23 - Judiciary and fundamental rights) 

Montenegro  has  made  progress  on  judicial  reform,  notably  in  the  form  of  reinforcing  the 
independence, accountability, impartiality and efficiency of judges and prosecutors, one of the 
key priorities set out in the Opinion. 

Preparations  have  focused  on  legislative  reforms  at  sub-constitutional  level  with  the  aim  of 
strengthening judicial independence and impartiality within the limits provided by the current 
Constitution.  Amendments  to  the  Laws  on  courts,  the  Judicial  Council  and  the  State 
prosecution  office  were  enacted  by  the  parliament  in  July  2011.  In  parallel,  the  process  of 
amending  the  Constitution  was  launched  and  advanced,  with  a  view  to  further  enhance 
judicial independence by means of de-politicised and merit-based appointments of the Judicial 
and  Prosecutorial  Councils'  members  and  of  State  prosecutors,  and  strengthen  the 
accountability of the judiciary.  

With  regard  to  the  independence  of  the  judiciary,  amendments  to  the  Law  on  the  State 
prosecution office provided for changes in the composition of the Prosecutorial Council and 
broadened its scope of action, including on the appointment of the Special prosecutor and in 
disciplinary  proceedings.  Amendments  to  the  Law  on  the  Judicial  Council  provided  for 
increased transparency and involvement of the judiciary in the procedure of appointment of 
judges and renowned jurists to the Judicial Council, and the involvement of the latter in the 
process of proposing candidates for the post of Supreme Court President. Candidates for this 
position have to meet henceforth stricter criteria, introduced by the amendments to the Law on 
courts.  Criteria  for  first-time  appointment  of  judges  and  deputy  State  prosecutors  and  their 
subsequent promotion, as well as for the appointment of court presidents and the permanent 
tenure  of  State  prosecutors  have  also  been  laid  down.  A  legal  obligation  to  apply  written, 
anonymous  tests  for  selection  of  magistrates  has  been  introduced.  In  September  2011,  the 
Judicial Council appointed the members of the Commission responsible for conducting these 
tests for the selection of judges. The new criteria for selecting entrants to the judicial system 
reduce the room for discretion by the Judicial and Prosecutorial Councils and thereby improve 
transparency  in  the  selection  process.  However,  these  selection  criteria  have  not  yet  been 
applied in practice. Some of them lack clarity, while the weighting of individual criteria is not 
fully  satisfactory.  The  merit-based  elements  of  the  career  system  need  to  be  further 
strengthened. 

The  procedure  to  amend  the  Constitution  in  the  area  of  the  judiciary  was  launched  by  the 
government in June 2011. In July the parliament enacted the decision in principle and charged 
its  Committee  for  Legal  and  Constitutional  affairs  to  draft  constitutional  amendments.  A 
number  of  alternative  amendments  were  drafted  and  sent  to  the  members  of  parliament  in 

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July. The amendments envisage new arrangements on the set-up of judicial institutions, aimed 
at limiting political influence in appointments and broadening judicial independence, notably 
through  the  increase  of  the  number  of  Judicial  Council  members  coming  from  the  judiciary 
and  a  new  appointment  procedure  of  the  Supreme  Court  President,  involving  the  Judicial 
Council. Provisions enhancing the capacity and the independence of the Constitutional Court 
are also envisaged. 

With regard to the accountability of the judiciary, amendments to the Law on courts provided 
an exhaustive list of all possible reasons for disciplinary action against judges and – for the 
first time – presidents of courts. Amendments to the Law on the Judicial Council provided for 
the  establishment  of  a  commission  for  monitoring  implementation  of  the  code  of  ethics  for 
judges and the autonomy of action of the disciplinary commission. Members of the latter were 
appointed  in  September  2011.  Disciplinary  sanctions  have  also  been  strengthened. 
Amendments to the Law on the State prosecution office provided for the adoption of a code of 
ethics  by  the  enlarged  session  of  the  Supreme  State  Prosecutor's  Office  and  list  all  possible 
reasons for disciplinary action against prosecutors. Initial efforts have been made to establish 
a track record on fighting corruption within the judiciary. Nonetheless, corruption and conflict 
of interest rules are still insufficiently monitored in the judiciary. Both judges and prosecutors 
continue  to  enjoy  functional  immunity  from  prosecution.  Since  the  entry  into  force  of  the 
Constitution  in  2007,  two  judges  have  been  stripped  from  their  functional  immunity. 
Procedures  for  removing  functional  immunity  need  to  be  strengthened  to  ensure  full 
accountability  of  judges  and  prosecutors  under  criminal  law.  Publicity  of  court  rulings, 
although foreseen, is not implemented in practice. 

Concerning  the  impartiality  of  judges,  random  allocation  of  cases  is  being  consistently 
implemented  in  a  number  of  courts  with  the  aid  of  an  IT  system.  However,  de  facto 
limitations, particularly in smaller courts, do not fully guarantee random allocation in every 
case.  The IT  system in place allows  case-tracking  and automatic allocation of  cases but not 
statistical reporting or electronic filing of judicial acts.  

The  envisaged  constitutional  amendments  are  expected  to  significantly  reduce  the  legal 
possibilities  for  disproportionate  political  influence  over  appointments  of  magistrates  and 
prosecutors,  thus  reinforcing  judicial  independence  and  prosecutorial  autonomy.  The 
envisaged provisions notably foresee that state prosecutors will not longer be appointed by the 
parliament as well as a new composition of the Prosecutorial Council. Once adopted and in 
order to become fully operational, these amendments are to be completed with provisions for 
merit-based  judicial  appointments  via  a  country-wide  single  recruitment  system  and  a 
coherent and stronger system of accountability.  

Regarding  the  efficiency  of  the  judiciary,  Montenegro  has  taken  further  measures  to  reduce 
the backlog of cases. With circa 12,000 unresolved complex cases from previous years in all 
courts in Montenegro at the end of 2010, the backlog was approximately 7% lower in 2010 
than  in  2009.  However,  concerns  persist  about  the  reliability  of  the  statistics  and  the 
soundness of the method used. The statistical indicators do not provide complete information 
about  courts'  performance,  the  duration  of  case-handling  and  the  human  and  financial 
resources allocated, thus creating problems with the consistency of data and effective follow-
up.  The  Law  on  notaries  introduced  a  notary  system  aiming  to  reduce  the  burden  on  courts 
and  administrative  bodies.  34  notaries  took  up  duties  in  July  2011.  The  new  Law  on 
enforcement  and  security  of  claims,  enacted  by  the  parliament  in  July  2011,  transferred 
powers  for  civil  enforcement  to  the  bailiffs.  However,  enforcement  of  civil  decisions  in 
particular  remains  weak.  Concerns  persist  over  the  long  duration  of  court  proceedings.  The 

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Law  on  the  right  to  trial  within  a  reasonable  time  is  not  yet  implemented  effectively,  as  a 
majority  of  complaints  are  rejected  on  procedural  grounds  and  parties  are  not  properly 
notified. The constitutional provision on the right to legal remedy does not fully comply with 
Article 13 of the European Convention on Human Rights.  

The 2011 budget for the judiciary amounts to € 26,5 million, which represents 0,83 % of the 
GDP.  Yet,  the  majority  of  the  funds  have  been  allocated  for  the  salaries  of  magistrates, 
prosecutors  and  administrative  staff.  Efforts  have  been  made  by  the  authorities  to  remedy 
shortfalls  in  the  judiciary's  infrastructure  and  equipment,  but  they  continue  to  hinder 
efficiency. The deadlines for a number of measures in the action plan for implementation of 
the judicial reform strategy (2007-2012) have been revised. No developments can be reported 
as  regards  streamlining  the  court  network.  Montenegro  continues  to  be  one  of  the  countries 
with the highest number of basic courts, magistrates, prosecutors and administrative staff in 
Europe. Determined steps are to be taken to streamline the courts system.  

As of 26 August 2011, the new Criminal Procedure Code (CPC) is applied in all Montenegrin 
courts. The Law on misdemeanours was amended in December 2010. Also, the Law on free 
legal aid and the Law amending the Criminal Code were adopted in April 2011, aligning their 
provisions  with  the  new  CPC  and  allowing  its  application.  Twenty  nine  additional  deputy 
State  prosecutors  have  been  appointed  and  a  number  of  trainings  on  CPC  provisions  have 
been delivered to prosecutors and judges. However, shortcomings remain with regard to the 
training  of  judges  and  prosecutors.  There  are  no  permanent  mandatory  courses  and  no  set 
curricula.  In  addition,  the  Judicial  Training  Centre  depends  on  scarce  financing  from  the 
central  budget  and  international  donors.  Training  with  set  curricula  for  all  members  of  the 
judiciary remains to be established. The training provided on implementation of the new CPC 
remains  insufficient,  in  particular  for  judges,  and  is  to  be  enhanced  following  the  full  entry 
into force of the CPC.  

Overall, progress has been made in the area of judicial reform. The legal framework regarding 
the independence of the judiciary and the autonomy of the public prosecution office has been 
improved  at  sub-constitutional  level  and  the  process  of  constitutional  reform  has  advanced. 
Provisions  on  the  accountability  of  judges  and  prosecutors  have  been  strengthened. 
Significant efforts will be needed in the period ahead to ensure completion of the legal reform 
and  effective  implementation  of  the  newly  adopted  legislation.  A  country-wide  single 
recruitment system based on anonymous tests for first-time judicial appointments remains to 
be  established.  Systematic  training  for  all  judges  and  prosecutors,  in  particular  on  new 
legislation and EU law, has yet to be put in place. Efforts to reduce the case backlog before 
courts have been stepped up, but the methodology used needs to become more consistent. The 
lack  of  adequate  infrastructure  and  equipment  continue  to  hinder  judicial  efficiency.  Full 
publicity  of  court  rulings  needs  to  be  ensured.  The  judiciary  still  has  to  demonstrate  its 
independence, accountability and efficiency in practice, particularly by producing convincing 
results, including final decisions on corruption and organised crime cases at all levels. 

Anti-corruption policy (See also Chapter 23 - Judiciary and fundamental rights)  

Progress can be reported in the fight against corruption, one of the key priorities set out in the 
Opinion. Montenegro has made significant efforts to strengthen the legal framework needed 
for combating corruption and to address outstanding recommendations of the Group of States 
against Corruption (GRECO). Amendments to the Law on conflict of interest were enacted in 
July 2011, with the aim of remedying legislative gaps identified in GRECO first and second 
evaluation  rounds.  Steps  have  also  been  taken  to  address  the  recommendations  made  in  the 

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third GRECO evaluation round covering the financing of political parties and incriminations. 
The  provisions  of  the  Criminal  Code  regulating  criminal  offences  of  active  and  passive 
bribery  have  been  amended,  with  a  view  to  ensure  alignment  with  the  Council  of  Europe's 
Criminal Law Convention on Corruption and its additional protocol. A new Law on political 
party financing, enacted in July 2011, brought important legislative improvements in this area. 
A new Law on public procurement was enacted in July 2011, aimed at reducing opportunities 
for  corruption  and  increasing  transparency  in  this  field.  The  new  Law  on  civil  servants  and 
State employees provided legal protection for whistleblowers. 

Some progress has been made on repressing corruption. Steps have been taken to strengthen 
the institutional and administrative capacity of the prosecutors and police to fight corruption. 
A special anti-corruption investigation team has been established, made up of representatives 
of  the  police  administration,  the  Office  for  prevention  of  money  laundering  and  terrorism 
financing,  the  tax  and  customs  administrations,  and  reporting  to  the  Special  Prosecutor  for 
organised  crime,  corruption,  terrorism  and  war  crimes.  Montenegro  has  made  efforts  to 
establish  a  solid  track  record  of  proactive  investigations,  prosecutions  and  convictions  in 
corruption cases at all levels, which is part of the Opinion key priority on anti-corruption. In 
December  2010,  a  High  court  judge  was  sentenced  in  second  instance  to  seven  years  of 
imprisonment  for  passive  bribery.  Nine  persons  were  sentenced  in  first  instance  to 
imprisonment for  abuse of official  positions and bribery in June 2011. During the reporting 
period, 28 persons have been indicted in three cases of abuse of official position and bribery. 
Among them is a high level corruption case, involving the at the time Mayor of Budva, his 
Deputy and a Member of Parliament.  

Prevention  has  been  tightened,  with  a  number  of  awareness-raising  campaigns  and  opinion 
polls  conducted  by  the  Directorate  for  Anti-corruption  Initiatives  (DACI).  In  July  2011,  the 
Government  adopted  a  risk  assessment  of  areas  vulnerable  to  corruption.  Six  areas  of 
particular  risk  have  been  identified:  local  self-government,  spatial  planning,  public 
procurement, privatisation, education and healthcare. The assessment acknowledged the need 
for more precise mechanisms for implementation and monitoring of anti-corruption initiatives 
as well as improvement of the reporting methodology used by the Tripartite Commission for 
corruption  and  organised  crime  cases.  The  Judicial  Training  Centre  adopted  training 
programme for judges and prosecutors in the area of anti-corruption and conducted a number 
of  trainings  and  seminars  in  this  field.  Specific  trainings  have  been  provided  to  judges  and 
prosecutors to facilitate implementation of the new Criminal Procedure Code.  

indicators.  The  National  Commission 

Progress  has  been  made  in  the  implementation  of  the  government's  anti-corruption  strategy 
and  action  plan,  which  is  part  of  the  key  priority  set  out  in  the  Opinion.  In  July,  the 
Government adopted a revised 2011-2012 Action Plan for the implementation of the Strategy 
for  fighting  corruption  and  organised  crime,  comprising  a  number  of  new  measures  and 
improved 
the 
implementation of the Action Plan adopted its first report in April 2011. It approved new rules 
of procedure, providing the possibility for the National Commission to centralise corruption-
related complaints and request ad hoc reports on corruption from State agencies. The sessions 
of the National Commission became fully open to the public in June 2011. Cooperation with 
civil  society  in  the  fight  against  corruption  has  improved  significantly.  NGOs  have  actively 
contributed to enhancing the strategic framework, providing evidence for initiating corruption 
cases and producing surveys. 

for  monitoring 

responsible 

However,  corruption  remains  a  serious  concern.  Implementation  of  the  new  anti-corruption 
legislation is yet to start. Proper impact assessments need to be developed, including plans for 

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the  necessary  human  and  financial  resources  and  preparations  for  implementation.  The  full 
entry  into  force  of  the  new  provisions  of  the  CPC  and  the  Criminal  Code  has  not  been 
sufficiently  prepared  and  will  require  additional  training,  in  particular  for  judges.  The 
independence  of  the  judiciary  remains  a  matter  of  concern  affecting  the  determination  to 
combat corruption.  

Despite  a  positive  trend,  the  track  record  in  combating  corruption  needs  to  be  further 
developed. Final convictions remain limited, in particular for high-level corruption cases. The 
number of corruption cases in which seizure or confiscation of assets were ordered is still very 
low. Provisions of the CPC and the Criminal Code on extended confiscation of criminal assets 
have not yet been used. No progress can be reported as regards the work of the State agency 
responsible for the confiscation of criminal assets. Further efforts are needed to strengthen its 
institutional  and  administrative  capacity.  The  capacity  of  prosecutors  and  police  to  conduct 
financial  investigations,  trace  criminal  assets  and  present  related  evidence  before  the  courts 
remains  to  be  improved.  The  level  of  inter-agency  cooperation  and  information  exchange 
between  the  different  law  enforcement  agencies  and  the  prosecutor's  office  remains  to  be 
enhanced. Cooperation and coordination between police and prosecutors in particular need to 
be  improved.  Prosecutors'  lack  of  access  to  the  national  database  of  the  police  and  their 
possibility  to  delegate  investigation  to  the  police  only  in  exceptional  circumstances 
considerably hamper implementation of the new CPC. Use of special investigative measures 
is impeded by the lack of adequate equipment and specialised human resources. 

Implementation of the new legislation on financing of political parties and election campaigns 
is  yet  to  start.  Concern  remains  over  the  insufficiently  dissuasive  and  undifferentiated 
sanctioning system, the regime and ceiling of membership fees, as well as the capacity of the 
State  Electoral  Commission  (SEC)  to  ensure  a  fully  effective  independent  oversight.  Few 
sanctions for non-compliance with the law have been applied by the supervisory bodies. The 
asset declarations of civil servants are still not being checked on substance to identify illicit 
enrichment. There is still no second-instance body responsible for supervising implementation 
of  the  Law  on  free  access  to  information,  nor  have  there  been  amendments  to  the  law.  The 
rules  of  procedure  of  the  public  administration,  including  appointment  and  internal  control, 
have  not  fully  integrated  every  aspect  of  prevention  of  corruption  and  conflicts  of  interest. 
Disciplinary provisions remain inefficiently implemented in practice. 

Overall, implementation of the government's anti-corruption strategy and action plan, part of 
the  key  priority  identified  in  the  Opinion,  has  continued.  The  strategic  and  legislative 
frameworks have been strengthened in the key areas of political party financing, conflicts of 
interest,  whistleblowers,  incrimination  and  public  procurement.  Risk  analyses  of  areas 
vulnerable  to  corruption  were  completed  with  a  view  to  further  fine-tuning  prevention 
policies. The technical and administrative capacity for preventing and fighting corruption has 
been  upgraded.  Steps  have  been  made  to  establish  a  solid  track  record  of  proactive 
investigations, prosecutions and convictions in corruption cases at all efforts, which is part of 
the  Opinion  key  priority  on  anti-corruption.  Yet,  efforts  need  to  be  stepped  up  to  further 
develop  it.  The  number  of  final  convictions,  in  particular  for  high-level  corruption  cases, 
remains  low.  Use  of  special  investigative  measures  continues  to  be  impeded  by  the  lack  of 
adequate  equipment  and  specialised  human  resources.  Inter-agency  coordination  and,  in 
particular,  cooperation  between  prosecutors  and  the  police  need  to  be  further  improved. 
Implementation of the legislative framework remains uneven. The newly enacted provisions 
in the areas of conflict of interest and political party financing need to be implemented with 
determination.  There  continues  to  be  a  need  for  stronger  monitoring  of  corruption  and 

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conflicts  of  interest  in  the  judiciary.  Corruption  remains  prevalent  in  many  areas  and 
continues to be a serious problem. 

2.2. 

Human rights and the protection of minorities (see also chapter 23 - Judiciary & 
fundamental rights) 

Observance of international human rights law 

With  regard  to  ratification  of  international  human  rights  instruments,  Montenegro  has 
complied  with  all  its  formal  post-accession  commitments  before  the  Council  of  Europe  and 
has also ratified the Convention on the Protection of Children against Sexual Exploitation and 
Sexual  Abuse.  It  has  also  signed  the  Council  of  Europe  Convention  on  Preventing  and 
Combating  Violence  against  Women  and  Domestic  Violence.  However,  the  Constitution 
(Article 20) has not yet been aligned with Article 13 of the European Convention on Human 
Rights  (ECHR)  to  safeguard  the  right  to  an  effective  remedy  before  national  authorities  for 
violations  of  rights  under  the  Convention.  Implementation  of  international  human  rights 
standards continues to be restricted to cases of conflicts with domestic legislation.  

As  regards  the  European  Court  of  Human  Rights  (ECtHR),  efforts  are  being  made  to 
improve national courts' compliance with ECtHR case law, in particular by providing training 
for judges and prosecutors and ensuring better dissemination of the relevant case law. During 
the reporting period, the Court delivered 2 judgements finding that Montenegro had violated 
rights  guaranteed  by  the  European  Convention  on  Human  Rights  (ECHR).  One  related  to 
freedom of expression, the other to the right to a trial within a reasonable time. A total of 275 
new  applications  allocated  to  a  decision  body  have  been  made  to  the  ECtHR  since  October 
2010.  In  September  2011,  820  allocated  applications  regarding  Montenegro  were  pending 
before the ECtHR. Most of these cases are related to non-implementation of court decisions, 
non-alignment  of  domestic  jurisprudence  with  the  case  law  of  the  Court,  freedom  of 
information, access to justice and length of procedures, . 

As  regards  promotion  and  enforcement  of  human  rights,  some  progress  has  been  made. 
The  influence  of  the  Protector  of  Human  Rights  and  Freedoms  (Ombudsman's)  Office  is 
increasing  considerably.  Its  cooperation  with  civil  society  has  been  enhanced  substantially, 
along  with  its  involvement  in  promoting  the  rights  of  the  most  vulnerable  groups.  The  law 
establishing  the  Ombudsman  as  the  national  authority  for  combating  discrimination  and 
preventing  torture  and  ill-treatment  was  adopted  in  July.  For  this  law  to  be  properly 
implemented,  the  Ombudsman's  Office  needs  to  be  provided  with  sufficient  financial  and 
human resources to carry out its tasks efficiently.  

The Ministry for Human and Minority Rights is involved in anti-discrimination training and 
awareness-raising. However, its broader role and leadership of the fight against discrimination 
remain  limited.  The  Parliamentary  Committee for Human Rights and Freedoms has stepped 
up  its  activities  and  cooperation  with  civil  society.  Its  influence  nonetheless  needs  to  be 
further strengthened. Courts have started to refer to ECtHR case law. However, protection of 
human  rights  by  law  enforcement  authorities  presents  shortcomings,  particularly  as  regards 
alignment with European standards and ECtHR case law. 

Civil and political rights 

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Montenegro made progress on enhancing media freedom, one of the key priorities set out in 
the Opinion; the legal framework has been improved and a sustainable implementation needs 
now to be ensured. 

Some  progress  has  been  made  on  prevention  of  torture  and  ill-treatment  and  the  fight 
against impunity. The new Law on the Ombudsman has given him competences in preventing 
torture and ill-treatment. Prison staff and members of the security department responsible for 
human  rights  and  resolution  of  incidents  have  undergone  further  training.  However, 
occasional  cases  of  violence  continue  to  be  reported,  in  particular  in  police  stations. 
Processing  of  reported  cases  continues  to  be  slow.  The  number  of  final  judicial  decisions 
remains low. 

for  minor  criminal  offenders.  Preparations 

Some  progress  has  been  made  regarding  the  prison  system.  The  Parliament  enacted 
amendments  to  the  law  on  execution  of  criminal  sanctions  in  July  2011,  providing  for  the 
establishment  of  a  probation  department  within  the  Ministry  of  Justice  and  introducing 
its 
alternative  sanction  measures 
implementation are underway. However, the position of the new Deputy Minister foreseen to 
lead the department has not been filled yet. Some rehabilitation work has been carried out on 
prison  facilities  and  four  new  buildings  were  constructed  and  put  in  use.  Furthermore,  an 
amnesty  law  passed  in  July  last  year  resulted  in  the  reduction  in  the  number  of  detained 
persons. Yet, prison overcrowding remains a problem and conditions, although improving, are 
still not in line with international standards, notably regarding provision of medical treatment 
and family rooms. Detention conditions in Spuz prison have improved, while those in Bijelo 
Polje facility remain an issue of concern. 

for 

Progress has been achieved on access to justice, with the adoption of the Law on free legal 
aid in April. However, the duration of court proceedings remains a cause for concern. 

Freedom of expression is, overall, respected in Montenegro. Progress has been made towards 
enhancing media freedom, one of the key priorities set out in the Opinion. Provisions related 
to defamation and insult have been removed from the Criminal Code. The Supreme Court laid 
down guidelines for the courts regulating the level of pecuniary compensation in defamation 
cases  against  media  in  line  with  the  case  law  of  the  European  Court  of  Human  Rights  and 
organised  related  training  for  judges.  The  number  of  cases  lodged  against  media  for 
defamation  was  reduced.  Courts  have  started  to  use  ECtHR  case  law  to  shape  their  rulings. 
There  have  been  no  further  incidents  of  physical  violence  against  journalists.  High  State 
officials have promoted a more favourable and safer environment for investigative journalism.  

However, there have been a few incidents whereby vehicles belonging to a daily newspaper 
were  set  on  fire.  The  attacks  were  condemned  by  high  state  officials,  but  no  progress  was 
made yet in investigating the case. Furthermore, previous cases of violence against journalists, 
including  a  murder  case,  have  not  yet  been  properly  investigated  and  processed.  Further 
efforts  are  needed  in  this  area.  Sound  implementation  by  all  courts  of  the  Supreme  Court 
guidelines  on  the  treatment  of  defamation  remains  to  be  confirmed,  including  in  the  appeal 
cases pending before the High Court. Compliance of journalists with professional ethics and 
standards  is  still  not  satisfactory,  notably  regarding  respect  of  the  privacy  and  dignity  of 
children in the media. The media self-regulatory body is not functioning. 

The financial  independence  of  the  audiovisual regulator and strengthening  of  its  monitoring 
capacity are still lagging behind, pending full adoption and implementation of administrative 
decisions  and  by-laws.  Efficiency,  professionalism  and  independence  of  the  public 

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broadcaster  have  still  not  been  fully  achieved,  notably  due  to  problems  with  its  financial 
sustainability,  an  insufficiently  merit-based  approach  to  staff  management  and  adequacy  of 
the representation of civil society on its board. 

Freedom  of  assembly  and  association  are,  overall,  respected  in  Montenegro.  Very  good 
progress  has  been  made  on  cooperation  between  State  institutions  and  civil  society 
organisations,  which  is  one  of  the  key  priorities  set  out  in  the  Opinion.  The  institutional 
framework  for  such  cooperation  has  been  strengthened.  The  Council  for  Cooperation  with 
NGOs has started functioning as an independent advisory body to the government on issues 
related to civil society. Contact points for cooperation with NGOs have been established in all 
the ministries and most other State bodies. NGOs are now regularly involved in the legislative 
and  policy-making  or  monitoring  process,  including  in  such  sensitive  fields  as  the  fight 
against corruption or the efficiency of the judiciary. The highest State authorities have regular 
contacts with NGOs, and the attitude of all stakeholders has become open and constructive. 
Efforts to improve cooperation with civil society are also being made at local level. The legal 
and  regulatory  frameworks  for  NGOs'  activities  and  State  financial  support  to  these 
organisations have been improved, notably through the adoption of a new Law on NGOs. The 
register  for  civil  society  organisations  has  been  updated  and  digitalised,  and  it  is  now 
available on the website of the Ministry of Interior. The dialogue with NGOs representing or 
dealing with the most vulnerable groups and gender equality is still not fully satisfactory. No 
amendments  have  been  made  to  the  Law  on  volunteer  work  to  alleviate  the  conditions  for 
voluntary activities in NGOs. 

Regarding freedom of thought, conscience and religion, inter-faith relations have remained 
smooth  overall.  However,  tensions  remain  between  the  Serbian  and  Montenegrin  Orthodox 
Churches  over  canonical  recognition  and  property  issues,  which  have  occasionally  become 
factors in party-political relations. 

Overall,  progress  has  been  made  on  improving  the  legal  and  regulatory  framework  and 
enforcing  civil  and  political  rights  in  Montenegro.  However,  shortcomings  remain  with  the 
fight against ill-treatment and impunity, access to justice and the prison system. The role of 
law enforcement authorities in protecting media freedom remains to be strengthened, in line 
with  European  standards  and  the  case  law  of  the  European  Court  for  Human  Rights.  The 
quality  and  sustainability  of  the  dialogue  between  the  State  institutions  and  civil  society 
representatives, in particular with NGOs dealing with the most vulnerable groups, remain to 
be further strengthened. 

Economic and social rights 

Montenegro has made progress on anti-discrimination, which is a key priority set out in the 
Opinion.  The  legal  and  policy  framework  has  been  strengthened;  however,  implementation 
remains  a  challenge.  There  has  been  some  progress  with  promoting  women's  rights  and 
gender  equality.  Training  for  labour  inspectors  and  trade  unions  has  been  launched,  along 
with public awareness-raising campaigns on gender equality. Activities to empower women in 
employment have been carried out, including in rural  areas. The arrangements  guaranteeing 
equal  earnings  have  been  improved.  Awareness-raising  and  legislative  efforts  have  been 
undertaken to increase women's representation in elected offices at national and local levels.  

Some  progress  has  been  made  also  on  enforcement  of  women's  rights.  The  government 
adopted  in  June  the  Strategy  for  protection  against  domestic  violence  for  the  period  2011-
2015. Awareness-raising campaigns against domestic violence have been carried out. One of 

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the  NGO-run  shelters  for  victims  of  domestic  violence  has  received  State  financial  support 
until the end of 2011 but it is still not clear whether new funds will be allocated for 2012. A 
service has been set up to provide victims with information on procedures and the steps to be 
taken. However, state activities to protect victims of domestic violence are lagging behind. In 
particular,  sustainable  financing  of  shelters,  setting  up  multidisciplinary  support  teams  and 
processing  reported  cases  of  violence  are  not  always  satisfactory.  Violations  of  women's 
employment  rights,  including  to  equal  pay,  are  rather  widespread.  Women  remain  under 
represented in decision making positions in the public and the private sector. 

Some progress has been made on protecting children's rights. The capacities of the Council 
for the Rights of the Child have been strengthened. A network of day-care centres has been 
set  up  for  children  with  disabilities.  Awareness-raising  campaigns  on  children's  rights  have 
been  stepped  up  (e.g.  for  Roma,  Ashkalis  and  Egyptians  and  for  children  with  disabilities). 
However,  institutions  dealing  with  enforcement  of  children's  rights  lack  the  necessary 
capacity and efficiency. Additional efforts are required to secure better inclusion and access to 
those  with  mental  difficulties. 
education  for  children  with  disabilities,  particularly 
Deinstitutionalisation  and  foster  or  community-based  care  remain  at  an  early  stage,  notably 
for children from the Komanski Most institution. Implementation of the strategy on early and 
pre-school  education  and  adoption  of  the  Law  on  juvenile  justice  are  still  pending.  Serious 
violations of children's rights to privacy and dignity by the media continue to occur.  

Progress  has  been  made  with  enforcing  the  rights  of  socially  vulnerable  persons  and/or 
persons  with  disabilities.  The  Law  against  discrimination  against  persons  with  disabilities 
and the Law on professional rehabilitation and employment of persons with disabilities have 
been adopted. Awareness-raising campaigns and training sessions for civil servants have been 
carried out. Inclusive educational activities have been launched, in cooperation with relevant 
international organisations. The network of day-care centres for children with disabilities has 
been extended. Efforts have been made to promote employment of persons with disabilities, 
notably  by  improving  the  legal  framework  and  stepping  up  the  activities  of  employment 
offices.  

However,  the  legal  framework  governing  the  rights  of  persons  with  disabilities  is  still  not 
fully  satisfactory,  both  regarding  positive  action  and  the  sanctions  mechanisms.  Awareness-
raising activities have not been coordinated with representatives of persons with disabilities. 
Access  to  education  and  deinstitutionalisation  of  children,  in  particular  those  with  a  mental 
disability,  is  at  a  rather  early  stage.  Persons  with  disabilities  have  very  limited  access  to 
employment,  including  in  public  institutions.  Operation  of  the  Fund  for  employment  of 
persons with disabilities is not fully satisfactory. Public places remain poorly adapted to the 
needs of these persons. Conditions in the Komanski Most institution are not fully aligned with 
European  and  international  standards,  notably  regarding  accommodation  of  female  inmates 
and  insufficient  separation  of  adult  from  juvenile  patients.  State  assistance  to  persons  with 
disabilities  and  their  primary  carers  remains  to  be  strengthened,  including  the  role  of  social 
care centres in this field.  

As  regards  anti-discrimination  policies,  one  of  the  key  priorities  set  out  in  the  Opinion, 
progress has been made. The Law on the Ombudsman was passed in July; with the new legal 
provisions,  he  has  now  responsibility  over  cases  of  anti-discrimination.  The  commitment  of 
the  government  on  this  issue  has  been  strengthened;  an  advisor  on  human  rights  and  anti-
discrimination was appointed in September in the Prime Minister's office. A Council for the 
protection against discrimination has been established, chaired by the same Prime Minister; it 
is tasked to monitor and coordinate activities on anti-discrimination  by  different authorities. 

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Awareness-raising  campaigns  on  the  inclusion  of  the  most  vulnerable  groups  have  been 
carried out, along with training for law enforcement agencies and civil servants. A reporting 
mechanism  has  been  defined.  However,  effective  implementation  of  the  anti-discrimination 
law  still  remains  a  challenge;  Roma,  Ashkalis  and  Egyptians,  persons  with  disabilities  and 
lesbian,  gay,  bisexual  and  transgender  (LGBT)  persons  are  still  subject  to  discrimination  in 
practice, including on the part of State authorities. The capacity of the Ombudsman's Office to 
effectively  address  cases  of  anti-discrimination  remains  limited,  as  well  as  processing 
discrimination  cases  by  law  enforcement  bodies.  Furthermore,  the  alignment  of  anti-
discrimination law with the acquis remains limited as there are cases in which it still permits 
direct discrimination and it fails to include an obligation for employers to provide reasonable 
accommodation for persons with disabilities. 

As  regards  the  rights  of  lesbian,  gay,  bisexual  and  transgender  (LGBT)  persons,  some 
progress  has  been  made.  The  State  authorities,  notably  at  the  highest  level,  have  shown 
greater openness to  respecting  the rights and situation of this population. Government work 
towards  finalising  an  LGBT  action  plan  has  advanced  and  a  conference  to  promote  anti-
discrimination  was  organised  by  the  government  in  September  in  Podgorica.  The  Police 
Directorate  signed  a  Memorandum  of  Understanding  with  the  relevant  NGO,  in  order  to 
ensure a peaceful rally of the gay population. However, LGBT persons continue to be subject 
to serious threats, while some cases of violence have been reported. Legal processing of cases 
reported  to  the  police  has  not  started.  Involvement  of  the  Ministry  of  Human  and  Minority 
Rights in protecting the rights of LGBT persons is insufficient. Public homophobic statements 
are still being made, including by politicians. 

Some progress has been made as regards labour and trade union rights. The amendments to 
the Law on the Social Council enhanced the independence and administrative, technical and 
coordination capacity of the national Social Council and strengthened the work of the social 
councils  at  municipal  level.  However,  bipartite  social  dialogue  and  the  development  of 
autonomous social dialogue remain insufficient, especially at local level; the Social Council 
secretariat provided by the law has not been set up yet. Yet, implementation and enforcement 
of labour law remains a serious challenge. The law on trade union representativeness is being 
implemented but procedures to check member lists are not in line with European standards on 
data protection. 

Limited  progress  has  been  made  on  property  rights.  The  government  set  up  specific 
commissions to deal with denationalisation issues, but the process of restitution remains very 
slow and needs to be accelerated. Furthermore, the transparency of the procedure is not fully 
ensured. No efforts were made to solve cases of property subject to restitution which has been 
privatised in the meantime. The Parliament adopted in June amendments to the Law on State 
Survey and Immovable Property Cadastre; however, the operations of the land register system 
remain to be improved, particularly regarding the completeness and accuracy of the data and 
its national coverage. No progress has been reported on legal regulation of the restitution of 
property  taken  from  religious  communities  after  1945.  Due  to  several  cases  of  forgery  of 
property  documents,  measures  have  been  taken  to  strengthen  control  over  the  land  registry 
offices.  

Overall, Montenegro has made some progress on improving the legal framework, awareness-
raising  and  training  of  civil  servants  regarding  economic  and  social  rights.  However, 
enforcement  of  these  rights  remains  rather  limited,  in  particular  for  the  most  vulnerable 
groups and gender equality, including the fight against domestic violence. 

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Respect for and protection of minorities, cultural rights 

Some progress has been made in the area of protection of minorities and cultural rights. The 
Law  on  minority  rights  was  amended  to  harmonise  it  with  the  Constitution  and  introduce  a 
guarantee  of  authentic  representation  of  minorities  in  parliament  and  local  assemblies.  The 
amendments  also  set  more  precise  criteria  for  the  composition  and  functioning  of  Minority 
Councils.  Some  progress  has  been  made  as  regards  cooperation  between  the  authorities  and 
Minority Councils, notably in the form of regular meetings with the Ministry of Human and 
Minority  Rights.  Inter-ethnic  relations  are  good,  overall,  including  management  of 
sensitive issues  of  ethnicity  and  language  in  the  population  census.  There  have  been 
occasional tensions, in particular between Montenegrins and Serbians as regards identity and 
language questions.  Yet,  a  broad  consensus  has  been  reached  on  the  use  of  the  official 
to the 
language, and  other 
constitutional  guarantee  to  persons  belonging  to  minority  nations  and  other  national 
communities  to  obtain  education  in  their  own  language.  In  implementing  this  agreement 
attention  should  be  made  to  the  respect  of  the  sensitivities  of  the  various  communities. 
Persons belonging to minorities remain under-represented in public institutions. Functioning 
of  the  Minority  Fund  is  still  not  fully  satisfactory  when  it  comes  to  allocating  funds  and 
monitoring the use made of them. 

in  official  use, in  schools'  curricula according 

languages 

Progress  on  inclusion  of  Roma,  Ashkali  and  Egyptian  (RAE)  persons  still  remains  rather 
limited, despite continuing efforts by the authorities at national and local levels in cooperation 
with  relevant  international  organisations  and  civil  society  representatives.  Efforts  have  been 
made  to  implement  the  strategy  for  2008-2012  to  improve  the  status  of  Roma,  Ashkali  and 
Egyptian population,  with the  support of a  monitoring commission where representatives of 
the RAE society are involved. The State has financed the setting-up of a Roma radio station.  

Progress  has  been  made  to  facilitate  civil  registration  of  RAE  population.  The  amendments 
made  to  the  law  on  citizenship  in  March  2011  have  extended  the  deadline  to  request  the 
Montenegrin  citizenship  by  31  July  2012,  under  easier  conditions,  for  those  who  already 
resided in Montenegro before June 2006. However, lack of proper civil registration continues 
to affect a large number of RAE persons; a number of domiciled RAE persons still have not 
been able to obtain Montenegrin citizenship. Insufficient pre-school and secondary education 
enrolment  and  high  drop-out  rates,  particularly  among  girls,  remain  to  be  addressed. 
Scholarships and other forms of financial support are available for RAE students; however it 
needs to be strengthened and mainstreamed through the relevant strategies, aiming at a better 
coordination  between  the  different  programs  in  support  to  education.  Illiteracy  remains 
widespread.  Discrimination  is  prevalent  in  access  to  employment,  despite  incentives  for 
employers; vocational trainings are offered to RAE job seekers, but they are not fully adapted 
to the need of these persons nor to the opportunities offered by the job market. Recruitment of 
RAE  graduates  in  the  public  sector  is  at  an  early  stage.  Problems  still  exist  with  access  for 
RAE  persons  to  satisfactory  living  conditions  and  to  social  and  health  care.  Efforts  to  fight 
child  begging  and  domestic  violence  in  RAE  families  need  to  be  intensified,  taking  into 
account the gender dimension in the formulation of adequate policies. No progress has been 
achieved regarding political representation of RAE persons.  

Some progress has been made on improving the situation of displaced persons, which is one 
of the key priorities set out in the Opinion. There are currently over 15,000 displaced persons 
originating  from  Croatia,  Bosnia  and  Herzegovina  and  Kosovo  in  Montenegro.  Since 
February 2011, the authorities have stepped up their efforts to give these persons legal status, 
international 
notably  via  awareness-raising  campaigns 

in  cooperation  with  relevant 

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organisations  and  closer  cooperation  with  the  countries  of  origin  to  facilitate  access  by  the 
persons  concerned  to  the  necessary  supporting  personal  documents.  In  July  2011,  the 
government adopted the "Strategy for Durable Solutions of Issues  Regarding Displaced and 
Internally Displaced Persons in Montenegro, with special emphasis on the Konik area". The 
new  strategy  replaces  the  2009  Action  Plan  and  confirms  the  extension  of  the  7  November 
2011  deadline  for  applications  for  foreigner  with  permanent  residence.  The  deadline  for 
adoption  of  the  amendment  to  the  law  is  October  2011.  The  strategy  outlines  action  for 
facilitating access to documents for vulnerable persons. However, mainly due to cumbersome 
procedures,  including  the  costs  of  collecting  supporting  documents  from  their  countries  of 
origin, around 30 % of displaced persons submitted relevant applications and less than 20 % 
of them obtained legal resident status. Smaller numbers have obtained temporary status, while 
around 600 have qualified for citizenship rights. Return to countries of origin continued but 
overall  numbers  remain  limited.  Efforts  to  accelerate  the  process  of  voluntary  return  for 
persons originating from Kosovo have been made, but results remain limited. Further efforts 
are  needed  by  both  Montenegro  and  Kosovo  to  remove  remaining  obstacles  and  facilitate 
return. 

According  to  the  strategy  and  in  line  with  the  extension  of  the  deadline  for  applying  for 
permanent residence, the validity of the decree which currently gives displaced persons access 
to social and economic rights will be extended. The strategy also commits to harmonise basic 
laws with the Law on Foreigners to ensure full access of displaced persons to economic and 
social  rights.  Several  laws  still  have  to  be  adopted  or  amended  to  this  effect.  Currently, 
enforcement of these rights remains insufficient. The new strategy outlines a durable solution 
to the Konik area but implementation is still at a very early stage. 

Overall, interethnic relations remain smooth in Montenegro. However, progress on economic, 
social,  cultural  and  political  inclusion  of  Roma,  Ashkali  and  Egyptian  persons  remains 
limited. 

2.3. 

Regional issues and international obligations 

With  regard  to  cooperation  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY),  in  the  reporting  period  Montenegro  neither  received  requests  for 
assistance nor had cases referred back to its national authorities from the ICTY for possible 
further investigation. Out of the four local war crimes cases in Montenegro, three are in the 
trial  phase  and  one  in  the  pre-trial  phase.  The  government  supported  the  campaign  to 
construct a memorial for victims of the 1992 deportation war crimes. Yet, so far, treatment by 
the Montenegrin court of the case of deportation of Bosniaks in 1992 is not fully aligned with 
ICTY case law. 

Montenegro  has  aligned  with  the  Council  Decision  advancing  universal  support  for  the 
International  Criminal  Court  and  promoting  the  widest  possible  participation  in  it5. 
However,  it  still  maintains  the  2007  bilateral  immunity  agreement  with  the  United  States 
granting exemptions from the jurisdiction of the International Criminal Court. This does not 
comply with the EU common positions on the integrity of the Rome Statute or the related EU 
guiding principles on bilateral immunity agreements. Montenegro needs to align with the EU 
position. 

5 

Council Decision 2011/168/CFSP of 29 March 2011. 

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Significant progress was made with regard to the Sarajevo Declaration Process, launched on 
31 January 2005. Bosnia and Herzegovina, Croatia, Montenegro and Serbia are cooperating 
within this process to find solutions for refugees who were displaced as a result of the armed 
conflicts in the former Yugoslavia between 1991 and 1995. The countries have continued to 
make progress on a number of outstanding issues, such as data exchange, civil documentation, 
public information, pensions and trust fund mechanisms, in the established regional working 
groups.  Following  the  meetings  of  June  and  September  2011,  Bosnia  and  Herzegovina, 
Croatia, Montenegro and Serbia agreed on a number of issues, including on the text of a joint 
declaration to be signed at a ministerial conference in November 2011 in Belgrade. A regional 
multi-year programme aimed at addressing the needs of the most vulnerable refugees, has also 
been  agreed,  together  with  a  donors'  conference  to  be  held  in  the  first  half  of  2012  in 
Sarajevo.  

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of 
Montenegro's  process  of  moving  towards  the  European  Union.  Montenegro  continues  to  be 
strongly involved in developing regional cooperation. Over the reporting period, it chaired the 
Central  European  Initiative  (CEI),  the  South-East  European  Cooperation  Process  (SEECP), 
the  US-Adriatic  Charter,  the  Adriatic-Ionian  Initiative  (AII),  the  Regional  Anti-Corruption 
Initiative (RAI) and the Multinational Advisory Group of the Centre for Security Cooperation. 
Montenegro has also renewed its partner status in the sectoral dialogue in the Organisation for 
Black  Sea  Economic  Cooperation  (BSEC).  Within  the  SEECP,  in  March  Montenegro 
endorsed  the  Regional  Strategic  Document  and  Action  Plan  on  Justice  and  Home  Affairs 
2011-2013. Montenegro is also continuing to participate actively in the Regional Cooperation 
Council  (RCC),  the  Central  European  Free  Trade  Agreement  (CEFTA),  the  Energy 
Community  Treaty,  the  European  Common  Aviation  Area  Agreement,  and  the  EU  Strategy 
for  the  Danube  region.  Montenegro  continues  actively  to  support  the  Igman  initiative  on 
reconciliation,  which  brings  together  NGOs  from  Bosnia  and  Herzegovina,  Croatia,  Serbia 
and Montenegro. Montenegro supports the RECOM initiative. 

As  regards  regional  judicial  and  police  cooperation,  Montenegro  has  ratified  and  started  to 
implement extradition agreements with Croatia and Serbia covering own nationals involved in 
serious  and  organised  crime.  An  equivalent  agreement  was  also  signed  with  the  former 
Yugoslav  Republic  of  Macedonia.  Agreements  on  police  cooperation  were  signed  with 
Croatia  and  Serbia.  Montenegro  ratified  the  agreements  with  Bosnia  and  Herzegovina  on 
mutual legal assistance in civil and criminal matters and on mutual recognition of decisions in 
criminal matters.  

Montenegro  continues  to  maintain  good  bilateral  relations  with  other  enlargement 
countries and the neighbouring EU Member State Italy. However, delimitation of borders 
with Croatia, Serbia, Bosnia and Herzegovina and Kosovo remains pending. The agreement 
on  dual  citizenship  with  the  former  Yugoslav  Republic  of  Macedonia  remains  the  only 
agreement of this kind with another country in the region. 

Relations with Albania have remained good. Cooperation between the two countries focused 
on economic and trade relations.  

Relations with Bosnia  and Herzegovina have continued to improve. Three  agreements were 
signed  relating  to  border  crossings  for  local  and  international  transport  and  defence. 
Agreements on cooperation in the field of tourism and exchange of data with regard to social 
insurance entered into force. 

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Montenegro continued to maintain good relations with Croatia. The two countries signed an 
agreement  on  the  extradition  of  citizens  sentenced  for  corruption  and  organised  crime.  A 
number of technical meetings have been held to prepare the joint submission of the Prevlaka 
border delimitation to the International Court of Justice, but no substantial progress has been 
achieved to date. The temporary agreement continues to function smoothly, but a permanent 
solution is necessary. 

Relations  with  the  former  Yugoslav  Republic  of  Macedonia  remained  good.  Bilateral 
agreements were signed on economic and social cooperation and on cooperation in the fields 
of education, science and technology. Agreements on bilateral investment protection and on 
coordination of social security systems were concluded. Furthermore, the two countries have 
also  signed  an  agreement  on  extradition  of  citizens  involved  in  organised  crime,  corruption 
and money laundering. 

Relations with Serbia remained good, overall. Cooperation is developing, in particular in the 
economic,  environmental  and  scientific  fields.  Serbia  opened  a  consulate-general  in  Herceg 
Novi. However, some issues concerning the dissolution of the State Union still remain to be 
solved, such as finalisation of the distribution of assets and liabilities and citizenship rights, 
particularly concerning dual citizenship.  

Montenegro continued to maintain good relations with Kosovo. A bilateral agreement relating 
to registration of displaced persons from Kosovo living in Montenegro entered into force on 
29 June. A readmission agreement was signed on the same day. Yet, the demarcation process 
has not progressed, notwithstanding the existence of a commission specifically responsible for 
it. The issue of explicit recognition of the Montenegrin minority in Kosovo remains pending.  

Relations  with  Turkey  are  good.  Turkey  provided  humanitarian  assistance  to  Montenegro 
following the floods that affected the country in December 2010. 

Overall,  Montenegro  continues  to  satisfy  the  Stabilisation  and  Association  Process 
conditionality  on  cooperation  with  the  ICTY  and  regional  cooperation,  despite  some 
outstanding bilateral issues. 

3. 

ECONOMIC CRITERIA 

The Commission's approach in its examination of economic developments in Montenegro 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  has  been  playing  an  active  part  in  the  EC  fiscal  surveillance  and  reporting 
arrangements applying to potential candidate countries since 2006. It participated for the first 
time in the EU multilateral fiscal surveillance procedure for candidate countries, including the 
ministerial dialogue with the ECOFIN Council in May 2011. The country's 2011  Economic 
and  Fiscal  Programme  presented  a  cautious  macroeconomic  baseline  accompanied  by  an 
expenditure-based fiscal consolidation framework, plus a wide structural reform agenda that 

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was consistent with past priorities. Meanwhile, a domestic political consensus was maintained 
on the fundamentals of a market economy. Overall, economic policy remained consistent. 

Macroeconomic stability 

The economy started to recover in 2010 from the effects of the crisis, growing by 2.5%, after 
contracting  by  5.7%  a  year  earlier.  The  first  signs  of  revitalisation  appeared  in  the  second 
quarter of 2010 after 18 months of continuous contraction. Growth was driven by net exports, 
private consumption and changes in inventories. From the supply side, the turn around of the 
global  metal  market  gave  an  additional  boost  to  local  industries,  raising  total  industrial 
production by 17.5% in 2010. Manufacturing output accelerated further by 9.6% on average 
during the first seven months of 2011. However, the overall industrial production rose much 
more modestly, by 0.2% year-on-year in July, as the utility sector output still remained below 
previous year level by -30%. The construction sector accelerated rapidly in the last quarter of 
2010, with the value of performed construction works expanding by 13% in 2010, compared 
with the contraction of 21% recorded a year earlier. The value of finalised construction works 
expanded  in  the  first  six  months  of  2011  by  30.8%  year-on-year.  Retail  sales  which  had 
shown a modest increased in 2010 (1.6%) increased further during the first half of 2011 by 
14.3% year-on-year. Average per-capita income in purchasing power standards amounted to 
40% of the EU-27 average in 2010, down from 41% in 2009. Overall, a modest recovery of 
the economy is underway. 

While domestic demand remained subdued in 2010, industry's recovery contributed to a 20% 
increase of total merchandise exports, with exports of aluminium accounting for 41% of this 
increase. At the same time, merchandise imports remained virtually flat. As a result, the large 
trade  deficit  dropped  to  42%  of  GDP  in  2010,  from  46%  a  year  earlier.  After  a  successful 
tourism  season  the  surplus  in  services  increased  by  16%,  supporting  the  contraction  of  the 
current  account  deficit  in  2010  down  to  a  still  very  high  25%  of  GDP,  from  30%  a  year 
earlier. The current account deficit contracted further during the first half of 2011 by 12.5% 
year-on-year to 22.4% of GDP in annualised terms. The improvement was mainly driven by a 
widening surplus on the services and income accounts. In 2010 the current account deficit was 
largely covered by net FDI and net portfolio investments, contributing 17% and 6% of GDP 
respectively. In the first half of 2011 net FDI inflows contracted by 45% year-on-year to 13% 
of GDP or 60% of the current account deficit. The surge in net portfolio investments during 
the  same  period  contributed  with  additional  11%  of  GDP,  financing  40%  of  the  deficit. 
Overall,  despite  the  continuous  expansion  of  merchandise  exports,  these  still  remain  below 
pre-crisis levels. 

Unemployment in 2010 remained high at 19.7%, up from 19.1% a year earlier. Employment 
contracted by 7.1% in the same period. The unemployment rate continued growing in 2011. It 
reached  19.9%  in  the  second  quarter  of  2011.  According  to  the  Agency  for  Employment 
(AEM),  recorded  employment  improved  during  the  first  half  of  2011;  increasing  by  6.6% 
year-on-year,  while  job  vacancies  increased  by  18%  year-on-year.  The  AEM  registered 
unemployment  rate  decreased  to  11%  in  July  2011,  down  from  12.2%  at  the  end  of  2010. 
There  remain  significant  discrepancies  in  labour  statistics  between  Labour  Force  Surveys 
(LFS) and the Agency for Employment (AEM) administrative records. Further efforts are also 
needed to address the high level of informal employment, estimated by the AEM at 20% of 
total  employment  in  2010.  Overall,  the  labour  market  deteriorated  during  2010,  but  shows 
mixed signs of improvement in 2011. 

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Consumer prices remained subdued during 2010, thanks to a reduction in food prices, and the 
reduction of annually adjusted electricity prices. Headline inflation averaged at 0.5% in 2010 
and picked up slightly to reach 0.7% year-on-year in December. Inflation accelerated further 
in 2011, averaging 2.9% on the first seven months of the year driven by food, transport, health 
and  communication  prices,  as  well  as  the  increases  in  excise  rates  on  alcohol  and  tobacco. 
Overall, price stability was generally maintained amid recent external pressures. 

Unilateral  euroisation  implies  that  there  is  only  limited  scope  for  the  use  of  domestic 
monetary  policy  instruments.  The  Central  Bank's  capabilities  as  lender  of  last  resort  are 
restricted and the ultimate stability of the financial system relies on its banks' supervision and 
on  the  soundness  of  the  government  fiscal  policy.  The  banking  system  seems  to  have 
stabilised  somewhat  in  2010  and  the  Central  Bank  has  been  strengthening  its  supervisory 
capacities. Bank deposits contracted by 1.9% in 2010 but they recorded positive growth rates 
during  the  first  half  of  2011.  However,  the  aggregated  level  of  bank  loans  remained  in 
negative  territory  during  the  same  period,  contracting  by  12.4%  year-on-year  at  the  end  of 
June 2011. The seven mid-sized and smaller banks recorded 12% annual credit growth in the 
first half of 2011, while the four largest registered 32% contraction. Overall, the largest banks 
could  not  support  the  economy  by  providing  new  credits  as  they  were  pursuing  their 
consolidation. 

In  2010,  the  consolidated  budget  deficit  stood  at  5%  of  GDP,  including  tax  arrears  worth 
some  2%  of  GDP.  Moreover,  the  level  of  contingent  liabilities  due  to  extended  guarantees 
represented  10.3%  of  GDP  at  the  end  of  2010.  Budget  revenues  totalled  42%  of  GDP.  The 
effects of the crisis translated into the contraction of 1.8% in VAT revenues and tax receipts 
down  by  5.1%,  plus  the  sharp  63%  contraction  of  corporate  income  tax  owing  to  the  weak 
financial  position  of  businesses.  Revenues  from  personal  income  tax,  social  security 
contributions and local taxes exceeded the plan. Public expenditures reached 45% of GDP, as 
gross wages increased by 2.4% and social protection transfers (mostly pensions) by 4%, while 
subsidies  contracted  by  12%  compared  with  the  planned  spending  level.  Implementation  of 
capital  expenditure  remained  flat  and  lower  than  planned  as  the  highway  works  were 
postponed.  The  consolidated  deficit  reached  1.6%  of  GDP  in  the  first  half  of  2011.  Public 
debt  without  state  guarantees  accounted  for  41%  of  GDP  in  2010  as  against  38%  a  year 
earlier.  The  increase  was  a  consequence  of  the  rapid  expansion  of  the  external  debt,  which 
accounts  for  72%  of  the  total.  The  public  debt  increased  further  following  the  new  issue  of 
Eurobonds in April 2011, reaching 45% of GDP by the end of June. Overall, past efforts at 
expenditure  control  have  resulted  in  large  arrears  accumulation  and  led  to  substantial 
contingent liabilities. 

The  global  economic  and  financial  crisis  has  posed  a  challenge  to  Montenegro's  policy 
framework.  The  fact  that  Montenegro  is  using  the  euro  as  its  sole  legal  tender,  and  has 
therefore abandoned standard monetary policy tools, leaves fiscal policy as the main effective 
policy  instrument.  The  quality  of  public  finances  was  improved  with  the  adoption  of 
important  structural  reforms,  such  as  the  public  pension  system,  the  streamlining  of  public 
employment, or a new financing scheme for local self-governments, although the full effect of 
these  reforms  will  take  still  some  time  to  get  through.  The  Montenegrin  economy  remains 
constrained  by  limited  diversification  and  competitiveness.  Overall,  despite  the  implicit 
constraints  in  the  form  of  a  limited  set  of  policy  tools,  the  overall  macroeconomic  stability 
improved compared to 2010. 

Interplay of market forces 

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The  majority  of  state  ownership  in  the  economy  remains  predominantly  concentrated  in 
transport (rail, port, airline and airports), and to a lesser extent in the metal and electric power 
industries,  as  well  as  in  a  few  miscellaneous  companies.  In  2010,  only  maritime  operator 
services  of  the  port  of  Bar  were  successfully  privatised,  as  well  as  some  property  of  tourist 
company Budvanska Rivijera and the Bijela shipyard. The privatisation process suffered from 
the  global  crisis.  Some  companies  repeatedly  failed  to  attract  interest  from  investors  (in  the 
case of the port container terminal and rail cargo due to the need for prior reconstruction of 
the railways) or went into bankruptcy proceedings (the steel mill and the tobacco factory). In 
August  2011  Italian  power  utility  A2A,  which  owns  44%  of  Montenegro  state  power 
company EPCG, waived its right to acquire majority ownership after the government reversed 
a 2009 decision to majority-privatise the company. Overall, majority state ownership remains 
concentrated in network industries. 

Only  a  limited  number  of  products  are  currently  subject  to  administrative  price  control, 
including  medicines,  bread  and  fuels.  Meanwhile  the  Energy  Regulatory  Agency  (ERA) 
establishes  electricity  prices  in  relation  to  production  cost  thresholds.  In  addition,  local 
authorities  may  control  the  prices  of  certain  utility  services  (water  supply,  sewerage,  refuse 
collection). In the absence of controls on the price of food other than bread, the government 
approved the payment of two one-off cash benefits in 2011 (totalling € 2 million) targeting the 
most  vulnerable  social  groups.  Administered  prices  accounted  for  10.7%  of  the  harmonised 
index of consumer price (HICP) in 2010. Overall, the influence of the state in price dynamics 
remains limited. 

Market entry and exit 

In 2010 there were 3,695 new companies registered in Montenegro, which is an increase of 
6.8% in the number of new registrations compared with 2009. Improvement in market entry 
was  achieved  with  the  establishment  in  May  2011  of  a  'one-stop  shop'  for  new  company 
registration  and  simultaneous  tax  and  customs  listing  instead  of  having  to  deal  with  three 
different institutions and procedures as was previously the case. So far, registration is possible 
at  the  central  registry  of  the  commercial  court,  but  not  yet  at  the  regional  units  of  the  tax 
administration. Additional support to the business environment was provided in the form of 
amendments  to  the  Law  on  Administrative  Fees  adopted  in  March  2011,  which  reduced  or 
simply abolished payment for a series of administrative and customs documents. The number 
of  bankruptcy  cases  in  2010  fell  to  2,196,  compared  to  6,150  a  year  earlier.  A  new 
Bankruptcy  Law  came  into  force  in  January  2011.  The  new  law  significantly  shortens 
deadlines and enables submitting a legally enforceable restructuration plan together with the 
bankruptcy petition, against which creditors' claims are to be settled. Another novelty is the 
possibility  for  the  debtor's  company  to  be  sold  as  a  single  legal  entity,  which  increases  its 
chances of survival. Overall, market entry and exit mechanisms were further improved. 

Legal system 

For the acquisition of real estate the  Property Relations Law and the entry into force of the 
Stabilisation and Association Agreement provide the same treatment to both EU citizens and 
nationals. The Law on State Surveying and Immovable Property Cadastre was adopted by the 
parliament  in  June  2011.  The  main  improvement  concerns  the  shortening  of  deadlines  for 
registration  of  immovable  property  to  eight  days  compared  with  thirty  days  before,  while 
authorities  are  obliged  under  the  new  law  to  make  a  decision  within  fifteen  days  of  the 
submission  of  the  request.  Meanwhile,  the  modernisation  of  the  current  cadastre  register 

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continues  with  the  addition  of  a  newer  digitalised  information  system.  Overall,  property 
registration procedures continue to improve. 

In  July  2011  the  parliament  adopted  the  Law  on  Enforcement  and  Securing  of  Claims.  The 
new law shortens delays in procedure and recognises mortgage contracts and notarial deeds as 
enforceable  documents.  It  also  allows  enforcement  against  immovable  property,  including 
their  public  sale  within  a  limit  of  50%  of  its  market  value.  Enforcement  against  monetary 
claims  is  also  tightened  up.  Although  the  strategic  and  legislative  framework  to  combat 
corruption  has  been  strengthened,  its  implementation  remains  uneven  and  corruption 
continues  to  be  a  cause  for  concern.  Overall,  the  new  law  on  Enforcement  and  Securing  of 
Claims laid the basis for swifter enforcement of contracts. However, weaknesses in the rule of 
law and prevalent corruption continue to have an adverse effect on the business environment 
and remain a major challenge. 

Financial sector development 

Total  bank  loans  accounted  for  71%  of  GDP  in  2010,  compared  to  80.4%  the  year  before. 
Loans to the private sector remained constant at 98% of total credit. The ownership structure 
is  largely  dominated  by  foreign  capital  (83%  of  total),  followed  by  private  domestic  shares 
(15%) and state ownership (2%). The banking sector remains highly concentrated, with four 
banks  accounting  for  68%  of  total  assets.  Financial  intermediation  remained  subdued  until 
May 2011 when two of the largest banks recovered from a long period of credit inactivity. In 
the case of Crnogorska Komercijalna Banka (CKB) it had to clearout its balance sheet, while 
Prva Banka's lending was banned by the Central Bank for a period of two and half years until 
the  bank  was  recapitalised  and  improved  its  liquidity.  The  Central  Bank  has  remained  very 
active,  developing  secondary  legislation  with  a  view  to  strengthening  the  resilience  of  the 
system  to  future  shocks.  In  2011  it  adopted  several  decisions,  namely  on  open  market 
operations,  on  conditions  for  lending  to  banks  to  maintain  their  liquidity,  on  approving  last 
resort financial aid to banks, on international reserves management,  on  the establishment of 
the  Investment  Committee,  on  capital  adequacy  and,  on  mandatory  reserves.  Overall, 
financial legislation improved. 

The interest rate spreads have been widening, as lending rates have been rising (from 9.63% 
in  2010  up  to  9.72%  in  June  2011)  while  deposits  rates  contracted  from  3.26%  in  2010  to 
3.06% in June 2011, the latter trend reflecting an overall improvement of banks' liquidity. The 
capital  adequacy  ratio  (CAR)  rose  from  11%  in  2009  to  15.9%  in  2010  and  15.3%  in  June 
2011,  remaining  above  the  minimum  legal  threshold  of  10%.  However,  the  share  of  non-
performing loans (NPL) raises concerns. It has been increasing, reaching 25.3% of total loans 
in June 2011. Some banks still recorded losses and weak profitability. In the first half of 2011 
the aggregated loss of banks totalled € 9 million, compared to 47 million loss a year earlier. 
At the end of 2010, the combined return on average assets (ROA) was -2.7% and the return on 
average equity (ROE) -27.3%. During the first half of 2011 the situation improved relatively, 
recording  ROA  of  -0.6%  and  ROE  of  -6.3%  by  the  end  of  June.  Overall,  the  financial 
situation of the banking sector and the increasing share of non-performing loans continued to 
reflect the fallout of the crisis, and remain a cause for concern. 

The leasing market remained virtually stagnant during 2010 as the value of their contracts was 
less than 0.9% of GDP compared with 1.1% a year earlier. Leasing showed signs of recovery 
in the first half of 2011, expanding by 3.3% year-on-year. The insurance market recorded a 
new entrant in 2011, raising the number of active companies in the country to 12. However, 
the  sector  still  remains  highly  concentrated,  with  one  company  accounting  for  53%  of  total 

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premiums.  Non-life  insurance  dominates  the  market  (86.6%  of  the  total  in  2010),  of  which 
compulsory motor vehicle insurance accounts for 56%. In 2010, the combined turnover of the 
two stock exchanges experienced a sharp contraction of 86% year-on-year, mostly as a result 
of the high base level following the partial privatisation of the electric power company a year 
earlier.  In  October  2010  the  two  stock  exchanges  merged  to  form  the  Montenegro  Stock 
Exchange, operating as a single entity from January 2011 onwards. The parliament adopted a 
law  on  takeover  of  joint  stock  companies  in  March  2011  to  improve  the  protection  of 
shareholders,  while  streamlining  takeover  procedures.  In  June  2011,  the  Securities 
Commission issued the first licence to a domestic brokerage company for margin trading. The 
stock market turnover further declined in 2011, contracting by 31% year-on-year in August. 
Overall,  non-banking  financial  institutions  continued  to  play  a  limited  role  as  a  source  of 
private sector financing. 

3.2. 

The  capacity  to  cope  with  competitive  pressure  and  market  forces  within  the 
Union 

Existence of a functioning market economy 

The  financial  sector  has  still  to  recover  from  the  fallout  of  the  crisis.  The  persistence  of 
external  and  internal  imbalances  and  the  risks  as  regards  public  finances  from  contingent 
liabilities  present  a  challenge  for  the  economy.  Unemployment  remained  high.  The 
stabilisation measures taken, coupled with a prudent fiscal stance, have reinforced the overall 
macroeconomic  stability.  Overall,  market  mechanisms  endured  the  global  turmoil  but 
potential vulnerabilities remain. 

Human and physical capital endowment 

The reform of the education and training system remains very important given the mismatch 
of skills with the labour market and the need to improve competitiveness. Reforms have been 
focused  on  vocational  education  and  training  (VET)  following  the  adoption  of  the 
amendments  to  the  Law  on  VET  in  July  2010.  Several  education  programmes  have  been 
prepared and updated: one for lower vocational education, 31 for three-year VET, 65 for four-
year secondary VET and one for higher VET. Furthermore, social partners (trade unions and 
employers association) as well as the chamber of commerce and the employment agency have 
been  also  more  involved.  In  order  to  align  market  needs  more  closely  with  academic 
curricula, three sectoral commissions (construction, agriculture and tourism) were established 
in  2010,  tasked  with  proposing  the  development  of  VET  qualifications.  Overall,  education 
reforms continued. 

Almost 70% of the needs for seasonal employment are covered by foreign workers. In June 
2011 the parliament amended the Law on Employment and Work of Foreigners, simplifying 
administrative  procedures  for  contracting  foreign  labour.  Active  employment  measures 
carried out during 2010 included programmes for education and professional training, public 
works  programmes,  credits  for  self-employment,  as  well  as  other  activities  such  as  career 
guidance,  specialisation  courses,  etc.  Overall,  progress  was  recorded  in  the  form  of  an 
improvement in several aspects of the labour market, but efforts should be sustained in order 
to increase labour participation rates. 

Half  of  total  public  investments  in  physical  capital  are  allocated  to  the  national  roads 
programme, representing some 2% of GDP in both 2009 and 2011. Investments on railways 
infrastructure  (around  1%  of  GDP  per  year)  are  largely  concentrated  in  reconstruction  of 

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existing sections, mostly financed from loans from International Financial Institutions. Total 
public investments in airports, telecommunications and the port of Bar represented less than 
0.3%  of  GDP.  As  regards  telecommunications,  broadband  connections  rose  by  4%  during 
2010, raising the penetration ratio to 35%. The incumbent Crnogorski Telekom enjoys a 98% 
share of the fixed telephony market, and m:tel 2%. In May 2011, the government adopted the 
plan  for  the  development  of  business  zones,  enabling  municipalities  to  create  communally 
equipped areas for the establishment of entrepreneurial activities. Overall, the country needs 
to invest further in modernisation and the development of human capital and infrastructures in 
order to support domestic companies in their efforts to expand into foreign markets. 

Sectoral and enterprise structure 

Two  of  the  main  domestic  manufacturing  industries  (aluminium  and  steel)  have  launched 
major  restructuring  programmes  in  the  past  few  years.  However,  although  the  KAP 
aluminium factory managed to implement its expensive social programme and return to pre-
crisis  production  growth  rates,  the  ironworks  company  Zeljezara  Niksic  succeeded  in 
modernising  its  working  capital  but  failed  to  agree  on  the  implementation  of  the  social 
programme  after  two  years  of  negotiations  with  the  trade  unions.  This  led  to  insolvency 
proceedings  in  April  2011  and  the  immediate  implementation  of  a  social  programme  for  a 
majority of its 1,410 employees (by the end of August some 750 of them had already received 
redundancy payments). The company has presented a restructuration plan to be decided upon 
by  the  commercial  court  in  early  October.  As  for  network  industries,  following  the 
unbundling of the operations and infrastructure services in the Port of Bar and the railways, 
reforms  are  currently  focused  on  implementing  their  social  programmes  ahead  of  a  new 
attempt  at  privatisation.  In  the  energy  sector,  the  power  grid  operator  (CGES)  increased  its 
share  capital  in  January  2011  with  the  entry  of  an  Italian  investor  providing  a  22%  stake 
whereas state ownership decreased to 55%. Reforms in the telecommunications industry were 
focused  on  technological  upgrading.  Overall,  the  ongoing  restructuring  in  several  key 
industries established the basis for further investments. 

The  contraction  of  employment  recorded  during  2010  affected  mostly  the  manufacturing, 
construction  and  extraction  industries  as  well  as  agriculture.  As  a  result,  the  share  of 
employment  in  industry  and  construction  contracted  to  20%  in  2010  from  21%  of  total 
employment a year earlier and the primary sector to 6.2% from 6.5% in 2009. Meanwhile, the 
share of employment in services increased further to 74% in 2010 compared to 73% in 2009. 
The informal sector, fuelled by weaknesses in tax and expenditure policies, as well as in law 
enforcement,  including  the  fight  against  corruption,  remains  large.  Overall,  the  sectoral 
structure of the economy continued to shift towards services. The informal sector presents an 
important challenge. 

Data  from  the  Tax  Administration  show  that  there  were  27,515  SMEs  active  in  2010,  of 
which  micro-enterprises  are  the  predominant group, representing 53% of the total, followed 
by  entrepreneurs  (including  those  registered  as  self-employed)  with  39%,  small  enterprises 
with 6% and medium-sized enterprises with 2%. SMEs account for 73% of total employment 
in the country, although the average size of these companies is quite small as most of them 
take  on  fewer  than  10  workers.  Their  share  of  total  exports  remains  slightly  above  30%  of 
total  exports.  Given  that  hey  find  access  to  credit  more  difficult,  the  public  Investment 
Development Fund started in 2010 to support SMEs by means of bank guarantees and credits 
co-financed with commercial banks. It facilitated 107 loans in 2010 for a total of €9 million, 
plus  an  additional  €3  million  from  associated  commercial  banks.  The  Fund's  activities  have 
been extended in 2011 by a €5 million factoring facility, the establishment of a guarantee fund 

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covering up to 50% of SMEs loans with commercial banks, as well as a budget of €3 million 
to support agriculture businesses. These subsidised loans for agriculture have a proportional 
larger  impact  in  a  sector  that  attracted  but  0.4%  of  total  commercial  loans  in  2010  (or  €9 
million). The weak quality of credit portfolios of the domestic banks and risk aversion has led 
to persistently high lending interest rates (9.2% on average). The high cost of finance remains 
a  major  obstacle  to  setting  up  and  developing  companies.  Overall,  a  significant  share  of 
entrepreneurial activities remains concentrated in non-tradable services. 

State influence on competitiveness 

Total State aid granted in 2010 amounted to €72 million, or 2.3% of GDP. Of this, around two 
thirds  were  allocated  to  the  aluminium  factory  KAP.  The  Niksic  steelworks  received 
additional 7%, but the call for insolvency proceeding in 2011 put an end to the subsidies to 
this company. Other companies, like the tobacco factory, the daily newspaper Pobjeda or the 
national TV broadcaster, received each less than 2% of this aid. Following the surge in global 
oil  prices,  the  government  also  introduced  in  May  2011  a  temporary  scheme  for  the  partial 
refund  of  excise  duties  on  fuel  for  agriculture  machinery,  construction,  transport  and  food 
processing  industries.  Overall,  direct  State  aid  has  been  declining,  although  the  sizeable 
amount of state guarantees cumulated in the last years remain a matter of concern. 

Economic integration with the EU 

Openness  of  the  economy,  defined  as  the  total  value  of  exports  and  imports  of  goods  and 
services,  increased  slightly  in  2010  to  99%  of  GDP.  The  main  foreign  destination  for 
domestic products remains the EU, which accounted for 56% of total merchandise exports in 
2010 (up from 48% in 2009), followed by CEFTA  countries with 34% (down from 40% in 
2009).  Yet,  most  of  Montenegro's  imports  originated  from  neighbouring  CEFTA  countries, 
with 40% of total trade in, compared with 38% from the EU. Import shares from both regions 
remained practically unchanged in 2010 compared with the previous year. Investments from 
the EU-27 represented 50% of total FDI inflows in 2010, compared with 80% a year earlier, 
largely reflecting the deal by the electric power company with Italian investors in 2009. Real 
effective exchange rate (REER) estimates based on inflation (CPI) suggest that, following a 
period  of  substantial  appreciation  in  2009,  international  competitiveness  stabilised  during 
2010. Overall, trade openness and integration with the EU remain substantial. 

4. 

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

This section examines Montenegro's ability to assume the obligations of membership – that is, 
the  acquis  as  expressed  in  the  Treaties,  the  secondary  legislation  and  the  policies  of  the 
Union.  It  also  analyses  Montenegro's  administrative  capacity  to  implement  the  acquis.  The 
analysis  is  structured  in  accordance  with  the  list  of  33  acquis  chapters.  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. 

Chapter 1: Free movement of goods 

There  has  been  no  progress  in  the  area  of  general  principles.  Montenegro  needs  to  ensure 
that its legislation is compatible with Articles 34 to 36 of the Treaty on the Functioning of the 
EU and the related case law of the European Court of Justice. 

In the case of horizontal measures, some progress can be reported.  

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In the area of standardisation, some progress has been made as regards adoption of European 
standards (ENs). By the end of August 2011 the Institute for Standardisation of Montenegro 
(ISME)  had  adopted  6,280  ENs  as  Montenegrin  standards.  A  National  Standardisation 
Strategy has been drafted but not adopted. The capacity of the ISME is gradually improving, 
but  it  is  still  hampered  by  limited  resources.  Its  annual  budget  totals  € 0.5 million  and  its 
human  resources  remain  limited.  Montenegro  has  not  yet  sealed  its  membership  of  the 
European Telecommunications Standards Institute (ETSI). As an EU candidate country, it still 
remains an affiliated member of the European Committee for Standardisation (CEN) and the 
European Committee for Electrotechnical Standardisation (CENELEC). 

The  ISME  has  established  two  technical  committees  on  automotive  fuels  in  May  and 
Eurocodes  in  construction  in  July.  More  efforts  will  be  required  in  order  to  convert  the 
working  groups  on  aluminium,  food  safety,  concrete,  energy  efficiency,  occupational  health 
and safety and human resources management into viable technical committees. The first step 
to connect ISME IT system with CEN/CENELEC system was completed, allowing ISME to 
report in an automated and integrated way on the adoption of the standards. As a result, data 
management and data quality at the ISME have improved significantly, with an error rate of 
less  than  0,5%  detected  when  importing  new  data  fields  from  the  CEN.  However,  the 
administrative capacity of the ISME needs to be further strengthened with a view to ensuring 
the institute's self-funding and sustainability and reinforcing its role in meeting the objectives 
of the national strategy.  

Limited progress can be reported on conformity assessment. Further harmonisation of the Law 
on technical requirements for products and conformity assessment with the general principles 
of  the  new  approach  and  the  horizontal  acquis  of  2008  is  required.  So  far,  very  few 
conformity assessment bodies (CABs) have shown interest in becoming designated and, in the 
future, notified CABs.  

Good progress can be reported in the field of accreditation. The number of accredited bodies 
has increased to 17. However, only two of them (related to lifts and construction products) are 
operating in the New Approach fields. The administrative capacity of the Accreditation Body 
of Montenegro (ATCG) is improving. In November 2010, the ATCG hosted the 26th General 
Assembly  of  the  European  cooperation  for  Accreditation  (EA).  It  still  needs  to  establish  a 
public  body  representing  the  interests  of  the  various  stakeholders  and  to  adopt  the  national 
strategy for accreditation.  

There  has  been  progress  on  metrology.  The  administrative  capacity  of  the  Bureau  of 
Metrology (BoM) has been strengthened. In 2010, the BoM moved to new premises, which 
were  refurbished  to  meet  international  requirements  for  metrology  laboratories.  New 
equipment has enhanced the testing capacity of the laboratories for mass, length, temperature, 
pressure,  volume,  electrical  quantities,  time  and  frequency  and  for  controls  on  pre-packed 
products. However, constant re-calibration needs to be ensured and the required resources to 
be secured by the government. The broken metrological traceability chain was re-established 
in the fields of mass, length and pressure, temperature and electrical quantities. The BoM has 
launched  pilot  on-the-ground  inspections  (e.g.  on  taximeters  and  weighing  instruments). 
However,  human  resources  remain  very  limited.  The  April  2010  organisation  chart  for  the 
BoM envisages 67 posts, but only staff of 25 is currently employed. Additional resources will 
be  required  to  install  an  integrated  IT  system  to  cover  all  the  activities  of  the  BoM.  The 
Bureau also needs to step up its efforts to obtain national accreditation for its laboratories. The 
BoM  became  a  member  of  the  European  Association  of  National  Metrology  Institutes 
(EURAMET) in June.  

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Some  progress  can  be  reported  on  market  surveillance.  A  Coordination  Body  for  Market 
Surveillance  composed  of  representatives  of  several  inspectorates  was  set  up  at  the  end  of 
2010 and a process of setting up a unified market inspection has been launched. The Law on 
general  product  safety  and  the  Law  on  technical  requirements  for  products  and  conformity 
assessment will need to be revised in view of full alignment with Regulation (EC) 765/2008.  

In  March  2011,  the  national  system  for  exchanges  of  information  on  dangerous  products 
(national  RAPEX)  was  tested  on  the  first  notification  of  a  dangerous  product.  The  IT 
application  for  the  Market  Inspectorate  is  now  operational  but  will  need  to  be  upgraded  for 
use by the whole market surveillance system. A new proactive approach including guidelines 
for market surveillance was developed and tested by pilot inspections of selected products in 
the first half of 2011.  

No progress can be reported in the 'Old Approach' product legislation. 

More  efforts  will  be  required  to  transpose  and  implement  the  eleven  'New  and  Global 
Approach' directives, which are currently in the pipeline, i.e. transposition of the acquis on 
construction  products,  machinery,  low-voltage  equipment,  electromagnetic  compatibility, 
radio  equipment  and  telecommunications  terminal  equipment,  recreational  craft,  lifts, 
common  provisions  for  both  measuring  instruments  and  methods  of  metrological  control, 
non-automatic  weighing  instruments,  pressure  equipment  and  noise  emissions  from  outdoor 
equipment.  Transposition  of  the 
'New  and  Global  Approach'  product  legislation  is 
substantially delayed by the lack of clear ownership and the wide division of responsibilities 
across  different  ministries.  Coordination  mechanisms  both  at  inter-institutional  level  and 
within the Ministry of Economic Affairs need to be strengthened. 

Regarding procedural measures, no progress was made.  

Conclusion 

Montenegro has made some progress in the field of free movement of goods and preparations 
in  this  area  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  the  EU  legislation.  Considerable  additional  efforts  are 
also needed to start transposing the product-specific acquis into Montenegrin legislation.  

4.2. 

Chapter 2: Freedom of movement for workers 

There has been some progress in the area of access to the labour market. A Law amending 
the  Law  on  employment  and  work  of  foreigners,  aiming  at  simplifying  existing  procedures 
and reducing requirements for issuing work permits, was adopted in June 2011. However, to 
comply with EU law on free movement of workers, EU nationals may not be subject to any 
work permit requirement as from accession.  

There has been some progress regarding preparations for future participation in the EURES 
(European Employment Services) network, particularly in planning the establishment within 
the Employment services of new administrative structures dedicated to EURES. 

There  has  been  little  progress  in  the  field  of  coordination  of  social  security  systems. 
Montenegro has ratified cooperation agreements with Austria, Belgium, the former Yugoslav 
Republic  of  Macedonia,  Switzerland  and  signed  such  an  agreement  with  Slovenia. 
Negotiations are under way with the Slovak Republic, Bulgaria, Greece, France, Bosnia and 

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Herzegovina, Croatia, Ukraine and Turkey. These new bilateral agreements are based on the 
same principles as the EU regulations on coordination of social security. No further progress 
was made towards strengthening administrative capacity.  

There were no developments as regards the European health insurance card. 

Conclusion  

Little progress has been made in the field of freedom of movement for workers. Montenegro 
continued to conclude and implement new bilateral agreements, notably with Member States. 
However,  institutional  capacity  remains  limited.  In  the  area  of  freedom  of  movement  for 
workers, alignment with the acquis is still at an early stage. 

4.3. 

Chapter 3: Right of establishment and freedom to provide services 

Progress can be reported on the right of establishment. The Montenegrin legislation and the 
procedures  for  entry  in  the  commercial  register  remain  non-discriminatory  against  foreign, 
including  EU,  operators  and  the  country  started  to  address  its  objectives.  Regarding  the 
issuing  of  construction  permits,  there  has  been  some  progress  on  preparing  legislative 
reforms.  Amendments  to  six  laws  on  waters,  agricultural  land,  protection  and  rescue, 
geological  researches,  electronic  communication  and  spatial  planning  and  construction  to 
simplify  the  procedure  for  issuing  construction  permits  were  adopted  by  the  parliament  in 
July.  The  one-stop  shop  for  business  registration  within  the  Central  Registry  of  the 
Commercial Court (CRCE) has been operational since May, while in the future the one-stop 
shop  will  be  integral  part  of  the  Tax  Administration.  Amendments  to  the  laws  on  tax 
administration,  accounting  and  auditing  and  business  organisation  were  adopted  by  the 
parliament in June. When implemented, the number of procedures will be reduced from seven 
to three. The CRCE will continue functioning within the Tax Administration. 

As  regards  freedom  to  provide  cross-border  services,  little  progress  has  been  reported  on 
transposition  of 
legislation, 
implementation of the Services Directive will require designating a central coordination body 
or unit which will liaise with all ministries and other bodies involved. 

the  Services  Directive.  Apart  from  harmonising  basic 

In  the  case  of  postal  services,  little  progress  can  be  reported.  Montenegro's  primary 
legislation  follows  the  principles  and  objectives  laid  down  in  the  acquis  and  further  efforts 
have been made in the form of preparation of a new Law on postal services. With effect from 
January 2011, the government moved responsibility for electronic communications and postal 
services  from  the  Ministry  of  Transport  and  Maritime  Affairs  to  the  Ministry  for  the 
Information  Society.  Certain  responsibilities  are  also  being  exercised  by  the  Ministry  of 
Finance,  especially  for  setting  the  tariffs  for  reserved  postal  services.  This  practice  raises 
substantive  concerns  about  ensuring  the  independence  of  the  national  regulatory  authority 
(NRA)  and  will  have  to  be  further  addressed.  The  national  regulatory  authority  for  postal 
services (NRA) is the Agency for Electronic Communications and Postal Services. The tender 
commission  to  choose  a  contractor  for  restructuring  the  universal  postal  operator  has  been 
established.  

There  have  been  no  developments  regarding  the  universal  service  obligation.  As  regards 
administrative  capacity,  a  head  inspector  for  electronic  communications  and  postal  services 
was appointed in October 2010. However, the number of staff dealing with postal services in 
the ministry and the NRA has not increased.  

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There  has  been  good  progress  in  the  field  of  mutual  recognition  of  professional 
qualifications.  The  Law  on  recognition  of  foreign  qualifications  for  regulated  professions 
was adopted by parliament in March 2011. Under this Law, evidence of formal education of 
nationals  of  EU  Member  States  is  recognised  as  if  it  had  been  acquired  in  Montenegro. 
Several  by-laws  will  have  to  be  adopted  to  implement  the  law.  The  Law  on  the  national 
qualifications framework entered into force in January 2011 and is now being implemented. 
The  rulebook  on  recognition  of  foreign  certificates  entered  into  force  in  February  2011. 
However,  further  adjustments  to  the  legal  framework  are  needed.  This  should  include 
eliminating all nationality, residence and inappropriate language requirements plus reciprocity 
clauses  and  introducing  a  legal  distinction  between  the  professions  of  doctor,  dentist  and 
pharmacist,  as  regards  both  training  for  and  access  to  the  these  professions.  Further 
adjustments  will  also  need  to  be  made  to  the  education  and  training  conditions  for  the 
professions benefiting from automatic recognition of professional qualifications on the basis 
of harmonised minimum training requirements. 

Conclusion  

Overall, little progress has been reported on the right of establishment and freedom to provide 
services.  On  the  right  of  establishment  progress  has  been  achieved  and  legislative  reforms 
have advanced in the case of issuing construction permits. Little progress was reported on the 
right to provide cross-border services. Considerable efforts need to be made on alignment of 
legislation on the Services Directive and also on administrative capacity and inter-institutional 
cooperation.  Montenegro  has  made  little  progress  towards  aligning  its  national  postal 
legislation  with  the  acquis  and  the  full  independence  of  the  NRA  and  integrity  of  its 
regulatory  functions  still  need  to  be  ensured.  Further  adjustments  to  the  legal  framework  in 
the field of mutual recognition of professional qualifications are needed. 

4.4. 

Chapter 4: Free movement of capital 

Regarding capital movements and payments, foreign direct investment (FDI) continued to 
be  a  key  factor  in  economic  development  in  Montenegro.  According  to  Central  Bank  data, 
FDI in Montenegro totalled approximately € 643 million in 2010. Of this, 40% was invested 
in companies and banks and 29% in real estate, while 25,5% covered inter-company debt and 
5,5% other investments. 50,1% of these inflows originated from EU countries, compared with 
64% over the period 2000-2009. 

No  legislative  developments  can  be  reported  on  free  movement  of  capital  and  on  payment 
systems. Moreover, the government's privatisation agenda was not entirely met. There was a 
decline  in  the  real  estate  sector,  notwithstanding  the  fact  that  EU  citizens  are  treated  as 
nationals when it comes to acquisition of immovable property. 

As  regards  payment  systems,  the  Central  Bank  of  Montenegro  adopted  the  "Decision  on 
mandatory elements of payer transfer orders" in March 2011. According to the decision, each 
transfer of funds must contain all the information necessary to comply with the relevant EU 
Regulation.  

With regard to the fight against money laundering progress can be reported. In September 
2010 the government adopted the Strategy for Preventing and Combating Terrorism, Money 
Laundering and Terrorist Financing for the period 2010–2014 together with the Action Plan 
for  implementing  the  Strategy  for  the  period  2010–2012.  A  National  Commission  for 
implementing the Strategy was established, made up of representatives from all the relevant 

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institutions.  The  government  submitted  amendments  to  the  Law  on  prevention  of  money 
laundering and terrorism financing to parliament in January 2011. These are intended to bring 
it closer to the acquis. New definitions and obligations were introduced, plus new provisions 
for  including  complete  information  on  the  payer  in  electronic  transfers  of  funds  (see  above 
under  'payment  systems'),  which  will  tighten  up  the  preventive  system.  More  efforts  are 
needed for the adoption of the law.  

The Insurance Supervision Agency adopted guidelines on risk analysis on money laundering 
and procedures for indentifying suspicious transactions. Reporting of suspicious transactions 
by  the  banking  sector  increased.  However,  banks  are  still  the  only  entities  reporting.  There 
have still been no convictions for terrorist financing and very few for money laundering. Due 
to lack of funds, professional training and upgrading of the IT systems remain incomplete 

The  rulebook  on  the  internal  organisation  of  the  Administration  for  Prevention  of  Money 
Laundering was adopted by the government in February 2011 with the aim of building up its 
capacity.  This  administration  serves  as  the  national  Financial  Intelligence  Unit  (FIU)  and 
currently  employs  28  staff  (out  of  38  posts  assigned),  compared  with  26  last  year,  due  to 
limited  State  funds.  However,  high  staff  turnover  is  hampering  effective  functioning  of  the 
FIU. In October 2010  it  signed  agreements on exchanges of  financial intelligence data  with 
Moldova, San Marino and Israel and updated similar agreements with the Russian Federation, 
Slovenia and Aruba. These bilateral agreements strengthened cooperation with other countries 
in this field.  

In March 2011 the Insurance Supervision Agency issued guidelines on risk analysis on money 
laundering and procedures for identifying suspicious transactions. 

Cooperation  between  the  Central  Bank  of  Montenegro,  the  Securities  and  Exchange 
Commission, the Insurance Supervision Agency and the Ministry of Finance was tightened by 
establishing  the  Council  for  Financial  Stability  in  September  2010.  In  December  2010  the 
Council decided to collect and exchange data and information of significance for the stability 
of the financial system (see also Chapter 9 – Financial services).  

Conclusion 

While  capital  movements  have  been  essentially  liberalised,  full  alignment  of  Montenegro's 
legislation with the acquis and strengthening of its administrative and supervision capacity are 
still  pending.  In  the  case  of  combating  money  laundering  and  financing  of  terrorism,  some 
progress  was  made,  mainly  in  the  form  of  the  adoption  of  a  strategy  and  guidelines.  Closer 
cooperation between the financial supervisory authorities and enforcement agencies has also 
been  achieved.  However,  there  are  gaps  and  risks  in  the  system  for  reporting  suspicious 
transactions  and  the  activities  of  supervisory  authorities  remain  unfocused.  Streamlining  of 
the  system  for  reporting  suspicious  transactions,  backed  up  by  a  proactive  approach  by  the 
FIU, are required for successful action in this field.  

4.5. 

Chapter 5: Public procurement 

The  general  principles  of  public  procurement  in  the  internal  market  have  been  partly 
transposed in the Montenegrin legislation. Now efforts will have to focus on implementation 
and enforcement.  

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Good  progress  can  be  reported  in  the  area  of  public  procurement,  including  the  award  of 
public  contracts.  The  new  Law  on  public  procurement  was  adopted  by  the  parliament  in 
July.  While  the  new  law  brought  progress,  full  harmonisation  with  acquis  has  not  been 
achieved  yet.  The  related  implementing  legislation  still  needs  to  be  finalised.  Additional 
resources will be required to carry out the planned intensive training campaign and to bring 
the newly established helpdesk at the Public Procurement Directorate fully into operation to 
support  enforcement  of  the  law.  Establishment  of  the  new  inspection  service  on  public 
procurement  will  require  appropriate  financial  resources.  The  2009  Law  on  concessions  is 
neither  compatible  with  the  relevant  EU  directive,  nor  with  key  provisions  of  the  remedies 
directive.  

Administrative  capacity  for  public  procurement  is  gradually  improving.  In  2010,  over  780 
public  procurement  officers  and  other  staff  directly  involved  in  public  procurement  were 
trained.  The  two  key  institutions  –  the  Public  Procurement  Directorate  (PPD)  and  the 
Commission for the Control of Public Procurement Procedures (PPC) – are showing growing 
self-confidence, but the limited human and financial resources assigned are constraining law 
enforcement, especially as far as the PPC is concerned. The independence of the concessions 
review body, the Concessions Commission, needs to to be ensured. Its powers are defined in 
very general terms and its institutional capacity needs to be improved.  

Since  the  PPC  was  established  it  has  adopted  1,053  decisions,  of  which  330  were  issued  in 
2010 and 140 in the first four months of 2011. In 2010, the Administrative Court cancelled 
the vast majority of the PPC decisions (60 out of 76) challenged in court, which is a cause for 
particular  concern.  Half  of  the  Administrative  Court's  negative  rulings  were  for  formal 
procedural issues and not related to the quality of the procurement procedures.  

Monitoring  of  signed  contracts  has  to  be  enhanced.  Streamlining  and  reducing  the  large 
number of contracting authorities and training them would allow more effective monitoring of 
the public procurement contracts. 

As regards the remedies system, the Public Procurement Law meets the main requirements of 
the  Remedies  Directive.  However,  the  legislation  has  to  be  more  detailed  and  fully  aligned 
with the Directive.  

Improvements  have  been  made  to  transparency  and  the  fight  against  corruption  and 
maladministration  in  the  tendering  process.  The  Annual  Report  on  Public  Procurement  in 
Montenegro for 2010 adopted by the government in June shows that in 2010 a total of 1,687 
public  tender  procedures  were  launched,  worth  € 467,369,416,  and  only  185  contracts  were 
signed under a negotiated procedure without prior publication (10%), which indicates a small 
improvement in transparency. The increasing number of bidders per tender and of complaints 
may also be interpreted as indicators of greater transparency and awareness of bidders' rights. 
However, more efforts are required to launch the newly developed IT system for publication 
of  procurement  notices,  which  structures  the  information  on  the  various  tenders  more 
systematically,  so  that  the  various  stages  of  procurement  procedures  can  be  followed.  The 
number of reports on public procurement submitted to the PPD by the contracting authorities 
has  increased,  but  keeping  track  of  all  direct  contracts  signed  without  a  tender  procedure 
remains an issue.  

In 2010, the PPC signed a cooperation agreement with the State Audit Institution (SAI) which 
envisages  joint  activities  against  corruption  and  other  forms  of  illegal  behaviour  during  the 
public  tender  process.  The  SAI  regularly  audits  public  procurement  procedures  and  makes 

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structural recommendations, which were discussed in parliament and at numerous round-table 
meetings in 2010. However, more efforts will be required to put the SAI's recommendations 
into  action.  The  main  concerns  remain  poor  contract  preparation  and  changes  in  contract 
conditions after the contract has been signed. The latter is not in line with the acquis and is 
allowed  only  in  specific  circumstances  and  without  changing  the  essential  terms  of  the 
contract.  

Conclusion 

Good progress can be reported in the area of public procurement, but further steps still need to 
be  taken  towards  alignment  with  the  acquis  and  adoption  of  the  relevant  implementing 
legislation.  Administrative  capacity  has  been  strengthened  and  the  transparency  of  the 
procedures  has  improved  somewhat.  Conditions  to  prevent  and  fight  corruption  in  public 
procurement  are  being  put  in  place.  Yet,  the  overall  institutional  set-up  for  public 
procurement, with a high number of contracting authorities, raises concerns about the capacity 
fully to implement the legislation on procuring and tendering and to ensure proper monitoring 
of contracts. 

4.6. 

Chapter 6: Company law 

As regards company law, Montenegrin legislation is largely consistent with the EU acquis, 
but  some  discrepancies  remain  to  be  addressed.  In  July,  2011  the  parliament  adopted  draft 
amendments  to  the  Business  Organisation  Law,  which  aims  to  harmonise  requirements  for 
publishing  data  on  business  organisations  and  the  grounds  for  cancelling  formation  of  such 
organisations.  In  March  2011  parliament  adopted  the  Law  on  takeovers  of  joint  stock 
companies, which is almost fully aligned with the Takeover Bids Directive.  

As  regards  electronic  signatures,  the  Root  Certificate  Authority  at  national  level  was 
established in December 2010. Nevertheless, e-signature is not operational yet. 

As regards corporate accounting and auditing, draft amendments to the Law on accounting 
and auditing have been adopted by the parliament in June. An independent public oversight 
body  for  auditors  and  a  quality  control  system  need  to  be  clearly  planned  and  established. 
Progress has been achieved in relation to auditing, since the law specifies which companies 
require  a  mandatory  audit,  the  competent  authority  to  carry  out  an  audit,  and  the  auditors' 
licences. The Central Registry of the Commercial Court does not have enough administrative 
capacity to report in timely manner on the percentage of limited liability companies that have 
submitted their financial statements. Nevertheless, according to the Tax Administration out of 
24,007  registered  limited  liability  companies,  14,787  (61.59%)  submitted  their  financial 
statements in 2010. The amendments to the Law on accounting and auditing envisage that the 
financial  statements  of  limited  liability  companies  will  have  to  be  submitted  to  the  Tax 
Administration only.  

Conclusion 

Good  progress  can  be  reported  in  the  field  of  company  law.  In  most  fields  Montenegro's 
company  law  is  aligned  with  the  EU  acquis.  Amendments  to  the  law  on  accounting  and 
auditing are in the right direction. Yet, an independent public oversight body for auditors and 
a related quality control system, along with a system of investigations and penalties need to be 
established.  

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4.7. 

Chapter 7: Intellectual property law 

In  the  area  of  copyright  and  neighbouring  rights,  a  revised  Law  on  copyright  and  related 
rights was adopted in July.  

In  the  area  of  industrial  property  rights,  the  Trademark  Law,  the  Law  on  protection  of 
topographies  of  semi-conductors  and  the  Law  on  the  legal  protection  of  industrial  designs 
were  adopted  in  December  2010.  While  the  adoption  of  these  texts  helped  to  align 
Montenegrin  legislation  more  closely  with  the  acquis,  serious  discrepancies  remain.  The 
Trademark  Law  does  not  include  a  provision  concerning  the  validity  of  the  filing  date.  The 
Patent  Law  does  not  provide  for  an  implementing  regulation  conferring  legal  powers  to 
regulate  certain  matters  related  to  procedures  envisaged  in  the  Law  properly.  Montenegro 
should  urgently  amend  the  Trademark  Law  and  the  Patent  Law  and  then  adopt  relevant 
implementing  legislation.  There  are  minor  deficiencies  and  discrepancies  of  the  Industrial 
Design Law with the acquis.  

Early  in  2011  the  Montenegrin  Intellectual  Property  Office  (MIPO)  moved  to  secure 
premises.  Currently  a  database  and  register  system  are  in  use,  providing  a  high  level  of 
document security.  MIPO is  implementing  the Industrial Property Automation System, with 
the  cooperation  of  the  World  Intellectual  Property  Organisation  (WIPO)  and  the  European 
Patent Office (EPO). However, it has not completely fulfilled its legal obligations with regard 
to  technical  infrastructure  for  processing  intellectual  property  rights.  There  have  been  no 
improvements  on  a  configured  network,  workflow  management  tools  and  working 
procedures. Limited expertise in intellectual property remains a problem.  

Regarding  enforcement  of  intellectual  property  rights,  Montenegro  started  preparing  a 
National  Strategy  on  Intellectual  Property.  The  Government  adopted  in  June  the  Decree  on 
customs  authorities`  treatment  of  goods  reasonably  suspected  of  infringing  intellectual 
property rights. In 2010 a limited number of specialised training courses took place to build 
the  capacity  of  judges  from  the  basic  and  commercial  courts  and  to  train  market  inspectors 
and  customs  officers.  Customs  control  capacity  has  also  been  built  up.  Awareness-raising 
sessions  on  copyright  issues  were  organised  by  public  and  professional  associations, 
chambers  of  commerce  and  academic  institutions.  The  upgraded  version  of  the  intellectual 
property  database  (INES  +)  was  installed  at  the  Montenegrin  Customs  Administration  and 
Market Inspection Authority in October 2010.  

The  Commercial  Court  received  25  cases  in  the  area  of  trademarks  and  the  protection  of 
copyrights in 2011. All cases are processed. In 10 cases, the procedure has been completed, 
while in eight cases the decision was the first instance decision (in which action is being taken 
on appeal). In the remaining seven cases the procedure is in progress.  

However, the continuing lack of human and financial resources and expertise are preventing 
the agencies from being more effective. Efforts on training and awareness-raising need to be 
strengthened, both for the public and for officials. Additional significant efforts are needed to 
increase efficiency and coordination between the relevant agencies.  

Conclusion 

Some  progress  can  be  reported  in  intellectual  property  law.  The  legislative  framework  on 
intellectual property is partially aligned with the acquis. The Trademark Law and the Patent 
Law need to be amended, and then their implementing legislation should be urgently adopted.  

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The  MIPO  premises  have  been  secured  and  human  resources  and  capacity-building  have 
improved.  Awareness-raising  and  capacity-building  efforts  have  also  taken  place  within 
enforcement  agencies.  However,  additional  strengthening  of  administrative  capacity  is  vital 
for further progress in this area. Montenegro will have to make further efforts to align with the 
EU acquis in this area and to implement it effectively in the medium term.  

4.8. 

Chapter 8: Competition policy 

Regarding  anti-trust  and  mergers,  progress  has  been  made  in  the  legislative  field.  The 
current  legal  and  institutional  framework  complies  with  EU  competition  rules  in  most 
respects;  however  some  adjustments  are  still  needed.  The  draft  Law  on  competition 
protection, which establishes the powers of the Competition Protection Administration (CPA) 
as  an  independent  agency,  will  amend  the  previous  definition  of  a  dominant  position  and 
introduce specific procedural provisions in line with the EU acquis. More efforts are needed 
to ensure the adoption of the law and the relevant by-laws.  

The  amendments  to  the  Misdemeanours  Law  and  the  amendments  to  the  Law  prescribing 
financial fines for misdemeanours were adopted by the parliament in July. They empower the 
Misdemeanours  Court  to  impose  fines  between  1  and  10%  of  turnover  on  companies 
infringing the competition rules. The Misdemeanours Law also provides for fines of up to € 
4,000 for individuals found guilty of an offence against the competition rules.  

As regards the administrative capacity of the CPA, little progress has been made. This body 
currently employs 12 staff, of whom only five are case-handlers. This number is insufficient 
in view of the tasks assigned to the CPA by law. Resources remain a critical issue. However, 
there  is  an  improvement  in  the  law  enforcement  record.  During  the  reporting  period  13 
mergers  were  approved.  No  mergers  were  prohibited  and  one  was  authorised,  subject  to 
conditions. Two applications for individual exemption from prohibition were approved with 
certain restrictions. The CPA adopted three decisions on abuse of a dominant position, one of 
them launched ex-officio and concluded in July. In two other ex-officio cases the investigation 
is  still  ongoing.  Further  investment  in  the  administrative,  investigative  and  managerial 
capacity of the Competition Protection Administration is required. 

In  the  field  of  State  aid  some  progress  can  be  reported.  The  SAC  and  the  State  Aid 
Monitoring  Unit  (SAMU)  within  the  Ministry  of  Finance  adopted  19  decisions  during  the 
reporting period. In 15 of these cases the SAC found the State aid to be compliant, in one non-
compliant and in three cases the SAC decided that the notified aid did not constitute State aid. 
The SAC initiated its first ex-officio case, which was completed by banning the grant given 
by the Ministry of Culture until notification of the existing aid. 

The  limited  number  of  employees  is  insufficient  for  the  SAMU  to  carry  out  its  tasks  and 
hinders the creation of a credible enforcement record of adequately reasoned decisions. The 
actual operational independence of the SAC and the SAMU needs to be further guaranteed. A 
State aid inventory has been compiled and is updated regularly. The programme for aligning 
the existing State aid rules is being implemented. 

The process of alignment of the legal framework on State aid control to EU rules was initiated 
but it has not been completed.  

The amount of State aid provided to the KAP aluminium company and to the steel company 
Željezara  Nikšić  and  its  compatibility  with  Montenegro's  obligations  under  the  Stabilisation 

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and Association Agreement remain unclear. Montenegro has provided only limited evidence 
on  the  considerations  taken  into  account  for  establishing  the  risk  premium  charged  for  the 
State guarantee issued to back up the loans to these companies. Additional data are needed to 
calculate the exact amount of aid given in the form of State guarantees for the relevant loans. 
Željezara Nikšić was declared bankrupt in April 2011. Its owner status remains unclear, which 
further  delays  decisions  about  the  company's  future.  The  reconstruction  plan  for  the  Nikšić 
bauxite mines should secure the long-term viability of the company.  

No  progress  has  been  made  in  the  field  of  liberalisation  of  regulated  sectors.  Before 
advancing  in  this  area,  it  will  be  necessary  to  further  analyse  and  monitor  undertakings 
enjoying  special  or  exclusive  rights.  In  sensitive  sectors  (i.e.  electronic  communications, 
energy,  transport,  financial  services,  etc)  regulated  by  sector  specific  legislation,  legal 
amendments  may  still  be  needed  to  decrease  the  market  entry  barriers  in  order  to  enhance 
competition.  

Conclusion 

There  has  been  some  progress  in  competition  policy.  Yet,  challenges  remain  on  the 
administrative  capacity  of  the  CPA  and  the  State  aid  bodies.  Furthermore,  the  alignment  of 
the legal framework on State aid control to EU rules has not been completed. The full respect 
of  the  State  aid  commitments  under  the  Stabilisation  and  Association  Agreement  remains  a 
cause for concern. The operational independence of the State aid authority needs to be further 
guaranteed.  As  regards  metal  industry,  authorities  need  to  ensure  full  transparency  on  the 
amount  of  State  aid  provided  to  the  aluminium  and  steel  companies.  Decisions  about  the 
ownership of the steel company which was declared bankrupt need to be taken without delay.  

4.9. 

Chapter 9: Financial Services 

There has been good progress in the area of banks and financial conglomerates. Important 
Basel II requirements, especially regarding the core capital that banks need to keep aside to 
respond  to  potential  financial  and  operational  risks,  have  been  introduced.  New  regulations 
aimed at complying with the Capital Requirements Directive with respect to own funds, credit 
risk mitigation, large exposure, counterparty credit risk and home/host issues were adopted in 
May 2011. However, they have yet to enter into force.  

Financial  stability  arrangements  compliant  with  the  EU  acquis  and  EU  best  practice  were 
made.  A  Financial  Stability  Council  was  established  in  September  2010  as  a  consultative 
body  on  financial  stability,  improving  the  framework  for  cooperation  between  the  three 
regulatory institutions: the Central Bank, the Insurance Supervision Agency and the Securities 
and  Exchange  Commission.  Internal  crisis  management  plans  were  adopted  by  all  financial 
supervisory  institutions.  Progress  has  been  made  regarding  the  Central  Bank's  supervisory 
role, in the form of improvements in its internal organisation and capacity and in exchanges of 
information with other supervisory authorities.  

There  has  been  some  progress  in  the  deposit  guarantee  scheme.  A  new  Deposit  Protection 
Law came into force in August 2010, but is not yet fully aligned with the EU acquis. Deposit 
guarantees  are  set  at  €  20,000,  which  will  gradually  increase  to  € 50,000  by  2013. 
Preparations for alignment with the financial collateral arrangements are well advanced.  

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There has been some progress with the administrative capacity of the Central Bank to fulfil its 
supervisory  role.  All  staff  of  the  Central  Bank's  banking  supervision  department  have 
received extensive training on how to implement the Basel II requirements. 

There  have  been  no  significant  developments  as  regards  insurance  and  pensions,  where 
preparatory work has been continuing on amendments to the Insurance Law and the Law on 
compulsory insurance in transport, in order to align them with the EU acquis. Alignment with 
the acquis on occupational pension funds remains to be addressed. 

There has been some progress with the administrative capacity of the Insurance Supervision 
Agency.  The  relevant  staff  received  extensive  training  to  prepare  them  for  applying  the 
Solvency  II  requirements.  However,  the  human  resources  of  the  Agency  have  not  been 
increased and several posts remain to be filled. 

As regards financial markets infrastructure, the new Bankruptcy Law adopted in January is 
aligned  with,  and  partly  transposes  into  Montenegrin  legislation,  the  relevant  directives  and 
regulations on settlement finality in payment and securities settlement systems. In the cases of 
Directive  2002/47/EC  on  financial  collateral  arrangements  as  regards  linked  systems  and 
credit  claims  and  Directive  2009/44/EC  amending  the  Settlement  Finality  Directive  and  the 
Financial Collateral Arrangements Directive there is no progress and the relevant legislation 
is still under discussion.  

There has been little progress in the areas of securities markets and investment services.  

Montenegro  will  need  to  implement  the  2010  Prospectus  Directive.  There  is  still  no 
legislation  in  place  on  investor  compensation  schemes  and  credit-rating  agencies.  The  EU 
acquis  on  undertakings  for  collective  investment  in  transferable  securities  has  not  been 
transposed yet. However, preparations are well advanced in order the legislation to be largely 
aligned with the acquis.  

Conclusion 

There  has  been  some,  but  uneven,  progress  in  the  field  of  financial  services.  Elements  of 
Basel  II  requirements  have  been  introduced  and  cooperation  between  the  three  regulatory 
institutions has been tightened. However, legislative alignment in the areas of insurance and 
occupational  pension  funds,  financial  infrastructure,  securities  markets  and  investment 
services  remains  to  be  achieved.  Despite  some  improvements  in  staff  training,  the 
administrative capacity of the Central Bank and Insurance Supervision Agency require further 
strengthening.  

4.10.  Chapter 10: Information society and media 

Progress  can  be  reported  in  the  field  of  electronic  communications  and  information 
technologies. In December 2010, the telecommunications portfolio was transferred from the 
Ministry of Transport and Maritime Affairs to the Ministry of the Information Society, which 
became the Ministry of the Information Society and Telecommunications. The regulator, the 
Agency  for  Electronic  Communications  and  Postal  Services  (EKIP),  has  built  up  its 
administrative  capacity  and  been  allocated  sufficient  resources  to  perform  its  tasks.  EKIP 
developed its activities in the form of adoption of implementing legislation, preparatory work 
for  market  analyses  and  decisions  on  significant  market  power  (SMP).  It  has  significantly 
stepped up its work on consumer protection issues, forcing operators to apply the letter of the 

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law strictly and to publish their tariffs and general conditions. A company has been selected to 
be  the  universal  service  provider  for  a  five-year  period  and  another  to  provide  universal 
telephone  directory  and  inquiry  services.  The  number  of  appeals  against  EKIP  decisions 
increased. A majority of decisions were confirmed in appeal. Yet, the capacity of the Ministry 
of  the  Information  Society  and  Telecommunications  to  act  as  a  second  instance  is  fairly 
limited.  The  appointment  procedure  improved  with  the  adoption  in  July  2011  of  the 
amendments to the Law on electronic communications, enabling the Parliament to take over 
from  the  government  the  responsibility  to  identify,  propose  and  appoint  members  of  the 
Council,  including  the  Chairman.  However,  the  appellative  and  supervisory  powers  of  the 
Ministry  of  the  Information  Society  and  Telecommunications  over  EKIP  (which  were 
transferred  to  this  Ministry  from  the  Ministry  of  Transport  and  Maritime  Affairs)  still 
endanger 
the  Law  on  electronic 
independence.  Implementation  of 
communications  through  the  adoption  of  secondary  legislation  and  introduction  of 
competitive safeguards is still at an early stage. This particularly affects the fixed telephony 
market, which is strongly dominated by the incumbent operator. Competition has emerged on 
the  mobile  telephony  market  with  three  operators  having  similar  market  shares  (as  well  as 
having  same  spectrum  usage  rights  in  all  three  bands).  Several  spectrum  licenses  for  fixed 
wireless access have been awarded. Overall, while the mobile broadband penetration is high 
(with penetration level standing at around 23% of the population), the fixed broadband market 
(at around 8%) is underdeveloped by EU standards.  

the  regulator's 

As  regards  information  society  services,  some  progress  can  be  reported,  notably  in  e-
government  and  e-registry.  The  level  of  alignment  with  the  EU  Directive  on  conditional 
access  services  is  now  quite  high.  In  April  2011,  Montenegro  signed  a  Memorandum  of 
Understanding  for  its  participation  in  the  European  Commission's  Information  and 
Communication  Technologies  Policy  Support  Programme  (ICT-PSP).  No  progress  has  been 
made on further aligning the Law on electronic signatures and e-commerce with the acquis.  

Good progress has been made in the area of audiovisual policy. The parliament adopted in 
December  2010  a  decision  appointing  members  to  the  Council  of  the  Electronic  Media 
Agency.  Three  members  have  been  appointed  for  a  period  of  five  years  and  two  for  four 
years. The Council appointed in February 2011 the Director of the Electronic Media Agency. 
It also adopted key documents such as the statutes and Code of Conduct of the Agency and 
the standing orders of the Council. Implementing legislation was adopted as well, providing 
for  the  financial  independence  of  the  audiovisual  regulator,  improvement  of  its  monitoring 
capacity and proper implementation of the Law on electronic media. Yet, implementation of 
this  legislation  is  still  at  an  early  stage.  A  new  Law  on  digital  broadcasting,  which  sets  a 
deadline for the digital switchover (1 January 2013), was adopted in July 2011. 

Two rulebooks providing for the better protection of minors have been adopted. 

Conclusion 

There  has  been  some  progress  in  the  field  of  electronic  communications  and  information 
society services in the form of legislative alignment. However, efforts remain to be made to 
implement the legislation fully and to introduce competitive safeguards ensuring level playing 
field for all operators. Administrative capacity of the Agency for Electronic communications 
and Postal Services has been strengthened. Yet, concerns about its independence remain. The 
Information  Society  and 
administrative  capacity  of 
Telecommunications  remains  limited,  especially  in  the  telecommunications  sector.  Good 
progress  has  been  made  in  the  area  of  audiovisual policy, in particular on aligning with the 

the  new  Ministry  of 

the 

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acquis.  The  Electronic  Media  Agency  has  been  strengthened,  but  its  capacity  remains 
inadequate  to  monitor  the  market  effectively.  Overall,  preparations  in  the  area  of  the 
information society and media are moderately advanced. 

4.11.  Chapter 11: Agriculture and rural development  

Little progress has been made on horizontal issues, in particular as regards establishment of 
the structures necessary for management of the common agricultural policy, such as a paying 
agency and an integrated administrative and control system.  

In 2011, funding for the agricultural budget remains low, similar to previous years at around 
€ 20  million.  It  covers  a  number  of  areas,  including  market  support  measures,  rural 
development and support for general services. Roughly 22% of the budget is targeted at direct 
support  measures  linked  to  production  of  livestock  and  crops.  Budget  allocation  to  rural 
development is positive, but access to financing for rural dwellers remains a concern. 

The  government  adopted  a  rulebook  on  the  internal  organisation  of  the  Ministry  of 
Agriculture and Rural Development providing for strengthening the administrative capacity in 
this field. 

The full results of the agricultural census are awaited. They are necessary to provide a good 
statistical basis for policymaking on agriculture and rural development. 

There as been little progress in the field of rural development. A first draft of a Instrument 
for Pre-accession Assistance for Rural Development (IPARD) programme has been prepared. 
Yet,  the  National  Fund,  the  future  paying  agency  and  the  managing  authority  still  have 
insufficient resources.  

Some progress can  be  reported  with regard to quality policy. A  law  was  adopted  in  March 
2011 on designation of origin, geographical indications and traditional specialities guaranteed 
for agricultural and food products. This new law is broadly aligned with the EU acquis in this 
area. Yet, further efforts are needed to implement and enforce this policy.  

Some progress has been made concerning organic farming. The number of registered organic 
producers continued to increase. The Organic Agriculture Development Programme for 2009-
2012 is being implemented, providing support for investment in organic agriculture with the 
help of donor funding. 

Conclusion 

There  has  been  some  progress  in  the  field  of  agriculture  and  rural  development.  However, 
progress on policy development and on using the available financial assistance in the field of 
rural development has been fairly limited. In this regard, the results of the agricultural census 
should provide a good basis of precise agricultural statistics to advance with agriculture and 
rural development policy. Preparations on basic  institutions  for  programming  and  managing 
IPARD  need  to  be  accelerated.  Overall,  in  the  area  of  agriculture  and  rural  development, 
alignment with the acquis remains at an early stage. 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy 

Little  progress  has  been  made  as  regards  general  food  safety.  An  evaluation  of  the  food 
safety  legislation  in  force  concluded  that  a  new  framework  law  compliant  with  the  EU 

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legislation  needs  to  be  adopted.  The  laboratory  capacity  was  increased  by  acquiring  new 
equipment  and  accrediting  certain  methods  of  analysis,  including  the  Veterinary  Diagnostic 
Laboratory.  

Some  progress  has  been  made  towards  alignment  with  the  acquis  in  the  area  of  veterinary 
policy. A Law on livestock breeding, aiming at aligning with the EU guidelines, was adopted, 
as was implementing legislation. Measures were taken to organise official controls prescribed 
under  the  2010  Operational  Programme  on  Animal  Health  Protection.  The  Law  on  animal 
identification and registration was amended, with the result of improving the system and of 
extending  it  to  sheep  and  goats.  The  Veterinary  Information  System  was  brought  into 
operation.  A  Laboratory  Information  Management  System  was  installed  at  the  Veterinary 
Diagnostic  Laboratory  and  the  relevant  staff  trained.  Campaigns  were  conducted  to  raise 
public  awareness  in  this  area.  Yet,  certain  animal  disease  contingency  plans  are  still  not  in 
place  and  a  comprehensive  programme  for  controlling  and  monitoring  transmissible 
spongiform  encephalopathy  (TSE)  has  yet  to  be  assembled.  The  new  veterinary  draft  law, 
which has been open to public debate, is pending.  

No progress can be reported concerning the placing on the market of food, feed and animal 
by-products. 

There  was  very  limited  progress  in  the  implementation  of  food  safety  rules,  mainly 
consisting in the adoption of a monitoring programme for nitrates in food of plant origin. As 
regards specific rules for feed, legislation on feeding stuffs intended for particular nutritional 
purposes and on certain products used in animal nutrition is yet to be adopted.  

Little  progress  has  been  made  in  the  phytosanitary  sector.  A  new  Law  amending  and 
supplementing  the  Law  on  plant  health  protection  was  adopted  with  the  aim  of  further 
alignment with the acquis. Implementing legislation on control of the major potato diseases 
and  on  the  list  of  authorised  substances  for  plant  protection  products  was  adopted.  Some 
progress was made on strengthening laboratory capacity for control of seed and seed material 
and  for  pesticide  residue  analysis  through  the  purchase  of  new  equipment.  Training  for 
administration staff continued. 

No progress has been made with alignment and implementation of the acquis in the area of 
genetically modified organisms.  

Conclusion 

There has been some progress in the field of food safety, veterinary and phytosanitary policy. 
In  the  area  of  general  food  safety,  Montenegro  has  improved  its  laboratory  capacity.  Yet,  a 
framework  law  aligned  with  the  acquis  has  yet  to  be  adopted.  Regarding  veterinary  policy, 
some progress has been made on legal alignment, capacity-building and implementation but 
implementing  legislation  remains  to  be  adopted.  Little  progress  has  been  made  as  regards 
alignment  with  the  phytosanitary  acquis.  Overall,  in  the  area  of  food  safety,  veterinary  and 
phytosanitary policy, alignment with the acquis remains at an early stage. 

4.13.  Chapter 13: Fisheries 

On  the  basis  of  the  Law  on  marine  fisheries  and  aquaculture,  new  implementing  legislation 
was  adopted  to  secure  closer  harmonisation  of  national  fishery  policy  with  the  acquis. 
However, further efforts remain to be made to align this new legislation fully with the acquis. 

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The  administrative  capacity  of  the  Fisheries  Unit  of  the  Ministry  of  Agriculture  and  Rural 
Development has been strengthened. 

Progress  has  been  made  in  the  field  of  resource  and  fleet  management.  The  Fishery 
Information  System  was  further  developed  to  make  it  compatible  with  the  relevant  EU 
requirements. The fleet register has been brought into operation, just after the precondition of 
issuing of licences for commercial fishing for 2011 was met.  

Little  progress  has  been  made  in  the  areas  of  inspection  and  control.  The  capacity  of  the 
fishery  inspectorate  has  improved  but  remains  limited.  It  employs  only  three  full-time 
inspectors,  not  enough  to  perform  all  the  necessary  controls.  Preparations  have  started  for 
meeting  the  upcoming  obligation  to  record  all  catches  by  electronic  means  and  submit  this 
information, also electronically, to the competent authorities. No progress has been made on 
ensuring systematic processing of logbooks, adequately registering catches and landings and 
using sales notes. In this respect, no progress was made towards meeting the requirement for 
systematic cross-checking between the catch composition and logbook records. 

There have  been  no developments as regards structural action and State aid. Montenegro 
provided  only  very  limited  support  to  the  fisheries  sector,  mainly  targeting  the  fishing  fleet 
and aquaculture.  

No  progress  can  be  reported  in  market  policy,  including  with  establishing  producers' 
organisations and collecting market data.  

Montenegro has concluded no new international agreements on fisheries. There have been 
no  new  developments  regarding  Montenegro's  application  to  join  the  International 
Commission for the Conservation of Atlantic Tunas (ICCAT). No difficulties were reported 
with implementation of existing agreements.  

Conclusion 

In the field of fisheries, some progress can be reported on strengthening the legal framework, 
upgrading  administrative  capacity,  enhancing  inspection  and  control  of  marine  fishery 
resources and performing more reliable and systematic collection of data on the fishing fleet, 
catches and landings, the biological state of the fish stocks and socio-economic data. Overall, 
preparations are on track. 

4.14.  Chapter 14: Transport policy 

Some progress can be reported in the area of road transport. Following the amendments to 
the  Law  on  road  transport  adopted  in  December  2010,  the  market  for  both  national  and 
international goods and passenger transport operations is regulated in compliance with acquis 
principles and the four criteria for access to the occupation of road haulage operator and road 
passenger  transport  operator  (professional  competence,  financial  standing,  good  repute  and 
effective  establishment).  In  the  case  of  discriminatory  road  charges  towards  EU  vehicles, 
environmental  charges  (so-called  eco-tax)  were  abolished  in  July  2011  for  heavy  goods 
vehicles and the government adopted in September a decree abolishing these charges for all 
other vehicles. Yet, this decree remains to be implemented. . As regards the technical acquis, 
implementing legislation was enacted on requirements to be met by road vehicles in terms of 
dimensions,  total  weight,  axle  load,  environmental  protection,  devices  and  equipment. 
Mandatory driving times and rest periods and use of tachographs are aligned with the social 
acquis.  However,  implementation  of  the  rules  on  digital  tachographs  in  the  European 

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Agreement concerning the work of crews of vehicles engaged in international road transport 
(AETR  Agreement)  has  been  delayed.  Road  safety  regulations  have  become  stricter, 
particularly  on  safety  features  of  road  infrastructure  and  enforcement  of  speed  limits,  but, 
overall, road safety remains a concern.  

There has been little progress concerning rail transport. The Law adopted in July 2010 on 
contractual relations in railway transport, including passenger and freight, introduced rules on 
passenger  rights  and  obligations.  The  national  legislation  has  not  yet  been  aligned  with  the 
third railway package and the most recent EU legislation. Further alignment of the legislation 
on  rail  transport  safety,  in  particular  with  the  Directives  on  train  driver  licences  and 
interoperability,  is  on  track,  but  not  adopted  yet.  The  absence  of  infrastructure  charges  for 
passenger  trains  does  not  comply  with  EU  standards.  The  administrative  capacity  of  the 
Railway  Authority,  which  is  not  yet  fully  operational,  remains  particularly  weak.  The 
authority  should  be  given  powers  to  impose  penalties  or  to  demand  any  information  from 
railway companies. The interoperability Directive has yet to be transposed and implemented. 
The Montenegrin institutions will need technical assistance to complete this task. The border 
crossing agreement signed between Montenegro and Serbia needs to be further aligned with 
EU  legislation.  Four  protocols  were  signed  under  this  agreement,  at  the  levels  of  policy, 
customs, veterinary inspections and railway companies. The agreement with Albania is being 
negotiated with a view to agreeing on a common border station. 

There is no inland waterway transport in Montenegro. 

No progress can be reported on combined transport. 

In the area of air transport, some progress was made with implementation of the European 
Common Aviation Area (ECAA) Agreement. However, the issues of the independence of the 
accident  investigation  body  and  of  implementation  of  the  safety  management  system  at  the 
airport, as required by the Montreal Convention, still need to be addressed. The air transport 
law  has  still  to  be  adopted.  As  regards  the  social  acquis,  implementing  legislation  was 
adopted  on  working  hours,  flying  time,  daily,  weekly  and  annual  rest  periods,  duration  of 
transport and readiness, number of take-offs and landings, health and national implementing 
measures  to  protect  aircraft  crew  members.  The  Directive  on  groundhandling  was 
implemented but further efforts are needed to improve its application. No assessment of the 
capacity of the airport was made. From an air traffic management (ATM) perspective, good 
progress  was  made  towards  fulfilling  the  ATM  obligations  in  the  ECAA  Agreement. 
Significant  efforts  will  be  needed  to  implement  the  associated  legislation  and  secure  a 
sustainable structure for the National Supervisory Authority. 

Some progress was made on maritime transport. In 2010, under the Paris Memorandum of 
Understanding (PMoU), no ships flying the Montenegrin flag were stopped. Steps were also 
taken to use the services of EU-recognised classification societies. The process of ratification 
of relevant IMO conventions was also initiated. On 4 May 2011 the PMoU Port State Control 
Committee  agreed  that  Montenegro  can  be  granted  cooperating  member  status  in  the 
framework  of  the  PMoU.  Progress  was  made  in  the  fields  of  pollution  from  vessels  and 
handling of waste, with the adoption in April 2011of a new Law on protection of the sea from 
pollution by vessels.  

No progress can be reported on satellite navigation.  

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Conclusion 

There  has  been  some  progress  in  transport  policy,  in  particular  road  and  air  transport,  but 
further efforts remain to be made to align fully with the transport acquis and to implement it 
effectively  in  the  medium  term.  Particular  attention  needs  to  be  paid  to  alignment  with  the 
third  railway  package  and  to  sound  implementation  of  social  and  technical  rules  in  road 
transport as well as of safety and security requirements in the maritime sector. Decisions to 
abolish discriminatory road charges for EU vehicles have been adopted. Yet, they need to be 
fully implemented. Preparations in the area of transport policy are moderately advanced. 

4.15.  Chapter 15: Energy 

A document outlining Montenegro's energy policy until 2030 was adopted by the government 
in March 2011. Its priorities are security of supply, developing a competitive energy market 
and sustainable energy development, including energy efficiency. 

Little progress was made in the area of security of supply. The decree on mandatory strategic 
stocks of oil and petroleum products has not been adopted yet. As regard participation of the 
country in regional gas infrastructure projects, Montenegro signed in May a Memorandum of 
Understanding  (MoU)  and  Cooperation  with  Trans-Adriatic  Pipeline  AG  with  the  aim  of 
exploring opportunities for developing natural gas markets and increasing diversity of supply 
in South-East Europe.  

There  has  been  little  progress  in  the  field  of  the  internal  energy  market.  Legislation  for 
implementing the Energy Law adopted in April 2010 remains to be adopted. Montenegro has 
not yet aligned with the third internal energy market package. The transparency of operations 
of  the  transmission  company  is  improving  but  does  not  fully  meet  the  requirements  of  the 
acquis (such as publishing network charges and investment forecasts). The Energy Regulatory 
Agency fulfilled some of the preconditions for establishing a functioning energy market, by 
adopting  substantial  implementing  legislation  and  rules.  Yet,  electricity  prices  do  not  cover 
costs,  which  is  an  obstacle  to  genuine  opening  of  the  market.  The  distribution  company 
remains integrated in the Montenegrin Electric Enterprise (EPCG), although the energy Law 
requires its legal unbundling. The government signed in August 2011 a MoU with the Italian 
company  A2A,  redefining  the  terms  of  EPCG  privatisation  and  recapitalisation.  The 
government will retain majority ownership in EPCG. The MoU also allows for the possibility 
of  a  merger  of  Pljevlja  coal  mine  with  EPCG  and  the  construction  of  Moraca  hydro  power 
plants.  

No  gas  infrastructure  has  been  built  and  no  implementing  legislation  concerning  the  gas 
market has been adopted. 

There  has  been  some  progress  in  the  area  of  renewable  energy.  Implementing  legislation 
aiming  to  improve  alignment  of  national  legislation  with  the  Renewable  Energy  and 
Cogeneration  Directives  was  adopted.  However,  further  efforts  should  be  made  towards 
setting up a regulatory environment that would foster the increased use of renewable energy 
sources in all sectors, as required by the EU renewable energy acquis.  

As regards energy efficiency, the National Energy Efficiency Action Plan, which covers the 
period  2010-2012,  was  adopted  by  the  government  in  December  2010.  Montenegro  has  no 
firm plans to implement the new EU Regulation on the labelling of tyres.  

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Progress has been made regarding nuclear energy, nuclear safety and radiation protection, 
Montenegro has ratified the Joint Convention on the safety of spent fuel management and the 
safety  of  radioactive  waste  management.  A  national  emergency  plan  for  radiation/nuclear 
accidents  was  adopted  by  the  Ministry  of  Interior  in  March  2011;  its  compliance  with  the 
acquis  and  with  international  standards  remains  to  be  verified.  This  is  also  the  case  for  all 
radiation  protection  regulations.  There  is  no  programme  of  environmental  monitoring  of 
radioactivity in compliance with Articles 35 and 36 of the Euratom Treaty. The licence for the 
storage facility for radioactive waste has not been issued. Regarding administrative capacity, 
there  is  still  no  specific  department  assigned  to  nuclear  issues  within  the  Environmental 
Protection  Agency  and  staffing  levels  devoted  to  radiation  protection  management  with  the 
Agency are insufficient. Furthermore, there is no separate or ring-fenced budget for regulation 
in this area.  

Conclusion  

Some progress can be reported in the area of energy. A new strategy on energy policy until 
2030 was adopted. Further efforts should be made towards adopting legislation concerning oil 
stocks  and  setting  up  a  regulatory  environment  that  would  foster  the  increased  use  of 
renewable energy sources in all the sectors, as required by the EU renewable energy acquis. 
Legislation for implementing the Energy Law remains to be adopted. Administrative capacity 
is still limited in all sectors. Preparations in the area of energy are moderately advanced. 

4.16.  Chapter 16: Taxation  

Limited progress can be reported as regards legislative alignment with the EU acquis in the 
area of indirect taxation, especially as regards VAT. A new Decree allowed deferred payment 
of customs debt (duties and VAT), within 30 days after acceptance of the customs declaration. 
The Law on excise duties was amended in December 2010 to increase the duties on cigarettes 
and other tobacco products and on beer. Despite this progress, further improvements remain 
to be made in order fully to align the structure, scope and level of excises with the EU acquis.  

Limited progress was made in the area of direct taxation. In March 2011 the Tax Law was 
amended in order to have corporate financial reports submitted to the Tax Administration, in 
line  with  the  one-stop  shop  principle.  Tax  relief  provisions  that  could  lead  to  harmful  tax 
competition were not formally assessed and need further elaboration. The 2008 Law on free 
zones was amended to repeal the exemption from corporate income tax granted to users and 
operators,  but  other  provisions,  among  others  related  to  financial  services  or  transparency, 
remain to be addressed.  

regards  administrative  cooperation  and  mutual  assistance,  agreements  on 

As 
administrative cooperation have been reached with five tax administrations.  

Operational capacity and computerisation of the tax administration have been improved by 
introducing  an  integrated  registration  and  collection  system.  By  applying  the  one-stop-shop 
principle, the service registration of activity for customs, VAT and excises can be concluded 
at one place. The capacity of the audit and collection departments of the Tax Administration 
and  its  management  has  been  strengthened  by  training  on  use  of  the  computerised  tax 
collection  risk  assessment  system.  However,  insufficient  human  resources  in  the  IT 
department are preventing full use of the system and jeopardising the overall progress of the 
Tax Administration in the IT field. No progress has been made regarding the internal control 
system of the Tax Administration.  

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Conclusion 

Progress has been made in the area of taxation, principally in the form of development of a 
computerised  registration  and  collection  system.  However,  the  capacity  of  the  Tax 
Administration  is  limited,  amongst  other  things,  by  the  lack  of  staff  for  its  IT  activities. 
Further  efforts  remain  to  be  made  to  increase  the  effectiveness  of  the  data  systems  in  the 
fields of administrative cooperation and internal control. Preparations in the area of taxation 
are on track. 

4.17.  Chapter 17: Economic and Monetary policy 

As regards monetary policy, under the Central Bank Law, the Central Bank of Montenegro 
has  adopted  its  statutes  and  passed  important  decisions  on  open  market  operations,  on 
liquidity loans to banks, on last-resort financial assistance, on supplying bank notes and coins 
to  banks,  on  eligibility  and  verification  of  authenticity  and  return  into  circulation  of  euro 
banknotes  and  coins,  on  treatment  of  suspected  instances  of  euro  banknotes  and  coins  and 
other  activities  to  protect  euro  against  counterfeiting,  on  establishing  the  investment 
committee,  on  guidelines  on  allocation  of  funds  for  the  implementation  of  monetary  policy 
instruments,  on  reserve  requirements,  on  the  Credit  Registry,  on  Capital  Adequacy,  and  on 
international reserve management. The Central Bank Law needs to be further adapted to the 
provisions  of  EU  legislation  on  withdrawal,  replacement  and  destruction  of  worn-out 
banknotes and coins. . The law also has to safeguard institutional and personal independence, 
especially regarding the case of the Governor of the Central Bank. There was also no progress 
regarding the privileged market access for the State of Montenegro by the Insurance Act. .  

In  December  2010  the  Financial  Stability  Council  adopted  decisions  on  the  collection  and 
exchange of data and information of importance for financial system stability and on the list 
of persons responsible for delivery of data and information to the Financial Stability Council. 
The  Security  Commission  and 
their 
Contingency  Plans,  but  those  of  the  Ministry  of  Finance  and  the  Central  Bank  are  still 
pending.  Therefore,  the  Financial  Stability  Council  has  not  passed  yet  the  National 
Contingency Plan for crisis management at the financial system level.  

the  Insurance  Supervisory  Authority  adopted 

Overall,  more  efforts  are  needed  for  completing  the  legal  framework  with  detailed 
arrangements  regarding  the  liquidity  of  banks.  Montenegro  needs  also  to  implement 
legislation  on  central  bank  independence,  monetary  financing,  privileged  access  to  public-
sector financial institutions and protection of the euro.  

In  the  area  of  economic  policy,  Montenegro  submitted  its  2011  Economic  and  Fiscal 
Programme (EFP) to the European Commission, covering the period 2010-2013. The EFP is 
an  integral  part  of  Montenegro's  policy  coordination  and  economic  planning  process.  It 
presents recent macroeconomic developments and the structural reform framework, including 
possible future macroeconomic scenarios. The EFP broadly meets EU requirements on format 
and content. However, further analysis is needed to confirm the solidity of the EFP's medium-
term  projections.  Structural  reform  measures  need  to  be  more  detailed.  This  is  particularly 
important  in  view  of  the  forthcoming  submission  by  Montenegro  of  its  pre-accession 
economic programme in 2012. 

Conclusion  

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Overall, progress can be reported in the field of economic and monetary policy. Montenegro 
completed the legal framework with detailed provisions on reserve requirements, on the credit 
registry and on the withdrawal, replacement and destruction of worn-out banknotes and coins. 
Nevertheless, it will have to make substantial efforts to complete its alignment with the acquis 
and  implement  legislation  effectively  in  the  medium  term,  focusing  on  issues  related  to 
central  bank  independence,  monetary  financing  and  privileged  access  to  public-sector 
financial  institutions.  Montenegro's  present  use  of  the  euro  is  distinct  from  euro  area 
membership. The implications for Montenegro's monetary system will have to be defined in 
detail and addressed in future accession negotiations.  

4.18.  Chapter 18: Statistics 

There has been limited progress on statistical infrastructure. The revised Statistical Law has 
to  be  adopted  to  provide  a  favourable  framework  for  development  of  a  strong  statistical 
system  in  Montenegro.  The  coordination  of  the  national  statistical  system  needs  to  be 
reinforced by strengthening both the coordinating role and the administrative capacity of the 
national statistical office (Monstat).  

The lack of human resources – notably of specialised statistics experts – and sufficient office 
space became even more critical in the reporting period.  

As  regards  classification  and  registers,  there  has  been  good  progress.  The  Law  on  the 
national statistical classification of economic activities, based on the European NACE Rev. 2 
classification,  was  adopted  in  March  2011.  Further  improvements  have  been  made  to  the 
statistical  business  register.  A  regular  survey  for  updating  the  business  register  has  been 
established.  The  national  classification  of  occupations,  harmonised  with  the  International 
Standard  Classification  of  Occupations  (ISCO-08),  is  being  implemented.  Monstat  has 
developed a metadata prototype and has started preparing metadata documentation for several 
domains.  

There  has  been  good  progress  in  sector  statistics.  In  April  2011  Montenegro  successfully 
conducted the population and housing census in line with international standards. Preliminary 
results were published in May 2011, followed by the first results by municipality in July. The 
first results of the agricultural census carried out in June 2010 were published in March 2011. 
Monstat  has  made  progress  in  the  area  of  agro-monetary  statistics,  with  the  introduction  of 
three new pilot surveys covering expenditure and prices. 

Progress  can  be  reported  in  the  area  of  national  accounts.  Monstat  has  started  experimental 
calculation of quarterly GDP in constant and current prices. Development of sectoral accounts 
is  progressing.  With  regard  to  price  statistics,  good  progress  was  noted.  In  February  2011 
Monstat launched monthly releases of the harmonised index of consumer prices. Progress has 
been  made  on  business  statistics.  The  structural  business  statistics  for  2008  were  published, 
and  further  improvements  were  made  for  the  2010  survey.  Regarding  short-term  statistics, 
improvements  have  been  made  to  the  methods  for  existing  surveys,  including  the  industrial 
production index. Monstat made progress in harmonising the tourism survey on arrivals and 
overnight  stays  with  EU  standards  and  has  published  the  preliminary  results  of  the  tourism 
satellite  accounts  in  July.  Data  transmission  to  Eurostat  needs  to  improve  as  Montenegro 
currently transmits only a limited number of datasets to Eurostat (e.g. external trade statistics 
and  purchasing  power  prices).  Montenegro  will  have  to  make  considerable  and  sustainable 
efforts  to  align  with  the  acquis  in  the  areas  of  agricultural,  business  and  macroeconomic 
statistics.  

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Conclusion 

Good  progress  can  be  reported  in  the  area  of  statistics,  but,  overall,  significant  challenges 
remain  before  Montenegro  reaches  a  satisfactory  level  of  alignment  with  the  acquis. 
Weaknesses  in  the  areas  of  agricultural,  business  and  macroeconomic  statistics  need  to  be 
addressed  as  a  matter  of  urgency.  The  statistical  infrastructure  needs  to  be  improved  as  a 
matter  of  urgency,  including  adequate  human  and  financial  resources.  Preparations  are 
moderately advanced. 

4.19.  Chapter 19: Social policy and employment  

There  has  been  little  progress  in  the  area  of  labour  law.  Amendments  to  the  labour  law, 
aiming at addressing part of the adjustment still required in order to align national legislation 
with  the  acquis,  have  not  been  adopted  yet.  Moreover, implementation  and  enforcement  of 
existing labour law remains a serious challenge. 

There  has  been  limited  progress  in  the  area  of  health  and  safety  at  work.  Education  and 
training  has  been  provided  to  labour  inspectors,  social  partners  and  persons  engaged  in 
activities  related  to  safety  at  work.  Awareness-raising  activities  were  stepped  up  by  closer 
cooperation  with  the  European  Agency  for  Safety  and  Health  at  Work.  However,  there  has 
been  no  progress  on  adopting  legislation  implementing  the  Safety  at  Work  Law  and 
transposing EU Directives into national law. The number of labour inspectors in the area of 
occupational  health  and  safety  is  insufficient.  Agencies  for  Health  and  Occupational  Safety 
and  Health  sections  within  the  Labour  department  of  the  Ministry  of  Labour  and  Social 
Welfare have not been established yet.  

There has been some progress in the social dialogue. The Law on the Social Council has been 
amended, establishing the Social Council as a legal entity. This should clear the way for full 
independence of this body and significantly improve administrative and technical operations. 
The Law sets out to strengthen the work of the Social Council at municipal level and improve 
communication  and  cooperation  with  the  Council  at  national  level.  It  also  introduces 
registration of municipal councils at the Ministry of Labour and Social Welfare, which should 
stimulate the partners at local level. However, the Social Council secretariat provided by the 
law  has  not  been  set  up  yet.  Employees  and  employers  started  to  submit  requests  to  the 
Agency for peaceful resolution of labour disputes in order to resolve individual or collective 
cases.  The  Agency  started  to  produce  its  track  record.  New  amendements  to  the  General 
Collective  Agreement  were  adopted  in  November  2010,  introducing  inter  alia  a  minimum 
wage  and  rules  for  its  determination  through  collective  bargaining.  However,  the  General 
Collective Agreement expires 31 December 2011. Progress on development of bipartite social 
dialogue remain slow. The Law on trade union representativeness is being implemented but 
the  procedures  to  check  representativeness  (trade  union  members  lists)  are  not  in  line  with 
data protection clauses, including those in the EU Charter of Fundamental Rights.  

Limited  progress  has  been  made  in  the  area  of  employment  policy.  The  labour  market  has 
further deteriorated in 2010 and showed only modest improvements in 2011. The activity rate 
stabilized  at  60%  for  the 15-64. There  has been a slight  increase of the employment rate in 
2011 (at 39.6% in the second half of 2011 compared to 38.9% in the same period of 2010) but 
with  persisting  significant  gender  gap  and  a  continuous  increase  of  unemployment,  close  to 
20% in mid-2011. The high incidence of long-term employment continued (at around 80% of 
total  unemployed  in  the  second  half  of  2011  according  to  Monstat)  as  well  as  youth 
unemployment (at 37.3% in the same period.) The low rate of employment, persisting skills 

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mismatch  and  gaps  between  the  north  and  other  parts  of  the  country  remain  causes  for 
concern.  An  evaluation  of  implementation  of  the  National  Action  Plan  for  Employment 
(NAPE)  found  that  the  strategy  for  employment  and  human  resources  development  for  the 
period 2007-2011 is delivering on most of the objectives. Montenegro continued to implement 
a wide range of active labour market measures, e.g. public works, seasonal employment, job 
subsidies,  co-financing  of  apprentices,  training,  retraining  and  credits  for  self-employment. 
However, they remain insufficiently targeted at the needs of vulnerable groups. Funding for 
active measures remained low and even decreased by 25% in 2010, due to budget restrictions. 
Five career guidance centres for information and vocational orientation have been established 
within  the  public  employment  service.  However,  a  large  share  of  unemployed  are  not 
registered at the PES and remain without active support. An action plan for the suppression of 
undeclared  work  (developed  with  ILO  assistance)  has  been  adopted  by  the  Social  Council. 
Implementation has started with a focus on awareness-raising and information for the labour 
inspectorate and social partners. 

There  has  been  limited  progress  in  preparations  for  the  European  Social  Fund.  Work  on 
setting  up  the  operating  structure  for  implementing  the  programme  has  been  launched. 
However, administrative capacity within the government bodies and municipalities involved 
is  still  insufficient  (see  also  Chapter  22  —  Regional  policy  and  coordination  of  structural 
instruments). 

Limited progress has been made on social inclusion. The economic deceleration has caused 
an increase in poverty. In 2010, almost 7% of the Montenegrin population were living below 
the absolute poverty line (set at € 170 per month), as compared with 4,9% in 2008. Poverty is 
more  widespread  among  the  rural  population  in  the  north.  Progress  on  development  of 
databases and indicators, as used in the EU to monitor social inclusion and social protection, 
remains slow. Additional efforts are needed to ensure the social integration of Roma, Ashkali 
and Egyptians.  

As  regards  people  with  disabilities,  adoption  in  July  2011  of  the  Law  on  prevention  of 
discrimination  against  people  with  disabilities  and  amendments  to  the  Law  on  vocational 
rehabilitation and employment of persons with disabilities is a good step forward. However, 
the  extent  and  substance  of  the  new  Law  will  need  further  adjustments  in  order  to  comply 
fully with the acquis. Strong awareness campaigns addressing the social inclusion of people 
with disabilities were conducted throughout the country. Yet, state financial support remains 
low and no progress was made on developing national reliable data.  

Some progress can be reported in the field of social protection, notably of pensions, where a 
process was launched progressively to increase the statutory retirement age and equalise it for 
both  genders  and  to  reform  the  'bonus-malus'  system  to  remove  incentives  for  early 
retirement.  Amendments  to  the  pension  insurance  scheme  were  adopted  in  January  2011. 
However,  introduction  of  funded  pension  schemes  based  on  mandatory  savings  was 
postponed  and  funding  for  the  current  pension  system  is  not  sustained.  Overall,  the  public 
finance situation is having a negative effect on the social reforms.  

There  has  been  progress  in  the  area  of  anti-discrimination.  The  Law  on  the  protector  of 
human rights and freedoms (Ombudsman) giving details of the Ombudsman's role in the fight 
against  discrimination  was  adopted  in  July  2011.  Training  activities  for  the  police  and  civil 
servants took place. However, implementation of the existing legislation remains weak. The 
Ombudsman's  Office  lacks  the  financial  and  administrative  means  necessary  to  act 
effectively.  Amendments  to  the  Anti-Discrimination  Law  expected  to  further  align  with  the 

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acquis  have  not  yet  been  adopted.  As  regards  lesbian,  gay,  bisexual,  and  transgendered 
person's  rights,  the  new  government  has  demonstrated  greater  openness  and  a  proactive 
approach  illustrated  by  large  awareness  campaigns  and  involvement  in  planning  the  'pride 
parade'. Yet, cases of discrimination against the LGBT community did not receive appropriate 
attention from public authorities. Cooperation between the Ministry of Human and Minority 
Rights and relevant civil society bodies need to be further strengthened 

Little progress can be reported on equal opportunities. Effective implementation of existing 
legislation  in  this  area  remains  a  challenge.  Awareness-raising  campaigns  and  training  for 
civil  servants  were  organised.  Local  action  plans  for  gender  equality  were  prepared  in  six 
municipalities and adopted in three of them. Progress on improving the equal pay legislation 
and introducing parental leave remain slow.  

Conclusion 

Little progress has been made in the area of social policy and employment. Amendments to 
the labour law remain to be adopted and further efforts to be made in the area of health and 
safety at work to align legislation with the acquis. The legislative  framework for the  Social 
Council  and  inclusion  of  persons  with  disabilities  has  been  strengthened  but  there  has  been 
little  progress  overall  regarding  social  inclusion.  Some  steps  have  been  taken  to  reform 
pensions.  In  the  area  of  anti-discrimination,  the  Law  on  the  Ombudsman  has  been  adopted 
and  some  progress  was  made  in  awareness-raising.  Yet,  the  measures  taken  to  address 
discrimination  against  socially  vulnerable  groups  remain  insufficient.  Important  steps  were 
made  regarding  the  tripartite  social  dialogue  but  concern  remains  as  to  the  trade  unions' 
representativeness. The capacity of the Public Employment Service needs to be strengthened, 
along  with  active  labour  market  measures  in  order  to  address  low  activity  and  employment 
rates and the mismatch between the skills available and needs. The situation of public finance 
negatively  affects  reforms  in  the  social  area.  .Promotion  of  gender  equality,  including  by 
means  of  equal  pay,  remains  weak.  Overall,  in  the  areas  of  social  policy  and  employment, 
alignment with the acquis remains at an early stage. 

4.20.  Chapter 20: Enterprise and industrial policy 

Progress can be reported in the area of enterprise and industrial policy principles. A new 
development  strategy  for  2011-2015  for  small  and  medium-sized  enterprises  (SMEs), 
prepared in close cooperation with business representatives, was adopted by the government 
in  January  2011.  The  action  plan  for  its  implementation  for  the  year  2011  was  prepared  in 
March  and  is  monitored  by  the  coordination  team  established  for  this  purpose.  In  June,  the 
Government adopted a similar strategy which is focused on promotion of competitiveness at 
the micro level in the period 2011-2015, previously adopted by the Council for Promotion of 
Competitiveness.  The  latter  was  established  in  November  2010  aiming  at  coordinating  all 
relevant  activities.  Further  action,  pratcularly  improved  coordination  of  various  institutions 
and better data on the SME sector, is needed to secure the effectiveness of these strategies.  

In designing and implementing the SME policy, Montenegro is applying the principles of the 
Small  Business  Act  and  participates  in  the  process  of  monitoring  led  by  the  European 
Commission and the OECD.  

In the area of business registration, further progress has been achieved by implementing the 
'Unified  registration  of  enterprises'  in  tax  administration.  However,  additional  efforts  are 
needed  in  this  area.  Montenegro  is  continuing  its  efforts  on  promoting  entrepreneurial 

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education and strengthening the technological capacity of SMEs, but further work remains to 
be done.  

There  has  been  some  progress  in  the  area  of  enterprise  and  industrial  instruments. 
Montenegro is continuing to participate in the Entrepreneurship and Innovation Programme. 
The Investment and Development Fund (IDF) started its funding operations, both directly and 
via intermediaries, and has started assessing possible cooperation with international financial 
institutions. However, it is too early to assess the effectiveness of its instruments.  

Coordination  of  institutional  support  to  SMEs  between  the  Ministry  of  Economy,  the 
Directorate  for  Development  of  SMEs  (SMEDD)and  its  the  regional  and  local  centres,  the 
Chamber  of  Commerce  and  financial  institutions  (IDF,  micro-credit  providers  and 
commercial banks) is developing but needs to be further strengthened  

No  progress  was  made  with  preparation  of  an  industrial  strategy.  The  assessment  of  the 
existing sectoral policies, necessary for formulating future industrial policy, is also lacking.  

Conclusion  

There has been some progress in enterprise and industrial policy. Montenegro is continuing to 
develop an enterprise policy in line with EU principles, particularly in the area of support for 
SMEs. However, industrial policy remains to be developed and efforts to formulate a policy 
in strategically important manufacturing sectors need to be intensified.  

4.21.  Chapter 21: Trans European Networks 

Limited  progress  can  be  reported  in  the  area  of  trans-European  transport  networks. 
Montenegro  continued  to  participate  in  the  implementation  of  the  Memorandum  of 
Understanding on development of the South East Europe Core Regional Transport Network 
and in the activities of the South East Europe Transport Observatory. However, further efforts 
remain  to  be  made  towards  joint  development  of  projects  of  regional  interest  with 
neighbouring countries. Upgrading road and rail links in the comprehensive network remains 
a priority. As regards the preparations for development of the Bar-Boljare motorway project 
to link the port of Bar to the border with Serbia (SEETO route IV), efforts are being made, 
with  support  from  the  European  Investment  Bank,  to  review  the  project  in  order  to  cut  the 
costs and secure its financial viability. Concerning rail network infrastructure, no progress can 
be  reported.  As  regards  the  port  of  Bar,  after  the  procedure  for  privatisation  of  the  cargo 
terminal  failed  in  April  2010,  a  privatisation  plan  was  adopted  in  March  2011.  Before  re-
launching the procedure, the government intends to increase its share in the company to 66% 
and  to  adopt  a  social  programme  for  voluntary  departures  of  staff.  Implementation  of  this 
social programme is a crucial factor in attracting interest in privatisation.  

There has been progress on in the area of trans-European energy networks. A new 400 kV 
overhead transmission line (OHL) for interconnection with Albania came into operation. As 
regards the underwater interconnection cable with Italy, agreements between Montenegro and 
the Italian company Terna were signed in November 2010 and published on the Ministry of 
Economy's website. Public hearings were organised on the draft detailed spatial plan and the 
draft strategic environmental impact assessment concerning the 400 kV OHL line linking the 
coast (Lastva) with the north of the country (Pljevlja). These two documents were adopted by 
the government in July 2011 after their approval by the Environmental Protection Agency and 
the publication of the report on the public hearings. A feasibility study for this 400 kV OHL 

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was approved by the Steering Committee of the Western Balkans Investment Framework and 
will  be  developed  from  September  2011  under  the  EC  Infrastructure  Project  Facility. 
Montenegro  signed  in  May  2011  a  Memorandum  of  Understanding  and  Cooperation  with 
Trans-Adriatic Pipeline AG on exploring opportunities in the natural gas market. The national 
transmission  system  needs  to  be  updated  and  work  remains  to  be  done  on  a  gasification 
strategy for the country. 

Conclusion 

Little  progress  has  been  made  in  the  area  of  trans-European  networks.  Regarding  TEN-T 
infrastructure,  further  work  remains  to  be  done  on  improving  road  and  rail  links.  Progress 
regarding  the  TEN-E  network  was  mainly  related  to  improving  electricity  interconnection 
lines.  Regarding  gas,  interconnections  with  neighbouring  countries  remain  to  be  developed 
(within  the  Energy  Community  gas  ring)  and  national  transmission  systems  updated. 
Preparations in the area of trans-European networks are still not very advanced. 

4.22.  Chapter 22: Regional policy and coordination of structural instruments 

Some limited developments can be reported as regards the legislative framework. A Law on 
regional development was adopted in April 2011, although not mandatory under EU cohesion 
policy.  

Little progress was made on establishment of the institutional framework. The government 
adopted a road map and action plan with a view to achieving accreditation under components 
III  (regional  development)  and  IV  (human  resources  development).  The  national  IPA 
coordinator  (NIPAC),  the  competent  accrediting  officer  (CAO),  the  national  authorising 
officer (NAO), the heads of operating structures and the Strategic coordinator (SG) have been 
appointed.  A  decree  which  defines  function  and  composition  of  the  different  operating 
structures was adopted in June 2011. In compliance with this decree, human resources were 
allocated  to  the  different  operating  structures.  Yet,  administrative  capacity,  in  terms  of  the 
necessary  staff  and  training,  is  still  weak.  In  view  of  Montenegro's  recently  achieved 
candidate  country  status  and  the  eligibility  for  IPA  components  III  and  IV  which  it  is 
conferring, preparations are lagging behind and need to be speeded up. 

With  regard  to  administrative  capacity,  limited  progress  was  made.  A  gap  assessment  has 
started.  Although  numerous  training  courses  have  been  organised,  administrative  capacity 
remains weak.  

In the area of programming, limited progress was made. Montenegro prepared a number of 
draft  documents:  a  strategic  coherence  framework  and  two  operational  programmes,  one  on 
regional  development  (component  III),  the  other  on  human  resources  management 
(component  IV).  However,  essential  elements  are  missing  such  as  the  implementing 
provisions,  allocation  of  financial  resources,  conduct  of  the  ex-ante  evaluation  and  the 
strategic environmental assessment. The quality and maturity of projects need to be improved 
in order to comply with the IPA component III and IV requirements and rules.  

In  the  areas  of  monitoring  and  evaluation  no  progress  has  been  made  in  developing  a 
roadmap to monitor and evaluate the quality and impact of development programmes.  

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Capacity building and training has been provided to the financial management and control 
structures  with  the  result  of  increased  knowledge  and  skills.  The  new  law  on  the  Audit 
Authority is pending and full independence of the AA still needs to be ensured.  

Conclusion 

Little  progress  has  been  made  in  the  field  of  regional  policy  and  coordination  of  structural 
instruments. Establishment of structures for implementing IPA components III and IV need to 
be  completed  as  a  matter  of  urgency.  Appropriate  administrative  capacity  needs  to  be 
developed,  notably  in  areas  such  as  strategic  planning,  project  development,  project 
management and financial management and control. Recruitment and training policies need to 
be  adopted  as  soon  as  possible.  Overall,  preparations  in  the  area  of  regional  policy  and 
coordination of structural instruments are at a very early stage. 

4.23.  Chapter 23: Judiciary and fundamental rights (see alsoPolitical criteria) 

Regarding the independence of the judiciary, some progress was made. The amendments to 
the Laws on courts, the Judicial Council and the State prosecution office improved to certain 
extend  the  legal  framework  by  reducing  the  possibilities  for  disproportionate  political 
influence. Amendments to the Laws on the Judicial Council and the State prosecution office 
laid down the criteria for first-time appointment of judges and deputy State prosecutors and 
their  subsequent  promotion,  for  the  appointment  of  court  presidents  and  for  the  permanent 
tenure  of  State  prosecutors.  These  amendments  also  introduced,  for  the  first  time,  a  legal 
obligation  to  apply  written,  anonymous  tests  for  selection  of  magistrates.  Members  of  the 
Commission responsible for conducting these tests for the selection of judges were appointed 
in September 2011. The new criteria for selecting entrants to the judicial system reduce the 
room  for  discretion  by  the  Judicial  and  Prosecutorial  Councils  and  thereby  improve 
transparency in the selection process. In parallel to the adoption of sub-constitutional changes, 
the Parliament enacted in July the decision in principle to amend the Constitution with the aim 
to strengthen judicial independence. Yet, with the current Constitution still in place, concerns 
persist  over  the  appointment  of  the  Supreme  Court  President  and  the  Supreme  State 
Prosecutor  by  parliament  by  simple  majority.  The  appointment  of  the  judges  of  the 
Constitutional  Court  is  still  not  fully  compliant  with  European  standards.  The  limited 
mandates  of  the  Supreme  State  Prosecutor  and  the  Heads  of  Prosecutors  Offices  remain 
problematic.  The  merit-based  elements  of  the  career  system  need  to  be  substantially 
strengthened and a country-wide single recruitment system remains to be established.  

Concerning the impartiality of judges, rules on conflict of interest and a code of conduct are 
in place. The rules for random allocation of cases do not yet guarantee genuinely random case 
allocation, as de facto limitations, particularly in smaller courts, continue to exist.  

As regards the accountability of the judiciary, initial steps have been taken to establish a track 
record  on fighting  corruption  within  the  judiciary.  Amendments  to  the  Law  on  the  Judicial 
Council provided for establishing a commission for monitoring implementation of the code of 
ethics  for  judges.  Amendments  to  the  Law  on  the  State  prosecution  office  provided  for 
adoption and monitoring of a code of ethics for prosecutors and list all possible reasons for 
disciplinary action against prosecutors. The Law on courts now lists all possible reasons for 
disciplinary  action  against  judges  and  court  presidents.  These  amendments  strengthen  the 
principle  of  security  of  tenure  by  introducing  clearly  defined  legal  grounds  for  disciplinary 
action  against  or  dismissal  of  judges  and  prosecutors.  Implementation  of  these  principles  is 
crucial  to  increase  transparency  and  ensure  proper  implementation  of  the  code  of  ethics. 

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Members of the Disciplinary commission were appointed in September 2011. Both judges and 
prosecutors continue to enjoy functional immunity. This broad protection from prosecution is 
an issue of concern. 

Regarding  the  efficiency  of  the  judiciary,  further  measures  have  been  taken  to  reduce  the 
backlog of cases in courts. With circa 12,000 unresolved complex cases from previous years 
in all courts in Montenegro at the end of 2010, the backlog was approximately 7% lower in 
2010 than in 2009. Yet, concerns persist about the reliability and quality of judicial statistics. 
The  IT  system  in  place  allows  case  tracking  and  automatic  allocation  of  cases  but  not 
statistical reporting and filing of judicial acts. The Law on notaries introduced a notary system 
aiming to reduce the burden on courts and administrative bodies. 34 notaries took up duties in 
July 2011. The new Law on enforcement and security of claims, enacted by the parliament in 
July 2011, transferred powers for civil enforcement to the bailiffs. However, enforcement of 
civil  decisions  in  particular  remains  weak.  Concerns  persist  over  the  long  duration  of  court 
proceedings.  The  Law  on  the  right  to  trial  within  a  reasonable  time  is  not  yet  implemented 
effectively.  The  constitutional  provision  on  the  right  to  legal  remedy  does  not  fully  comply 
with Article 13 of the ECHR.  

The 2011 budget for the judiciary amounts to € 26,5 million, which represents 0,83 % of the 
GDP.  However,  with  over  80%  of  the  funds  allocated  for  the  salaries  of  magistrates  and 
administrative staff, there were not sufficient budgetary resources to remedy shortfalls in the 
infrastructure  and  equipment,  which  continue  to  hinder  efficiency.  No  developments  can  be 
reported  as  regards  streamlining  the  court  network.  Montenegro  continues  to  be  one  of  the 
countries with the highest number of basic courts, magistrates, prosecutors and administrative 
staff in Europe. Efforts need to be stepped up to streamline the courts system.  

The new Criminal Procedure Code (CPC) fully entered into force on 26 August 2011 and is 
now  applied  in  all  Montenegrin  courts.  The  Laws  on  misdemeanours  and  on  free  legal  aid 
together with the Criminal Code have been aligned with the new CPC. 29 additional deputy 
State prosecutors have been appointed and a number of prosecutors and judges have received 
training  on  CPC  rules.  However,  the  capacity  of  State  prosecutors  to  implement  the  new 
legislation  and  ensure  proactive  guidance  and  coordination  of  police  and  other  law 
enforcement agencies remains insufficient. Enhanced training on implementation of the new 
CPC remains essential. 

Some progress can be reported in anti-corruption policy. Steps have been taken to address 
outstanding GRECO recommendations in the form of amendments to the Law on conflicts of 
interest and to the Criminal Code, enacted in June and July 2011 respectively. A new Law on 
political  party  financing,  adopted  in  July  2011,  improved  the  legislative  framework  in  this 
area.  Furthermore,  the  new  Law  on  civil  servants  and  State  employees  provided  legal 
protection for whistleblowers in the public administration. A new Law on public procurement 
was enacted in July 2011, with the aim of reducing opportunities for corruption and increasing 
transparency in this field.  

As  regards  repressive  measures,  the  institutional  and  administrative  capacity  of  the 
prosecutors  and  police  to  fight  corruption  has  been  partially  strengthened.  A  special  anti-
corruption investigation team has been established, made up of representatives of the police 
administration, the Office for prevention of money laundering and terrorism financing and the 
tax and customs administrations and reporting to the Special Prosecutor for organised crime, 
corruption,  terrorism  and  war  crimes.  Yet,  inter-agency  cooperation  remains  insufficient. 
Coordination  between  police  and  prosecution  is  hampered  by  the  lack  of  interconnected 

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databases  and  restrictive  provisions  on  delegating  investigations  to  law  enforcement  agents. 
Intelligence-led  policing  is  still  at  initial  stage  and  remains  to  be  implemented  across  the 
country. There is still no clear division of competences between the different anti-corruption 
bodies and the overall coordination of the implementation of anti-corruption efforts needs to 
be greatly improved. 

Most  of  the  corruption  cases  prosecuted  are  for  abuse  of  official  positions  and  bribery.  In 
December  2010,  a  High  court  judge  was  sentenced  in  second  instance  to  seven  years  of 
imprisonment for passive bribery. Nine persons were sentenced in first instance in June 2011 
to  imprisonment  for  abuse  of  official  positions  and  bribery  in  a  cadastre  case.  During  the 
reporting  period,  three  cases  were  initiated  against  28  persons  for  abuse  of  official  position 
and  bribery,  among  whom  are  the  former  Mayor  of  Budva,  his  Deputy  and  a  Member  of 
Parliament.  In  2010,  the  competent  organisational  units  filed  criminal  charges  against  12 
police  officers  for  13  criminal  offences  involving  elements  of  corruption  (11  for  abuse  of 
official  position  and  two  for  passive  bribery).  Despite  a  positive  trend,  the  track  record  of 
investigations and convictions needs to be further developed. Final court rulings, in particular 
for high-level corruption cases, remain limited. Financial investigations have to be conducted 
more systemically, as a common method of investigating serious crime. The number of cases 
in which seizure or confiscation of assets were ordered remains low. There are still no cases in 
which  the  new  provisions  of  the  CPC  and  the  Criminal  Code  on  extended  confiscation  of 
criminal assets have been used. 

In the area of corruption prevention, the Government adopted in July a risk analysis of areas 
vulnerable to corruption, which identified six areas of particular risk: local self-government, 
spatial  planning,  public  procurement,  privatisation,  education  and  healthcare.  Among  the 
recommendations  of  this  analysis  are  the  introduction  of  more  precise  mechanisms  for 
implementation  and  monitoring  of  anti-corruption  initiatives  as  well  as  improvement  of  the 
reporting methodology used by the Tripartite Commission for corruption and organised crime 
cases.  In  July,  the  Government  adopted  a  revised  2011-012  Action  Plan  for  the 
implementation of the Strategy for fighting corruption and organised crime, comprising 106 
new  measures  and  improved  indicators.  The  Directorate  for  Anti-corruption  Initiatives 
(DACI)  organised  a  number  of  relevant  awareness-raising  campaigns  and  opinion  polls. 
Cooperation with civil society in the area of anti-corruption has improved significantly. The 
Judicial Training Centre adopted training programme for judges and prosecutors in the area of 
anti-corruption  and  conducted  five  trainings  and  seminars  in  this  field,  attended  by  291 
participants. 

98%  of  State  officials  and  95%  of  local  officials  submitted  their  asset  declarations  for 
2010/2011  within  the  deadline  set  by  the  law.  For  the  first  time  a  public  official  has  been 
brought  to  court  for  failure  to  submit  asset  declaration.  Yet,  the  asset  declarations  of  civil 
servants  are  still  not  being  checked  on  substance  in  order  to  establish  cases  of  illicit 
enrichment. In 2010, the Criminal Court asked the Commission for Prevention of Conflicts of 
Interest  to  initiate  misdemeanour  procedures  against  615  public  officials  who  had  failed  to 
submit  complete  declarations  of  interest,  which  resulted  in  382  final  decisions  and 
misdemeanour fines totalling € 23,000. Amendments have been introduced in the Conflict of 
Interest law to strengthen the competences of the Commission for Prevention of Conflict of 
Interest.  Yet,  these  will  enter  into  force  only  in  March  2012.  Concern  remains  over  the 
capacity  of  the  Commission  to  perform  its  supervisory  role  adequately.  Also,  there  is  no 
uniform template for declarations of interest. 

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Few  sanctions  have  been  applied  to  the  political  parties  which  breached  the  rules  on 
financing. In 2010, seven political parties received a warning for submitting their reports on 
expenditure in election campaigns after the deadline set by the law and one party was fined 
for not submitting a report. Whereas the new law on political party financing brings important 
improvements,  concern  remains  over  the  insufficiently  dissuasive  and  undifferentiated 
sanctioning system, as well as the regime and ceiling of membership fees. Further legislative 
changes and important administrative strengthening will be needed to ensure a fully effective 
independent  oversight  by  the  State  Electoral  Commission  (SEC),  which  will  become 
supervisory authority with the entry into force of the law in January 2012. 

Montenegro is continuing to improve the legal and institutional framework for protection of 
fundamental  rights.  However,  sound  implementation  of  the  existing  legislation  and 
strengthening administrative capacity in this area are lagging behind. 

Some progress has been made against torture and ill-treatment. A new Law passed in July has 
tasked  the  Ombudsman  to  prevent  torture  and  ill-treatment.  However,  occasional  cases  of 
violence in police stations continue to occur. Reported cases are still processed slowly.  The 
number of final verdicts remains low. Some progress can be reported with the prison system. 
The  legal  and  institutional  framework  is  improving.  The  Amnesty  law  passed  last  year  has 
contributed to make prisons less overcrowded. Some rehabilitation work has been carried out 
on prison facilities and four new buildings were constructed and put in use. However, prison 
conditions  still  do  not  fully  comply  with  European  standards.  Freedom  of  expression  is, 
overall, respected in Montenegro. Progress has been made towards enhancing media freedom. 
However,  sound  implementation  of  the  regulatory  framework  has  still  to  be  confirmed. 
Investigation  of  past  cases  of  violence  and  of  continuing  threats  against  investigative 
journalists is lagging behind, as is journalists' compliance with professional ethics standards. 

Freedom  of  assembly  and  association  are,  overall,  respected  in  Montenegro.  Very  good 
progress  has  been  made  on  cooperation  between  State  institutions  and  civil  society 
organisations, which is a key priority of the Opinion.  

Some progress has been made in promoting and protecting women's rights. The government 
adopted  in  June  the  Strategy  for  protection  against  domestic  violence  for  the  period  2011-
2015; however, state activities to effectively protect victims of domestic violence are lagging 
behind. Access for women to employment rights and to decision-making posts in public and 
private sector are not being sufficiently addressed.  

As  regards  children's  rights,  some  progress  has  been  made  on  improvement  of  the  legal, 
regulatory  and  institutional  framework.  The  capacities  of  the  Council  for  the  Rights  of  the 
Child  have  increased.  However,  the  situation  is  not  fully  satisfactory  when  it  comes  to 
strengthening  the  institutions  dealing  with  children's  rights,  protecting  the  rights  of  children 
with disabilities and without parental care or respecting children's privacy. 

Some  progress  has  been  made  with  the  rights  of  persons  with  disabilities.  However,  they 
continue to face problems with access to economic and social rights, notably to education and 
employment. Deinstitutionalisation is at an early stage and conditions of the Komanski Most 
institute are not yet in line with European and international standards. 

As regards anti-discrimination policy, efforts have been made. The Law on the Ombudsman 
was passed in July; he has now responsibility over cases of anti-discrimination. An advisor on 
human  rights  and  anti-discrimination  was  appointed  in  September  in  the  Prime  Minister's 

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Office.  A  Council  for  the  protection  against  discrimination  has  been  established,  to  monitor 
and  coordinate  the  work  of  the  authorities  in  this  field.  Awareness-raising  campaigns  and 
trainings for civil servants have been organized. However, the effective implementation of the 
legal  and  institutional  framework  on  anti-discrimination  remains  a  challenge,  and  its 
alignment  with  the  acquis  it  is  still  limited.  The  most  vulnerable  groups  continue  to  face 
discrimination, including by public entities. 

Some  progress  has  been  made  as  regards  labour  and  trade  union  rights.  However,  bipartite 
social  dialogue  and  the  development  of  autonomous  social  dialogue  remain  insufficient, 
especially  at  local  level.  Implementation  and  enforcement  of  labour  law  remains  a  serious 
challenge. 

Limited progress has been made on property rights. The process of restitution remains very 
slow. The Parliament adopted in July amendments to the law on state survey and immovable 
property cadastre; yet, functioning of the cadastre system remains to be further improved. As 
regards minorities, the interethnic climate in Montenegro remains smooth. Progress has been 
achieved on harmonising the legal framework with the Constitution. Some effort has been put 
to  facilitate  civil  registration  of  Roma,  Ashkali  and  Egyptian  population.  However,  RAE 
persons continue to be the most vulnerable group facing discrimination in access to economic, 
social,  cultural,  economic  and  political  rights.  The  situation  of  displaced  RAE  persons  is  a 
matter of concern, particularly in the Konik area. 

As  regards  personal  data  protection,  some  progress  has  been  made.  The  Agency  for 
Protection  of  Personal  Data  has  been  established  and  started  functioning,  although  still 
lacking  of  an  adequate  allocation  in  terms  of  human  resources  and  financing.  It  is  actively 
involved in protection of personal data. However the Agency has not yet established a prior-
checking  system,  as  stipulated  by  the  Data  Protection  Directive.  Its  capacities  for 
investigation and analysis need to be further developed and its independence needs to be fully 
ensured in practice. Legislation on retaining certain personal data has yet to be aligned with 
the  Data  Retention  Directive.  A  proper  balance  has  still  not  been  struck  between  the 
Information Secrecy Act, the Law on protection of personal data and the Law on free access 
to information. 

There were no developments regarding EU citizens' rights.  

Conclusion 

Overall, Montenegro has made some progress in this area, notably as a result of its efforts to 
address  the  relevant  key  priorities  set  out  in  the  Commission  Opinion.  Further  sustained 
efforts will be needed to align with the acquis in this chapter, in particular to implement and 
enforce  it  effectively  in  the  medium  term.  Further  strengthening  of  administrative  and 
implementation capacity is needed. 

4.24.  Chapter 24: Justice, freedom and security 

There  has  been  some  progress  on  migration.  A  new  strategy  for  integrated  management  of 
migration for 2011-2016 and the corresponding action plan for 2011-2012 have been adopted. 
The  police  developed  software  for  online  reporting  by  hotels  of  short-term  stays  by 
foreigners. The readmission agreement with the EU continues to be implemented smoothly. 
Montenegro  signed  a  bilateral  readmission  agreement  with  Kosovo  and  ratified  the  existing 
readmission agreement with Albania. Construction of a reception centre for foreigners is in its 

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final  phase.  The  number  of  irregular  migrants  detected  increased  in  2011,  partly  due  to  the 
events  in  the  southern  Mediterranean  region.  Further  efforts  are  needed  to  ensure  full 
alignment with the acquis on legal migration, notably on right to family reunification, long-
term  residence  and  conditions  of  admission  of  third-country  nationals  for  the  purposes  of 
studies.  Steps  are  to  be  taken  to  strengthen  administrative  capacity  and  to  improve  inter-
agency cooperation. In this area, the country is advanced. 

Some progress has been made in the area of asylum. Amendments to the Law on foreigners 
were  enacted  in  July,  with  the  aim  of  bringing  it  closer  to  the  EU  acquis  and  international 
standards.  A  national  database  for  checking  asylum  seekers'  personal  data,  including 
fingerprints, has been set up. Reception conditions for asylum applicants have improved, but 
further efforts are needed to ensure that they have access to healthcare, education and personal 
documents. Construction of a centre for asylum-seekers is under way. Both the law on asylum 
and the law on foreigners are yet to be fully implemented and harmonised with the EU acquis 
and  international  standards.  The  quality  of  adjudication  of  asylum  claims  needs  to  be 
improved.  The  State  Asylum  Appeals  Commission has  continued  to  render  its  decisions  on 
asylum  cases  mainly  on procedural  rather  than  substantive  aspects.  During  the  reporting 
period,  out  of  96  asylum  applications  submitted,  57  were  rejected  as  groundless,  37 
procedures were suspended and 3 persons were granted subsidiary protection. In this area, the 
country is moderately advanced.  

There has been some progress on visa policy. Bilateral agreements concluded with Bulgaria, 
Croatia  and  Serbia  complemented  the  country's  limited  consular  network,  as  their  consular 
offices  issue  visas  for  Montenegro  in  a  number  of  third  countries.  In  2010,  a  total  of  2,258 
visas were issued, out of which Montenegrin consular offices issued 1,773, Bulgarian 406 and 
Serbian 79. There is still neither an online link between the diplomatic and consular missions 
and the Ministry of Foreign Affairs and European Integration's (MFAEI) national visa system 
nor  a  visa  sticker  with  security  features.  The  number  of  visas  issued  at  the  border  is  still 
relatively high, which is a cause for concern. The administrative and technical capacity of the 
MFAEI  and  of  the  country's  diplomatic  and  consular  network  need  to  be  upgraded.  The 
country  has  not  yet  fully  aligned  its  legislation  with  the  EU  negative  and  positive  lists. 
Preparations in this area are progressing slowly. 

Visa liberalisation for Montenegrin citizens travelling to the Schengen area has been in force 
since 19 December 2009. Implementation of the visa-free regime has been smooth so far, with 
small  numbers  of  asylum-seekers  and  irregular  migrants  detected  in  the  Schengen  area.  To 
ensure  the  continued  implementation  of  the  commitments,  a  post  visa  liberalisation 
monitoring mechanism was established in view of increased numbers of asylum seekers from 
the region. The Commission presented its first monitoring report to the European Parliament 
and the Council in June 2011.  

Progress  can  be  reported  in  the  field  of  external  borders  and  Schengen.  The  integrated 
border management strategy and action plan have been implemented. All 28 border crossing 
points have been equipped with the necessary IT equipment, including passport readers, and 
have online access to the national and Interpol databases. A system for electronic surveillance 
of the blue border has been set up and a video monitoring system was installed in the ports of 
Bar  and  Kotor.  A  risk  assessment  on  green  and  blue  border  safety  has  been  adopted. 
Cooperation  with  Frontex  is  good  and  Montenegro  was  involved  in  a  joint  operation.  The 
institutional and  administrative capacity of the border police has been strengthened,  notably 
with  the  aid  of  training  based  on  common  EU  standards.  Further  efforts  are  needed  to 
maintain  the  capacity  of  the  border  police  and  avoid  frequent  rotation  of  trained  staff.  The 

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security of the blue border and the border with Kosovo need to be substantially strengthened. 
Preparations in the area of external borders and Schengen are advanced. 

There  has  been  good  progress  in  judicial  cooperation  in  civil  and  criminal  matters.  As 
regards civil matters, Montenegro ratified the Hague Conventions on the taking of evidence 
abroad in civil and commercial matters, and on the service abroad of judicial and extrajudicial 
documents  in  civil  and  commercial  matters.  Practical  enforcement  of  both  the  national  and 
international  legal  frameworks  needs  to  be  improved.  As  regards  judicial  cooperation  in 
criminal matters, the legal framework for fighting serious and organised crime at regional and 
international levels has been strengthened. Montenegro ratified an extradition agreement with 
Croatia covering own nationals, amended the existing extradition agreement with Serbia and 
signed  an  equivalent  accord  with  the  former  Yugoslav  Republic  of  Macedonia.  The 
agreements  with  Bosnia  and  Herzegovina  on  mutual  legal  assistance  in  civil  and  criminal 
matters  and  on  mutual  recognition  of  decisions  in  criminal  matters  were  also  ratified  in 
December 2010. However, the legal framework is not yet complete. Further efforts are needed 
to align it fully with the acquis, in particular by applying legislation on the European evidence 
warrant  and  the  principle  of  mutual  recognition  of  judgments  and  probation  decisions.  The 
capacity  of  the  Ministry  of  Justice  to  implement  the  existing  framework  for  judicial 
cooperation in criminal matters remains to be strengthened. Montenegro needs to make sure 
that  it  meets  all  the  criteria,  notably  on  personal  data  protection,  to  conclude  cooperation 
agreement with Eurojust. Preparations in this area are progressing. 

Progress has been made in the area of police cooperation and the fight against organised 
crime. Montenegro stepped up its efforts to strengthen the fight against organised crime based 
on threat assessment and proactive investigations, increased cooperation with regional and EU 
partners,  efficient  processing  of  criminal  intelligence  and  enhanced  law  enforcement 
capacities  and  coordination,  and  to develop  a  solid  track-record  in  this  area,  which  is  a  key 
priority set out in the Opinion. Regional and international police cooperation has improved, 
and the number of investigations and convictions in the area of organised crime has gradually 
increased.  During  the  reporting  period,  Montenegro  successfully  conducted  a  number  of 
police  operations  in  close  cooperation  with  Interpol,  Europol  and  some  EU  Member  States, 
which  lead  to  the  indictment  of  22  persons.  An  international  law  enforcement  coordination 
unit  (ILECU)  has  been  formally  established  to  improve  cooperation  and  investigations  in 
cases  with  a  foreign  dimension.  Montenegro  continued  to  cooperate  with  Interpol  and  other 
relevant  organisations.  The  police  signed  a  bilateral  agreement  with  the  Italian  police  on 
cooperation in the fight against organised crime and drug trafficking. Similar bilateral police 
cooperation agreements were signed with Serbia and Croatia.  

The policy framework in this area has improved. An action plan for the period 2010-2012 for 
the  fight  against  organised  crime  and  corruption  has  been  adopted,  along  with  a  police 
development and operational strategy for the period 2011-2013. The new Criminal Procedure 
Code  (CPC)  became  fully  applicable  in  August  2011.  It  established  a  prosecutor-led 
investigation  model,  extended  the  use  of  special  investigative  measures,  introduced  the 
reverse burden of proof for property of suspicious legal origin and extended confiscation of 
criminal assets. The legislative framework and institutional framework for witness protection 
is in compliance with international standards. 

During the reporting period, financial investigations in two cases have lead to the temporary 
seizure of assets, amounting to over € 20 million. An organised crime threat assessment has 
been  developed  and  further  steps  were  taken  to  establish  an  intelligence-led  policing  (ILP) 
model. A joint investigation team has been put in place and an undercover unit set up within 

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the Criminal Police Directorate. The institutional and administrative capacity of the police has 
been strengthened, including with the aid of training courses to improve its capacity to fight 
organised crime and corruption. Specific training on the new provisions of the CPC has been 
given to law enforcement agents, judges and prosecutors. 

Yet,  insufficient  information-sharing  between  prosecutors  and  law  enforcement  agents  and 
restrictive  provisions  on  delegating  investigations  to  the  police  are  hampering  smooth 
implementation  of  the  new  CPC.  Cooperation  and  coordination  between  police  and 
prosecution need to be improved. Use of special investigative measures is rare and hampered 
by the lack of adequate equipment and specialised human resources. The new Law on internal 
affairs and amendments to the rulebook on the internal organisation of the police are still to be 
adopted. Frequent rotation of trained police officers in expert areas is a challenge in terms of 
maintaining capacity and professionalism. 

Police and prosecutors' capacity to conduct financial investigations, trace criminal assets and 
present  related  evidence  before  the  courts  remains  to  be  strengthened.  Intelligence-led 
policing  is  still  at  an  initial  stage  and  remains  to  be  implemented  across  the  country.  The 
ILECU  is  not  yet  fully  functional  and  crime  mapping  is  at  initial  stage.  Further  efforts  are 
needed  to  strengthen  the  financial  capacity  and  autonomy  of  the  Witness  Protection  Unit 
(WPU). The level of inter-agency cooperation remains insufficient and impeded by the lack of 
a  national  integrated  intelligence  system.  Operational  cooperation  with  Europol  needs  to  be 
put in place and a liaison officer posted.  

Progress has been made in the fight against money laundering. A new rulebook on the internal 
organisation  and  job  descriptions  of  the  Administration  for  prevention  of  money  laundering 
and terrorism  financing has been adopted. The number  of  staff  of  the  Financial  Intelligence 
Unit  (FIU)  has  been  increased  slightly.  Inter-agency  cooperation  on  crime  suppression  has 
been  stepped  up  under  an  agreement  signed  by  the  relevant  authorities  in  December  2010. 
Cooperation with other countries has been strengthened by bilateral agreements on exchanges 
of financial intelligence data signed with Moldova, San Marino and Israel. Similar agreements 
with the Russian Federation, Slovenia and Aruba have been updated. 

The Insurance Supervision Agency adopted guidelines on risk analysis on money laundering 
and  procedures  for  identifying  suspicious  transactions.  Reporting  of  suspicious  transactions 
by the banking sector has increased. However, banks are still the only entities reporting. The 
overall level of reporting of suspicious transactions by relevant bodies remains insufficient to 
allow  proactive  investigations  by  prosecutors.  Suspicious  transactions  are  still  reported  on 
paper forms which encumbers the procedure. The Law on the prevention of money laundering 
and terrorism financing remains to be amended in line with MONEYVAL recommendations. 
High staff turnover and limited technical capacity are hampering effective functioning of the 
FIU. The analytical capacity of law enforcement agencies in this area needs to be increased. 
There have been only two final convictions for money laundering in the reference period. 

Some progress has been made with regard to trafficking in human beings. Montenegro ratified 
the  Council  of  Europe  Convention  on  the  protection  of  children  against  sexual  exploitation 
and sexual abuse. The government adopted an action plan defining the activities in the fight 
against  trafficking  in  human  beings  for  the  period  2010-2011.  Fifteen  trafficking  offenders 
were  given  prison  sentences  in  2010.  Substantial  public  awareness-raising  and  training 
activities continued. There is a good cooperation with civil society organisations in this area. 
At  the  same  time,  identification  and  protection  of  victims,  especially  children,  and  other 
vulnerable groups  need to be  strengthened considerably. Only one victim  of trafficking was 

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identified during the reporting period. More efforts are needed in order to protect victims and 
make their reintegration into society easier.  

Montenegro has made progress with addressing challenges posed by organised crime. Further 
work  needs  to  focus  on  putting  in  place  and  using  the  various  instruments  necessary  for 
efficient  police  and  investigative  work,  including  intelligence-led  policing,  establishing  an 
integrated  intelligence  information  system,  strengthening  proactive  investigations  and 
interagency cooperation. Effective implementation of the new Criminal Procedure Code is the 
key to achieving sustainable results in this area. Further efforts are needed in the fight against 
trafficking in human beings and fight against money laundering in particular. Preparations in 
the  area  of  anti-money  laundering  are  progressing  slowly.  In  the  fight  against  trafficking  in 
human beings, Montenegro is moderately advanced. 

There  has  been  some  progress  in  the  fight  against  terrorism.  The  government  adopted  a 
strategy for preventing and combating terrorism, money laundering and terrorist financing for 
the period 2010–2014, along with an action plan for implementing the strategy for the period 
2010–2012.  A  National  Commission  for  implementing  the  strategy  has  been  established, 
made  up  of  representatives  from  all  the  relevant  institutions.  The  special  counter-terrorism 
unit in the Police Directorate received training.  

Capacity to detect and address activities possibly linked to terrorism remains limited. The lack 
of  a  uniform  inter-agency  information  system  at  national  level,  allowing  transmission  of 
classified documents, considerably hinders counter-terrorism efforts. Preparations in this area 
are moderately advanced. 

Progress  can  be  reported  on  cooperation  in  the  field  of  drugs.  The  Law  on  prevention  of 
misuse  of drugs  was  enacted  by  parliament  in  May  2011,  thus  completing  the  national 
legislative  framework.  During  the  reporting  period,  Montenegro  successfully  conducted  a 
number of police operations, in close cooperation with the police forces of EU Member States 
and  the  US  Drug  Enforcement  Agency,  which  led  to  the  seizure  of  higher  quantities  of 
cocaine and the arrest and prosecution of members of organised crime organisations. Regional 
and  international  police  cooperation  has  been  strengthened  with  the  ratification  and 
implementation of bilateral agreements on the subject of organised crime with Croatia, Serbia 
and Italy. A National Office on Drug Prevention has been established within the Ministry of 
Health and a threat assessment on drug trafficking completed. Some progress has been made 
in relation to drug prevention in schools and detention centres.  

Drug trafficking remains a major concern, as Montenegro is one of the main Balkan routes for 
drug  trafficking  to  and  from  the  EU.  The  amount  of  seizures  remains  low.  In  the  reference 
period,  just  728  kg  of  marijuana,  6  kg  of  heroin  and  a  small  quantity  of  other  drugs  were 
seized.  Measures  to  fight  infiltration  of  the  legal  system  by  organised  crime  organisations 
need  to  be  stepped  up,  as  does  cross-border  police  cooperation.  The  administrative  and 
technical  capacity  of  the  law  enforcement  agencies  to  fight  drug-related  crime  has  to  be 
strengthened.  Law  enforcement  cooperation  and  coordination,  in  particular  to  ensure  the 
security  of  the  blue  border,  needs  to  be  reinforced.  A  focal  point  for  cooperation  with  the 
European  Monitoring  Centre  for  Drugs  and  Drug  Addiction  (EMCDDA)  remains  to  be 
appointed. Further efforts are needed on drug prevention and on treatment and rehabilitation 
of drug users. Preparations in this area are progressing. 

Some progress has been reported on customs cooperation. A customs cooperation agreement 
was  signed  with  Serbia  in  November  2010.  The  Customs  Administration  carried  out  a  gap 

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analysis  of  customs  blueprints,  which  highlighted  the  need  to  initiate  the  procedure  for 
accession to the Convention on mutual assistance and cooperation between the Member States 
(Naples II). The Convention on the use of information technology for customs purposes has 
not been ratified yet. The technical and administrative capacity of customs services needs to 
be further upgraded and cooperation with other law enforcement agencies enhanced in order 
to fight organised crime effectively. Preparations in this area are progressing. 

For the fight against counterfeiting of the euro, see Chapter 32 – Financial control. 

Conclusion 

Further progress has been made on strengthening the legal and institutional framework in the 
area of justice, freedom and security. Some progress has been made in the field of migration 
and asylum, but further efforts are needed to ensure proper reception conditions for asylum-
seekers  and  irregular  migrants.  Visa  policy  requires  further  alignment.  Progress  has  been 
made in the area of border management. Good progress has been achieved on strengthening 
judicial cooperation, particularly in criminal matters. A new strategy was adopted for fighting 
terrorism.  Progress  has  been  made  on  addressing  challenges  in  the  fight  against  organised 
crime, in particular in the form of closer international and regional cooperation. The number 
of  related  investigations  and  arrests,  notably  in  the  area  of  drugs  trafficking,  increased 
slightly.  Further  efforts  to  tackle  drug  trafficking  are  needed.  Intelligence-led  policing  and 
inter-agency  cooperation  also  need  to  be  improved.  Financial  investigations  in  two  major 
cases led to the temporary seizure of assets of significant amount. Yet, the overall number of 
financial  investigations  and  confiscations  of  criminal  assets  remains  low.  Investigation  and 
prosecution  mechanisms  have  to  be  strengthened,  in  particular  in  the  areas  of  trafficking  in 
human  beings  and  money  laundering.  Amendments  to  the  laws  on  internal  affairs  and  on 
preventing money laundering are still pending. Preparations in this area are on track.  

4.25.  Chapter 25: Science and research 

Good  progress  can  be  reported  in  the  area  of  research  and  innovation  policy.  Political 
commitment and administrative capacity were strengthened by the creation in December 2010 
of a new Ministry of Science, responsible for policymaking and funding of research activities. 
In  addition,  the  government  established  in  February  2011  a  new  Council  for  Scientific  and 
Research  Activity  comprising  11  members  representing  the  public  and  private  sectors, 
research institutes and academics.  

With respect to research cooperation under the Seventh EU Framework Programme (FP7), 
Montenegro  organised  several  information  days,  participated  regularly  in  FP7  management 
meetings  and  built  a  good  functioning  network  of  national  contact  points.  It  has  also  taken 
action to stimulate participation by Montenegrin research entities in FP7 by granting financial 
support  to  successful  applicants.  However,  in  terms  of  successful  projects,  progress  is 
moderate.  

Montenegro is actively pursuing research opportunities with other international partners and 
has  concluded  several  bilateral  science  and  technology  agreements  with  neighbouring 
countries and international partners such as COST, EUREKA and NATO.  

Some  progress  was  made  towards  integration  into  the  European  Research  Area  (ERA). 
Montenegro  has  taken  several  further  measures  to  implement  the  National  Strategy  for 
Science  and  Research  Activities  (2008-2016).  A  new  Law  governing  scientific  research 

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activity  was  adopted  in  December  2010.  It  sets  out  conditions  for  State  funding  for  both 
public and private institutions in 14 research programmes and priority areas in line with FP7. 
Montenegro  has  also  taken  several  decisions  to  increase  use  of  information  technology  for 
research purposes. The government has set up an electronic information system on scientific 
and  research  activities  which  aims  at  processing  automatically  all  information  of  interest  to 
scientific  activities  in  Montenegro  and  abroad.  It  has  also  adopted  an  information  and 
communications  technology  (ICT)  development  plan  to  assess  use  of  ICT  for  scientific 
research activities, review the legislation adopted in the ICT field and analyse the networking 
between  ICT  companies  and  scientific  research  institutes.  In  January  2011,  a  strategy  for 
development  of  SMEs  was  adopted,  covering  the  period  2011-2015.  It  focuses  on  creating 
better  business  conditions  and  entrepreneurship  for  SMEs  and  includes  several  measures  to 
stimulate  and  monitor  research  activities  of  SMEs  which,  in  turn,  will  contribute  to  the 
Innovation  Union.  In  March  2011,  an  Action  Plan  on  Mobility  of  Scientists  was  adopted 
containing measures aiming at strengthening inward, outward and inter-sectoral mobility over 
the  period  2011-2012  and,  in  doing  so,  preparing  for  adoption  of  the  European  Charter  and 
Code  of  Conduct  for  the  recruitment  of  researchers.  EURAXESS,  the  mobility  portal 
organised  by  the  University  of  Montenegro  which  is  the  bridgehead  organisation,  has  been 
fully  operational  since  November  2010.  Montenegro  launched  a  feasibility  study  on 
establishing science parks and centres of excellence.  

In the absence of valid statistics, it has not been possible to monitor progress on investment in 
research, but the level is still very low (estimated at 0,13% of GDP in 2008). The Ministry of 
Science and the Statistical Office are currently carrying out a statistical survey in line with EU 
standards.  

Conclusion 

Good  progress  can  be  reported  in  the  areas  of  science  and  research.  The  institutional  and 
legislative  framework  for  scientific  research  activities  has  been  strengthened  and  several 
measures  have  been  taken  to  improve  the  mobility  of  researchers.  However,  investment  in 
research  remains  weak  and  further  efforts  are  needed  in  order  to  establish  stronger  links 
between  the  scientific  community  and  the  private  sector  and  stimulate  public  and  private 
investment  in  scientific  research  activities.  Further  efforts  are  also  required  to  increase 
participation  in  the  Seventh  EU  Framework  Programme  for  research  activities.  Preparations 
for the Innovation Union need to be duly considered. Overall, the action taken is in line with 
and contributes to the objectives set at EU level for research and innovation. Preparations in 
this area are well on track. 

4.26.  Chapter 26: Education and culture 

Some  progress  has  been  made  in  the  fields  of  education  and  training.  The  legislative 
framework has been strengthened. A new Law on the national qualifications framework and a 
corresponding action plan covering the period 2011-2012 were adopted in December 2010. In 
December also, Amendments to the Law on pre-school education were adopted in compliance 
with the strategy for early and pre-school education, providing for the enrolment of five-year-
olds in primary school (2010-2015). The first Law on adult education was adopted in March 
2011.  Yet,  planned  educational  reforms  are  slow  in  being  implemented  and  the  human  and 
financial  resources  of  the  newly  established  Ministry  of  Education  and  Sports  (formally 
Education  and  Science)  are  weak.  Montenegro's  participation  in  the  latest  PISA  helps  to 
identify gaps in the education reform. As regards inclusive education, the Law on education 
of  children  with  special  needs  was  amended  to  provide  further  support.  In  addition, 

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implementation  of  the  existing  legislation  on  inclusive  education  for  vulnerable  groups  and 
children with disabilities is continuously improving. There was some progress with vocational 
education  and  training  (VET)  consisting  mainly  in  the  adoption  of  a  set  of  rulebooks  on 
examination  and  evaluation  of  formally  and  informally  acquired  knowledge.  Yet,  the  VET 
system needs to be modernised with a view to responding better to labour market needs (see 
also Economic criteria). 

Implementation of the Bologna process in higher education continued. A strategy for quality 
assurance  and  another  for  higher  education  development  and  financing  were  adopted  in 
March and April 2011 respectively. The challenge remains to be in the implementation phase 
of  these  strategies,  in  part  due  to  the  limited  administrative  capacity.  Members  of  the  new 
Higher  Education  Council  have  been  appointed  in  accordance  with  the  amended  Law  on 
higher education. The new Council comprises thirteen members appointed for four years. As 
regards student mobility, students' participation in various European mobility programmes has 
been  increasing  constantly.  The  Tempus  programme  remains  the  most  important  instrument 
for reforms in higher education in Montenegro. 

In the field of youth policy, progress has been made regarding participation by Montenegro in 
the  Youth  in  Action  Programme's  European  Voluntary  Service  (EVS)  and  cooperation  with 
the countries neighbouring the EU.  

Some progress can be reported in the field of culture. Montenegro is participating in the EU 
Culture  programme.  It  submitted  in  March  2011  a  request  to  join  the  Europe  for  Citizens 
programme.  

Conclusion 

Some  progress  can  be  reported  in  the  area  of  education  and  culture.  Quality  assurance 
mechanisms  and  a  national  qualification  framework  have  been  adopted,  in  line  with  the 
Bologna process. Yet, implementation is still a challenge. The visibility of and access to the 
Youth  in  Action  programme  have  been  enhanced.  Cooperation  with  neighbouring  countries 
has been strengthened via the Tempus programme. Further efforts will be required to ensure 
inclusive  education  for  vulnerable  groups  and  children  with  special  needs.  Capacities  for 
sound  financial  management  and  financial  control  still  need  to  be  strenghened  in  a  view  of 
Montenegro's  participation  in  the  decentralised  EU  programmes.  Overall,  in  the  area  of 
education and culture, alignment with the acquis is moderately advanced.  

4.27.  Chapter 27: Environment 

Little  progress  has  been  made  in  the  area  of  the  environment.  As  regards  horizontal 
legislation,  a  new  Law  on  offences  providing  for  special  sanctions  for  environmental 
violations  was  adopted  in  January  2011.  This  law  aims  at  aligning  with  the  Directive  on 
environmental crime but further efforts will be needed to align fully this law with the acquis, 
especially  as  regards  criminalisation  of  specific  offences,  criminal  penalties  and  sanctions 
other  than  fines.  An  'Aarhus  Centre'  was  opened  in  April  2011  with  the  main  goal  of 
improving access to information, public participation in decision-making and access to justice 
in  environmental  matters.  Implementation  of  environmental  impact  assessments  has 
improved,  but  involvement  of  civil  society  and  other  stakeholders  is  still  insufficient.  No 
progress  was  achieved  on  aligning  national  legislation  with  the  acquis  as  regards  access  to 
liability  and  strategic 
environmental 
environmental assessment provisions on trans-boundary aspects.  

justice,  environmental 

information,  access 

to 

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Some  progress  have  been  made  in  the  field  of  air  quality  by  adopting  implementing 
legislation on air quality monitoring and limit values for the pollutant content in liquid fuels 
and for emissions from stationary sources. Laws on ratification of the three protocols on long-
range  transboundary  air  pollution  were  adopted  in  June  2011.  However,  setting  up  an  air 
monitoring  system  and  identifying  conurbations  and  zones  are  still  at  an  early  stage.  No 
improvement can be reported in the administrative capacity in this field.  

Progress on waste management was limited to adoption of implementing legislation relating 
to  permits,  import  and  export  of  waste  and  treatment  of  certain  waste  streams.  As  regards 
infrastructure,  the  first  recycling  centre  has  begun  operating  in  Podgorica.  Most  waste, 
however, is still disposed of in open sites or multiple unauthorised dumps. Development of an 
integrated waste management system is at an early stage and little progress was achieved, in 
particular, with construction of regional landfills in line with EU standards.  

No  progress  can  be  reported  in  the  field  of  water  quality.  Insufficient  investment,  unclear 
division  of  responsibilities  between  the  authorities  and  lack  of  coherence  in  their  action  are 
seriously hampering progress in this area.  

In  the  field  nature  protection,  some  progress  can  be  reported  with  regard  implementing 
legislation  –  a  number  of  rulebooks  have  been  adopted  on  different  aspects  of  management 
and  protection  of  wild  fauna  and  flora.  However,  implementation  of  the  Habitats  and  Birds 
Directives, including building up scientific data for designation of protected areas and future 
Natura 2000 sites, is lagging behind. 

As  regards  industrial  pollution  and  risk  management  some  progress  was  made  in  aligning 
with the Waste Incineration and Solvents Emissions directives.  

Some progress can be reported in the field of chemicals, mainly related to ratification of the 
Stockholm and Rotterdam Conventions.  

As regards the fight against noise, a new Law on noise protection was adopted in May 2011. 

Regarding climate change, Montenegro made little progress on general policy developments. 
Significant  awareness-raising  is  required  at  all  levels.  The  issue  of  climate  change  is 
integrated scarcely or not at all into sectoral policies, strategies and plans, with the exception 
of the national forest policy. A National Policy and Action Plan for Climate Change are still 
missing.  At  the  international  level,  Montenegro  supported  the  EU's  position  at  COP16  in 
Cancun and has associated with the Copenhagen Accord but has not formulated pledges for 
greenhouse  gas  (GHG)  emissions  reduction.  Montenegro  submitted  the  first  national 
communication under the UNFCCC in October 2010 and development of the second is under 
way. The country participated actively in the climate work under the Regional Environmental 
Network for Accession (RENA). 

As regards the EU climate acquis, the national legislation is at an early stage of alignment. A 
Decree on limit values for the pollutant content in liquid fuels of petroleum origin has been in 
force  since  1  January  2011.  Further  efforts  are  required  towards  convergence  with  the  EU 
Monitoring  Mechanism  Decision.  No  progress  was  made  on  preparing  for  inclusion  of 
Montenegro's installations in the EU emissions trading system (EU ETS). Concrete steps are 
needed  to  gradually  move  towards  taking  a  GHG  reduction  target  in  order  to  be  able  to 
implement EU climate acquis, especially the EU Emissions Trading Scheme and to join the 
EU Effort-Sharing. As far as ozone-depleting substances and fluorinated gases are concerned, 

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Montenegro  continues  to  implement  the  Montreal  Protocol,  but  needs  to  take  further  steps  to 
align with the EU legislation. Montenegro associated itself with the Declaration adopted at the 
22nd meeting of the Parties to the Montreal Protocol on the global transition away from HCFCs 
and CFCs.  

Some  progress  was  made  regarding  administrative  capacity.  Following  the  government 
reshuffle in December 2010, responsibility for environmental policies was transferred to the 
Ministry for  Sustainable Development  and Tourism and the part of the ministry responsible 
for the environment was restructured, based on a new organisation chart. A new department in 
charge of waste management and municipal development was created. However, this has not 
yet resulted in any significant improvement in administrative capacity. In particular, the heavy 
reliance  on  temporary  staff  and  high  turnover  within  the  ministry  remains  an  issue.  The 
administrative  capacity  of  the  Environmental  Protection  Agency  (EPA)  has  improved. 
However, the EPA's inspection section needs to be reinforced. While the general number of 
inspections  at  national  level  is  increasing,  there  are  problems  with  handling  inspections 
properly,  recording  breaches  and  filing  infringement  cases  for  further  prosecution. 
Administrative  capacity  as  well  as  technical  and  financial  resources  need  to  be  considerably 
strengthened for the country to be able to align with and implement the requirements of the EU 
climate change policy and legislation. 

Conclusion 

Montenegro has made little progress with alignment and implementation of the acquis in the 
field  of  the  environment  and  climate  change.  Progress  is  mainly  related  to  adoption  of 
implementing  legislation  on  waste  management  and  nature  conservation  and  ratification  of 
some 
the 
international  environmental  agreements.  The  administrative  capacity  of 
Environmental Protection Agency has improved. Montenegro needs to speed up its strategic 
planning in all sectors and find sustainable funding for implementation. The environment and 
climate  change  has  to  be  integrated  into  other  sectors  more  systematically,  in  particular 
energy. Capacity for environmental impact assessments needs to be improved and substantive 
public  consultations  held.  The  capacity  of  the  administration  at  national  and  local  level 
responsible for environment and climate change needs to be strengthened. 

4.28.  Chapter 28: Consumer and health protection 

There  has  been  progress  in  the  area  of  consumer  protection.  The  annual  report  on  the 
Implementation of the National Consumer Protection Programme (NCPP) for 2010-2012 and 
its corresponding action plan was adopted in July 2011 by the government. Implementation is 
on  track  but  the  Department  in  charge  within  the  Ministry  of  Economy  needs  to  be 
strengthened  in  order  to  enhance  coordination  and  further  improve  implementation.  The 
administrative capacity of the Arbitration Board, responsible  for settling  consumer disputes, 
requires  also  strengthening.  There  are  only  two  non-governmental  organisations  actively 
involved in consumer protection, both of which suffer from a serious lack of resources. The 
Council for cooperation of governmental and non-governmental bodies, established in April 
2010, does not involve any of them yet. Awareness of consumer protection still needs to be 
raised as the majority of the population (87 %) believes that it is not sufficiently informed.  

There  has  been  some  progress  on  product  safety  issues.  In  compliance  with  the  Law  on 
general  product  safety  and  with  the  aim  of  further  aligning  with  the  acquis,  a  rulebook 
establishing Montenegrin standards on general product safety has been adopted. A body has 
been established for coordinating the activities of State and non-State authorities responsible 

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for  market  surveillance,  providing  guidelines  and  monitoring  objectives  set  in  the  market 
surveillance strategy (see also Chapter 1 – Free movement of goods). 

There has been some progress as regards  non-safety-related issues. A new Law  on tourism, 
partly transposing the Package Travel Directive, was adopted in October 2010. The new Law 
on  consumer  protection  has  yet  to  be  adopted  to  align  national  legislation  with  several  EU 
Directives  including  those  dealing  with  unfair  commercial  practice,  unfair  terms  of  contract 
and  injunctions,  distance  selling,  certain  aspects  of  timeshares  and  sale  of  consumer  goods 
and with Commission recommendations on arbitration and mediation in disputes.  

There has been some progress in the area of public health. e-health is fully integrated into the 
primary healthcare system but its implementation is still slow. Efforts to upgrade healthcare 
information systems need to continue in order to guarantee safe management of patient data.  

Amendments  to  the  Law  limiting  use  of  tobacco  products  were  adopted  in  June  2011.  Yet, 
smoking  remains  a  serious  problem  which  is  having  negative  effects  on  public  health  and 
more efforts are needed to address it.  

With  regard  to  communicable  diseases,  an  action  plan  to  implement  international  health 
regulations  and  a  2010-2014  strategy  for  the  fight  against  HIV/AIDS  have  been  adopted  in 
June  2011.  The  aim  of  this  strategy,  in  line  with  EU  and  international  commitments  and 
strategies,  is  to  keep  Montenegro  a  low-prevalence  country  for  HIV,  to  ensure  universal 
access  to  HIV  prevention  and  treatment  interventions  and  to  improve  the  quality  of  life  of 
people living with HIV through a coordinated multi-sectoral response. However, surveillance 
and  response  mechanisms  need  strengthening,  in  particular  with  reference  to  the  groups  at 
greatest risk. 

Improvements were made to the legislative framework on blood but further efforts are needed 
to establish a modern blood transfusion system in line with EU standards and to achieve self-
sufficiency  in  securing  safe  blood  and  blood  products.  No  progress  can  be  reported  in  the 
field of tissues and cells and in organ donation and transplantation.  

Limited progress can be noted in the field of mental health. An action plan for mental health 
improvement  in  Montenegro  (2011-2014)  was  adopted  in  August  2011  by  the  National 
Mental Health Commission. Yet, implementation of the national strategy is still slow, due to 
limited administrative capacity and limited availability of qualified staff.  

In  the  field  of  cancer  prevention  and  control,  adequate  resources  need  to  be  allocated  to 
organise and implement the national programme for early detection of breast cancer adopted 
in June 2010. Implementation of the screening programmes on breast, cervical and colorectal 
cancer needs to be accelerated. There is no specific policy document – a national strategy or 
action plan – to prevent and reduce alcohol-related harm that could be assessed against the EU 
strategy on alcohol. 

Conclusion 

Overall,  some  progress  has  been  made  in  the  fields  of  consumer  and  health  protection. 
Montenegro continues to make progress towards alignment with the EU consumer policy and 
the EU health strategy. However, further efforts are required to align national legislation with 
the acquis and build up administrative capacity. In the area of consumer protection, support 
for consumer organisations needs to be increased and awareness-raising activities stepped up. 

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Concerning health, both monitoring and evaluation need to be strengthened when it comes to 
communicable diseases, notably with regard to vulnerable communities. Implementation of a 
modern blood transfusion system is still pending. Attention needs to be paid to alignment with 
EU legislation in the fields of tissues, cells and organs. 

4.29.  Chapter 29: Customs Union 

Some progress has been made in the customs legislation. The Decree on harmonisation of the 
customs  tariff  nomenclature  for  2011  has  been  adopted  with  the  aim  of  aligning  the 
nomenclature  of  the  national  customs  tariff  with  the  EU  Combined  Nomenclature  for  2011. 
The  Law  on  administrative  fees  has  been  amended  to  abolish  all  customs-related 
administrative fees that were not in line with the Stabilisation and Association Agreement and 
the EU acquis. A new Decree allowed deferred payment of customs debt, within 30 days after 
acceptance  of  the  customs  declaration.  Legislation  providing  stronger  protection  of 
intellectual property rights was adopted in June 2011 with the aim of aligning with the acquis. 
The new rulebook  on cash  controls,  which includes details and procedures  for  moving  cash 
into  or  out  of  the  country  and  penalties  for  failing  to  declare  such  movements,  entered  into 
force on 29 June 2011.  

The Montenegro customs authorities have made progress on building up their administrative 
and  operational  capacity  and  adopted  a  Business  Change  Management  Plan,  setting  the 
timeframe  for  implementing  the  blueprints  guidelines.  Moreover,  the  administration 
established an action plan covering, amongst other things, trade facilitation and improved risk 
analysis. The customs authorities finalised the database for human resources management. On 
the basis of the training strategy, the newly created Division for Training organised systematic 
training for customs officers and business representatives. Montenegro joined the CUSTOMS 
2013 programme. Further efforts are needed to strengthen internal control in order to prevent 
and  detect  corruption  and  other  misconduct  effectively.  The  department  in  charge  of  post-
clearance  controls  needs  to  be  strengthened  so  that  it  can  systematically  plan  and  operate  a 
posteriori controls compensating for the reduction in physical and documentary checks.  

In  October  2010  Montenegro  extended  the  functions  of  its  national  Customs  Information 
System by adding new IT modules for transit, simplified procedures and customs tariffs. The 
latter follows a similar structure to the EU TARIC 2 application. No progress was made with 
future membership of the Common Transit Convention. 

Conclusion 

Some  progress  has  been  achieved  in  customs  legislation,  mainly  consisting  of  aligning  the 
combined  nomenclature  with 
the  EU  Combined  Nomenclature  and  abolishing  all 
administrative  customs  fees  which  were  not  in  line  with  the  Stabilisation  and  Association 
Agreement  and  the  acquis.  However,  further  efforts  remain  necessary  in  areas  such  as 
management  of  quotas,  security-related  provisions  and  aligning  with  the  EU  customs 
legislation.  In  the  areas  of  administrative  and  operational  capacity,  Montenegro  needs  to 
reinforce implementation of existing procedures and working methods. Additional efforts are 
needed on internal control, post-clearance control and prevention and detection of corruption 
and misconduct. Preparations for possible accession to the Convention on a Common Transit 
Procedure should be stepped up.  

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4.30.  Chapter 30: External relations 

There has been some progress in the field of common commercial policy.  

The  country  has  generally  continued  to  coordinate  with  the  European  Commission  and  to 
align with the policies and positions of the EU towards third countries and with international 
organisations. 

Montenegro  is  not  yet  a  member  of  the  World  Trade  Organisation  (WTO).  It  redoubled  its 
efforts to ensure swift accession to the WTO, but accession negotiations are still pending. 

Montenegro does not yet operate any formal export credit scheme. No progress was made on 
aligning  national  legislation  in  this  context.  Montenegro's  legislation  concerning  export 
controls for dual-use goods is not yet fully in line with the acquis. The Law on foreign trade 
in  arms,  military  equipment  and  dual-use  goods  is  not  fully  aligned  with  EU  legislation, 
especially on brokering and transit provisions for dual use.  

Montenegro  is  currently  negotiating  bilateral  free  trade  agreements  with  Belarus  and 
Kazakhstan. The negotiations for a free trade agreement with EFTA countries were concluded 
in  July.  It  is  scheduled  to  be  signed  in  November  and  enter  into  force  in  July  2012. 
Montenegro  continues  to  play  an  active  and  constructive  role  within  CEFTA.  Parliament 
adopted  a  number  of  laws  ratifying  the  most  recent  bilateral  investment  agreements  and 
agreements  on  trade  and  economic  cooperation  (e.g.  with  the  former  Yugoslav  Republic  of 
Macedonia, the Czech Republic, Malta, etc.). 

Limited  progress  has  been  made  on  strengthening  the  administrative  capacity  of  the 
Department  for  multilateral  trade  cooperation  and  international  economic  relations  in  the 
Ministry of Economy. It needs to be reinforced in terms of both human resources and general 
trade-related  expertise.  The  inter-ministerial coordination  mechanism  already  in  place  needs 
further strengthening.  

As regards development policy and humanitarian aid policies, no developments have been 
observed. Donor activities are still taking place on an ad hoc basis. 

Conclusion 

Some progress has been made in the area of external relations. Coordination of positions in 
international  organisations  with  the  EU  has  been  smooth.  However,  further  awareness  of 
Montenegro's obligations in this area will be needed, together with strengthening institutional 
and  administrative  capacity  on  multilateral  trade  issues  and  development  and  humanitarian 
aid.  

4.31.  Chapter 31: Foreign, Security and Defence Policy 

The  regular  political  dialogue  between  the  EU  and  Montenegro  continued  to  cover  foreign 
policy issues. (Concerning relations with other enlargement countries and Member States, see 
Political criteria 2.3 — Regional issues and international obligations.) 

As  regards  the  common  foreign  and  security  policy  (CFSP),  in  the  reporting  period 
Montenegro  aligned  itself,  when  invited,  with  66  out  of  67  EU  declarations  and  Council 
decisions  (99%  alignment).  (As  regards  the  International  Criminal  Court,  see  Political 
criteria 2.3 — Regional issues and international obligations.) 

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Fifteen more countries have recognised Montenegro as an independent State. However, there 
are still 51 countries that have not yet recognised Montenegro since it gained independence in 
2006. 

There have been delays in appointment of a Political Director and European Correspondent.  

Montenegro  has  implemented  all  United  Nations  Security  Council  and  EU  restrictive 
measures.  

No additional developments can be reported concerning conflict prevention. 

As  regards  non-proliferation,  Montenegro  is  participating  in  some,  but  not  all,  international 
export control arrangements and instruments concerning the non-proliferation of weapons of 
mass  destruction.  Compliance  with  international  commitments  on  small  arms  and  light 
weapons (SALW), including the aims of the EU strategy on SALW, is continuing, with the 
aid of national laws and control systems. Regarding nuclear safeguards, Montenegro ratified 
the  Comprehensive  Safeguards  Agreement  and  its  Additional  Protocol  with  the  IAEA  in 
December 2010. 

With  regard  to  cooperation  with  international  organisations,  Montenegro  presented  its  first 
Annual  National  Programme  within  the  first  NATO  Membership  Action  Plan  (MAP)  in 
October 2010. Montenegro's broad Council of Europe post-accession monitoring was changed 
to dialogue-based monitoring. 

As  regards  security  measures,  Montenegro  continued  its  work  on  practical  arrangements 
necessary  to  comply  with  the  Council  Decisions  on  information  security,  including  on 
handling of classified information. In particular, it has adopted the security arrangements for 
implementing  the  Agreement  on  security  procedures  for  the  exchange  and  protection  of 
classified  information  between  Montenegro  and  the  European  Union.  Preparations  for 
introducing  the  communication  networks  for  associated  countries  (Associated  Countries 
Network, ACN) are ongoing. 

As  regards  the  common  security  and  defence  policy  (CSDP),  and  in  particular  civil  and 
military  crisis  management,  an  agreement  between  the  EU  and  Montenegro,  establishing  a 
framework for Montenegro's participation in EU crisis management operations, was signed in 
February 2011. Montenegro continues to participate in international operations such as ISAF 
in Afghanistan, UNMIL in Liberia and EU NAVFOR Atalanta.  

Conclusion 

Montenegro  has  made  progress  in  this  chapter.  The  country  has  aligned  itself  with  all  EU 
declarations  and  Council  Decisions  and  has  continued  to  make  a  strong  contribution  to 
regional  stability.  However,  necessary  legal  and  administrative  measures  remain  to  be 
adopted, together with the appropriate adjustments. 

4.32.  Chapter 32: Financial control 

The  legislative  framework  for  introducing  public  internal  financial  control  (PIFC)  was 
completed  in  2010  with  the  adoption  of  the  secondary  legislation  required,  including  a 
rulebook on establishment of financial management and control (FMC) systems, instructions 
on  annual  reporting  on  FMC  systems  and  internal  audit  (IA)  and  amendments  to  the  State 
Treasury directions 

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Implementation  needs  to  be  strengthened.  The  capacity  of  the  financial  units  to  support 
management  needs  to  be  significantly  reinforced.  The  understanding  of  delegation, 
empowerment  and  managerial  accountability  is  still  weak  and  needs  to  be  consolidated  and 
put into practice. A more systematic approach is needed to ensure that the relevant capacity is 
created and maintained in both the central harmonisation unit (CHU) and budget users. 

Some  progress  can  be  reported  on  establishment  of  internal  audit.  The  administration  is 
finding  it  difficult  to  recruit  audit  staff  and  too  few  auditors  have  so  far  been  appointed. 
Substantial  efforts  and  resources  will  be  required  to  introduce  international  standards  in 
internal audit. 

In the case of external audit, further progress can be reported. With a view to reinforcing the 
independence of the State Audit Institution (SAI), the PIFC Law was amended in March 2011 
to exempt the SAI from the obligation to submit an annual report on its FMC system and IA 
to the Ministry of Finance. The SAI is actively examining additional measures to ensure that 
its independence is in line with international standards  

The  SAI's  capacity  is  steadily  increasing.  In  addition  to  the  audit  of  the  annual  financial 
statement  of  the  government,  13  individual  audits  were  conducted.  But  while  all  the  SAI's 
administrative  posts  have  been  filled,  33%  of  the  auditor  posts  are  currently  vacant.  Efforts 
are required to adopt the law on the operation of the Audit Authority (AA), through which it 
will  be  formally  separated  from  the  SAI  and  ensure  the  AA's  resources  for  its  future 
operations. Administrative and managerial autonomy of SAI has to be ensured  

Little progress can be reported on protection of the EU's financial interests. An anti-fraud 
coordination service (AFCOS) directly reporting to the Minister of Finance was established to 
coordinate  cooperation  with  OLAF.  However,  formal  confirmation  is  still  awaited.  Its 
administrative capacity remains limited. Further steps are needed to identify all the national 
authorities which need to be involved in cooperating with OLAF, to form an AFCOS network 
and to prepare the legal basis for its operations. Limited progress can be reported in the fight 
against counterfeiting of the euro. Training programmes on detection of forged banknotes 
continued, but overall investigative capacity in this area remains limited.  

Conclusion 

Montenegro has made progress in the field of financial control. However, the country needs to 
implement  its  financial  management  and  control  systems  and  to  develop  the  internal  audit 
function. Development of external audit remains on track. Montenegro is still at an early stage 
of developing cooperation with OLAF. Capacity to fight counterfeiting of the euro needs to be 
enhanced. 

4.33.  Chapter 33: Financial and budgetary provisions 

There  have  been  no  particular  developments  as  regards  traditional  own  resources,  VAT 
resources and GNI resources. For progress in the underlying policy areas, see chapters 16 – 
Taxation, 18 – Statistics, 29 – Customs union and 32 – Financial control.  

As regards administrative infrastructure, institutions are in place in the underlying policy 
areas  indirectly  affecting  the  own  resources  system.  However,  in  addition  to  further 
strengthening these institutions, a fully operational coordination structure will be required to 

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74 

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ensure correct calculation, forecasting, collection, payment and control of own resources and 
reporting to the EU on implementation of the rules on own resources.  

Conclusion 

Overall, there are no significant divergences between the systems in Montenegro and the EU 
in terms of basic principles and institutions for the underlying policy areas affecting correct 
application of the rules on own resources. In due course, a coordinating body will have to be 
set  up  to  streamline  and  steer  pre-accession  preparations  in  the  own  resources  field.  The 
administrative framework for the application of the own resources rules is not yet in place.  

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STATISTICAL DATA (as of 30.09.2011) 
Montenegro 

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

Note
12) 

2000 
612 

2010 
619b 
13 812  13 812 13 812 13 812 13 812 13 812 13 812  13 812  13 812  13 812  13 812 

2002 
617 

2003 
619 

2005 
623 

2006 
624 

2001 
615 

2004 
621 

2007 
625 

2009 
630 

2008 
628 

Statistical Annex 

National accounts 
Gross domestic product (GDP) (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
Industry 
Construction 
Services 

Final consumption expenditure, 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 (2005=100) 

2001 

2000 
2005 
1 066  1 295  1 360  1 510  1 670  1 815 

2007 
Note
1) 
2 681 
2)  1 750e  2 113e 2 208e 2 435e 2 684e 2 912e 3 443e  4 280e 

2006 
2 149 

2002 

2003 

2004 

2008 
3 086 
4 908 
10 000  10 800 

: 
: 
: 
: 
: 
: 
: 

: 
: 
1.1 
: 
: 
: 
: 

: 
: 
1.9 
: 
: 
: 
: 

: 
: 
2.5 
: 
: 
: 
: 

3) 
3) 
3) 
3) 

12.4 
19.1 
4.3 
64.2 
91.9 
16.9 
5.5 
36.8 
51.1 

11.6 
12.2 
11.9 
19.2 
20.0 
20.8 
3.4 
4.1 
3.9 
63.5 
65.8 
63.8 
100.2  105.8  101.0 
13.3 
14.6 
17.5 
2.1 
4.1 
5.9 
30.6 
35.4 
38.4 
47.0 
59.9 
62.0 

: 
: 
4.4 
: 
: 
: 
: 

10.9 
18.8 
3.5 
66.9 
99.4 
17.0 
-0.4 
42.0 
58.1 

6 900 
31 
4.2 
: 
: 
: 
: 

10.4 
17.1 
3.6 
68.9 
99.8 
18.0 
-0.3 
43.6 
61.1 

8 400 
35 
8.6 
: 
: 
: 
: 

10.1 
16.0 
4.3 
69.5 
104.2 
21.9 
3.6 
49.4 
79.1 

40 
10.7 
: 
: 
: 
: 

8.5 
13.6 
4.2 
73.7 
108.5 
32.3 
1.5 
44.4 
86.7 

Note

2000 
87.7 

2001 
86.8 

2002 
87.7 

2003 
89.5 

2004 
2005 
101.8  100.0 

2006 
100.9 

2007 
100.9 

Inflation rate 
Annual average inflation rate (CPI, % change on previous year) 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

2007 
: 

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: 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) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

Note

2000 
: 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 
: 

2002 
-175 
-433 
100 
76 
82 
: 
87 
0 

2003 
-102 
-359 
112 
88 
58 
: 
39 
5 

2004 
-120 
-416 
148 
86 
62 
: 
51 
2 

2005 
-311 
-674 
196 
20 
147 
6 
399 
4 

2006 
-687 
-1 010 
197 
36 
90 
7 
470 
26 

2007 
-1 078 
-1 607 
439 
31 
59 
2 
568 
115 

2009 
2 981 
4 720 
9 700 
41 
-5.7 
: 
: 
: 
: 

10.0 
13.6 
6.5 
69.9 
106.2 
26.7 
0.4 
32.1 
65.4 

2009 
67.5 

2009 
3.4 

2009 
-896 
-1 372 
385 
5 
85 
5 
1 066 
33 

2010 
3 104 
5 006 
9 800 e 
40e 
2.5 
: 
: 
: 
: 

9.2 
13.5 
6.1 
71.2 
105.6 
21.1 
1.7 
34.7 
63.1 

2010 
79.4 

2010 
0.5 

2010 
-778 
-1 317 
446 
-22 
114 
16 
552 
22 

43 
6.9 
: 
: 
: 
: 

9.3 
13.5 
7.7 
69.5 
113.8 
38.3 
2.3 
39.6 
94.0 

2008 
99.1 

2008 
9.2 

2008 
-1 584 
-2 102 
399 
46 
73 
9 
582 
74 

EN 

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EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
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 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: 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) 
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 
Population (15-64): total of population aged 15-64 (thousand) 
Population in economic activity (15-64): total of population aged 15-64 that is economically active 
(thousand) 
Total employment (15-64): total of population aged 15-64 that is employed (thousand) 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
* Employment rate (15-64): share of population aged 15-64 in employment (%) 

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

EN 

Note

Note

4) 
5) 
6) 

1) 

Note

Note

: 
: 
: 

2000 
: 
: 

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

2000 
: 
: 
: 
: 
: 
: 

2000 
6.1 
11.1 
: 
: 

: 
: 
: 

2001 
: 
: 

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

2001 
: 
: 
: 
: 
: 
: 

2001 
5.5 
14.6 
: 
: 

0 
87 
73 

2002 
: 
84.5 

2002 
: 
: 
: 
: 
: 
125 
: 
: 
: 
: 
: 
55 

2002 
: 
: 
: 
: 
: 
: 

2002 
4.8 
10.8 
: 
: 

0 
44 
32 

1 
53 
38 

3 
403 
337 

2003 
-2.4 
47.1 

2004 
-2.0 
44.5 

2005 
-2.0 
38.3 

2003 
: 
: 
285 
403 
494 
199 
: 
: 
: 

2005 
: 
: 
351 
615 
867 
374 
: 
12.1 
: 

2004 
: 
: 
291 
437 
547 
279 
: 
: 
: 
1.000  1.000  1.000 
: 
60 

: 
173 

: 
50 

2 
496 
300 

2006 
3.4 
32.6 

2006 
: 
: 
484 
1 099 
1 587 
843 
: 
10.3 
: 
1.000 
: 
329 

7 
683 
461 

2007 
6.6 
27.5 

2007 
: 
: 
592 
1 557 
2 728 
2 213 
: 
9.3 
3.4 
1.000 
: 
490 

6 
656 
378 

2008 
0.5 
29.0 

2008 
: 
: 
512 
1 209 
2 339 
2 754 
: 
9.4 
4.1 
1.000 
: 
337 

2 
1 099 
782 

2009 
-4.4 
38.3 

2009 
: 
: 
: 
: 
: 
2 358 
: 
9.4 
3.9 
1.000 
: 
397 

19 
574 
287 

2010 
-5.0 
41.0 

2010 
: 
: 
: 
: 
: 
2 152 
: 
9.6 
3.3 
1.000 
: 
416 

2007 

2006 

2005 
974.3  1 457.4 2 073.1 2 529.7 1 654.2  1 657.3 
330.4 
460.6 
-513.7 -1 016.2 -1 618.4 -2 113.6 -1 377.2  -1 327.0 

441.1 

454.7 

416.2 

277.0 

2009 

2010 

2008 

2003 
: 
: 
: 
: 
: 
: 

2003 
4.3 
11.0 
: 
: 

2004 
: 
: 
: 
: 
: 
: 

2004 
3.4 
7.8 
: 
: 

: 
53.5 
45.3 

2005 
2.4 
8.4 
71.4 
77.0 

: 
66.5 
47.4 

2006 
2.5 
11.0 
71.5 
76.6 

: 
69.2 
45.4 

2007 
3.0 
7.4 
72.1 
77.2 

2007 
: 

261.5 
210.7 
61.0 
49.2 
56.6 
41.9 

: 
62.2 
42.7 

2008 
4.1 
7.5 
72.8 
78.1 

2008 
: 

264.2 
219.4 
61.2 
50.8 
58.3 
43.5 

: 
48.3 
37.5 

2009 
4.4 
5.7 
73.1 
77.9 

2009 
: 

262.1 
211.7 
60.3 
48.8 
56.0 
41.6 

: 
55.9 
37.7 

2010 
: 
: 
: 
: 

2010 
: 

259.1 
207.9 
59.3 
47.6 
54.3 
41.0 

EN 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

: 

: 

: 

: 

: 

254.3 
181.8  176.6  177.6  168.5  187.3  176.5b
59.0b 
60.4 
40.9b 
38.5 
46.2b 
46.2 
35.6b 
30.6 

57.1 
37.1 
45.6 
29.0 

59.1 
37.7 
46.6 
29.0 

58.9 
36.2 
44.5 
28.1 

51.7 
37.4 
46.5 
28.8 

251.5 
176.7 
58.4 
41.0 
47.8 
34.8 

7) 
7) 
7) 
7) 
7) 

77 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

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 (%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) 

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/HICP) 
(2000=100) 
* Early school leavers - Share of population aged 18-24 with at most lower secondary education and 
not in further 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 
Spending on human resources (public expenditure on education in % of GDP) 
* Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Environment 
* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

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) 

Note

Note

Note

Note

Note

Note

: 

2000 
18.1 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 
: 
: 
: 
19.3 
: 
: 
: 
: 

: 
: 
: 
: 
21.2 
: 
: 
: 
: 

: 
: 
: 
: 
20.7 
: 
: 
: 
: 

: 
: 
: 
: 
22.7 
: 
: 
: 
: 

: 
: 
: 
: 
27.7b 
: 
: 
: 
: 

: 
: 
: 
: 
30.3 
: 
: 
: 
: 

: 
: 
: 
: 
29.6 
: 
: 
: 
: 

: 
: 
: 
: 
19.3 
18.1 
20.9 
: 
: 

: 
: 
: 
: 
16.8 
15.9 
17.9 
: 
: 

6.5 
14.0 
6.7 
72.8 
19.1 
18.0 
20.4 
: 
15.6 

6.2 
13.9 
6.1 
73.9 
19.7 
18.9 
20.7 
: 
: 

2000 
2005 
181.0  211.0  149.1  173.9  195.3  213.1 

2002 

2003 

2001 

2004 

2006 
246.0 

2007 
338.0 

2008 
416.0 

2009 
463.0 

2010 
479.0 

100.0 

91.6 

109.7  119.3  130.9  139.7 

156.4 

179.9 

195.2 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

2001 

2000 
2005 
185.2  161.0  166.8  171.8  176.1  190.9 

2010 
260.1 
639.6  775.5  674.4  778.7  872.0  1 127.4 1 097.9 1 611.5 2 496.5  2 201.4 

2006 
244.7 

2007 
285.6 

2008 
298.5 

2009 
283.9 

2002 

2003 

2004 

2001 
18.1 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2002 
18.1 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 
: 

2002 
: 
: 
: 
: 
: 
: 

2003 
18.1 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 
: 

2003 
: 
: 
: 
: 
: 
: 

2004 
18.1 
: 

2004 
: 
: 
: 

2004 
: 
: 
: 
: 

2004 
: 
: 
: 
: 
: 
: 

2005 
18.1 
: 

2005 
: 
: 
: 

2005 
: 
: 
: 
: 

2005 
: 
: 
: 
: 
: 
: 

2006 
18.1 
: 

2006 
: 
: 
: 

2006 
: 
493.8 
: 
: 

2006 
982 
: 
982 
: 
-49 
933 

2007 
18.1 
: 

2007 
: 
: 
: 

2007 
: 
384.4 
: 
: 

2007 
795 
: 
795 
: 
9 
804 

2008 
18.1 
: 

2008 
: 
: 
: 

2008 
: 
: 
: 
: 

2008 
1 136 
: 
1 136 
: 
-25 
1 111 

2009 
18.1 
: 

2009 
: 
: 
: 

2009 
: 
: 
: 
: 

2009 
622 
: 
622 
: 
-18 
606 

2010 
18.1 
: 

2010 
: 
: 
: 

2010 
: 
: 
: 
: 

2010 
1 267 
: 
1 267 
: 
-20 
1 268 

EN 

78 

EN 

 
  
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electricity generation (thousand GWh) 

2.7 

2.5 

2.3 

2.7 

3.3 

2.9 

3.0 

2.1 

2.8 

2.8 

4.0 

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

8) 
9) 
9) 
9) 
10) 
11) 

2000 
95.0 
518p 
179e 
19e 
293e 
197e 
3p 
: 
: 

2002 

2003 

2001 
2004 
107.0  106.0  101.0  104.0 
518p 
518p 
169e 
178e 
27e 
21e 
254e 
244e 
209e 
194e 
3p 
4p 
: 
: 
: 
: 

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

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

2005 
99.0 
517p 
118 
11 
255 
186 
3p 
: 
: 

2006 
102.0 
517 
115 
13 
249 
178 
3 
: 
: 

2007 
89.0 
516 
109 
10 
222 
173 
2 
: 
: 

2008 
: 
516 
106 
10 
209 
160 
3 
: 
: 

2009 
: 
516 
101 
12 
200 
152 
3 
: 
: 

2010 
: 
516 
119 
12 
244 
179 
17b 
: 
151 

: = not available 
p = provisional 
e = estimated value 
b = break in series 
* = Europe 2020 indicator 
The  balance  of  payments  sign  conventions  are  used  for  FDI.  For  FDI  abroad  a  minus  sign  means  investment  abroad  by  the  reporting  economy  exceeded  its  disinvestment  in  the  period,  while  an  entry 
without sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus 
sign indicates that disinvestment exceeded investment. 
Footnotes: 
1) 
2) 
3) 
4) 

No official national currency exists. Euro is the currency in use. 
Mid-year estimate of population used to calculate per capita values; the data are without Financial Intermediation Services Indirectly Measured (FISIM). 
Data according to NACE Rev 1.1. 
As of 31 December. Instead of standard M1, data under national definition of M0 are provided. Monetary base (M0) is comprised of banks` deposits with the CBM (settlement account and reserve 
requirement account) and the estimated amount of cash in circulation. Monetary aggregate M1 is comprised of M0, demand deposits by the non-banking sector held with banks and the CBM, in 
euro  and  other  currencies,  excluding  deposits  by  the  Central  Government.  Monetary aggregate M11 comprises M1  increased by the Central  Government’s demand  deposits in euro  and other 
currencies. Monetary aggregate M2 includes M1 and the non-banking sector’s time deposits with banks, in euro and other currencies, excluding deposits by the Central Government. Monetary 
aggregate M21 comprises M2 increased by the Central Government’s time deposits in euro and other currencies. 
As of 31 December. Instead of standard M2, data under national definition of M11 are provided. 
As of 31 December. Instead of standard M3, data under national definition of M21 are provided. 
Age group refers to persons aged 15 or more years until 2004; from 2005 onwards age group 15-64 is used. 
Agricultural area includes: arable land, and area under pastries, fishponds and ponds. 
Number of livestock in 1000 including enterprises and cooperatives and households. 
Calculated net quantity in 1000 tonnes; including enterprises and cooperatives, and households. 
Including households, enterprises and cooperatives; from 2010, data includes all cereals (wheat, ray, barley, oats, grain maize, buckwheat); from 2000 to 2009 only data on wheat included.  
The figure for 2010 is estimated on the results of the 2011 population census, the figures from 2003 to 2009 are to be revised. 

79 

EN 

5) 
6) 
7) 
8) 
9) 
10) 
11) 
12)  

EN