COMMISSION STAFF WORKING DOCUMENT Montenegro 2018 Report Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2018 Communication on EU Enlargement Policy
Date: 2018-04-17
Institutions: Directorate-General for Neighbourhood and Enlargement Negotiations, European Commission
Subjects: Montenegro, accession criteria, accession negotiations, pre-accession strategy

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 17.4.2018  SWD(2018) 150 final  COMMISSION STAFF WORKING DOCUMENT Montenegro 2018 Report Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2018 Communication on EU Enlargement Policy {COM(2018) 450 final}  
 
 
Table of Contents 

1. 

INTRODUCTION .................................................................................................................... 3 

1.1. Context ............................................................................................................................. 3 

1.2. Summary of the Report .................................................................................................... 3 

2.  FUNDAMENTALS FIRST: POLITICAL CRITERIA AND RULE OF LAW CHAPTERS ......................... 6 

2.1.Functioning of democratic institutions and Public Administration Reform ..................... 6 

2.1.1. Democracy ................................................................................................................ 6 

2.1.2. Public Administration Reform ................................................................................ 10 

2.2. Rule of law and fundamental rights ............................................................................... 13 

2.2.1. Chapter 23: Judiciary and fundamental rights ........................................................ 13 

2.2.2. Chapter 24: Justice, freedom and security .............................................................. 29 

3. FUNDAMENTALS FIRST: ECONOMIC DEVELOPMENT & COMPETITIVENESS ............................. 40 

3.1. The existence of a functioning market economy ........................................................... 40 

3.2. The capacity to cope with competitive pressure and market forces within the Union .. 45 

4. 

 REGIONAL ISSUES AND INTERNATIONAL OBLIGATIONS ..................................................... 48 

5.   ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP ................................................... 50 

5.1. Chapter 1: Free movement of goods .............................................................................. 50 

5.2. Chapter 2: Freedom of movement for workers ............................................................. 52 

5.3. Chapter 3: Right of establishment and freedom to provide services ............................. 52 

5.4. Chapter 4: Free movement of capital ............................................................................ 53 

5.5. Chapter 5: Public procurement ...................................................................................... 54 

5.6. Chapter 6: Company law ............................................................................................... 56 

5.7. Chapter 7: Intellectual property law .............................................................................. 57 

5.8. Chapter 8: Competition policy ...................................................................................... 57 

5.9. Chapter 9: Financial services ......................................................................................... 59 

5.10. Chapter 10: Information society and media ................................................................ 60 

5.11. Chapter 11: Agriculture and rural development .......................................................... 61 

5.12. Chapter 12: Food safety, veterinary and phytosanitary policy .................................... 62 

5.13. Chapter 13: Fisheries ................................................................................................... 63 

5.14. Chapter 14: Transport policy ....................................................................................... 64 

5.15. Chapter 15: Energy ...................................................................................................... 66 

1 

 
 
 
5.16. Chapter 16: Taxation ................................................................................................... 68 

5.17. Chapter 17: Economic and monetary policy ............................................................... 69 

5.18. Chapter 18: Statistics ................................................................................................... 70 

5.19. Chapter 19: Social Policy and employment ................................................................ 71 

5.20. Chapter 20: Enterprise and industrial policy ............................................................... 73 

5.21. Chapter 21: Trans-European networks ........................................................................ 74 

5.22. Chapter 22: Regional policy and coordination of structural instruments .................... 75 

5.25. Chapter 25: Science and Research ............................................................................... 76 

5.26. Chapter 26: Education and Culture ............................................................................. 77 

5.27. Chapter 27: Environment and climate change ............................................................. 79 

5.28. Chapter 28: Consumer and health protection .............................................................. 81 

5.29. Chapter 29: Customs union ......................................................................................... 83 

5.30. Chapter 30: External relations ..................................................................................... 84 

5.31. Chapter 31: Foreign, security and defence policy ....................................................... 85 

5.32. Chapter 32: Financial control ...................................................................................... 86 

5.33. Chapter 33: Financial and budgetary provisions ......................................................... 89 

ANNEX I - RELATIONS BETWEEN THE EU AND MONTENEGRO ................................................... 91 

ANNEX II – STATISTICAL ANNEX ............................................................................................... 93 

2 

 
 
 
 
 
 
1. 

INTRODUCTION  

1.1.   Context 
Accession negotiations with Montenegro were opened in June 2012. To date 30  negotiating 
chapters  have  been  opened,  of  which  3  have  been  provisionally  closed.  In  June  2017 
Montenegro  became  a  member  of  NATO.  Montenegro  continued  to  broadly  implement  the 
Stabilisation  and  Association  Agreement  and  the  meetings  of  the  joint  bodies  under  the 
agreement took place on regular intervals. 

Six  negotiating  chapters  were  opened  during  the  reporting  period  and  one  provisionally 
closed. Holding the accession conferences was made possible also due to the progress made in 
the area of the rule of law, as per the requirements of the Negotiating Framework. Progress 
towards meeting the interim benchmarks set in the rule of law chapters will be key for further 
progress in the accession negotiations.  
1.2.   Summary of the Report1 
Concerning the  political criteria, the reporting period  has  been  marked by the low level of 
trust towards the electoral framework and  the prolonged parliamentary boycott by the entire 
opposition since the October 2016 parliamentary elections.  Returning the  political debate to 
the Parliament is the responsibility of all political actors.  Parts of the opposition returned to 
the Parliament in December 2017, but this partial and selective ending of the boycott is yet to 
result  in  improved  parliamentary  dialogue  and  scrutiny.  The  political  scene  remains 
fragmented,  polarised  and  marked  by  lack  of  political  dialogue,  notably  in  the  democratic 
institutions.  

The parliamentary legislative capacity and the oversight of the executive needs to be further 
enhanced.  The  parliament  still  addresses  the  State  Audit  Institution's  audit  findings  in  a 
limited manner, and there is no discussion or reporting on implementation of major policies 
and legislation. In December 2017, the Parliament adopted without proper public consultation 
a  set  of  laws  which  only  partially  address  the  recommendations  of  the  OSCE's  Office  for 
Democratic  Institutions  and  Human  Rights  (OSCE/ODIHR).  A  comprehensive  electoral 
reform  should  be  considered.  There  were  8  local  elections  in  the  reporting  period.  Local 
elections  do  not  take  place  on  the  same  day  nationwide,  but  on  a  rolling  bases;  thus  a 
prolonged and highly personalised election mood characterises the political landscape. Due to 
the  electoral  cycle,  election  observation  is  difficult,  particularly  for  international  observers, 
leaving ample room for claims of irregularities that cannot be independently evaluated. There 
were  no  new  developments  in  the  political  and  judicial  follow-up  of  the  alleged  misuse  of 
public funds for party political purposes in 2012 (the 'audio recordings affair').  

As regards governance, there is a need to strengthen transparency, stakeholders' participation, 
and the government's capacity to implement reforms. Coherence of the policy-making system 
should  be  ensured  through  co-ordinated  policy  development.  Mechanisms  for  government's 
consultation of civil society organisations are in place, but they need clear rules, and genuine 
involvement on both sides.  

1  This  report  covers  the  period  from  October  2016  to  February  2018.  It  is  based  on  input  from  a  variety  of 
sources,  including  contributions  from  the  government  of  Montenegro,  the  EU  Member  States,  European 
Parliament reports and information from various international and non-governmental organisations.  

3 

 
 
 
                                                            
Montenegro  is  moderately  prepared  with  the  reform  of  its  public  administration.  Good 
progress has been made, notably through the adoption of new laws on civil servants and state 
employees  and  on  local  self-government  aimed  at  implementing  merit-based  recruitment 
across  the  public  service.  Strong  political  will  is  still  needed  to  effectively  address  the 
de-politicisation of the public service and the optimisation of the state administration, as well 
as to ensure efficient implementation and financial sustainability of reforms. 

Montenegro’s judicial system is moderately prepared and some progress has been made. The 
legislative framework on the judiciary aimed to increase its independence and professionalism 
has yet to be fully implemented. Institutional capacity has been strengthened.  

Montenegro has achieved some level of preparation in the fight against corruption. Despite 
some  progress,  corruption  is  prevalent  in  many  areas  and  remains  an  issue  of  concern.  The 
operational capacity of institutions has improved; however, all institutions should demonstrate 
a more proactive attitude. Challenges to the credibility, independence and priority-setting of 
the  Anti-Corruption  Agency  need  to  be  addressed.  Financial  investigations  and  seizure  and 
confiscation  of  assets  remain  to  be  improved.  An  initial  track  record  of  investigation, 
prosecution  and  final  convictions  in  high-level  corruption  cases  has  been  established,  but 
needs  to  be  further  consolidated.  Further  improvements  of  the  track  record  of  successful 
investigations  and  convictions  will  only  be  possible  in  an  environment  where  independent 
institutions are shielded from any undue influence and incentivised to fully use their powers. 

In  the  fight  against  organised  crime,  there  is  an  initial  track  record  of  prosecutions  in  the 
fight against smuggling of migrants and against drug trafficking. However, further results are 
needed  to  produce  a  convincing  track  record,  in  particular  in  the  fight  against  money 
laundering and trafficking in human beings. 

On  fundamental  rights,  Montenegro  further  aligned  its  legislation  with  EU  standards.  In 
particular the work of the Ombudsman office has improved, but more efforts are still needed 
in  strengthening  the  institutional  framework  and  effective  protection  of  human  rights. 
Following  the  progress  made  on  anti-discrimination  legislation,  Montenegro  now  needs  to 
ensure that adequate institutional mechanisms are in place to protect vulnerable groups from 
discrimination. Implementation of the legislation remains weak and institutional capacity on 
human  rights  needs  to  be  increased.  The  Roma2  minority  remains  the  most  vulnerable  and 
most discriminated community. Gender-based violence and violence against children remains 
a serious concern in the country.  

Montenegro  has  achieved  some  level  of  preparation  on  freedom  of  expression,  but  no 
progress  was  made  in  the  reporting  period.  There  have  been  no  notable  developments 
regarding  investigations  into  old  cases  of  violence  against  journalists.  Recent  political 
interference in the national public broadcaster Council and the Agency for Electronic Media 
are a matter of serious concern. The media scene remains highly polarised and challenges in 
understanding the role of free media persists. The number of defamation cases remains high, 
also due to weak self-regulatory mechanisms.  

Montenegro remained constructively committed to bilateral relations with other enlargement 
countries  and  neighbouring  EU  Member  States  and  an  active  participant  in  regional 
cooperation.  

2 All these groups are considered under the wider "Roma" umbrella term under the EU Framework for National 
Roma Integration Strategies. 

4 

 
 
 
                                                            
As  regards  the  economic  criteria,  Montenegro  has  made  some  progress  and  is  moderately 
prepared  in  developing  a  functioning  market  economy.  Macroeconomic  and  fiscal  stability 
were strengthened but further efforts are required to address persistent challenges, especially 
the  high  public  debt  burden.  The  economy  has  been  growing  uninterruptedly  since  2013 
amidst low or moderate inflation. The financial sector has improved its solvency and liquidity. 
However, the export base needs to improve in scope and in quality to reduce the trade deficit. 
Rule of law weaknesses, including unfair competition from the informal economy, negatively 
impact on the business environment. The labour market faces structural challenges, reflected 
in low participation and high unemployment rates. 

Montenegro has made some progress and is moderately prepared in terms of capacity to cope 
with  competitive  pressure  and  market  forces  within  the  Union.  The  construction  of  key 
infrastructure  in  a  number  of  areas  as  well  as  developing  human  capital  set  the  basis  for 
improved  competitiveness.  Education  reform  is  ongoing,  but  more  efforts  are  needed  to 
address  the  skills  mismatch.  SMEs  remain  confronted  with  numerous  challenges,  such  as 
access  to  finance  or  regulatory  complexity.  Further  efforts  are  still  required  to  improve  the 
overall export performance of local companies. 

Concerning  Montenegro's  ability  to  assume  to  the  obligations  of  membership,  important 
work  on  alignment  and  preparation  for  the  implementation  of  the  acquis  has  taken  place  in 
most  areas.  The  country  has  a  good  level  of  preparation  in  areas  such  as  company  law  and 
foreign, security and defence policy. It is moderately prepared in many chapters, such as free 
movement  of  goods,  agriculture,  food  safety,  veterinary  and  phytosanitary  policy. 
Montenegro is at an early stage of preparation regarding fisheries and budgetary and financial 
provisions, and at some level of preparation in the area of environment and climate change, 
statistics,  social  policy  and  employment.  Good  progress  has  been  made  in  the  areas  of 
company  law,  agriculture  and  rural  development,  food  safety,  veterinary  and  phytosanitary 
policy.  There  has  been  backsliding  in  the  area  of  public  procurement.  Looking  ahead, 
Montenegro  should  focus  in  particular  on  competition  policy,  environment  and  climate 
change  and  public  procurement.  Strengthening  the  administrative  capacity  for  ensuring  the 
application  of  the  acquis  remains  a  substantial  challenge  for  Montenegro.  Montenegro  has 
continued to align with all EU common foreign and security policy positions and declarations. 

Although Montenegro so far remained outside the main Western Balkans migration route to 
the  EU,  it  witnessed  an  increase  in  the  number  of  migrants/asylum  seekers  entering  its 
territory  and  must  therefore  strengthen  its  capacity  to  cope  with  sudden  increases  in 
migration-related pressure. Montenegro made further progress in particular on the migration-
related  legal  framework.  While  Montenegro’s  capacity  to  handle  asylum  requests  has  been 
sufficient  so  far,  it  might  now  be  challenged  by:  (i)  the  growing  number  of  asylum  seekers 
and the extended length of their stays, sometimes due to lengthy appeal procedures; and (ii) 
the introduction of more demanding asylum procedures, aligned with the EU standards. In this 
context, Montenegro needs to put in place a return mechanism for irregular migrants, which is 
in  line  with  the  EU  acquis,  as  well  as  to  align  its  visa  policy  progressively  with  the 
EU’s. Montenegro should open additional reception facilities that meet the required standards 
and improve management of all facilities. Further to the adoption of the Schengen action plan 
in February 2017, Montenegro continued to align its legislation with the EU acquis on visas. 

5 

 
 
 
 
 
2. 

FUNDAMENTALS FIRST: POLITICAL CRITERIA AND RULE OF LAW CHAPTERS  

2.1. 

Functioning of democratic institutions and Public Administration Reform  

2.1.1. Democracy 
The reporting period was marked by prolonged parliamentary boycott by the entire opposition 
following  the  October  2016  parliamentary  elections.  Returning  the  political  debate  to  the 
Parliament  is  the  responsibility  of  all  political  actors.  Only  in  December  2017,  parts  of  the 
opposition returned to the Parliament. The partial and selective ending of the boycott is yet to 
result in improved  parliamentary scrutiny. The Presidential Elections were held on 15 April 
2018. 

Elections  

The overall situation is marked by a low level of trust in the electoral framework and conduct 
of elections. In December 2017, without proper public consultation, the Parliament adopted a 
set of laws, which only partially address the recommendations of the Office for Democratic 
Institutions  and  Human  Rights  of  the  Organisation  for  Security  and  Cooperation  in 
Europe (OSCE/ODIHR).  A  comprehensive  electoral  reform  should  be  considered.  The 
Presidential elections held in April 2018, were observed by the OSCE/ODIHR.  

In  October  2017,  the  Parliament  established  a  parliamentary  working  group  to  propose  a 
methodology for implementing the OSCE/ODIHR recommendations on the electoral reform. 
The working group was composed of ruling majority Members of Parliament (MPs) only, as 
the  three  opposition  parties  which  qualify  for  membership  did  not  appoint  representatives. 
None of the sessions were open to the public, nor have the conclusions of the meetings been 
published. All interested parties were invited to provide comments and suggestions on how to 
implement  the  recommendations.  However  the  revised  electoral  legislation  itself  was  not 
subject to a public consultation. 

The recommendations issued by OSCE/ODIHR Election Observation Mission, following the 
October  2016  elections,  have  partially  been  addressed,  as  the  Parliament  passed  a  set  of 
election  related  laws  in  December  2017:  amendments  to  the  media  Law,  the  Law  on  voter 
register  and  the  Law  on  financing  political  entities  and  election  campaigns.  The  draft 
amendments  to  the  Law  on  councillors  and  representatives  did  not  reach  the  required 
two-thirds majority.  

As the framework electoral Law requiring a two-thirds majority was not amended, there were 
no significant improvements regarding the electoral administration or the residence and legal 
competence  requirement,  which  have  been  OSCE/ODIHR  priority  recommendations. 
Recommendations for which no legal changes are needed also remain unaddressed, including 
measures 
the  electoral 
administration,  namely  the  State  Electoral  Commission.  Given  the  remaining  substantial 
shortcomings, a comprehensive electoral reform should be considered.  

transparency  and  professionalisation  of 

to  ensure  greater 

Involvement  of  women  in  politics  remained  low,  including  in  the  electoral  administration. 
There are no women among the political party leaders and very few in the parties' leadership. 
Electoral  lists  satisfy  minimum  requirements  in  terms  of  gender  equality.   The  cross-party 
Women  Political  Network  has  formulated  concrete  measures  and  financial  incentives  to 
increase women political representation 

6 

 
 
 
Following the 2016 parliamentary elections, the Special Prosecution Office (SPO) opened 198 
cases  to  investigate  alleged  violations  of  the  electoral  rights.  Of  these  cases,  113  have  been 
closed  due  to  lack  of  evidence,  while  in  six  cases,  indictments  have  been  issued.  In  three 
cases, suspended final sentences have been issued. In one case the sentence was two months 
imprisonment; in two cases the criminal charges were dismissed. Civil Society Organisations 
(CSO) and opposition political parties consider the judiciary's follow up as inadequate and as 
further eroding public trust in elections. 

Following  a  short  electoral  campaign  period,  given  the  nomination  of  candidates  late  in  the 
process, regular Presidential Elections we held in April 2018. The election was observed by 
national and international observers, including the OSCE/ODIHR Monitoring Mission.  

There were 8 local elections in the reporting period. Local elections do not take place on the 
same  day  nationwide,  but  on  a  rolling  bases;  thus  a  prolonged  and  highly  personalised 
election  mood  characterises  the  political  landscape.  Due  to  the  electoral  cycle,  election 
observation is difficult, particularly for international observers, leaving ample room for claims 
of  irregularities  that  cannot  be  independently  evaluated.  Local  elections  in  Nikšić  were 
boycotted  by  the  opposition.  For  the  local  elections  held  in  November  2017,  both  the 
governing  party  and  the  opposition  parties  reported  irregularities  on  voting  procedures  and 
incidents between party activists. Irregularities were also reported in the February 2018 local 
elections, which resulted in a rerun in a limited number of polling stations. 

There were no new developments in the political and judicial follow-up of the alleged misuse 
of public funds for party political purposes in 2012 (the 'audio recordings affair').  

Parliament 

The political scene remains fragmented, polarised and marked by a lack of political dialogue, 
particularly  in  the  democratic  institutions  where  it  belongs.  Elected  members  of  Parliament 
have an important role to ensure checks and balances. With the exception of one opposition 
coalition group and 3 independent MPs, who returned to the Parliament in  December  2017, 
the  opposition  as  a  whole  has  boycotted  its  legislative  activity  since  the  Parliament's 
convocation in November 2016. Political dialogue and constructive engagement by all parties 
is required to enhance parliamentary accountability and oversight of the executive.   

Following  the  October  2016  parliamentary  elections,  the  new  Parliament  was  convened  in 
November.  The  number  of  women  Members  of  Parliament  (MPs)  increased  from  15  to  19, 
now accounting for 23 %.   

The  political  scene  has  fragmented  further,  with  serious  rifts  not  only  between  ruling  and 
opposition parties, but also within some opposition parties, which led to the creation of a new 
party in September 2017. This situation prevented meaningful political dialogue from taking 
place. 

In spite of the fragmentation, the opposition has been overall united in enforcing a consistent 
boycott of Parliament's legislative activities and a more selective boycott of its sessions since 
November 2016. The opposition insists that the alleged election-day coup attempt in October 
2016  has  decisively  affected  the  turnout  and  results  of  the  elections,  rendering  them 
essentially flawed. This claim is strongly rejected by the ruling party.  

Both the legislative and oversight role of parliament have been hampered by the opposition 
boycott.  While  the  Parliament  was  nominally  functional  with  42  votes  of  81  present  (In 
December  2017  the  number  reached  63)  the  absence  of  the  opposition  negatively  impacted 

7 

 
 
 
democratic  scrutiny  of  the  legislative  procedure  and  the  quality  of  parliamentary  debate.  In 
the absence of the entire opposition until December 2017, any law could be adopted within a 
time-frame  which  in  a normally  functioning  parliament,  with  the  opposition  participating  in 
the discussions and legislative committees, would be equivalent to an urgent procedure. The 
same  is  true  for  appointments  made  by  the  Parliament.  There  have  been  cases  which  are 
problematic  from  the  point  of  view  of  integrity  of  selected  candidates.  The  parliament  has 
dismissed members of the national public broadcaster RTCG Council, while the related legal 
proceedings  have  still  been  pending.  Parliament's  capacity to  scrutinise proposed  legislation 
for compliance with EU acquis remains low. 

The  parliamentary  oversight  of  the  executive  needs  to  be  further  enhanced.  Parliament 
continued  to  addresses  the  State  Audit  Institution's  audit  findings  in  a  limited  manner,  and 
there is no discussion or reporting on the implementation of major policies and legislation. 

Parliament's code of ethics, which allows complaints from citizens, the media, and interested 
parties, has been  in  place since 2014, but  no complaints alleging  breaches  of the code  have 
been submitted since October 2016. No complaints were addressed to the human rights and 
anti-corruption  committees.  A  considerable  number  of  MPs  attended  training  sessions  on 
conflict of interest and good conduct. In 2017, 3 MPs have been deprived of their immunity at 
the  request  of  the  state  prosecution,  leading  to  1  prison  sentence  in  a  case  which  the 
opposition  claims  constitutes  political  persecution.  Two  judicial  proceedings  involving 
opposition MPs are currently underway. 

Parliament's administrative capacity has been enhanced, with a slight increase in the number 
of  employees,  although  no  new  premises  were  provided.  At  administrative  level,  the 
Parliament maintained a high level of transparency. 

The  main  legal  framework  regulating  political  parties  is  contained  in  the  Law  on  Political 
Parties and the Law on the Funding of Political Subjects and Electoral Campaigns, amended 
in December 2017, with the aim to implement some of the OSCE/ODIHR recommendations. 
Additional  shortcomings  in  the  existing  legal  framework,  including  those  identified  by 
OSCE/ODIHR,  are  yet  to  be  addressed.  These  include:  (i)  leaving  unregulated  the  exact 
duration  of  electoral  campaigns,  (ii)  failing  to  ensure  further  strengthening  of  women's 
participation in politics and (iii) further professionalisation of the Election Commission. 

The  level  of  budgetary  political  party  financing  is  considerably  above  the  regional  average. 
The task of monitoring political party financing lies with the Anti-Corruption Agency, which  
has  taken  steps  to  develop  a  methodology  for  quality  risk  assessment  and  in-depth  control, 
which has been lacking so far. 

Governance 

The government's capacity to implement reforms, transparency and stakeholders' participation 
need  to  be  strengthened,  and  the  coherence  of  the  policy-making  system  should  be  ensured 
through  co-ordinated  policy  development.  Political  dialogue  in  democratic  institutions  is 
necessary  for  the  overall  sustainability  and  inclusiveness  of  governance.  New  units  of  local 
self-government  have  been  established,  while  their  competences  in  some  fields  have  been 
reduced. Local public finances are still to be consolidated. 

EU  accession  remains  Montenegro's  key  foreign-policy  goal,  since  Montenegro  became  a 
member  of  NATO  in  June  2017.  The  new  government,  elected  in  November  2016,  led  by 
Prime Minister Dusko Markovic, is composed of 19 ministers and 3 deputy prime ministers (2 

8 

 
 
 
of  whom  are  also  ministers).  Four  ministers  are  women,  as  in  the  previous  cabinet.  Newly 
established  ministries  include  a  Ministry  of  European  Affairs  and  a  Ministry  of  Public 
Administration. The Minister of European Affairs and Chief Negotiator resigned in February 
2018 after the Anti-Corruption Agency found him to be in conflict of interest. The decision is 
being challenged in front of the Administrative Court. 

While  the  framework  is  in  place  for  ensuring  coherent  policy-making,  policy  development 
and  co-ordination  remain  weak.  The  government  should  ensure  that  central  government 
bodies cooperate and lead the strategic planning, oversee the execution, ensure the capacity to 
steer the policy-development process and establish a regular administrative-level coordination 
mechanism involving all central government bodies. 

The government has been sharing EU accession process related documents, such as the rule of 
law  non-papers,  with  the  public,  in  line  with  the  Law  on  free  access  to  information. 
Stakeholders' inclusion in the EU accession process should however be further improved, and 
the  process  itself  should  be  made  more  transparent.  Systematic  and  genuine  public 
stakeholder consultation is still not a standard feature of the legislative process.  

The  absence  of  a  genuine  political  dialogue  in  the  Parliament  and  the  subsequent  lack  of 
parliamentary  oversight  have  contributed  to  a  significant  increase  in  the  number  of  laws 
submitted  to  the  Constitutional  Court  by  the  opposition,  civil  society,  the  Ombudsman  and 
others. 

As  regards  local  self-government,  the  adoption  of  the  Law  on  Spatial  Planning  and 
Construction  in  September  2017  met  with  criticism  from  civil  society  and  a  number  of 
mayors, given its political ramifications. The law centralises spatial planning and construction 
to the level of the Ministry of Sustainable Development and Tourism, thus abolishing the right 
of  the  local  authorities  to  adopt  and  issue  spatial  plans  and  permits.  The  main  opposition 
leaders have challenged the law in front of the Constitutional Court. 

In July, the Parliament adopted the Law on the Old Capital which establishes a special fund of 
1 % of the national annual budget for the development of the city of Cetinje, thus effectively 
doubling  its  municipal  budget.  The  new  legislation  raises  concerns  over  national  and 
municipal fiscal consolidation. Municipalities in Montenegro continue to struggle with fiscal 
consolidation. All but one municipality adopted the Code of ethics for elected representatives 
and officials and the Code of ethics for local civil servants and state employees. Both are to be 
monitored by specific commissions.  

Civil society 

Some progress was made in improving the legal and institutional framework for cooperation 
between the government and civil society organisations, particularly on setting the legal basis 
for public funding of Non-Governmental Organisations. There is a general acknowledgement 
that  civil  society  has  an  important  role  in  the  accession  process,  but  beyond  CSOs'  formal 
participation  in  various  working  groups,  the  conditions  for  a  genuine  consultation  process 
remain to be strengthened. Mechanisms are in place for government to consult CSOs but these 
mechanisms need additional resources, clear rules and genuine involvement on both sides.  

An empowered civil society is a crucial component of any democratic system and should be 
recognised and treated as such by the state institutions.  

Since  May  2017,  the  National  Office  for  Cooperation  with  NGOs  is  subordinated  to  the 
Ministry  of  Public  Administration.  Its  role  is  to  monitor  the  implementation  of  the 

9 

 
 
 
government's  NGO  development  strategy.  The  Council  for  the  Development  of  NGOs,  an 
advisory body gathering representatives of ministries and of NGOs, is still not functional.  

There  are  several  channels  for  dialogue  between  CSOs  and  public  institutions  on  sectoral 
policies.  CSOs  participate  in  various  working  groups,  including  on  accession  negotiations. 
However, the efficiency and planning of the consultation process should be improved to make 
it  genuinely  inclusive.  Cooperation  between  NGOs  and  local  governments  is  still  not 
sufficiently developed. 

Conditions for voluntary work and civic activism should be improved so that they are more 
conducive to such activities. The legal framework for volunteering remains overly restrictive. 
The financial regulatory environment for CSOs should be improved. 

In  June  2017  amendments  were  adopted  to  the  law  on  NGOs,  with  the  aim  of  achieving  a 
more  effective  system  of  public  funding  for  CSOs.  The  amendments  set  a  minimum 
percentage  of  the  annual  state  budget  to  be  allocated  to  civil  society  projects  and  introduce 
new  standards  and  procedures  for  public  funding  of  NGOs.  The  amended  law  also  makes 
provision for a decentralised system of funding and a centralised system of strategic planning. 
This  requires  ministries  to  organise  sector-specific  consultations  with  relevant  CSOs,  if 
cooperation with civil society is part of their sectorial strategy. Secondary legislation in this 
area still needs to be prepared.  

2.1.2. Public Administration Reform 
Montenegro  is  moderately  prepared  with  the  reform  of  its  public  administration.  Good 
progress has been made, notably through the adoption of new laws on civil servants and state 
employees  and  on  local  self-government  aimed  at  implementing  merit-based  recruitment 
across  the  public  sector,  in  line  with  the  Commission  2016  recommendations.  However, 
strong  political  will  is  still  needed  to  effectively  address  the  de-politicisation  of  the  public 
service  and  the  optimisation  of  the  state  administration,  as  well  as  to  ensure  efficient 
implementation and financial sustainability of reforms.  

In the coming year, Montenegro should in particular:  

→  further  ensure  professionalisation  and  de-politicisation  of  the  public  service,  notably  by 
adopting  the  secondary  legislation  needed  to  implement  the  new  laws  on  civil  servants  and 
state employees and on local self-government; 

→  substantially  upgrade  the  quality  of  policy  planning,  by  introducing  a  medium-term 
planning  framework,  including  fiscal  planning,  and  by  ensuring  the  consistency  and 
coordination of sector strategies;   

→  improve  the  quality  of  regulatory  impact  assessments  and  ensure  that  inclusive  public 
consultations are properly conducted without unjustified restrictions on their scope. 

Policy development and coordination 

The legal framework and institutions are in place to ensure a coherent policy-making system, 
including for European integration. However, coordination among key centre of government 
institutions has been more focused on procedural issues than on substance, hence limiting the 
effectiveness of the planning system. Policy planning is mainly done on an annual basis, since 
the government has no comprehensive medium-term planning framework. The medium-term 
fiscal  plan  is  not  linked  to  policy  plans.  While  several  (sector)  strategies  do  not  yet  have 

10 

 
 
 
proper  costing,  the  first  Medium  Term  Government  Programme  2018-2020  was  adopted  in 
February 2018. 

Structured  dialogue  between  government  and  parliament  on  policy  priorities,  and  on  acquis 
alignment  is  not  fully  ensured,  and  several  laws  were  adopted  via  urgent  procedure  (9%  in 
2016). In December 2016 tasks related to policy development and coordination were entrusted 
to  the  Ministry  for  European  Affairs,  and  a  new  Ministry  of  Public  Administration  was 
established. Reports on implementation of Montenegro's Programme of Accession to the EU 
are published regularly. The 2018-2020 Programme of Accession to the EU was adopted in 
early 2018. 

Inclusive  and  evidence-based  policy  and  legislative  development  remains  only  partially 
ensured.  Policy  development  capacity  needs  to  be  increased.  Public  consultations  on 
legislative proposals are regulated by law, and they have to be performed using eGov portal 
which has eParticipation module for public consultations. However, they are not implemented 
in a uniform manner by all institutions, and they are often done too late in the process. Undue 
limitations  to  the  scope  of  public  consultations  need  to  be  avoided.  Regulatory  impact 
assessments  are  more  systematically  produced  in  the  legislative  process,  but  adequate 
resources need to be assigned to performing regulatory impact assessments by ministries and 
quality  control  by  the  Ministry  of  Finance  needs  to  be  ensured.  The  government  is  legally 
obliged to monitor and report on implementation of the central planning documents, however 
there is  no legal  requirement  for  ministries to  report  on implementation of sector strategies. 
Monitoring reports are publicly  available, which enables  public scrutiny over  government 
work. Reporting focuses however on outputs rather than on outcomes. 

Public financial management  

The  first  annual  monitoring  report  on  implementation  of  the  2016-2020  public  financial 
management (PFM)  reform programme and action plan was adopted in March 2017. Civil 
society  is  not  systematically  involved  in  monitoring  of  the  programme  implementation. 
Several PFM reforms are progressing on schedule, but there have been delays in some areas, 
which require technical  assistance to streamline reforms. In  the coming period,  Montenegro 
plans  to  focus  on  budget  credibility  and  control,  creating  an  effective  system  of  cash 
management,  public  expenditures  planning,  budgeting  execution  and  control,  as  well  as  a 
proper debt management strategy and fiscal risks analysis.  

Montenegro's  budget  transparency  has  improved  during  the  reporting  period.  The 
government systematically publishes the budget proposal, the enacted budget, and the in-year 
and  final  budget  execution  report,  though  line  institutions  are  not  yet  proactively  providing 
budgetary information. However, the quality and comprehensiveness of these documents need 
to  be  improved.  The  timing  of  the  State  Audit  Institution  reports  fully  respect  the  legal 
obligations and reports are made available to the general public. There has been progress in 
the  area  of  public  internal  financial  control,  enhancing  accountability  and  transparency;  a 
transparency  roadmap  is  integrated  in  the  PFM  reform  programme,  improving  the  quality, 
presentation and visualisation of the annual budget and in-year reports are drafted according 
to  best  international  practices.  However,  Montenegro  needs  to  further  enhance  budget 
transparency, notably by joining the Open Budget Index and by producing a citizens' budget. 

Public service and human resources management 

A new Law on Civil Servants and State Employees was adopted at the end of 2017. It aims 
to  ensure  merit-based  recruitment  for  senior  civil  servants,  improve  procedures  for  testing 

11 

 
 
 
ability  and  selection,  including  at  the  highest  managerial  level,  and  enhance  transfers, 
promotions  and  appraisal  processes.  It  also  foresees  training  for  managers,  and  enhances 
managerial  accountability  and  the  delegation  of  powers  in  the  recruitment  and  assessment 
procedures,  by  removing  the  political  level  from  many  such  decisions.  The  final  selection 
decision should as a rule be delegated to a clearly determined management level, which will 
also increase transparency, apart for a limited number of positions that report directly to the 
political  level.  Similar  measures  are  included  in  the  new  law  on  local  self-government 
adopted  at  the  same  time.  Nevertheless  implementing  legislation  and  procedures  need  to  be 
adopted in the coming months in order to implement these laws. 

Human resources management units are in place across the state administration, but most 
need to be considerably strengthened. The human resources management authority (HRMA) 
is  currently  implementing  the  first  nationally  accredited  training  programme  for  human 
resources managers. A substantial human resource optimisation exercise was launched at the 
end  of  2017  across  the  state  and  local  administrations,  which  should  reduce  staffing  needs 
overall  by  5  %  (at  national  level)  by  2020  but  also  address  the  additional  capacity  needs 
related  to  European  integration  (mentioned  in  most  of  the  chapters  below).  The  central 
personnel register is being updated more regularly, but it has not yet been linked to the salary 
system.  On  the  remuneration  system,  amendments  to  the  law  on  salaries  of  public  sector 
employees  were  adopted  in  April  2017  as  foreseen  by  the  fiscal  strategy  2017-2020 
specifically reducing the variable part of salaries by 1 % for most grades and 6 % more for 
senior staff. Professional development and training is provided by the HRMA. Training for 
managers is foreseen under the new law on civil servants and state employees. 

Integrity  plans  are  in  place  across  the  public  administration  and  integrity  managers  have 
been  appointed  in  most  institutions.  The  anti-corruption  agency  monitors  and  publishes 
regularly reports on implementation and makes recommendations for improvement.   

Accountability of the administration 

The  overall  organisation  of  the  state  administration  lacks  legal  clarity  and  does  not  ensure 
effective lines of accountability in many parts of administration. As there are no clear criteria 
for different administrative bodies, similar types of institutions may report to ministries, to the 
council  of ministers or to  the parliament. There has  not  been progress towards performance 
management.  Rather,  institutions  continue  to  have  a  bureaucratic  and  process-oriented 
approach  to  planning,  budgeting  and  reporting  of  their  activities.  Though  managerial 
accountability remains underdeveloped and the delegation of decision-making powers limited, 
the  Ministry  of  Finance  analysed  the  situation,  and  presented  the  findings  to  the  Public 
Administration  Reform  Council  in  late  2017.  The  new  Law  on  civil  servants  and  state 
employees also starts to address this with regard to recruitment decisions. (See Chapter 32) 

Citizens' rights to good administration are regulated and are subject to internal and external 
oversight  mechanisms,  including  the  Ombudsman.  However,  the  Ombudsman's  and  State 
Audit Institution's recommendations are not implemented consistently.  

The  citizens'  right  to  access  public  information  is  regulated  by  the  law  on  free  access  to 
public information, which was amended in April 2017 regarding the re-use of information and 
open data portal (see also under Chapter 23). Proactive disclosure of information on websites 
of public institutions remains limited, but the Agency for the protection of personal data and 
access to information has started supervising this across the public administration. Its capacity 

12 

 
 
 
was strengthened, but its 2017 budget was only increased slightly. Administrative silence by 
the public administration remains a concern and a major cause of citizens' complaints.  

The legal framework for the  right to administrative justice was enhanced in July 2017 by 
the  entry  into  force  of  the  law  on  general  administrative  procedures  and  the  law  on 
administrative  disputes.  The  right  to  seek  compensation  is  not  well  understood  by  the 
general public. Montenegro does not have a specific law on public liability, although a clear 
procedural framework exists. There is however no monitoring in place on the public liability 
requests and how citizens are compensated. 

Service delivery to citizens and businesses 

A  more  user-oriented  administration  is  a  government  priority.  The  Law  on  electronic 
signature  and  identification  was  adopted  April  2017,  and  a  pilot  project  was  launched  for  a 
government  service  bus,  an  infrastructure  solution  to  ensure  the  data  exchange  between 
different registers across the public administration. Two new electronic services for citizens 
were also made available at the end of 2017, including a service to enrol children in schools 
and  a  public  procurement  service.  However,  no  mechanisms  are  in  place  to  monitor  user 
perceptions or service delivery performance.  

Simplification  of  administrative  procedures  is  ongoing.  The  new  Law  on  administrative 
procedures entered into force in July 2017, and the harmonisation of sectoral laws to the new 
law  was  finalised,  though  a  lot  of secondary legislation, which  defines  many  administrative 
procedures, requirements, time limits and fees, still need to be harmonised with it.  There is as 
yet also no government-wide interoperability framework to support further digitalisation and 
simplification of administrative procedures. 

Strategic framework for public administration reform 

Montenegro  is  implementing  the  2016-2020  public  administration  reform  strategy. 
Political support is necessary to ensure the successful implementation of the strategy. To this 
end a PAR Council was established, led by a deputy Prime Minister, in late 2016. It has met 
twice so far. Financial sustainability of the reforms needs to be fully ensured. While most 
actions  were  costed  in  the  2016-2018  public  administration  reform  action  plan,  they  were 
often co-funded by donors and the actual funding from the annual state budget was not clearly 
established.  Due  to  the  reorganisations  after  the  2016  elections,  the  implementation  of  the 
2016-2018 public administration reform action plan was delayed, notably with respect to the 
optimisation of the public administration, which will now start in 2018. The 2018-2020 action 
plan,  adopted  in  January  2018,  is  more  thoroughly  costed  thanks  to  the  use  of  a  clear 
methodology. 

2.2. 

 Rule of law and fundamental rights 

2.2.1. Chapter 23: Judiciary and fundamental rights 
The  EU's  founding  values  include  the  rule  of  law  and  respect  for  human  rights.  A  properly 
functioning  judicial  system  and  an  effectively  fight  against  corruption  are  of  paramount 
importance, as is respect for fundamental rights in law and in practice. 

Montenegro is moderately prepared to apply the  acquis and European standards in this area 
and has made some progress overall. The legislative framework on the judiciary intended to 
increase its independence and professionalism has  yet to  be fully implemented. Institutional 
capacity has been  strengthened. However, corruption  is  widespread  and remains an issue of 

13 

 
 
 
concern. On fundamental rights, Montenegro further aligned its legislation with EU standards 
and the work of the Ombudsman's Office in particular has improved, but more efforts are still 
needed on strengthening the institutional framework and effective protection of human rights 
in practice. On freedom of expression, recent developments challenging the independence of 
public media bodies raise concerns.  

In the coming year, Montenegro should in particular:  

  step up efforts to increase the use of financial investigations in line with Financial Action 
Task  Force  (FATF)  standards,  and  establish  a  track  record  of  seizure  and  confiscation  of 
criminal assets; 

  strengthen the independence, accountability, professionalism and overall efficiency of the 
judicial system; 

  strengthen media freedom, including by clearly stepping up efforts to investigate cases of 
violence  against  journalists  and  by  shielding  public  broadcaster  RTCG  and  all  other  media 
from undue influence and political pressure. 

Montenegro is implementing a detailed action plan which was adopted prior to the opening of 
the accession negotiations in this chapter in December 2013. 

Functioning of the judiciary 

Montenegro’s  judicial  system  is  moderately  prepared.  During  the  reporting  period, 
Montenegro  made  some  progress  in  meeting  the  recommendations  on  strengthening  the 
independence,  professionalism  and  accountability  of  the  judiciary.  The  capacities  of  the 
Judicial and Prosecutorial Councils have improved, judges and prosecutors were recruited for 
the  first  time  under  the  new  system  and  implementation  of  the  new  IT  strategy  has  started. 
However, the recruitment, professional appraisal and promotion system of judges has yet to 
be fully implemented. In addition, a track record of implementation of codes of ethics and of 
disciplinary  responsibility  is  still  lacking,  and  human  resources  management  has  not 
improved. 

In the coming year, Montenegro should in particular: 

  strengthen the independence and professionalism of the judiciary by fully implementing 
the recruitment, professional appraisal and promotion system; 

  strengthen  the  accountability  of  the  judiciary  by  developing  a  track  record  of 
implementation  of  codes  of  ethics  and  of  the  disciplinary  responsibility  for  judges  and 
prosecutors; 

  step  up  the  work  on  the  rationalisation  of  the  judicial  network  including  by  ensuring 
better human resources management. 

Strategic documents  

Montenegro’s action plan for Chapter 23 outlines comprehensive judicial reforms. In addition, 
a 2014-2018 Judicial Reform Strategy and accompanying bi-annual action plan to implement 
it are in place (the most recent action plan covers 2017-2018). A mechanism for monitoring 
the implementation of the strategy is also in place.  

Management bodies  

The  Judicial  and  the  Prosecutorial  Councils  are  the  key  bodies  in  charge  of  managing  the 

14 

 
 
 
judicial system and the careers of judges and prosecutors. Their composition and appointment 
procedures are broadly in line with European standards. In January 2018, the mandate of the 
Prosecutorial Council expired. After the Parliament in two attempts failed to vote on a list of 
four new Council members out of renowned lawyers, the Law on the State Prosecution was 
amended  in  February  2018  in  order  to  allow  for  the  Parliament  to  vote  on  individual 
candidates.  

The 2018 budget of the Judicial Council substantially increased to EUR 1.4 million, compared 
to  EUR  864  774  in  2017.  The  2018  budget  of  the  Prosecutorial  Council  is  EUR  541  114 
(2017:  EUR  455  877).  Additional  employees  have  been  recruited  in  both  councils.  Even 
though further strengthening of the administrative and professional capacity of both councils 
is  needed,  they  should  in  principle  be  able  to  implement  the  systems  for  recruitment, 
professional  assessment,  promotion  and  disciplinary  accountability.  However,  they  need  to 
improve  their  capacity  in  strategic,  budget  and  human  resources  planning,  as  well  as  their 
public  communication.  Both  councils  still  need  to  improve  transparency  of  their  work, 
including  by  fully  motivating  and  publishing  decisions  on  promotions  and  appointments, 
disciplinary proceedings, and the minutes of their meetings. Members of both councils should 
also devote more time and show full commitment to performing their functions.    

Independence and impartiality  

Following  the  2013  amendments  to  Montenegro’s  Constitution,  judicial  independence  has 
been  strengthened,  including  by  formally  reducing  room  for  political  influence  on  the 
appointments  to  the  judiciary.  However,  attempted  political  interference,  including  by 
authorities  internal  to  the  judiciary,  remains  an  issue  of  concern.  A  firmer  political 
commitment is needed to ensure the full independence of Montenegro’s justice system. 

The  principle  of  random  allocation  of  cases  is  guaranteed  by  the  law  on  courts  and 
implemented automatically through PRIS, the judicial information system, although for very 
small  courts  there  are  certain  limits.  The  practice  of  reallocating  large  numbers  of  cases 
between  courts  to  reduce  backlogs,  risks  undermining  the  right  to  a  lawful  judge  in  the 
absence of clear criteria. 

Montenegro  should  strengthen  impartiality  of  the  judiciary  by  revising  the  provision  in  the 
Law on the Judicial Council according to which disciplinary sanctions can be imposed only if 
a judge fails to seek recusal in at least three cases.  

The number of presidential pardons granted, which affect the independence of the judiciary, 
further dropped in 2017 to 1 case (down from 6 cases in 2016). 

Accountability  

Track  records  related  to  the  enforcement  of  disciplinary  accountability  and  to  the  codes  of 
ethics  for  judges  and  prosecutors  are  still  very  limited.  In  2017,  the  Commission  for 
monitoring the implementation of the code of ethics for judges dealt with 18 cases (2016: 19 
cases, 2 violations established) and did not find that any violations had occurred. In none of 
the 3 cases reported, a violation of the code of ethics of prosecutors was established in 2017 
(2016:  3  cases,  violation  established  in  one  case).  Disciplinary  proceedings  initiated  against 
one judge resulted in the statutory minimum sanction, while the proceedings initiated against 
one  prosecutor  resulted  in  20  %  salary  reduction  for  3  months.  All  cases  that  would  give 
grounds for disciplinary action need to be followed up on.  

15 

 
 
 
Mechanisms to detect breaches of integrity rules and to enforce disciplinary penalties need to 
become more effective. Public awareness of existing complaint mechanisms should be further 
raised  and  the  possibility  of  challenging  the  dismissal  of  complaints  before the  Judicial  and 
Prosecutorial Councils should be introduced. Relevant decisions by the 2 councils need to be 
better motivated and a case-law has yet to be developed in this area.  

The judicial inspection subordinated to the Ministry of Justice was strengthened in September 
2017, with the number of inspectors going up from 3 to 7. Further improvement and effective 
enforcement  of  the  judicial  inspection  system  are  needed,  including  more  thorough  and 
unannounced inspections. 

Following  the  introduction  of  the  bailiffs  system  in  spring  2014,  the  disciplinary 
responsibility of bailiffs has become a cause for concern. In 2017, 8 disciplinary proceedings 
were  initiated  against  bailiffs.  In  one  of  the  cases,  the  bailiff  in  question  was  temporary 
banned from performing its activity. In March 2017, amendments to the Law on bailiffs were 
adopted  to  ensure  effective  monitoring  of  their  work  and  higher  professional  and  ethical 
standards.  However,  to  tackle  this  problem,  further  steps  going  beyond  legislative 
amendments are needed, including appropriate training. 

Professionalism and competence  

Further  to  the  completion  of  legislative  reforms,  Montenegro  is  now  organising  single 
nation-wide  competitions  for  judges  and  prosecutors  (8  vacancies  for  new  prosecutors 
published in 2017), based on the new system applicable since 2016. The 2018-2019 plan of 
vacant positions was adopted in December 2017. Despite efforts of both councils to organise 
transparent  and  merit-based  selections,  challenges  remain  over  the  planning  of  recruitments 
and the transparency of selection procedures. 

After  the  pilot  phase  of  implementation  of  the  new  regular  professional  assessment  system 
was  completed  in  autumn  2016,  the  Judicial  and  Prosecutorial  Councils  reviewed  the 
assessment  criteria.  Regular  professional  assessments  of  prosecutors  are  ongoing,  while  for 
judges  they  should  start  in  early  2018.  Scepticism  within  the  judiciary  towards  regular 
professional assessment, which is one of the reasons for delays, needs to be addressed. 

Quality of justice  

Activities continued to harmonise jurisprudence, including with the case-law of the European 
Court of Human Rights.  

Following the move of the Judicial Training Centre into new premises in January 2017, the 
Centre is now fully equipped and the number of staff has increased. For 2018, it was allocated 
its  own  budget  of  EUR  624  240  (2017:  EUR  447  594).  This  allocation  is  still  below  the 
statutory minimum and for some specialised trainings the Centre continues to be dependent on 
donor  support.  The  autonomous  and  self-sustainable  functioning  of  the  Judicial  Training 
Centre  needs  to  be  guaranteed.  Its  administrative  and  managerial  capacity,  as  well  as 
cooperation  with  the  Judicial  and  Prosecutorial  Councils  needs  improvement  without  delay. 
The Centre also needs to play a more active role in identifying training needs on the basis of a 
training  needs  assessment,  promoting  training  among  the  targeted  audience,  evaluating 
training activities, and producing training materials covered by copyright.   

Instructions  for  collecting  statistical  data  in  compliance  with  the  European  Commission  for 
the Efficiency of Justice (CEPEJ) guidelines have not yet been fully implemented. Data on the 
total length of proceedings is still not available. Statistical information on the performance of 

16 

 
 
 
the  judicial  system  is  not  systematically  analysed,  nor  used  for  management  and 
policy-making purposes. 

PRIS,  the  judicial  information  system,  is  used  by  all  courts  for  tracking  cases,  for  some 
aspects  of  case  management  and  for  communication  with  parties.  However,  the  system  still 
has security gaps and does not operate reliably outside Podgorica. The system also allows for 
collection  of  comprehensive  statistics,  but  its  reliability  continues  to  raise  serious  concerns. 
Replacement of PRIS with a new IT system is planned under the 2016-2020 ICT strategy for 
the judiciary. Alternative solutions are needed until the new IT system and all its features are 
operational.  Such  transitional  arrangements  should  serve  the  purpose  of  allocating  human 
resources more efficiently and set more realistic workload standards for judges, based on the 
results and recommendations of the case-weighting study completed in 2015. 

The 2018 budget for the judiciary is EUR 37.8 million (0.9 % of GDP), which represents a 
marginal  increase  compared  to  2017  (EUR  34.8  million,  i.e.  0.82  %  of  the  2017  GDP).  In 
2018,  EUR  28.8  million  was  allocated  to  courts  (2017:  EUR  26.4  million)  and 
EUR 8.9 million to prosecutors’ offices (2017: EUR 8 million). Given that the largest part of 
the budget is spent on salaries, the funds allocated remain insufficient, in particular to cover 
investment needs and improve overall poor judicial infrastructure. Montenegro has 41 judges 
and 17 prosecutors per 100 000 inhabitants. According to the CEPEJ, the European average is 
21 judges/11 prosecutors per 100 000 inhabitants.  

The  impact  of  alternative  dispute  resolution  continues  to  be  low  and  has  even  declined.  In 
2017,  the  total  number  of  cases  referred to  and  solved  through  mediation  (excluding  labour 
disputes)  fell  to  161  cases  compared  to  429  in  2016.  The  total  number  of  labour  disputes 
referred for mediation was 2 055 (2016: 9 175). The use of mediation needs to be promoted 
further both among judges and parties to the disputes. 

Efficiency  

Montenegro is in general not affected by substantial court backlogs. However, in the course of 
2017, the case backlog increased with more than 25 %, from 32 313 cases pending at the end 
of 2016 to 40 780 pending at the end of 2017.  

The total number of cases that have been pending for more than three years before all courts 
did not change considerably (3 206 cases pending on 31 December 2017, 3 214 pending at the 
end  of  2016).  In  2017,  the  disposition  time,  i.e.  the  average  time  from  filing  the  case  to  a 
decision,  was  295  days  for  first-instance  proceedings  in  civil  cases  and  97  days  for 
commercial  cases  (2016:  165  days  for  civil  cases  and  80  days  for  commercial  cases). 
Montenegro  needs  to  continue  to  work  on  increasing  the  efficiency  of  the  judiciary, 
monitoring backlogs and reducing the number of cases pending. 

The number of incoming enforcement cases before the courts has continued to fall, although 
slightly, following the introduction of the bailiff system (2016: 1 771; 2017: 1 688), while the 
number of pending enforcement cases has declined considerably (end of 2017: 10 521; end of 
2016:  42  468).  The  numbers  of  appeals  against  decisions  issued  by  bailiffs  also  fell  (from 
13 850 in 2016 to 8 224 in 2017). A centralised case management system for bailiffs has been 
established, which makes it possible to centrally monitor the recovery rate, costs and duration 
of proceedings. Enforcement of courts' decisions remains problematic.  

While  the  2016-2019  mid-term  strategy  for  the  rationalisation  of  the  courts  network  was 
adopted  in  December  2016,  all  concrete  rationalisation  measures  are  postponed  until  after 

17 

 
 
 
2019. Reforms in these areas should draw on data and conclusions of a proper needs analysis, 
and  a  cost-benefit  analysis  of  the  past  and  planned  reforms.  Better  human  resources 
management also needs to be ensured.  

Domestic handling of war crimes cases  

Implementation  of  the  war  crimes  prosecution  strategy  continued.  Of  the  eight  new  cases 
opened  by  the  Special  Prosecutor's  Office  (SPO)  for  the  fight  against  corruption,  organised 
crime,  war  crimes,  terrorism  and  money  laundering  in  2016,  six  are  still  in  the  preliminary 
investigation  phase.  In  one  of  these  cases,  prosecution  was  not  pursued  due  to  lack  of 
evidence.  In  September  2017,  court  proceedings  started  against  an  individual  charged  with 
crimes  against  the  civilian  population.  In  all  the  cases  under  preliminary  investigation,  the 
SPO  had  to  rely  on  letters  rogatory  to  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia (ICTY) and to the prosecution services of the neighbouring countries.  

By the end of 2017, 154 decisions on claims for compensation were final (December 2016: 
125),  and  a  total  amount  of  EUR  1  485  510  (by  end  of  2016:  EUR  1  097  713)  had  been 
awarded. Montenegro needs to ensure that victims of war crimes have equal access to justice, 
that reparations are in line with the national legislation, and that the proceedings are finalised 
within a reasonable time. 

Despite some positive developments in the reporting period, Montenegro needs to further step 
up its efforts to fight impunity for war crimes. It needs to apply a more proactive approach in 
order to effectively investigate, prosecute, try and punish war crimes in line with international 
standards,  and  also  to  prioritise  such  cases.  The  judicial  decisions  reached  so  far  have 
contained  legal  mistakes  and  shortcomings  in  the  application  of  international  humanitarian 
law. Charges of command responsibility, co-perpetration and aiding and abetting have so far 
not been brought. 

Fight against corruption 

Montenegro  has  some  level  of  preparation  in  the  fight  against  corruption.  Despite  some 
progress  in  particular  as  regards  the  institutional  capacity,  a  more  proactive  attitude  is  still 
needed.  Challenges  related  to  the  independence  and  priority-setting  of  the  Anti-Corruption 
Agency  need  to  be  addressed.  Financial  investigations,  seizure  and  confiscation  of  assets 
remain to be improved. Further improvements of the track record of successful investigations 
and  convictions  will  only  be  possible  in  an  environment  where  independent  institutions  are 
shielded from any undue influence and incentivised to fully use their powers.  

In the coming year Montenegro should in particular: 

→ continue improving the operational capacity of the institutions and their cooperation; 

→  step  up  efforts  to  increase  the  use  of  financial  investigations,  including  by  improving 
operational capacity, and establish track records of seizure and confiscation of criminal assets; 

→ significantly improve track records in the areas of repression and prevention of corruption, 
including by imposing effective sanctions. 

Track record 

An  initial  track  record  of  investigation,  prosecution  and  final  convictions  in  high-level 
corruption  cases  has  been  established,  but  needs  to  be  further  consolidated.  Following  the 
first,  final  and  enforceable  judgments  in  high-level  corruption  cases  in  February  and 
December 2016, a further 14 final and enforceable judgements were issued in 2016 and five 

18 

 
 
 
in 2017, imposing sentences between 6 months and 3 years and 8 months. In addition, fines 
were  imposed,  and  compensation  was  ordered  in  the  form  of  return  of  property  with  an 
estimated value of approximately EUR 24 million. Most of these judgements were based on 
plea bargain agreements. Among the convicted individuals were several mayors, two judges 
and the former President of the State Union of Serbia and Montenegro who has not yet started 
serving  his  prison  sentence.  Trials  are  ongoing  in  other  high  profile  cases  processed  in  the 
previous period, including a case concerning 12 public officials.  

In 2017, indictments were lodged in 10 cases of high-level corruption against 18 individuals 
and three legal entities, while new investigations were launched in 16 cases, involving, among 
others,  former  mayors  and  state  and  municipal  officials.  In  the  first  months  of  2018, 
indictments were lodged in two high-level corruption cases, involving two former mayors.  

Precautionary freezing of assets (e.g. of a plot of land and company premises) was imposed in 
one  case  in  which  investigation  is  ongoing  against  12  individuals,  including  two  deputy 
ministers,  and  one  legal  person.  However,  the  track  record  on  seizure  and  confiscation  of 
assets needs considerable improvement. New financial investigations were launched in 2017 
against 53 individuals and 13 legal entities in relation to six high-level corruption cases. 

Montenegro  has  made  some  progress  in  establishing  a  track  record  in  the  prevention  of 
corruption. In addition, the amount of fines imposed by misdemeanour bodies is increasing. 
However,  the  practice  of  issuing  sanctions  below  the  statutory  minimum  is  not  having  a 
deterrent  effect  and  counteracts  effective  enforcement  of  rules  on  prevention  of  corruption. 
The Anti-Corruption Agency (ACA) should use its power to directly impose  misdemeanour 
penalties. 

For the period 2016-2017, 96 % of public officials submitted income and asset declarations 
within the prescribed time limit (2015/2016: 92.1 %). In 2017, the ACA cross-checked over 
1 600  assets  declarations  and  fulfilled  its  annual  plan,  which  is  based  on  a  priority  order. 
Misdemeanour proceedings for failure to submit income or asset declarations were instituted 
against  312  public  officials  and  fines  totalling  EUR  42  090  were  imposed  (2016:  EUR 
38 270).  Another  42  (2016:  40)  misdemeanour  proceedings  were  instituted  due  to 
irregularities  identified  in  the  asset  declarations  submitted.  In  these  cases  fines  totalling 
EUR 6 720  (2016: EUR 3 680)  were imposed.  About 71 %  of public officials  and 75 %  of 
civil  servants  gave  optional  consent  to  the  Agency  for  access  to  their  bank  account  for  the 
purpose  of  verifying  the  data  submitted  in  the  income  and  asset  declarations.  Among  those 
officials who gave such optional consent are 10 members of the government.  

Since the beginning of 2017, the Agency initiated enquiries into inexplicable wealth against 
24  public  officials  (down  from  49  in  2016)  but  found  no  irregularities.  The  Agency  is 
encouraged  to  perform  more  in-depth  checks  of  officials  on  random  samples,  including 
searching  for  illicit  enrichment,  changes  and  transfers  of  assets,  and  identifying  origins  of 
assets. 

In 2017, the ACA issued 127 opinions on incompatibility of functions (2016: 185 opinions 
and 58 decisions). Based on ACAs opinions, 37 public officials resigned from their office or 
function.  Challenges  remain  regarding  cases  of  conflict  of  interest,  which  are  scarce. 
Moreover, recent opinions issued by the Agency, including those concerning members of the 
governing  council  of  the  public  broadcaster  RTCG  and  the  Council  of  the  Agency  for 
Electronic  Media,  have  shown  significant  weaknesses  in  the  application  of  the  law,  the 
establishment of the facts and proper reasoning. This opened a debate over the need to shield 

19 

 
 
 
the  Agency  from  undue  external  pressure.  In  February  2018,  ACA's  decision  establishing 
conflict  of  interest  in  the  case  of  the  Minister  of  European  Affairs  resulted  in  latter's 
resignation. This decision is being challenged before the Administrative Court. 

On the funding of political parties and electoral campaigns, the ACA continued to monitor 
the  overall  compliance  of  relevant  entities  in  meeting  the  obligations  laid  down  in  the  anti-
corruption legislation. It also performed routine control checks of party financing along with 
oversight of election campaigns, registering a considerable increase in reported irregularities. 
On the October 2016 elections it initiated 405 misdemeanour procedures for noncompliance 
and 5 temporary suspensions of payment of budgetary funds to political entities (86 in the first 
half  of  2016).  No  irregularities  were  noted in  the  preparations  for  the  5  municipal  elections 
that took place in March and November 2017. 

The  ACA  has  not  identified  any  abuse  of  public  resources  for  party  purposes,  despite 
persistent  reports  from  the  opposition  and  civil  society  that  such  abuse  is  widespread.  The 
ACA still needs to develop a quality risk assessment methodology and make more effective 
use  of  its  investigative  powers,  including  though  more  in-depth  checks.  New  software 
enabling in-depth, result-oriented checks based on risk assessment and strategic planning has 
the potential to improve the Agency's track record in this respect. 

The  State  Audit  Institution  (SAI)  published  positive  audit  reports  on  annual  financial 
statements  of  15  political  parties,  one  conditional  report  and  one  negative  report,  while 
regularity audits yielded mostly conditional reports with recommendations for improvement. 

In  2017,  5,577  initial  requests  for  access  to  information  were  made  to  public  bodies.  Of 
these,  the  information  requested  was  not  provided  in  1,951  cases  (2016: 1  562  of  a  total  of 
6,426  initial  requests  for  access  to  information).  The  Agency  for  Data  Protection  and  Free 
Access  to  Information  received  1  086  complaints  of  which  it  upheld  356  (2016:  1,122  of 
2 687  complaints).  Most  were  cases  of  administrative  silence,  i.e.  cases  where  the  requests 
remained  unanswered  by  the  public  institutions,  which  is  a  matter  of  concern.  In  2017  the 
Administrative Court ruled in 12 cases against the public body's decision not to grant access 
to information. Court decisions on access to information are however not effectively enforced. 
The  increasing  practice  of  declaring  the  requested  documents  classified  in  order  to  restrict 
access  to  information  is  a  matter  of  concern  (68  in  2017;  30  in  2016).  Public  institutions 
urgently  need  to  improve  implementation  of  the  law  and  comply  promptly  with  access  to 
information requests, especially in areas where there is a risk of corruption.  

Results on the protection of  whistle-blowers remain limited. In 2017, the ACA received 69 
reports  on  threats  to  the  public  interest  (56  in  2016),  and  2  requests  for  whistle-blower 
protection (8 in 2016). Protection was granted in one case. It further initiated 27 proceedings 
on  its  own  initiative  for  determining  the  existence  of  a  threat  to  the  public  interest  and 
established  such  a  threat  in  16  of  these  cases  (no  such  cases  were  reported  for  2016).  One 
misdemeanour proceeding is under way. 

With the support of the ACA, integrity plans have so far been adopted by 688 (of 700) public 
bodies and 679 bodies have appointed integrity managers. Electronic submission of integrity 
plans  and  reports  on  their  implementation  is  planned  to  start  in  2018,  which  will  make  it 
easier to process and analyse them. The ACA continued initiating misdemeanour proceedings 
against  public bodies which had not  fulfilled the legal obligation  to  adopt  an integrity  plan; 
since  2016,  the  total  amount  of  fines  imposed  was  EUR  18  640.  However,  the  practical 
impact of these plans on prevention of corruption is yet to be assessed. 

20 

 
 
 
On the implementation of the Law on lobbying, 6 lobbying certificates have been issued, but 
only  one  person  obtaining  such  a  certificate  has  so  far  registered  with  the  ACA.  These  low 
numbers  suggest  that  lobbying  activities  are  being  carried  out  outside  the  legal  framework. 
The  ACA  has  been  addressing  this  issue  through  awareness  raising,  but  it  still  needs  to 
demonstrate a more pro-active approach in detecting, following-up and punishing breaches of 
the  law.  It  should  further  focus  its  attention  on  potentially  lobbied  individuals  in  public 
institutions and bodies. 

There are still hardly any cases demonstrating the effective implementation of codes of ethics 
for members of the legislative and executive authorities.    

The  impact  of  anti-corruption  measures  in  particularly  vulnerable  areas  remains  limited. 
Despite  greater  staff  numbers  in  some  inspection  services,  there  is  still  a  strong  and  urgent 
need  to  improve  and  strengthen  internal  inspection  mechanisms  within  the  public 
administration  and  to  improve  their  cooperation  with  law-enforcement  authorities.  For 
instance,  inspection  capacity  in  public  procurement  needs  to  be  further  improved.  The 
ongoing introduction of full e-procurement is expected to help achieve more transparency and 
reduce  opportunities  for  abuses.  However,  checks  on  the  overall  public  procurement  cycle 
remain a cause for concern. 

Institutional framework  

Prevention of corruption 

An  Anti-Corruption  Agency  (ACA)  with  administrative  investigative  powers  was  set  up  in 
January 2016. Of the 60 planned positions in the Agency, 56 have been filled. Some progress 
was made  on strengthening  the capacity of the department for political parties and electoral 
campaign  financing.  However,  intensified  staff  training  on  whistle-blower  protection  and 
lobbying is still needed.   

The Agency's IT system which includes an electronic case management system and a system 
for electronic submission of reports is in place and is being upgraded continuously. It provides 
direct links to databases of other institutions (Central Registry of the Commercial Court, the 
Vehicle  Registry,  the  Weapons  registry,  the  Central  Registry  of  Citizens,  the  Real  Estate 
Administration, the Tax Administration, the Central Depositary Agency, and the Registry of 
Criminal Records). This links make it possible to, for instance, cross-check data in real time 
and  automatically  detect  potential  incompatibilities  of  functions.  The  visibility  and 
transparency  of  the  Agency’s  web  page  has  also  improved,  including  the  visibility  of  the 
electronic form for reporting corruption.  

In  November  2017,  the  ACA  signed  an  agreement  with  the  State  Audit  Institution.  Several 
agreements  with  other  relevant  public  institutions  have  already  been  signed  and  more  are 
planned. 

The  ACA  is  still  not  perceived  as  sufficiently  independent  and  proactive  by  the  general 
public. Due to personal ties between its management and the political elite, allegations of its 
political  instrumentalisation  persist.  To  strengthen  public  confidence,  the  ACA  should  be 
allowed to operate independently of any political influence. Its management and staff should 
ensure maximum transparency, integrity and impartiality, and accountability. The ACA must 
further improve its communication and outreach activities. 

21 

 
 
 
 
 
Law enforcement 

The  Special  Prosecution  Office  (SPO),  which  was  set  up  in  2015  has  the  lead  in  criminal 
investigations into corruption-related offences. Special prosecutors have been appointed and 
almost all specialised experts have been recruited. So far, 35 positions out of 37 provided for 
in  the  Rulebook  on  internal  organisation  adopted  in  March  2017  have  been  filled.  Since 
mid-2016 the SPO is supported by a Special Police Unit (SPU), which is now fully staffed. 
However, due to the significant amount of cases dealt with by the SPO, the capacity of SPU 
should be considerably improved. 

judges  and  police 

to  fight  corruption  remains 

The  leading  role  of  the  SPO  in  pre-trial  investigations  is  well  accepted  and  the  relationship 
between SPO and SPU remains good, particularly thanks to the establishment of special joint 
investigation  teams.  In  spite  of  this,  the  overall  institutional  and  operational  capacity  of 
prosecutors, 
insufficient  and  needs 
improvement, particularly through specialised training. While there has been some progress, 
financial  investigations  are  still  not  launched  systematically  in  corruption  cases  and  the 
concept  needs  further  alignment  with  Financial  Action  Task  Force  (FATF)  standards.  The 
lack of financial investigation skills in the police and prosecution needs to be addressed as a 
matter of priority through targeted specialised long-term training. Only a few cases continue 
to  be  submitted  to  the  prosecution  by  the  police,  and  hardly  any  originate  from  official 
inspections or auditing bodies. Political influence should not be exerted on law enforcement 
and judicial officials by members of the executive and the legislative branch with the aim of 
interfering in their independent functioning. 

There  has  been  improvement  in  putting  IT  infrastructure  in  place,  including  setting  up 
protected  electronic  channels  between  all  prosecutors'  offices  and  some  ministries,  and 
installation of a case management system for the SPO.  

It is of utmost importance that both the SPU and the SPO are able to recruit the most suitable 
experts. Suitable premises for the SPO need to be provided without delay (see also the section 
on organised crime under Chapter 24). 

Legal framework  

Montenegro  is  a  party  to  all  international  anti-corruption  conventions.  The  legal  framework 
and  secondary  legislation  on  anti-corruption  are  in  place.  Passive  and  active  corruption  are 
both  punishable  under  the  Criminal  Code.  Montenegro  is  encouraged  to  make  illicit 
enrichment  a  criminal  offence.  Out  of  11  GRECO  recommendations  on  the  ethics  and 
integrity  of  MPs,  prosecutors  and  judges,  5  are  considered  to  be  fully  implemented,  and  3 
partially implemented, while 3 recommendations have not yet been implemented.  

In December 2016, amendments were adopted to the Law on the financing of political entities 
and  election  campaigns.  As  a  result,  public  funding  for  the  regular  functioning  of  political 
entities  fell  from  0.6  %  to  0.5  %  of  the  state  budget,  effective  as  of  1  January  2017.  In 
December  2017  further  amendments  to  this  Law  were  adopted  to  implement  some  of  the 
OSCE/ODIHR  recommendations.  Additional  identified  shortcomings  in  the  existing  legal 
framework on political parties' financing, including those identified by ODIHR, are yet to be 
addressed.  

Impediments  to  establishing  a  more  convincing  track  record  in  successfully  addressing 
high-level  corruption  also  remain  in  the  legal  framework  regulating  pre-trial  and  financial 
investigations,  and  some  excessive  formalities  will  need  to  be  filtered  out  of  the  legal 

22 

 
 
 
framework. The high number of cases ending with plea bargains further raises concerns about 
transparency and consistency of the  sanctioning policy. The use  of plea  bargain agreements 
needs  to  be  carefully  balanced  against  the  public  expectation  that  corruption-related  crimes 
should be duly punished in accordance with sanctions stipulated in law, in particular when it 
concerns politically-exposed persons. 

Amendments to the Law on free access to information were adopted in April 2017 aligning it 
with the EU acquis on re-use of public information. While these amendments are expected to 
speed  up  proceedings  for  obtaining  information,  there  are  concerns  over  authorities' 
increasing tendency to declare information as classified, thus excluding it from the scope of 
this law. For instance, the government has decided to mark all audio recordings of its sessions 
confidential. 

Strategic framework 

The  action  plan  for  Chapter  23  outlines  comprehensive  reforms  to  prevent  and  combat 
corruption. It is complemented by an 'operational document' adopted in 2016 which sets out 
additional measure to prevent corruption in certain areas particularly vulnerable to corruption, 
such  as  public  procurement,  privatisation,  urban  planning,  education,  healthcare,  local 
government  and  police.  The  impact  of  these  measures,  however,  remains  limited  and 
Montenegro  should  develop  more  effective  sector-specific  plans  for  the  prevention  of 
corruption.  

 Fundamental rights 

Reforms to further align with the EU and international human rights standards have continued 
and progress has been made in particular on anti-discrimination legislation. Montenegro now 
needs  to  ensure  that  adequate  institutional  mechanisms  are  in  place  to  protect  vulnerable 
groups from discrimination. Implementation of the legislation remains weak and institutional 
capacity on human rights needs to be increased. The Roma and Egyptian minority remains the 
most  vulnerable  and  most  discriminated  community.  Gender-based  violence  and  violence 
against children also remain serious concerns in the country.  

To address these shortcomings, Montenegro should in particular:  

  further  strengthen  human  rights  institutions,  and  the  Ministry  of  Human  and  Minority 
Rights, and increase their knowledge of international and European human rights standards; 

 strengthen the application and protection of human rights and ensure effective protection 
of victims of human rights violations, including by providing for effective investigations into 
ill-treatment by law enforcement, and cases of deaths and physical attacks on individuals, in 
accordance with the case-law of the European Court of Human Rights (ECtHR); 

  ensure  effective  implementation  of  fundamental  rights  policies  on  gender  equality,  the 
rights of the child and Roma rights by securing sufficient budget allocation to implement the 
policies, improve the capacity of responsible institutions and increase their inter-institutional 
coordination.  

No new ratifications of international human rights instruments took place. Montenegro has 
yet  to  ratify  the  International  Convention  on  the  Protection  of  the  Rights  of  All  Migrant 
Workers and Members of Their Families.  

Montenegro  continued  its  dialogue  and  cooperation  with  international  human  rights 
organisations  and  monitoring  bodies,  in  particular  of  the  United  Nations  (UN)  and  of  the 

23 

 
 
 
Council of Europe (CoE). In 2017 Montenegro presented the reports on the implementation of 
the UN Convention on Elimination of all Forms of Discrimination against Women, and of the 
UN  Convention  on  the  Right  of  Persons  with  Disabilities.  The  third  report  on  the 
implementation of the Framework Convention for the Protection of National Minorities was 
prepared  in  June  2017.  The  Report  of  the  European  Committee  on  Racism  and  Intolerance 
was adopted in September 2017. 

Montenegro  continued  to  ensure  a  good  level  of  cooperation  with  the  European  Court  of 
Human  Rights  and  none  of  the  Court's  judgements  against  Montenegro  are  subject  to  the 
enhanced  supervisory  procedure.  Since  September  2016,  15  judgments  against  Montenegro 
were issued by the ECtHR. These concerned procedural aspects of the right to life (i.e. lack of 
effective investigation), the right to private life, and prohibition of discrimination. Violations 
were also found on the right to a trial within reasonable time and lack of effective remedy. A 
further  11  cases  were  concluded  after  the  government  gave  a  commitment  to  pay 
compensation for duration of proceedings. During the reporting period, 208 new applications 
against  Montenegro  were  registered by  the  Court.  On  1  February  2018, the  total  number  of 
applications pending before the Court was 85.  

Improvements  are  needed  on  the  overall  awareness  of  the  institutions  and  judiciary  of  the 
rights protected by the European Convention on Human Rights (ECHR), their willingness to 
apply the standards in daily practices, and improve the reasoning of the decisions, including 
those  of  the  Constitutional  Court.  Several  activities  are  ongoing  in  this  area,  including 
capacity  building  in  the  judiciary  and  publication  of  selected  ECtHR  cases  on  the  Supreme 
Court’s homepage. 

On  the  promotion  and  enforcement  of  human  rights,  the  Ministry  of  Human  Rights  and 
Minorities  (MHRM)  and  the  Ombudsman’s  Office  continued  to  receive  assistance,  with  a 
view to strengthening their respective capacity. The MHRM plans to increase its staff. Several 
aspects  of  the  Ombudsman's  Office's  work  have  improved,  including  its  visibility,  outreach 
and productivity. However, there is still room to increase its efficiency and the quality of its 
opinions.  Public  trust  in  this  institution  has  improved  as  shown  by  the  number  of  reported 
cases.  Cases  initiated  by  the  Ombudsman  on  its  own  initiative  have  also  increased. 
Cooperation  with  CSOs  remains  positive,  but  more  systematic  consultations  would  be 
desirable.  The  Ombudsman's  Office  is  accredited  under  the  Global  Alliance  of  National 
Human  Rights  Institutions  with  a  B  status.  Financial  resources  provided  to  MHRM  and  the 
Ombudsman's Office are not sufficient to enable them to efficiently carry out their tasks. 

On the prevention of torture and ill-treatment, Montenegro has continued to implement the 
recommendations of the European Committee for the Prevention of Torture and Inhuman or 
Degrading Treatment. The national preventive mechanism, whose capacity and independence 
have been strengthened, continued to work as a separate department under the Ombudsman. 
The  incidents  of  police  brutality  reported  in  early  2018,  and  shortcomings  and  delays  in 
investigating and prosecuting cases of alleged violence by law-enforcement officers show the 
difficulties  in  eradicating  ill-treatment  and  establishing  a  record  of  deterrent  sanctions.  The 
same applies to cases of violence in prisons. 

On  the  prison  system,  detention  conditions  continue  to  improve,  including  in  juvenile 
detention  facilities,  but  they  remain  poor  overall.  This  is  also  the  case  for  the  provision  of 
healthcare to inmates and for staff working conditions. On a positive note, the authorities have 
drawn  up  rules  on  the  use  of  restraint  as  a  means  of  coercion,  contingency  plans  to  better 
handle  emergency  situations  in  prisons  and  new  instructions  on  healthcare.  However, 

24 

 
 
 
trainings,  awareness-raising  or  capacity-building  among  prison  guards  and  other  staff  on 
fundamental  rights  standards  in  prisons  still  needs  to  be  ensured.  There  are  delays  in  the 
implementation of the alternative sanction system and there is a need to increase the capacity 
of  the  whole  probation  system.  Rehabilitation  and  resocialisation  programmes  also  remain 
limited. 

On  protection  of  personal  data,  the  country  has  ratified  the  CoE  Convention  108  on  the 
Protection  of  Individuals  with  regard  to  Automatic  Processing  of  Personal  Data  and  its 
additional protocol. Amendments to the Law on Data Protection related to video surveillance 
were  adopted  in  March  2017.  However,  implementation  of  the  data  protection  legal 
framework remains weak. Work has not yet started on aligning the broader legal framework 
with the new EU data protection acquis in the field. The Agency for Personal Data Protection 
and  Free  Access  to  Information  employed  new  staff  but  its  activities  are  still  limited. 
Awareness-raising should continue, as should training on data protection standards, including 
for  judges.  Further  efforts  need  to  be  undertaken  to  align  the  personal  data  protection 
legislation with the General Data Protection Regulation 2016/679 and Directive 2016/680. 

While  freedom  of  thought,  conscience  and  religion,  and  equal  treatment  of  all  religious 
communities are guaranteed by the Constitution, there has been no progress in preparing the 
new  Law  on  Freedom  of  Religious  Belief.  Tensions  between  the  Serbian  and  Montenegrin 
Orthodox Churches continued. 

Freedom of expression 

Montenegro has some level of preparation on freedom of expression. No progress was made 
in the reporting period. There have been no notable developments on investigations into old 
cases of violence against journalists. Political interference in the national public broadcaster 
(RTCG)  and  the  Agency  for  Electronic  Media  (AEM)  are  a  matter  of  serious  concern.  The 
media scene remains highly polarised and challenges persist in understanding the role of free 
media.  The  number  of  defamation  cases  remains  high,  also  due  to  weak  self-regulatory 
mechanisms. Training of the judiciary on ECtHR case-law on freedom of expression needs to 
continue.  

In addressing the shortcomings, Montenegro should in particular:  

 clearly step up and prioritise efforts to investigate cases of attacks against journalists; 

  ensure  the  financial  and  editorial  independence  of  RTCG  and  AEM,  as  well  as  of  their 
governing bodies and of all other media outlets; 

 strengthen the capacity of self-regulatory bodies.  

Intimidation of journalists 

On  freedom  of  expression,  progress  on  addressing  violence  against  journalists  and  media 
remains very limited, especially in dealing with old unsolved cases. Seven cases of attacks on 
journalists  took  place  in  2017.  Three  of  these  cases  resulted  in  misdemeanour  proceedings, 
while in one case the authorities found no elements of criminal or minor offences. Criminal 
investigations into old cases, including the 2004 murder of an editor-in-chief, continue to be 
ineffective and the authorities have so far failed to step up and prioritise efforts to solve these 
cases. In October 2017, a first-instance court awarded compensation to a journalist for lack of 
effective investigation into an attempt on his life in 2007. In the same case, in November 2017 
the Constitutional Court awarded the journalist additional compensation. Protection offered to 

25 

 
 
 
the  same  journalist  was  withdrawn  based  on  the  assessment  that  the  threat  was  no  longer 
imminent. There have also been reports of undue pressure on journalists by law-enforcement 
to disclose their sources. 

The  ad  hoc  commission  monitoring  violence  against  media,  which  was  re-established  in 
September 2016, has so far produced three reports focusing on more recent cases, identifying 
a number of shortcomings and delays in investigations. The commission's recommendations, 
which  were  endorsed  by  the  government,  need  to  be  fully  implemented.  Efforts  should  be 
stepped  up  to  prosecute  these  cases  effectively,  also  so  as  to  avoid  the  application  of  the 
statute of limitations. The authorities are expected to demonstrate zero tolerance for threats or 
attacks  against  the  media,  and  should  refrain  from  making  statements  that  may  create  an 
environment not conducive to freedom of expression.  

Legislative environment 

The new Law on RTCG came into force in September 2017 providing for a yearly financial 
allocation  to  RTCG  amounting  to  0.3  %  of  GDP.  Amendments  to  the  Law  on  electronic 
media  aimed  at  further  alignment  with  the  EU  acquis  were  adopted.  Montenegro  needs  to 
review  its  laws  governing  or  affecting  the  media  sector  in  a  thorough,  coherent  and 
coordinated  manner,  in  order  to  ensure  their  alignment  with  EU  acquis  and  international 
media freedom standards.     

Implementation of legislation/Institutions 

The  still  relatively  high  number  of  defamation  cases  points  to  weak  self-regulatory 
mechanisms. There is still no uniform approach to sanctions, suggesting that ECtHR case-law 
is  not  yet  sufficiently  known.  Self-regulatory  bodies  continue  to  reflect  the  overall 
polarisation  of  the  media  scene  in  Montenegro.  Effective  and  uniform  application  of  the 
revised  code  of  ethics  of  journalists  has  yet  to  be  achieved.  Dialogue  between  various  self-
regulatory  mechanisms  should  be  further  enhanced  to  improve  professional  standards  in 
media reporting. 

While  no  new  cases  of  blocking  internet  services  have  occurred  in  2017,  there  has  been  no 
administrative  or  judicial  follow-up  of  the  cases  of  blocking  freeware  and  cross-platform 
instant  messaging  services  on  election  day  in  October  2016,  which  suggests  the  fragility  of 
freedom of expression online. 

Public service broadcaster 

Initial  positive  developments  on  RTCG's  editorial  independence  and  professionalism  were 
challenged by instances of undue political interference and political pressure on its Council. 
Several members of the RTCG Council were dismissed and replaced by the Parliament in late 
2017 and early 2018. In its new composition, the RTCG Council voted out its chair, replacing 
him  with  one  of  the  newly  appointed  members.  Concerns  about  political  pressure  also 
surrounded the delayed signature of the government's agreement with RTCG on the provision 
of  public  broadcasting  services  and  the  approval  of  the  collective  agreement  regulating  the 
work of its employees.  

Economic factors 

Concerns about transparency and non-discrimination in state advertising persist. Following a 
ruling  of  the  Constitutional  Court,  the  State  is  no  longer  allowed  to  provide  funds  to 
commercial broadcasters, as it did in the past via AEM. The fact that many media outlets are 

26 

 
 
 
not  financially  sustainable  has  a  negative  impact  on  the  quality  of  reporting  and 
professionalism. 

Journalists are jointly represented in Montenegro's media trade union. Two associations aimed 
at  fostering  and  promoting  professional  journalism  across  the  polarised  media  scene  also 
exist,  but  still  need  to  reach  their  full  potential.  The  precarious  economic  situation  of 
journalists,  particularly  due  to  job  insecurity  and  low  salaries,  is  putting  them  at  risk  of 
editorial  interference  and  possible  self-censorship.  There  is  no  structured  dialogue  between 
the government and the media community on the working conditions of journalists.  

Freedom  of  assembly  and  association  is  guaranteed  by  the  Constitution  and  the  relevant 
legal framework is in place. While no major developments can be reported for 2017, there is a 
need to strengthen the practical implementation of standards in this area. 

On property rights, in September 2017 Parliament adopted a new Law on spatial planning 
and construction. Arbitrary interference in property rights in the application of this law needs 
to  be  prevented.  The  process  of  restitution  of  properties  expropriated  in  the  past  remained 
slow.  Montenegro  needs  to  provide  for  fair  proceedings  within  a  reasonable  time  when 
implementing its existing legal framework on property rights and restitution of property. 

On  non-discrimination,  amendments  to  the  Law  on  the  prohibition  of  discrimination  were 
adopted  in  June  2017,  aiming  at  further  alignment  with  the  acquis;  however,  court  cases 
remain  rare.  Employment  discrimination  on  the  basis  of  political  affiliation  continues  to  be 
reported  (for  issues of  discrimination in  employment see also Chapter  19).  The work of the 
Ombudsman's  Office  in  this  area  has  improved,  but  its  capacity  needs  to  be  further 
strengthened.  Progress  towards  the  criminalisation  of  racist  and  hate  speech  was  made  with 
new  amendments  to  the  Criminal  Code  in  July  2017,  but  the  number  of  prosecuted  cases 
remains low.  

On equality between women and men, there are concerns about the practical impact of the 
relevant legislation. In addition, the effectiveness of the gender referral mechanism needs to 
be ensured. During  the reporting period, Montenegro adopted the 2017-2021 action plan on 
gender  equality,  but  implementing  it  requires  adequate  human,  technical  and  financial 
resources. Montenegro should also adopt measures to counter stereotypes and discriminatory 
practices, trafficking and exploitation of prostitution. It is also necessary to improve women’s 
political  participation,  education  and  economic  empowerment,  and  to  address  the  needs  of 
women  facing  multiple  discriminations.  Another  area  of  concern  is  the  phenomenon  of 
sex-selective abortions. 

With the adoption of the Criminal Code in July 2017, Montenegro aligned its legislation with 
the  Istanbul  Convention  on  violence  against  women  and  domestic  violence.  However,  the 
implementation of the Convention is proceeding slowly and gender-based violence remains a 
serious concern. There is little improvement in the capacity and gender sensitivity of existing 
institutions.  The  limited  numbers  of  protection  orders  issued  in  cases  of  repeated  reports  of 
violence needs to be addressed. Effective victim support services are yet to be provided, along 
with better and more accessible legal aid. 

On  the  rights  of  the  child,  there  is  a  need  for  better  coordination  of  policies  as  no  single 
institution has the overall responsibility on this issue. In April 2017, the 2017-2021 strategy 
for  the  prevention  and  protection  of  children  from  domestic  violence  was  adopted. 
Amendments to the Family Law have provided better procedural guaranties for the rights of 
the  child  and  for  explicit  prohibition  of  corporal  punishment.  However,  more  efforts  are 

27 

 
 
 
needed to ensure adequate implementation. The Ombudsman's Office has intensified its work 
on this issue and the number of child-related applications is increasing. More efforts are also 
necessary to address child begging and forced child marriages which affect mostly the Roma 
community, as well as the overall violence against children. Treatment of juveniles in prisons 
also calls for improvement. The very low number of reported cases of sexual violence against 
children 
identification  of  victims.  The 
de-institutionalisation  process  has  to  continue  and  needs  to  be  supported  by  alternative 
services such as foster care, kinship care and community-based care.  

reporting 

concerns 

raises 

about 

and 

Little progress was made on the rights of people with disabilities. Legislative alignment with 
international  standards,  including  the  UN  Convention  on  the  Rights  of  Persons  with 
Disabilities,  is  progressing  slowly.  The  issue  of  deprivation  of  legal  capacity  needs  to  be 
addressed without delay, in line with the Convention. There is no clear budget allocated for 
implementing the strategic and legal framework. Montenegro still needs to provide for regular 
and  sustainable  financial  support  for  organisations  of  people  with  disabilities,  and  adequate 
spending of funds for professional rehabilitation. It also still needs to improve the consultation 
mechanisms  for  people  with  disabilities  and  their  representative  organisations.  The  country 
should  also  adopt  comprehensive  strategies  on  de-institutionalisation  and  accessibility.  The 
adaptation  of  public  buildings,  including  the  accessibility  of  polling  stations  and  public 
university faculties, needs to continue. 

Montenegro  continues  to  be  a  regional  leader  on  the  rights  of  lesbian,  gay,  bisexual, 
transgender and intersex (LGBTI) persons. Overall, the authorities have continued to show 
overall openness on this issue and collaboration with civil society is strong. Preparation of the 
Law on civic partnership is ongoing. In  September, the National  Pride Parade took place in 
Podgorica without any incidents, but there was an increase in reports of hate speech targeting 
LGBTI persons, including from high-level religious representatives. Despite an improvement 
in relations between the LGBTI community and the police, records of prosecution based on 
hate speech need  to  improve. Continued and proactive efforts are still needed  to  ensure full 
and effective implementation of the existing legal framework to protect the rights of LGBTI 
people  and  to  tackle  public  attitudes  towards  them,  including  through  anti-discrimination 
campaigns. 

Issues of labour and trade union rights are covered in chapter 19. 

In the field of procedural rights, substantial efforts are needed to ensure full alignment with 
the acquis, particularly on rights for suspects and the accused in criminal proceedings, as well 
as on victims' rights, and sufficient budgetary allocations are required to enforce such rights. 
Dissemination of information on free legal aid also needs improvement. Concerns still persist 
about the proper application of ECtHR case-law in cases of prolonged pre-trial detention. 

Some  progress  was  made  on  minority  rights.  In  April  2017,  the  new  Law  on  the  rights  of 
minorities was adopted, which should eliminate the risk of conflict of interest in the process 
of  granting  funds  to  minorities.  In  order  to  secure  smooth  implementation,  the  relevant 
implementing legislation should be swiftly adopted and the capacity of MHMR strengthened. 

The latest strategy for the social inclusion of Roma and Egyptians (2016-2020) focuses on 
legal status, education, employment, housing, health, social welfare and culture identity and 
information. An action plan was adopted in March 2017. However, the budget provided for 
the strategy is insufficient to achieve its objectives. 

28 

 
 
 
Despite some progress, Roma remain the most vulnerable and discriminated community in the 
country. On education, there was progress on the number of children enrolled in pre-schools 
and primary education, while preparatory pre-school education has been extended from 2 to 4 
weeks. Other positive measures include provision of free text books, scholarships, enrolment 
through quotas in secondary and university education, summer camps for Roma students and 
provision  of  transportation  in  Podgorica.  However,  the  level  of  knowledge  of  the  official 
language  remains  poor,  prevention  measures  against  school  drop-outs  are  not  implemented, 
and  insufficient  attention  is  given  to  adult  education.  Only  one  third  of  Roma  students 
complete compulsory  education and just 3 % (the lowest in the region) complete secondary 
education. Efforts to include Roma in the labour market are not yielding satisfactory results; 
their labour force participation is decreasing and informal employment continues to be high. 
There  is  a  need  to  improve  outreach,  adjust  mainstream  employment  activities  to  the  Roma 
situation  and  ensure  sustainability  of  results.  The  great  majority  of  Roma  have  access  to 
health insurance coverage although the percentage of coverage has dropped since 2011. 

The  vast  majority  of  Roma  live  in  poor  housing  conditions  and  many  of  them  live  in 
segregated settlements. Also, nearly half of the households are not legalised. Access to public 
services  remains  a  challenge.  Following  the  successful  closure  of  the  Konik  II  camp  by 
providing social housing, the authorities should address the housing conditions of domiciled 
Roma and the risk of evictions in other municipalities. An estimated 16 % of Roma lack civil 
registration.  Additional  efforts  are  needed  on  the  protection  and  promotion  of  the  Romani 
language. 

On  displaced  and  internally  displaced  people  (IDPs),  during  2017  the  Ministry  of  Interior 
significantly reduced the number of pending applications for resolving the status of IDPs. Out 
of  14  781  claims,  14  391  were  processed,  in  12  064  cases  IDPs  acquired  the  status  of 
foreigner  with  permanent  residence,  243  claims  were  dismissed  and  2  093  rejected  or 
proceedings  were  suspended  due  to  incomplete  documentation.  390  applications  are  still 
pending. However, there are still a number of cases of undocumented people. 

Montenegro is a party to all major international conventions relating to statelessness and with 
the  new  law  on  foreigners  adopted  in  February  2018  a  separate  procedure  for  determining 
statelessness  was  introduced.  So  far,  there  are  no  officially  recognised  stateless  persons, 
despite having an estimated number of 486 people who consider themselves stateless living in 
the country. 

On  citizens'  rights,  Montenegro's  preparations  to  develop  and  implement  an  investors' 
citizenship  scheme  continued.  As  a  candidate  country,  Montenegro,  when  using  its 
prerogatives  to  award  nationality  should  act  in  a  spirit  of  sincere  cooperation  and  should 
refrain from any measure which could jeopardise attainment of EU's objectives.  

2.2.2. Chapter 24: Justice, freedom and security  
The EU has common rules for border control, visas, external migration and asylum. Schengen 
cooperation  entails  lifting  border  controls  inside  the  EU.  There  is  also  cooperation  in  the 
fight against organised crime and terrorism, and judicial, police and customs cooperation. 

Montenegro  is  moderately  prepared  to  implement  the  acquis  in  this  area.  The  legal  and 
strategic frameworks are now largely in place. Some progress was achieved, in particular on 
the migration-related legal framework. In the fight against organised crime, there is an initial 
track record of prosecutions in the fight against the smuggling of migrants and against drug 

29 

 
 
 
trafficking.  However,  further  results  are  needed  to  produce  a  convincing  track  record,  in 
particular in the fight against money laundering and trafficking in human beings. 

In the coming year, Montenegro should in particular: 

financial 

 develop a strategic approach towards financial investigations, including by (i) adopting the 
FATF  concept  on 
financial 
investigations  when  dealing  with  organised  crime,  terrorism,  money  laundering  and  serious 
corruption  cases;  (iii)  start  financial  investigations  from  the  very  start  of  the  criminal 
investigation;  and  (iv)  apply  a  multidisciplinary  and  proactive  approach  to  financial 
investigations; 

(ii)  automatically 

investigations; 

implement 

 continue to improve its capacity to deal with sudden increases in mixed migration flows, in 
particular when it comes to human and material resources; 

  continue  to:  (i)  work  on  enhancing  cooperation  with  neighbouring  countries  on  border 
management issues; (ii) increase resources devoted to modernising border infrastructure and 
to the surveillance of borders, and (iii) implement anti-corruption measures. 

Montenegro is implementing a detailed action plan which was adopted prior to the opening of 
the accession negotiations in this chapter in December 2013. 

Fight against organised crime 

Montenegro  has  some  level  of  preparation  in  the  fight  against  organised  crime.  Some 
progress  was  made  on  strengthening  the  regulatory  and  institutional  framework,  which  is 
now  largely  in  place.  However,  the  track  record  on  some  forms  of  organised  crime,  for 
example  on  money  laundering  as  a  stand-alone  crime  and  trafficking  in  human  beings, 
remains 
implementing  previous 
recommendations.  

limited.  Montenegro  made 

little  progress  on 

In the coming year, Montenegro should in particular:  

   step  up  efforts  to  establish  a  track  record  of  investigations,  prosecutions,  final 
convictions,  seizures  and  confiscations  of  proceeds  of  crime  in  organised  crime  cases,  with 
particular focus on money laundering and trafficking in human beings; 

 remove  legal and  regulatory  obstacles  in  the investigation phase, by promoting proactive 
investigations and a more strategic approach towards financial investigations inspired by the 
‘EU action plan for the way forward with regard to financial investigations’;  

 carry  out  an  in-depth  reform  to  raise  the  professionalism  of  the  police,  including  by 
ensuring  a  centralised,  transparent  and  merit-based  recruitment  process,  and  by  attracting 
appropriate expert profiles. 

Institutional set-up and legal alignment 

The  total  number  of  police  officers  is  3  940.  There  are  633  police  officers  per  100  000 
inhabitants, compared to the EU average of 211 in 2015. 

The legal and institutional framework to fight against organised crime is largely in place and 
aligned with EU acquis, with the exception of the much-needed reform of the police. A new 
Law on internal affairs, which is expected to introduce structural changes in the organisation 
of  the  police,  including  a  merit-based  recruitment,  evaluation  and  promotion  system,  is 
awaited.  Following  the  application  by  the  Committee  of  Experts  on  the  Evaluation  of 

30 

 
 
 
Anti-Money  Laundering  Measures  and  the  Financing  of  Terrorism  (Moneyval)  of  step  2  of 
the compliance enhancing procedures to Montenegro in December 2016, the country amended 
its  legislative  framework.  However,  amendments  to  the  Law  on  the  prevention  of  money 
laundering  and  terrorism  financing,  are  still  to  be  adopted,  including  to  ensure  further 
alignment with the newly adopted standards of the Financial Action Task Force (FAFT). 

The  Special  Police  Unit  (SPU),  dealing  with  high-profile  organised  crime  cases,  is  now 
staffed with the 20 posts provided for. In the Special Prosecutor’s Office (SPO), 35 out of the 
37 posts provided for are currently filled. In addition, the number of specialised staff assisting 
the special prosecutors has increased.  

Montenegro has reached a good level of preparation to implement the acquis on international 
police  cooperation.  The  Automated  Fingerprint  Identification  System  (AFIS)  became 
operational  in  March  2017.  As  required  by  the  acquis,  Montenegro  has  now  five  full-time 
contact  points  for  the  exchange  of  intelligence  with  Member  States’  law-enforcement 
authorities, and one national contact point on football matches and for the protection of public 
figures. The Schengen Information System has been gradually incorporated into the national 
database and the Supplementary Information Request at the National Entries (SIRENE) office 
will be operational in 2019. Montenegro actively and efficiently participates in regional and 
international  police  cooperation  through  Europol,  Interpol  and  the  Southeast  European  Law 
Enforcement  Centre.  Some  2  795  pieces  of  information  were  exchanged  through  Europol 
from  January  to  October  2017.  Montenegro  integrated  the  Secure  Information  Exchange 
Network Application (SIENA) into a national case management application, for the purpose 
of  automatic  communication  with  Europol.  However,  Montenegro  does  not  yet  have  the 
technical possibility to carry out automatic data exchange of DNA, fingerprints and vehicles. 

On its strategic framework, Montenegro has sectoral strategies and action plans on the fight 
against organised crime, including on the fight against human trafficking beings and money 
laundering, the prevention of drug abuse and of arms trafficking. A new national Serious and 
Organised  Crime  Threat  Assessment  was  adopted  in  December  2017,  identifying  6  priority 
areas  for  2018-2019  (terrorism  and  religious  extremism,  drug  smuggling,  illegal  migration, 
serious criminal offences arising from conflicts between organised crime organisations, loan 
sharking and high-level corruption).  

Implementation and enforcement capacity 

Investigations for the criminal  offence  of organised crime were launched against  63 people, 
with 43 indicted. Investigations into cybercrime, including online child sexual abuse, remain 
very  rare.  On  human  trafficking,  the  first  prosecution  in  the  last  three  years  was  initiated 
during the reporting period, but did not result in a criminal conviction. Also, there have been 
no convictions on money laundering. 

Powerful  criminal  groups  operate  in  and  from  the  country.  Their  activities  include  drug 
trafficking,  cigarette  smuggling,  migrant  smuggling,  money  laundering,  organised  property 
crimes  and  crimes  against  individuals.  Criminal  activities  lead  to  frequent  gang-related 
murders.  Fighting  organised  crime  and  corruption  remains  crucial  to  countering  criminal 
infiltration of the political and economic systems. 

A  gap  remains  between  identified  strategic  priorities  and  operational  priorities.  Conditions 
should be created to enable both the SPU and the SPO to further recruit and retain the most 
suitable  high-level  expert  profiles.  To  retain  its  experts,  the  SPO  needs  to  review  its  job 
classification to ensure sufficient remuneration. The precarious conditions in which the SPO 

31 

 
 
 
is housed need to be addressed. Overall, there is a good cooperation between the SPU and the 
SPO, particularly since special joint investigation teams have been set up. 

Measures  are  also  needed  to  strictly  ensure  that  there  is  no  political  interference  in  the 
operational activities of law-enforcement bodies and the prosecution of cases. In addition, a 
number  of  technical  shortcomings,  both  of  a  legal  and  operational  nature,  still  prevent 
Montenegro from achieving more convincing results in this area. 

Proactive  investigations  launched  following  intelligence-led  policing  remain  rare  compared 
to  those  launched  on  the  basis  of  signals  received.  The  police  should  act  more  on  its  own 
initiative and prosecutors should delegate more actions to the police. This much-needed shift 
in investigative practice requires a better exchange of data between the local and the central 
levels.  Information  gathering  by  the  police  continues  to  be  hindered  by  the  lack  of  direct 
electronic  access  to  key  databases.  A  secured  channel  of  communication,  established  in 
October  2017  between  the  main  stakeholders  (i.e.  the  Ministries  of  Justice,  Interior  and 
Finance,  the  Supreme  State  Prosecution  and  the  Supreme  Court),  is  expected  to  foster 
inter-agency exchange of data and to facilitate investigations and prosecutions. 

Financial investigations remain mostly confined to asset confiscation and are launched only 
when  a  criminal  investigation  is  well  advanced  and  not  at  the  same  time  as  the  criminal 
investigation.  Legal  conditions  for  the  launch  of  a  financial  investigation  are  overly 
formalistic.  Montenegro  should  develop  a  strategic  and  proactive  approach  with  regard  to 
financial investigations. 

As  regards  asset  confiscation  there  were  12  cases  of  permanently  seized  property  in  2017 
(against 37 in 2016) and 20 cases of temporarily seized property in 2017 (against 5 in 2016). 
However, most confiscations target the property whose use contributes to the commission of a 
crime  and  not  the  proceeds  of  the  crime.  Confiscation  of  criminal  assets  should  become  a 
strategic  priority  in  the  fight  against  organised  crime,  terrorism  and  high-level  corruption. 
Criminal  groups  engage  in  an  increasingly  wide  range  of  profitable  illegal  activities  and 
reinvest substantial profits in the economy. Montenegro has an Asset Recovery Office, with a 
specialised  unit  to  manage  seized  assets.  However,  the  tools  for  freezing,  managing  and 
confiscating  criminal  assets  are  not  effective  enough.  Montenegro  should  therefore  develop 
and implement a more comprehensive and coherent  legal framework for the confiscation  of 
proceeds of crime.  

In line with the EU acquis, Montenegro should in particular: (i) focus on implementing rules 
on confiscation of assets which are not directly linked to a specific crime, but which clearly 
result  from  similar  criminal  activities  committed  by  the  convicted  person  (extended 
confiscation); (ii) focus also on rules on confiscating criminal assets that were purposefully 
transferred  from  the  suspect  to  a  third  party  (third-party  confiscation);  (iii)  allow 
confiscation  of  criminal  assets  where  a  criminal  conviction  is  not  possible,  in  particular 
because  the  suspect  is  deceased,  permanently  ill  or  has  fled  (non-conviction  based 
confiscation);  and  (iv)  ensure  that  competent  authorities  more  systematically  temporarily 
freeze assets that risk disappearing if no action is taken, subject to confirmation by a court as 
soon  as  possible  (precautionary  freezing).  In  addition,  it  is  crucial  that  financial 
investigations  into  a  person’s  assets  are  allowed  to  continue  for  years  after  a  criminal 
conviction  in  order  to  fully  execute  a  previously  issued  confiscation  order  (effective 
execution).  Montenegro  also  should  urgently  step  up  its  capacity  to  manage  frozen  or 
confiscated assets so that they do not lose economic value (asset management). 

32 

 
 
 
The fight against money laundering is not efficient enough to produce convincing results. A 
couple of ongoing criminal investigations on suspicion of money laundering are reported, but 
only one case has been brought before the court in recent years (see also Chapter 4). Money 
laundering  is  often  not  prosecuted  as  a  stand-alone  crime,  but  in  connection  with  other 
criminal  offences,  which  hampers  progress  in  this  area.  Acquittals  of  defendants  in  some 
high-profile cases send negative signals and raise concerns about the quality of investigation 
and  evidence  gathering in  money  laundering  cases.  The  ability  of  courts  to  remain  shielded 
from political interference in high-profile cases needs to be asserted and supported by a strong 
and  more  professional  evidence-based  investigation.  A  more  balanced  use  of  plea  bargain 
agreements in organised crime cases could avoid an impression of impunity. 

Montenegro  made  no  progress  in  the  fight  against  human  trafficking,  although  the  legal, 
institutional and strategic frameworks are in place and are being continuously improved. The 
failure  to  identify  victims  and  to  detect  the  organised  and  forced  nature  of  prostitution,  of 
child begging and of certain forms of labour brings into question the political will and ability 
of the police and the prosecution service to effectively address this type of crime. Proactive 
investigations must become general practice in this area. All stakeholders (i.e. the police, the 
prosecutors, the judges, the labour inspection, and the social workers) need to improve their 
operational capacity and their ability to work together in a multidisciplinary approach on the 
prevention  and  repression  of  trafficking  in  human  beings  and  on  the  protection  of  victims. 
Cooperation between NGOs and police units needs to improve and create the conditions for 
an  efficient  referral  of  cases  from  NGOs  to  the  police.  Awareness  of  international  human 
rights  standards  and  case-law  among  magistrates,  the  police,  social  workers  and  labour 
inspectors  needs  to  be  strengthened.  Montenegro  needs  to  demonstrate  that  it  is  capable  of 
establishing a track record in this area.  

Montenegro is participating in the implementation of the Action Plan on illicit trafficking in 
firearms  between  the  EU  and  the  South  East  Europe  region  (2015-2019).  Montenegro 
implements a national Strategy for Control and Reduction of Small Arms and Light Weapons 
and Ammunition and its Action Plan for 2013-2018. 

There  are  persistent  concerns  relating  to  fight  against  illicit  tobacco  trade  through 
Montenegro,  especially  in  the  port  of  Bar,  which  serves  as  a  platform  for  smuggling 
counterfeit  cigarettes  into  the  EU  together  with  legally  produced  and  illegally  traded 
cigarettes.  Montenegro  is  actively  stepping  up  its  cooperation  with  European  customs 
authorities  to  address  this  issue.  More  needs  to  be  done  to  develop  a  solid  track  record, 
including a more systematic check on cargo ships’ traffic, strengthened cooperation between 
border  police  and  customs,  improved  proactive  investigations  and  more  frequent  use  of 
financial  investigations  to  detect  the  organised  criminal  set-up  beyond  apparently  isolated 
smuggling cases. 

Fight against terrorism 

Institutional set-up and legal alignment 

Montenegro’s  legal  framework  is  largely  aligned  with  the  acquis  and  international 
instruments  on  anti-terrorism,  although  the  law  on  the  prevention  of  money  laundering  and 
in  compliance  with  Moneyval 
to  be  amended, 
terrorism 
recommendations.  Cooperation  with  Interpol  has  continued  on  maintaining  database 
integration, especially for preventing foreign fighters from crossing the borders. In July 2017, 

financing  still  needs 

33 

 
 
 
Montenegro  ratified  the  Additional  Protocol  to  the  Council  of  Europe’s  Convention  on  the 
Prevention of Terrorism. 

Implementation and enforcement capacity 

The implementation of the 2016-2018 strategy to combat violent extremism is delayed due to 
insufficient  capacity  and  resources.  The  number  of  investigations  and  prosecutions  remains 
very  low  in  this  area.  This  type  of  crime  is  not  the  most  prominent  in  the  work  of 
law-enforcement  agencies,  as  the  country  has  been  only  marginally  affected  by  the 
phenomenon of radicalisation and foreign fighters so far. There is evidence of approximately 
23 departures of nationals (including 5 women and 3 children) to the battlefield in Syria since 
the  beginning  of  the  conflict,  out  of  which  6  reportedly  died,  while  10  returned  to 
Montenegro.  The  SPO  is  conducting  preliminary  investigations  into  three  cases  of 
Montenegrin nationals who have reportedly fought in the war zone or financed the departure 
of foreign fighters to the battlefield. In addition, a few Montenegrin nationals have reportedly 
been  fighting  in  eastern  Ukraine  on  the  side  of  pro-Russian  separatists.  Two  fighters  were 
prosecuted and convicted upon returning to Montenegro for participation in a foreign armed 
formation.  As  for  other  types  of  terrorist  threats,  the  trial  related  to  the  election-day  coup 
attempt started in September 2017 before the High Court in Podgorica. 

Despite the relatively low visibility of the terrorist threat in Montenegro, especially relating to 
radicalisation and the return of foreign fighters, institutional awareness needs to be increased 
to monitor possible terrorist threats. Preventive anti-radicalisation activities in this area need 
to be developed, as well as reintegration measures when radicals return, as provided for in the 
strategy to  combat violent  extremism. Montenegro should appoint  a national  focal point for 
preventing  and  countering  violent  extremism.  A  track  record  on  preventing  and  addressing 
terrorism financing still needs to be developed. 

Legal and irregular migration 

Institutional set-up and legal alignment 

The strategic framework on legal and irregular migration has largely been in place since the 
adoption  in  February  2017  of  the  2017-2020  strategy  for  integrated  migration  management. 
The  strategy  aims  to  develop  an  integrated  approach  to  migration  management.  However, 
inter-ministerial cooperation on migration still needs substantial improvements. 

A  new  law  on  foreigners  was  adopted  in  February  2018.  It  regulates  the  entry,  exit, 
movement,  stay,  rights  and  work  of  foreigners  in  Montenegro,  but  also  returns,  including 
voluntary returns, entry bans (thus aligning the legal framework with the EU acquis on both 
legal  and  irregular  migration).  A  substantial  amount  of  secondary  legislation,  regulating  in 
particular  the  application  procedures  for  the  different  categories  of  foreigners  and  stateless 
people, will need to be adopted for its implementation. Currently Montenegro does not have a 
separate  procedure  for  determining  statelessness,  despite  having  ratified  the  relevant 
convention in 2013. On irregular migration, amendments to the Criminal Code allowing for 
the implementation of the Protocol to the UNTOC Convention concerning the Smuggling of 
Migrants were adopted in May 2017. 

Montenegro has 13 implementing protocols on readmission with EU Member States and 10 
readmission agreements with non-EU countries (including with all its neighbouring countries, 
the former Yugoslav Republic of Macedonia and Turkey). 

34 

 
 
 
 
 
Implementation and enforcement capacity 

In 2017, 614 people were prevented from illegally crossing the border, of which 438 outside 
border  crossings.  Investigations  into  migrant  smuggling  are  regularly  conducted,  often  in 
cooperation with partner countries’ police services.  

The readmission agreement with the EU continues to be implemented smoothly. There were 
379  readmission  requests  from  EU  Member  States  in  2017.  Amongst  all  third  countries, 
Montenegro shows the highest return rate from the Member States and Schengen-associated 
countries. The acceptance of readmission requests concerning third-country nationals remains 
low. Cooperation with the main readmission partner countries among Member States has to 
be improved in this regard. 

At the end of 2017, Montenegro faced a large influx of migrants, mainly from North Africa, 
which put the Centre for Irregular Migrants under pressure. Some 234 irregular migrants were 
accommodated  during  the  year,  compared  to  123  in  2016, while  85 irregular  migrants  were 
returned. 

Although Montenegro is so far outside the main Western Balkans migration route to the EU, 
it must strengthen its capacity to cope with sudden increases in migration-related pressure and 
urgently address the issue of reception capacity, including particular attention to children. The 
relevant action plan in the event of a possible influx of refugees and migrants does not make 
many  references  to  their  specific  needs.  In  the  fight  against  migrant  smuggling,  law 
enforcement agencies should make a better use of regional initiatives and of the possibility to 
participate in Joint Investigation Teams. 

Asylum 

Institutional set-up and legal alignment 

The  legal  framework  on  asylum  has  been  aligned  with  the  EU  asylum  standards  since  the 
entry into force in January 2018 of the new asylum law. Some by-laws, in particular on safe 
countries of origin, are still to be adopted. Under the new law, the Ministry of Interior takes 
over the management of the Centre for Asylum Seekers, thus centralising the main functions 
of  the  asylum  system  (i.e.  first-instance  determination  of  international  protection  and 
reception  services).  The  integration  of  refugees,  including  access  to  employment,  remains 
under  the  Ministry  of  Labour  and  Social  Welfare’s  responsibility.  The  law  also  makes 
provision  for  implementing  the  EU  acquis  on  the  content  of  international  protection;  this 
fundamental  aspect  of  the  asylum  policy  will  require  stronger  preparation  and  better 
coordination of the relevant ministries.  

Another important change is the transfer of competences on asylum appeal decisions from the 
State  Asylum  Appeal  Commission  to  the  Administrative  Court.  The  State  Asylum  Appeal 
Commission received 156 complaints in 2017 and accumulated a backlog of about 110 cases. 
There is no legal provision regulating the transfer of these cases to the Administrative Court. 
Asylum seekers who filed appeal complaints have been waiting for several months and in the 
meantime remained accommodated in the Centre for Asylum Seekers, the capacity of which 
was already saturated. 

All stakeholders, including the Directorate for Asylum of the Ministry of Interior, the Asylum 
Office,  the  Administrative  Court  and  the  social  ministries,  will  need  further  training  and 
capacity building to be able to fulfil their new tasks and responsibilities under the law. 

35 

 
 
 
 
 
Implementation and enforcement capacity 

Nine out of 10 positions in the Asylum Office are filled. The new asylum law raises standards 
in the asylum procedure, and the human capacity and expertise of the Office may need to be 
strengthened to comply with these standards. 

The  number  of  asylum  applications  grew  considerably  from  335  in  2016  to  849  in  2017. 
Algerian nationals accounted for almost half of the applicants, followed by Iraqi, Moroccan 
and Syrian nationals. As in previous years, most applicants absconded before the end of the 
procedure,  as  most  asylum  seekers  do  not  perceive  Montenegro  as  their  final  destination 
country.  Therefore  the  number  of  people  under  international  protection  in  Montenegro  is 
small  -  28  people  in  total  at  the  end  of  2017.  The  system  is  nevertheless  at  risk  of  being 
congested by a continuous rise in applications and of facing consequent overcrowding in the 
reception facilities for asylum seekers.  

The  number  of  asylum  seekers  accommodated  throughout  the  year  increased  from  259  in 
2016  to  799  in  2017.  The  Centre  for  Asylum  Seekers  has  specialised  staff  such  as  social 
workers,  psychologists,  nurses,  but  it  continued  to  face  staffing  issues  which  resulted  in 
delays for the provision of some basic services such as healthcare. To complement the Centre 
for  Asylum  Seekers,  the  Centre  for  Foreigners  (albeit  a  detention  facility)  and  hotel 
accommodation  in  Konik  were  temporarily  used  as  additional  reception  facilities.  However, 
these did not provide some basic services. 

While Montenegro’s capacity to handle asylum requests has been sufficient so far, it is now 
challenged  by:  (i)  the  growing  number  of  asylum  seekers  and  the  extended  length  of  their 
stays,  sometimes  due  to  lengthy  appeal  procedures;  and  (ii)  the  introduction  of  more 
demanding asylum procedures, aligned with the EU standards.  

Montenegro  must  as  a  matter  of  priority  open  additional  reception  facilities  that  meet  the 
required  standards,  including  for  minors  and  unaccompanied  minors.  It  must  increase  the 
human  resources  on  both  reception  and  status  determination  services,  and  strengthen  the 
capacity  of the  staff  in  all  relevant administrations.  To  meet  the  challenges  of  an  integrated 
and  efficient  asylum  policy,  inter-ministerial  and  inter-service  coordination  must  be 
considerably improved. 

Visa policy 

Further to the adoption of the Schengen action plan in February 2017, Montenegro continued 
to align its legislation with the EU acquis on visas. 

Amendments  to  the  Decree  on  the  visa  regime  were  adopted  in  March  2017,  waiving 
short-stay visa requirements for stays of up to 90 days for nationals of seven Pacific nations, 
that  are  included  in  the  EU  visa-free  list.  Montenegro  temporarily  exempted  nationals  from 
Russia, Armenia, Kazakhstan and Georgia from short-term visa requirements during summer, 
although seasonal visa exemption measures are not in line with the EU  acquis. Montenegro 
needs  to  align  its  visa  policy  progressively  with  the  EU’s.The  software  automating  the  visa 
issuing process was finalised. Under a pilot scheme, a few consular missions of Montenegro 
and the Ministry of Interior are now connected to the national visa information system. As of 
October 2016, 5 embassies of Montenegro can issue visa stickers. Only 12 visas were issued 
at the borders in 2017. These exceptions were in line with the acquis. 

36 

 
 
 
To  prevent  abuse  of  the  visa-free  regime  with  the  EU,  Montenegro continued to  implement 
measures as recommended in the European Commission’s reports on post-visa liberalisation 
monitoring, including better integration of the Roma community. 

Schengen and external borders 

Institutional set-up and legal alignment 

Montenegro has some level of preparation on Schengen and external borders. The legislative 
framework requires further changes to bring it into line with the Schengen acquis, especially 
on border control and local border traffic arrangements. 

The  strategic  framework  is  in  place,  with  the  2014-2018  integrated  border  management 
strategy and the Schengen action plan. 

The border police, a division of the police under the Ministry of the Interior, was reorganised 
into  three  regional  branches  and  one  national  coordination  centre.  Inter-agency  cooperation 
between the border police, the customs authorities and the Police Directorate of the Ministry 
of Interior continued to improve, including through mutual access to databases. In February 
2017  the  Police  Directorate  and  other  relevant  administrative  authorities  signed  a  joint  plan 
for preventing corruption at the border. 

Implementation and enforcement capacity 

The  border  police  lacks  sufficient  human  resources.  This  is  partially  addressed  in  the 
integrated  border  management  strategy,  which  focuses  on  reorganising  the  border  police  to 
use  resources  more  efficiently,  and  on  increasing  training  skills  and  analytical  capacity. 
However, the shortage still needs to be addressed as a matter of priority. 

Around  200  posts  are  still  vacant  in  the  border  police,  with  an  overall  serious  gender 
imbalance. Yet under the Schengen action plan, around 600 more border police officers would 
be  needed.  Shortcomings  in  the  transparency  and  professionalism  of  the  border  police 
recruitment system persist and must be addressed by the announced police reform. 

Montenegro’s track record on detecting forged documents increased from 61 in 2016 to 137 
in  2017,  but  remains  low  due  to  insufficient  training  and  lack  of  proper  devices. 
Reconstruction  of  some  border  crossing  points  to  align  them  with  European  standards 
continued. More financial resources need to be devoted to modernising border infrastructure 
and  to  step  up  the  surveillance  of  the  green  and  blue  borders  (in  particular  electronic 
surveillance)  and  at  border  crossing  points  (in  particular  at  the  border  with  Albania). 
Cooperation at the sea border with Croatia, Albania and Italy also has to be improved. 

Cooperation with neighbouring countries at technical level remains good. Border demarcation 
agreements  are  still  to  be  concluded  with  Serbia  and  Croatia  and  an  agreement  is  being 
negotiated  with  Albania.  Montenegro  has  ratified  the  border  demarcation  agreement  with 
Kosovo. In February 2018, the Presidents signed a common statement in which they invited 
the parliament of Kosovo to ratify the Agreement. Local border traffic agreements with Serbia 
and Bosnia and Herzegovina are still pending and the existing agreement with Croatia should 
be  brought  into  line  with  the  acquis.  In  2017  Montenegro  conducted  196  joint  patrols  with 
Albania,  156  with  Serbia,  283  with  Bosnia  and  Herzegovina,  73  with  Kosovo  and  11  with 

 This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ 
Opinion on the Kosovo declaration of independence. 

37 

 
 
 
                                                            
Croatia.  211  cases  of  illegal  entry  were  prevented.  The  Regional  Centre  for  Police 
Cooperation  in  Trebinje  is  fully  operational.  In  May  2017,  the  Ministries  of  Interior  of 
Montenegro, Albania and Kosovo signed a joint protocol to establish a Joint Centre for Police 
Cooperation  in  Plav.  Discussions  on  the  joint  demolition  of  alternative  roads  crossing  the 
common borders between Montenegro and Serbia and Kosovo are still ongoing. Montenegro 
continuously  cooperates  with  Europol,  Interpol  and  the  European  Border  and  Coast  Guard 
Agency on countering cross border criminal activities. 

Regarding the fight against corruption at the border, while some preventive measures are in 
place,  a  track  record  of  corruption  detection,  investigation  and  prosecution  is  yet  to  be 
established.  The  EU’s  Schengen  Catalogue  of  recommendations  and  best  practices  for 
preventing  corruption  should  be  implemented,  particularly  the  installation  of  cameras  in 
first-line border police stations. 

Judicial cooperation in civil and criminal matters 

The  institutional  and  legal  set-up  continued  to  be  strengthened.  As  regards  judicial 
cooperation  in  criminal  matters,  the  agreement  on  cooperation  between  Montenegro  and 
Eurojust  entered  into  force  in  June.  A  Montenegrin  liaison  prosecutor  started  working  in 
Eurojust  in  December.  In  2017  Montenegro  was  involved  in  4  Eurojust  cases  (against  2  in 
2016),  mainly  regarding  fraud,  terrorism  and  money-laundering.  The  draft  law  on  judicial 
cooperation  in  criminal  matters  with  EU  Member  States,  designed  to  align  the  domestic 
legislation with several acquis instruments, is still to be adopted.  

As  for  judicial  cooperation  in  civil  matters,  the  2007  Hague  Convention  on  child  support 
started  being  implemented  on  1 January 2017.  In  October  2017,  Montenegro  signed  the 
Hague Convention on Choice of Court Agreements. 

The necessary staff increase in the area of judicial cooperation in civil and criminal matters 
has not yet taken place. Training of staff from the Ministry of Justice as well as of judges and 
prosecutors continued, but no formal training plan for judicial cooperation in criminal matters 
has been adopted yet. 

The  statistics  on  handling  requests  of  judicial  cooperation  in  criminal  and  civil  matters 
continue to show some backlog, particularly with the neighbouring countries, but the backlog 
is being progressively addressed. 

Cooperation in the field of drugs 

The  legal,  institutional  and  strategic  frameworks  are  largely  in  place.  Montenegro  is 
implementing  its  2013-2020  national  drug  strategy  and  action  plan  (in  line  with  the  EU 
Strategy and Action Plan), including by training of relevant staff. The close cooperation with 
the  European  Monitoring  Centre  for  Drugs  and  Drug  Addiction  (EMCDDA)  continued. 
Montenegro’s  Forensics  Centre  cooperates  with  the  police  in  detecting  cocaine  as  an 
accredited  laboratory.  A  national  network  of  experts  in  relevant  ministries  is  in  place. 
Montenegro  laid  the  foundation  for  a  national  early  warning  system  on  new  psychoactive 
substances,  but  the  system  has  to  be  further  consolidated  to  meet  the  EMCDDA  standards. 
The  national  focal  point,  located  in  the  Ministry  of  Health,  consists  currently  of  only  one 
person. More resources are needed to improve the work on drug monitoring and coordination 
of  relevant  administrations.  Cooperation  with  Europol  continues  on  new  detected drugs  and 
with civil society on the rehabilitation of drug addicts. 

38 

 
 
 
The country remains an entry point and transit country for drugs to western Europe. Although 
Montenegro  is  traditionally  a  small  consumption  market,  a  slight  increase  in  cannabis 
consumption was reported due to the vicinity of Albania as a major producer, but also due to a 
modest  local  production.  In  2017  a  new  record  of  drug  seizures  was  made  (2.65  tonnes), 
mainly  herbal  cannabis  from  Albania.  Some  135  criminal  charges  were  filed  against  179 
people. The anti-drug department of the police investigated a number of drug-related cases in 
2017,  including  the  use of  special  surveillance measures,  and  carried  out  a  few long-lasting 
investigations  as  part  of  international  cases,  in  a  fruitful  cooperation  with  third  countries’ 
police services.  

Law-enforcement  agencies  need  to  improve  their  capacity  to  tackle  complex  international 
criminal  drug-trafficking  networks.  There  is  still  no  solid  track  record  of  seizure  and 
confiscation of the proceeds of drug-related crimes, or of financial investigations in this area. 
The  anti-drug  department  of  the  police  is  still  understaffed.  The  lack  of  secure  storage  for 
seized drugs and precursors prior to destruction remains a concern. An appropriate process for 
destroying  precursors  has  yet  to  be  set  up.  On  drugs  seizure,  as  required  under  the  EU 
protocol, a single electronic database needs to be set up to collect, analyse and share all data 
on drugs seizure. 

Customs cooperation 

The customs administration applies risk analysis and continued to improve IT support for the 
risk  management  system.  It  has  now 
investigative  powers  and  cooperates  with 
law-enforcement  agencies  under  agreements  and  memoranda  on  mutual  cooperation  and 
exchange of information. International cooperation operates on the basis of 30 signed bilateral 
agreements in customs matters, including 12 with EU Member States. Montenegrin customs 
participated  in  a  number  of  joint  international  operations  to  prevent  illicit  trade  in 
psychoactive substances, drugs and drug precursors, fire arms, cultural goods, oil derivatives, 
counterfeit  goods  and  cigarettes.  A  major  seizure  of  cigarettes  worth  EUR  4  million  took 
place in March 2017. Illicit tobacco trade remains a concern, and the customs administration’s 
prevention capacity must be strengthened. 

Counterfeiting of the euro (criminal law aspects) 

Montenegro  has  taken  steps  to  align  is  legislation  with  the  acquis  on  the  suppression  of 
counterfeit  currencies  and  the  competent  authorities  and  procedures  for  dealing  with 
counterfeit  money  are  established.  Montenegro  ratified  the  International  Convention  for  the 
Suppression of Counterfeiting of Currencies. (see Chapter 32 Financial control) 

39 

 
 
 
 
3. FUNDAMENTALS FIRST: ECONOMIC DEVELOPMENT & COMPETITIVENESS 

Key economic figures 

2015 

2016 

Gross  domestic  product  per 
(% of EU28 in PPS) 

capita  

GDP growth (%) 

42 

3.4 

45 

2.9 

2017 

N/A 

4.4* 

Unemployment rate (female; male) (%) 

17.8 
(18.0; 17.6) 

18.0 
(18.5; 17.4) 

16.0* 
(15.4; 16.8) 

Economic  activity  rate  for  persons  aged 
15–64:  proportion  of  the  population  aged 
15–64 
active  
is 
(female; male) (%) 

economically 

that 

62.6 
(68.3; 56.9) 

63.4 
(70.2; 56.6) 

64.0* 
(70.8; 57.2) 

Current account balance (% of GDP) 

Net  Foreign  direct 
(% of GDP) 

investment 

(FDI)  

-13.2 

16.9 

-18.1 

9.4 

-19.0 

11.3 

Source: Monstat.  * Latest available data; average for the period QI-QIII 2017. 

In  line  with  the  conclusions  of  the  European  Council  in  Copenhagen  in  June  1993,  EU 
accession  requires  the  existence  of  a  functioning  market  economy  and  the  capacity  to  cope 
with competitive pressure and market forces within the Union. 

The  monitoring  of  these  economic  criteria  should  be  seen  in  the  context  of  the  central 
importance  of  economic  governance  in  the  enlargement  process.  Each  enlargement  country 
prepares  an  Economic  Reform  Programme  (ERP)  annually,  which  sets  out  a  medium-term 
macro-fiscal  policy  framework  and  a  structural  reform  agenda  aimed  at  ensuring 
competitiveness  and  inclusive  growth.  The  ERPs  are  the  basis  for  country-specific  policy 
guidance jointly adopted by the EU and the Western Balkans and Turkey at ministerial level 
in May each year. 

3.1. The existence of a functioning market economy 
Montenegro has made some progress and is moderately prepared in developing a functioning 
market economy. Macroeconomic and fiscal stability were strengthened but further efforts are 
required  to  address  persistent  challenges,  especially  the  high  public  debt  burden.  The 
economy has been growing uninterruptedly since 2013 amidst low or moderate inflation. The 
financial  sector  has  improved  its  solvency  and  liquidity.  However,  the  export  base  needs  to 
improve in scope and in quality to reduce the trade deficit. Rule of law weaknesses, including 
unfair  competition  from  the  informal  economy,  negatively  impact  on  the  business 
environment. The labour market faces structural challenges, reflected in low participation and 
high unemployment rates. 

In order to support long-term growth, Montenegro should pay particular attention to: 

  continue fiscal consolidation efforts to strengthen the sustainability of public finances; 

  facilitate the resolution of non-performing loans (NPLs); 

  improve labour market flexibility to boost participation rates and reduce informality. 

40 

 
 
 
Economic governance 

long-term 
policy 

orientation 
to 
needs 

Figure 1 Montenegro convergence 

The 
of 
economic 
be 
further.  Unaffordable 
strengthened 
public  spending  increases  in  the  run-up 
to  the  last  parliamentary  elections  in 
October 2016 required severe corrective 
government's 
measures.  The 
frontloaded  fiscal  consolidation  policy 
and  reforms  helped  redressing  some  of 
the  negative  impact  on  public  finances 
and 
in 
labour  market  participation, 
particular  of  women.  Efforts  should  be 
to  avoid  a  reversal  of 
maintained 
a 
consolidation 
deterioration of macroeconomic stability.  The policy guidance jointly adopted in May 2017 
has been partially implemented. 

Source: Eurostat, national sources 

policies 

new 

and 

Macroeconomic stability  

The pace of economic growth continues to strengthen. From 2012, when the last recession 
episode  took  place,  to  2016,  the  economy  recorded  annual  average  growth  of  2.9  %.  GDP 
accelerated  further  in  the  first  three  quarters  of  2017,  registering  an  average  expansion  of 
4.4 %  y-o-y,  driven  by  private  consumption  and  investment.  Household  consumption 
increased  partly  due  to  a  record-breaking  tourist  season  boosting  domestic  demand  and 
employment. Investment expanded by 10.5 % y-o-y until September 2017, driven by public 
capital  spending  on  the  highway  project  and  on  private  investment  in  tourism  and  energy. 
After several years containing maintenance costs, government consumption started to grow in 
2017.  Exports  have  been  supported  by  a  boom  in  tourism.  However,  growing  domestic 
demand  meant  that  growth  in  imports  also  matched  the  pace  of  export  growth,  leading  to  a 
negative  contribution  from  net  exports.  Five  years  of  continuous  growth  resulted  in  some 
further economic convergence with the EU. In 2016, Montenegro's GDP per capita expressed 
in purchasing power standards rose to 45 % of the EU average, up from 39 % in 2012.  

The trade deficit continues to worsen, despite strong exports performance. In 2017, the 
merchandise trade deficit further increased to 44.2 % of GDP, up from 41.9 % a year earlier. 
As a result, the current account deficit deepened to 19.0 % of GDP, up from 18.1 % a year 
earlier, in spite of the improvement of the services account benefitting from the strong tourism 
season.  Improvements  in  merchandise  exports  have  been  largely  related  to  crude  (and  low 
value  added)  material,  while  project-related  purchases  of  construction  material  and 
equipment,  but  also  higher  oil  prices,  maintained  upward  pressure  on  imports,  surging  by 
22 %  y-o-y  in  the  last  quarter  of  2017.  In  2017,  net  FDI  inflows  totalled  11.3  %  of  GDP, 
compared  to  9.4  %  in  2016,  covering  59.3  %  of  the  current  account  deficit;  the  rest  of  the 
external gap being financed by loans (31.7 %) and portfolio investments (3.2 %). 

Inflation  increased,  driven  by  rising  international  commodity  prices.  Inflation  remained 
historically low in the period 2013-2016, with average annual rates of below 2 %.  However, 
since the end of 2016, import prices grew faster as the cost of petroleum products kept rising 
over the year. Meanwhile, domestic price pressures have remained modest as average nominal 
wage growth has lingered markedly below inflation in the last five years with the exception of 

41 

 
 
 
 
2016.  Overall,  the  harmonised  index  of  consumer  prices  grew  by  2.8  %  y-o-y  in  2017, 
compared  to  0.7  %  a  year  before.  Higher  value  added  taxes  and  an  increase  in  regulated 
electricity prices are set to generate additional inflationary pressures in 2018. 

stringent 

fiscal  policy 

Figure 2 Montenegro fiscal developments 

The  new  government  introduced  a 
more 
to 
address debt-related concerns. Along 
with  the  2017  budget,  a  plan  was 
adopted  for  redressing  public  finances 
at  the  end  of  2016.  This  plan  was 
complemented  in  July  2017  with  a 
relatively more ambitious medium-term 
fiscal 
further 
increase of excises and VAT, adjusting 
social  benefits,  introducing  additional 
in  public  sector  wages,  and 
cuts 
introducing a new excise on coal. These 
corrective  measures,  whose  combined 
fiscal  impact  is  estimated  at  3.6  %  of 
GDP over 4 years, are expected to bring the budget close to balance in 2019 and to lower the 
public debt ratio as of 2020. Budget performance in 2017 reflects a threefold surge in capital 
spending  over  the  year,  totalling  6.1  %  of  GDP,  along  with  improved  performance  of  tax 
revenue  collection,  rising  by  20  %  y-o-y,  driven  by  VAT,  excises  and  social  security 
contributions.  Overall,  in  2017,  the  central  government  accumulated  a  deficit  of  5.6  %  of 
GDP compared with 3.4 % in 2016. 

Source: Eurostat, national sources 

including 

strategy, 

Public debt growth is driven to a large extent by financing the main section of the Bar-
Boljare  highway.  In  2016,  a  slowdown  of  the  highway  works  plus  an  upwards  revision  of 
GDP resulted in only a slight increase of the public debt to 64.4 % of GDP. After resuming 
the works on the highway in 2017 (worth some 4.6 % of GDP), preliminary estimates from 
the Ministry of Finance indicate public debt totalled 66 % of GDP at the end of the year. State 
guarantees  accounts  for  some  additional  10.9  %  of  GDP.  Overall,  given  the  high  levels  of 
public  debt,  its  repayment  profile  and  the  tightening  of  global  financial  conditions,  it  is 
essential  to  rebalance  the  budget  structure  towards  growth-enhancing  spending  and  to 
continue fiscal consolidation efforts. 

Given  the  constraints  stemming  from  Montenegro's  unilateral  use  of  the  euro,  a 
restrictive fiscal stance appears to be justified to rebuild buffers and reduce debt-related 
vulnerabilities during the current cyclical upswing. The plan for improving public finances 
adopted  at  the  end  of  2016  and  the  medium-term  fiscal  strategy  of  July  2017  represent  two 
important  steps  to  address  a  very  high  and  increasing  debt  level.  The  continuation  of  fiscal 
consolidation  remains  essential  for  the  sustainability  of  public  finances  and  for  achieving 
gradual  compliance  with  Montenegro's  fiscal  rules,  by  adopting  additional  measures  if 
needed. 

Functioning of product markets 

Business environment 

There  was  no  significant  improvement in  the  business  environment.  In  accordance  with 
the  public  administration  reform  strategy  2016-2020,  the  number  of  electronic  services 

42 

 
 
 
 
offered via the e-Government portal increased. It is also planned to optimise the capacity of 
the  public  services.  However,  the  poor  implementation  of  laws  and  delays  in  obtaining 
information  and  services  need  to  be  addressed.  The  introduction  of  electronic  cadastral 
services  to  improve  data  updating  is  still  pending.  A  new  law  on  spatial  planning  and 
construction  was  adopted  in  October  2017,  albeit  implementing  legislation  is  yet  to  be 
adopted. Moreover, challenges remain in the construction industry, notably high permit costs, 
and lengthy procedures for paying taxes and property registration. Despite these barriers, the 
number  of  companies  and  entrepreneurs  increased  by  3.6  %  y-o-y  in  2017.  Market  exit 
procedures  seem  broadly  efficient,  with  90  %  of  bankruptcy  procedures  taking  up  to  six 
months,  and  only  1  %  of  cases  requiring  longer  than  one  year.  Indebtedness  and  liquidity 
constraints  affect  the  corporate  sector.  At  the  end  of  December  2017,  there  were  16,220 
companies  and  entrepreneurs  (including  inactive  ones)  with  frozen  bank  accounts  due  to 
unpaid claims. 

Despite  some  progress  with  legal  proceedings,  a  consistent  and  efficient  application  of 
legislation is still necessary to ensure legal certainty and predictability. The bailiff system 
continues making progress with the introduction of a centralised case management system. In 
the period from October 2015 to December 2016, 50.9 % of the total enforcement cases were 
solved,  of  which  89.6  %  through  the  complete  collection  of  claims.  Alternative  dispute 
resolution remains low, with only 161 cases referred for mediation in 2017 compared to 429 
in 2016. Weaknesses in the area of rule of law negatively impact on the business environment. 
Investors complain about the inconsistency of case law, non-enforcement of court orders and 
interferences with property rights of investors. Unfair competition from the informal economy 
is also considered a severe obstacle. 

State influence on product markets 

State aid allocation from the budget is declining but the  regime of tax exemptions and 
other types of support require an in-depth review of their economic impact. In the first 
eleven  months  of  2017,  budget  allocation  for  subsidies  declined  to  0.47  %  of  GDP.  The 
government did not extend any new state guarantees in 2016, and just two new guarantees in 
the  first  nine  months  of  2017,  totalling  0.6  %  of  GDP.  However,  there  are  concerns  about 
continuing  support  to  the  national  airline  (See  more  under  Chapter  8)  and  the  need  for  a 
comprehensive restructuring of the company.  

Privatisation and restructuring 

The  privatisation  process  advanced  further  notwithstanding  some  setbacks.  State 
ownership  in  the  economy  is  limited  a  few  companies.  However,  information  on  the  size, 
composition  and  performance  for  the  entire  SOE  sector  is  difficult  to  obtain.  In  2017,  the 
bankrupt  textile  producer  Vunko  was  sold,  and  a  lease  granted  to  an  international  hotel 
operator to upgrade and manage two state-owned hotels. Negotiations for selling the shipyard 
in Bijela are well advanced. However, some privatisations stalled or reversed. In April 2017, 
the  government  halted  the  negotiations  on  the  sale  of  the  Port  of  Bar  and  the  rail  company 
Montecargo,  arguing  low  price  and  unclear  plans  from  the  bidder.  Unless  a  new  investor  is 
found, state participation in the economy is set to increase (entailing some contingent fiscal 
risks)  as  a  result  of  the withdrawal  of  a  major  investor's  41.7  %  stake  in  the  electric  power 
company EPCG. 

43 

 
 
 
 
 
Functioning of the financial market 

Financial stability 

The  banking  system  as  a  whole  improved  its  solvency  and  liquidity  position.  There  are 
fifteen banks in Montenegro, with foreign-owned banks accounting for 80.4 % of total capital, 
largely  dominating  the  sector.  Considering  the  relatively  large  number  of  entities  and  the 
small size of the economy, some mergers and acquisitions could be expected in the medium 
term. In  2017, the aggregated capital  adequacy ratio was 16.4 %,  well above  the regulatory 
minimum  of  10  %.  Banks'  profitability  remains  low  albeit  improving,  with  return  on  assets 
(ROA)  and  return  on  equity  (ROE)  of  0.9  %  and  6.9  %  respectively.  The  ratio  of  NPLs 
dropped to 7.3 % of total loans at the end of 2017 as a result of sell-offs of impaired assets to 
factoring companies and, more recently, new regulation facilitating loan restructuring and the 
clearing of banks' balance sheets. However, large disparities still remain across lenders, with 
the smaller non-EU and domestic banks presenting a significantly weaker position, calling for 
the reinforcement of the banking supervision framework and carrying out independent asset 
quality reviews for all banks. 

Access to finance 

Corporate sector borrowing remains below pre-crisis levels. Lending increased by 11.8 % 
y-o-y in 2017, but credit to privately-owned companies remained subdued, recording average 
3.2  %  annual  growth  in  2017.  This  contrasts  with  the  household  sector,  which  recorded  a 
much stronger (11.1 % y-o-y) growth in the same period. The low credit growth to corporates 
is  the  result  of  risk  aversion  among  banks  driven  –among  others–  by  the  poor  investment 
readiness  of  firms,  the  lack  of  standardized  financial  reporting,  low  effectiveness  of  the 
judicial  system,  and  credit  registry  data  gaps.  The  reduction  of  non-performing  loans  was 
accompanied by a further lowering of financing costs for domestic companies. In December 
2017, the weighted average effective interest rate amounted to 5.70 %, down from 6.38 % a 
year earlier. 

The non-bank financial sector is underdeveloped. The stock market turnover is very low, 
at just 1.0 % of GDP and most of the operations relate to the secondary market. The insurance 
market is also modest, with gross premiums totalling some 1.6 % of GDP in 2017. The size of 
the leasing market remained marginal, accounting for 0.4 % of GDP in the first three quarter 
of 2017. Total assets and liabilities of micro-financial institutions amounted to 1.4 % of GDP 
at  the  end  of  October  2017.  The  lending  capacity  of  the  state-run  Investment  Development 
Fund (IDF) reached 4.2 % of GDP in 2017, comparable to a medium-sized bank. 

Functioning of the labour market  

Economic  growth  and  the  rollback  of  some  unaffordable  social  benefits  are  slowly 
improving  labour  market  trends.  In  the  third  quarter  of  2017,  the  unemployment  rate 
according to the labour force survey declined to 15.1 % from 17.1 % a year before, while the 
employment rate increased to 55.6 % from 51.4 % a year earlier. By gender, the employment 
rate of men reached 62.1 % compared to 49.1 % for women. Youth unemployment is high at 
27.5 %, although declining from 33.5 % a year before. The long-term unemployment rate was 
broadly unchanged at 73.4 %. Data from the Employment Agency presents a more negative 
picture: at the end of 2017, employment dropped by 7.6 % y-o-y while the unemployment rate 
reached  22.2  %,  up  from  21.1  %  a  year  before.  Discrepancies  could  be  explained  to  some 
extent by the high proportion of informal employment, but also, by the revision of the social 

44 

 
 
 
programme  for  mothers  of  three  children  or  more,  after  which  several  thousand  mothers 
returned from a pensioner status back to the labour market as unemployed. 

Fear of losing social protection benefits hinders the transition to formal work. The high 
marginal  effective  tax  rate  on  earnings  below  social  assistance  levels  combined  with 
ineffective  labour  inspections  presents  a  disincentive  for  people  to  transit  from  informal  to 
formal sector jobs, including part-time and seasonal jobs, which are filled to a large extent by 
workers from neighbouring countries. Since May 2017, real wages have declined due to the 
acceleration of inflation and the waning of the growth effects from the previous year's hike of 
public sector salaries. In consequence, the average gross wage contracted by 0.8 % y-o-y in 
real terms in 2017. 

Figure 2 
(% of Active population) 

Unemployment in Montenegro 

Participation 

Figure 3 
Montenegro 
(% of Labour Force) 

rate 

in 

Source: Eurostat, national sources 

3.2.   The  capacity  to  cope  with  competitive  pressure  and  market  forces  within  the 
Union 
Montenegro  has  made  some  progress  and  is  moderately  prepared  in  terms  of  capacity  to 
cope with competitive pressure and market forces within the Union. The construction of key 
infrastructure  in  a  number  of  areas  as  well  as  developing  human  capital  set  the  basis  for 
improved  competitiveness.  Education  reform  is  ongoing,  but  more  efforts  are  needed  to 
address  the  skills  mismatch.  SMEs  remain  confronted  with  numerous  challenges,  such  as 
access  to  finance  or  regulatory  complexity.  Further  efforts  are  still  required  to  improve  the 
overall export performance of local companies. 

In order to support long-term growth, Montenegro should pay particular attention to:  

  continue  the  development  of  research  and  innovation  capacities  to  facilitate  synergies 

between academic institutions and enterprises; 

  develop infrastructure in a fiscally responsible manner, respecting competition and public 

procurement rules; 

  continue to address the mismatch between education outcomes and labour market needs.  

Education and innovation  

Investment  in  research  and  development  remains  modest.  Montenegro  has  been 
participating  in  numerous  international  programmes  and  cooperation  projects  (See  Chapter 

45 

 
 
 
 
 
 
 
25:  Science  and  Research).  National  programmes  are  largely  funded  by  the  government, 
while  private  sector  funding  remains  marginal.  Several  institutional  frameworks  for  science 
and  development  linking  the  business  and  academic  community  are  being  implemented, 
namely  the  BIO-ICT  Centre  of  Excellence  and  the  Innovative  Entrepreneurship  Centre 
“Tehnopolis”.  Activities  are  also  underway  to  establish  a  Science  and  Technological  Park 
within the campus of the University of Montenegro in Podgorica. 

Montenegro's education system is undergoing a broad reform to improve its quality. A 
legislative package was adopted in 2017 to  facilitate that practical knowledge  and skills are 
better  developed  at  all  levels.  It  also  established,  among  other  measures  (see  Chapter  26:  
Education  and  Culture),  an  Agency  for  the  Control  and  Quality  Assurance  in  Higher 
Education and introduced financial incentives to promote excellence of teachers and students. 

Efforts  continued  to  modernise  secondary  vocational  education.  To  facilitate  school  to 
work transition, amendments to the law on vocational education were adopted in July 2017, 
introducing  the  so-called  'dual  education  system',  which  requires  practical  training  with 
employers. A subsequent information campaign has contributed  to a 15 % higher enrolment 
under the new system for the 2017/2018 school year, whereby 264 students signed contracts 
with  97  employers.  However,  the  quality  of  vocational  education  and  training  needs  to  be 
improved. 

Physical capital and quality of infrastructure 

Insufficient  and  inadequate  infrastructure  remains  a  challenge.  The  quality  of  the  road 
network is below European standards. Reconstruction and modernisation of the road network 
is  advancing  according  to  plan,  including  the  construction  of  the  priority  section  of  the 
highway.  The  railway  system  is  inexpensive;  however,  services  are  quite  limited,  slow  and 
outdated.  Several  track  sections  as  well  as  signalling  are  being  upgraded.  The  airports  also 
require higher capacity to cater for the fast growing number of passengers. Modernisation of 
the port of Bar is underway, in particular in the container terminal. However, the intermodal 
connection with the railways requires a major overhaul. The electricity mix is overly reliant 
on  hydropower  and  thermal  sources,  but  insufficient  to  cover  the  needs  of  the  country. 
Diversification advanced with the construction of the first wind energy plant, which became 
operational  in  November  2017.  The  electricity  transmission  corridor  towards  Italy  is  under 
construction.  A  number  of  waste  management  plants  and  water  distribution  and  treatment 
systems are currently under construction. 

The Strategy for the development of the information society is ambitious. The goal is to 
enable  basic  broadband  access  to  all  the  population  already  in  2018,  and  with  high  speed 
broadband access (30 Mbit/s or more) in 2020. The electronic communication infrastructure is 
used by 11 operators. However, low investment in fixed-line broadband infrastructure has this 
far resulted in the slowest broadband connections in the region. 

Sectoral and enterprise structures 

Little  change  was  recorded  in  the  structure  of  the  economy.  Services  remain  the 
predominant  engine  of  the  economy,  with  71.8  %  of  total  gross  value  added  in  2016, 
compared  to  11.9  %  for  the  industrial  sector,  10.9  %  for  agriculture,  and  5.4  %  for 
construction.  The  predominance  of  services  is  even  more  pronounced  when  observing 
employment by sectors, accounting for 84.8 % of the jobs, with total employment in industry 
and agriculture far behind with 7.8 % and 7.4 % respectively. 

46 

 
 
 
SMEs are the backbone of Montenegro's economy. Nearly 70 % of value added and more 
than three quarters of national employment is generated by SMEs, compared with an average 
of 57 % and two thirds respectively in the EU. However, SMEs are confronted with numerous 
challenges,  like  the  complexity  of  business-related  legislation,  particularly  at  local  level,  or 
the  lack  of  access  to  affordable  finance.  In  addition,  these  firms  remain  focused  on  the 
domestic market and need to become more regionally competitive to strengthen their impact 
on the national economy. The Investment and Development Fund channels the largest portion 
of  public  sector  financial  support  to  SMEs  through  credit  lines,  financing  and  factoring 
services. 

Economic integration with the EU and price competitiveness 

The share of trade with the EU and CEFTA countries is high but declining, as exchanges 
with  other  countries,  like  China  and  Turkey,  increase.  In  2017,  trade  with  the  EU 
accounted for 34.7 % of Montenegro's goods exports and 47.4 % of its merchandise imports. 
Trade with CEFTA represented 41.1 % of exports and 31.2 % of imports. The development of 
a  Regional  Economic  Area  based  on  EU  rules  and  standards,  to  which  all  Western  Balkan 
economies  have  committed,  has  the  potential  to  generate  untapped  growth.  Financial 
integration with the EU is also substantial, accounting for 88.4 % of foreign share of capital in 
local banks and 38.7 % of total FDI inflows in 2017.  

Figure 5 Montenegro trade integration with the EU 

70,0

60,0

50,0

40,0

30,0

20,0

10,0

0,0

120

100

80

60

40

20

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Share of Imports from EU
Share of exports to EU
Trade with the EU (2008=100) (RHS)

Montenegro needs to improve its 
export  performance.  In  2016,  the 
total  value  of  traded  goods  and 
services  totalled  103.4  %  of  GDP, 
with exports representing only 40.5 
% of GDP. The country has a small 
manufacturing  base  concentrated 
on  commodities  with  low  value-
added.  However, 
of 
services are growing fast thanks to 
important  investment  on  high-end 
tourism 
Imports  are 
largely concentrated on energy and 
two  sectors  which  offer 
food, 
significant  potential  for 
import 
substitution. 

facilities. 

exports 

Source: Eurostat, national sources 

Price  competitiveness  has  been 
to 
preserved 
broadly 
moderate import prices and low labour costs. Labour costs have declined in real terms each 
year since 2011, except for a 3.4 % y-o-y increase in 2016. Consequently, domestic producer 
prices remained flat or recorded some marginal annual increase of less than 0.3 % in each of 
the last three years, preserving local companies' competitiveness. 

due 

47 

 
 
 
 
 
4. 

 REGIONAL ISSUES AND INTERNATIONAL OBLIGATIONS 

There  were  no  developments  in  Montenegro’s  cooperation  with  the  International  Criminal 
Tribunal  for  the  former  Yugoslavia.  For  the  handling  of  domestic  war  crimes  cases,  see 
chapter 23 — Judiciary and fundamental rights.  

Montenegro  still  maintains  a  bilateral  immunity  agreement  with  the  United  States,  granting 
exemptions  for  US  citizens  from  the  jurisdiction  of  the  International  Criminal  Court. 
Montenegro  needs  to  align  with  the  EU  common  positions  on  the  integrity  of  the  Rome 
Statute or with the related EU guiding principles on bilateral immunity agreements.  

Montenegro  has  continued  to  cooperate  closely  with  Bosnia  and  Herzegovina,  Croatia  and 
Serbia under the Sarajevo Declaration Process, which aims at sustainable solutions for some 
74 000 people who became refugees and displaced persons as a result of the armed conflicts 
in  ex-Yugoslavia  during 
the  Regional  Housing  Programme 
construction/purchase  of  apartments  and  housing  units  has  progressed  well.  The  application 
processes  for  beneficiary  selection  have  demonstrated  high  needs  and  interest  for  housing 
solutions throughout the country. 

the  1990s.  Under 

The  unresolved  fate  of  missing  persons  resulting  from  the  conflicts  of  the  1990s  remains  a 
humanitarian concern in the Western Balkans. The number of cases in Montenegro, currently 
at 57, is low, but all efforts should be made to ensure identification as soon as possible. 

Regional cooperation and good neighbourly relations form an essential part of Montenegro’s 
process of moving towards the EU. They contribute to stability, reconciliation and a climate 
conducive  to  addressing  open  bilateral  issues  and  the  legacies  of  the  past.  The  country 
continued  to  participate  actively  in  regional  initiatives  such  as:  South  East  Europe 
Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council,  CEFTA,  the  Western 
Balkans  Six,  the  Energy  Community  Treaty,  the  European  Common  Aviation  Area 
Agreement,  the  Central  European  Initiative  (CEI),  the  Regional  Initiative  for  Migration  and 
Asylum  (MARRI),  RECOM,  the  "Brdo-Brijuni  process",  the  Adriatic-Ionian  Initiative, 
European Union macro-regional Strategies for the Danube Region (EUSDR) and the Adriatic 
and  Ionian  Region  (EUSAIR),  and  the  Igman  Initiative.  In  addition,  Montenegro  took 
important  commitments  at  the  Western  Balkans  Summit  in  Trieste  to  implement  a 
Multiannual Action Plan (MAP) for the development of a Regional Economic Area (REA) in 
the Western Balkans and swiftly appointed a national REA coordinator. The implementation 
of  the  plan will  strengthen  CEFTA  to  allow  further economic  integration  within the  region, 
based on EU rules and standards.  

The  impetus  given  through  the  ‘Berlin  process’  and  the  Western  Balkans  Six  initiative, 
notably  regarding  the  EU’s  connectivity  agenda,  has  continued  to  foster  increased  regional 
cooperation. Building on the results of previous Summits, the July 2017 Trieste summit saw 
further  advances  on  the  connectivity  agenda  through  the  signature  of  the  Transport 
Community  Treaty.  Cooperation  continued  also  in  previously  established  areas,  notably 
through the agreement on the action plan for a Regional Economic Area and the opening of 
the  Regional  Youth  Cooperation  Office  in  Tirana  in  July.  With  regard  to  the  connectivity 
agenda,  Montenegro  still  needs  to  finalise  with  Albania  the  modus  operandi  for  the  joint 
border  railway  station  in  Tuzi,  transpose  the  road  Intelligent  Transport  Systems  (ITS) 
directive  and  adopt  EU  technical  specifications  for  the  European  Rail  Traffic  Management 
System (ERTMS). 

48 

 
 
 
Montenegro remained constructively committed to bilateral relations with other enlargement 
countries and neighbouring EU Member States. Montenegro is encouraged to sign a bilateral 
convention  on  regional  cooperation  under  Article  15  of  the  Stabilisation  and  Association 
Agreement (SAA) with all partners with an SAA in force. 

Relations  with  Albania  continue  to  be  good.  The  Prime  Minister  of  Albania  visited 
Montenegro  in  April  2017.  In  December  2017  Montenegro's  President  visited  Albania.  A 
protocol was signed in May 2017 between the Ministries of Interiors of Albania, Kosovo and 
Montenegro on establishing the joint centre for police cooperation in Plav. Montenegro also 
cooperates  with  Albania  under  the  Albania-Montenegro-Croatia  Trilateral,  established  in 
2017,  as  part  of  the  Adriatic-Ionian  dialogue.  Two  trilateral  meetings  took  place  during  the 
reporting period. 

A  cooperation  agreement  between  the  government  of  Montenegro  and  the  Council  of 
Ministers  of  Bosnia  and  Herzegovina  on  the  process  of  EU  accession  came  into  force  in 
March 2017 and President Filip Vujanovic paid an official visit to Bosnia and Herzegovina. 
An  agreement  on  shared  location  of  diplomatic  and  consular  representations  was  signed  in 
July.  

Relations  between  Montenegro  and  Kosovo  remained  good.  In  February  2017,  Kosovo 
adopted  a  strategy  for  the  affirmation  and  integration  of  the  Montenegrin  minority.  The 
agreement on border/boundary demarcation  was ratified by the Kosovo Assembly  in  March 
2018. In February 2018 both Presidents signed a common statement in which they agreed that 
once the border/boundary demarcation agreement enters into force, a bilateral working group 
will  be  established  to  identify  and  address  potential  disputes  on  the  marking  of  the 
border/boundary in specific sectors. 

Relations with the former Yugoslav Republic of Macedonia remained good. The President 
of the Parliament visited Montenegro and the Prime Minster, Foreign Minister and Minister of 
Defence of Montenegro visited Skopje during the reporting period.  

Relations  with  Serbia  remained  good.  The  joint  committee  of  the  governments  of 
Montenegro  and  Serbia  in  the  context  of  the  EU  accession  met  for  the  second  time  in 
November 2016.  The Montenegrin Prime Minister visited Belgrade in February 2017 as his 
first bilateral visit following his election. In July 2017, the Serbian Prime Minister took part in 
an  international  meeting  in  Podgorica  and  met  with  her  Montenegrin  counterpart.  Serbian 
Minister  of  Foreign  Affairs  visited  Podgorica  in  January  2018.  There  have  been  no 
developments on issues related to citizenship rights in the two countries. The demarcation of 
borders is still pending. 

A plan for bilateral cooperation on defence for 2017 was signed with  Turkey in September 
2017. The readmission agreement between the two countries entered into force in December 
2016. 

Joint work on finding a solution for the border demarcation between Montenegro and Croatia 
is ongoing. A plan of bilateral cooperation on defence for 2017 was signed in August 2017. 
The  second session  of  the  joint committee  aimed  at  implementing  the  agreement  on  mutual 
protection of minorities was held in May 2017. 

A  plan  for  bilateral  cooperation  on  defence  was  signed  in  February  2017  with  Italy.  In 
September 2017, the government made a decision to publish the agreement between the two 
governments  on  mutual  exchange  and  protection  of  confidential  data.  A  protocol  on 

49 

 
 
 
cooperation between the Montenegrin parliamentary committee on European Integration and 
the committee for European Union policies of the Italian Senate was signed in March 2017.  

5.  

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

 Chapter 1: Free movement of goods  

5.1. 
The free movement of goods ensures that many products can be traded freely across the EU 
based on common rules and procedures. Where products are governed by national rules the 
principle of the free movement of goods prevents these creating unjustified barriers to trade. 

Montenegro is moderately prepared in the area of free movement of goods. Some progress 
was  made  in  this  area  during  the  reporting  period.  However  the  recommendations  of  the 
2016 report, both on the ensuring adequate human and financial resources and on alignment, 
have not been adequately addressed, and are therefore reiterated below in an updated form. 

In the coming year, Montenegro should in particular: 

→  ensure  that  sufficient  human  and  financial  resources  are  allocated  to  its  market 
surveillance,  standardisation  and  accreditation  bodies,  and  for  REACH  (Registration, 
Evaluation,  Authorisation  and  Restriction  of  Chemicals), 
the 
implementation of aligned legislation; 

to  ensure 

in  order 

→ update and then comply with the action plan for alignment with the acquis in this chapter. 

General principles 

Regarding  the  general  principles,  Montenegro's  legal  framework  for  the  free  movement  of 
goods  is  largely  aligned  to  the  EU  acquis.  On  measures  that  impact  on  the  production, 
distribution  and  marketing  of  industrial  products  only  some  regarding  medical  products 
and  tobacco  remain.  Montenegro  is  implementing  its  2014-2018  Strategy  and  action  plan 
for alignment to the EU acquis in this chapter, though it plans to revise and extend the action 
plan due to changes to the EU acquis and delays in alignment.  

Non-harmonised area 

In its Action Plan for compliance with Articles 34-36 of the Treaty for the European Union 
(TFEU)  Montenegro  identified  all  measures  that  could  interfere  with  the  free  movement  of 
goods and sets out how and by when these will be addressed. In implementing this it repealed 
30 legislative acts in the area of construction products in the reporting period.  

Harmonised area: quality infrastructure 

The Office for Quality Infrastructure was established in October 2016. It coordinates the work 
related to this chapter, including alignment to the EU acquis regarding the horizontal quality 
infrastructure  and  the  technical  requirements  for  products.  In  June  2017,  the  government 
adopted implementing  legislation to increase the number of  market surveillance inspectors 
in line with Montenegro's Accession Programme to the European Union 2017-2018.  

In 2017 Montenegro adopted an action plan to implement accreditation development strategy 
and an action plan for the implementation of the standardisation development strategy. The 
Institute  for  Standardisation  of  Montenegro  (ISME)  adopted  a  total  of  2  300  Montenegrin 
standards  (MEST)  -  designed  to  be  fully  harmonised  with  European  and  international 
standards - in the reporting period, bringing the total to 17 102 MEST. 

50 

 
 
 
A  number  of  pieces  of  implementing  legislation  were  adopted  in  the  field  of  metrology. 
However, the capacity of the Metrology Bureau needs reinforcing; it currently has 40 staff out 
of the 52 foreseen. 

In market surveillance, at the end of 2017 a new law on general product safety was adopted 
which is designed to be aligned with the EU acquis. A total of 1 515 inspection controls were 
carried  out  in  the  Montenegrin  market,  of  which  425  inspections  were  in  proactive 
surveillance  and  the  rest  in  reactive  surveillance.  In  the  area  of  product  safety,  some  210 
types  of  hazardous  products  were  found  (total  quantity  of  15  042  items).  Of  these,  105 
products (3 193 items) were permanently taken off the market, 63 products (707 items) were 
returned to the supplier/distributor, and 16 types of product (2 375 items) were destroyed (see 
also Chapter 28). 

On accreditation in January 2017, the Accreditation Body of Montenegro (ATCG) accredited 
4  new  conformity  assessment  bodies  -  3  management  system  certification  bodies  and  1 
testing laboratory. In the same period, a single conformity assessment body lost the status of 
accredited organisation. As of February 2018, 35 bodies have been accredited by the ATCG, 
of which 22 are testing laboratories, 2 are calibration laboratories, 6 are control bodies, 1 is a 
product  certification  body  and  4  are  management  system  certification  bodies.  However  the 
inadequate resources of the Accreditation Body of Montenegro hamper the implementation of 
its current strategy and action plan for accreditation. 

Harmonised area: sectoral legislation 

Regarding  the  ‘New  and  Global  Approach’  product  legislation  in  the  reporting  period 
Montenegro  adopted  legislation  designed  to  align  with  the  EU  acquis  in  several  sectors 
including  eco-design,  radio  equipment,  non-automatic  weights,  metrology  and  measuring 
devices,  simple  pressure  vessels,  low  voltage  electrical  equipment,  and  machinery.  Further 
legislation  was  adopted  designed  to  increase  alignment  on  construction  products  and  on 
energy efficiency. Implementing legislation was also adopted in the period designed to align 
to  the  EU  acquis  on  recreational  boats  and  personal  watercraft  vessels  and  to  increase  the 
degree  of  alignment  with  the  EU  acquis  on  explosives  for  civil  use  and  on  pyrotechnic 
products. However, the implementation of aligned legislation is not always fully ensured due 
to quality infrastructure capacity issues. 

On  ‘Old  Approach’  product  legislation,  Montenegro  adopted  implementing  legislation  in 
the reporting period designed to increase alignment to the EU acquis on pre-packed products 
and  several  sub-sectors  of  fertilisers.  Further  steps  have  been  taken  with  the  aim  to  move 
towards  alignment  with  REACH  and  the  EU  acquis  on  chemicals,  including  by  adopting  a 
new  law  on  chemicals  in  July  2017.  Several  pieces  of  implementing  legislation  were  also 
adopted,  including  some  designed  to  align  to  the  EU  acquis  on  the  export  and  import  of 
hazardous chemicals and to some of the EU acquis on classification, packaging and labelling 
of chemicals, and biocides. Montenegro also adopted legislation designed to be aligned to the 
EU acquis on Medicinal Product Pricing. However, the administrative capacity necessary to 
implement REACH needs strengthening.  

On  drug  precursors,  national  legislation  is  partly  aligned  to  the  EU  acquis.  Good 
laboratory practices are aligned to the acquis on industrial chemicals.  

On procedural measures,  on  firearms  since the entry into force  of the  law on weapons in 
March 2015, 3 674 weapons have been registered. 10 095 weapon certificates were issued in 
the  reporting  period.  4  412  firearms,  833  weapons,  61  876  pieces  of  ammunition  and  246 

51 

 
 
 
explosive  mines  have  been  destroyed  since  2014.  On  defence  products  &  defence 
procurement  amendments  to  the  public  procurement  law,  which  entered  into  force  in  June 
2016,  were  partly  aligned  to  the  EU  acquis  on  defence  and  security  procurement.  However 
further amendments adopted in June 2017 removed these elements, so it is no longer aligned 
(see Chapter 5 – Public procurement). 

5.2.   Chapter 2: Freedom of movement for workers 
Citizens of one Member State have the right to work in  another Member  State and must be 
given the same working and social conditions as other workers. 

Montenegro  has  some  level  of  preparation  in  this  area.  Some  progress  was  made  on 
freedom of movement for workers.  

In the coming year, Montenegro should, in particular:  

→  strengthen  efforts  to  prepare  for  the  coordination  of  social  security  systems  ensuring 
non-discrimination. 

On  access  to  the  labour  market,  the  law  on  foreigners,  which  governs  the  entry,  stay  and 
work of foreign citizens, is in force. Alignment with the acquis is planned through a revised 
law on foreigners, which will be applied as of the date of accession.  

Some  progress  has  been  made  on  preparations  to  join  EURES  (the  European  network  of 
employment services). The Department for EURES and International Employment Mediation 
of the Employment Agency increased its staff by one EURES adviser, but still needs to hire 
one  more.  The  Employment  Agency  also  signed  a  memorandum  of  cooperation  on 
recruitment with the Slovak Employment Agency in January 2017.   

On  the  coordination  of  social  security  systems,  development  of  bilateral  agreements  on 
social insurance continued. Montenegro ratified further bilateral agreements with Bulgaria in 
October 2016 and Slovakia in December 2016. A bilateral agreement on social insurance with 
Romania is still to be adopted, while negotiations are ongoing with Serbia on amendments to 
the current bilateral agreement, as well as with Bosnia and Herzegovina. The administrative 
capacity of the institutions responsible for social security systems needs to be strengthened.  

The  European  Health  Insurance  Card  is  recognised  under  the  Law  on  health  insurance. 
However the decision on its future introduction is pending on the analysis of its impact on the 
state budget, which is yet to be delivered. 

5.3.   Chapter 3: Right of establishment and freedom to provide services 
EU natural and legal persons have the right to establish themselves in any Member State and 
to provide cross-border services. For certain regulated professions, there are rules on mutual 
recognition of qualifications. Postal services are gradually being opened up to competition. 

Montenegro  remains  moderately  prepared  in  these  fields.  Some  progress  was  made  on 
the right of establishment and freedom to provide services.  

In the coming year, Montenegro should, in particular:  

→  step  up  efforts  to  align  its  legislation  on  the  mutual  recognition  of  professional 
qualifications with the acquis and with the Services Directive. 

On the  right  of  establishment, activities on electronic company registration  remain stalled, 
including its extension to all regional tax administration offices. 

52 

 
 
 
On  the  freedom  to  provide  cross-border  services,  preparations  for  alignment  with  the 
Services  Directive  continued.  The  2015  report  on  the  implementation  of  the  action  plan  for 
the  alignment  with  the  Services  Directive  was  adopted  in  September  2016,  and  the  2016 
report  was  adopted  in  November  2017.  The  framework  law  on  services  was  adopted  in 
October 2017. The Framework Law sets the legal basis for the establishment of the point of 
single contact. 

On postal services, the rulebook on postal services, as provided for under the amended Law 
on  postal  services,  was  adopted  in  June  2017,  further  aligning  national  legislation  with  the 
acquis.  Following  the  discontinuation  of  the  Ministry  for  Telecommunications  and 
Information  Society,  the  Department  of  Postal  Services,  which  is  an  integral  part  of  the 
Directorate for Electronic Communications, Postal Services and Radio Spectrum, became part 
of the Ministry of Economy. 

On mutual recognition of professional qualifications, the law on the recognition of foreign 
qualifications  for  regulated  professions,  provided  for  under  the  national  plan  on  developing 
qualifications  for  regulated  professions  still  needs  to  be  adopted.  After  accreditation  of  the 
academic study programme for architecture at the end of 2015, the certificate for accreditation 
was  issued  for  study  programmes  in  medicine,  pharmacy,  dentistry  and  higher  medical 
schools in May 2017. Work continued to prepare the list of regulated professions.  

 Chapter 4: Free movement of capital 

5.4. 
In  the  EU,  capital  and  investments  must  be  able  to  move  without  restriction  and  there  are 
common rules for cross-border payments. Banks and other economic operators apply certain 
rules to support the fight against money laundering and terrorist financing. 

Montenegro  is  moderately  prepared  in  this  area.  Some  progress  was  made  on  payment 
systems as well as in the fight against money laundering.  

In the coming year, Montenegro should in particular: 

→ fully align with the EU acquis on payment systems; 

  further  align  its  legislation  with  the  latest  acquis  on  the  prevention  of  the  use  of  the 
financial  system  for  the  purposes  of  money  laundering  or  terrorist  financing,  increase 
institutional  capacity  to  perform  checks  on  all  reporting  entities,  enhance  cooperation 
between all stakeholders and reporting; 

  further  strengthen  the  legal  framework  to  address  the  deficiencies  identified  in  the 
MONEYVAL Report. 

On capital movements and payments, the law on current and capital operations with foreign 
countries was amended in October 2017, to further align it with the EU acquis.  

Some progress was made on payment systems. To ensure further alignment with the acquis, 
the  Central  Bank  of  Montenegro  adopted  amendments  to  the  Decision  on  the  structure, 
conditions  and  manner  of  opening  and  closing  of  transaction  accounts.  The  number  of 
registered payment institutions' agents reached 23. 

On  the  fight  against  money  laundering,  Montenegro  adopted  a  number  of  laws  and 
amendments to existing laws. The following laws were amended: (i) the Law on the Basics of 
the  Intelligence  Security  Sector  of  Montenegro;  (ii)  the  Law  on  International  Restrictive 
Measures;  (iii)  the  Criminal  Code;  (iv)  the  Law  on  Misdemeanours.  However,  the  legal 
framework  on  data  retention  and  the  sanctions  system  are  still  not  compatible  with  the  EU 

53 

 
 
 
acquis  relating  to  money  laundering  and  countering  terrorist  financing.  Amendments  to  the 
Law  on  the prevention of  money  laundering  and  terrorism  financing  are  still  to  be adopted. 
These also aim to ensure further harmonisation with the newly adopted FAFT standards. 

The  strategic  framework  is  in  place,  consisting  of:  (i)  the  2015-2018  strategy  for  the 
prevention and suppression of terrorism, money laundering and terrorist financing; and (ii) the 
strategy's accompanying action plan. A new action plan covering 2017 and 2018 was adopted 
in May 2017. 

Montenegro has increased its institutional capacity to perform checks on all reporting entities 
regarding  the  prevention  of  money  laundering.  Since  October  2016,  the  Central  Bank  of 
Montenegro  has  performed  10  checks  of  banks  and  2  checks  of  microcredit  institutions  in 
order to verify that their operations comply with the regulations on the prevention of money 
laundering and terrorism financing. The Administration for Prevention of Money Laundering 
and  Financing  Terrorism  carried  out  87  checks  of  taxpayers,  identified  11  suspicious 
transactions, and forwarded 69 notifications to other competent state bodies (see also Chapter 
24). 

5.5.   Chapter 5: Public procurement 
EU  rules  ensure  public  sector  procurement  of  goods,  services,  and  works  in  any  Member 
State  is  transparent  and  open  to  all  EU  companies  on  the  basis  of  non-discrimination  and 
equal treatment. 

Montenegro  remains  moderately  prepared  on  public  procurement,  which  is  an  area 
particularly  vulnerable  to  corruption.  The  June  2017  amendments  to  the  Law  on  public 
procurement constitute backsliding in terms of legal alignment.  

In the coming year Montenegro should in particular:  

→ adopt legislation that is aligned with the 2014 EU Procurement Directives, including on 
concessions; 

→  prepare a detailed and comprehensive plan for the roll-out of e-procurement;   

→  improve  the  functioning  of  the  remedies  system,  including  its  coverage  of  low-value 
procurements,  concessions,  and  defence  procurement,  and  improve  the  administrative 
capacity  and  IT  infrastructure  of  the  State  Commission  for  the  Control  of  Public 
Procurement. 

Institutional set-up and legal alignment 

The  institutional  and  legal  framework  on  public  procurement  is  broadly  aligned  with  the 
acquis,  apart  from  concessions,  where  the  preparation  of  an  acquis-compliant  law  has  been 
significantly delayed. 

Several  of  the  amendments  to  the  Law  on  public  procurement,  adopted  in  June  2017,  have 
reduced the level of compliance with EU rules. Prepared by an ad-hoc task force, and without 
public  consultation,  the  amended  law  no  longer  applies  to  low-value  procurement  and 
procurements  in  the  area  of  defence  and  security.  The  changes  also  introduced  several  new 
exemptions that are not in the EU acquis.  

Montenegro  needs  to  ensure  that  any  international  bilateral  agreement,  including  for  large 
infrastructure projects, does not unduly restrict competition and that they comply with the EU 

54 

 
 
 
acquis  and  related  TFEU  provisions  on  public  procurement,  as  well  as  with  commitments 
under the World Trade Organisation Government Procurement Agreement.  

While  the  implementation  of  the  2016-2020  strategy  on  public  procurement  is  ongoing, 
several activities are delayed. Moreover, the strategy does not cover concessions in detail and 
lacks information about financial planning and resource allocation.  

Implementation and enforcement capacity 

Montenegro’s public procurement market corresponded to approximately 10 % of GDP in 
2017, based on preliminary data, compared with 11.8 % in the previous 2 years. 

Contracting  authorities’  capacity  to  manage  public  procurement  processes  continues  to 
improve  gradually,  but  is  hampered  by  the  ad-hoc  changes  to  the  public  procurement  law. 
Procurement  planning  needs  to  be  more  realistically  aligned  with  the  allocated  resources. 
Moreover,  public  procurement  still  suffers  from  an  overly  formalistic  approach  and  the 
prevalence of price as the only award criterion. A decree adopted in autumn 2017 envisages 
the use of centralised purchasing for certain standard procurements. This could lead to savings 
and  efficiency  gains;  however,  the  decree  is  not  yet  implemented.  Framework  contracts  are 
not widely used. 

Monitoring  of  contract  awards  and  contract  implementation  is  hindered  by  the  public 
inspection  service’s  insufficient  capacity  to  perform  its  tasks  effectively.  In  addition,  better 
internal  auditing  within  contracting  authorities  is  required  to  improve  monitoring  and 
verification of contract implementation (see also Chapter 32 — Financial control). 

Montenegro  urgently  requires  improvement  of  data  management  systems  to  trace  the 
complete procurement cycle and make the system more user-friendly. With this in mind, work 
on development of a full e-procurement system is foreseen to begin during 2018. 

The  Public  Procurement  Administration  (PPA)’s  capacity  appears  insufficient  to  implement 
the  reforms  needed  to  further  improve  the  performance  of  the  public  procurement  system 
effectively and in a timely manner. 

On the public procurement certification and training programme, at the end of 2017, a total of 
478 employed procurement officers passed the professional certification examination, which 
is still lower than the number of contracting authorities. The number of contracting authorities 
could be further reduced to gain efficiency: in 2017 the figure stands at 620, compared  with 
614 in 2016 and 648 in 2015. 

A  regulatory  and  institutional  framework  is  in  place  on  integrity  and  conflict  of  interest 
mechanisms  in  public  procurement.  The  number  of  integrity-related  reports  remains  low; 
surveys  of  public  opinion  show  that  public  procurement  continues  to  be  perceived  as  a 
significant source of corruption. In September 2017, the PPA and the Anti-corruption Agency 
signed a cooperation agreement to improve the public procurement system and reduce conflict 
of interest and corruption risks. 

Efficient remedies system 

The  right  to  legal  remedy  is  stipulated  in  the  Constitution  and  the  law  on  public 
procurement.  The  remedies  system  includes  an  administrative  review  by  the  State 
Commission for the  Control of Public Procurement (PPC), an independent administrative 
body reporting directly to Parliament. It does not cover concessions and, following the June 
amendments, no longer applies to low-value and defence/security procurements. 

55 

 
 
 
In  2017,  the  PPC  decided  upon  approximately  1  000  cases  and  upheld  about  30  %  of  the 
submitted  appeals,  which  is  slightly  less  than  in  the  previous  year.  The  number  of 
Administrative  Court  rulings  annulling  decisions  of  the  PPC  is  significant  at  about  40  % 
(2016 data). This and existing capacity bottlenecks undermine the functioning of the remedies 
system. The PPC is still understaffed, particularly given the large number of appeals. Last but 
not  least  the  PPC’s  IT  infrastructure  would  need  to  be  further  upgraded,  while  the 
transparency of PPC rulings still needs to be improved by upgrading the register of decisions 
and introducing user-friendly online search functions. 

 Chapter 6: Company law 

5.6. 
The  EU  has  common  rules  on  the  formation,  registration,  and  disclosure  requirements  of  a 
company,  with  complementary  rules  for  accounting  and  financial  reporting,  and  statutory 
audit. 

Montenegro has reached a good level of preparation on company law. Good progress was 
made  through  adopting  the  Law  on  Audit  and  establishing  a  statutory  audit  oversight 
system.  

In the coming year, Montenegro should in particular: 

→ align the law on business organisations with the acquis in the area of company law; 

→ continue alignment with EU corporate accounting and statutory audit acquis by adopting 
any necessary implementing legislation. 

In the area of company law, draft amendments are advanced concerning the law on business 
organisations  which  aim  at  further  acquis  alignment  on  a  wide  range  of  issues,  including 
cross-border mergers. Company takeovers are regulated under national legislation. The Law 
on  Capital  Markets,  encompassing  provisions  for  acquis  alignment  with  transparency 
requirements  for  listed  companies,  was  adopted  in  December  2017.  Montenegro  plans  to 
adopt  relevant  bylaws to  further align  with  the  acquis in  this  area.  Further  compliance  with 
EU  corporate  governance  principles  is  necessary.  Montenegro  continues  to  develop  online 
electronic  company  registration  to  facilitate  the  business  environment.  Efforts  should  also 
continue to facilitate exchange with EU Member States' business registers. 

Progress  was  made  on  corporate  accounting  and  auditing  through  the  adoption  in  June 
2017  of  the  Law  on  Audit,  which  governs  rules  and  procedures  for  the  registration  and 
education of certified auditors, including a system of inspection and penalties. Statutory audit 
is mandatory for public-interest entities. A public audit oversight system has been set up with 
the establishment of the Audit Council, along with a dedicated unit in the Ministry of Finance 
to monitor the operations of certified auditing companies. Montenegro should ensure that this 
oversight  system  is  adequately  funded  and  resourced  to  enable  its  proper  functioning.  No 
oversight tasks have been delegated to the Institute of Certified Accountants of Montenegro, 
the  professional  body  in  this  field.  Montenegro  applies  international  financial  reporting 
standards  (IFRS)  and  international  auditing  standards  (IAS).  A  rulebook  was  adopted 
regulating  the  content,  deadlines,  and  manner  of  compiling  and  submitting  financial 
statements, aimed at further harmonisation with the EU Accounting Directive. The adoption 
of further rulebooks or bylaws are foreseen in order to achieve further acquis compliance on 
accounting and auditing. 

56 

 
 
 
 
 
5.7.   Chapter 7: Intellectual property law 
The EU has harmonised rules for the legal protection of intellectual property rights (IPRs), as 
well  as  rules  for  the  legal  protection  of  copyright  and  related  rights.  Rules  for  the  legal 
protection  of  IPRs  cover,  for  instance,  patents  and  trademarks,  designs,  biotechnological 
inventions and pharmaceuticals. Rules for the legal protection of copyright and related rights 
cover, for instance, books, films, computer programmes and broadcasting.  

Montenegro has a good level of preparation on intellectual property law. Some progress 
was  made  on  further  legislative  alignment  and  coordination  of  concerned  bodies.  Serious 
challenges remain on enforcement.  

In the coming year, Montenegro should in particular:  

 improve its track record of investigations, prosecutions and judicial follow-up, including 
reporting;  

  further  strengthen  capacities  of  all  intellectual  property  rights-related  bodies,  in 
particular the Administration for Inspection Affairs – Market Inspections.  

On  copyright  and  neighbouring  rights,  a  Rulebook  on  the  sources  of  diligent  searches 
appropriate for certain categories of works and phonograms was adopted in March 2017. 

On industrial property rights, amendments to the Law on trademarks, the Law on protection 
of industrial design and the Law on patents were adopted in December 2016, aiming to align 
terminology  with  the  newly  adopted  Law  on  general  administrative  procedure.  The 
amendments are implemented as of July 2017. 

On  enforcement,  Montenegro  had  developed  an  adequate  statistical  reporting  format. 
Criminal  investigation  and  prosecution  remain  unsatisfactory  with  only  2  cases  in  the 
reporting period. The Ministry of Economy established the Intellectual Property Rights (IPR) 
Coordination  team  in  March  2017,  in  order  to  strengthen  cooperation  and  enforcement 
mechanisms amongst the intellectual property rights bodies. Preparations have started for the 
accession to the European Patent Convention. The IT infrastructure was improved. 

The staffing of the Intellectual Property Office (IPO) remains low: only 19 of the 27 posts are 
currently  filled.  The  Administration  for  Inspection  Affairs  has  no  specialised  inspectors  for 
intellectual property and systematically loses staff, which reduces inspection capacity. 

5.8.   Chapter 8: Competition policy 
EU rules protect free competition. They include antitrust rules against restrictive agreements 
between companies and abuse of dominant position, and also include rules on concentrations 
between  companies  which  would  significantly  impede  competition.  EU  rules  also  prevent 
governments from granting State aid which distorts competition.  

Montenegro  has  some  level  of  preparation/is  moderately  prepared  in  this  area.  Some 
progress  was  registered,  in  particular  concerning  the  independence  of  the  State  Aid 
Authority - in February 2018 Montenegro adopted a law which serves as the legal basis to 
transfer the State Aid Authority into the Agency for Protection of Competition. As regards 
alignment  with  State  aid  rules,  Montenegro  has  a  good  level  of  preparation,  but  further 
significant  efforts  are  needed  for  their  enforcement.  Montenegro  has  a  good  level  of 
preparation  as  regards  alignment  with  the  rules  on  antitrust  and  mergers.  However, 
implementation of these rules continues to demonstrate some weaknesses.  

57 

 
 
 
In the coming year, Montenegro should in particular:  

 ensure the functioning of the Agency for the Protection of Competition and improving 
its track record on antitrust and mergers;  

  ensure  the  functioning  at  all  levels  of  the  State  Aid  Authority  and  effectiveness  of  its 
control on State aid at all levels, including the building up of an enforcement record;  

 ensure transparency on all State aid decisions. 

Antitrust and mergers 

The  legislative  framework  is  broadly  in  line  with  the  acquis  and  the  Stabilisation  and 
Association Agreement (SAA). The law on protection of competition is largely aligned with 
TFEU  Articles  101  on  restrictive  agreements  and  102  on  abuses  of  dominant  position.  The 
law also provides for an ex ante control of mergers above certain turnover thresholds, in line 
with the principles of the Merger Regulation. Implementing legislation is largely in place and 
in line with the relevant regulations and Commission guidelines.  

As regards the institutional framework, the Agency for Protection of Competition (APC) is 
responsible for implementing the law on the protection of competition. It is an operationally 
independent authority, whose director is appointed by the government. 

The powers of the APC are broadly comparable to those of the European Commission in the 
area of competition. It may (i) act upon a complaint or a notification (e.g. for mergers) or on 
its  own  initiative,  request  information  and  carry  out  on-site  investigations;  (ii)  approve 
mergers, with or without conditions, or prohibit them; and (iii) comment on draft legislation 
that may affect competition. The APC’s decisions may be appealed before the Administrative 
Court. A leniency policy for self-reporting cartel members is in place. However, fines can still 
only be imposed by a decision of misdemeanour courts, not directly by the APC.  

On enforcement capacity, the APC's staff was increased by five persons, bringing the total to 
19.  However,  its  staffing  level  and  expertise  remain  insufficient.  On  implementation,  the 
number of decisions on cartels and abuses of dominant position have decreased over the years 
and stagnated in the reporting period, with 6 in 2014, 3 in 2015, 4 in 2016 and none in 2017. 
So  far,  the  APC  started  an  in-depth  investigation  of  a  merger  only  once  in  2015,  which 
resulted in its conditional approval. In addition, to date only one fine in 2014 and 2 in 2017 
have been imposed by the misdemeanour court. The APC has so far carried out only 2 on-site 
inspections, of which 1 in the reporting period. In order to step up its enforcement policy, the 
APC needs to carry out more on-site inspections and to further promote the use of its leniency 
policy as a means to uncover cartels. The APC issued 8 opinions on the relevant secondary 
legislation. 

Decisions  of  the  APC  appealed  before  the  courts  were  upheld  to  some  extent.  The 
implementation  of  APC  decisions  was  in  some  cases  hampered  by  the  application  of  the 
statute  of  limitation.  The  courts’  capacity  to  handle  complex  competition  cases  must  be 
significantly strengthened.  

State aid 

The legislative framework is broadly in line with the acquis and with the SAA. The Law on 
State aid control is aligned with TFEU Articles 107 and 108, but only partially aligned with 
EU  secondary  legislation.  Amendments  to  the  Law  on  State  aid  control  were  adopted  in 
February 2018 in order to further align with this acquis, as per the SAA obligations.  

58 

 
 
 
As  regards  the  institutional  framework,  the  State  Aid  Control  Commission  (SACC)  is 
responsible  for  implementing  the  Law  on  State  aid  control.  Administratively  part  of  the 
Ministry of Finance, its members are nominated by aid-granting ministries. Decisions on State 
aid can be appealed before the Administrative Court. 

In  February  2018,  Montenegro  adopted  amendments  to  the  Law  on  the  protection  of 
competition, which further expand the mandate of the APC to include State aid control. The 
law thus serves as the legal basis to transfer the state aid authority to APC, and is an important 
step to meet the SAA requirement on the operational independence of the State Aid Authority. 

The  State  Aid  Authority  has  to  establish  a  solid  track  record  of  enforcement  The  SACC’s 
enforcement capacity remained insufficient and its staffing level still inadequate. The SACC 
is assisted by the State Aid Control Unit, which saw its staff numbers reduced from 10 to 7 in 
2017. The SACC's level of expertise and its budget were not increased.  

On implementation, the number of  decisions  adopted  by the SACC decreased significantly 
from 31 in 2015 to 19 in 2016 and to 13 in 2017 (with only two negative decisions taken in 
2015). The SACC received no complaint between 2013 and 2017, which could indicate a low 
awareness  of  State  aid  rules  among  stakeholders.  There  is  evidence  that  some  aid  measures 
granted  at  central  or  local  level  (e.g.  through  VAT  exemptions),  in  particular  to  large 
companies,  were  not  notified  or  properly  investigated  by  the  SACC.  One  example  is 
Montenegro Airlines - the restructuring plan from 2012 for the airline has only been partially 
implemented but further State support was granted to keep the airlines operational. Awareness 
of  the  State  aid  rules  among  aid  grantors  is  weak  and  advocacy  must  be  stepped  up 
considerably.  

Liberalisation  

The  Law  on  protection  of  competition  and  the  Law  on  State  aid  control  are  applicable  to 
public undertakings and undertakings with special or exclusive rights, except when  applying 
the  laws  would  obstruct  the  performance  of  the  particular  tasks  of  services  of  general 
economic interest that are assigned to such undertakings, in line with Article 106 of the TFEU 
and  with  the  SAA.  The  rules  on  the  financing  of  services  of  general  economic  interest  are 
largely aligned with the State aid acquis. However, Montenegro needs to further demonstrate 
that these rules are properly enforced. There are no monopolies of a commercial character as 
provided for in Article 37 of the TFEU. 

 Chapter 9: Financial services 

5.9. 
EU rules aim at ensuring fair competition between and the stability of financial institutions, 
namely  banking,  insurance,  supplementary  pensions,  investment  services  and  securities 
markets. They include rules on authorisation, operation and supervision of these institutions. 

Montenegro is moderately prepared in the area of financial services. Good progress was 
made  on  legal  alignment  and  in  addressing  the  high  level  of  non-performing  loans,  as 
recommended last year.  

In the coming year, Montenegro should in particular: 

  further  advance  its  alignment  through  the  adoption  of  acquis-compliant  legislation  on 
deposit protection and the reorganisation and winding-up of credit institutions.  

On  banks  and  financial  conglomerates,  the  legislation  on  taking  up  and  pursuing  the 
business of credit institutions is  largely aligned with  the applicable EU rules.  Montenegro’s 

59 

 
 
 
capital  adequacy  requirements  are  based  on  Basel  II.  Alignment  with  the  Capital 
Requirements Directive and the Directive on recovery and resolution of credit institutions and 
investment firms is yet to be achieved. In June 2017, Parliament enacted amendments to the 
Law  on  voluntary  financial  restructuring  of  debts  to  financial  institutions,  with  the  aim  of 
facilitating the resolution of non-performing loans. Moreover, a new Law on financial leasing, 
factoring, purchase of receivables, micro-lending and credit guarantee operations was adopted 
in October 2017, further extending the supervisory tasks of the Central Bank.   

Montenegro's rules on insurance and occupational pensions are partially aligned with those 
of  the  EU.  They  largely  comply  with  Solvency  I  rules,  but  are  yet  to  be  aligned  with  the 
acquis on the taking up and pursuing of a business in the area of insurance and reinsurance 
(Solvency II). The Insurance Supervision Agency continued to build its capacity by training 
its  employees,  and  in  September  2017  adopted  implementing  legislation  on  reporting 
obligations and the conditions for the transfer of operations of insurance companies. 

On  financial  market  infrastructure,  the  Securities  and  Exchange  Commission  started  to 
implement  the  recommendations  of  the  2016  IMF  and  the  World  Bank  Financial  System 
Stability  Assessment.  The  laws  on  the  Central  Bank  and  on  current  and  capital  operations 
with foreign countries were amended in October 2017, further extending the supervisory tasks 
of  the  Central  Bank.  Montenegro  also  aligned  national  provisions  with  the  acquis  on 
settlement finality in payment and securities settlement systems.  

On  securities  markets  and  investment  services,  a  Law  on  capital  markets  was  adopted  in 
December  2017  to  achieve  further  alignment  with  the  acquis  on  markets  in  financial 
instruments, market abuse, prospectuses and capital markets; implementing legislation is yet 
to  be  adopted.  In  October  2016,  representatives  of  Montenegro’s  Securities  and  Exchange 
Commission signed a Declaration on cooperation with other capital market regulators in the 
region.  

5.10.   Chapter 10: Information society and media  
The EU supports the good functioning of the internal market for electronic communications, 
electronic  commerce  and  audio-visual  services.  The  rules  protect  consumers  and  support 
universal availability of modern services. 

Montenegro  continues  to  be  moderately  prepared  in  the  area  of  information  society  and 
media. No progress was made during the reporting period and the previous recommendations 
were  not  fulfilled.  While  funding  of  the  public  service  broadcaster  services  RTCG  is  now 
bound  to  the  GDP,  its  editorial  independence  was  challenged  by  disputed  dismissals  of 
members of its Council. The capacity of the Agency for electronic communications and postal 
services (EKIP) and the Agency for electronic media (AEM) needs to be strengthened.  

In the coming year, Montenegro should in particular:  

 provide the  media regulators and the public service broadcaster with sufficient resources 
for their independent functioning, and shield them from undue political interference; 

 grant AEM a mechanism for imposing penalties, i.e. the possibility to fine media outlets 
that violate the ethical standards laid down in the Law on electronic media;  

  establish  a  track  record  to  demonstrate  administrative  capacity  to  enforce  the  acquis  for 
electronic  communications,  information  society  services  and  audio-visual  media  services, 
including as regards regulatory independence. 

60 

 
 
 
The  Law  on  electronic  communications  regulates  the  electronic  communications  and 
information and communication technologies sector. It was adopted in 2017 to ensure the 
independence  of  the  regulatory  authority  and  to  cover  roaming.  The  Ministry  for 
to  exist,  with 
Telecommunications  and  Information  Society  (MfTaIS)  has  ceased 
responsibility  for  this  area  transferred  to  the  Ministry  of  Economy.  As  a  result,  the  whole 
institutional set-up had to be reconfigured, with a new rulebook on the internal organisation of 
the Ministry of Economy adopted in May 2017.  

Repeated legal proceedings launched by telecommunication operators against EKIP decisions 
to lower regional roaming rates with Bosnia and Herzegovina, the former Yugoslav Republic 
of Macedonia and Serbia are ongoing.  

The European emergency number 112 has been implemented and is functioning.  

On information society, the newly established Ministry for Public Administration took over 
responsibility  from  the  former  MfTaIS.  A  new  multiannual  strategy,  based  on  the  Digital 
agenda  for  Europe  and  the  Digital  single  market  strategy,  was  adopted.  It  addresses  issues 
such  as  accessibility  of  broadband  services,  cyber  security,  digital  business,  eHealth  and 
e-education. 

On audio-visual policy, the Agency for electronic media continues to exercise its mandate in 
a  professional  manner.  However,  the  Agency's  independence  has  been  called  into  question 
due to its uneven implementation of sanctions for breaches of the code of ethics of journalists 
and its performance in monitoring the media in the run-up to elections. Legal provisions and 
its operational capacity for electronic media monitoring should be strengthened.  

Amendments to the laws on electronic media and on the national public broadcaster (RTCG) 
came into force on 1 September 2017. They regulate the financing of the public broadcaster 
through  a  contract  between  the  RTCG  and  the  government.  The  law  also  foresees  separate 
accounting for the RTCG, with a clear distinction between commercial and public funds. The 
RTCG  budget  for  2018  has  been  increased  slightly  from  EUR  17.9  to  18.6  million.  Stable 
financial  resources  need  to  be  ensured,  and  editorial  independence  and  professionalism 
standards further improved. Recent dismissals in the RTCG and AEM Councils raised serious 
concerns about their representativeness and independence, which need to be protected against 
undue influence and political pressure from any side. 

5.11.   Chapter 11: Agriculture and rural development 
The  common  agricultural  policy  (CAP)  supports  farmers  and  rural  development.  This 
requires  strong  management  and  control  systems.  There  are  also  common  EU  rules  for 
quality policy and organic farming. 

Montenegro is moderately prepared in the area of agriculture and rural development. Good 
progress  continued,  including  the  entrustment  with  budget  implementation  tasks  for  two 
measures under the IPARD II programme.  

In the coming year, Montenegro should in particular:  

→ implement measures entrusted under the IPARD II programme and seek entrustment with 
budget implementation tasks for other measures of the programme;  

→  continue  to  implement  the  action  plan  for  acquis  alignment  on  agriculture  and  rural 
development,  in  particular  by  further  developing  the  integrated  administrative  and  control 
system. 

61 

 
 
 
As  regards  horizontal  issues,  progress  remains  to  be  made  in  bringing  direct  support 
measures  in  line  with  the  acquis  by  fully  decoupling  them  from  production  and  linking  the 
payments  to  cross-compliance.  Montenegro  is  advancing  in  establishing  a  Land  Parcel 
Identification  System  as  part  of  the  overall  Integrated  Administration  and  Control 
System (IACS) needed to manage and control funding under the common agricultural policy. 
IACS  development  and  capacity  building  need  to  continue  in  2018.  Farm  advisory  services 
are  provided  by  regional  centres  of  the  Ministry  of  Agriculture  and  Rural  Development  but 
these  services  need  to  be  strengthened.  The  development  of  a  Farm  Accountancy  Data 
Network (FADN) is underway. 

On  common  market  organisation  (CMO),  the  Law  on  the  organisation  of  the  market  in 
agricultural products aligning towards to the EU acquis in this area was adopted in July 2017. 
The  development  of  implementing  legislation  needs  to  continue  and  administrative  capacity 
must be developed. 

On  rural  development,  Montenegro  was  entrusted  in  October  2017  with  budget 
implementation  tasks  for  the  IPARD  II  measures  'Investments  in  physical  assets  of 
agricultural  holdings' and 'Investments  in  physical  assets  concerning  processing  and 
marketing of agricultural and fishery products'. The Financing Agreement entered into force 
on  6  December  2017.  This  provides  the  basis  for  the  implementation  of  the  IPARD  II 
programme  with  the  first  call  for  proposals  launched  in  February  2018.  Another  aim  is  for 
Montenegro  to  be  entrusted  with  budget  implementation  tasks  for  additional  programme 
measures in 2018.  

On  quality  policy,  the  Law  on  quality  schemes  for  agricultural  and  food  products  aligned 
with the EU acquis was adopted in March 2017. While implementing legislation has yet to be 
adopted, some progress is being made on the development and promotion of quality schemes 
in  Montenegro.  On  organic farming, Montenegro has taken measures to  align with the EU 
acquis:  it  has  a  competent  authority  for  organic  production,  an  accreditation  system  for  the 
control  bodies,  and  a  system  of  certification  of  organic  production.  Organic  farming  is 
promoted through area and livestock unit payments but remains a small sector. 

5.12.   Chapter 12: Food safety, veterinary and phytosanitary policy 
EU  hygiene  rules  for  foodstuff  production  ensure  a  high  level  of  food  safety.  Animal  health 
and welfare and the safety of food of animal origin are safeguarded together with quality of 
seed, plant protection material, protection against harmful organisms and animal nutrition.  

Montenegro is moderately prepared in this area. Good progress was made, including with 
the adoption of implementing legislation and on fighting animal diseases.  

In the coming year, Montenegro should in particular:  

 continue to implement the strategy for transposing and implementing the acquis, especially 
on official control of compliance with feed and food law, animal health and animal welfare 
rules; 

  continue  to  improve  administrative  capacity,  especially  for  inspection  services  and 
laboratories; 

 continue and support the ongoing upgrading process of food establishments. 

62 

 
 
 
On  general  food  safety,  good  progress  has  been  made  on  aligning  food  and  feed  safety 
legislation with the EU acquis. Several pieces of implementing legislation have been adopted 
during the reporting period. 

On  veterinary  policy,  the  multiannual  programme  for  the  eradication  of  rabies  continued. 
The autumn 2016, spring 2017 and autumn 2017 vaccination campaigns were completed. The 
vaccination  of  cattle  against  lumpy  skin  disease  was  carried  out  in  2017.  Since  September 
2016 no cases of lumpy skin disease have been registered, which is an important step towards 
stopping  its  spread  into  the  EU.  The  programme  of  compulsory  measures  for  animal  health 
protection  was  implemented  in  2017  and  the  programme  for  2018  has  been  prepared. 
Capacity building for veterinary services was further pursued.  

On the placing on the market of food, feed and animal by-products, Montenegro provided 
legal preconditions for the production, processing and placing on the market of raw milk and 
milk products  in line with  EU requirements. On the upgrading of establishments, a national 
programme  was  adopted  in  July  2017  to  improve  facilities  for  products  and  by-products  of 
animal origin. This includes plans to improve Category III facilities by introducing deadlines 
for  removing  irregularities.  The  number  of  establishments  compliant  with  EU  regulations 
increased from 11 to 70 since the beginning of 2016. An audit by the European Commission 
in  November  2017  provides 
of 
recommendations  to  further  improve  the  system,  particularly  on  the  verification  of  official 
controls. 

the  official  controls  system  for  meat  and  milk 

Implementing legislation on food safety rules was adopted in various fields. 

On specific rules for feed, no relevant developments have taken place. 

Implementing  legislation  on  phytosanitary  policy  in  the  field  of  plant  health,  seed  and 
planting  material  and  plant  protection  was  adopted.  Montenegro  began  to  implement  its 
national  plan  for  sustainable  use  of  plant  protection  products  in  accordance  with  the 
2016-2021 action plan. Capacity building for phytosanitary services was further pursued. The 
programme  of  phytosanitary  measures  for  2017  was  implemented  and  the  programme  for 
2018  has  been  prepared.  The  plant  passports  system  for  grapevine  planting  material  was 
implemented. 

No developments on genetically modified organisms (GMOs) have taken place.  

5.13.   Chapter 13: Fisheries 
The  common  fisheries  policy  lays  down  rules  for  management  of  fisheries,  protects  living 
resources  of  the  sea  and  limits  the  environmental  impact  of  fisheries.  This  includes  setting 
catch quotas, managing fleet capacity, rules for markets and aquaculture as well as support 
for fisheries and coastal communities.  

Preparations remain at an early stage. Good progress was made in this area, particularly as 
regards the strengthening of administrative capacity.  

In the coming year, Montenegro should in particular:  

 continue implementing the action plan on aligning with, implementing and enforcing the 
EU acquis;  

  continue  strengthening  administrative,  data  collection,  scientific  advice,  inspection  and 
control capacities. 

63 

 
 
 
The new Directorate General for Fisheries was established in the Ministry of Agriculture and 
Rural Development in March 2017. This strengthens Montenegro's administrative capacity in 
the area of fisheries. The Directorate-General consists of a directorate for resource and fishing 
fleet  management,  and  a  directorate  for  monitoring  and  inspection  supervision.  The 
Directorate General currently employs 10 people, including three inspectors. 

On  resource  management,  an  annual  data  collection  programme  on  the  Montenegrin 
fisheries,  aligned  with  the  EU  acquis  and  the  recommendations  of  the  General  Fisheries 
Commission for the Mediterranean (GFCM), was successfully developed. Implementation of 
the programme started in April 2017.  

On inspection and control, good progress was made in upgrading the Fisheries Information 
System (FIS) and in developing the Automatic Location and Identification system (AIS). On 
illegal, unreported and unregulated fishing (IUU), the Law ratifying the FAO Agreement on 
port  state  measures  to  prevent,  repress  and  eliminate  illegal,  unreported,  and  unregulated 
fishing was adopted in March 2017. On fisheries governance, Montenegro signed the Malta 
MedFish4Ever  Declaration  including  its  action  plan  for  sustainable  fishing  and  fishing 
communities in the Mediterranean.     

There were no substantial  developments on  fleet  management,  structural actions, market 
policy, state aid, or international agreements. 

5.14.   Chapter 14: Transport policy 
The EU has common rules for technical and safety standards, security, social standards, State 
aid  and  market  liberalisation  in  road  transport,  railways,  inland  waterways,  combined 
transport, aviation and maritime transport. 

Montenegro is moderately prepared/has a good level of preparation in the area of transport 
policy. Some progress has been achieved thanks to further legislative alignment in maritime 
and road transport, but more efforts are needed for inland waterways and intelligent transport 
systems.  Further  strengthening  of  administrative  and  technical  capacity  is  needed  for 
alignment, implementation and enforcement in road, rail and maritime transport.  

In the coming year, Montenegro should in particular: 

  ensure  the  operational  independence  and  appropriate  staffing  of  the  railway  regulatory 
body and the railway safety authority; 

  increase  efforts  to  lay  down  the  strategic  framework  for  implementing  Intelligent 
Transport Systems (ITS) on its core road, rail and maritime network and to align with the ITS 
Directive; 

 achieve full membership of the Paris Memorandum of Understanding (MoU) on port State 
control. 

On  the  general  transport  acquis,  Montenegro  signed  the  Transport  Community  Treaty  in 
July 2017 and ratified it in March 2018. The strategic framework is in place and is expected to 
be further strengthened  by the new  transport development strategy which is  being finalised. 
The single project pipeline for the transport sector was updated in 2017. Further efforts should 
be  made  to  complete  alignment  with  the  acquis  on  public  service  obligations,  passengers' 
rights, and on procedures and criteria for the award of public service contracts in the field of 
road  and  rail  transport.  No  further  alignment  was  made  with  the  acquis  on  summertime 
arrangements. The administrative capacity of the Ministry of Transport and Maritime Affairs 

64 

 
 
 
has recently been strengthened with the establishment of a new Directorate for International 
Cooperation  and  EU  Funds,  which  should  streamline  and  coordinate  EU-funded  transport 
infrastructure  projects.  The  accident  investigation  body  for  air,  maritime  and  rail  transport 
was established in 2015 and is fully operational. 

On  road  transport,  the  new  law  on  road  transport  was  adopted,  providing  for  further 
alignment  with  the  acquis,  but  the  new  law  on  road  safety  is  still  to  be  adopted.  Fatal  and 
serious road traffic accidents are still significantly above the EU average and further efforts 
by  all  responsible  institutions  are  needed  to  implement  and  enforce  the  legislation  on  road 
safety, as well as for education and awareness-raising of road users. The 2017 programme for 
the  reconstruction  and  maintenance  of  state  roads  amounted  to  EUR  38  million,  marking  a 
EUR 6 million decrease year-on-year. 

The  law  on  the  transport  of  dangerous  goods  was  adopted  in  2014  and  further  amended  in 
February 2018 but its implementation is lagging behind and the national body for the control 
of transport of dangerous goods has not been set up. No progress was made on the alignment 
with  the  acquis  on  transportable  pressure  equipment.  With  the  new  law  on  road  transport, 
further alignment was made on market access, particularly for coach and bus services. Further 
alignment to the acquis is needed on driving times and rest periods, while enforcement of the 
existing social legislation needs to be further improved. No progress was made on clean and 
energy-efficient  road  transport  vehicles  or  on  intelligent  transport  systems.  Cycling  as  an 
alternative,  energy-efficient  mode  of  urban  transport  is  being  promoted  through  the 
construction of dedicated cycling lane infrastructure in Podgorica.  

On rail transport, in March 2017 the government adopted a new 2017-2027 strategy for the 
development  of  the  railway  sector  and  the  2018-2020  national  railway  infrastructure 
programme  in  December  2017.  The  reorganisation  of  the  Railway  Directorate  into  an 
independent and effective railway regulatory body and safety authority is yet to be completed. 
Additional efforts are needed to implement effectively the EU legislation on rail passengers' 
rights and to reduce delays and cancellations. Open access to the railway infrastructure, with 
transparent charges and capacity allocations, needs to be further aligned with the acquis. 

As regards rail market opening, concrete measures on the review of national technical rules 
and safety rules are yet to be adopted. Furthermore, network statements for rail and sea freight 
terminals  are  yet  to  be  published,  and  a  consultation  platform  with  freight  forwarders  and 
shippers has not yet been created. A public call for tenders for the sale of 51 % of shares in 
the Montecargo Joint Stock Company was unsuccessful. Further implementing legislation on 
railway safety and interoperability has been adopted, but implementation remains insufficient. 
Montenegro  should  take  concrete  steps  in  aligning  with  the  rail  technical  specifications  on 
Control Command and Signalling (TSI CCS) of the acquis. 

On  maritime  transport,  amendments  to  the  law  on  the  safety  of  maritime  transport  were 
adopted.  However,  implementation  needs  to  improve  especially  on  port  State  control.  The 
community  vessel  traffic  monitoring  and  information  system  (VTMS)  has  been  operational 
since 2015 and there are ongoing efforts to comply with the technical criteria for becoming a 
full  member  of  the  Paris  Memorandum  of  Understanding.  On  maritime  education,  training 
and certification systems for seafarers, Montenegro ratified the Seafarers' Identity Documents 
Convention.  Montenegro's  system  of  seafarers'  training,  education  and  certification  was 
recognised  at  EU  level  in  2017  and,  as  a  result,  Montenegrin  seafarers  are  able  to  work  on 
board  EU  Member  States'  fleet.  The  law  on  the  safety  of  maritime  transport  was  further 
aligned with the Maritime Labour Convention. 

65 

 
 
 
On inland waterway transport, no progress was made on legislative alignment with the EU 
acquis.  Montenegro  participates  in  the  EU  strategy  for  the  Danube  Region.  It  is  not  a 
signatory  of  any  international  or  bilateral  agreements  on  internal  navigation.  Montenegro  is 
yet to adopt a law on merchant shipping. 

On  aviation,  Montenegro  has  reached  a  good  level  of  alignment  with  the  acquis  under  the 
first transitional phase of the European Common Aviation Area (ECAA) Agreement and the 
Single European Sky. With the entry into force of the ECAA Agreement, Montenegro has yet 
to demonstrate that remaining open issues related to the first transitional phase can be solved 
imminently,  in  particular  on  economic  regulation.  Legislation  is  aligned  with  the  acquis  on 
aviation  safety  and  was  further  improved  in  2017  with  designations  on  safety  controls  of 
aircrafts and airports. In 2016, Montenegro adopted a rulebook laying down detailed rules for 
the implementation of air traffic management (ATM) network functions. The national airline 
company  'Montenegro  Airlines'  is  facing  major  sustainability  issues,  having  accumulated 
significant financial debts. Montenegro has adopted regulations on airport capacity, schedule 
facilitation and slot allocation. 

On  combined  transport,  Montenegro  adopted  in  2014  a  new  law  on  combined  freight 
transport that also aligned with the acquis on the establishment of common rules for certain 
types  of  combined  transport.  However,  significant  efforts  are  needed  to  further  develop 
intermodal transport, especially as regards the transport of containers from the port of Bar and 
the construction of suitable intermodal terminals. 

5.15.   Chapter 15: Energy 
EU  energy  policy  covers  energy  supply,  infrastructure,  the  internal  energy  market, 
consumers,  renewable  energy,  energy  efficiency,  nuclear  energy  and  nuclear  safety  and 
radiation protection. 

Montenegro has reached a good level of preparation in the field of energy. Some progress 
was  made  in  the  reporting  period,  especially  on  further  legislative  alignment  related  to 
renewable energy and energy efficiency.  

In the coming year, Montenegro should, in particular:  

  create  or  join  a  functioning  day-ahead  market  and  couple  with  neighbouring  markets, 
including Italy;  

 move to market-based support schemes for renewable energy production and streamline 
the permitting and connection procedures;  

 adopt the Law on security of supply of oil products and set up the stockholding body for 
the mandatory oil stocks.  

On security of supply, Montenegro has an energy development strategy up to 2030, with a 
2016-2020 action plan and a long-term energy balance for 2017-2019. 

Concerning  oil  stocks,  the  action  plan  on  compulsory  strategic  reserves  of  oil  and/or 
petroleum  products  was  adopted  in  April  2015,  but  the  Law  on  security  of  supply  of  oil 
products, which should start implementation of the Oil Stocks Directive, is yet to be adopted. 
The current level of stocks remains close to zero.  

Montenegro has participated in the European Network of Transmission System Operators for 
Electricity  (ENTSO-E)  since  its  beginning.  An  interconnection  with  Italy  is  under  way  and 
others with Serbia and Bosnia and Herzegovina are planned. Montenegro does not have a gas 

66 

 
 
 
market.  It  signed  a  multilateral  memorandum  of  understanding  under  the  Berlin  process  to 
establish a day-ahead market and merge it with a neighbouring market by 2018.  

The 2015 energy law and the 2016 law on cross-border exchange of electricity and natural gas 
are aligned with the Third Energy Package on the internal energy market for both electricity 
and gas. Implementing legislation is still needed. The amendment to the energy law of July 
2017  further  specified  the  responsibilities  of  the  Energy  Regulatory  Agency  (ERA).  ERA 
experts joined the Agency for the Cooperation of Energy Regulators (ACER) working groups 
in January 2018.  

The  power  distribution  and  supply  functions  of  the  Montenegrin  Electric  Power  Company 
have been legally separated since 2016. The electricity market for households was opened up 
in  2015  but  no  new  providers  entered  the  market.  Customers  connected  to  the  high  voltage 
network have been supplied under negotiated prices. Since 2006, the aluminium plant, KAP, 
has been a self-supplier in the wholesale market with its own balancing responsibility. ERA 
preliminarily certified the transmission system operator in October 2017. 

Despite the favourable investment environment, connection of new generation facilities to the 
system, expropriation procedures and drafting planning documents remain challenging.  

ERA  is  an  operationally  and  financially  independent  authority  with  32  staff,  but  its  overall 
independence still needs further improvement. ERA regulates prices for power from domestic 
producers  based  on  market  prices  and  prices  of  grid  services.  Wholesale  electricity  market 
prices  are  freely  formed.  There  are  no  more  cross-subsidies  in  the  market  and  tariffs  for 
supply to vulnerable buyers were introduced in 2012.  

The national legislation is aligned with the Hydrocarbons Licensing Directive; the Safety of 
Offshore  Operations  Directive  is  not  yet  fully  implemented.  Concession  contracts  for 
production  of  hydrocarbons  were  signed  in  September  2016  and  March  2017.  Montenegro 
adopted  the  gasification  master  plan  in  June  2017,  including  the  list  of  priority  investment 
projects  and  its  strategic  environmental  impact  assessment,  as  well  as  the  programme  for 
offshore  exploration  and  hydrocarbon  production  in  July  2017.  The  Ionian-Adriatic  Gas 
Pipeline is the leading option for the gasification of Montenegro.  

The  national  action  plan  on  the  use  of  renewable  energy  sources  by  2020  was  adopted  in 
2014. In 2016 41.6 % of energy gross final consumption came from renewable sources, thus 
exceeding the 33 % 2020 target, due to a revision of data on biomass. The national legislation 
has  been  partially  aligned  with  the  Renewable  Energy  Directive;  some  implementing 
legislation was adopted.  

Support to RE producers is based on feed-in tariffs. The country needs to move to an auction 
system  compliant  with  the  2014-2020  Guidelines  on  State  aid  for  environmental  protection 
and  energy.  Development  of  new  projects,  particularly  on  hydropower,  should  be  in 
conformity with the EU legislation on concessions and the environment and should take into 
account  the  impact  on  areas  of  high  natural  interest.  ERA  issues  certificates  of  origin. 
Administrative  and  grid-related  procedures  remain  cumbersome  for  RE  producers. 
Sustainability criteria for biofuels and bio-liquids are yet to be implemented.  

The  2016-2018  energy  efficiency  action  plan  aims  to  achieve  9  %  savings  of  the  average 
five-year  final  energy  consumption  by  2018  and  to  renovate  1  %  of  central  government 
buildings  by  February  2016.  The  energy  efficiency  obligation  schemes  have  not  yet  been 
established. Further alignment was achieved thanks to the adoption in December 2016 of the 

67 

 
 
 
2017-2019  plan  for  reconstruction  of  state-owned  buildings.  An  annual  energy  efficiency 
operating  plan  of  public  administration  institutions  was  adopted  in  April  2017.  Part  of  the 
energy efficiency acquis is yet to be adopted, but several rulebooks on energy labelling (2016) 
and  eco-design  for  energy-related  products  (2017)  were  adopted.  Montenegro  is  not  fully 
compliant with the Energy Performance of Buildings Directive. Administrative capacity has 
to  be  considerably  strengthened,  in  particular  for  inspection  supervision  and  local 
administration.  

On nuclear energy, nuclear safety and radiation protection, Montenegro does not have a 
nuclear industry, a research reactor or any other facility producing radioactive materials, and 
national  legislation  prohibits  the  construction  of  nuclear  facilities.  In  December  2016,  the 
2017-2021 strategy and action plan for protection from ionising radiation, radiation safety and 
management  of  radioactive  waste  were  adopted.  National  legislation  on  ionising  radiation 
protection and basic safety standards is partly aligned with the acquis.  

Montenegrin legislation is not yet aligned with the Directive on the supervision and control of 
shipments  of  radioactive  waste  and  spent  fuel.  The  amendments  to  the  Convention  on  the 
physical protection of nuclear material were ratified in 2016. Montenegro is implementing the 
Treaty on the non-proliferation of nuclear weapons and additional protocols.  

In  July  2017,  the  European  Commission  received  the  Agreement  between  the  European 
Atomic  Energy  Community  (Euratom)  and  Montenegro  for  their  participation  in  the 
Community arrangements for the early exchange of information in the event of radiological 
emergency (ECURIE). However, Montenegro is still to submit critical information in order to 
become  a  fully  operational  ECURIE  member.  Montenegro  also  expressed  willingness  to 
voluntarily join the European Radiological Data Exchange Platform. 

The  regulatory  body  for  radiation  and  nuclear  safety  and  security  and  radioactive  waste 
management is composed of 8 representatives from the Ministry of Sustainable Development 
and Tourism, the Environmental Protection Agency, the Administration for Inspection Affairs 
and  the  Ministry  of  Interior.  A  five-member  advisory  committee  for  protection  against 
ionising radiation and  radiation safety was set up in  April 2012. Montenegro  has a licensed 
and  operational  storage  facility  for  radioactive  waste,  mainly  from  medical  and  industrial 
applications, in compliance with international standards since 2012. 

5.16.   Chapter 16: Taxation 
EU rules on taxation cover value-added tax and excise duties as well as aspects of corporate 
taxation.  They  also  deal  with  cooperation  between  tax  administrations,  including  the 
exchange of information to prevent tax evasion. 

Montenegro is moderately prepared in the area of taxation. Some progress was made in 
this field, including on the 2016 recommendation.  

In the coming year, Montenegro should in particular: 

  continue  to  implement  the  action  plan  addressing  the  issues  highlighted  by  the  Tax 
administration diagnostic assessment tool (TADAT) analysis. 

  ensure  that  by  end  2019  it  joins  the  Global  Forum  on  Transparency  and  Exchange  of 
Information for Tax Purposes and the Inclusive Framework of OECD BEPS (base erosion 
and profit shifting), and signs the OECD multilateral convention on mutual administrative 
assistance in tax matters. 

68 

 
 
 
Montenegro  adopted  and  started  implementing  the  action  plan  to  address  the  issues 
highlighted by the Tax administration diagnostic assessment tool analysis. The Fiscal Strategy 
2017-2020 and the action plan for the suppression of a "grey" economy were adopted in June 
2017.  

On indirect taxation, amendments to the law on value added tax (VAT) raising the VAT rate 
from 19 % to 21 % were adopted in July 2017 and came into force on 1 January 2018. These 
amendments also reduced the exemption threshold for goods imported in the personal luggage 
of  travellers  to  less  than  EUR  75.  Amendments  to  the  law  on  excises  were  also  adopted  in 
July  2017,  thereby  increasing  excises  on  petrol  and  diesel  and  by  introducing  excise  on 
natural gas to bring them closer to the EU minima excise rates. A number of tax exemptions 
granted to holders of private yachts are not in line with the EU acquis. 

On direct taxation, certain legislative changes, such as amendments to the laws on personal 
income,  salaries  of  public  sector  employees  and  on  health  insurance,  were  made  to  ensure 
smoother implementation of the existing legislation. In October 2017, the law on sales tax for 
used motor vehicles, vessels, aeroplanes and aircrafts was amended. 

Regarding  administrative  cooperation  and  mutual  assistance  Montenegro  is  yet  to 
automatically  exchange  financial  account  information  based  on  the  OECD  single  Global 
Standard and to introduce a tax administration central liaison office (CLO).  Montenegro has 
committed to become a member of the OECD Global Forum and its Inclusive Framework on 
BEPS  as  well  as  to  sign  and  ratify  the  Convention  on  multilateral  competent  authority 
agreement on automatic exchange of financial account information by 2019. 

On  operational  capacity  and  computerisation,  the  tax  administration  took  actions  to 
improve the business processes, as foreseen in an action plan adopted in October 2016. These 
actions include legislative (a law on re-programming of tax claims) and operational actions as 
well as activities related to the improvement of the IT systems. In January 2018 Montenegro 
signed  a  contract  with  the  World  Bank  for  a  loan  of  EUR  14  million  for  a  project  on  tax 
administration  reform  and  an  EU  Twinning  project  (“Support  to  Tax”)  started,  designed  to 
assist Montenegro with alignment to the EU acquis in Chapter 16. 

5.17.   Chapter 17: Economic and monetary policy 
EU rules require the independence of central banks and prohibit them from directly financing 
the public sector. Member States coordinate their economic policies and are subject to fiscal, 
economic and financial surveillance. 

Montenegro remains moderately prepared in the area of economic and monetary policy. 
Good  progress  was  achieved  through  the  adoption  and  ongoing  implementation  of  an 
action plan for acquis alignment on economic and monetary policy, and of a medium-term 
fiscal consolidation strategy, in line with the 2016 report's recommendations. 

In the coming year, Montenegro should in particular:  

→ continue to implement the action plan for alignment with the acquis. 

Montenegro does not have standard monetary policy tools at its disposal, as it uses the euro 
as legal tender, leaving fiscal policy as the main macroeconomic policy instrument. Its present 
use of the euro, decided by the national authorities under exceptional circumstances, is fully 
distinct from membership of the euro area. Within this framework, amendments to the Law on 
the  Central  Bank  and  the  Law  on  current  and  capital  operations  with  foreign  countries, 
adopted in October 2017, created the legal preconditions for the full functional, institutional, 

69 

 
 
 
personal and financial independence of the Central Bank. The amendments also authorise the 
Central  Bank  to  approve  emergency  liquidity  assistance  to  a  credit  institution  and  stipulate 
that it can buy public debt securities only on the secondary market. Legislation on insurance 
and  voluntary  pensions  needs  to  be  brought  in  line  with  EU  rules  on  the  prohibition  of 
privileged  access  of  the  public  sector  to  financial  institutions.  Further  steps  are  needed  to 
ensure that the primary objective of price stability is defined in compliance with the TFEU.  

On economic policy, the government submitted its 2018-2020 economic reform programme 
(ERP)  in  January  2018.  The  authorities’  analytical  capabilities  to  design,  implement  and 
monitor  structural  reforms  are  gradually  improving.  Work  progressed under  the  strategy  for 
implementing  the  2010  methodology  of  the  European  System  of  Accounts  standards  (ESA 
2010). Montenegro continues to regularly submit fiscal notifications and produces some of the 
data  required  for  the  macro-economic  imbalance  procedure.  However,  the  notifications  are 
incomplete and need to be aligned with EU requirements, in particular as regards data relating 
to the excessive deficit procedure. 

Further  alignment  with  the  EU  Directive  on  Requirements  for  Budgetary  Frameworks  is 
needed. While Montenegro has put in place a multiannual budgetary framework, its content 
and  reliability  need  further  improvement.  Particular  efforts  should  be  invested  in  further 
strengthening economic policy formulation. While the macroeconomic framework is broadly 
consistent, the 2016 budget surpassed Montenegro’s fiscal rules’ deficit and debt limits of 3 % 
and  60  %  GDP  respectively.  In  response,  the  government  adopted  a  medium-term  fiscal 
consolidation strategy in June 2017.  The strategy’s full implementation will be essential for 
safeguarding  the  sustainability  of  public  finances  and  stabilising  the  level  of  public  debt  to 
gradually  comply  with  the  fiscal  rules,  including  through  the  adoption  of  additional  fiscal 
measures, if needed. 

5.18.   Chapter 18: Statistics 
EU  rules  require  that  Member  States  are  able  to  produce  statistics  based  on  professional 
independence,  impartiality,  reliability,  transparency,  and  confidentiality.  Common  rules  are 
provided for the methodology, production and dissemination of statistical information. 

Montenegro is  moderately prepared  in  the area  of statistics.  Some progress  was made  on 
harmonising the statistical methodology with EU standards and the increased transmission of 
data, notably macroeconomic, social, business and agricultural statistics. However, significant 
efforts are still needed in the statistical system to address the 2016 recommendations.  

In the coming year; Montenegro should in particular: 

  considerably  strengthen  the  human  and  financial  resources  of  the  Statistical  Office  of 
Montenegro (Monstat) and also strengthen the human resources of the Ministry of Finance in 
order to fulfil its responsibilities regarding government finance statistics;  

 further align its statistics with ESA 2010, including government finance statistics; 

On statistical infrastructure, the legal framework is in line with the European statistics Code 
of Practice. The Statistical Office of Montenegro (Monstat) is the main producer and overall 
coordinator of statistics. Its professional independence is enshrined in law. The government of 
Montenegro issued a "Commitment on Confidence" in February 2018, guaranteeing Monstat's 
professional  independence  and  demonstrating  its  trust  in  the  National  Statistical  System  of 
Montenegro. However, Monstat's financial and administrative capacities are still limited due 

70 

 
 
 
to inadequate resources: only 107 of 200 available posts are filled. Monstat's office premises 
also remain inadequate, both in terms of space and of the image they provide.  

Monstat  has  signed  19  memoranda  of  understanding  with  administrative  data  providers. 
Coordination  of  producers  of  official  statistics  also  continued  to  improve,  but  needs  further 
strengthening.  The  main  classifications  (NACE  Rev.  2,  ISCO-08,  NUTS,  CPA,  GEONOM 
and ISCED 2011) are in compliance with the EU acquis.  

Data  transmission  to  Eurostat  increased.  However,  although  progress  was  achieved  in  the 
area of macro-economic statistics, continued efforts will be needed to align them with ESA 
2010. Monstat compiles annual and quarterly gross domestic product (GDP) using the output 
and expenditure approach in current and previous year prices. Revised time series for GDP for 
2006-2009  according  to  ESA  2010  were  transmitted  to  Eurostat.  Monstat  does  not  yet 
compile annual or quarterly sector accounts.  

Considerable  efforts  are  needed  to  develop  government  finance  statistics  and  financial 
accounts. The Central Bank compiles statistics on the balance of payments and foreign direct 
investment,  which  are  partially  aligned  with  the  EU  acquis.  The  harmonised  index  of 
consumer  prices  (HICP)  and  purchasing  power  parities  (PPP)  are  mostly  aligned.  The 
excessive deficit procedure (EDP) tables have been regularly sent to Eurostat since October 
2014, on best effort basis with important tables missing.  

In business statistics Monstat started transmitting structural business statistics (SBS) data to 
Eurostat  in  July  2017.  Short-term  statistics  (STS)  improved  over  the  reporting  period.  The 
Business  Register  is  largely  aligned  with  the  EU  PRODCOM  list  of  EU  products,  but  no 
foreign  affiliates'  statistics  (FATS)  have  been  received  by  Eurostat.  Tourism  statistics  are 
compliant except for dissemination of the data due to national restrictions to publishing pilot 
data. Transport statistics are largely aligned. Research and development data are in line with 
the EU acquis.  

In social statistics, Montenegro has started preparations for applying a register-based census 
methodology for the 2021 population and housing census making a maximum use of registers 
kept by other public bodies. The survey of income and living conditions (EU-SILC) continues 
to  be  conducted  and  has  been  further  aligned.  Labour  market  statistics  are  broadly  aligned 
with  the  EU  acquis,  work  to  produce  structure  of  earnings  data  progressed  well  but  further 
improvement  is  needed  on  the  labour  cost  index.  Crime  statistics  are  partially  in  line  with 
Eurostat's  annual  data  collection  requirements.  Eurostat  receives  data  on  the  migrant 
population, migration  and acquisitions of citizenship statistics  without metadata and has  not 
yet received data on asylum.  

Good  progress  was  achieved  in  agricultural  statistics.  Complete  datasets  of  annual  crop 
statistics (ACS) and animal production statistics (APS) have been transmitted to Eurostat, as 
well  as  the  results  of  the  2016  Farm  Structure  Survey  (FSS).  Production  accounts  for 
agriculture were established for the period 2012-2016. Energy statistics are fully compliant 
for  annual  data  and  partially  compliant  for  monthly  data.  Energy  price  statistics  are  fully 
compliant. In March 2017, Eurostat was able to publish the first SHARES (Renewable energy 
sources)  data  for  Montenegro.  In  environment  statistics,  waste  statistics  are  partially 
compliant. Statistics on environmental accounts have not yet been received by Eurostat. 

5.19.   Chapter 19: Social Policy and employment 
EU rules in the social field include minimum standards for labour law, equality, health and 
safety at work and non-discrimination. They also promote social dialogue at European level. 

71 

 
 
 
Montenegro  has  some  level  of  preparation  in  the  field  of  social  policy  and  employment. 
Some progress was made in the reporting period.  Alignment with the acquis is ongoing. The 
mismatch between the education system and labour market needs remains an issue of concern. 

In the coming year, Montenegro should in particular: 

 develop prior gender impact assessment of the policies;  

  introduce  active  labour  market  measures  for women  negatively  affected  by  the  repeal  of 
the social benefits; 

 increase the collaboration with the social partners and other non-state actors operating in 
the sector.  

On labour law, legislative alignment with the major pieces of EU legislations is still pending. 
A  monitoring  system  for  the  implementation/impact  of  the  legal  framework  needs  to  be  set 
up.  

On health and safety at work, a number of rulebooks were adopted in the reporting period. 
Better  monitoring  is  needed  to  check  that  the  Law  on  health  and  safety  at  work  is  being 
implemented effectively. Only 9 inspectors work in the area of health and safety at work, a 
number  which  is  considered  insufficient.  Regarding  accidents  at  work,  up  to  20  %  were 
recorded  as  being  fatal.  In  addition,  Montenegro  still  does  not  have  a  functional  National 
Institute for Occupational Health. 

With  regard  to  social  dialogue,  the social  partners  should  be,  more  systematically  and  with 
better  notice,  consulted  on  issues  concerning  employment  and  social  affairs,  including  on 
developing strategic documents. No effective measures were taken to increase and strengthen 
the capacities for better functioning of the Social Council which remains underused despite its 
mandate in this field.   

On employment policy, the Government adopted in December 2016 the 2017 action plan for 
the  implementation  of  the  national  strategy  for  employment  and  human  resources 
development.  Based  on  the  Labour  Force  Survey  for  the  third  quarter  of  2017,  the 
unemployment rate fell to 14.8 %. However, the activity rate remains low at 56.4 % and the 
inactivity rate is high at 43.6 %. Women, youth and long-term unemployed remain in the hard 
to employ categories and regional differences persist. A white paper to promote youth work 
was  prepared  in  cooperation  with  the  International  Labour  Organisation  (ILO).  On  the 
informal  economy,  labour  inspections  need  further  improvement  and  the  statistics  and 
diagnostic  tools  are  not  available  regularly.  The  IT  system  of  the  Employment  Agency  of 
Montenegro needs to be updated.  

As regards preparations for the European Social Fund (ESF), the implementation of the first 
operational  programme  for  human  resources  development  (2012-2013)  was  successfully 
concluded in December 2017.  

On  social  inclusion  and  protection,  the  2017-2021  strategy  and  action  plan  for  the 
prevention  and  protection  of  children  against  violence  were  adopted  in  April  2017.  In 
addition,  the  2018-2022  strategies  for  the  development  of  a  system  for  social  and  child 
protection  and  of  a  system  for  protection  of  the  elderly,  together  with  their  corresponding 
2018  action  plans,  were  adopted  in  September  2017.  The  Constitutional  Court  ruled  the 
amendments  to  the  Law  on  social  and  child  protection  granting  mothers  of  three  and  more 
children  social  benefits  as  unconstitutional.  A  new  piece  of  legislation  was  put  in  place 

72 

 
 
 
instead,  laying  down  different  conditions  for  each  affected  category  of  women.  However, 
proper  implementation  of  the  legislative  framework  needs  to  be  ensured  and  significant 
efforts are needed so that former beneficiaries of these social benefits are not put in a worse 
economic  situation  than  before  the  benefits  were  introduced.  Support  measures  to  increase 
labour market participation of women are also necessary. 

In July 2017, an agreement was signed between the Employment Agency of Montenegro and 
social  work  centres  on  new  working  methods  for  the  preparation  of  individual  activation 
plans. 

On de-institutionalisation, the significant reduction in the overall number of children living in 
institutions  (including  the  absence  of  any  child  under  the  age  of  3)  has  been  maintained.  
the  successful 
Alternative  care  services  need 
de-institutionalisation efforts.   

to  be  strengthened 

to  complete 

The  sustainability  of  social  services  remains  a  concern,  as  full  decentralisation  of  service 
provision and funding has still not happened. Adequate financial resources need be secured to 
ensure  the  provision  of  continuous  social  services  at  local  level  as  well  assisting  in  the 
implementation  of  local  social  inclusion  plans.  Moreover,  the  Institute  for  Social  and  Child 
Protection is under-funded which hinders its functioning.  

The  implementation  of  the  second  phase  of  the  social  card  –  social  welfare  information 
system  continued  successfully.  Moreover,  the  linkage  between  activation  measures  and  the 
work of social protection schemes needs to be strengthened.  

On  non-discrimination  in  employment  and  social  policy,  amendments  to  the  Law  on 
prohibition of discrimination were adopted in June 2017. December 2016 saw the adoption of 
the  strategy  for  the  protection  of  persons  with  disabilities  from  discrimination  and  the 
promotion of equality for the period 2017-2021, along with its 2017/2018 action plan. Also in 
December  2016,  a  manual  on  promoting  decent  work  opportunities  for  young  Roma  in 
Central  and  Eastern  Europe  was  presented  by  the  authorities  in  cooperation  with  ILO. 
Additionally,  Montenegro  is  still  not  fully  aligned  to  the  UN  Convention  on  the  Rights  of 
Persons with Disabilities.   

On equality between women and men in employment and social policy, in March 2017 the 
government  adopted  the  2017-2021  plan  of  activities  for  reaching  gender  equality  together 
with  the  accompanying  programme  for  2017-2018.  The  2017  action  plan  for  the 
implementation of the 2015-2020 strategy for the development of women's entrepreneurship 
was  adopted  in  April  2017.  Financial  and  non-financial  support  to  single  parents  is 
insufficient  despite  an  increased  number  of  facilities,  financial  and  non-financial  support  to 
single  parents.  Women  continue  to  be  exposed  to  various  severe  forms  of  gender 
discrimination, including discrimination based on marital status and motherhood.   

5.20.   Chapter 20: Enterprise and industrial policy 
EU industrial policy enhances competitiveness, facilitates structural change and encourages 
an enterprise friendly environment that stimulates small and medium sized enterprises. 

Montenegro  is  moderately  prepared  on  enterprise  and  industrial  policy.  Some  progress 
was  made  on 
industrial  policy  and  strengthening  Small  and 
Medium-sized  Enterprise  (SME)  support,  as  recommended  in  the  2016  report.  There  is  a 
need  to  further  build  up  administrative  capacity  and  ensure  strong  inter-ministerial 
coordination. 

implementing 

the 

73 

 
 
 
In the coming year, Montenegro should in particular: 

→  continue  to  implement  industrial  policy  in  close  cooperation  with  industry  and  other 
relevant  stakeholders,  and  conduct  a  mid-term  review  of  the  policy  to  assess  its 
effectiveness. 

On  enterprise  and  industrial  policy  principles,  the  government  transformed  the  previous 
working  team  into  a  coordination  body  to  implement  its  2016-2020  industrial  policy  with  a 
view  to  improving  the  sectoral  and  inter-ministerial  coordination.  A  mid-term  review  is 
planned for 2018.  

The 2016 Small Business Act assessment found that Montenegro made some progress in its 
institutional  and  regulatory  environment  for  SMEs  and  good  progress  on  lifelong  and 
entrepreneurial  learning.  At  the  same  time,  increased  efforts  to  strengthen  business  support 
services are needed.  

Business  representatives  underline  that  further  simplification  of  business-related  legislation 
should be a priority. In spite of improvements, administrative procedures for issuing permits 
and licences remain costly and time consuming.  National legislation is not yet fully aligned 
with the acquis on combating late payment in commercial transactions.  

The  Decree  on  business  zones,  adopted  in  November  2016,  lays  down  the  conditions  for 
setting  up  such  zones  at  national  and  local  levels.  Existing  zones  need  to  harmonise  their 
operational rules and incentives for beneficiaries by mid-2018. 

On  enterprise  and  industrial  policy  instruments,  investment  incentives  were  expanded 
further.  The  country’s  Investment  and  Development  Fund  approved  credits  and  factoring 
arrangements  worth  EUR  172.2  million  in  2017.  During  the  same  period,  under  the  2017-
2020 cluster development programme seven clusters received support totalling EUR 100 000. 
Montenegro  continued  to  participate  in  the  EU’s  COSME  competitiveness  programme. 
However, effective working structures still need to be created to help Montenegrin applicants 
prepare their applications for EU funding under the COSME programme. 

On  sector  policies,  Montenegro  is  yet  to  adopt  a  new  SME  strategy.  Specific  SME 
non-financial  support  measures  are  being  implemented  in  the  context  of  the  2017/18 
Economic  Reform  Programmes.  This  includes  SME  mentoring  and  European  Enterprise 
Network advisory services, financial literacy activities, and the establishment of an electronic 
database  on  consultancy  services.  The  2015-2020  strategy  for  the  development  of  women 
entrepreneurship and the 2015-2019 strategy for the promotion of life-long learning continued 
to be implemented.  

5.21.   Chapter 21: Trans-European networks 
The EU promotes trans-European networks in the areas of transport, telecommunications and 
energy to strengthen the internal market and contribute to growth and employment.  

Montenegro is moderately prepared in the area of trans-European networks. Some progress 
was made in the reporting period, notably the signature of the Transport Community Treaty in 
July 2017 and its ratification in March 2018.  

In the coming year, Montenegro should in particular:  

  strengthen  the  administrative  capacity  for  trans-European  networks  in  transport, 
telecommunications and energy; 

74 

 
 
 
→  continue  with  the  harmonisation  of  the  legal  framework  with  TEN-T  and  TEN-E 
Regulations. 

On  transport  networks,  Montenegro  continued  to  participate  in  the  South  East  Europe 
Transport Observatory and in the Western Balkans 6 connectivity agenda. It reached a very 
good  level  of  implementation  of  the  connectivity  reform  measures,  signed  the  Transport 
Community Treaty in July 2017 and ratified it in March 2018. Montenegro is yet to adopt a 
new  transport  development  strategy,  in  line  with  the  TEN-T  objectives  and  updated  (June 
2017) single project pipeline priorities. Some financing resources remain to be identified. 

Montenegro  contributes  to  the  TEN-T  Regional  Transport  Network  with  a  number  of 
rehabilitation  and  upgrading  projects,  such  as  the  port  of  Bar,  Podgorica  Airport,  the 
Bar-Boljare highway (extension of the Orient East-Med core corridor in the Western Balkans) 
and  the  Bar–Vrbnica  railway.  Progress  was  made  with  the  construction  of  the  first  priority 
section  Smokovac-Matesevo  of  the  Bar-Boljare  highway,  while  other  sections  are  at  a 
preliminary design stage. A comprehensive cost benefit analysis for the entire highway will 
set  recommended  standards  and  means  of  financing  for  the  remaining  sections,  in  line  with 
EU  public  procurement  rules.  Upgrading  of  the  Bar-Vrbnica  railway  is  at  an  early  stage  of 
implementation  using  EU  funding.  Progress  was  also  made  on  studies  for  the  design  of  the 
Adriatic-Ionian highway. 

As  regards  the  institutional  framework  and  administrative  capacity,  the  Ministry  of 
Transport  and  Maritime  Affairs'  Directorate  for  Railways,  Transport  and  State  Roads  is  in 
charge  of  the  TEN-T.  In  the  road  sector,  a  state-owned  company  is  responsible  for  the 
development  of  Montenegro's  highways  and  transport  facilities.  In  the  rail  sector,  the 
administrative and technical capacity of the four state-owned companies remained limited. 

Montenegro is yet to fully align its legislative framework with the TEN-T and TEN-E acquis. 
However,  the  national  legislation  on  railway  interoperability,  the  safety  of  road  transport 
infrastructure, the Single European Sky regulation and air transport operations have been fully 
aligned with the acquis. 

On energy networks, Montenegro has  an energy development strategy up to  2030, with an 
action  plan  2016-2020.  The  2012  European  Energy  Community  strategy  still  applies.  Some 
progress was made on the connectivity reform measures for energy. 

Progress  was  identified  on  the  Projects  of  Energy  Community  Interest,  particularly  the 
ongoing interconnection of the electricity systems of Montenegro and Italy by undersea cable 
and the planned extension to Serbia and Bosnia and Herzegovina. Design studies are on-going 
for the Ionian-Adriatic Pipeline, which is one of the Projects of Mutual Interest.  

The Ministry of Economy's Directorate of energy is in charge of TEN-E. Although there are 
no dedicated posts dealing directly with TEN-E, 3 staff members at the Directorate perform 
TEN-E related activities. As regards the Trans-European Communication Networks, the law 
on electronic communications is aligned with the acquis. 

5.22.   Chapter 22: Regional policy and coordination of structural instruments 
Regional policy is the EU’s main tool for investing in for sustainable and inclusive economic 
growth.  Member  States  bear  responsibility  for  its  implementation,  which  requires  adequate 
administrative capacity and sound financial management of projects' design and execution. 

Montenegro is moderately prepared on regional policy and the coordination of structural 

75 

 
 
 
instruments.  Some  progress  was  made  on  implementing  the  action  plan  to  meet  EU 
cohesion policy requirements.  

In the coming year, Montenegro should in particular: 

→ take steps to demonstrate a positive trend in implementing the EU pre-accession funds 
and make progress in its efforts to carry more indirect management of funds.  

On the legislative framework, key strategic documents have been adopted (such as a national 
strategy  for  regional  development,  sectorial  strategies  and  action  plan  for  meeting  the 
requirements of the EU Cohesion Policy). The transposition of key parts of the acquis under 
other  chapters  (e.g.  EU  legislation  on  environmental  impact  assessment,  anti-discrimination 
legislation,  public  procurement,  and  State  aid  control,  etc.)  is  a  necessary  prerequisite  for 
proper  implementation  of  European  structural  and  investment  funds.  The  adopted  fiscal 
strategy for 2017-2020 constitutes a step towards multi-annual budget planning. 

On  the  institutional  framework,  some  preparatory  work  was  conducted.  The  institutional 
framework for management of EU pre-accession assistance (IPA) is operational and has been 
established,  but  the  implementation  capacity  to  make  it  more  effective  needs  to  be  further 
improved. 

On  administrative  capacity,  the  management  structure  for  IPA  was  reorganised  and 
improved  with  the  National  Authorising  Officer  (NAO)  being  given  a  higher  level  of 
seniority. A new administrative procedure was also put in place requiring the opinion of the 
NAO  on  all  organisational  changes  in  the  management  structures  of  IPA  funds.  However, 
staff turnover remains an issue of concern, with the recruitment and retention plan still to be 
developed and implemented. 

On programming, the introduction of the sectoral approach under IPA had a positive effect. 
A  special  body  for  strategic  planning  coordination  was  created  which  should  consolidate  a 
number of strategies from some of the existing sectors. The single project pipeline adopted for 
the first time in December 2015 is being periodically reviewed, the most recent review was 
carried out in June 2017. 

On  monitoring  and  evaluation,  the  monitoring  committees  under  decentralised/indirect 
management  have  been  set  up  and  meet  regularly.  An  interim  evaluation  for  regional 
development  operational  programme  is  under  implementation,  as  well  as  an  ex-post 
evaluation on the performance of the human resources development operational programme. 
A management information system still needs to be developed. 

As for financial management, control and audit, the legal framework is in place.  Based on 
the Audit Authority's assessment some further improvements are needed on human resources 
and internal organisation. 

5.25.   Chapter 25: Science and Research 
The  EU  provides  significant  support  to  research  and  innovation.  All  Member  States  can 
benefit  from  the  EU’s  research  programmes,  especially  where  there  is  scientific  excellence 
and solid investment in research. 

There is a good level of preparation in this chapter and some progress was made through 
expanding international cooperation and steps taken to improve Horizon 2020 results. 

In the coming year; Montenegro should in particular:  

76 

 
 
 
 develop a smart specialisation strategy; 

  continue  efforts  to  improve  participation  in  Horizon  2020  and  increase  investment  in 
research. 

On research and innovation policy, Montenegro adopted its 2017-2021 strategy and action 
plan  for  scientific  research  activities  in  December  2017.  Gross  domestic  expenditure  on 
research and development (R&D) remains low at 0.38 % of GDP (2015) with 58 % coming 
from  public  sources,  and  30  %  from  the  private  sector.  673  fulltime  equivalent  researchers 
were employed in R&D in 2015. Statistics gathering for R&D and innovation is not yet at an 
adequate level. Montenegro needs to develop a human resources strategy for research which 
will form part of its integration into the Regional Economic Area. 

Montenegro is preparing a smart specialisation strategy with the support of the Commission, 
and  an  inter-ministerial  working  group,  including  business,  academia  and  NGOs  has  been 
established.  At  this  stage,  the  main  sector  priorities  are  sustainable  agriculture  and  energy, 
ICT, manufacturing, and health and wellbeing; tourism is a cross-cutting priority.  

Work  on  establishing  a  Science  and  Technology  Park  at  the  University  of  Montenegro 
continued and the innovative entrepreneurship centre “Tehnopolis” is now fully operational. 
Some 14 EU funded small-scale projects were  supported to strengthen cooperation between 
academia  and  the  private  sector,  but  more  efforts  are  needed  in  this  regard.  Activities  are 
underway to strengthen cooperation with the scientific and research diaspora community.  

To  date,  Montenegro's  participation  in  the  framework  programme  Horizon  2020  (H2020) 
remains limited (13 projects). However, participatory capacities of applicants, such as success 
rates,  have  improved  and  are  close  to  the  European  average.  Training  was  provided  to 
improve  the  development  of  project  proposals.  In  addition,  the  H2020  National  Office, 
national focal points, and the system of delegates to the H2020 Programme Committees were 
reorganised,  and  awareness  raising  measures  continued.  Montenegro  is  receiving  support 
from the Horizon 2020 Policy Support Facility. 

Montenegro continues to be active in the EUREKA and COST projects, as well as the NATO 
Science and Peace for Security, and the International Atomic Energy Agency programmes. 

 Chapter 26: Education and Culture  

5.26. 
The EU supports cooperation in education and culture through funding programmes and the 
coordination  of  Member  State  policy  through  the  open  method  of  coordination.  Member 
States must also prevent discrimination and facilitate the education of children of EU migrant 
workers. 

There  is  a  good  level  of  preparation  in  this  chapter.  The  good  progress  made  on 
implementing  the  revised  curricula  based  on  learning  outcomes,  revised  enrolment  policies, 
and the introduction of practical learning must be maintained and ensured across all levels of 
education.  

In the coming year, Montenegro should in particular: 

→  continue  efforts  to  increase  pre-school  participation  rates,  including  from  disadvantaged 
backgrounds; 

→  continue  with  curricular  reform  in  primary  and  secondary  education  to  teach  basic  and 
transversal skills and focus on learning outcomes; 

77 

 
 
 
→  continue  to  strengthen  sector  governance  and  improve  enrolment  policies  for  vocational 
and higher education.  

On education and training, numerous laws were amended introducing significant regulatory 
changes  from  pre-school  to  higher  education.  The  2017-2018  action  plan  to  implement  the 
strategy to develop general secondary education (2015-2020) was adopted in December 2016. 
The  revised  enrolment  policy  for  gymnasia  and  vocational  schools  aims  for  reduced  class 
size.  The  2017-2024  strategy  for  teacher  education  and  related  2017-2018  action  plan  were 
adopted;  training  should  focus  on  developing  students'  key  competencies.  Pre-school 
participation rates remain low, although with an increase from 38 % to 43 %. The rate of early 
school leavers reduced slightly to 5.5 % compared to 5.7 % in 2015, while  lifelong learning 
remains  low  at  3.3  %  (EU  2020  target  15  %).  The  annual  budget  for  education  increased 
slightly  to  4.3  %  of  GDP.  Montenegro  established  a  working  group  tasked  with  achieving 
more substantive improvements in the next round of the Programme for International Student 
Assessment  (PISA)  testing,  in  2018.    Montenegro's  national  qualifications  framework  is 
harmonised  with  the  European  qualifications  framework  and  implementation  is  ongoing. 
Activities for greater inclusion and improved support services for children with special needs 
should continue.  

Amendments to the Law on higher education were adopted in June, establishing tuition-free 
enrolment for the first and second cycles and introducing 25 % practical training for all study 
programs.  This  is  foreseen  to  lead  to  the  eventual  phasing  out  of  the  graduate  traineeship 
programme.  An  agency  for  the  control  and  quality  assurance  in  higher  education  has  been 
established  and  its  statute  has  been  adopted.  At  34  %  (30-34  year  olds),  tertiary  education 
attainment  compares  well  with  the  current  EU  average  of  39.1  %.  Latest  data  shows  the 
employment  rate  of  recent  graduates  is  59  %.  Software  introduced  to  prevent  and  combat 
plagiarism in higher education has yet to demonstrate positive results. This sector remains a 
high risk area for corruption.  

Progress  was  achieved  on  vocational  education  and  training  (VET)  to  better  meet  labour 
market needs, through implementation of the newly developed dual education programme and 
the  introduction  of  a  system  of  vocational  teacher  placement  in  industry.  Importantly,  a 
related system of quality assurance and monitoring mechanisms needs to be ensured. New and 
revised VET curricula were introduced in the school year 2017/2018, accompanied by teacher 
training.  Qualifications  based  on  learning  outcomes  continue  to  be  developed  and 
scholarships are available for enrolment in deficit occupations. Enrolment from VET to higher 
education  remains  high.  The  2018-2019  action  plan  on  implementation  of  the  strategy  on 
vocational  education  development,  along  with  the  implementation  report  of  the  2016-2017 
action plan, was adopted in December 2017.  

Good participation in Erasmus+ continues. Results from the 2017 international credit mobility 
strand report the successful participation of Montenegro, including 275 out-goers to EU and 
166 in-comers to the country. The figures have been rising since the first call was published in 
2015,  with  an  overall  of  1  236  students  and  staff  benefiting  from  this  strand.  In  Capacity 
Building in Higher Education, the institutions from Montenegro have actively participated in 
12 projects over the last three calls, two of them as coordinating partners. 

On youth, a new Directorate now operates within the Ministry of Sport. A youth centre was 
inaugurated  in  Podgorica  in  February  2017,  which  also  serves  as  the  local  antenna  of  the 
Regional  Youth  Cooperation  Office  (RYCO).  The  youth  strategy  is  in  place,  as  well  as  the 
national  strategy  for  employment  and  human  resources  development.  Coordination  on 

78 

 
 
 
horizontal issues affecting youth employment, inclusion, active citizenship, volunteering, and 
education needs to be ensured.  More than 800 young participants benefited from one of the 
three Youth mobility actions since 2014 (mobility of youth workers, youth exchanges and the 
European Voluntary Service). 

On culture, international cooperation was enhanced. The 2017 programme for protection and 
preservation  of  cultural  assets  was  adopted  in  December  2016,  while  the  2017-2018  action 
plan  to  implement  the  programme  for  cultural  development  was  adopted  in  February  2017. 
Montenegro continues implementation measures on the UNESCO Convention; due attention 
should  be  paid  to  preserving  Kotor's  UNESCO  World  Heritage  status.  Participation  in  the 
Creative Europe programme could be improved, with only 4 submitted applications in the last 
4  calls  without  any  selected  project  so  far.  The  Ministry  of  Culture  established  a  Creative 
Europe Desk as the implementing body for the Culture and MEDIA sub-programmes.  

5.27.   Chapter 27: Environment and climate change 
The  EU  promotes  strong  climate  action,  sustainable  development  and  protection  of  the 
environment. EU law contains provisions addressing climate change, water and air quality, 
waste  management,  nature  protection,  industrial  pollution,  chemicals,  noise  and  civil 
protection. 

Montenegro has some level of preparation in this area. Some progress was made in further 
aligning legislation with the acquis. Significant efforts are still needed on implementation and 
enforcement, in particular on water quality, nature protection, and waste management.  

In the coming year, Montenegro should in particular; 

→  accelerate  implementation  of  the  national  strategy  for  transposing,  implementing  and 
enforcing of the EU acquis on environment and climate change, especially in the waste and 
water sectors; 

→  take  measures  to  preserve  and  improve  the  ecological  value  of  protected  areas  and 
potential Natura 2000 sites such as Ulcinj Salina, Lake Skadar and river courses; 

→  start  implementing  the  Paris  Agreement,  by  implementing  the  national  strategy  and 
legislation on climate change, as well as related energy and transport policies; 

Environment 

On horizontal legislation, further implementation of the national strategy and its action plan 
is  needed.  The  lack  of  administrative  capacity  and  financial  resources  at  national  and  local 
level  is  delaying  the  implementation  of  the  strategy.  Cooperation  with  civil  society  has 
improved,  but  further  efforts  are  needed  to  achieve  effective  public  participation  and 
consultation in decision-making. The level of legislative alignment on environmental impact 
assessment  (EIA)  and  strategic  environmental  assessments  is  at  an  advanced  stage.  Better 
coordination  is  needed  with  the  'appropriate  assessment'  procedure  under  the  Habitats 
Directive. Implementation of EIA and public consultations need to improve, especially at the 
local  level.  The  implementation  of  the  Environmental  Crime  and  Environmental  Liability 
Directives  is at an early stage due to insufficient inspection and prosecution  capacities. The 
law  on  infrastructure  for  spatial  information  was  adopted  in  June  2017.  The  former 
Environmental  Protection  Agency  was 
the  Ministry  of  Sustainable 
Development  and  Tourism  as  Nature  and  Environmental  Protection  Agency  (NEPA). 
Montenegro needs to ensure that the agency functions independently. 

integrated 

into 

79 

 
 
 
On air quality, the level of legislative alignment shows a good level of preparation. An action 
plan  to  implement  the  national  strategy  on  air  quality  management  for  2017-2020  was 
adopted, along with a report on its implementation between 2013 and 2016. On ambient air 
quality and cleaner air for Europe, a short term action plan to tackle air pollution in Pljevlja 
was  adopted.  However,  implementation  of  the  adopted  action  plans  and  the  prescribed 
measures  remains  a  challenge.  Alignment  with  the  EU  requirements  on  sulphur  content  in 
liquid fuels further progressed. Work on further improving its monitoring system is ongoing. 

On  waste  management,  Montenegro  is  partially  aligned  with  the  acquis.  No  progress  has 
been  made  in  this  area in the reporting period.  The  national strategy for waste management 
until  2030  and  the  national  waste  management  plan  2015-2020  are  in  place.  Considerable 
efforts  are  needed  to  implement  them  and  Montenegro  needs  to  decide  on  its  basic  waste 
management model. Affected municipalities need to remedy illegal waste disposal and the use 
of temporary waste disposal sites. Urgent action is needed to set up infrastructure for separate 
waste  collection  and  recycling  and  to  provide  adequate  financial  and  human  resources, 
including for inspection activities. 

Alignment  in  the  area  of  water  quality  remains  limited.  The  national  strategy  for  water 
management until 2035 was adopted. The law on urban wastewater management was adopted 
in December 2016. The division of responsibilities in water quality between the Ministry of 
Sustainable  Development  and  Tourism  and  the  Ministry  of  Agriculture  and  Rural 
Development  is  operational.  Work  on  river  basin  management  plans  is  ongoing,  but  the 
competent management authorities are yet to be operational. A monitoring system for water 
status still needs to be established. Quality monitoring of surface and ground waters needs to 
be significantly improved. Wastewater has been identified as a main source of pollution. The 
decision  to  designate  sensitive  water  areas  in  the  Danube  and  Adriatic  basins  was  adopted. 
The  development  of  a  floods  hazard  map  and  flood  risk  map  has  not  yet  started.  The 
implementation of the Marine Strategy Framework Directive is at an early stage. 

On nature protection, Montenegro is partially aligned with the  acquis. Montenegro further 
aligned  with  the  Habitats  Directive  and  streamlined  the  institutional  framework  for 
designating future  Natura 2000 sites, but  still needs to  strengthen administrative capacity  to 
manage  Natura  2000  in  the  future.  Resolute  and  urgent  action  is  needed  to  protect  the 
potential  Natura  2000  site  Ulcinj  Salina,  including  its  full  bird  protection  value.  Potential 
investments in hydropower and touristic developments need to comply with nature protection 
requirements. Work for the identification and designation of marine protected areas needs to 
start.  Enforcement  and  inspection  capacity  needs  to  be  further  strengthened,  particularly 
through skills development. 

On  industrial  pollution  and  risk  management,  Montenegro  is  partially  aligned  with  the 
acquis.  Five  integrated  permits  have  been  issued  so  far.  In  October  2017,  the  Agency  for 
nature protection refused the aluminium plant’s request for issuing an integrated permit. Work 
has started for the rehabilitation and remediation of four ecological hot-spots.  

On chemicals, Montenegro is partially aligned with the acquis. A new law on chemicals was 
adopted  to  further  align  with  REACH  and  CLP  regulations.  Montenegro  adopted  the  law 
ratifying the amendments to the Stockholm Convention on long-lasting organic pollutants, but 
full  implementation  of  the  Rotterdam  and  Stockholm  Conventions  is  still  pending.  No 
national help desk has been established as a first point of contact for questions related to the 
CLP and  REACH  regulations  and  no  centre  for  the  control  of  chemical  poisoning. 

80 

 
 
 
Montenegro needs to strengthen its professional and technical capacity on chemicals. For this 
the Nature and Environmental Protection Agency (NEPA) collaborates with ECHA. 

On  noise,  Montenegro  has  fully  aligned  with  the  Noise  Directive  and  works  on  the 
preparation of strategic noise maps. 

On civil protection, Montenegro has been a member of the EU Civil Protection Mechanism 
since April 2015. It still needs to connect with the EU Civil Protection Mechanism Common 
Emergency  Communication  and  Information  System.  The  national  strategy  for  emergency 
situation  has  been  in  place  since  2006.  The  strategy  for  disaster  risk  reduction  and 
corresponding action plan 2018-2023 was adopted.  

Climate change 

The  level  of  alignment  is  limited.  Montenegro  has  its  climate  change  strategy  in  place  but 
needs to ensure consistency with the EU 2030 climate and energy policy framework and also 
its integration into all relevant sectoral policies and strategies.  

the  Paris  Agreement.  Subsequently, 

As  for  the  UN  Framework  Convention  on  Climate  Change  (UNFCCC),  Montenegro  has 
ratified 
the  National  Council  for  Sustainable 
Development  and  Climate  Change  established  a  multi  sectoral  working  group  whose  main 
task will  be to  monitor  the implementation of the Paris Agreement. So  far, it has  submitted 
two national communications, and is working on the second bi-annual report. 

Montenegro needs to draft its climate change law, which will, among other things, incorporate 
aspects  of  the  EU  emissions  trading  system  (ETS),  the  Effort  Sharing  Regulation  and  the 
monitoring and reporting mechanism (MMR). Montenegro drafted guidelines to establish the 
ETS in the next three years. Secondary legislation on fuel economy, emissions from new cars 
and  a  greenhouse  gases  inventory  was  adopted,  providing  for  partial  alignment  with  the 
acquis. Further efforts are required to align with the climate acquis. Administrative capacity 
remains  weak  and  poorly  equipped  to  deal  with  the  emerging  challenges.  The  planned  Eco 
Fund should also provide funding for low emissions projects. 

 Chapter 28: Consumer and health protection  

5.28. 
EU rules protect consumers in relation to product safety, dangerous imitations and liability 
for  defective  products.  The  EU  also  ensures  high  common  standards  for  tobacco  control, 
blood, tissues, cells and organs, patients’ rights and communicable diseases. 

Montenegro is moderately prepared on consumer and health protection. Some progress can 
be  reported  in  the  field  of  consumer  protection  in  relation  to  regulatory  alignment,  partly 
addressing  the  recommendation  made  in  the  2016  report.  However  progress  on  health 
protection  with  regard  to  the  previous  recommendations  in  this  area  and  on  consumer 
awareness has been limited. 

In the coming year; Montenegro should in particular: 

→ complete the alignment of national legislation with the EU consumer protection acquis and 
ensure the necessary implementation capacity; 

→ ensure further alignment with EU health protection acquis, notably with regard to tobacco 
control and patients’ rights in cross-border healthcare;  

→ adopt and start implementing the foreseen Action Plans on communicable diseases and on 
substances of human origin. 

81 

 
 
 
National legislation is partly aligned to the EU acquis on consumer protection. On product 
safety-related issues, further amendments to the law on general product safety in early 2018 
were made to align it with the EU acquis. However, the law on consumer protection requires 
further  amendments  to  ensure  full  alignment  with  the  EU  acquis.  Administrative  and 
enforcement  capacity  needs  improving  to  ensure  correct  implementation  of  all  applicable 
laws.  In  September  2017,  a  2017-2018  action  plan  for  the  national  consumer  protection 
programme  was  adopted.  Greater  public  awareness  of  the  banking  ombudsman  and  the 
possibility to seek out-of-court settlements continue to be needed, as is additional support for 
civil society organisations. 

Though  market  surveillance  capacities  need  to  be  further  enhanced  (see  Chapter  1),  the 
number of inspections (safety and non-safety related) performed increased to 22 930, 5 550 
irregularities and 210 types of hazardous products were found (total quantity of 15 042 items). 
Of these, 105 products (3 193 items) were permanently taken off the market, 63 products (707 
items)  were returned to the supplier/distributor, and 16 types  of product  (2  375 items)  were 
destroyed. On non-safety related issues, more work is needed on raising consumer awareness 
and improving access to information on consumers’ rights. 

Regarding  public  health,  national  legislation  on  healthcare  is  partly  aligned  with  the  EU 
acquis. A law on health inspection was adopted in April 2017, designed to be aligned to EU 
acquis. Average life expectancy rose slightly from 76.1 to 76.6 between 2010 and 2016. The 
2015-2020  master  plan  for  health  development  is  ongoing,  its  objective  is  to  provide 
accessible and comprehensive health care. Although the country’s final health budget in 2016 
was  5.8 %  of  GDP,  the  lack  of  fiscal  sustainability  continued  to  impact  negatively  on  the 
work  of  public  health  bodies,  programmes  and  actions.  The  over-prescription  of  medicines 
continues, and the prescription of antibiotics needs to be strictly controlled to strengthen the 
fight against anti-microbial resistance. In regard to the health information system, the Law 
on Data Collection in the Field of Health establihes the parameters of health data protection. 
The  Health  Insurance  Fund  has  developed  an  Integrated  Information  System  (IIZS)  which 
covers all health providors.  

Regarding tobacco control, national legislation is partly aligned to EU acquis in this area and 
the  smoking  ban  in  public  places  is  not  implemented.  Montenegro  signed  the  WHO 
Framework Convention on Tobacco Control (FCTC) in 2006; it ratified the FCTC Protocol to 
Eliminate Illicit Trade in Tobacco Products in October 2017. 

On  blood,  tissues,  cells  and  organs,  Montenegro  is  partly  aligned  to  the  EU  acquis.  
Legislation  was  adopted  in  2016  designed  to  ensure  further  alignment  on  the  transport, 
tractability, and the system of organs for transplants. However, the planned action plan on the 
field of substances of human origin needs to be finalised, adopted and implemented. 

In  the  field  of  serious  cross-border  health  threats  including  communicable  diseases, 
alignment to EU acquis in the field of  communicable diseases needs to be completed.  The 
2016  programme  for  mandatory  immunisation  against  certain  communicable  diseases  is 
ongoing. In early 2018, Montenegro adopted its action plan on communicable diseases 2017- 
2022, and nominated a contact to participate in the Health Security Meetings (serious cross-
border health threats). However, it needs to do more to ensure funding regarding HIV/AIDS. 

Regarding  patients’  rights  in  cross-border  healthcare,  the  Health  Insurance  Act,  which 
provides that an insured person has the right to use healthcare in EU Member States and third 
countries at the expense of compulsory health insurance, is partly aligned with the EU acquis. 

82 

 
 
 
The  Institute  for  Public  Health  is  responsible  for  eHealth  issues.  As  concerns  rare  diseases 
national registries are partly established and a National Strategy for Rare Diseases 2013-2020 
is  being  implemented,  covering  diagnosis,  registration,  treatment,  awareness  raising,  and 
improved coordination. 

Health promotion regarding non-communicable diseases remains weak, though a minimum 
set of indicators has been established for chronic non-communicable diseases to be monitored 
through  the  Regional  Centre  for  Chronic  Non-communicable  Diseases.  A  2017-2018  action 
plan  for  rare  diseases  was  adopted  in  December  2016.  With  regard  to  national  cancer 
screening programmes are being implemented on colon cancer, cervical cancer and on early 
detection  and  treatment  of  breast  cancer.  However,  more  needs  to  be  done  to  ensure  that 
children can be screened and/or treated while their rights are respected and cancer registries 
need to be established. 

A  2017-2018  action  plan  to  implement  the  strategy  for  improvement  of  mental  health  was 
adopted in December 2016. National data is not available regarding the proportion of mental 
health care ensured by institutions compared to community-based care.  

No data is available in regard to nutrition and physical activity. Further efforts need to be 
made  in  the  field  of  alcohol  and  alcohol-induced  disorder.  WHO  reports indicate  that  the 
ban on alcohol product sales to minors is not being implemented; in September 2017 a 2017-
2018 action plan was adopted in this regard.   

On  drug  abuse  prevention  and  harm  reduction,  a  2017-2018  action  plan  for  the 
implementation  of  the  strategy  to  prevent  drug  abuse  was  adopted  in  February  2017.  The 
involvement of civil society in the National Council for the Prevention of Drug Abuse and in 
the National Commission on Drugs needs to be further enhanced and encouraged, as there is 
only one representative of civil society in both of these bodies. 

On  health  inequalities,  access  to  healthcare  services  needs  to  be  improved  for  people  with 
disabilities, people living with HIV, children and adults who use drugs, prisoners, women in 
prostitution, LGBTI people, internally displaced persons and Roma.  

5.29.   Chapter 29: Customs union 
All Member States are part of the EU customs union and follow the same customs rules and 
procedures.  This  requires  legislative  alignment,  adequate  implementing  and  enforcement 
capacity, and access to the common computerised customs systems.  

Montenegro is  moderately prepared for customs union and made  some progress during 
the reporting period.  

In the coming year; Montenegro should in particular:  

 advance preparations for accession to the Convention on a common transit procedure, in 
particular by establishing an EU-compatible computerised transit system;  

 implement capacity building and trade facilitation measures. 

On  customs  legislation,  the  degree  of  alignment  is  high.  Amendments  to  the  customs  code 
were adopted in October 2017 to prepare for accession to the Convention on a common transit 
procedure  and  the  Convention  on  the  facilitation  of  trade  in  goods,  in  line  with  the  2016 
recommendation.  These  amendments  also  include  the  criteria  for  authorised  economic 
operators and the abolition of the‘negative list’ for the acquisition of non-preferential origin. 
The Regional Convention on Pan-Euro-Mediterranean preferential rules of origin is applied in 

83 

 
 
 
 
Montenegro, including diagonal cumulation of origin. The Decree on the customs treatment 
of  goods  with  reasonable  suspicion  of  infringing  intellectual  property  rights,  aligning  with 
applicable EU rules, is in force since January 2017. In October 2017, Montenegro ratified the 
FCTC  Protocol  to  Eliminate  Illicit  Trade  in  Tobacco  Products.  Montenegro  also  adopted 
amendments  to  the  law  on  customs  service  to  strengthen  operational  rules  for  monitoring, 
intercepting  and  examining  vehicles,  passengers  and  baggage.  In  December  2017, 
Montenegro adopted a decree on the customs tariffs.  

Further  harmonisation  is  needed  on  transit,  drug  precursors,  security  aspects,  and  on  export 
control  for  cultural  goods.  Montenegrin  customs  rules  also  include  a  number  of  customs 
exemptions  that  are  not  included  in  the  Union  Customs  Code.  Moreover,  customs  inland 
terminals  are  located  in  privately  owned  facilities  charging  a  fee  to  every  lorry  required  to 
enter the terminal to discharge customs obligations. Such fees are not in line with the acquis.  

 On  administrative  and  operational  capacity,  in  October  2017,  the  government  adopted  a 
new  rulebook  on  internal  organisation  and  systematisation  for  the  customs  administration, 
with  a  view  to  establishing,  inter  alia,  a  group  for  transit  and  a  new  computerised  transit 
system,  a  customer  helpdesk,  and  to  strengthening  post-clearance  and  internal  audit  control 
units. The customs administration implements the business strategy 2016-2018 and a customs 
IT strategy, but staffing of the IT department remains an issue. The customs administration’s 
training  strategy  2016-2018  is  based  on  the  EU  competences  framework.  Customs  integrity 
plans are being implemented and preparations for the accreditation of the customs laboratory 
are ongoing. 

Montenegro  is  encouraged  to  promote  a  more  service-oriented  organisational  culture  in  its 
customs  services  and  to  strengthen  efforts  to  expand  the  use  of  its  trade  facilitation 
instruments.  First  authorisations  for  simplified  procedures  were  granted  to  economic 
operators.  The  customs  administration  is  a  member  of  the  coordination  team  for  the 
implementation  of  intellectual  property  rights.  The  customs  administration  faces  significant 
challenges in controlling the illicit tobacco trade, in particular the transit through the Port of 
Bar  free  zone,  and  should  continue  to  develop  its  international  cooperation  in  this  regard. 
Revenue collection in 2017 shows an 18 % increase compared to 2016.  

5.30.   Chapter 30: External relations 
The  EU  has  a  common  trade  and  commercial  policy  towards  third  countries,  based  on 
multilateral and bilateral agreements and autonomous measures. There are also EU rules in 
the field of humanitarian aid and development policy. 

Montenegro  has  reached  a  good  level  of  preparation.  Some  progress  was  made  on  the 
international  development  cooperation  and 
legislative  and 
humanitarian  aid.  The  legislative  basis  has  been  set  for  issuance  and  financing  of  export 
credits.  

institutional  setup  for 

In the coming year; Montenegro should in particular:  

→ adopt legislation, in line with the acquis, on export controls of dual-use goods;   

→  strengthen  the  administrative  capacity  of  the  Directorate  within  the  Ministry  of 
Economy  responsible  for  trade  with  the  EU,  CEFTA  and  work  within  the  WTO 
framework,  in  particular  in  view  of  a  smooth  implementation  of  the  Regional  Economic 
Area Multi-annual Action Plan; 

→  adopt  a  legislative  and  strategic  framework,  in  line  with  the  acquis,  on  development 

84 

 
 
 
policy and humanitarian aid; and develop a database of donor support. 

As  regards  the  common  commercial  policy,  Montenegro  continued  to  coordinate  its 
positions  and  align  its  policies  closely  with  those  of  the  EU,  including  within  the  WTO.   It 
ratified  the  WTO  Trade  Facilitation  Agreement  and  notified  its  list  of  commitments,  which 
now  need  to  be  carefully  reviewed  in  order  to  speed  up  implementation.  In  addition, 
Montenegro needs to submit the notifications required under Articles 1.4, 10.6.2 and 12.2.2 of 
the WTO Trade Facilitation Agreement. The first review of Montenegro's trade policies and 
practices by the WTO was initiated in March 2017 and will be ongoing in 2018.  

Montenegro aligned its national control  list  of  dual-use goods  with  the 2015  EU regime of 
exports, transfer, brokering and transit of dual-use items in October 2016. Further alignment 
with the acquis on export controls of dual-use goods remains to be completed. Administrative 
and control capacity should be further improved. Montenegro's application to the Wassenaar 
Arrangement is currently under examination.  

The law on foreign trade in certain goods which could be used for capital punishment, torture 
or other cruel, inhuman or degrading treatment or punishment was adopted in December 2017 
to  further  align  with  the  acquis  in  this  area.  Montenegro  also  has  legislation  aimed  at 
implementing the Kimberley Process certification procedure, including penalty provisions. 

Amendments  to  the  law  on  investment  and  development  fund  were  adopted  in  November 
2017, aimed at regulating the issuance and financing of export credits.  

Montenegro continued its active participation in the Central European Free Trade Agreement 
(CEFTA).  The  law  on  ratification  of  Additional  Protocol  5  on  trade  facilitation  within 
CEFTA was adopted in December 2017, and entered into force in January 2018. Under the 
optimisation plan (see the public administration reform section), Montenegro should ensure 
the necessary administrative capacity at the Ministry of Economy concerning trade with the 
EU, CEFTA, and work within the WTO framework. 

Montenegro  is  negotiating  bilateral  investment  agreements  with  San  Marino,  Croatia, 
Romania,  Bulgaria,  Portugal,  Norway,  Iran,  Algeria,  Thailand,  Kosovo,  Bosnia  and 
Herzegovina  and  Canada.  Montenegro  needs  to  ensure  the  compatibility  of  its  bilateral 
investment treaties with the EU acquis. 

On development policy and humanitarian aid, a department for development cooperation 
and humanitarian aid has been established within the Ministry of Foreign Affairs, as well as 
an inter-ministerial working group which includes representatives of the state administration, 
civil society and businesses community. A related legislative and strategic framework is under 
preparation.  Additional  funds  from  the  budget  will  be  needed  to  implement  the  law.  Initial 
steps have been taken to develop a database of donor support projects (received and provided) 
using the OECD Development Assistance Committee methodology. 

Montenegro  needs to  continue  its  preparations  in  this  chapter  in  accordance  with  its  overall 
Action Plan on external relations. 

 Chapter 31: Foreign, security and defence policy 

5.31. 
Member  States  must  be  able  to  conduct  political  dialogue  in  the  framework  of  the  foreign, 
security and defence policy, to  align with  EU  statements, to take part in  EU  actions and to 
apply agreed sanctions and restrictive measures. 

Montenegro has a good level of preparation. Some progress was made through the adoption 

85 

 
 
 
of  amendments  to  the  law  on  international  restrictive  measures.  Montenegro  continued  to 
participate in civil and military crisis management missions and to align with EU positions. 

The  regular  political  dialogue  between  the  EU  and  Montenegro  on  foreign  and  security 
policy  issues  continued.  Montenegro's  foreign  affairs  and  defence  ministries  have  sufficient 
structures in place to be able to participate in the common foreign and security policy and the 
common  security  and  defence  policy.  (For  more  information  on  developments  in  bilateral 
relations  with  other  enlargement  countries  and  EU  Member  States,  see  Political  criteria  — 
Regional issues and international obligations.) 

On  the  common  foreign  and  security  policy  (CFSP),  Montenegro  supported  the  Global 
Strategy  for  the  European  Union’s  Foreign  and  Security  Policy.  Montenegro  aligned,  when 
invited, with all relevant EU declarations and Council decisions (100 % alignment) during the 
reporting period. Amendments to the law on international restrictive measures were adopted 
in  June  2017,  introducing  a  system  of  automatism  to  the  procedure  of  freezing  assets  of 
persons  from  the  national  list  and  prescribing  the  setting  up  of  a  national  list  of  legal  and 
natural persons designated as terrorists (or their financiers), as well as the criteria on the basis 
of  which  legal  or  natural  persons  can  be  designated  as  terrorists.  As  a  Party  to  the  Rome 
Statute, Montenegro needs to align with the EU position on the integrity of the Rome Statute 
and  bilateral  immunity  agreements.  (For  more  information  on  developments  concerning  the 
International  Criminal  Court,  see  Political  criteria  —  Regional  issues  and  international 
obligations).  

Montenegro  continued  to  participate  in  some,  but  not  all,  international  export  control 
arrangements and instruments on non-proliferation. An action plan for the implementation of 
the 2016-2020 Strategy for non-proliferation of weapons of mass destruction was adopted in 
June,  and  a  national  coordination  body  responsible  for  monitoring  its  implementation  was 
formed in July.  

Montenegro  has  a  strategy  with  Action  Plan  (2013-2018)  for  the  control  and  reduction  of 
Small Arms and Light Weapons (SALW) and ammunition, and a related national registration 
system and database. Montenegro is also implementing a project on SALW demilitarisation 
and safe storage in conjunction with UNDP and OSCE.   
Regarding  cooperation  with  international  organisations,  Montenegro  became  the  29th 
NATO Member State on 5 June 2017.  

On  security  measures,  the  EU-Montenegro  security  agreement  on  the  exchange  and 
protection  of  classified  information  continued  to  be  implemented  smoothly.  Montenegro 
should continue to align with the EU security rules. 

Montenegro continued to actively participate in military crisis management missions under 
the  common  security and  defence  policy  (CSDP)  notably  EUTM  Mali  and  EU  NAVFOR 
Atalanta.  Montenegro  also  took  part  in  UN  operations,  notably  UNFICYP  and  MINURSO, 
and participated in the International Security Assistance Force (ISAF) mission in Afghanistan. 
Since the expiration of ISAF’s mandate in 2014, officers deployed by Montenegro continued 
to serve in the NATO-led Resolute Support mission. A proposal for Montenegro to contribute 
to KFOR forces in Kosovo has also been launched. 

5.32.   Chapter 32: Financial control 
The  EU  promotes  the  reform  of  national  governance  systems  to  enhance  managerial 
accountability  and  sound  financial  management  of  income  and  expenditure  as  well  as 

86 

 
 
 
external audit of public funds. The financial control rules further protect the EU’s  financial 
interests against fraud in the management of EU funds and the euro against counterfeiting. 

Montenegro is moderately prepared on financial control. There was some progress overall, 
and good progress especially on internal  and external audit. Further efforts are necessary to 
increase awareness of the importance of managerial accountability and internal control and to 
strengthen implementation. The 2016 recommendations remain valid, especially with regard 
to managerial accountability.  

In the coming year, Montenegro should in particular:  

 →  ensure  a  government-level  agreement  on  the  definition  and  approach  to  managerial 
accountability,  including  how  it  applies  to  institutional  responsibilities,  resource  allocation, 
reporting  on  the  achievement  of  objectives,  and  financial  management,  and  start  its 
implementation throughout the public administration;  

  ensure  adoption  of  the  external  audit  methodology  that  fully  complies  with  the 
International Standards of Supreme Audit Institutions (ISSAIs); 

→ significantly strengthen the coordination capacity of the National Anti-fraud Coordination 
Service and establish a solid track record on investigations and reporting of irregularities. 

Public internal financial control 

The  strategic  framework  is  broadly  in  place.  Internal  control  and  elements  of  managerial 
accountability are addressed in the public administration reform strategy and public financial 
management  reform  programme,  but  Montenegro  still  needs  to  adopt  a  policy  paper,  which 
presents  a  clear  approach  to  managerial  accountability  and  how  it  should  apply  in  different 
parts of the administration. A mechanism for effective coordination, monitoring and reporting 
of the public administration, public financial management and PIFC (Public Internal Financial 
Control) reforms needs to be still put in place. 

Managerial accountability still needs to be fully embedded in the administrative culture of 
the public sector. While basic accountability mechanisms between ministries and subordinate 
bodies are in place, effective management of subordinate bodies is not fully ensured.  Basic 
mechanisms  for  planning,  budgeting  and  reporting  on  the  activities  of  central  government 
bodies are in place, but performance management has not progressed. Medium-term strategic 
planning is weak and not linked to the government work programme, though work has started 
to  improve  this.  Annual  plans  and  reports  often  remain  process-oriented,  and  not  linked  to 
specific and measurable objectives, indicators or targets. Financial variations from targets are 
often  not  reported.  Decision-making  and  budgetary  powers  within  institutions  are  rarely 
delegated (see Public Administration Reform). 

Public sector internal control implementation is regulated in line with the standards of the 
Committee  of  Sponsoring  Organisations  (COSO)  and  the  guidelines  of  the  International 
Organisation of Supreme Audit Institutions (INTOSAI). Irregularity management needs to be 
regulated.  Implementation  of  internal  control  is  uneven,  though  more  institutions  have 
adopted annual financial management and control action plans. Risk management procedures 
are  improving  but  they  are  still  not  fully  incorporated  in  the  governance  processes.  The 
centralised budget inspection function is still not adequately staffed or fully operational. 

Internal audit practice is regulated in line with the international standards and is organised 
on a decentralised basis. Most public-sector entities have established internal audit functions, 

87 

 
 
 
though  few  meet  national  legal  requirements.  The  availability  of  qualified  auditors  has 
substantially  increased  thanks  to  the  provision  of  training  programmes  compliant  with 
international  audit  standards.  Internal  audit  units  perform  mainly  system,  financial  and 
compliance  audits,  and  capacity  for  IT  and  performance  audit  work  is  improving.  Most 
internal  audit  units  have  adopted  strategic  and  annual  internal  audit  plans.  The  number  of 
recommendations and their rate of implementation are increasing. 

The  Central  Harmonisation  Unit  in  the  Ministry  of  Finance  is  responsible  for 
methodological  guidance,  training  and  monitoring  of  implementation.  It  performs  quality 
assessments at both central and local levels. It reports annually on PIFC implementation to the 
government, which then adopts conclusions and recommendations for the next period. 

External audit 

Montenegro’s constitutional and legal framework ensures independence of the State Audit 
Institution  (SAI)  in  line  with  INTOSAI  standards.  The  president  and  four  members  of  the 
senate, two of whom were appointed during the reporting period, have immunity by virtue of 
their  office.  The  law  provides  that  they  cannot  be  members  of  a  political  party  or  perform 
other professional activity. 

The SAI’s institutional capacity continues to be problematic. The SAI cannot fully cover its 
exhaustive audit mandate with the current staffing level. During the reporting period the SAI 
hired  6  new  audit  staff,  bringing  the  total  number  of  auditors  to  45  (out  of  the  total  of  65 
staff). The SAI has recently adopted its 2018-22 strategic development plan. 

To improve the quality of audit work, the SAI has approved a methodology for auditing the 
Final Statement of Accounts of the State Budget of Montenegro and a new performance audit 
manual. It also has adopted guidelines for audit quality control and assurance. However, it has 
not yet developed fully ISSAI compliant methodology to guide the work of auditors. The SAI 
works  according  to  annual  audit  plans  and  performs  activities  in  accordance  with  a 
professional code of ethics.  

On  the  impact  of  audit  work,  the  designated  parliamentary  committee  considers  the  draft 
budget along with information from the SAI and the Central Bank. All SAI audit reports are 
published.  The  SAI  reports  to  the  Parliament  on  its  audit  work  and  other  activities  in  its 
annual report. However, SAI rarely submits individual audit reports to parliament - only 5 out 
of 41 audit reports were submitted to it in 2016. Parliament only makes limited use of the SAI 
report,  but  it  requires  the  government  to  report  on  implementation  of  the  SAI’s 
recommendations regarding the Final Statement of Accounts. 

Protection of the EU’s financial interests 

Montenegro`s legislation is largely aligned with the acquis, though it needs to assess how its 
legislation  complies  with  the  new  EU  Directive  on  the  fight  against  fraud  to  the  Union's 
financial interests by means of a criminal law. The national anti-fraud coordination service 
(AFCOS)  implements  a  strategy  to  fight  fraud  and  manage  irregularities  since  2015.  The 
capacity  of  AFCOS  to  coordinate  13  institutions  in  the  AFCOS  network  is  improving  but 
needs  to  be  further  strengthened.  Montenegro  cooperates  with  the  European  Commission 
and is connected to the Irregularity Management System. However, so far no cases have been 
reported  through  the  system.  Montenegro  still  needs  to  establish  a  solid  track  record  on 
investigations and reporting on irregularities.  

88 

 
 
 
 
 
 
Protection of the euro against counterfeiting 

Montenegro  has  a  high  level  of  acquis  alignment,  and  it  has  ensured  ratification  of  the 
Geneva Convention for the suppression of counterfeiting currency. The Central Bank ensures 
the required administrative structures and capacity for technical analysis and classification of 
counterfeited euro notes and coins. It systematically provides training for the police and cash 
handlers.  The  Central  Bank  implements  cooperation  agreements  signed  with  the  European 
Commission  and  the  European  Central  Bank  and  actively  cooperate  with  a  number  of  EU 
Member  States'  central  banks.  Montenegro  takes  part  in  the  actions  of  the  Pericles  2020 
programme.  

 Chapter 33: Financial and budgetary provisions 

5.33. 
This  chapter  covers  the  rules  governing  the  funding  of  the  EU  budget  ("own  resources"). 
These resources mainly consist of i) contributions based on the gross national income of each 
Member  State;  ii)  customs  duties;   and  iii)  a  resource  based  on  value-added  tax.  Member 
States  must  have  the  appropriate  administrative  capacity  to  adequately  co-ordinate  and 
ensure the correct calculation, collection, payment and control of own resources.  

 Preparations in this area are at an early stage. There was some progress in strengthening the 
administrative  capacities  for  coordination  and  management  of  own  resources,  but  further 
efforts  are  needed  to  ensure  a  solid  institutional  set-up  and  strong  inter-institutional 
cooperation  among  all  the  institutions  and  bodies  involved  in  the  application  of  the  own 
resources system.  

In the coming year, Montenegro should in particular: 

→  advance  the  alignment  of  the  legal  framework  and  rules  of  administration  for  the  own 
resources system; and respect commitments made in the framework of the technical assistance 
and own resources monitoring program;   

→ ensure the updating and implementation of the own resources system action plan;    

→  further  strengthen  the  capacities  of  the  Directorate  for  Coordination  and  Management  of 
Own Resources of the EU and of all institutions involved in the own resources system. 

Montenegro’s  legal  framework  for  the  own  resources  system  is  partly  aligned  with  the  EU 
acquis.  

As  regards  traditional  own  resources,  Montenegro's  collection,  accounting  and  control 
procedures to clearly and accurately establish and account for the customs debt are only partly 
aligned  with  the  EU  acquis.  No  separate  accounts  are  in  place  for  outstanding  debts  or  for 
guaranteed but contested debts. The implementation of the own resources system action plan 
is  behind  schedule  and  the  requested  revised  action  plan  has  not  yet  been  delivered.    On 
value-added tax-based resource, the law on VAT is aligned with the EU acquis.  Software 
is in place to facilitate the entry and processing of returns, mathematical and logical controls 
as  well  as  the  productions  of  various  reports  and  statistical  surveys.  However,  substantial 
efforts  are  needed  to  calculate  the  statistical  VAT  base,  the  weighted  average  rate  and 
compensations  to  the  VAT  base  to  ensure  a  harmonised  base  with  the  EU.  On  the  gross 
national income-based resource, the Statistical Office regularly produces and publishes data 
on the GNI, in accordance with the ESA 2010 methodology and in line with the EU acquis. 
The  balance  of  payments  is  compiled  in  accordance  with  the  new  methodology  of  the 
International  Monetary  Fund  and  EU  acquis.  The  estimate  of  the  non-observed  economy  is 
partially included in the GDP calculation.  

89 

 
 
 
As regards  administrative infrastructure, a Directorate for Coordination and Management 
of Own Resources of the EU has been established within the Ministry of Finance to steer and 
streamline  own  resources  pre-accession  preparations.  Its  administrative  capacities  were 
strengthened  through  recruitments  during  the  reporting  period.  However,  sufficient  staff 
should be allocated to accelerate the own resources administrative preparations. 

90 

 
 
 
 
 
 
ANNEX I - RELATIONS BETWEEN THE EU AND MONTENEGRO 

Within  the  framework  of  the  accession  negotiations,  by  February  2018,  30  chapters, 
including chapters 23 and 24 on the rule of law, had been opened, 3 of which, i.e. science and 
research, education and culture and external relations, have been provisionally closed. 

Montenegro  is  participating  in  the  Stabilisation  and  Association  Process.  Overall, 
Montenegro  continued  to  broadly  implement  its  obligations  under  the  Stabilisation  and 
Association Agreement (SAA).  

Regular  political  and  economic  dialogue  between  the  EU  and  Montenegro  has  continued 
through the SAA structures. The Stabilisation and Association Council met in June 2017 and 
the  Stabilisation  and  Association  Committee  in  December  2016  and  2017.  Regular 
subcommittee  meetings  have  been  held  throughout  the  period.  Two  meetings  of  the 
Stabilisation  and  Association  Parliamentary  Committee  were  held,  in  June  2017  and 
December 2017. 

Montenegro participates in ministerial dialogue between the economic and finance ministers 
of  the  EU  and  the  candidate  countries,  which  aims  at  helping  the  latter  gradually  meet  the 
economic  accession  criteria  and  be  better  prepared  in  terms  of  economic  reforms, 
competitiveness and job creation. The most recent meeting was held on 23 May 2017, where 
joint recommendations were adopted. 

Visa  liberalisation  for  citizens  of  Montenegro  travelling  to  the  Schengen  area  has  been  in 
force  since  December  2009.  As  part  of  the  monitoring  mechanism  in  place  since  visa 
liberalisation, the Commission has been regularly assessing the progress made by the country 
in implementing reforms introduced under the visa roadmap. The monitoring mechanism also 
includes  an  alert  mechanism  to  prevent  abuses,  coordinated  by  the  European  Border  and 
Coast  Guard  Agency.  The  Commission  has  regularly  submitted  its  post-visa  liberalisation 
monitoring  reports  to  the  European  Parliament  and  the  Council.  A  readmission  agreement 
between the European Union and Montenegro has been in force since 2008. 

EU  financial  assistance  to  Montenegro  under  the  Instrument  for  Pre-accession  Assistance 
(IPA) for the period 2007-2013, with a total allocation to Montenegro of EUR 235.7 million is 
now largely completed. The implementation of the IPA Components I and II was managed by 
the EU Delegation in Podgorica, while management for components III and IV was conferred 
to Montenegro.  

Montenegro  is  currently  benefitting  from  pre-accession  assistance  with  an  indicative 
allocation of EUR 270.5 million for the period 2014-2020, out of which more than EUR 152 
million has been already programmed in the period 2014-2017 based on the priorities set out 
in the Indicative Strategy Paper. The 2017 action programme provided EUR 33.85 million for 
reforms in the area of public administration reform and transport addressing key requirements 
of the accession negotiations. 

Montenegro  continues  to  benefit  from  support  under  the  IPA  multi-country  and  regional 
programmes.  It  continues  to  participate  in  four  cross-border  cooperation  programmes  with 
neighbouring  Western  Balkan  countries  and  in  transnational  cooperation  programmes  with 
Member  States  under  the  European  Regional  Development  Fund  and  the  IPA  Adriatic 
cross-border programme. 

Montenegro  continues  to  benefit  from  participation  in  the  following  EU  programmes,  with 
IPA  support:    Erasmus+,  Creative  Europe  (Culture  and  Media  strands),  Employment  and 

91 

 
 
 
Social  Innovation,  Horizon  2020,  Customs  2020,  Fiscalis  2020,  Competitiveness  of 
Enterprises and Small and Medium-Sized Enterprises Programme (COSME). 

92 

 
 
 
Annex II – Statistical annex 

STATISTICAL DATA (as of 16.02.2018) 

Montenegro 

Basic data 

Population (thousand) 

Note 

2005 

613 

2012 

620 

2013 

621 

2014 

622 

2015 

622 

2016 

622 

Total area of the country (km²) 

13 812 

13 812 

13 812 

13 812 

13 812 

13 812 

National accounts 

Gross domestic product (GDP) (million 
euro) 

Note 

2005 

: 

2012 

3 182 

2013 

3 363 

2014 

3 458 

2015 

3 655 

2016 

3 954 

GDP (euro per capita) 

2 912 

5 126 

5 413 

5 563 

5 827 

6 355 

7 000 

10 500 

10 900 

11 300 

12 200 

13 000 

GDP per capita (in purchasing power 
standards (PPS)) 

GDP per capita (in PPS), relative to the EU 
average (EU-28 = 100) 

Real GDP growth rate: change on previous 
year of GDP volume (%) 

Employment growth (national accounts 
data), relative to the previous year (%) 

Labour productivity growth: growth in GDP 
(in volume) per person employed, relative to 
the previous year (%) 

Unit labour cost growth, relative to the 
previous year (%) 

**3 year change (T/T-3) in the nominal unit 
labour cost growth index (2010 = 100) 

Labour productivity per person employed: 
GDP (in PPS) per person employed relative 
to EU average (EU-28 = 100) 

Gross value added by main sectors 

Agriculture, forestry 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 
(%) 

30 

39 

41 

3.5 

41 

1.8 

42 

3.4 

45 

2.9 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

-2.7 

: 

: 

: 

: 

: 

8.9 

12.2 

5.5 

73.4 

9.8 

14.3 

4.5 

71.4 

103.8 

100.5 

10.0 

13.5 

4.2 

72.3 

99.6 

9.7 

12.8 

4.5 

73.0 

98.4 

9.0 

12.3 

6.8 

71.9 

96.4 

19.8 

20.2 

19.0 

20.1 

23.2 

0.8 

-0.6 

1.2 

-0.1 

2.9 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

93 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exports of goods and services, relative to 
GDP (%) 

Imports of goods and services, relative to 
GDP (%) 

Gross fixed capital formation by the general 
government sector, as a percentage of GDP 
(%) 

Business 

Industrial production volume index (2010 = 
100) 

Number of active enterprises (number) 

Birth rate: number of enterprise births in the 
reference period (t) divided by the number of 
enterprises active in t (%) 

Death rate: number of enterprise deaths in 
the reference period (t) divided by the 
number of enterprises active in t (%) 

People employed in SMEs as a share of all 
persons employed (within the non-financial 
business economy) (%) 

Value added by SMEs (in the non-financial 
business economy) (EUR million) 

Total value added (in the non-financial 
business economy) (EUR million) 

: 

: 

: 

43.7 

41.3 

40.1 

42.1 

40.5 

68.1 

61.4 

60.0 

60.6 

62.9 

: 

: 

: 

: 

: 

Note 

2005 

126.9 

2012 

83.5 

2013 

92.3 

2014 

81.8 

2015 

88.3 

2016 

84.4 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

11.8 

16.2 

14.5 

14.9 

13.1 

4.6 

4.3 

9.1 

7.6 

6.1 

: 

: 

: 

: 

: 

764 

811 

869 

912 

1 071 

1 133 

1 271 

1 308 

1 336 

1 530 

Inflation rate and house prices 

Note 

2005 

2012 

Harmonised consumer price index (HICP), 
change relative to the previous year (%) 

1) 

3.4 

4.0 

2013 

1.8 

2014 

-0.5 

2015 

1.4 

2016 

0.1 

**Annual change in the deflated house price 
index (2010 = 100) 

: 

: 

: 

: 

: 

: 

Balance of payments 

Note 

2005 

2012 

-588 

2013 

-487 

2014 

-526 

2015 

-483 

2016 

-715 

-302 

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 
balance for primary income (million euro) 

Balance of payments current account: net 
balance for secondary income (million euro) 

2) 

2) 

2) 

2) 

2) 

94 

-642 

-1 384 

-1 329 

-1 376 

-1 464 

-1 657 

173 

613 

653 

690 

789 

769 

20 

54 

66 

46 

147 

130 

123 

114 

93 

99 

53 

120 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net balance for primary and secondary 
income: of which government transfers 
(million euro) 

**3 year backward moving average of the 
current account balance relative to GDP (%) 

**Five year change in share of world exports 
of goods and services (%) 

Net balance (inward - outward) of foreign 
direct investment (FDI) (million euro) 

Foreign direct investment (FDI) abroad 
(million euro) 

of which FDI of the reporting economy in 
the EU-28 countries (million euro) 

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

of which FDI of the EU-28 countries in the 
reporting economy (million euro) 

**Net international investment position, 
relative to GDP (%) 

Year on year rate of change in gross inflow 
of remittances (in national currency) from 
migrant workers (%) 

Public finance 

***General government deficit / surplus, 
relative to GDP (%) 

***General government gross debt relative 
to GDP (%) 

Total  government revenues, as a percentage 
of GDP (%) 

Total government expenditure, as a 
percentage of GDP (%) 

2) 3) 

6 

18 

22 

24 

4 

24 

: 

: 

-19.6 

-16.8 

-16.0 

-14.3 

-15.5 

: 

: 

: 

: 

: 

2) 

2) 

2) 

2) 

2) 

399.0 

461.6 

323.9 

353.9 

619.3 

371.6 

3.6 

20.8 

13.0 

20.7 

11.1 

-167.0 

3.3 

20.6 

11.1 

14.9 

8.8 

-1.8 

402.6 

482.4 

336.9 

374.6 

630.3 

204.5 

337.7 

219.7 

79.8 

117.4 

411.8 

-34.4 

: 

: 

: 

: 

: 

: 

: 

12.2 

8.4 

1.9 

0.0 

-7.4 

Note 

2005 

-1.6u 

2012 

-5.7 

2013 

-5.2 

2014 

-3.1 

2015 

-7.4 

2016 

-2.8 

38.6 

53.4 

57.5 

59.9 

66.2 

64.4 

39.9 

40.7 

42.6 

44.8 

41.7 

42.6 

41.5 

45.0 

47.2 

47.7 

50.0 

46.2 

Financial indicators 

Note 

2005 

2012 

2013 

2014 

2015 

2016 

Gross external debt of the whole economy, 
relative to GDP (%) 

Gross external 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) 

4) 

5) 

6) 

: 

: 

351 

615 

867 

95 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total credit by monetary financial 
institutions to residents (consolidated) 
(million euro) 

**Annual change in financial sector 
liabilities (%) 

**Private credit flow, consolidated, relative 
to GDP (%) 

**Private debt, consolidated, relative to GDP 
(%) 

Interest rates: day-to-day money rate, per 
annum (%) 

Lending interest rate (one year), per annum 
(%) 

Deposit interest rate (one year), per annum 
(%) 

8) 

8) 

Euro exchange rates: average of period (1 
euro = … national currency) 

Trade-weighted effective exchange rate 
index, 42 countries (2005 = 100) 

**3 year change (T/T-3) in the trade-
weighted effective exchange rate index, 42 
countries (2005 = 100) 

Value of reserve assets (including gold) 
(million euro) 

7) 

374 

1 842 

1 985 

1 929 

1 956 

2 075 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

12.11 

9.47 

9.36 

9.22 

8.53 

7.45 

: 

1 

: 

: 

3.23 

2.54 

1.86 

1.23 

0.93 

1 

: 

: 

1 

: 

: 

1 

: 

: 

1 

: 

: 

1 

: 

: 

173 

348 

424 

545 

674 

803 

External trade in goods 

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 * 100) (number) 

Share of exports to EU-28 countries in value 
of total exports (%) 

Share of imports from EU-28 countries in 
value of total imports (%) 

Demography 

Crude rate of natural change of population 
(natural growth rate): number of births minus 
deaths (per thousand inhabitants) 

Note 

2005 

874 

2012 

1 821 

2013 

1 773 

2014 

1 784 

2015 

1 842 

2016 

2 062 

406 

367 

376 

333 

317 

326 

-468 

-1 454 

-1 398 

-1 451 

-1 524 

-1 736 

9) 

: 

96 

102 

101 

101 

98 

62.3 

51.5 

41.5 

35.7 

35.6 

37.4 

53.8 

44.5 

44.2 

45.8 

41.3 

48.2 

Note 

2005 

2.5 

2012 

2.5b 

2013 

2.5 

2014 

2.4 

2015 

1.7 

2016 

1.8 

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Infant mortality rate deaths of children under 
one year of age (per thousand live births) 

8.4 

4.4 

4.4 

4.9 

2.2 

Life expectancy at birth: male (years) 

Life expectancy at birth: female (years) 

71.3 

76.8 

74.2 

78.3 

74.1 

79.0 

74.1 

78.9 

74.4 

78.6 

: 

: 

: 

Labour market 

2005 

2012 

2013 

2014 

2015 

2016 

Not
e 

Economic activity rate for persons aged 20–
64: proportion of the population aged 20–64 
that is economically active (%) 

*Employment rate for persons aged 20–64: 
proportion of the population aged 20–64 that 
are in employment (%) 

Male employment rate for persons aged 20–64 
(%) 

Female employment rate for persons aged 20–
64 (%) 

Employment rate for persons aged 55–64: 
proportion of the population aged 55–64 that 
are in employment (%) 

Employment by main sectors 

Agriculture, forestry and fisheries (%) 

Industry (%) 

Construction (%) 

Services (%) 

People employed in the public sector as a 
share of total employment, persons aged 20–
64 (%) 

People employed in the private sector as a 
share of total employment, persons aged 20–
64 (%) 

Unemployment rate: proportion of the labour 
force that is unemployed (%) 

10) 

11) 

Male unemployment rate (%) 

Female unemployment rate (%) 

Youth unemployment rate: proportion of the 
labour force aged 15–24 that is unemployed 
(%) 

Long-term unemployment rate: proportion of 
the labour force that has been unemployed for 
12 months or more (%) 

Unemployment rate for persons (aged 25–64) 
having completed at most lower secondary 
education (ISCED levels 0-2) (%) 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

64.8 

65.1 

67.6 

68.5 

69.1 

50.9 

52.6 

55.6 

56.7 

57.1 

56.8 

57.8 

61.4 

61.9 

51.3 

45.0 

47.5 

49.4 

51.5 

63.0 

37.6 

38.7 

38.7 

40.0 

41.2 

5.7 

11.7 

5.7 

76.9 

34.7 

4.5 

11.9 

5.9 

77.7 

36.0 

5.7 

11.1 

6.5 

76.8 

32.8 

7.7 

10.8 

6.6 

74.8 

32.4 

7.7 

9.8 

7.7 

74.8 

31.2 

47.1 

47.7 

48.2 

46.6 

47.0 

30.3 

19.7 

19.5 

18.0 

17.5 

17.8 

19.3 

20.3 

43.7 

20.1 

18.8 

41.6 

17.8 

18.2 

35.8 

17.7 

17.3 

37.6 

18.3 

17.1 

35.9 

15.6 

16.0 

14.0 

13.6 

13.4 

36.4 

39.7 

32.8 

28.7 

22.1 

: 

: 

: 

: 

: 

97 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unemployment rate for persons (aged 25–64) 
having completed tertiary education (ISCED 
levels 5-8) (%) 

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 
inflation index) (2010 = 100) 

GINI coefficient 

Poverty gap 

*Early leavers from education and training: 
proportion of the population aged 18–24 with 
at most lower secondary education who are not 
in further education or training (%) 

Standard of living 

Number of passenger cars relative to 
population size (number per thousand 
population) 

Number of mobile phone subscriptions relative 
to population size (number per thousand 
population) 

Mobile broadband penetration (per 100 
inhabitants) 

Fixed broadband penetration (per 100 
inhabitants) 

Infrastructure 

Density of railway network (lines in operation 
per thousand km²) 

Length of motorways (kilometres) 

Innovation and research 

Public expenditure on education relative to 
GDP (%) 

*Gross domestic expenditure on R&D relative 
to GDP (%) 

: 

10.3 

9.0 

9.0 

9.4 

11.5 

2005 

2012 

2013 

2014 

2015 

2016 

Not
e 

195 

484 

487 

479 

480 

499 

61.8 

94.8 

91.2 

91.4 

90.6 

94.4 

12) 

12) 

26 

2.1 

: 

26 

2.8 

6.6 

26 

2.4 

5.1 

: 

: 

: 

: 

: 

: 

5.1 

5.7 

5.5 

2005 

2012 

2013 

2014 

2015 

2016 

193.9 

280.3 

288.3 

280.1 

282.8 

296.9 

872.0 

1 595.0 

1 605.4 

1 630.3 

1 620.1 

1 632.5 

: 

: 

10 

14 

13 

15 

10 

17 

9 

18 

9 

19 

2005 

2012 

2013 

2014 

2015 

2016 

18.1 

18.1 

18.1 

18.1 

18.1 

18.1 

0 

0 

0 

0 

0 

0 

2005 

2012 

2013 

2014 

2015 

2016 

: 

: 

: 

: 

: 

: 

: 

0.37 

0.36 

0.37 

: 

: 

Not
e 

Not
e 

13) 

Not
e 

98 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government budget appropriations or outlays 
on R&D (GBAORD), as a percentage of GDP 
(%) 

Percentage of households who have internet 
access at home (%) 

: 

: 

: 

: 

: 

: 

: 

55.0e 

55.8e 

63.6e 

67.5e 

69.8e 

Environment 

*Index of greenhouse gas emissions,  CO2 
equivalent (1990 = 100) 

Energy intensity of the economy (kg of oil 
equivalent per 1 000 euro GDP at 2010 
constant prices) 

Electricity generated from renewable sources 
relative to gross electricity consumption (%) 

Road share of inland freight transport (based 
on tonne-km) (%) 

Energy 

Primary production of all energy products 
(thousand TOE) 

Primary production of crude oil (thousand 
TOE) 

Primary production of solid fuels (thousand 
TOE) 

Primary production of gas (thousand TOE) 

Net imports of all energy products (thousand 
TOE) 

Gross inland energy consumption (thousand 
TOE) 

2005 

2012 

2013 

2014 

2015 

2016 

Not
e 

82.0 

68.2 

60.7 

: 

: 

: 

: 

341.0 

306.1 

294.6 

301.1 

280.6 

40.2 

36.6 

72.3 

52.2 

43.1 

54.4 

14) 

31.5 

51.0 

100.0b 

100.0 

100.0 

100.0 

2005 

2012 

2013 

2014 

2015 

2016 

Not
e 

593 

704 

762 

692 

717 

660 

: 

: 

: 

: 

: 

: 

287 

393 

372 

364 

390 

308 

0 

436 

0 

366 

0 

233 

0 

291 

0 

306 

: 

342 

1 035 

1 070 

995 

975 

1 030 

988 

Gross electricity generation (GWh) 

2 864 

2 844 

3 945 

3 173 

3 003 

3 141 

Agriculture 

Agricultural production volume index of 
goods and services (at producer prices) (2010 
= 100) 

Utilised agricultural area (thousand hectares) 

Livestock numbers: live bovine animals 
(thousand heads, end of period) 

Livestock numbers: live swine (thousand 
heads, end of period) 

2005 

2012 

2013 

2014 

2015 

2016 

Not
e 

: 

: 

: 

: 

: 

: 

15) 

16) 

517p 

118 

16) 

11 

223b 

85 

18 

223 

89 

230 

94 

231 

92 

256p 

89p 

21 

22 

25 

56p 

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16) 

: 

230 

220 

237 

224 

223p 

17) 

186 

159 

182 

192 

183 

181 

: 

: 

: 

5 

0 

8 

0 

8 

0 

7 

0 

8p 

0 

34 

42 

44 

51 

43p 

Livestock numbers: live sheep and live goats 
(thousand heads, end of period) 

Raw milk available on farms (thousand 
tonnes) 

Harvested crop production: cereals (including 
rice) (thousand tonnes) 

Harvested crop production: sugar beet 
(thousand tonnes) 

Harvested crop production: vegetables 
(thousand tonnes) 

18) 

: = not available 

b = break in series 

e = estimate 

p = provisional 

s = Eurostat estimate 

u = low reliability 

* = Europe 2020 indicator 

** = Macroeconomic Imbalance Procedure (MIP) indicator 

*** = The government deficit and debt data of enlargement countries are published on an "as is" basis 
and without any assurance as regards their quality and adherence to ESA rules. 

Footnotes 

1)  2005: consumer price index. 

2)  2005: based on balance of payments manual edition 5 (BPM5). 

3)  Secondary income only. 

4)  National definition of M0, comprised of bank deposits with the CBM (settlement account and reserve 

requirement account) and the estimated amount of cash in circulation. 

5)  National definition of M11, comprised of M0 plus demand deposits by the non-banking sector held with 

banks and the CBM, in EUR and other currencies, plus the Central Government’s demand deposits in EUR 
and other currencies. 

6)  National definition of M21, comprised of M11 plus the non-banking sector’s time deposits with banks, in 
EUR and other currencies, plus the Central Government’s time deposits in EUR and other currencies. 

7)  Loans include total banks' loans granted to non MFI residents and other claims (factoring and forfeiting, 

claims on outstanding bills of acceptance, guarantees and bills of exchange). 

8)  Weighted average effective interest rate, outstanding amounts. 

9)  Calculated from indices with the previous year as the reference year (= 100). 

10)  Data of NGOs are excluded. Number of employees in the public sector as a share of the total number of 

persons employed. 

100 

 
 
 
 
 
 
 
 
 
11)  Comprises data of private companies or enterprises, entrepreneurs and private households. Number of 

employees in the private sector as a share of the total number of persons employed. 

12)  World Bank methodology, by consumption approach, source: MONSTAT (release Poverty Analysis of 

Montenegro), link http://www.monstat.org/eng/page.php?id=340&pageid=73. 

13)  Density relative to the total area (including inland waters) rather than the land area. 

14)  2005 and 2012: total freight traffic (national territory and international transport). 

15)  2005: based on the reports of agricultural organisations (agricultural enterprises and cooperatives) engaged in 

crop production and estimates for private agricultural holdings. 

16) 

Including livestock held by enterprises, cooperatives and households. 

17) 

In million litres. Net quantity, from enterprises, cooperatives and households. 

18)  2014 and 2015: including the production of kitchen gardens. 

101