Source: EURLEX
Language: en
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# 52014SC0301

**COMMISSION STAFF WORKING DOCUMENT MONTENEGRO 2014 PROGRESS 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 Enlargement Strategy and Main Challenges 2014-2015 /\* SWD/2014/0301 final \*/**

  

TABLE OF
CONTENTS

1............ Introduction. 3

1.1......... Preface. 3

1.2......... Context 3

1.3......... Relations between the EU
and Montenegro. 3

2............ Political criteria. 4

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

2.2......... Human rights and the
protection of minorities. 11

2.3......... Regional issues and
international obligations. 11

3............ Economic criteria. 13

3.1......... The existence of a
functioning market economy. 14

3.2......... The capacity to cope
with competitive pressure and market forces within the Union. 18

4............ Ability to take on
the obligations of membership. 20

4.1......... Chapter 1: Free movement
of goods. 20

4.2......... Chapter 2: Freedom of
movement for workers. 21

4.3......... Chapter 3: Right of
establishment and freedom to provide services. 21

4.4......... Chapter 4: Free movement
of capital 22

4.5......... Chapter 5: Public
procurement 22

4.6......... Chapter 6: Company law.. 23

4.7......... Chapter 7: Intellectual
property law.. 23

4.8......... Chapter 8: Competition
policy. 24

4.9......... Chapter 9: Financial
services. 24

4.10....... Chapter 10: Information
society and media. 25

4.11....... Chapter 11: Agriculture
and rural development 26

4.12....... Chapter 12: Food safety,
veterinary and phytosanitary policy. 26

4.13....... Chapter 13: Fisheries. 27

4.14....... Chapter 14: Transport
policy. 28

4.15....... Chapter 15: Energy. 29

4.16....... Chapter 16: Taxation. 29

4.17....... Chapter 17: Economic and
monetary policy. 30

4.18....... Chapter 18: Statistics. 31

4.19....... Chapter 19: Social policy
and employment 31

4.20....... Chapter 20: Enterprise and
industrial policy. 33

4.21....... Chapter 21: Trans-European
networks. 33

4.22....... Chapter 22: Regional
policy and coordination of structural instruments. 34

4.23....... Chapter 23: Judiciary and
fundamental rights. 35

4.24....... Chapter 24: Justice,
freedom and security. 47

4.25....... Chapter 25: Science and
research. 51

4.26....... Chapter 26: Education and
culture. 52

4.27....... Chapter 27: Environment
and climate change. 53

4.28....... Chapter 28: Consumer and
health protection. 54

4.29....... Chapter 29: Customs union. 55

4.30....... Chapter 30: External
relations. 56

4.31....... Chapter 31: Foreign,
security and defence policy. 56

4.32....... Chapter 32: Financial
control 57

4.33....... Chapter 33: Financial and
budgetary provisions. 58

Statistical Annex. 60

1.
Introduction
1.1.
Preface

The
Commission reports regularly to the Council and Parliament on the progress made
by the countries of the Western Balkans region towards European integration,
assessing their efforts to comply with the Copenhagen criteria and the
conditionality of the Stabilisation and Association Process.

This
progress report, which largely follows the same structure as in previous years:

–   briefly
describes the relations between Montenegro and the European Union;

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

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

–   reviews
Montenegro’s capacity to take on the obligations of membership, i.e. the acquis
expressed in the Treaties, the secondary legislation, and the policies of
the European Union.

This
report covers the period from October 2013 to September 2014. Progress is
measured on the basis of decisions taken, legislation adopted and measures
implemented. As a rule, legislation or measures which are under preparation or
awaiting parliamentary approval have not been taken into account. This approach
ensures equal treatment across all reports and enables an objective assessment.

The
report is based on information gathered and analysed by the Commission. Many
sources have been used, including contributions from the government of
Montenegro, the EU Member States, European Parliament reports[1] and
information from various international and non-governmental organisations.

The
Commission draws detailed conclusions regarding Montenegro in its separate
communication on enlargement,[2]
based on the technical analysis contained in this report.

1.2.
Context

The European
Council granted the status of candidate country to Montenegro in December 2010.
Accession negotiations were opened in June 2012. The Stabilisation and Association
Agreement between Montenegro and the EU entered into force in May 2010.

1.3.
Relations between the EU and Montenegro

Within
the framework of the accession negotiations, the screening process was
completed in May 2014. By September 2014, twelve chapters, including chapters
23 and 24 on the rule of law, had been opened, two of which, i.e. science and
research, and education and culture, 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). The protocol on the
adaptation of
the SAA, to take account of Croatia’s accession to the EU, was signed in
December 2013; pending its ratification, the protocol is applied on a
provisional basis with effect from 1 July 2013.

Regular
political and economic dialogue between the EU and Montenegro has continued
through the SAA structures.
The Stabilisation and Association Council met in June 2014 and the
Stabilisation and Association Committee in December 2013. Various subcommittee
meetings have been held since October 2013, plus two meetings of the
Stabilisation and Association Parliamentary Committee, in December 2013 and
March 2014.

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.

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 Frontex. The
Commission has regularly submitted its post-visa liberalisation monitoring
reports to the European Parliament and the Council. The next report will be
presented by the end of 2014. A visa-waiver suspension mechanism
entered into force in January 2014. On this basis, EU Member States can request
the Commission, in an emergency situation and as a measure of last resort, to
examine the possibility of temporarily suspending the visa waiver for
third-country nationals. A readmission agreement between the European
Union and Montenegro has been in force since 2008.

The EU has
provided financial assistance to Montenegro under the Instrument for
Pre-accession Assistance (IPA) for the period 2007-2013, with a total
allocation to Montenegro of € 235.7 million. The IPA national programme
2012-2013 stands at € 31.0 million overall, with most of the funding
supporting the implementation of reforms relating to the rule of law, public
administration and environment sectors, and rural development measures in the
agriculture and rural development sector.

The
implementation of the IPA allocation continues to be managed by the EU
Delegation in Podgorica. Montenegro’s preparations for decentralised implementation
of IPA programmes (by the national authorities) have further advanced, and
management of IPA components III and IV was conferred on Montenegro.

Under IPA II,
Montenegro will continue to benefit from pre-accession assistance for
2014-2020, with a total indicative allocation of € 270.5 million. An
indicative strategy paper for the years 2014-2020, drafted in partnership with
Montenegro and in consultation with all relevant stakeholders, was adopted by
the Commission on 18 August 2014. Over this period, IPA assistance will
aim at supporting reform efforts in the areas of the rule of law, democratic
governance and competitiveness and growth.

Montenegro
continues to benefit from support under the IPA multi-beneficiary and regional
programmes and to participate in five 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
participates in the following EU programmes: the Seventh Research
Framework Programme, the Competitiveness and Innovation Framework Programme,
Culture, Lifelong Learning, and Customs. Montenegro has also recently concluded
or is in the process of concluding new agreements for a number of programmes,
including: Horizon 2020; Competitiveness of Enterprises and
Small and Medium-sized Enterprises, Fiscalis, Erasmus+, Creative Europe,
Europe for Citizens, and Employment and Social Innovation.

2.
Political criteria

This section
examines the progress made by Montenegro towards meeting the Copenhagen
political criteria, which require stability of institutions guaranteeing
democracy, the rule of law, human rights and respect for and protection of
minorities. It also monitors regional cooperation, good neighbourly relations
with enlargement countries and EU Member States and compliance with
international obligations, such as cooperation with the International Criminal
Tribunal for the former Yugoslavia.

2.1.
Democracy and the rule of law

Constitution

No amendments
were made to the Constitution during the reporting period. On the
implementation of the constitutional reforms adopted in July 2013, see
Chapter 23 — Judiciary and fundamental rights.

Elections

During the reporting
period, elections were held in 17 out of 23 municipalities. They were
marred by allegations of abuse of state resources for electoral purposes,
vote-buying, and irregularities in the voters’ register. All allegations of
electoral irregularities need to be investigated, and, where necessary,
prosecuted by the competent authorities. Due to the polarised political
climate, the formation of the new administrations in certain municipalities
after the elections has been a difficult process. The parliamentary working
group on restoring citizens’ trust in the electoral process failed to reach
agreement on amendments to the legislative framework in the area of elections
and political party financing with a view to addressing shortcomings, including
those identified by the OSCE’s Office for Democratic Institutions and Human
Rights (OSCE/ODIHR) following previous elections. In January, the tasks of the
working group were taken over by the parliamentary Speaker’s Collegium (the
Speaker, Deputy Speaker and chairs of parliamentary groups). A package of
amendments, originally scheduled for adoption in September 2013, was eventually
adopted in February (the law on political party financing and electoral
campaigning, the law on the single voters’ register, the law on personal ID
cards, and the law on local self-government) and March (the law on the election
of municipal councillors and Members of Parliament).

The law on
political party financing and the law on the single voters’ register were
adopted without cross-party consensus. The other laws were adopted with the
support of all political groups. Several amendments entered into force in time
to take effect for the spring local elections. The law on the single voters’
register and the law on the election of municipal councillors and MPs contain
certain transitional arrangements which are expected to take effect only as of
1 November 2014.

The
election legislation reform envisages changes in the composition of the State
Election Commission (SEC), by providing for the president and a civil society
representative to be non-partisan members elected by parliament. It also
introduces a system of electronic identification of voters and centralised
management of the voters’ register by the Ministry of Interior. The changes to
the law on political party financing aimed at limiting the scope for abuse of
state resources in the electoral campaign by prohibiting and restricting
certain payments during the pre-election period, for example by imposing
stricter limits on temporary employment. The amendments also gave the SEC
increased oversight and control competences and introduced additional and
stricter penalties for breaches of the law. Parliament
failed to appoint the new SEC in time for the May local elections. Revision of
the legislative framework did not include the law on financing election
campaigns for the president of Montenegro, mayors and presidents of
municipalities, as originally envisaged.

The
package of amendments addresses several of the outstanding OSCE/ODIHR recommendations,
while some issues remain to be addressed in line with European standards and
best practices. These include e.g. the right to stand as an independent
candidate, proportional public funding to promote a level playing field for all
candidates, auditing of political parties, political balance in polling
stations and rules on the composition of the election commissions at municipal
and polling station levels. The administrative capacity of the SEC needs to be
significantly strengthened for it to carry out its mandate effectively.

The
implementation of the amendments to the law on political party financing was
marked by controversies over the interpretation of certain provisions. In June,
following a request by the ruling Democratic Party of Socialists — which had
voted against the law — the constitutional court ruled a significant part of
the amendments to the law unconstitutional. Certain annulled
provisions had been inserted in response to outstanding OSCE/ODIHR and Group of
States against Corruption (GRECO) recommendations. Some of the annulled
provisions had been considered as problematic by experts when the law was being
drafted.

Overall,
election
legislation has improved, although important issues remain to be addressed in
line with international recommendations. The local elections held during the
reporting period show that the goal of strengthening public confidence in the
electoral system has not been achieved yet. The new provisions need to be
effectively implemented. Montenegro needs to ensure that its legislative
framework in the area of political party financing is fully in line with
European standards and best practices and to establish a track record of
effective implementation. Full cross-party support will be required for this to
be achieved. Allegations surrounding the municipal elections need to be
investigated and, where necessary, prosecuted.

Parliament

In
March, parliament adopted the 2014 action plan for strengthening its legislative
and oversight role. Follow-up to the conclusions adopted by
parliamentary committees in oversight hearings remains limited and needs to be
reinforced. There was no political follow-up to the technical report adopted by
parliament in July 2013 on the alleged misuse of public funds for party
political purposes. Judicial follow-up remains to be completed.

As
regards its oversight role, parliament has continued to hold consultative and
control hearings on a variety of topics. Consultative
hearings were held inter alia on foreign policy, public procurement in
the health system, the functioning of local self-government, and the
implementation of the strategy against domestic violence.

The
transparency of parliament’s work continued to be strengthened through direct
interaction with citizens and replies to all requests for access to
information. Information and documents related to the work of parliament and
its working bodies continue to be published regularly. The establishment of
procedures for acting upon citizens’ initiatives addressed to the parliamentary
committees on human rights and anti-corruption is pending. Parliament has not
yet adopted its code of ethics.

In December,
parliament unanimously adopted a resolution on Montenegro’s path to
European integration, setting out its role, and, in particular, the role of the
parliamentary European Integration Committee, in the accession process. To
date, the committee has conducted consultative hearings, discussed negotiating
positions drafted by the government and government reports related to the EU
accession process, and organised public debates on EU-related topics.

In October 2013,
parliament amended its rules of procedure, in line with the new constitutional
provisions concerning the selection procedures for several judicial
and prosecutorial office-holders. After several attempts, the parliament
finally appointed a new Supreme State Prosecutor in October. (See
also Chapter 23 — Judiciary and fundamental rights).

Parliament
continued its intensive legislative activity. Upon proposals
from the working group on building trust in the electoral process, taken over
by the Speaker’s Collegium, parliament adopted comprehensive changes to the
electoral legislative framework. Underlying tensions among political parties
and a lack of consensus on some features of the reform affected the process. (See
above — Elections).

The overall
number of staff fell over the reporting period from 153 to 130. Training
courses continued to be provided. Continuous efforts are needed to further
increase parliament’s administrative and expert capacity.

Overall,
the
adoption
of the resolution on Montenegro’s EU accession is a welcome step forward in
defining parliament’s competences in the accession process, including vis-à-vis
the government. Transparency continues to be ensured. Parliament’s legislative
activity has grown and needs to continue to be strengthened. Parliament has
continued to increase its oversight role, including through control and
consultative hearings. Conclusions adopted in oversight hearings need to be
followed up more effectively. Parliament’s administrative capacity
needs to be strengthened.

Government

The government
remained focused on the objective of EU membership. It adopted a number of
strategic documents in the context of the EU integration process, including the
2014-2018 EU accession programme; the 2013-2016 pre-accession economic
programme; and the 2014-2018 strategy for informing the public on the EU
accession process.

In March, the
government adopted amendments to the decision on the establishment of the
negotiating structures. In addition to enhancing the competences of the
working groups, the Rule of Law Council, chaired by the Minister of Justice,
was established as a new body in charge of monitoring rule of law-related
activities in the negotiation process, including the implementation of the
action plans for chapters 23 and 24. A new Commission for European Integration,
headed by the Chief Negotiator, was also established to monitor the
implementation of the 2014-2018 EU accession programme, and of the obligations
stemming from the Stabilisation and Association Agreement. The new structures
need to result in better coordination among the various institutions involved
in the accession negotiations. The government published two reports on the
implementation of the action plans for chapters 23 and 24. The government also
established a commission to monitor the competent authorities’ actions in the
investigation of old and recent cases of threats and violence against
journalists, chaired by a representative of the media. Its recommendations need
to be fully followed up by the authorities. (See Chapter 23 —
Judiciary and fundamental rights).

The
administrative capacity of the Ministry of Foreign Affairs and European
Integration was further strengthened. The ministry’s overall budget for 2014
was increased compared to 2013, although the EU accession programme was
allocated fewer funds than in 2013. As regards transparency, the government has
continued to publish, on the ministry’s website, translations of the screening
reports endorsed by the EU Council. Communication with citizens improved,
including through direct interaction via social media and the use of existing
channels for reporting suspected cases of corruption and the informal economy.
The internet platform for e-petitions remains active; however, only two
petitions have received a sufficient number of electronic signatures, and only
one of them was endorsed by the government.

With regard to local
self-government, in February parliament adopted amendments to the law on
the territorial organisation of Montenegro, whereby Gusinje (previously part of
Plav municipality) was granted municipal status. Elections were held in 17
municipalities (see above — Elections). The 2014 action plan for the
reform of local self-government was adopted. In the context of election
legislation reform, a positive step was taken in transferring management of the
voters’ register to the Ministry of Interior, removing this competence from
local self-government.

Overall,
the
government remained focused on EU integration. The structures for the accession
negotiations were further strengthened, as was the administrative capacity of
the Ministry of Foreign Affairs and European Integration to coordinate the EU
accession process. Coordination among the various institutions must be
strengthened. Efforts to increase government transparency brought limited
results. Transparent, efficient and accountable local administration needs to
be established. The criteria for creating new municipalities should include
financial and administrative sustainability.

Public
administration

Montenegro
has a comprehensive strategic framework for public administration reform
in place. The Public Administration Reform strategy 2011-2016 covers the state
administration, local government and publicly-owned bodies and agencies. The
areas it addresses include civil service reform; public-sector wage reform;
improving the quality of legislation and strategic planning, including the
introduction of regulatory impact assessments; modernisation of administrative
procedures for better service delivery; reform of the inspection supervision
system; and local-level organisation and administration, including financing
and public financial management. The coordination and monitoring mechanism for
implementing the strategy was further strengthened through the establishment,
in November, of an inter-ministerial body led by the Ministry of Interior,
while overall coordination is led by the Deputy Prime Minister. The revised
2014-2015 action plan and reports on implementation during the previous period
and the first half of 2014 were adopted in December and July respectively. A
special group on PAR, established as a forum for policy dialogue between the
Commission and Montenegro in the framework of the SAA, met in February and July
to discuss and monitor implementation of the strategy.

Policy
development and coordination across the
sectors are operational, but need to be further improved. The scope of
inter-ministerial consultations on legislative proposals needs to be broadened.
The link between policy planning and available financial resources needs to be
further developed. There is a lack of formal requirements for medium-term
resource planning. Inter-ministerial coordination and consultation with civil
society is mandatory and underpinned by government decree, but in practice does
not happen on a regular basis. The existing rules for regulatory impact
assessments need to be amended to ensure that an impact assessment is prepared
prior to public consultation and that it is updated before the government takes
its decision. An impact assessment should accompany any draft law that is
presented to parliament.

With
regard to public service and human resources management, the
implementing legislation for the new law on civil servants and state employees
was completed at the end of 2013. The focus should now be on ensuring effective
application of the new legal framework in the public sector. Appointments and
dismissals need to be closely and transparently monitored and reported on,
especially in the case of senior managers, in order to avoid arbitrary
decisions. In the reporting period, the Human Resources Management Authority
introduced a new training module for senior management staff in the public administration
and induction training for newcomers. The Authority’s capacity needs to be
further strengthened to ensure effective monitoring of the implementation of
the law on civil servants and state employees in all public-sector bodies.
Human resources
plans still need to be prepared in all state bodies. The central personnel
records needs to be further updated, as the majority of institutions have not
yet provided the relevant data. No progress has been made in enhancing the
transparency, efficiency and accountability of local government administration.
The law on local self-government needs to be harmonised with the new rules on
public service management.

As
regards the undated resignation letters submitted at the request of the
government by senior officials and heads of administrative bodies, which had
been an issue of serious concern, in January the Minister of Interior confirmed
that they had been destroyed at the request of the government.

The plan for the
reorganisation of the public sector, as part of the public administration
reform (PAR) strategy, was published in November. Based on a sector analysis,
the plan provides for a gradual reduction of employees in all sectors by 10 %
over the next four years. Major savings are expected in the health, education
and internal affairs sectors. The plan, which now needs to be implemented, must
also take into account the Montenegrin programme of accession. A body to
monitor the implementation of the plan started its work in December, with
regular reporting obligations.

The first phase
of the merger of different inspection services into one centralised body was
completed, aiming at enhanced transparency, consolidation of resources and
greater effectiveness and efficiency of operations.

There has not
been any progress in improving accountability and service delivery. The
new law on general administrative procedures needs to be
adopted. Transparency and accountability of the work of the public
institutions and officials need to be ensured. Finding the right balance
between the right to free access to information and the protection of personal
data remains a challenge.

Montenegro
still needs to develop a comprehensive public financial management
reform programme to address more systematically the necessary reforms in the
different parts of the public financial management system. The Public
Expenditure and Financial Accountability (PEFA) assessment from 2013 provides a
basic framework for preparing the reform programme. Montenegro adopted the
legal basis for the multiannual budgetary framework and the introduction of numerical
fiscal rules on budget deficit and public debt in April. A
gradual shift to programme-based budgeting needs to be ensured. Significant
investment is required to upgrade the expenditure management system with a
focus on improving registration, reporting and monitoring commitments in
connection with contracting, and on producing real-time data on spending in
relation to appropriations.

Overall,
there has been some progress in the area of public administration reform. Implementation
of the public administration reform strategy is on track but further efforts
are needed to improve the quality of legislation and local administration. Montenegro
also needs to address the necessary public financial management reforms more
comprehensively and ensure appropriate sequencing of reform actions. The
legislative framework and its implementation need to be improved. Public
administration needs to be further rationalised and the strengthening of
administrative capacity for European integration ensured. In many areas, the
work on the preparations for EU accession takes up a substantial part of the
human and financial resources available to the relevant parts of the
administration.

Ombudsman

The
capacity of the Ombudsman’s office remains limited, in terms of both human and
financial resources. Amendments to the law on the Ombudsman were adopted,
enhancing Montenegro’s alignment with European and international standards. The
fact that the amendments have weakened the role of the Ombudsman in dealing
with anti-discrimination cases remains a matter of concern. Despite the overall
rather high number of staff, the number of posts in the departments dealing
with substantive human rights and anti-discrimination issues is rather limited,
and various positions remain vacant, including two out of four deputy posts.
This raises concerns about the institution’s capacity to fulfil its broad remit
and efficiently handle complaints. Little follow-up is given to concrete cases
of discrimination.

Civil
society

An
empowered civil society is a crucial component of any democratic system and
should be recognised and treated as such by state institutions. In July, the
new Council for development of non-governmental organisations was appointed by
the government. Among its main tasks, there are those related to monitoring of
the strategy for development of civil society organisations (CSOs) and the
relevant part of negotiations’ action plan on chapter 23. The Council should be
in the position to better steer the process of development of civil society.
Representatives of CSOs continue to be involved in the activities of the state
and local administration, including working groups on the EU accession
negotiation chapters. On various occasions, civil society representatives have
voiced their dissatisfaction with their level of involvement in the process.
Greater transparency is needed in the government’s procedures for cooperation
with and consultation of CSOs, especially in legislative drafting. Continuous
cooperation between CSOs and public administration bodies is not yet
guaranteed. A sustainable system of public funding for CSOs and an appropriate
institutional framework need to be further developed. The current system of
public funding has so far proved to be inefficient, as acknowledged by the
latest report from the State Audit Institution. An enabling legal framework for
volunteering activities and corporate social responsibility/philanthropy also
remains to be established. Relations between CSOs and the government have been
overly adversarial on occasion, especially on issues concerning the political
situation, rule of law and fundamental rights. Some civil society activists
have been targeted on a personal basis by local media. CSOs have a crucial role
in this area, which is distinct from that of political parties but integral to
the political and socio-economic process.

Judicial
system

In the area of
judicial reform, some progress has been made. Key reforms of the recruitment,
promotion and disciplinary systems for judges and prosecutors are still
pending. They need to fully reflect European standards and best practices, and
to be understood and supported by all stakeholders so as to ensure effective
implementation. Following alignment of relevant legislation with the
constitutional reforms of July 2013, key judicial and prosecutorial officials
were elected. Parliament finally agreed on the appointment of a new Supreme
State Prosecutor. The slightly negative evolution of the clearance rate and the
number of pending cases as compared to last year is due to a significant
increase in the number of incoming cases. The length of proceedings has
decreased, and overall courts managed to solve considerably more cases than in
the previous year. The efficiency of the judiciary should increase further. It
is a matter of serious concern that the power to conduct misdemeanour
proceedings has still not been transferred to courts. Montenegro needs to step
up its efforts to fight impunity for war crimes, and effectively investigate,
prosecute, try and punish war crimes in line with international standards.

For a detailed
analysis of developments in the judicial system, see Chapter 23 — Judiciary
and fundamental rights.

Fight
against corruption

In
the area of anti-corruption, progress has been limited. The legislative
framework remains to be strengthened. Pending the establishment of a new
anti-corruption agency, the capacity of existing institutions in the area of
prevention of corruption needs to be improved and they need to take a more
proactive approach. The system of checks for conflicts of interest and asset
declarations is not effective. Following the constitutional court’s annulment
of a significant part of the amendments to the law on political party financing
designed to reduce the scope for abuse of state resources for electoral
purposes, Montenegro needs to ensure that its legislative framework in the area
of political party financing is fully in line with European standards and best
practice and to provide an initial track record on the correct implementation
of the law, including application of deterrent sanctions where required.
Increased efforts are needed with regard to the development of a solid track
record of investigation, prosecution and final conviction in corruption cases,
including high-level cases, and the systematic use of the power to seize and
confiscate assets. Cooperation between the prosecution and the police in
pre-trial investigation remains to be improved. The impact of anti-corruption measures
so far has been limited. Corruption remains prevalent in many areas and
continues to be a serious problem, requiring effective implementation of deep
and lasting reforms.

For a detailed
analysis of developments in the area of anti-corruption policy, see Chapter
23 — Judiciary and fundamental rights.

Fight
against organised crime

In the area of
organised crime, the legislation needs to better clarify the role of the
judiciary and the police in the pre-trial phase. While Montenegro has continued
to develop a track record in the fight against drugs, and new cases were opened
on people smuggling, more needs to be done to combat trafficking in human
beings, cybercrime and money laundering. Financial investigations and the
confiscation of assets are not yet applied systematically. More efforts are
needed to improve interagency coordination. Cooperation
with neighbouring countries and EU Member States, at bilateral and regional and
international levels, continued.

For a
detailed analysis of developments in the fight against organised crime, see
Chapter 24 — Justice, freedom and security.

2.2.
Human rights and the protection of minorities

Some progress
was made on fundamental rights; the country is gradually familiarising itself
with the international reporting mechanisms stemming from the international
conventions ratified so far. A gap remains between legal alignment and
implementation of human rights standards in the policy framework, and practice.
This particularly affects the disadvantaged and the most vulnerable groups.
Amendments to the law on the Ombudsman were adopted, in line with
European and international standards; preparation for the adoption of
implementing legislation should continue without delay. Human rights
institutions’ action is hampered by the lack of staff, skills and financial
resources, and by frequent staff turnover. Attacks against the media are cause
for serious concern. Some cases of violence against journalists and attacks on
media property have been successfully investigated and processed. In other
cases, investigations are pending and both the material perpetrators and those
allegedly behind the attacks remain to be identified. Some progress was made in
the area of civil registration and education of Roma. In April a new action
plan to implement the Strategy for improvement of position of Roma and
Egyptians in Montenegro was adopted. Overall, the Roma community face
discrimination, especially in the field of employment, health issues and
housing. Some progress was made on lesbian, gay, bisexual, transgender and
intersex (LGBTI) issues, especially through capacity-building activities for
civil servants and police officers. Attacks against LGBTI persons and activists
continued, reflecting a widespread hostility to sexual diversity.

For a
detailed analysis of developments in the area of human rights and the
protection of minorities, see Chapter 23 — Judiciary and fundamental rights.
For developments in the areas of trade union rights, anti-discrimination
and equal opportunities, see also Chapter 19 — Social policy and employment.

2.3.
Regional issues and international obligations

With regard to
cooperation with the International Criminal Tribunal for the former
Yugoslavia, Montenegro neither received any requests for assistance
nor had cases referred back to its national authorities by the court for
possible further investigations.

For the handling
of domestic war crimes cases, see Chapter 23 — Judiciary and
fundamental rights.

Montenegro still
maintains a 2007 bilateral immunity agreement with the United States, granting
exemptions for US citizens from the jurisdiction of the International
Criminal Court. In doing so, it is not complying with the EU Common
Positions on the integrity of the Rome Statute or with the related EU guiding
principles on bilateral immunity agreements. Montenegro needs to align with the
EU position in the framework of accession negotiations.

Montenegro, along with Bosnia and
Herzegovina, Croatia and Serbia, has continued to closely cooperate in the
Sarajevo Declaration Process, which aims to find sustainable solutions for
people who became refugees and displaced persons as a result of the armed
conflicts in ex-Yugoslavia during the 1990s. In March, the United Nations High
Commissioner for Refugees (UNHCR) recommended that UN member states terminate
refugee status for refugees originating from Croatia, at the latest by the end
of 2017.

Implementation of the regional housing
programme, expected to provide lasting housing solutions for some 6 000
people in Montenegro, has started. The legal framework and the national
implementation bodies have been set up. Three waves of projects, representing € 10
million in grants, have been approved; two further projects are in the planning
stage. The construction of the first project is scheduled to begin in 2015.
Good overall cooperation between the partner countries on the process and its
housing programme needs to continue.

The unresolved fate of missing persons
from the conflicts in the 1990s remains a humanitarian concern in the Western
Balkans. Montenegro, Serbia, Bosnia and Herzegovina and Croatia signed in
August a Declaration on the role of the state in addressing the issue of
persons missing as a consequence of armed conflict and human rights.

Regional
cooperation and good neighbourly relations form an
essential part of Montenegro’s process of moving towards the EU. Montenegro has
continued to actively participate in regional initiatives, including the
South-East European Cooperation Process, the Regional Cooperation Council, the
Central European Free Trade Agreement, and the Energy Community Treaty. Montenegro
hosted the first meeting of the Enhanced Cooperation within the Stabilisation
and Association Process. Montenegro continues to
actively support the Coalition for Reconciliation Commission (RECOM) and Igman
initiatives on regional reconciliation.

In
December, Montenegro, Bosnia and Herzegovina and Serbia signed a protocol to
establish a joint centre for police cooperation in Trebinje (Bosnia and
Herzegovina), which opened officially in March. An agreement between
Montenegro, Albania and Kosovo, on the meeting point of the state border and
its maintenance, was signed in July. On 29 September 2014, Montenegro, Bosnia
and Herzegovina, the former Yugoslav Republic of Macedonia and Serbia signed an
agreement on reducing the prices of roaming services on public mobile
communications networks.

Montenegro
continues to maintain good bilateral relations with other enlargement
countries and neighbouring EU Member States. However, the delimitation of
borders with Croatia, Serbia, and Kosovo\* remains
pending. A bilateral convention on regional cooperation under Article 15 of the
SAA was concluded in December with Serbia, but has not yet been concluded with
Albania.

Montenegro continued to maintain good
relations with Albania. In April, both countries signed an agreement on
cooperation in the field of tourism.

In December, Montenegro signed a
protocol on cooperation in the area of forensic examinations and expertise with
Bosnia and Herzegovina. A protocol on exchange of information and
evidence in war crimes between the state prosecutor’s offices of the two
countries was signed in April. A bilateral border agreement was initialled in
May.

Montenegro and the
former Yugoslav Republic of Macedonia signed an agreement on sharing
diplomatic and consular services and a protocol on cooperation in the area of
military training. In October 2013, Montenegro ratified the readmission
agreement with the former Yugoslav Republic of Macedonia. Agreements on mutual
enforcement of court decisions in criminal matters and on legal aid in civil
and criminal matters were also signed in December.

The Montenegrin
Prime Minister visited Serbia in December for the first such visit in a
decade. A memorandum of understanding and cooperation in the field of tourism
was concluded in February. Cooperation agreements on diplomatic training and
mutual sharing of premises for diplomatic and consular offices were signed in
June. A joint operation between Serbia and Montenegro contributed to the arrest
of the alleged leader of a prominent organised crime group. There were no
developments in the dispute between the Orthodox churches in the two countries.

Concerning Kosovo, the
embassy of Montenegro in Pristina became fully operational. An agreement on
recognition of pension rights was signed in December, while agreements on
police cooperation, on the opening of joint border crossings, on local border
traffic as well as protocols on joint border patrols and border cooperation
were signed in March. The joint commission on border demarcation continued its
work. A Protocol on cooperation in the fight against trafficking in human
beings was signed in April.

Montenegro
ratified the readmission agreement with Turkey in October 2013. An
agreement between the two countries on technical cooperation in the field of
standardisation was signed in February, while an agreement on cooperation and
mutual assistance in customs matters was signed in September.

Montenegro
and Croatia worked closely in the field of education and scientific
research. In May, the two countries signed a protocol on police cooperation
during the summer season. The amended local border traffic agreement has not
been signed yet. The temporary agreement on the Prevlaka peninsula continues to
be implemented smoothly. In June, the prime ministers of the two countries
indicated again that the issue will most likely be solved through international
arbitration. No developments have taken place on border demarcation.

Montenegro
and Italy signed an agreement on scientific and technological
cooperation. In December, Montenegro ratified the two agreements concluded with
Italy on enhancing the application of the European Convention on Extradition
and the European Convention on Mutual Assistance in Criminal Matters. In March,
an agreement on transport of passengers and freight in international road
transport was also signed, while a protocol for the implementation of the
readmission agreement between the two countries was initialled.

Overall,
Montenegro
continues to play an active role in regional cooperation and maintains good
relations with the neighbouring enlargement countries and EU Member States.
Certain bilateral issues with neighbouring countries are still open, notably in
the area of border demarcation. Montenegro needs to align with the EU position
on the integrity of the Rome Statute and with the related EU guiding principles
on bilateral immunity agreements.

3.
Economic criteria

In examining
economic developments in Montenegro, the Commission’s approach was guided by
the conclusions of the European Council in Copenhagen in June 1993, which
stated that membership of the Union requires the existence of a functioning
market economy and the capacity to cope with competitive pressure and market
forces within the Union.

Monitoring of
the economic criteria needs to be seen in the context of the increased role of
economic governance in the enlargement process, as welcomed by the General
Affairs Council of 17 December 2013. To this end, the ECOFIN Council in May
adopted targeted policy guidance for Montenegro based on its Pre-Accession
Economic Programme.

3.1.
The existence of a functioning market economy

Montenegro’s macroeconomic stability recorded some
improvement and the economy recovered from the 2012 recession.
However, several challenges hinder the
efficient allocation of resources. The current-account and fiscal imbalances
persist and domestic demand remains subdued as banks are not yet playing their
intermediation role in the economy. Labour market conditions, as well as
diversification and overall competitiveness are all still weak while key
investments are at an incipient phase of development or delayed.

Economic
policy

The government’s
third Pre-Accession Economic Programme (PEP), covering the period 2014-2016,
presents a broadly consistent, albeit somewhat optimistic, medium-term
macroeconomic and fiscal framework based on the projection of a gradual
acceleration of growth from 3.6 % in 2014 to 3.8 % in 2016. The key
objectives of the programme remain fiscal consolidation, achieving a nearly
balanced budget in 2015, and improvements in the business environment to
support economic growth. Overall, the political consensus on market economy
fundamentals has broadly been maintained, with one particular exception
concerning the resolution of the bankrupt aluminium firm (KAP) and its debt
clearance. Montenegro needs to step up its efforts, in line with the
conclusions from the ministerial dialogue between the economic and finance ministers
of the EU and the candidate countries from May 2014 to set public debt on a
declining path, reduce the high burden of banks’ non-performing loans, and
improve the business environment as well as labour market conditions.

Macroeconomic
stability

The
economy recovered from a double-dip recession in 2013, growing by 3.3 %
after contracting by 2.5 % the year before, according to latest data from
the national statistical office. Growth was largely driven by investments
thanks to stronger activity in the construction sector, as well as by net
exports fuelled by stronger external demand for electricity and for tourism
services, but also by a sharp contraction of imports. Private and public
consumption recorded some slight growth of around one percentage point in real
terms. Investment expanded thanks to stronger activity in the construction
sector. Tourism continues generating good results, but external shocks from
floods in neighbouring countries and from tensions between Ukraine and Russia —
that are important tourism markets as well as foreign direct investment (FDI)
sources for Montenegro — cannot be discarded. Growth continued in 2014, with
the economy expanding in the first two quarters by 1.7 % and 0.3 %
year-on-year respectively, driven by investments (mostly construction) and some
recovery in private consumption. However, industrial output turned negative in
the first six months of 2014. While manufacturing and mining recorded some
expansion, the sharp decline in utilities after an exceptionally high
electricity output the year before, led to an overall decline in industrial
production, down in the first half of 2014 by an average 15 %
year-on-year. Moreover, downside risks to a sustained economic recovery persist
as domestic demand remains subdued due to credit growth constraints, high
unemployment, and falling wages. Growth recovery led to a modest rise in
average per-capita income expressed in purchasing power standards to 42 %
of the EU average in 2013, compared to 41 % a year earlier. Overall,
the recovery remains fragile due to the weakness of domestic demand and high
dependency on the external environment.

External
imbalances are easing. The current-account deficit declined in 2013 to 14.6 %
of GDP from 18.7 % a year earlier due to a stronger contraction of imports
rather than an improvement in exports. Yet, the trade deficit remains one of
the main structural problems, reflecting the local economy’s narrow production
base, lack of competitiveness and high import dependence. In 2013, the strong
export performance of electricity was due to exceptionally favourable weather
circumstances, and consequently exports in 2014 are more modest. In the first
half of 2014, the trade deficit widened 4.5 % year-on-year as exports
declined much faster than imports and the base effect from past energy exports
faded off. As a result, in the four quarters to June the current-account
deficit slightly increased to 14.8 % of GDP. So far, risks have been
mitigated on the financing side. In 2013, total net capital inflows were
greater than the current-account deficit, driven by net FDI inflows worth 9.7 %
of GDP and by transfers. This allowed the central bank to increase its
reserves. In the four quarters to June 2014, net FDI remained broadly stable at
9.6 % of GDP. Overall, despite some improvement, the sustainability
of the external position remains a key challenge.

Despite some
marginal improvement, the unemployment rate remains very high, above 19 %,
with a large predominance of long-term (82 %) and youth (42 %)
unemployment. The 2013 employment and activity rates of the population aged
20-64 stand at a low 52.6 % and 65.1 % respectively. These weak
labour market conditions are exerting downward pressure on wages, which
continued to contract, weakening private consumption. Overall, labour
market imbalances are reflected by persistently high youth and long-term
unemployment.

Given the
unilateral use of the euro, the ability of the central bank of Montenegro to
conduct monetary policy is limited. The strength of the euro together with
lower international prices exert downward pressure on imported inflation from
energy and food, while falling wages and tight credit conditions also added to
the deceleration of prices. As a result, over the course of 2013, the average harmonised
consumer price inflation declined to 1.8 %, from 4.0 % a year before.
Disinflation turned into negative growth rates in January 2014, recording
afterwards six consecutive months with negative consumer price growth, despite
uninterrupted growth of retail sales during the same period. Overall,
Montenegro faces a general fall in the aggregate price level, driven by a drop
in global commodity prices in the absence of a proper monetary policy rather
than by a decrease in aggregate demand.

Fiscal reporting
and accounting remains an issue. In 2013, the unplanned payment of state
guarantees as well as substantial disbursements related to obligations from
previous years for restitution, old foreign currency saving and some court
decisions claims, brought the consolidated budget deficit to 5.3 % of GDP,
up from the preliminary estimate of 2.3 %, albeit a marginal improvement
compared to the 5.9 % deficit recorded a year earlier. Measures were
adopted to boost revenue, including an increase in personal income tax and in
the standard VAT rates while, in order to reduce expenditure, the government
froze pensions and public-sector wages and cut capital spending. Unburdened
from past liabilities, the cumulated budget deficit recorded some improvement
in the first seven months of 2014, declining to 1 % of the full-year GDP
compared to 3.6 % a year earlier, as budget revenue — supported by higher
VAT and social security contributions — kept growing faster than expenditure.
In the past, loans to cover state guarantees contributed to a further increase
in public debt, which has doubled since 2008 to reach 58 % of GDP in 2013,
although marginally declined to 57.5 % of GDP at the end of June 2014.

Montenegro’s
main policy challenge is to restore fiscal stability, together with curbing the
large current-account deficit. The adoption of fiscal rules in April 2014 seems
to confirm the continuity of consolidation efforts, although the efficiency of
its enforcement mechanism needs to be verified once the law is implemented.
However, expensive construction projects (prone to risks of delays and cost
overruns) like the Smokovac-Mateševo highway section, may require additional
measures to contain public debt within the fiscal rules threshold. Moreover,
public finances are characterised by a high degree of non-discretionary
spending and some persisting risks of slippages, over and above a sizable stock
of state guarantees. Overall, as the fiscal position failed to improve
despite consolidation efforts, the challenge of ensuring fiscal sustainability
and steering the public debt in a downward trajectory remains.

Interplay
of market forces

The
development of the private sector is financed through a sustained inflow of
foreign investment facilitated by public property concessions and
privatisations. State ownership of the economy is comparatively low and
predominantly concentrated in transport and utilities, together with a few
firms in the agriculture, publishing and tourism sectors. The aluminium conglomerate KAP, in which the
state had a 29 % stake, was declared bankrupt in October 2013 after having
accumulated debts worth several times the company’s value. Its assets — divided
into several groups — were sold to local companies in 2014, thus putting an end
to the state’s role as a shareholder. One of the former co-owners (CEAC) filed
several complaints against the sale of KAP that were rejected by local courts.
However, a Nicosia court adopted a decision banning the sale of KAP’s assets.
As a result, the sale of KAP remains on hold until the bankruptcy administrator
can transfer the property free of litigation, with risks of a new round of
contingent liabilities for the public finances. The state also had a 29 %
stake in the Nikšić bauxite mines that were declared bankrupt in February 2014
but, in the absence of a reorganisation plan by the owners (i.e. the state and
CEAC); the bankruptcy administrator offered the company’s property for sale at
the end of July although investors have shown no interest so far. Concerning
administrative prices, these remain moderate, accounting for 7.4 % of the
consumer price basket. Overall, state ownership of the economy has been
reduced following the bankruptcy of the aluminium factory and bauxite mines.

Market
entry and exit

The number of new companies rose substantially in 2013
to 4 146, or 17 % more than the previous year. These figures must be
treated with caution, however, as some of these might be former companies that
have re-established themselves as a way of escaping debt. It remains difficult
to obtain credit particularly for small and micro businesses, which have either
very few, or, in most cases, no alternative means of financing apart from the
banking sector, and therefore endure severe liquidity problems. The ongoing
modernisation of public administration including the simplification of
procedures and, ultimately, the creation of a more efficient administration
remains a challenge for the years to come. In 2013, the number of companies
liquidated as a result of bankruptcy proceedings declined markedly, totalling
217 or 25 % less than a year before. Overall, as the recovery takes
hold, the number of Montenegrin companies is growing.

Legal
system

Uncertainties relating to the Montenegrin legal and
judicial system may in some cases entail risks for economic agents. Laws
sometimes contain ambiguous provisions and are therefore difficult to
implement. Moreover, the outcome of judicial proceedings is difficult to
predict as Court orders are not always enforced or followed by law enforcement
institutions. Out-of-court resolution of commercial disputes through the
mediation centre has made further progress, with both the number and the value
of commercial disputes successfully resolved increasing.

Licensing, tax administration procedures, and contract
enforcement are priority issues identified by the business community as key
obstacles. In April 2014 the first public bailiffs started work on the task of
improving contract enforcement. In early September 21 public bailiffs, out of a
total of 32 stipulated by the law, had been appointed. Progress has been made
on reducing municipal fees for construction permits and making it easier to
obtain them by shortening deadlines, streamlining procedures and setting up
one-stop shops. However, the business registration service has yet to be
extended to all regional tax administration offices. In July 2014, the parliament
adopted the Law on e-Government with a view to improve communication with the
users of state administration services. The e-Government Portal was revamped,
although only part of the administration has started working with electronic
documents in a production environment. There has been little progress on the
regulatory impact assessment project, which is intended to assess the
regulatory framework and issue recommendations on simplifying regulation (e.g.
by means of a ‘regulatory guillotine’). Overall, simpler and more
predictable regulation of business and further efforts to tackle corruption are
needed to improve the business climate.

Financial
sector development

The banking sector has remained stable. In May 2014, the
central bank of Montenegro issued an operating licence for a new local one,
raising to 12 the number of banks in the country. However, the number of
entities does not seem to have had a noticeable impact on interest rates for
new loans, which remain persistently high, at above 10 %. Risk premiums
appear to be the main cause for the elevated lending rates. The sector is
dominated by foreign banking groups, which account for 83.5 % of total
bank capital. However, all banks are increasingly resorting to own deposits
financing to offset the decline in foreign funding. Banks posted positive
financial results in 2013 as well as in the first half of 2014, compared to
substantial losses in 2012. Credit quality still remains a key concern as banks
struggle with a large stock of bad loans. Thus, the banks’ credit activity
remains constrained by the high level of non-performing loans (NPL), and
burdened by lengthy procedures for banks’ collateral execution through the
judicial enforcement of contracts. Despite a timid recovery[3]
in 2013, the total amount of credit to the economy contracted in the first six
months of 2014.

In order to address this problem, the central bank
adopted a decision in November 2013 requiring banks to develop resolution
strategies for non-performing loans. However, the parliament still needs to
adopt the law on voluntary financial restructuring known as the ‘Podgorica
approach’. This would provide a framework for out-of-court proceedings for
restructuring the debts of economically viable companies, including through
purchases of debtors’ claims supported by tax and supervisory
incentives. Meanwhile, some banks have
offloaded part of their bad loans to factoring companies. However, factoring
services are not regulated, creating legal uncertainties for some types of
transactions. Hence, the authorities initiated in September 2014 proceedings to
prepare a law on factoring with a view to improving the legal framework and
establishing an appropriate level of supervision.

Altogether, the non-banking financial sector remains
relatively small and underdeveloped. In 2013, the total annual market turnover
of the stock market represented less than 1 % of GDP, while insurance
companies’ gross premiums accounted for some 2 % of GDP. However, some
recent developments could help to expand these markets in the future. Thus, in
May 2014, Montenegro’s stock exchange recorded the first trade in government
bonds, while the Insurance Supervision Agency delivered the first licence to a
bank to engage in insurance operations.

Overall, together with other measures, the swift
implementation of the ‘Podgorica approach’ to tackling banks’ non-performing
assets will be instrumental in restoring bank lending and thereby support
domestic demand.

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

 Human
and physical capital endowment

The high unemployment rate requires the gap between
supply and demand for labour skills to be bridged by supporting labour mobility
and by making active labour market policies and education more effective.
Internal labour mobility remains a key issue. Montenegrins are reluctant to
apply for seasonal jobs (which account for some 70 % of the total offer of
employment) and employers resort instead to recruiting workers from
neighbouring countries.[4] Standard active labour
market programmes have been implemented with relatively few funds, focusing on
finding work for young people and seasonal workers. Based on evaluations, more
effective and outcome-oriented active labour market measures should be
expanded, with greater emphasis on the poorest areas of the country. There is
also a need to increase the quality of education, particularly vocational
education and adult learning.

A number of major infrastructure projects in energy,
transport and tourism are being developed in an effort to diversify and
strengthen the economy. The electric power company is in the process of
selecting the bidder for the construction of a new block for the thermal power plant.
Once completed, this plant will reinforce energy independence (including from
weather conditions) with the potential to gradually turn ‑together with two
planned hydropower plants‑ the country into a net exporter of electricity.
Meanwhile, construction works for the electricity interconnection with Italy
and the reinforcement of the transmission grid are ongoing. In June 2014,
concession contracts for building 10 small hydropower plants were signed. On
transport infrastructure, in May 2014 the government adopted a law on the
Bar-Boljare highway, and in September, the Chinese Exim Bank approved the loan
for this project, providing for construction work to start by the end of 2014.
The container and general cargo terminal in the port of Bar started investing
in new equipment. Construction of two large tourist resorts started at the end
of 2013, and concessions for developing new ones are at different stages of
development.

Montenegrin institutions have started to participate
more actively in international programmes run by the EU and in bilateral
cooperation with EU Member States. The funds allocated to research and
development (R&D) programmes increased in 2014; a centre of
excellence in bioinformatics (BIO-ICT) began operations in July 2014 and plans for the establishment of a science and
technology park (Technopolis) are advancing. The Ministry of Science continued
co-financing in 2014 the second research year, counting with 104 national
projects, although total R&D financing (at some 0.5 % of GDP) still appears
modest. Moreover, private sector participation in R&D remains low.

Overall, further efforts are required on research,
development and innovation to strengthen the competitiveness of domestic
companies as well as on building the necessary infrastructure to support
sustainable expansion of the economy. Pursuing education reform to reduce the
skills gap, strengthening active labour market policies, and introducing more
flexibility in the labour market through distinct collective agreements for the
public and private sectors are essential to reduce unemployment.

Sector
and enterprise structure

The structure of the economy has changed in the last
decade. It is no longer driven mainly by industrial production — metallurgy, in
particular — but by the service sector, mainly tourism, together with
transport, retail sales, and to a lesser extent, construction and energy
production. While the restructuring of the aluminium industry remains
uncertain, the renovation of the steel mill by its new owner is well underway.
The company, acquired in May 2012 following bankruptcy by its former owners,
has invested in new machinery and, on completion — planned within two years —
production capacity is expected to increase substantially. Furthermore, the new
owner is in the process of procuring two other companies; a machine builder and
a foundry located next to the steel mill. In the network industries, various
services of the port of Bar have been privatised. The railways and Montenegro
Airlines are being restructured and listed — for several years now — for
privatisation. In the energy sector, the state remains the major shareholder in
the electric power company EPCG, and increased its share by two percentage
points to 57 % after the company’s tax arrears were converted into equity
in July 2014. However the influence of the state remains contractually limited
as the privatisation contract — by which an Italian investor acquired a
participation of more than 40 % — also assigned the management rights to
the company. The state also retains a majority stake (55 %) in the
electricity transmission system operator CGES.

Public-sector support schemes for small and medium-sized
enterprises (SMEs) remain limited. The — de facto — development bank of
Montenegro (the Investment and Development Fund), provides support through a
variety of instruments, mainly credit lines, but also credit guarantees,
factoring, and to a lesser extent, support for start-up businesses, export
promotion programmes and studies. However, the fund’s financial capacity to
sustain all these activities appears modest (around 1 % of GDP per year).
The government is also supporting the economic development of the less
developed regions. It has adopted development plans for six municipalities, set
up two new business zones, and provided incentives for five industrial clusters
dealing with agro-food and forestry products. In addition, the government
continued the efforts to reduce the informal economy by stepping up checks on
excise goods, retail trade, and labour.

Overall, the economy is going through a transformation
process, reinforcing the services and energy sectors while older industries
like metallurgy and transport are being restructured.

State
influence on competitiveness

The aluminium conglomerate has severely drained public
funds. Between its privatisation in 2005 and its recent liquidation in June
2014, KAP cost the government some € 350 million in state guarantees and
subsidies for electricity, in addition to unpaid taxes and social security
contributions. The total amount of state aid granted in 2013 reached 3 %
of GDP compared to 1.3 % a year earlier. The activation of state
guarantees accounts for a substantial share of this aid in the last two years.
The general government budget foresees a substantial decline in state aid for
2014, planning 0.6 % of GDP for subsidies in addition to 0.3 % of GDP
for state guarantees ‑already disbursed‑ in the first half of this year.
However, other forms of state support, apart from direct budgetary transfers,
are also available, either from the Investment Development Fund, or through
grants and loans for agricultural producers. Investors may also benefit from
tax exemptions (usually releases from municipal utility fees while premises are
under construction). In addition, for some very large projects of strategic
importance, ad hoc measures may be adopted to help the investor, like the law
on the Bar-Boljare highway, granting exemption from VAT and custom duties. Overall,
after the liquidation of the former aluminium conglomerate, the allocation of
state aid funds has dropped markedly.

Economic
integration and convergence with the EU

Montenegro remains a very open economy. In 2013, the
total trade of goods and services was close to 104 % of GDP, albeit down
from 113 % the year before. Exports of goods and services totalled 42 %
of GDP in 2013,
according to the latest national data.
Merchandise exports to the EU represented 41 % of Montenegro’s total
exports compared with 49 % to CEFTA countries, while goods from the EU
remain predominant, accounting for 44 % of total imports compared with 39 %
from CEFTA. In services and foreign investment, Russia remains Montenegro’s
single most important partner, accounting for 28 % of tourism stays and of
FDI inflows. The EU accounts for 20 % of tourism and 39 % of foreign
investment, while CEFTA’s contribution stands at 36 % of the tourism
total, but only 4 % of FDI inflows. Since 2011, Montenegrin exports have
gained some marginal competitiveness as wages have continued to contract in
real terms. Overall, further efforts are still necessary to strengthen
export capabilities and the integration of Montenegrin businesses in the common
market.

4.
Ability to take on the obligations of membership

This section
examines Montenegro’s ability to take on the obligations of
membership — that is, the acquis as expressed in the Treaties, the
secondary legislation and the policies of the Union. It also analyses the
country’s
administrative capacity to implement the acquis. The analysis is
structured according to the list of 33 acquis chapters. In each sector,
the Commission’s
assessment covers the progress achieved during the reporting period, and
summarises the country’s overall level
of preparation.

4.1.
Chapter 1: Free movement of goods

As
regards horizontal measures, the strategy and action plan for
introducing free movement of goods have been prepared but not yet adopted. The
coordination role and powers of the Department for Quality Infrastructure have
been strengthened in some respects. In contrast, budgetary resources have
declined over the last few years. More work is needed to ensure the functioning
of a contact point dealing with World Trade Organisation (WTO) and EU technical
regulations.

As regards standardisation,
11 393 standards were adopted, 26 % of which are harmonised
standards, and 15 technical committees were established. Further work is needed
to meet all membership criteria of the European Committees for Standardisation
and for Electrotechnical Standardisation (CEN/CENELEC). Preparations for membership
in the European Telecommunications Standards Institute are at an early stage.
The number of accredited conformity assessment bodies increased to 21
but remains low. Montenegro’s 2014-2018 accreditation strategy was
finalised in March but is still awaiting adoption. A formal application to sign
the European Cooperation for Accreditation Multilateral Agreement has not yet
been submitted.

As
regards metrology, the Bureau of Metrology calibration laboratories for
length, mass and temperature were accredited in March. Three other laboratories
— for time and frequency, pressure, and electric quantities — are preparing for
accreditation. In January, a regulation on fixed storage tanks entered into
force.

In
the area of market surveillance, parliament adopted amendments to the
law on market surveillance in July. Rulebooks for recording inspections and for
fees for phytosanitary inspections were also adopted in March. In 2013, 24 512
dangerous products were identified, of which 9 384 high-risk items have
been banned from the market.

As regards ‘Old
Approach’ product legislation, three rulebooks on textiles, footwear, and
crystal glass were prepared but have not yet been adopted.

As regards ‘New
and Global Approach’ product legislation, parliament adopted the new law on
construction products in March. The rulebooks on low voltage equipment and on
lifts were adopted in January. Amendments to the law on explosive materials
were adopted in July. The rulebooks on measuring instruments and on
non-automatic weighing instruments were found to comply with the EU acquis
on European Conformity (CE) marking. The rulebook on radio and
telecommunications terminal equipment and on electromagnetic compatibility
still needs to be aligned in this regard.

In
the area of procedural measures, in March the government adopted the
2014-2018 strategy for integrated border control and a five-year action plan.

Conclusion

There
has been limited progress to align the legislation and build up implementation
capacity in the area of free movement of goods, but work is ongoing. Montenegro
needs to strengthen its capacity, coordination and ownership in order to
implement the ambitious harmonisation programme and ensure the implementation
of newly adopted EU legislation. The limited resources of all quality
infrastructure bodies are an issue of concern. Preparations in this area are
relatively advanced.

4.2.
Chapter 2: Freedom of movement for workers

In
the area of access to the labour market, the current legislation still
requires EU nationals to obtain work permits.

Administrative
capacity for the coordination of social security systems still requires
strengthening. Negotiations on bilateral social security agreements with
Slovakia and Bosnia and Herzegovina progressed further.

Training on the European
Health Insurance Card took place in March 2014.

Conclusion

There
has been limited progress in the field of freedom of movement for workers. A
number of important adjustments to Montenegrin legislation are necessary to
align it with EU rules on access to the labour market. Sustained efforts are
also required in particular to develop administrative capacity for the
coordination of social security systems. Preparations in this area are still at
an early stage.

4.3.
Chapter 3: Right of establishment and freedom to
provide services

With
regard to the right of establishment, electronic company registration is
not yet fully available. Activities on streamlining procedures for issuing
construction permits at local one-stop-shops further continued.

As regards
freedom to provide cross-border services, preparations for transposing the
Services Directive continued.

Some of the
implementing legislation for the law on postal services was adopted. The
postal service (Posta Crne Gore) is still planned for privatisation in
2014. The administrative capacity of the National Regulatory Authority remains
unchanged but is sufficient.

In the field of mutual
recognition of professional qualifications, in April the government adopted
a national plan for developing qualifications for practising regulated
professions and an action plan for 2013-2018.

Conclusion

Some
progress was made on the right of establishment and freedom to provide
services. Substantial
efforts are still needed to implement the acquis on mutual recognition
of professional qualifications and the Services Directive. Overall,
preparations are moderately advanced.

4.4.
Chapter 4: Free movement of capital

As regards capital
movements and payments, further efforts are needed to complete legislative
alignment with the acquis.

In
December, parliament adopted a new law on the payment systems to bring
legislation further in line with the acquis.

With regard to
the fight against money laundering and terrorism financing, Montenegro
adopted the 2013-2014 action plan to implement the Strategy for the Prevention
and Suppression of Terrorism, Money Laundering and Terrorism Financing
2010-2014. A new law addressing the Financial Action Task Force recommendations
in this area was adopted in July. Montenegro amended its criminal code
and drafted a new law on capital markets based on part of the Moneyval
recommendations. Interagency cooperation still needs to be strengthened. The IT
system of the Administration for the Prevention of Money Laundering and
Terrorism Financing (APMLTF) still needs to be upgraded.

Conclusion

Some
progress was achieved in the area of free movement of capital. The legal
framework still needs to be upgraded in line with Moneyval recommendations in
particular. The IT system of the APMLTF needs to be upgraded. More efforts are
needed to enhance interagency coordination and the capacity to carry out
financial investigations. Overall, preparations are moderately advanced.

4.5.
Chapter 5: Public procurement

As regards the general
principles applying to public procurement, Montenegro prepared amendments
to the law on public procurement, in view of further harmonising the
legislation with the EU rules particularly in the utilities and defence
sectors. Adoption is pending and some further harmonisation efforts will be
needed. Montenegro has to also align its legislation with the 2014 EU
procurement acquis. The process of accession to the WTO Government
Procurement Agreement was launched in November and is at an advanced stage.

As
regards the award of public contracts, the number of contracting authorities
has been reduced further. The public procurement market shrank in terms of the
number of contracts, total value, and percentage of GDP. The public procurement
administration’s capacity to enforce the law on public procurement and to
monitor the award of public contracts is improving. Annual reporting and data
collection needs to be strengthened. The quality of the procurement process and
the business communities’ awareness of the existing remedies have gradually
increased as a result of capacity-building measures. Further efforts are needed
to improve the use of framework agreements and central purchasing. The number
of public procurement inspectors increased from one to two, but the capacity of
the inspection service needs to be built up to ensure more effective control of
contract procedures and of the contracts awarded.

As
regards remedies, the 2012 annual report of the State Commission for the
Control of Public Procurement (SCCPP) was adopted by parliament in November
2013. In July, the government adopted the 2013 Annual Report. The number of
SCCPP decisions taken in 2013 rose by 30 % compared to 2012, but capacity
needs to be increased still further. Nine per cent of the decisions were
challenged in the Administrative Court. The high rejection rate of SCCPP
decisions by the Administrative Court and the rate of implementation of the
SCCPP recommendations remain issues of concern.

Conclusion

Limited
progress has been made with regard to public procurement. The efficiency and
effectiveness of the public procurement system improved but progress in this
direction needs to continue, and administrative and enforcement capacity at all
levels needs to increase. Monitoring should focus on economic impact,
effectiveness, and efficiency as well as formal requirements. Overall,
preparations in the area of public procurement remain moderately advanced.

4.6.
Chapter 6: Company law

National
legislation on company law is largely in line with the acquis.
Key outstanding issues relate to legislative alignment in the areas of
transparency, cross-border mergers and takeover bids. Following the
introduction of the electronic application for registration in May 2012, full
electronic registration of companies remains to be completed.

Regarding
corporate accounting and auditing, preparations have advanced for
initiating the World Bank project on the setting up and implementation of an
independent public oversight body for auditors and a related system of quality
assurance.

Conclusion

Little
progress was made in the field of company law. Overall, preparations remain
moderately advanced.

4.7.
Chapter 7: Intellectual property law

In
the area of copyright and neighbouring rights, the
Intellectual Property Office of Montenegro authorised the collective management
of film producers’ rights in Montenegro. Alignment with
the new acquis of the terms protection, ‘orphan works’ and collective
rights management organisations remains to be achieved.

In the area of
industrial property rights, amendments to the law on trademarks aimed at
further alignment with the acquis were adopted in March. The regulation
on the professional exam for representatives of trademarks and designs was
adopted in April. The Intellectual Property Office’s IT infrastructure is still
weak.

With regard to enforcement,
the Ministry of Economy prepared a report on the implementation of the national
intellectual property rights (IPR) strategy for 2013. Overall, enforcement in
the commercial court and customs administration is good, with the exception of
criminal prosecution. The number of cases brought before the commercial court
fell in 2013 due to the introduction of a simplified customs procedure, which
provides for seized goods to be destroyed in customs detention. The
Intellectual Property Office recruited two new staff members. Specialised
training for the office’s staff and employees of other IPR-related bodies
increased. Specialisation of first-instance judges and market inspectors is
still needed. The office cooperated with universities and SMEs to raise
awareness of the practical implications of IPR, research and innovation.

Conclusion

Some
progress was made in the field of intellectual property. Legislation
on intellectual property is largely in line with the acquis, but
further work is needed to achieve full legislative alignment, in particular
with regard to the laws on copyright and related rights, the legal protection
of industrial design, the protection of semiconductor topographies, and
patents. Coordination of all IPR-related bodies needs to be further strengthened
through the introduction of formal cooperation mechanisms. Lack of IT and human
resources are still a challenge for the Intellectual Property Office. More work
is needed on specialisation and training, and on setting up effective
enforcement mechanisms. Overall, preparations are advanced.

4.8.
Chapter 8: Competition policy

As regards anti-trust
and mergers, in February the government adopted seven by-laws regulating
block exemptions. Cases of conflicting legislation should be eliminated,
notably as regards third parties’ access to confidential information.

Montenegro’s
enforcement record has improved, particularly as regards anti-trust policy. The
fact that merger control consumes a substantial part of the agency’s resources
may jeopardise the enforcement of cases concerning cartel and abuse of
dominance. More resources need to be devoted to such cases. On abuse of
dominant position, the agency initiated one ex officio case, completed
four new cases and conducted its first dawn raid. A ruling by the administrative
and supreme courts upholding a previous agency decision on abuse of dominance,
along with agency decisions on anti-competitive agreements, contributed to
raising public awareness of competition rules and their enforcement. The agency’s
current administrative and investigative capacity is still insufficient and
needs to be strengthened. Moreover, the capacity of the judiciary to deal with
complex competition cases must be reinforced.

As regards state
aid, in March the new decree on criteria, conditions and procedures for
granting state aid was adopted, obliging the Ministry of Finance to publish all
relevant EU acquis related to state aid on a regular basis. Amendments
to the law on state aid control remain necessary, in particular on procedural
aspects, to ensure that Montenegro’s state aid procedures comply fully with the
acquis. The State Aid Control Commission (SACC) prepared a harmonisation
programme for aligning aid schemes and measures with the state aid rules. In
December, parliament adopted amendments to the laws on personal income tax and
on corporate profit tax but further alignment is still needed. Amendments to
align the business development incentive programme and the law on free zones
with the state aid rules have yet to be adopted. A new regional map of state
aid was adopted in June.

The
administrative capacity and operational independence of the SACC and the State
Aid Control Unit (SACU) still need to be strengthened and their enforcement
record improved. Progress was made with the upgrade of the SACC’s internet
site, on which its state aid decisions are published. The state aid reports for
2012 and 2013 have not been adopted yet by parliament.

The resolution
of the bankruptcy procedure of the aluminium plant KAP remains an
issue of serious concern and must be done in compliance with state aid rules.
The company is still operating and aid is still being granted in breach of SAA
obligations. The sole bid for the assets made by the privately-held firm Uniprom
was accepted by KAP’s bankruptcy administrator in February but no final
agreement has been reached on the price of electricity supplied to KAP or the
company’s future.

As
regards liberalisation, Montenegro needs to align its system with the EU rules
and redefine the scope of ‘services of general economic interest’ in its
legislation.

Conclusion

Some
progress was made on competition policy. Administrative capacity needs to be
improved, as does the independence of the state aid authorities. Compliance
with SAA state aid rules in the case of KAP needs to be urgently ensured.
Overall, preparations are moderately advanced.

4.9.
Chapter 9: Financial services

In the area of banks
and financial conglomerates, the central bank of Montenegro passed a set of
implementing decisions for the consumer credit law in October. In November,
amendments to the decision on minimal standards for management of credit risk
in banks were adopted.

In
the area of insurances and occupational pensions, the Insurance
Supervision Agency adopted several rulebooks, notably on restrictions related
to depositing and investing technical reserves funds and capital funds, on
detailed contents of books of claims and on the professional exam for working
as a certified actuary. In terms of staffing, the agency has 21 full-time
employees, excluding the president of the Agency’s Council.

No
developments have taken place on financial market infrastructure.

In the area of securities
markets and investment services, the Securities and Exchange Commission
produced several analyses, notably on the implementation of the directive on
markets in financial instruments in the Montenegrin regulatory system and on
the impact of the introduction of tax exemptions and state incentives in
voluntary pension funds. The capacity of the Securities and
Exchange Commission needs to be further upgraded.

Conclusion

There
has been some progress in the field of financial services. The Insurance
Supervision Agency strengthened its operational capacity. The capacity of the
Securities and Exchange Commission needs to be further upgraded. Substantial
efforts are needed to further align with the acquis, notably in the
insurance field. Overall, preparations are moderately advanced.

4.10.
Chapter 10: Information society and media

As regards electronic
communications and information and communications technologies, following
the adoption in July 2013 of the new law on electronic communications, the
Ministry of Telecommunications and Information Society and the Agency for
Electronic Communications and Postal Services (EKIP) adopted 48 pieces of
implementing legislation. EKIP is still required to transfer any budget surplus
to the state budget. Parliament continues to have the authority to dismiss the
entire EKIP Council in case the latter does not approve EKIP’s financial
report. In the context of the new law, EKIP re-launched an appeal against this
provision before the constitutional court. The court had dismissed the previous
case on the same provision in February. The government has abolished the
one-euro tax on all SIM cards and internet and cable connections. While
competition in mobile services has resulted in the highest mobile penetration
in the region at 160 % and over 35 % penetration of the mobile
broadband (when including 3G services), competition in fixed voice and
broadband services remains low. In 2013, fixed broadband penetration was at
14.1 % (EU average of 29 %).EKIP has paid particular attention to
broadband access and pricing. In February, an EKIP decision resulted in a
reduction in prices for fixed and mobile networks in accordance with the cost
method of accounting and separate accounting.

As
regards information society services, the law on e-government was
adopted in July. Montenegro has not yet established a legal basis for the
re-use of public-sector information. The ‘wireless Montenegro’ project is
currently providing free public wireless internet access for around 300.000
users in specific locations and its services are being further expanded to
cover new locations throughout the country. In March, parliament adopted a law
ratifying the European Convention on the Legal Protection of Services Based on
or Consisting of Conditional Access.

In
the area of audiovisual policy, the Agency for Electronic Media remains
obliged to transfer all budget surpluses to the state budget and to have its
financial and technical reports approved by the parliament. This clearly
undermines the Agency’s independence. Its overall capacity to fulfil its tasks
has been strengthened, particularly its monitoring capacity. A number of
broadcasters have not been able to pay licence fees to the agency, and the
agency filed lawsuits against them to recover revenues. The lack of or delay in
collecting revenues puts at risk the agency’s capacity to meet its mission. The
digital switchover is on track. The state public service broadcaster RTCG’s
main challenge remains financial unsustainability, with its three public
channels

Conclusion

There
has been some progress in the area of information society and media. A good
level of legal alignment has been reached. There are still concerns as regards
the independence of the EKIP and of the Agency for Electronic Media,
particularly for want of a decision by the constitutional court. The
independence of the state broadcaster RTCG is undermined by the lack of appropriate
financial resources to meet its public broadcasting and digitalisation
obligations.
Overall, preparations in the area of information society and media are
moderately advanced.

4.11.
Chapter 11: Agriculture and rural development

In the area of horizontal
issues, the amended law on agriculture and rural development and
implementing legislation on the registration of agricultural holdings were
adopted. The
strategy for agriculture and rural development remains to be adopted. Direct
support measures will need to be brought into line with the acquis, by
decoupling them from production and introducing a system of payment
entitlements.

In the area of common
market organisation, preparations are at an early stage. Efforts to develop
the olive oil sector are being made. A law on olive growing remains to be
adopted.

As regards rural
development, the Directorate for payments in the Ministry of Agriculture
and Rural Development is set up to undertake its duties for the Instrument for
Pre-accession Assistance for Rural Development (IPARD) agency. A separate
budget was approved for the directorate, which consists of five departments
responsible for implementing IPARD. Thirty-six members of staff are assigned to
setting up systems in the payments sector. Clear individual responsibilities
have been assigned and a budget for additional staff allocated. Permanent staff
members need to be recruited in line with the organisation chart to ensure
continuity. The premises for the future IPARD agency were designated but still
need to be renovated and furnished. The programme has not yet been adopted.
Review of the accreditation package by an external audit company has been
finalised. Major findings for the IPARD Agency and the Managing Authority are
mostly related to human resources management. Further preparation for
accreditation of operating structures will depend on the audit findings.
Capacity building for the payments sector, the rural development sector and the
National Fund within the Ministry of Finance is on track.

In the field of quality
policy, Montenegro’s law on designations of origin, geographical
indications and designations of traditional specialty agricultural products and
foodstuffs is broadly in line with the acquis. Implementing legislation
needs to be adopted and particular attention should be paid to implementation.

With regard to organic
farming, the law on organic production was adopted in December.

Conclusion

There
has been some progress on agriculture and rural development policy. The
agriculture and rural development national strategy needs to be adopted and
additional capacity building is required to ensure future implementation of the
IPARD programme and to develop overall capacity for implementing the common
agricultural policy. Overall, alignment with the acquis is at an early
stage.

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

As
regards general food safety, a strategy for the transposition and
implementation of the acquis in this area remains to be adopted. The
implementing legislation on the method and sampling procedure for laboratory
testing of food of plant origin in primary production was adopted in February.
The revised law on food safety remains to be adopted. Capacity building is on
track in the fields of controls on contaminants in feed and food; EU
legislation on feed; veterinary and plant health inspection; food composition
and information; investigation of foodborne outbreaks; food hygiene and
controls; and veterinary and food safety control checks at border inspection
posts.

In the area of veterinary
policy, the implementing legislation on prevention, detection, control and
eradication of classical swine fever was adopted in March. The multiannual
programme for the eradication of rabies continued. The 2013 programme of
mandatory animal health protection measures was implemented and the programme
for 2014 adopted. Veterinary control checks at border inspection posts are on
track and construction works have started at the border inspection post in the
port of Bar, to facilitate checks on animal products (not live animals). The
extension of the animal identification and registration system to pigs and the
establishment of the monitoring system of live bivalve molluscs are on track.

With
regard to the placing on the market of food, feed and animal by-products, preparations
for the classification of all food
establishments and all establishments handling animal by-products, based on the
acquis, have started.

In the area of food
safety rules, the monitoring programmes for pesticide residues in and on
food of plant and animal origin and for nitrate in plant foods and leafy
vegetables for 2014 were published, as was the list of active substances
permitted for use in plant protection products. The 2013 programme for
pesticide residues has been implemented.

In the area of phytosanitary
policy, amendments to the law on plant protection products were adopted in
April, as was implementing legislation on several issues, such as control and
eradication of some harmful organisms, inspections, the register of plant
protection products, licences for scientific research and the register of
agricultural plants. The 2013 programme of phytosanitary measures was
implemented. The programme of phytosanitary measures and the action
plan for the eradication and control of red palm weevil was adopted
and published and implementation started. Amendments to the law on plant health
protection remain to be adopted.

Conclusion

There
has been some progress in the field of food safety, veterinary and
phytosanitary policy. Further efforts are needed on all
aspects of this policy area, in particular the conclusion of the strategy for
the transposition and implementation of the acquis. Overall,
preparations remain at an early stage.

4.13.
Chapter 13: Fisheries

Montenegro
has started preparing a strategy and action plan on the EU requirements and
future implementation needs under this Chapter. Amendments to the law on marine
fishery and mari-culture are under preparation. Montenegro has adopted a number
of implementing legal acts.

In the area of
inspection and control, the capacity of the fisheries inspectorate remains
very limited. Substantial work is still needed to ensure systematic processing
of data from logbooks, adequate registration of catches and landings, the use
of sales notes and systematic cross-checking between catch composition and
logbook records.

Conclusion

No
progress was made in the field of fisheries. The national
strategy and action plan need to be adopted. Work is needed
to strengthen administrative capacity, align legislation with the acquis
and implement EU standards, particularly in the areas of resource and fleet
management, inspection and control, market policy, structural policy and state
aid policy. Overall, preparations in this area are at an early stage.

4.14.
Chapter 14: Transport policy

In
the area of road transport, amendments to the law on road transport,
adopted in March, provided for further alignment with the acquis relating
to the road transport market, but full alignment still needs to be achieved.
Montenegro adopted the action plan for implementing the road safety strategy
for 2014 and rulebooks for applying the law on road traffic safety. Further
efforts are needed to improve technical and administrative capacity to ensure
adequate implementation of the relevant road safety acquis in connection
with roadside inspections, vehicles roadworthiness tests, driving licences,
professional drivers’ qualifications and infrastructure safety. Legislation
aimed at alignment with the acquis on the transport of dangerous goods
was adopted in July.

As regards rail
transport, the new law on the safety, organisation and efficiency of
railway transport was adopted in December, providing further alignment in the
area of safety and interoperability. Preparations are being made to set up a
joint national body for independent investigation of accidents in air, railway
and maritime transport. The business plan for 2013 -2017, drafted by the
Railway Directorate, has yet to be endorsed by the government due to financial
constraints.

On air
transport, a memorandum of understanding on setting up a functional
airspace block (FAB) was signed in November between the Montenegro’s Agency for
Civil Aviation, Serbia’s Directorate of Civil Aviation and the Serbia and
Montenegro Air Traffic Services. Further work to ensure compliance with
European Common Aviation Area (ECAA) Agreement requirements needs to be carried
out, especially regarding consumer protection (air carrier liability and
passenger compensation for denied boarding and flight cancellation). The
National Commission for Investigation of Accidents and Serious Incidents in
Civil Aviation is still not fully operational due to financial constraints.
Further work is needed to increase and improve incident reporting as part of
safety management. The government privatisation plan for 2014 includes
Montenegro Airlines.

As
regards maritime transport, the new law on maritime safety and security,
further aligning the national legislation with the acquis, entered into
force in January. Amendments were made in June to the law on the prevention of
sea pollution from vessels. The amendments aim to further align the
legislation with the relevant international conventions and the acquis
on port reception facilities for ship-generated waste and cargo residues. The
new rulebook on qualification, training and authorisation of the seafarers
serving on ships was adopted in November. Montenegro is now participating in
the European Union Long-Range Identification and Tracking Data Centre. (EU
LRIT). Montenegro agreed with EMSA (European Maritime Safety Agency) on a
roadmap for the integration of Montenegro into the EU LRIT Data Centre. The
European Commission has approved Montenegro’s participation in CleanSeaNet
(CSN). Montenegro is active in identifying and tracking sea surface polluters.
Further work is still needed to align the legislation with the EU acquis
on reporting formalities for ships. The availability of properly qualified,
trained and authorised officers, in particular harbourmasters, remains a major
challenge.

Regarding
intermodal transport, Montenegro adopted in June a new law on combined
freight transport. The country needs to further develop as a priority a
balanced intermodal environmentally-friendly and competitive transport and
mobility system.

Conclusion

Overall,
some progress has been made in the area of transport policy. Further efforts
are needed to implement the road safety acquis effectively, and to
establish and operate an independent accident investigation body for air,
maritime and rail transport. Montenegro has to ensure further investment in all
transport areas and further harmonisation with the EU’s safety standards and
interoperability. Overall, preparations in the area of transport policy are
moderately advanced.

4.15.
Chapter 15: Energy

Montenegro
adopted in July its Energy Development Strategy for the period to 2030.

In the area of security
of supply, Montenegro made no progress in implementing EU
requirements for mandatory oil stocks.

As
regards the internal energy market, the Energy Regulatory Agency adopted
further implementing legislation necessary for the functioning of the energy
market. The distribution company is still part of the Montenegrin Electric
Power Company (EPCG). There has been no progress with regard to the development
of a gas market in Montenegro. Montenegro has yet to accede to the Energy
Charter Treaty. Montenegro continued preparations for alignment with the
Third Energy Package by 1 January 2015, as required under the Energy Community
Treaty.

As regards renewable
energy, Montenegro’s national target for the share of energy from renewable
sources in gross final consumption of energy in 2020 is 33 %. Montenegro
has not yet adopted a National Renewable Energy Action Plan to meet this
target. In line with the energy law, the government adopted a decree in January
2014 on incentives for electricity production from renewable energy sources and
co-generation. Measures to regulate biofuels and promote renewable energy in
transport have yet to be introduced. Construction work on small hydropower
plants on eight watercourses progressed. One wind power plant obtained the
building permit, while a second one still requires one prior to the launch of
the construction works. The government adopted the 2013-2015 action plan for energy
efficiency, and annual operational plans for energy efficiency for public
institutions. Administrative capacity for the promotion of energy efficiency
remains limited. The new law on energy efficiency has not yet been adopted.
Full alignment with the acquis on the labelling and energy performance
of buildings has yet to be achieved. Projects to improve the energy efficiency
of public buildings are ongoing.

As
regards nuclear energy, nuclear safety and radiation protection, the
government adopted the sixth, seventh and eighth national report and
declaration on nuclear materials in November, February and May respectively.
The government adopted the first biannual report on implementation of the
strategy for protection from ionising radiation, radiation safety and
radioactive waste management. Montenegro has not yet acceded to the Convention
on Nuclear Safety. The focus of administrative capacity building was on
training existing staff.

Conclusion

Some
progress was made on energy. Preparations for alignment with the third Energy
Package need to be stepped up. Legislation on oil stock reserves and the
renewable energy action plan still need to be adopted. Preparations in the area
of energy remain moderately advanced.

4.16.
Chapter 16: Taxation

In
the area of indirect taxation, the new law on excises remains to be
adopted. A new methodology regarding the calculation of the amount of the
weighted average selling price of cigarettes was applied as from January.
Further alignment is required, both on the value added tax (VAT) and on excises.

In the field of direct
taxation, the following laws were amended in January: the law on personal
income tax extending the tax on gross monthly salaries over 720 € to 15 %
for another year to comply with fiscal consolidation measures; the law on
corporate taxes regarding tax exemptions on corporate and personal income for
activities in less developed municipalities to further comply with state aid
rules. The law on ratification of the agreement between Montenegro and
Azerbaijan on the avoidance of double taxation of income tax was adopted in
October. The government announced that plans for the withdrawal of the bank
secrecy have been agreed so that the required legislative amendments are
scheduled to enter into force in 2017.

As regards operational
capacity and computerisation, the business strategy for the Tax
Administration for the period 2014-2018 remains to be adopted. The new rulebook
on the internal organisation of the Ministry of Finance established a new tax
police department in the Tax Administration with the aim to strengthen the Tax
Administration’s capacity to fight tax evasion, money laundering and other
economic crime. The tax police department still needs to be staffed. The Tax
Administration continues to publish quarterly the list of tax debtors which is
now expanded to the 200 largest tax debtors covering also debts arising from
excise tax. The Tax Administration introduced electronic VAT registration and
electronic submission of VAT returns. The capacity of the Tax Administration’s
IT department has been increased by three new members of staff. A comprehensive
IT strategy, including EU accession requirements, should be adopted before the
end of the year.

Conclusion

Limited
progress has been made in the area of taxation. Legislation in line with the EU
acquis should be gradually adopted. The business and IT strategies need
to be adopted. The capacity of the Tax Administration and IT functions and
preparations for accession need to be further strengthened. Further action is
needed on administrative cooperation and mutual assistance where Montenegro
needs to start preparing for alignment. Montenegro is
moderately advanced in this area.

4.17.
Chapter 17: Economic and monetary policy

As regards monetary
policy, Montenegro does not have standard monetary policy tools at its
disposal, as it uses the euro as legal tender. This leaves fiscal policy as the
main effective policy instrument. The practice of monetary financing and
privileged access by the public sector to financial institutions are not in
line with the EU acquis.

In
the area of economic policy, Montenegro submitted its third
Pre-accession Economic Programme to the European Commission in January, covering
the period 2014-2016. The programme is de facto incorporated in the
national budget planning exercise, using the same macroeconomic and fiscal
frameworks as the country’s annual budget. In April, parliament adopted a new
budget and fiscal responsibility law, which introduces numerical fiscal rules,
such as upper limits for the budget deficit and public debt of 3 % and 60 %
of GDP respectively, which represents partial alignment with Directive 85/2011
on the requirements for budgetary frameworks. The government further pursued
fiscal consolidation, but the challenge of fiscal sustainability and taming
growing public debt remains. While the analytical work has been further
improved, continued efforts are needed to complete all statistical requirements,
including alignment with the European System of Accounts standards (ESA 2010)
regarding the general government deficit and debt levels and the submission of
fiscal notifications. Capacity for economic policy formulation and coordination
needs to be strengthened.

Conclusion

There
was some progress on economic and monetary policy. Monetary financing and the
public sector’s privileged access to financial institutions require additional
alignment. Montenegro’s present use of the euro, decided by the Montenegrin
authorities in exceptional circumstances, is fully distinct from membership of
the euro area. Capacity for economic policy formulation and coordination needs
to be strengthened. Overall, alignment in the area of economic and monetary
policy is moderately advanced.

4.18.
Chapter 18: Statistics

As
regards statistical infrastructure, Montenegro adopted in January the
2014-2018 strategy for official statistics, the medium-term statistical
programme for 2014-2018 and the 2014 annual plan for statistics. The professional
independence of the national statistical office, Monstat, was boosted with the
appointment of the Director for a five-year term. No progress was made as
regards the office’s staffing and management capacity, which reached critically
low levels. Some progress was achieved on coordination as regards agricultural
statistics as well as economic and financial statistics following the signature
of the memorandum of understanding with the Central Bank. Cooperation between
official statistics producers, particularly with regard to government
finance statistics, macroeconomic and business statistics, needs to be
significantly enhanced.

In the area of classifications
and registers, Monstat improved the business and agricultural registers and
issued a publication on relevant statistical classification in January
providing detailed information on four statistical classifications. In June,
Montenegro adopted the International Standard Classification of
Education (ISCED).

In the area of sectoral
statistics, concerning national accounts, Monstat has started preparations
for introducing ESA 2010 focusing on capital expenditure, R&D, and
governmental investment in military equipment. As regards agricultural
statistics, Monstat harmonised the livestock and crop statistics and started providing data on milk and dairy production.
In agro-monetary statistics, methodological improvements were introduced as
regards agricultural price indices. In business statistics, Monstat compiled a
publication on business operations in Montenegro for 2012, started publishing
industrial turnover indices as a key short-term indicator in September 2013 and
improved the tourism statistics. In December, Monstat started providing
maritime statistics. In the area of social statistics, the SILC (Statistics on Income and
Living Conditions) survey was harmonised with Eurostat methodology. In
December, Monstat published the last release from the 2011 population and
housing census. Overall, transmission via eDamis is done for 20 domains and 29
subdomains but efforts to send more statistical data need to be intensified.

Conclusion

Progress
was achieved in the area of statistics, particularly in harmonising the
statistical methodology with the EU standards. Concerning national accounts,
significant efforts still need to be invested to ensure the alignment with ESA
2010. The key concerns remain Monstat’s inadequate human and financial
resources and the need for coordination with the other producers of official
statistics. Overall, preparations in this area are moderately advanced.

4.19.
Chapter 19: Social policy and employment

Amendments
to the labour law to regulate the rights of employees in the event of
bankruptcy were adopted in July. Implementation and enforcement of the
legislation in this area remains a challenge.

The law on
occupational health and safety at work aiming at further aligning with
the acquis was adopted in July. The capacity of the Directorate for
Inspection Affairs, including the labour inspectorate, remains weak. The
Department for Labour Inspection is not sufficiently mobile. Risk assessment at
the workplace is rare.

In the field of social
dialogue, the general collective agreement entered into force in March.
Amendments to the law on the social council were adopted by parliament in
December, allowing the council’s secretariat to be set up. It has been given a
budget to build up its technical and administrative capacity. Bipartite and
autonomous social dialogue remains weak, especially in the private sector and
at corporate level. Social partners still lack capacity.

In the area of employment
policy, a 2014 action plan was adopted in December to implement the
2012–2015 national strategy for employment and human resources development.
Montenegro is preparing its first employment and social reform programme, with
a view to identifying and addressing key challenges in employment policy and
social inclusion. A kick-off meeting took place in May 2014. The labour
market situation remains critical, with some signs of slight recovery as more
vacancies are being advertised through the employment agency. According to the
EU Labour Force Survey, the unemployment rate remained high at above 19 %.
Standard active labour market programmes have been implemented with relatively
small funds, focusing on the employment of young people and of seasonal
workers. An action plan on youth employment for 2014 was adopted in November.
The promotion of adult education, especially in the private sector, is slow.
Development and employment gaps between the north and other parts of the
country remain to be addressed. There are still many implicit advantages to
take up undeclared work over regular employment. Intensive efforts have been
made in order to decrease this phenomenon, especially on the coast and in
Podgorica. In general, developing reliable data and statistics remains an
outstanding issue in several areas, in particular for labour market analysis.

As regards
preparations for the European Social Fund, the administrative capacity
of the operating structure for IPA component IV has been stepped up through
seminars, workshops and on-the-job training. Preparations for implementing the
operational programme for human resources development, including preparations
for conferral of management powers, are on track. Staff training in the Audit
Authority is insufficient, including training on working methods. There is a
lack of coordination between ministries and the relevant public services. (See
also Chapter 22 — Regional policy and coordination of structural instruments)

In
the area of social inclusion, implementing legislation for the law on
social and child protection has been adopted; a government decree was adopted
in February with a view to setting up an institute for social and child
protection. A new action plan to implement the strategy for improving the
position of Roma and Egyptians in Montenegro was adopted in April. As regards
de-institutionalisation, the number of day-care centres for children with
disabilities has increased to eight. Concerning people with disabilities, the
government adopted an action plan for the strategy for integration of people
with disabilities 2014–2015 in March. Overall access to buildings for people
with disabilities, including those in the areas of education and medical
facilities, remains limited. None of the thirteen priority buildings in public
use have so far been adapted. The law prohibiting discrimination against people
with disabilities still has shortcomings. Financial support paid to employers
for employing people with disabilities is insufficiently protected against
misuse.

In
the field of social protection, the process for introducing the Social
Card / Social Welfare Information System is continuing smoothly. Implementing
legislation related to cash benefits and social welfare procedures was adopted
in December with a view to contributing to the reform of social care. In
December, the law on contributions for compulsory social insurance and the law
on pensions and disability insurance were amended by parliament. The
introduction of standards for service delivery, and professional empowerment of
service providers to meet them, is not yet complete. Administrative and fiscal
decentralisation of social services needs to be improved. Funded pension
schemes based on mandatory savings have not yet been introduced. Further
measures are needed to make the pension system more adequate and sustainable.
In the health care sector, equal access to health care services also needs to
be ensured for members of socially disadvantaged groups.

Amendments
to the anti-discrimination law were adopted by parliament in March to
further align it with the acquis. There are still some shortcomings in
its scope (concerning racial discrimination) and provision for penalties. Training
on and promotion of anti-discrimination measures have continued, particularly
at local level. The administrative capacity of the council
for protection against discrimination has increased, but its work still lacks
transparency and openness. Judges’ and prosecutors’ awareness of the
anti-discrimination acquis needs to be further improved. Attention
should be paid to making sufficiently comprehensive statistical data available
in order to allow monitoring of discrimination on the basis of different
grounds. (See also Chapter 23 — Judiciary and fundamental rights)

In
the field of equal opportunities, training for civil servants and state
employees continued. The legal framework needs to be aligned with the EU acquis.
There was limited strengthening of financial and human resources to ensure that
gender equality mechanisms work well, particularly in rural areas, but also
that the gender equality action plan is implemented. Women remain
underrepresented in the labour market. Gender-segregated statistical indicators
need to be provided. (See also Chapter 23 — Judiciary and fundamental rights)

Conclusion

There
has been some progress in the area of social policy and employment. Resolute
action is needed to further advance legal alignment and to address the critical
labour market situation. Work should be stepped up as regards poverty reduction
and improving the inclusion of the Roma and Egyptian population, and people
with disabilities and other vulnerable groups. Proper and transparent social
dialogue needs to be ensured. Administrative capacity needs to be strengthened
across all sectors. Overall, preparations in the area of social policy and
employment are still at an early stage.

4.20.
Chapter 20: Enterprise and industrial policy

In the field of enterprise
and industrial policy principles, there is a
need for enhanced sector coordination and ownership of the process, and
strengthened administrative capacity. Montenegro is implementing the Small
Business Act and has made progress, showing a good performance in
the area of entrepreneurship and insolvency procedures. Registering new
companies has become easier with the improved online registration system and
speedier land registry procedures. Administrative procedures for issuing
permits and licences remain costly and time-consuming.

In
the area of enterprise and industrial policy instruments, the Ministry
of Economy began implementing the 2012-2016 support programme for the
development of clusters in the north of the country and in less developed
municipalities. The agreement on Montenegro’s participation in the EU programme
on Competitiveness of Enterprises and Small and Medium-sized Enterprises was
signed in June. Administrative capacity and support measures need to be
strengthened to make full use of such programmes.

In
the area of sector policies, in January the government adopted the
2014-2018 strategy for the development of the manufacturing industry. The
government also adopted the 2014 action plans for the strategy on SMEs and the
promotion of micro-level competitiveness.

Conclusion

Limited
progress has been made in the area of enterprise and industrial policy. The
lack of administrative capacity and fragmented strategies impede the
effectiveness of the instruments that have been put in place. Overall,
preparations in this area are moderately advanced.

4.21.
Chapter 21: Trans-European networks

In
the area of trans-European transport networks, Montenegro has continued
to participate in work under the memorandum of understanding on the development
of the South-East Europe Regional Transport Network. Montenegro should focus on
the development and prioritisation of projects on the routes defined in the
indicative extension of the TEN-T to the Western Balkans region. As
regards the Bar-Boljare motorway project (SEETO route 4), further steps were
taken to start construction on the priority section from Smokovac to Mateševo.
Montenegro and the Chinese companies involved signed a contract for the design,
construction, and supply and installation of equipment in February. Montenegro
and China signed an amended intergovernmental agreement, ratified by the
Montenegrin Parliament in June 2014, which provides the legal basis for the
contracts for this project. The financial agreement has yet to be concluded,
and construction works have not yet commenced.

As
regards the privatisation of the port of Bar, in December parliament approved
the act awarding concessions for the reconstruction and commercial exploitation
of the harbour terminals for a period of 30 years. The concession and sale
agreements, with a Turkish company acquiring 62 % of the state share in
the container and general cargo terminals, were concluded in January.

In
the area of trans-European energy networks, construction of the
underwater interconnection cable with Italy continues. The implementation of a
400 kV overhead line linking the coast (Lastva) with the north of the country
(Pljevlja) has advanced further. As regards gas, in December Montenegro signed
a memorandum of understanding with Azerbaijan, Albania, Bosnia and Herzegovina
and Croatia on cooperation in the construction of the Ionian-Adriatic Pipeline
(as a branch of the Trans-Adriatic Pipeline).

Conclusion

Some
progress has been made in the area of trans-European networks. Significant work
still remains to be done on improving road and rail links. The electric
transmission system requires further upgrading. Overall, preparations in this
area remain moderately advanced.

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

As regards the
legislative framework, the decision assigning responsibilities for
decentralised management of the pre-accession funds was published in October.
Amendments to the decree on decentralised management of IPA components I-IV
were adopted in December. The relevant national policies (competition,
state aid, public procurement, environmental protection, transport,
anti-discrimination, gender equality) are not yet fully in line with EU
standards and requirements.

As
regards the institutional framework, the final report of the conferral
of management audit for IPA components III and IV was formally accepted by the
national authorities in January 2014. Updated versions of the manuals of
procedure were approved in December 2013. The Commission Decisions for
conferral of management for Component III and IV were adopted.

The administrative
capacity of the operating structures for IPA components III and IV was
reinforced with the appointment of two heads of department for the management
of EU funds. Staffing
and longer-term employment prospects in all the operating structures improved.

In the area of programming,
for
component III, preparations for a major project application for environment and
for one operation identification sheet for transport started with the
assistance of JASPERS. Project preparation and strategic
planning capabilities still need to improve in order to secure full absorption
capacity for the programme. Regarding Component IV, six operation
identification sheets were drafted. Further improvements in project preparation
and strategic planning capabilities are required to achieve better quality and
compliance with the operational programme. Procurement documents, draft
communication action plans and guidelines for applicants are under preparation.

In
the area of monitoring and evaluation, the project management and
accounting systems were tested with a view to compliance with international IT
security standards. The development and installation of a comprehensive
computerised management information system is still at an early stage.

As
regards financial management, control and audit, the head and deputy
head of the Audit Authority were appointed in December. The authority has moved
to new premises. The capacity of the authority and of the internal audit units
in the line ministries needs to be enhanced. A new audit
methodology was prepared. A decision setting up the coordination body for
monitoring and preventing fraud and irregularities (the anti-fraud coordination
service (AFCOS) network) was adopted in December.

Preparations
for a detailed action plan and timetable for meeting the requirements for
future use of EU structural funds have started.

Conclusion

Good
progress has been made as regards the establishment of necessary structures for
management of pre-accession funds, where the conditions for conferral of management
powers have been created. Preparations as regards the management
of the future European Structural and Investment Funds are at an early stage.

4.23.
Chapter 23: Judiciary and fundamental rights

As
part of the ‘new approach’ on the rule of law, and in line with the negotiating
framework, this chapter was opened in December 2013 after Montenegro produced a
detailed action plan. Interim benchmarks have been set for this chapter based
on the action plan. The implementation of the action plan is assessed below.

Judicial system

In the area of
judicial reform, the action plan is generally being implemented on time. Key
reforms are still in progress. They need to fully reflect European standards
and best practices, and to be understood and supported by all stakeholders to
be effective.

The new judicial
reform strategy for 2014-2018 was adopted in April. The strategy reflects and
complements the main reform priorities identified and addressed by the action
plan.

Independence
of the judiciary

Following
alignment of the relevant legislation with the constitutional reform of July
2013, key judicial and prosecutorial officials have been elected. In December,
parliament elected judges to the constitutional court. The election and
appointment procedures for the reformed Prosecutorial Council and the Judicial
Council were completed in February and June respectively. In July the President
of the Supreme Court was elected in line with the new procedures; the previous
office-holder, who occupies this post since 2007, has been re-appointed.

Parliament
failed in its first attempt to elect the Supreme State Prosecutor. The required
two thirds (first round of voting in December) and subsequently three-fifths
majority (second round of voting in March) was not reached. In April, a third
round of voting, requiring a three-fifths majority, was also unsuccessful. The
legal basis for this third round of voting were new provisions introduced in
the parliament’s Rules of Procedure in October 2013. In July the constitutional
court declared these provisions unconstitutional. A new procedure for election
of the Supreme State Prosecutor was launched in May; in the first round of
voting held in July the candidate proposed by the Prosecutorial Council did not
receive the necessary majority. In October, parliament
finally appointed the new Supreme State Prosecutor.

On the basis of
the constitutional amendments and the amended law on the state prosecutor’s
office, the Prosecutorial Council completed the procedure for selecting the
heads of state prosecutor’s offices. All former office-holders who applied for
the position were confirmed. The appointment of state prosecutors (former
deputy state prosecutors) needs to be carried out in line with European
standards. A decision of the Constitutional Court on the constitutionality of
the (re)selection of prosecutors is pending.

The systems of
recruitment and career development of judges and prosecutors still leave room
for undue influence affecting the independence of the judiciary. Work on the
legislative basis for introducing a single, countrywide recruitment system for
judges and prosecutors, a system of voluntary horizontal mobility and a new
system of promotion of judges and prosecutors and of periodic professional
assessment of their performance is at an advanced stage.

Independent and
impartial functioning of the Judicial and Prosecutorial Councils needs to be
ensured, and their staffing and budget increased. The selection criteria for
appointments and promotions continue to be vague and magistrates are not
assessed on the basis of clearly defined indicators. The grounds for decisions
are not fully documented. Uniform, objective, and transparent assessment of
candidates has yet to be guaranteed. The Judicial Council’s transparency, in
terms of publication of information about its decisions, has improved. Although
the website of the Supreme State Prosecutor’s Office has started publishing
some information on the activities of the Prosecutorial Council, its work needs
to be more transparent. Most courts have been publishing their decisions online
in a timely manner.

The number of
decisions granting presidential pardons dropped significantly in 2013 compared
to 2012. Out of a total of 337 requests, the President granted a pardon in 49
cases (2012: 146 cases). Out of the decisions granting pardon in 2013, one
dealt with a serious crime (ill-treatment); pardon was not granted in relation
to the criminal offences of corruption, organised crime and torture.

Competence for
conducting misdemeanour proceedings should be transferred to courts without
further delay. It is a matter of serious concern that, under the current
system, prison sentences can be imposed by misdemeanour bodies appointed by the
executive.

Impartiality
and accountability of the judiciary

As regards
safeguards to ensure the impartiality of judges, random allocation of cases
continues to be ensured in courts, but shortcomings still persist in smaller
courts. In 2013 judges made 666 requests to recuse themselves in cases of
potential conflicts of interest, of which 612 were adopted; out of 530 requests
made by parties 48 were adopted.

New codes of
ethics aligned with the relevant European and international standards were
adopted in March for judges and in May for prosecutors.

The procedure
for establishing disciplinary accountability of a judge or prosecutor is
initiated and conducted by the disciplinary commissions under the Judicial
Council and the Prosecutorial Council respectively. Five disciplinary
proceedings were initiated against judges and two against prosecutors. All the
cases against judges were dismissed. One prosecutor received a reduction in
salary, while the second case was dismissed. A procedure for dismissal has been
initiated against one judge. The Administrative Court annulled a decision of
the Prosecutorial Council on dismissal of a state prosecutor. Acting upon four
initiatives submitted, the commission for monitoring compliance with the code
of ethics for judges found that in one case a judge breached the code of
ethics, while in the other cases no violations were established. No
violations of the code of ethics for prosecutors have been reported.
Efforts to raise public awareness of complaint mechanisms should continue.

The disciplinary
system remains to be improved to fully comply with the principles of legality
and proportionality and to reduce discretion in the application of disciplinary
rules. The disciplinary commission’s dual role in investigating and deciding on
disciplinary proceedings needs to be reviewed. Work on the new law on the state
prosecutor’s office, which will also address the reform of the disciplinary
system, is at an advanced stage. Immunity rules and their practical application
need to be clarified to ensure full accountability of judges and prosecutors
under criminal law.

Professionalism,
competence and efficiency of the judiciary

In 2013 overall
courts managed to process slightly less cases than they received. The clearance
rate for all courts was 98.6 % (2012: 102.5 %). At the end of 2013,
37 125 cases were pending (2012: 35 546). The slight increase in
pending cases in 2013 (4 %) is due to a significant increase in new cases
(22 %). Overall, in 2013, courts managed to solve considerably more cases
(17 % increase) than in the previous year. On 31 December 2013 there were
4 089 cases older than three years pending before all courts. The
administrative court reduced the number of pending cases by 17 %, while
the number of cases pending in the commercial courts remained more or less
constant. Efforts to monitor and further decrease backlogs should continue.

The efficiency
of the constitutional court needs to be significantly improved. Although the
amendments to the law on the constitutional court of September 2013 envisage
that cases should be decided within 18 months, given that on 1 January 2014 1 352
cases were pending, it is unlikely that this can be achieved in the short term.
Out of these, 1 167 cases were constitutional appeals due to the violation
of human rights and liberties.

In the area of
enforcement, the high number of pending cases has further increased (by 5 %).
21 bailiffs (out of a planned 32) have been recruited; 13 began work in April,
while additional eight started their work in September. The majority of new
enforcement proceedings will now be processed by bailiffs. This is expected to
significantly relieve the burden on the courts. The impact of the new bailiff
system needs to be monitored. As regards monitoring of the recovery rate, costs
and duration of enforcement proceedings, every bailiff uses his/her software. A
reliable system to monitor these data on the national level still has to be
established.

The enforcement
of civil and administrative decisions remains weak.

Overall,
the length of proceedings has decreased. In 2013 the disposition time for first-instance
proceedings in civil cases was 237 days and in commercial cases 303 days. The
possibility of referring cases from higher to lower instances without going
into the merits of the case remains one of the main reasons for lengthy trials;
this option should be limited to extraordinary circumstances in accordance with
European best practice.

Frequent
changes to the relevant legislation hinder the effectiveness of the fight
against corruption and organised crime. A high percentage of cases are referred
back to the lower court for retrial, mostly on the basis of formal
infringements of the criminal procedure code.

Work
on the legislative basis for setting up the new special prosecutor’s office is
ongoing. The new office needs to have a clear and well-defined mandate to
effectively investigate and prosecute cases of high-level corruption, organised
crime as well as war crimes and terrorism. It needs to be well resourced, enjoy
the necessary independence and have swift access to all relevant information
held by other institutions. Appropriate facilities remain to be provided.

Alternative
dispute resolution still has a low impact. While the use of mediation has been
promoted via a publicity campaign, it is not widely used yet and needs to be
further promoted — both among judges and parties to the dispute.

The 2014
judicial budget (including the courts and the prosecution) is € 26.6
million (0.86 % of GDP) (2013: 26.1 million), of which € 20.6 million
(2013: 20.3 million) is allocated to the judiciary and € 6 million (2013:
5.8 million) to the prosecution. The main beneficiaries of the slightly
increased budget were the prosecution and administrative services in courts.
The salaries of magistrates and administrative staff continue to account for
the bulk of the judicial budget, thus limiting the scope for remedying
shortcomings in infrastructure and equipment.

Comprehensive
statistical data were collected through the judicial information system,
(PRIS). Concerns remain as to the reliability and consistency of these data.
Implementation of Council of Europe CEPEJ (European Commission for the
Efficiency of Justices) standards is underway. Arrangements for calculating all
relevant indicators and for measuring the length of trials are in the process
of being entered in PRIS. Statistical data are not yet used for analysing
shortcomings in the performance of the judicial system and finding adequate
solutions. Currently there is no budget allocated to maintaining and upgrading
PRIS, for which Montenegro relies entirely on donations. A regulation about
procedures, methodology and timeframes for the collection of statistical data
in compliance with CEPEJ guidelines remains to be adopted.

A medium- and
long-term human resources strategy needs to be developed. Standards for the
workload of judges and standard timeframes for proceedings for specific types
of cases and specific courts have yet to be set as a basis for determining the
resources needed to eliminate the backlog and to resolve the influx of new
cases.

The
Judicial Training Centre continued to provide initial and continuous training
to judges and prosecutors. Its independence, administrative and financial
capacity need to be strengthened. It is a matter of concern that for 2013 it
was allocated no own budget. For initial training, funds are made available
through re-allocation from other budget lines, while for continuous training
Montenegro relies on donors.

With regard to access
to justice, 564 requests for free legal aid were registered in 2013 (2012:
428), of which 464 were approved (2012: 304). The use of this mechanism needs
to be further promoted in all courts and sufficient resources need to be made
available. Free legal aid services are inaccessible to some ethnic groups,
notably asylum-seekers, due to linguistic barriers. Efforts need to be made to
ensure access to free legal aid for marginalised groups and victims of domestic
violence. Further efforts are necessary to introduce an effective system of
free legal aid.

Handling
of domestic war crimes cases

As regards domestic
handling of war crimes, no serious efforts to tackle impunity have been
demonstrated. Montenegrin courts and judicial bodies seem to take a rather
formalistic approach to implementing the action plan measures on this issue.

In December, the
Bijelo Polje High Court acquitted all eight defendants accused of war crimes in
the Kaludjerski Laz (1999) case. In August, the state prosecution appealed the
judgment. In the case of war crimes committed against prisoners of war and
civilians in the Morinj camp (1991), in April the Appellate Court upheld the
judgment of the Podgorica High Court of July 2013. The four defendants were
given sentences ranging between two and four years of imprisonment, which is
below the statutory minimum of five years’ imprisonment. Decisions by the
Montenegrin judiciary on war crime cases need to be in line with international
humanitarian law, to reflect the case-law of the International Criminal
Tribunal for the former Yugoslavia, and to fully apply domestic criminal law.
Charges of command responsibility, co-perpetration and aiding and abetting have
so far not been brought.

In April, the
state prosecutor’s offices of Montenegro and Bosnia and Herzegovina signed a
Protocol on Cooperation in Prosecution of Perpetrators of War Crimes, Crimes
against Humanity and Genocide. The agreement is designed to facilitate the
exchange of evidence and information on war crimes cases.

Montenegro needs
to step up its efforts to fight impunity for war crimes, and effectively
investigate, prosecute, try and punish war crimes in line with international
standards. All outstanding allegations of war crimes need to be duly followed
up. Montenegro needs to ensure that victims of war crimes have access to
justice and reparations.

Anti-corruption policy

In the area of
anti-corruption, several important measures in the action plan are behind
schedule, in particular the adoption of legislation. While many technical tasks
have been carried out, overall the impact of anti-corruption measures has led
to limited tangible results. Implementation of the strategy for the fight
against corruption and organised crime and the accompanying action plan for
2013-2014 continued. Given the many institutions and bodies involved in this
area, Montenegro needs to strengthen its overall capacity to properly
coordinate, implement and monitor all the actions planned. During the reporting
period the national commission for the fight against corruption and organised
crime held only two meetings. The parliamentary committee on anti-corruption
held a total of 11 sessions, three of which were control hearings. So far the
committee has not lived up to its potential and has not been actively involved
in preparing key anti-corruption legislation.

Prevention
measures in the fight against corruption

Limited progress
has been made in strengthening the legal and institutional anti-corruption
framework. The adoption of a number of relevant laws has been significantly
delayed: these include the law on lobbying, the law on general administrative
procedure and amendments to the law on public procurement (adoption had been
scheduled for December 2013). Also the code of ethics for MPs
(adoption had been scheduled for December 2013) as well as the law on
prevention of corruption, setting out the competences of the future
anti-corruption agency, and amendments to the law on prevention of conflicts of
interest (adoption had been scheduled for June 2014) are yet to be adopted. The
anti-corruption agency needs to have a clear and well-defined mandate and
effective powers to carry out its tasks. It needs to enjoy the necessary
independence, have sufficient resources as well as access to all relevant
information held by other institutions.

Amendments to
the law on political party financing, originally scheduled for adoption in
September 2013, were adopted in February. The changes to the law aimed at
meeting outstanding OSCE/ODIHR and GRECO recommendations. They introduced
additional rules to prevent abuse of public resources for political party and
election campaign purposes by prohibiting and restricting certain payments
during the pre-election period, inter alia imposing stricter limits on
temporary employment. The amendments also increased the oversight and
monitoring responsibilities of the State Election Commission, and introduced
additional and stricter penalties for breaches of the law. The recommendations
on auditing of political parties have not yet been fully addressed.

In June, the
constitutional court annulled a significant part of the amendments to the law
on political party financing. Certain annulled provisions were a
response to outstanding OSCE/ODIHR and GRECO recommendations. Some annulled
provisions had, in the process of drafting the law, been considered as
problematic by experts. Efforts are needed to put in place a
legislative framework that is fully in line with European standards and best
practice and to develop a track record of effective implementation.

Based on the
amendments to the law on political party financing adopted in February, the
State Audit Institution (SAI) will audit the political parties’ annual
financial statements, while the State Election Commission will be the main
institution in charge of monitoring political party and electoral campaign
funding. The administrative capacity of the SAI has been strengthened by
providing additional staff, new equipment and training. Also in view of its
greater responsibilities, the administrative capacity of the State Election
Commission needs to be significantly increased as a matter of urgency. For
several years now it has not had the resources to perform its tasks
effectively. The development of a track record of effective control of party
financing, including deterrent penalties for proven wrongdoing, has not yet
started.

On the
amendments to the law on political party financing, see also Political
criteria — Elections.

As regards
checks on asset declarations, 3 793 (97 %) out of the 3 907
public officials submitted income and assets Declaration for 2013/2014. In
2014, the commission for the prevention of conflicts of interest checked
significantly more asset declarations on substance than in 2013 (January —
August 2014: 1 957; 2013: 1 489), comparing the declared data with
data from the tax administration, the real estate administration, the
administration for public procurement, the Securities and Exchange Commission,
the Ministry of Interior and the Ministry of Transport. The number of officials
found to have reported inaccurate or incomplete data has substantially increased
in 2014 (January — August 2014: 519; 2013: 206). The decision on which asset
declarations to fact-check is not based on a risk-assessment methodology. The
practice of discontinuing proceedings if officials provide additional
information and correct their data should be abolished. Misdemeanour
proceedings mostly resulted in admonitions or small fines. The Commission is
not yet connected to the databases of all relevant institutions. It also still
lacks the power to access information held by banks and other financial
institutions and to check for illicit enrichment. The current system of checks
on asset declarations is not effective and sanctions are not deterrent. In line
with Article 20 of the United Nations’ Convention Against Corruption,
Montenegro should consider criminalising inexplicable wealth.

The commission
for the prevention of conflict of interest publishes data from asset
declarations kept in the register of income and assets. In May, the Supreme
Court suspended a decision whereby the administrative court had ordered the
commission (in February) to remove some data taken from public officials’ asset
declarations from its website.

Following the
adoption of the relevant implementing legislation on the declaration of assets
by police officials, since the end of November about 500 high-ranking police
officers submitted declarations to the Ministry of Interior. So far 20 asset
declarations have been cross-checked on substance by the police internal
control unit. In four cases irregularities have been found. So far preliminary
investigations have been launched in one case. In order to ensure equal
treatment of all officials with an obligation to declare their assets, it is
advisable that a single body be in charge of the checks.

As regards
control of conflicts of interest, checks have been limited to the area of
incompatibility of functions. So far, the commission for the prevention of
conflicts of interest has not dealt with cases of public officials taking
official decisions that benefited themselves or persons close to them.

At present, the
law on the prevention of conflicts of interest does not apply if other laws
(e.g. the law on public procurement) lay down their own rules. This should be
reconsidered with a view to ensuring a consistent and effective legal
framework.

The commission’s
administrative capacity (budget, staff and IT infrastructure) needs to be
increased and the commission should carry out its tasks in a more proactive
manner. A system of electronic submission of asset declarations should be
introduced. The lack of electronic case-management threatens the transparency
and impartiality of the work of the commission, in particular since
case-management (the distribution of cases and instructions on action to be
taken) is at the discretion of the president of the commission. The penalties
laid down by law are low and are not deterrent; in practice, misdemeanour
bodies regularly go even below the legally prescribed penalties.

The new law on
general administrative procedure, originally intended for adoption in December
2013, remains to be adopted. Integrity plans have been adopted in four
pilot institutions (the police force, the customs administration, the Basic
Court in Podgorica and the Supreme State Prosecutor’s Office) and in a number
of other institutions (32 out of a total of 102 state authorities) but are not
being systematically implemented in practice. (see also Political criteria —
Public administration).

Progress
was made on achieving transparency in the public procurement process. Amendments
to the law on public procurement aiming at strengthening provisions on
prevention of corruption, including control of conflict of interest remain to
be adopted.

The
number of employees dealing with public procurement in the Administration for
Inspection increased from one to two, but its capacity needs to be further
enhanced. Montenegro still needs to introduce full e-procurement as an
instrument for more transparency and to strengthen monitoring and control
measures. Work on the development of a risk-assessment methodology has started.
Checks on contract implementation remain a cause for concern, particularly in
the light of the weak internal audit function. Neither the state commission for
control of public procurement nor the SAI have ever signalled any suspicions of
corruption to state prosecutors. The capacity of the judicial system to deal
with public procurement cases needs to be increased. (See also Chapter 5 —
Public procurement)

The Directorate
for Anti-Corruption Initiatives (DACI) continued to implement awareness-
raising campaigns and to provide anti-corruption training courses and workshops
on integrity plans for public officials. Whistle-blower protection needs to be
made more effective in practice, in order to facilitate reporting of corruption
acts.

The right
balance must be found between the right to free access to information and the
rules on personal data protection, taking into account the need to ensure the
transparency and accountability of the work of public institutions and officials.
In 2013 almost half of the complaints received by the agency for personal data
protection and free access to information were about administrative silence. No
penalties have ever been applied as a result of misdemeanour proceedings for
non-compliance with the law on free access to information. As regards the
application of provisions on grounds for restricting access to information, the
agency established in all cases that public interest is prevailing. The
agency’s administrative capacity to deal with access to information has been
strengthened by two additional staff. Staff training on applying the law in
line with European standards and best practice has continued. The electronic
database of published decisions could be improved and made more user-friendly.

Repressive
measures in the fight against corruption

The
institutional and operational capacity of prosecutors, judges and police to
fight corruption remains insufficient. The prosecution service, including the
special prosecutor’s office, lacks administrative staff. The special prosecutor’s
office has been reinforced with two economists. Additional specialised staff,
including two IT experts, remain to be recruited. The office’s special
investigative team still lacks direct access to relevant databases, as well as
human and financial resources, in particular financial expertise. Further
specialised training is needed at all levels. The capacity to carry out
systematic financial investigations in corruption cases needs to be enhanced.
The professional capacity of the Public Property Administration, responsible
for the management and sale of the proceeds of crime, needs to be reinforced.
An electronic register of confiscated property was set up in September 2013.

The
formation of a multidisciplinary team in the special prosecutor’s office,
including financial and economic experts, has been postponed until the new
special prosecutor’s office is set up. Interagency cooperation needs to be
further developed. Cooperation between prosecutors and the police in pre-trial
investigation is not yet efficient. The balance between effective direction by
the prosecution and the appropriate level of police autonomy and initiative
remains to be found. In April the state prosecutor’s office and the police
administration in the Ministry of Interior signed an agreement on cooperation
in pre-trial and criminal procedures with a view to further clarifying their
respective roles. The main elements of this agreement should also be included
in the criminal procedure code. Work on amendments to the criminal procedure
code is in progress.

Limited progress
was made in developing an initial track record of investigation, prosecution
and final conviction in corruption cases, including high-level corruption
cases. Several investigations were launched, including investigations into two
mayors and two former mayors (in three of these cases, preliminary
investigations); so far they have resulted in indictments in two cases. No
final convicting judgments have been issued in high-level cases. In the retrial
of the ‘Zavala’ case, involving a former mayor of Budva and a national MP
charged with abuse of office and bribery, in July the court issued the same
sentences as in the previous proceeding: 10 defendants were sentenced to
imprisonment ranging between 2 to 5 years; one person was acquitted. The
judgment is not final yet. As regards allegations of misuse of public funds for
political party purposes (the ‘audio recording’ affair), first-instance
proceedings were held before the Pljevlja Basic Court against 12 persons
charged with abuse of power. In September the court issued conditional prison
sentences of 6 months against the director of the local Social Welfare Centre
in Pljevlja as well as one employee in the centre. Ten persons were acquitted.

Neither
financial investigations nor the instruments of seizure and confiscation of
assets are used systematically. In no corruption case has the confiscation of
assets been ordered.

Law enforcement
authorities do not take a proactive stance towards looking into allegations of
corruption, especially those involving high-level officials. A high rate of
investigations into reported corruption-related offences never results in
charges. The vast majority of tip-offs of corruption received by the state prosecution
service come from citizens, NGOs and private companies. Very few cases are
submitted by the police and not a single complaint has come from public
supervisory authorities. There is a strong and urgent need to improve and
strengthen control and inspection mechanisms within the public administration
and to improve their cooperation with law enforcement authorities.

Shortcomings
with regard to the independence and accountability of the judicial system
remain a matter of serious concern and hamper the fight against corruption.

A
system for statistical monitoring of criminal offences that involve an element
of corruption in all criminal proceedings via the Judicial Information System
PRIS has been established.

Construction
and land planning, education, healthcare and public procurement continue to be
particularly vulnerable to corruption.

Fundamental rights

Alignment
with the EU acquis and international standards

Overall,
Montenegro continued to respect international human rights instruments.
It ratified the Convention on Reduction of Statelessness in October 2013. In
February, It presented its second and third reports on the implementation of
the Convention on the Elimination of All Forms of Racial Discrimination to the
UN Committee on the Elimination of Racial Discrimination, and its report on the
implementation of the UN Convention on the Rights of Persons with Disabilities.
In April, the Council of Europe’s committee of ministers decided to discontinue
the regular stocktaking dialogue with Montenegro, welcoming Montenegro’s
progress in fulfilling accession commitments and statutory obligations and with
the understanding that the Montenegrin authorities will complete the reforms
under way, according to the timetables adopted by the country.

Montenegro continued
to ensure a good level of cooperation with the European Court of Human
Rights; none of the 14 cases under supervision is subject to the enhanced
monitoring mechanism. The court delivered judgments on two applications related
to the right to a fair trial and to prohibition of torture. A total of 255 new
applications have been allocated to a decision body since September 2013,
bringing the number of pending applications to 670. Training for judges on
human rights law and on the way the court works should continue.

Effective
application of human rights

As regards promotion
and enforcement of human rights, amendments to the law on the Ombudsman
were adopted, enhancing Montenegro’s alignment with European and international
standards. The fact that the amendments have weakened the role of the Ombudsman
in dealing with anti-discrimination cases remains a matter of concern. Despite
the overall rather large staff, the number of posts in the departments dealing
with substantive human rights and anti-discrimination issues is rather limited,
and various posts remain vacant, including two out of four deputy posts. This
raises concerns about the institution’s capacity to fulfil its broad mandate
and efficiently handle complaints. Little follow-up is given to concrete cases
of discrimination. The parliamentary committee for human rights and freedoms
continued to promote human rights by holding sessions open to the public,
including hearings.

Overall, the
capacity of the institutions in charge of protection and enforcement of human
rights, including the judiciary and police, remains weak and needs
strengthening. Concerning the judiciary and police, well-trained, specialised
members of staff are needed. Vulnerable groups are most affected by the
shortcomings in this area.

In the field of prevention
of torture and ill-treatment, the amendments to the law on the Ombudsman
better define the role of the Ombudsman as the national preventive mechanism.
A framework plan for visits in this capacity to relevant authorities and facilities
has been adopted. Urgent recommendations following a visit by the European
Committee for the Prevention of Torture and Inhuman or Degrading Treatment or
Punishment in 2013 have been implemented and a plan has been drawn-up to
follow-up to all the remaining recommendations. In November, the Bijelo Polje
High Court sentenced four police officers from Berane to a total of nine years
of imprisonment for attempting to murder three people in 2007. These police
officers had been previously suspended by the Minister of Interior. In June,
the Podgorica Basic Court sentenced three police officers to three months of
imprisonment each, for ill-treatment of a detainee. Cases of ill-treatment in
police facilities are a major cause for concern and require a firm response at
the highest level. In general, processing of such cases continues to be slow
and the number of officers punished is low. The treatment of convicted persons
and detainees still needs to be brought in line with international standards,
as do the screening and reporting capacity of the prisons’ medical services and
their cooperation with judicial authorities.

As regards the prison
system, the law on execution of suspended sentence and community work
sentence has been adopted, as part of the broader reform of the penitentiary
system in Montenegro. In November, a community service agreement was signed
between the Ministry of Justice and five municipalities, to enable convicted
persons to serve alternative sentences by providing community work. Two community
work sentences have been passed so far and are in the process of being
implemented. Cooperation with civil society is satisfactory and the prison
administration has concluded memoranda of understanding with local NGOs to
facilitate the monitoring of the condition of detainees. The weak human
resources capacity of the Probation Office risks undermining the credibility of
the alternative sanctions system and needs to be addressed as a matter of
priority. The lack of adequate infrastructure and programmes for the
rehabilitation and re-socialisation of detainees, including drug addicts, needs
also to be addressed, notably by providing adequate financial resources. The
prison health service is understaffed and its overall material conditions poor.

Freedom of
expression
has been undermined by new cases of violence against journalists, and attacks
on media property. A commission for monitoring the activities of the competent
authorities in the investigation of old and recent cases of threats and
violence against journalists was set up in December. It is composed of
representatives of the Ministry of Interior, the prosecutor’s office, the
police, the National Security Agency, NGOs and media representatives. Its
recommendations need to be fully followed up by the authorities. Among
preventive measures taken, the police have provided protection for two
journalists and for a newspaper’s property. Some cases of
violence against journalists and attacks on media property have been
successfully investigated and processed, while in others investigations are
pending and both the material perpetrators and those allegedly behind the
attacks remain to be identified. Overall, violence against journalists remains
a source of serious concern. Older cases in particular need to be addressed as
a matter of urgency to avoid them being time-barred. Public statements in
support of media freedom help create a climate conducive to respect for and the
protection of journalists.

The lack of
professional and ethical standards among media practitioners also remains a
cause for concern, contributing to further tensions in the media environment.
Some mainstream media have introduced their own media ombudsman. The media
community remains divided over the creation of one authority responsible for monitoring
and upholding professional and ethical standards in journalism.

Montenegro
continues to uphold freedom of assembly and association.

Freedom of
thought, conscience and religion continues to be guaranteed and
enforced; tensions persist between the Serbian and the Montenegrin Orthodox
Churches, especially on property issues. A new law on the legal status of
religious communities has not yet been adopted.

Progress
regarding women’s rights and gender equality remains limited. In
January, Montenegro presented a report on the steps taken to implement the
Convention on the Elimination of All Forms of Discrimination against Women.
Legislation implementing the law on domestic violence was adopted, providing
for counselling and protection. Local action plans on gender equality have been
adopted in 5 out of 23 municipalities, and two offices set up. Institutional
capacity remains weak, with the central gender equality department facing high
turnover. An informal network of coordinators for gender equality, composed of
representatives of ten municipalities, was established in October. Cooperation
with civil society needs to improve. The role of parliament and the involvement
of MPs in gender-related issues remain limited. At present, only 13 % of
MPs are women. The newly adopted amendments to the law on the election of MPs
and municipal councillors require that one out of every four places on the
electoral list goes to a candidate of the less-represented gender. It also
provides that an MP or councillor of the less-represented gender can be
replaced only by a representative of that gender. However, the new amendments
have only marginally improved women’s political representation and further
efforts are needed in this regard. In November,
the Gender Equality Committee questioned the Minister of Labour and Social
Welfare and the Chief of Police about the implementation of the 2011–2015
strategy for protection against domestic violence. The
hearing revealed that the statistics on domestic violence are unreliable and that
inter-institutional cooperation, especially between social services and the law
enforcement authorities, needs to be significantly improved. Further efforts
are needed to strengthen the capacity of the police and social services dealing
with individual cases of violence against women, and to consistently implement
the relevant protocol of procedures. The first rehabilitation and
re-socialisation centre for drug-addicted women is under construction.

Children’s
rights
continue to be enforced. The Council for the Rights of the Child was
re-established in January. The Council is chaired by the Minister of Labour and
Social Welfare and is composed of 12 other members, including four
representatives of the NGO sector. One of the key tasks of the Council is to monitor
the implementation of the 2013-2017 national action plan for children.
Implementing legislation for the law on social and child protection, as well as
the plan to transform the residential institution for children in Bijela, remain
to be adopted. A manual for working with juveniles in conflict with justice was
developed, with a view to preparing individual treatment plans and training the
relevant staff.

Montenegro
took some positive steps to improve the situation of the socially vulnerable
and/or persons with disabilities. The 2014-2015 strategy and action plan
for the integration of people with disabilities were adopted, together with a
strategy on inclusive education. A new council for the care of disabled people
was set up, which includes NGO representatives. The government allocated € 400 000
in 2014 for building ramps to improve access to public institutions, including
medical facilities, schools and universities. None of the 13 buildings marked
as priority objects has been adapted. The law prohibiting discrimination
against people with disabilities still needs to be amended in line with the acquis
and international standards. The newly adopted amendments to the law on the
election of MPs and municipal councillors have shortcomings regarding the accessibility
of polling stations for people with disabilities. Financial support paid to
employers for employing people with disabilities is still insufficiently
protected against misuse. Monitoring and penalties in this area remain weak.

Protection
of minorities and cultural rights

In the field of anti-discrimination
policies, the anti-discrimination law has been amended and brought almost
fully into line with the acquis, notably as regards direct and indirect
discrimination, but some shortcomings still persist concerning racial
discrimination and as regards the provisions on sanctions. Training on the
provisions of the new law has started. The Ombudsman and the Ministry of Human
and Minority Rights continued to promote the protection of all vulnerable groups,
but with limited follow-up to cases relating to human rights violation and
discrimination. The relevant department in the Ombudsman office remains
understaffed.

As regards lesbian,
gay, bisexual, transgender and intersex (LGBTI) persons, the 2014 action
plan for the LGBT Strategy was adopted. The first pride parade in Podgorica
took place in October 2013, supported adequately by the authorities; however,
groups of anti-LGBTI protesters damaged property in the city and injured
several police officers. The first LGBTI community centre opened in Podgorica
and was subject to several attacks. In none of these cases the perpetrators
have been identified and prosecuted; the issue of police protection needs to be
better addressed. A first wave of training for police officers was organised,
with a view to establishing trust between law enforcement personnel and the
LGBTI community. Ongoing anti-discrimination campaigns in schools, aimed at
students and teachers, should be continued. A memorandum of understanding was
signed between the Supreme Court and one of the LGBTI civil society
organisations in March, to improve the cooperation in the field of trainings
for judiciary. However, criminal convictions for attacks against members of the
LGBTI community remain few, while cases are often classed as minor offences.
Attacks on LGBTI community members and activists continued, reflecting a
widespread hostility to sexual diversity.

Labour and trade
union rights are generally respected. The role of the social
council was strengthened following the adoption of amendments to the relevant
law in December. A new general collective agreement entered into force in March
and covers a two-year period; the registries of trade unions and information on
union representativeness are made public. Bi-partite and autonomous social
dialogue remains weak, and the social council still faces staff shortages.
Fully transparent representation and the right to form new unions need to be
ensured.

Regarding property
rights, restitution of property in line with Montenegro’s legislation
continues to be slow due to cumbersome procedures and a lack of administrative
capacity. Efforts are needed to address pending cases, in line with the
national legislation and with the European Convention on Human Rights.
Displaced persons permanently resident in Montenegro still face discrimination
with regard to access to land.

Montenegro
continues to ensure respect for and the protection of minorities and
cultural rights. Interethnic relations in the country continue to be good and
funds continued to be allocated to developing cultural identity and language.
The Minority Fund continues to operate with significant shortcomings, notably
regarding the allocation of funds and proper implementation and overall
management of projects; annual activity reports were not submitted to
parliament in 2012 or 2013. A report from the State Audit Institution has also
questioned the capacity of the Ministry for Human and Minority Rights to
supervise the legality of work of the national minority councils. Most of them
appear to lack work programs and financial plans. A working group has drafted
recommendations for improving the performance of the fund.

As for the
inclusion of Roma, Ashkali and Egyptians, within the framework of its
presidency of the Decade of Roma Inclusion, Montenegro hosted in January an
international conference on combating discrimination against Roma. A second
seminar on Roma issues, organised by the European Commission, was held in
Montenegro in June; it brought together all the relevant local and
international stakeholders to discuss the five priority areas identified by the
EU-Roma summit of April 2014. In April a new action plan to implement the
Strategy for improvement of position of Roma and Egyptians in Montenegro was
adopted. In education, the number of Roma students attending primary school has
increased markedly compared to previous years, and the desegregation process
continued; however, drop-out rates and the low proportion of female Roma
students among the total population of Roma students is a cause for concern.
Discrimination remains prevalent in access to employment and to social care and
healthcare. Participation in seasonal employment programmes needs to be
fostered. Domestic violence and child begging largely affect the Roma
community. Roma continue to be underrepresented in politics, partly because
there are no lower electoral thresholds set for them as there are for other
minorities.

There
have been three working meetings of the coordination board in charge of
overseeing the implementation of the strategy for finding durable solutions to
the status of internally displaced persons (IDPs) since October 2013,
which is an improvement in comparison to last year.
Efforts continued to solve the status issue for remaining IDPs who are still
not registered. According to the law on foreigners, the deadline for
submitting documents to acquire permanent or temporary residence has been
extended for the third time, with the final deadline being 31 December 2014. A
new draft law foresees that the status of IDPs will cease to exist as of
January 2015; no provisions have been made for the remaining IDPs who have not
yet applied for foreigner status. Yet, there are still almost 1 500 people
in this situation, most of them internally displaced from Kosovo. Raising
awareness and information campaigns on registration, especially in Romani and
Albanian languages, need to continue. Only part of the IDPs willing to go back
to Kosovo has managed to do so. Construction is ongoing in Kosovo to resolve
the situation of 10 families, among those willing to go back; 12 have already
returned. A sustainable solution remains to be found for the remaining 54. The
law on non-contentious proceedings has yet to be amended to facilitate subsequent
birth registration for 448 people of the 1 500 above. With regard to the
gradual closure of the Konik camps, the construction of apartments began in
September. Overall, the implementation of measures included in the IDPs
strategy should be accelerated.

As
regards personal data protection, the right balance must be found
between the right to free access to information and the rules on personal data
protection, taking into account the need to ensure that public institutions and
officials are accountable and their work transparent. Trainings for the staff
of the data protection agency have continued.

Conclusion

Overall,
in the area of judiciary and fundamental rights progress has been uneven.

In the area of
judicial reform, some progress has been made. Key reforms of the recruitment,
promotion and disciplinary systems for judges and prosecutors are still
pending. They need to fully reflect European standards and best practices, and
to be understood and supported by all stakeholders so as to ensure effective
implementation. Following alignment of relevant legislation with the
constitutional reforms of July 2013, key judicial and prosecutorial officials
were elected. Parliament finally agreed on the appointment of a new Supreme
State Prosecutor. The slightly negative evolution of the clearance rate and the
number of pending cases as compared with last year is due to a significant
increase in the number of incoming cases. The length of proceedings has
decreased, and overall courts managed to solve considerably more cases than in
the previous year. The efficiency of the judiciary should increase further. It
is a matter of serious concern that the competence for conducting misdemeanour
proceedings has still not been transferred to courts. Montenegro needs to step
up its efforts to fight impunity for war crimes, and effectively investigate,
prosecute, try and punish war crimes in line with international standards.

In
the area of anti-corruption, progress has been limited. The legislative
framework remains to be strengthened. Pending the establishment of a new
anti-corruption agency, the capacity of existing institutions in the area of
prevention of corruption needs to be improved and they need to take a more
proactive approach. The system of checks for conflicts of interest and asset
declarations is not effective. Following the constitutional court’s annulment
of a significant part of the amendments to the law on political party financing
designed to reduce the scope for abuse of state resources for electoral
purposes, Montenegro needs to ensure that its legislative framework in the area
of political party financing is fully in line with European standards and best
practice and to provide an initial track record on the correct implementation
of the law, including application of deterrent sanctions where required.
Increased efforts are needed with regard to the development of a solid track
record of investigation, prosecution and final conviction in corruption cases,
including high-level cases, and the systematic use of the power to seize and
confiscate assets. Cooperation between the prosecution and the police in
pre-trial investigation remains to be improved. The impact of anti-corruption
measures so far has been limited. Corruption remains prevalent in many areas
and continues to be a serious problem, requiring effective implementation of
deep and lasting reforms.

Some
progress was made on fundamental rights; the country is gradually familiarising
itself with the international reporting mechanisms stemming from the international
conventions ratified so far. A gap remains between legal alignment and
incorporation of human rights standards into the policy framework, into
practices of administration, especially those of law enforcement agencies, and
into the courts’ case-law. This affects particularly disadvantaged and most
vulnerable groups. Amendments to the law on the Ombudsman were adopted, in line
with European and international standards in this area; preparation of the
implementing legislation should continue without delays. Human rights
institutions’ action is hampered by the lack of staff, skills and financial
resources, and by frequent staff turnover.

4.24.
Chapter 24: Justice, freedom and security

As
part of the ‘new approach’ on the rule of law, and in line with the negotiating
framework, this chapter was opened in December 2013 after Montenegro produced a
detailed action plan. Interim benchmarks have been set for this chapter, based
on the action plan. The implementation of the action plan is assessed below.

Legal and irregular migration

In
December, the centre for irregular migrants was finally opened and put into
operation. The centre can accommodate 46 persons and reports to the Ministry of
Interior. Implementing legislation was adopted in October. A readmission agreement
with Serbia entered into force in January. In 2013, 753 irregular
migrants were detected, mostly nationals of Albania, Syria and Kosovo. In May,
28 persons were indicted for people smuggling, following the dismantling of two
international rings allegedly smuggling migrants to EU countries. Further
efforts are necessary to ensure full alignment with the acquis in the
field of legal migration, and to raise the authorities’ awareness of the issues
of mixed migration, the integration of migrants and the protection of
vulnerable groups.

Asylum

Montenegro faced
a further increase in the number of asylum applications lodged in 2013
(3 554, compared to 1 529 in 2012); none of the applicants was
granted protection. A new centre for asylum-seekers was opened in February and
is fully functioning and able to host a maximum of 65 persons. The centre’s
capacity should be increased, including to assist with the adequate reception
of asylum-seekers who choose to remain in the centre, and of unaccompanied
minor asylum seekers; implementing legislation needs to be adopted. Training on
the principle of non-refoulement, as well as on the EU directives on asylum,
should continue for the asylum office staff and for the border police. The lack
of interpreters remains an obstacle, and solutions should be found. The law on
asylum remains only partially aligned, including as regards the limitation of
subsidiary protection to six months. Efforts should continue to prevent the
migrants’ and asylum centres from being targeted by organised crime groups
involved in smuggling migrants.

Visa policy

The number of
visas issued at the border continued to be low. Decisions temporarily
suspending visa requirements for nationals of Azerbaijan, Armenia and
Kazakhstan were adopted for the summer season. Amendments to the decree on visa
regime entered into force, allowing nationals of the United Arab Emirates and
of Moldova to enter, cross or stay in Montenegro up to three months without
visa and with a valid travel document.

Implementation
of the visa-free regime with the EU continued to be smooth overall. The
majority of travellers to the Schengen area are bona fide, however in 2013
there were over 1 000 unfounded asylum applications lodged by Montenegrins
nationals in the EU and Schengen-associated countries. The authorities need to
continue their actions in the framework of the post-visa liberalisation
monitoring mechanism to counter this phenomenon through closer operational
cooperation and information exchange with EU Member States and Schengen-associated
countries, carrying out investigations of facilitators of irregular migration.
Efforts should also include more effective border controls in line with
fundamental rights, information campaigns for travellers and implementation of
short- and long-term measures to improve social and economic inclusion of the
most vulnerable groups of the population most likely to migrate, including
Roma.

Schengen and external borders

Montenegro
adopted a revised 2014-2018 Integrated Border Management (IBM) Strategy and
action plan, in line with the EU concept of IBM. Additional equipment was
procured to enhance green border supervision; all border crossing points are
now connected to Interpol’s travel document database. Practical cooperation
with Frontex, including in the framework of the Western Balkans Risk Analysis
Network (WB-RAN), has continued and needs to be consolidated. A ‘training the
trainers’ system for the border police is in an early phase of development.
Cooperation with neighbouring countries remained good; joint patrols continued.
The negotiations on border demarcation moved forward with Bosnia and
Herzegovina and with Kosovo; talks are ongoing to close the unauthorised border
crossing points, or to revise the status of some of these roads in line with EU
standards. A package of bilateral agreements on border control was signed with
Kosovo in March and an agreement with Albania was signed in December. The joint
police cooperation centre with Bosnia and Herzegovina and with Serbia has
started working. Overall, the legislative framework for border control has yet
to be entirely aligned with the acquis. A comprehensive border
surveillance system at sea and land, and the streamlining of the border police,
to make it more effective, remain among the top priorities. The security of the
green and blue border needs to be reinforced, including in ports. Further steps
are needed to foster operational interagency cooperation between all agencies
at the border and to enable the border police to directly coordinate international
affairs in their area of responsibility. Participation of the border police in
investigative activities would contribute to increase its awareness on the most
complex forms of cross-border crime, and to the overall fight against organised
crime. A joint plan for measures to prevent and deal with corruption at border
crossings was drafted by all the relevant institutions in April and needs to be
effectively implemented.

Judicial cooperation in civil and criminal matters

Parliament
adopted a new law on international private law in December, with a view to
further aligning Montenegro’s legislation with the acquis. In December,
Montenegro also ratified two bilateral agreements with Italy to facilitate the
implementation of the European Conventions on Mutual Legal Assistance in
Criminal Matters and on Extradition. In July, Montenegro ratified two bilateral
agreements with the former Yugoslav Republic of Macedonia on mutual enforcement
of decisions in criminal matters and on legal assistance in civil and criminal
matters. Training for judges and prosecutors continued. A new curriculum for
specialised training on judicial cooperation in civil matters was approved in
March by the Judicial Academy. A fact-finding visit by Eurojust took place in
Montenegro in October 2013, with a view to the future signing of a cooperation
agreement. The recommendations included in the report of Eurojust, following
its visit, are being implemented, including those on improving the handling of
personal data by the prosecution and on prosecutors’ cooperation with the data
protection authority. The Montenegrin Ministry of Justice became observer to
the Network for Legislative Cooperation between the Ministries of Justice of
the EU in October 2013.

Police cooperation and the fight against organised
crime

Montenegro
continued to be active at international and regional level. In December, the
Ministries of Interior of Montenegro, Bosnia and Herzegovina and Serbia signed
a protocol on the establishment of the joint centre for police cooperation in
Trebinje. Additionally, the Ministries of Interior of Montenegro and Bosnia and
Herzegovina signed a protocol on cooperation in forensic examinations. In
March, Montenegro signed a police cooperation agreement with Kosovo. In close
cooperation with Serbia, the United States and several European intelligence
and security services, Montenegro took an active part in arresting one of the
most wanted persons for alleged trafficking of cocaine. The 24/7 service needed
for police cooperation has been established. The operational agreement with
Europol was signed in September 2014.

The
promotion of ethical standards in the police force was strengthened by the
adoption of an integrity plan in March. In line with the amended law on
internal affairs, about 500 high-ranking police officers submitted asset
declarations. Amendments to the Criminal Procedure Code, especially to improve
the pre-trial phase, remain to be adopted. Independent and transparent
oversight of the police, a fair and uniform recruitment policy and an effective
complaints’ mechanism have yet to be established. The current specialised units
of the police remain understaffed, including at regional level. A secure
platform to store and exchange data between law enforcement agencies has yet to
be established.

An agreement on
mutual cooperation between the police and the prosecution was signed in April,
to improve understanding of their respective roles in investigations. The
prosecutor’s leading role in investigations and cooperation with the police
require further enhancement and clarification with a view to build consistent
and effective relations between the two institutions and increase the
efficiency of criminal investigations. The 2013 Serious and Organised Crime
Threat Assessment was adopted, providing a strategic picture of the organised
crime situation in Montenegro. A clear link now needs to be established between
the findings of the assessment and implementing policy priorities. As regards
Montenegro’s track record in tackling cases of organised crime, new cases were
launched in the area of migrants’ smuggling and drug trafficking but further
work is required. Frequent changes to the relevant legislation are a serious
cause for concern, as is the lack of independence and initiative of the
investigative police, which is accountable to the prosecution.

Amendments to
the law on witness protection were adopted in June. They aimed at improving the
witness protection system in the country, including by increasing the number of
potential witnesses, and by introducing the category of ‘collaborator of
justice’. Financial investigations to map and confiscate the financial
flows of criminal organisations are underused. There have been no new cases of seizures
of criminal assets. Montenegro needs to align its legislation with the new acquis
in this area. A single manual on operational procedures in the field of asset
confiscation has been compiled, and an e-register established, to record the
assets managed by the relevant agency. Operational interagency cooperation
needs to be improved. The strategy for the control and reduction of small arms
and light weapons 2013-2018 has continued to be implemented, including by
organising various training and rescue exercises.

The capacity of
the prosecutor’s office and of the police in the area of cybercrime is
still weak, including as regards monitoring of e-sites. Training modules in
this area need revision. Five criminal charges were filed in the reporting
period.

In relation to anti-money
laundering, Montenegro responded to a number of Financial Action Task Force
(FATF) recommendations through the 2013 amendments to the criminal code and
through the amendments to the relevant law, adopted in July. The law
reinforced the sanctioning system, but overall the legal
framework still presents shortcomings and its effective
implementation is still needed. The number of suspicious transactions reported
and investigated continues to be very low. The anti-money laundering
administration has a high staff turnover. Training in this area is limited,
including awareness-raising on reporting obligations. The IT system of the
Administration for the Prevention of Money laundering and Terrorist Financing
needs to be upgraded to continue the international data exchange.

In the area of trafficking
in human beings, training for judges, prosecutors and others has continued
and should be enhanced, including for the police and border police. One person
was put up at the shelter for trafficked persons, and one new investigation
opened in the reporting period. A comprehensive, multidisciplinary and
victim-oriented approach has yet to be developed. The low number of victims of
trafficking identified and few criminal cases prosecuted remain of concern; the
identification of victims needs improvement, as do investigations, prosecution
and convictions against human beings traffickers.

Fighting
organised crime and corruption is fundamental to countering criminal
infiltration of the political, legal and economic systems.

Anti-terrorism

The laws on
explosive substances and on transport of dangerous substances were adopted to
further align with the acquis. An action plan was adopted in March to
implement the United Nations Security Council resolution on non-proliferation
of weapons of mass destruction. Montenegro will need to step up its capacity to
prevent radicalisation, including developing adequate measures to address the
phenomenon of foreign fighters.

Cooperation in the field of drugs

The
implementation of the strategy for the prevention of drugs abuse has continued,
including by delivering training in the field of drug identification, on
international investigations and on evidence collection. Additional technical
equipment was provided to the police division responsible for the fight against
drugs. Work by the relevant institutions to address the marginalisation of
people with drug addictions needs to be enhanced; cooperation between the
relevant institutions and NGOs dealing with people with drug addictions remains
limited.

The amount of
seized drugs rose of around 30 % compared to 2012. A total of 1 338
kg of cannabis and 7.1 kg of heroin were seized both at border crossings and
within Montenegro. In June 2014 the police, in close cooperation with the
customs, seized 250 kg of cocaine on a ship in the port of Bar which came from
Ecuador. The market value of the seized drugs is estimated at € 12.5
million. New criminal cases were opened, while various police operations are
ongoing, including in cooperation with international partners. A risk-assessment
analysis and a technical equipment needs assessment for the port of Bar were
jointly developed by the police and customs authorities, to improve checks on
passengers and goods; joint control teams were formed and premises allocated.
Sustainable implementation of these measures remains crucial, as Montenegro is
on the main drug trafficking routes throughout the Western Balkan region.
Cooperation with the European Monitoring Centre for Drugs and Drug Addiction
continued and Montenegro participated in training on the early warning system
and in meetings of the European information network on drugs and drug addiction
(Reitox).

As regards customs
cooperation, representatives of the administration took part in joint
operations organised by the European Anti-Fraud Office. Following the adoption
of the risk analysis for the port of Bar, relevant profiles were entered into
the customs administration’s risk management system; they are also available to
the police.

For measures
against counterfeiting of the euro, see Chapter 32 — Financial
control.

Conclusion

Overall,
Montenegro has made some progress in the area of justice, freedom and security.
The implementation of the action plan is broadly going according to schedule.
Montenegro should now start matching legal and institutional progress with
better results on the ground in terms of establishing sustainable track records
in various areas. Alignment with the acquis in the field of legal
migration, asylum and visas is still at an early stage. Attention should be
paid to monitoring the functioning of the two new centres for migrants and for
asylum-seekers, and in adjusting their capacity to that of migration flows. In
this area, additional efforts are needed to ensure awareness and an appropriate
response from all the institutions involved. Further investment is required to
control the borders. Montenegro remains actively involved in regional and
international judicial and law enforcement cooperation. In the area of
organised crime, the legislation requires fine-tuning to better clarify the
role of the judiciary and the police in the pre-trial phase. While Montenegro
has continued to develop a track record in the area of the fight against drugs,
difficulties remain in addressing the most complex forms of crime such as
trafficking in human beings, cybercrime and anti-money laundering. Financial
investigations and confiscation of assets are not yet used systematically. More
efforts are needed to enhance interagency coordination. The legal framework on
anti-money laundering and terrorism financing needs to be aligned with European
and international standards; the IT system of the relevant administration needs
to be upgraded as a matter of priority.

4.25.
Chapter 25: Science and research

The
overall level of participation in the EU framework programme for
research (FP7) remained stable — with an overall success
rate of 23.9 % compared to the EU average of 21.6 % —
but participation of SMEs, and successful Marie Sklodowska-Curie grants,
remained very weak. Montenegrin research teams continued participating in
EUREKA actions as well as cooperating in the frame of COST. The
agreement associating Montenegro with the new EU research
and innovation programme Horizon 2020 (covering 2014-2020) was signed in July
2014, allowing for retro-active participation of entities from
the country as
from 1 January 2014. Montenegro successfully hosted a regional Horizon
2020 event in Budva in March. It has also
taken the necessary administrative measures to ensure participation in Horizon
2020 and notably nominated its network of national contact points and
representatives in the programme committees. In June, the government adopted
the Framework Programme for Cooperation with the International Atomic Energy
Agency.

Regarding
further integration into the European Research Area (ERA), Montenegro is
participating as an observer in the European Research Area Committee and in all
other bodies overviewing EU policy actions on research and innovation.
Montenegro also agreed to contribute on a voluntary basis to the second ERA
Progress Report. The level of investment in research slightly increased
to 0.50 % of GDP in 2013, but is still much lower than the EU average of
2.07 %. Based on the amended strategy for scientific research activities
(2012-2016), Montenegro aims to invest 1.4 % of its GDP in research by
2016. A centre of excellence in bioinformatics (BIO-ICT) began operations in
July at
the Faculty of Electrical Engineering in the University of Montenegro in
Podgorica. This, together with the planned establishment of the first science
and technology park in Nikšić, should facilitate reaching the 1.4 %
target, as will the further increase in the national funding budget which
almost doubled in 2013 compared to 2012.

With
respect to the Innovation Union, Montenegro took some steps to encourage
innovation in research and the Ministry of Science issued calls for proposals
to co-finance scientific research activities such as co-financing for authors
of patents and innovative solutions, and calls emphasising applied and
developmental research and the development of innovation. Montenegro has been
active in cooperating at regional level and co-signed the Western Balkans
Regional R&D Strategy for Innovation adopted in October 2013.

Conclusion

Good progress
was made in the area of science and research. Steps were taken to strengthen
the research and innovation capacity at national level and facilitate
integration into the European Research Area. Serious efforts and good
monitoring will be necessary to reach Montenegro’s own investment target by
2016, and to meet the challenges of participation in the new EU programme
Horizon 2020.
Overall, preparations in this area are well on track.

4.26.
Chapter 26: Education and culture

In
the field of education, training and youth, parliament adopted
amendments to the law on higher education in September 2013. An external
evaluation of initial teacher education was started to measure the matching
between education skills and labour market needs. Montenegro finalised its own
study on labour market requirements and higher education. In July the
government adopted an analysis on the state of play in the field of recognition
of foreign education documents with recommendations for improvement in this
area. Non-discrimination between EU and Montenegrin nationals needs to be
guaranteed by the date of accession and alignment with the EU Directive on the
Education of Children of Migrant Workers ensured.

Montenegro has
advanced well in the referencing of the National Qualifications
Framework to the European Qualifications Framework and presented
this to the relevant EU Advisory Group in June. Montenegro achieved weak
results in OECD / PISA testing of 15-year olds on language, mathematics and
science. Gross enrolment rates in upper secondary education (ISCED 3) remain,
with ca. 90 %, close to the OECD average. Access to secondary education
remains problematic for Roma, Ashkali and Egyptian (RAE) children, students
with disabilities and those living in remote, mountainous areas.

Regarding the
reform of vocational education, entrepreneurship centres were established in
three secondary vocational education schools in north-east Montenegro. The
share of enrolment in upper secondary VET, with roughly two thirds, is
relatively high. However, attractiveness, in particular of the 3-year VET
programmes, is decreasing.

In June
Montenegro signed an agreement to participate in the policy support networks
and electronic platforms of the Erasmus+ programme. As a candidate country,
Montenegro should track statistics on the EU’s five education and training
indicators.

The Youth in
Action programme saw an increased number of young people involved in
international youth activities.

In the area of culture,
Montenegro signed an agreement with the EU on participation in the Culture
strand of the Creative Europe programme.

Conclusion

Some
progress has been made in the field of education and culture. The mismatch
between skills available and labour market needs still remains an issue.
Overall, preparations are advanced.

4.27.
Chapter 27: Environment and climate change

As
regards the environment, in the area of horizontal legislation,
the government adopted amendments to the decree on projects that are subject to
environmental impact assessment (EIA) to fully align with the relevant
directive. Further efforts are needed to implement EIA and Strategic
Environmental Assessments Directives, both at national and local level. As
regards access to environmental information, the three Aarhus Centres are
functioning well. The law on environmental liability was adopted. Cooperation
with civil society organisations needs to be further strengthened.

The government
adopted the first report on the implementation of the national strategy for air
quality management for 2013. In line with the national strategy, plans for
air quality management have been produced for the two most affected
municipalities, Niksic and Pljevlja. The Environmental Protection Agency has
developed an online platform for air quality monitoring and reporting in real
time. Administrative capacity in the area of air quality needs to be increased.

In line with the
law on waste management, implementing legislation was adopted, notably a
decree on waste disposal methods, and the rulebook on the register for licences
issued to collectors, transporters and traders in waste. The national strategy
for waste management has not yet been adopted. Further efforts are needed to
implement and enforce legislation in this area. Cooperation between state and
local authorities needs to be strengthened.

Water quality
remains an issue of concern. Significant efforts are needed to align water
quality legislation with the acquis and to implement it. Monitoring
networks and river-basin water management plans are in their infancy, as is the
infrastructure for wastewater treatment. Two new wastewater treatment
facilities were put into operation, in Zabljak and in Budva.

In December
2013, parliament amended the law on nature protection, mainly as regards
the evaluation of plans, programmes, projects, actions and activities that may
have a significant impact on the maintenance and integrity of the ecological
network and ecologically significant sites, together with compensatory
measures. It still misses out essential articles of the Habitat and Birds
Directive. In March, the Agreement on conservation of whales and dolphins
(cetaceans) in the Black Sea, Mediterranean Sea and Atlantic Ocean area was
ratified. The law on national parks has been adopted. Administrative capacity
needs to increase, especially with regard to scientific work, inspection and
enforcement.

In the field of chemicals,
the government adopted the national implementation plan for the Stockholm
Convention for 2014-2020. Parliament adopted amendments to the law on
protection from noise in December.

Montenegro
signed in September 2014 the agreement for participation in the EU Civil
Protection Mechanism. Disaster risk reduction and disaster management need
to be treated as a matter of priority at national and local level, given the
fact that the region is prone to natural disasters.

In the area of climate
change, a comprehensive national climate policy and a climate change
strategy needs to be developed in line with the expected EU 2030 policy
framework on climate and energy. Substantial efforts are also needed to fully
integrate climate considerations into all relevant sectoral policies and
strategies. The second national communication was submitted to the United
Nations Framework Convention on Climate Change, in December. Montenegro
regularly associated itself with EU positions at international level. The
Council needs to be strengthened further. The country has
not yet put forward a mitigation commitment by 2020 under the Copenhagen Accord.
Montenegro needs to put forward by the first quarter of 2015 its intended
nationally determined contribution to the 2015 Climate Agreement, consistent
with those of the EU and its Member States.

Regarding
alignment with the climate acquis, significant efforts are especially
required to strengthen the country’s monitoring, reporting and verification
capacity. The establishment of the National Council for Sustainable Development
and Climate Change marks a positive development in inter-institutional
coordination and cooperation. Montenegro participated regularly in the
Environment and Climate Regional Accession Network project.

Administrative
capacity in the area of climate change needs to be significantly strengthened in
order to address the need for enhanced climate action in a
sustainable manner, beyond the project-by-project basis. Strengthening
administrative capacity in the fields of environment and climate change needs
to be a priority for the country.

Conclusion

Montenegro
has made little progress in the areas of environment and climate change.
Administrative capacity in all areas of environment and climate change has to
be strengthened at both central and local level. Strategic planning,
substantial investment and significant further efforts are needed to ensure
alignment with and implementation of environment and climate acquis. The
country needs to put forward by the first quarter of 2015 its intended
contribution to the 2015 Climate Agreement. Cooperation with civil society
organisations needs to be further strengthened. Preparations in these areas are
still at an early stage.

4.28.
Chapter 28: Consumer and health protection

In
the area of consumer protection, the 2013-2014 action plan for the
implementation of the 2012–2015 national consumer protection programme was
adopted in December. In January, the Department for Consumer Protection in the
Ministry of Economy was replaced by a Directorate for the Development of
National Brand and Consumer Protection, supervising an Office for Consumer
Protection. The trial of the first collective lawsuit filed in May 2013 by the
consumer protection centre CEZAP to protect consumer credit is still pending.
Support for consumer protection NGOs, including regular funding, is still
needed, as is awareness-raising with the general public.

As regards product-safety-related
issues, legal alignment on liability for defective products was completed,
with the adoption of the law on consumer protection. Revision of the
legislation on general product safety is ongoing. A national programme of
surveillance of products on the market for 2014 was adopted by the
government in October 2013. In the reporting period, there were 3 847
inspections in the area of product safety. These uncovered 134 irregularities
related to placing dangerous products on the market. The system for exchange of
information between the different inspection authorities is in use (see also
Chapter 1 — Free movement of goods).

As
regards non-safety-related issues, a law on
consumer protection, aiming at further alignment with the acquis, was
adopted in December 2013 and entered into force in July 2014. The
law on consumer credits entered into force in February. A media campaign was
organised to inform citizens about it. 5 437 market inspections were
conducted and 3 766 irregularities found. The total number of completed
inspections in the area of consumer protection is 9 284. In total, 3 900
irregularities were found.

In the area of public
health, implementation of e-health proceeds slowly.

As
regards tobacco control, a licensing agreement for the use of pictorial
warnings on tobacco packages was signed with the European Commission in March. Enforcement
of the law limiting the use of tobacco products, which extends the areas where
smoking is prohibited, continues to pose challenges, especially in restaurants.
Inspections, on hold since June 2012, have not resumed.

In the area of communicable
diseases, a programme of mandatory immunisation of the population against
certain communicable diseases on the territory of Montenegro for 2014 was
adopted in November. Plans and programmes for maintaining the country’s status
as free of poliomyelitis for the period 2014–2016, and for removing smallpox
and rubella and preventing congenital rubella syndrome for the period
2014–2016, were both adopted in March. Montenegro has no formal surveillance
system for antimicrobial resistance. The national commission on hospital
infections has not met so far. The majority of small laboratories suffer from a
lack of adequate equipment. There is also a lack of an adequate system of
coordination between laboratories and insufficient quality control.

As regards blood,
tissues, cells and organs, the law on blood provision, aiming at further
alignment with the acquis, was adopted in December, followed by six
by-laws. In October 2013, the Ministry of Health signed a memorandum
of cooperation with Croatia in the field of organ donation and transplantation.
A Commission assessment mission in the field of substances of human origin took
place in July, providing for follow-up recommendations in this field. Upgrading
and restructuring of facilities for handling blood, blood components, tissues
and cells will continue to be necessary to meet EU technical standards.

In
the area of patients’ rights in cross-border healthcare, preparations
still need to start.

In
the field of pharmaceuticals, two rulebooks on clinical trials of human
medicinal products and on advertising of medicinal products were adopted in
January, along with guidelines on good clinical practice for human medicines.

In
the field of mental health, training for nurses and psychiatrists
working in various mental health care institutions was organised during 2013.
Measures are being taken to introduce community-based services as an
alternative to institutionalisation. A new service — house visits to mentally
ill patients — has notably been implemented.

In
the field of health inequalities, activities have been carried out to
inform the Roma population about their right to healthcare in all health
facilities. Health mediators have been established and trained. In the area of nutrition,
a multi-country workshop on action to reduce salt intake took place in
November.

Conclusion

There
has been further progress in the area of consumer and health protection. Legal
alignment and administrative capacity building need to continue in both areas.
Due attention needs to be paid to acquis enforcement and the application
of EU quality and safety standards, in particular in the area of public health.
Better support for consumer NGOs is needed. Preparations in these areas are on
track.

4.29.
Chapter 29: Customs union

As regards customs
legislation, amendments to the customs law were
adopted in December. These amendments refer to exemption from customs duties,
implementation of transit procedures in line with the convention on a common
transit procedure, and safety and security provisions for international trade
in goods. The customs tariff was updated in line with the 2014 version of the
EU’s Combined Nomenclature. In the framework of CEFTA, since 1
April 2014, Serbia, Albania, Montenegro and the former Yugoslav Republic of
Macedonia started applying the regional Convention on Pan-Euro-Med Preferential
Rules of Origin.

As
regards Montenegro’s administrative and operational capacity, the
customs administration continued with activities to boost the capacity and
efficiency of the risk analysis system, by developing new instructions and IT
tools. Understaffing of the IT units needs to be addressed. On the basis of the
customs administration 2013-2015 business strategy and action plan, a new ICT
strategy for 2014-2020 was adopted. Customs’ operational capacity to
apply simplified procedures and security measures needs to be increased. An
agreement on cooperation and mutual assistance in customs matters between
Montenegro and Turkey was signed in September 2013. Some efforts
were invested in strengthening internal control to effectively prevent and
detect corruption and other misconduct. The customs
administration conducted anti-corruption campaigns, adopted an integrity plan
in line with the customs’ anti-corruption policy, and appointed intellectual
property rights coordinators in the customs branch offices. A customs transit
system compliant with the EU’s new computerised transit system has yet to be
put in place, but preparations are ongoing.

Conclusion

Further
progress has been achieved in the area of customs legislation, in particular
through amendments to the customs law. Work on further alignment with the acquis
needs to continue. In the areas of administrative and operational capacity,
the customs administration needs to fully implement the customs business and IT
strategies, and enhance the capacity of the IT units. Preparations for
possible accession to the convention on a common transit procedure need to be
stepped up. Overall, preparations in the field of customs union remain
moderately advanced.

4.30.
Chapter 30: External relations

In the field of
the common commercial policy, the process of accession to the World
Trade Organisation (WTO) Government Procurement Agreement was launched in
November and is at an advanced stage. The law on control of exports of dual use
goods needs to be further aligned with the acquis, in particular with a
view to improving control mechanisms.

As regards bilateral
agreements with third countries, Montenegro is negotiating bilateral
free trade agreements with Belarus and Kazakhstan, in line with its obligations
under the Free Trade Agreement with Russia and taking into account the Eurasian
Customs Union formed in the meantime. Economic
cooperation agreements were signed with Romania and
Slovakia. Montenegro signed a bilateral investment treaty with the Republic of
Moldova and is currently negotiating bilateral investment treaties with 12
countries. Montenegro continues to play an active role in the Central European
Free Trade Area.

As regards development
policy and humanitarian aid, fully operational administrative structures
still need to be set up. Humanitarian contributions are still decided on a
case-by-case basis without a legislative framework.

Conclusion

Little
progress has been made in the area of external relations. Montenegro has
continued to fulfil the commitments it made upon accession to the WTO.
Preparations in the fields of development and humanitarian aid remain at an
early stage. Overall, preparations in the area of external relations remain on
track.

4.31.
Chapter 31: Foreign, security and defence policy

The regular political
dialogue between the EU and Montenegro on foreign and security policy
issues continued. (For more information on relations with other
enlargement countries and EU Member States, see Political criteria —
Regional issues and international obligations.)

As
regards the common foreign and security policy (CFSP), Montenegro
aligned itself, when invited, with all relevant EU declarations and Council
decisions (100 % alignment). (As regards the International Criminal Court,
see Political criteria — Regional issues and international obligations.)

Montenegro
generally aligned itself with and implemented restrictive measures
introduced by Council decisions, including EU restrictive measures in the context
of Russia’s illegal annexation of Crimea and events in eastern Ukraine.
Montenegro voted in favour of the UN General Assembly Resolution on the
territorial integrity of Ukraine. The law on international
restrictive measures is yet to be adopted.

Montenegro is
participating in some, but not all, international export control arrangements
and instruments concerning non-proliferation of weapons of mass
destruction. Compliance with international commitments on small arms and light
weapons (SALW), including the aims of the EU strategy on SALW, is continuing
with the aid of national laws and control systems. Montenegro adopted the
2014-2018 action plan for the implementation of UN Security Council Resolution
1540 to prevent the proliferation of nuclear, chemical and biological weapons.
Montenegro ratified the UN Arms Trade Treaty in July 2014.

Montenegro
continued to engage actively in cooperation with international organisations.
In October, Montenegro presented its fourth Annual National Programme,
launching the fourth cycle of the NATO Membership Action Plan.

As regards security
measures, Montenegro continued its work on practical arrangements necessary
to comply with Council decisions on information security, including the
handling of classified information. Parliament
adopted amendments to the law on classified information in March.

Montenegro
continued to participate in civil and military crisis management
operations under the common security and defence policy (CSDP).
Montenegro continued to participate in the EU operation ATALANTA in Somalia. It
also continued to participate in the international operations ISAF in
Afghanistan, UNMIL in Liberia and UNFICYP in Cyprus. Montenegro
deployed one officer to the EU mission in Mali (EUTM) in June and expressed
readiness to participate with one officer in the EU mission in Central African
Republic (EUFOR CAR).

Conclusion

Montenegro
continued to participate in civil and military crisis management operations. The
country continued its full alignment with EU declarations and Council decisions
in the field of foreign and security policy. Overall,
preparations in the area of foreign, security and defence policy are well on
track.

4.32.
Chapter 32: Financial control

As regards public
internal financial control (PIFC), Montenegro updated the action plan for
the PIFC strategy for 2013-2017, focusing specifically on activities that will
further strengthen managerial accountability and improve senior management’s
delegation of responsibilities to middle management, in April. Amendments to
the PIFC law entered into force in August. The Central Harmonisation Unit
prepared guidelines on risk management and launched two pilot exercises to
assess the quality of financial management and control in two ministries.
Recruitment of internal audit staff at central and local level continued and
more internal auditors were trained and certified, with special emphasis on
auditing EU funds. Montenegro needs to continue to build a comprehensive risk
management system and to ensure that the principle of managerial accountability
is fully embedded in the management culture, including delegation of
responsibilities. A PIFC-compatible budget inspection function has yet to be
created.

In
the area of external audit, the amendments to the Law on State Audit Institution,
aimed at enhancing the SAI’s financial and operational independence in line
with the standards of the International Organisation of Supreme Audit
Institutions (INTOSAI) were adopted in July. The oversight function of the
State Audit Institution (SAI) was strengthened by enhanced parliamentary
scrutiny of the public spending and audit findings in 2013. The government also
took steps to improve implementation of the SAI’s audit findings by adopting an
action plan and by establishing a coordination committee for monitoring its
implementation. The Audit Authority was fully separated from the SAI in
December 2013. There is a positive trend in the implementation of the SAI’s
annual audit programmes, but the audit capacity still needs to be strengthened.
The focus on performance audits remains very limited. The vacant position in
the SAI Senate still has to be filled.

In
the area of protection of the EU’s financial interests, the government
adopted a decision on the establishment of the anti-fraud coordination service
(AFCOS) network for the monitoring and prevention of fraud and irregularities
and cooperation with the Commission in December 2013. Preparations for an
anti-fraud strategy to protect the EU’s financial interests started in March.
The capacity of the AFCOS unit in the Ministry of Finance needs to be further
increased.

As regards
protection of the euro against counterfeiting, there is a
high level of legislative alignment. Active measures were taken to train cash
handlers in the commercial banks and the post office of Montenegro to ensure
systematic use of technical devices to detect counterfeit currency and to
submit data to the relevant national and international authorities. National
legislation on medals and tokens similar to euro coins has yet to be aligned
with the acquis.

Conclusion

There
has been progress in the area of financial control. Montenegro needs to ensure
further implementation of the managerial accountability and delegation
frameworks in the public sector, and to strengthen the capacity of internal
audit. In the area of external audit, the SAI’s audit capacity needs to be
enhanced. As regards protection of the euro against counterfeiting, the 1929
Geneva Convention needs to be ratified and national legislation needs to be
aligned with the acquis on medals and tokens similar to euro coins.
Overall, preparations in this area are moderately advanced.

4.33.
Chapter 33: Financial and budgetary provisions

Concerning
the rules of administration of the own resources system, including traditional
own resources, the value added tax-based resource and the gross
national income-based resource, Montenegro is not yet aligned with the acquis.
(For developments in the underlying policy areas, see
Chapters 16 — Taxation; 18 — Statistics; 29 — Customs union; and 32 —Financial
control.)

As
regards administrative infrastructure, the administrative capacity of
the institutions in the policy areas that indirectly affect the own resources
system (customs, taxation, statistics, financial control) needs to be further
strengthened.

A
department for the coordination and management of the EU’s own resources has
been set up in the Ministry of Finance. This structure will need to be fully
operational to ensure correct calculation, accounting, forecasting, collection,
payment and control of own resources and reporting to the EU on the
implementation of the EU’s own resources rules.

With
regard to tools for fighting tax evasion and fraud and reducing the size of the
informal economy, the government continued with the fiscal consolidation
measures launched in 2013. The focus of government action against the informal
economy includes emphasis on the market for tobacco products and the labour
market.

Conclusion

There
has been limited progress on financial and budgetary provisions. The
administrative framework for applying the own resources rules, and capacity to
apply the rules correctly will need to be further built up. Preparations in
this area are at an early stage.

Statistical Annex

STATISTICAL DATA || || || || || || ||

Montenegro || || || || || ||

|| || || || || || || || ||

|| Basic data || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Population (thousand) || || 615 || 630 || 618b || 620 || 620 || 621 ||

|| Total area of the country (km²) || || 13 812 || 13 812 || 13 812 || 13 812 || 13 812 || 13 812 ||

|| || || || || || || || ||

|| National accounts || || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross domestic product (GDP) (million euro) || || 1 295 || 2 981 || 3 104 || 3 234 || 3 149 || : ||

|| GDP (euro per capita) || 1) || 2 113 || 4 720 || 5 011 || 5 211 || 5 063 || : ||

|| GDP (in Purchasing Power Standards (PPS) per capita) || || : || 9 685 || 10 143b || 10 546 || 10 863 || : ||

|| GDP (in Purchasing Power Standards (PPS) per capita), relative to the EU average (EU-28 = 100) || || : || 41 || 42 || 42 || 41 || 42 ||

|| Real GDP growth rate: change on previous year of GDP volume (%) || || 1.1 || -5.7 || 2.5 || 3.2 || -2.5 || : ||

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

|| Labour productivity growth: growth in GDP (constant prices) 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 (2005 = 100) || || : || : || : || : || : || : ||

|| Labour productivity per person employed: GDP (in PPS) per person employed relative to EU average (EU-27 = 100) || || : || : || : || : || : || : ||

|| Gross value added by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || || : || : || 9.3 || 9.5 || 8.8 || : ||

|| Industry (%) || || : || : || 14.8 || 12.2 || 12.4 || : ||

|| Construction (%) || || : || : || 5.9 || 5.8 || 5.5 || : ||

|| Services (%) || || : || : || 70.1 || 72.4 || 73.3 || : ||

|| Final consumption expenditure, as a share of GDP (%) || || 100.1 || 106.2 || 105.6 || 104.0 || 105.2 || : ||

|| Gross fixed capital formation, as a share of GDP (%) || || 17.5 || 26.7 || 21.1 || 18.4 || 18.5 || : ||

|| Changes in inventories, as a share of GDP (%) || || 5.9 || 0.4 || 1.7 || -0.3 || 1.0 || : ||

|| Exports of goods and services, relative to GDP (%) || || 38.4 || 32.1 || 34.7 || 42.7 || 44.1 || : ||

|| Imports of goods and services, relative to GDP (%) || || 61.9 || 65.4 || 63.1 || 64.9 || 68.8 || : ||

|| || || || || || || || ||

|| Industry || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Industrial production volume index (2010 = 100) || || 110.5 || 85.1 || 100.0 || 89.8 || 83.5 || 92.3 ||

|| || || || || || || || ||

|| Inflation rate and house prices || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Consumer price index (CPI), change relative to the previous year (%) || || : || : || : || 3.3 || 4.0 || 1.8 ||

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

|| || || || || || || || ||

|| Balance of payments || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Balance of payments: current account total (million euro) || 2) || : || -830 || -710 || -710 || -588 || -487 ||

|| Balance of payments current account: trade balance (million euro) || 2) || : || -1 322 || -1 267 || -1 267 || -1 389 || -1 329 ||

|| Balance of payments current account: net services (million euro) || 2) || : || 401 || 464 || 464 || 612 || 653 ||

|| Balance of payments current account: net income (million euro) || 2) || : || 5 || -22 || -22 || 54 || 66 ||

|| Balance of payments current account: net current transfers (million euro) || 2) || : || 85 || 114 || 114 || 135 || 123 ||

|| of which government transfers (million euro) || 2) || : || 5 || 16 || 16 || 18 || 22 ||

|| \*\*3 year backward moving average of the current account balance relative to GDP (%) || 2) || : || -39.1 || -33.5 || -24.6 || -21.5 || -18.7 ||

|| \*\*Five year change in share of world exports of goods and services (%) || 2) || : || 3.4 || 3.3 || 3.3 || -2.9 || -1.6 ||

|| Net inward foreign direct investment (FDI) (million euro) || 2) || : || 1 066.5 || 552.1 || 389.1 || 461.6 || 323.9 ||

|| Foreign direct investment (FDI) abroad (million euro) || 2) || : || 32.9 || 22.1 || 12.3 || 20.8 || 13.0 ||

|| of which FDI of the reporting economy in the EU-28 countries (million euro) || 2) || : || 6.9 || 18.9 || -9.4 || 20.6 || 11.1 ||

|| Foreign direct investment (FDI) in the reporting economy (million euro) || 2) || : || 1 099.4 || 574.2 || 401.4 || 482.4 || 336.9 ||

|| of which FDI of the EU-28 countries in the reporting economy (million euro) || 2) || : || 787.8 || 292.7 || 204.9 || 219.7 || 79.8 ||

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

|| || || || || || || || ||

|| Public finance || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| General government deficit / surplus, relative to GDP (%) || || : || -5.4 || -4.6 || -5.2 || -5.9 || -2.3 ||

|| General government gross debt relative to GDP (%) || || : || 38.2 || 40.9 || 46.0 || 50.9 || 58.0 ||

|| || || || || || || || ||

|| Financial indicators || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross foreign debt of the whole economy, relative to GDP (%) || || : || : || : || : || : || : ||

|| Gross foreign debt of the whole economy, relative to total exports (%) || || : || : || : || : || : || : ||

|| Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || : || : || : || : || : || : ||

|| Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || || : || : || : || : || : || : ||

|| Money supply: M3 (M2 plus marketable instruments, million euro) || || : || : || : || : || : || : ||

|| Total credit by monetary financial institutions to residents (consolidated) (million euro) || 3) || : || 2 372 || 2 166 || 1 945 || 1 842 || 1 966 ||

|| \*\*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 (%) || || : || 9.38 || 9.63 || 9.73 || 9.47 || 9.36 ||

|| Deposit interest rate (one year), per annum (%) || || : || 3.87 || 3.26 || 3.02 || 3.23 || 2.54 ||

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

|| Trade-weighted effective exchange rate index (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) || || : || 397 || 416 || 303 || 348 || 424 ||

|| || || || || || || || ||

|| External trade in goods || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Value of imports: all goods, all partners (million euro) || || : || 1 658 || 1 646 || 1 828 || 1 818 || 1 769 ||

|| Value of exports: all goods, all partners (million euro) || || : || 278 || 329 || 451 || 365 || 372 ||

|| Trade balance: all goods, all partners (million euro) || || : || -1 381 || -1 317 || -1 377 || -1 454 || -1 396 ||

|| Terms of trade (export price index / import price index \* 100) (number) || || : || : || 106 || 101 || 96 || 102 ||

|| Share of exports to EU-28 countries in value of total exports (%) || || : || 51.6 || 57.2 || 59.9 || 51.2 || 41.0 ||

|| Share of imports from EU-28 countries in value of total imports (%) || || : || 42.4 || 42.6 || 40.6 || 44.5 || 44.1 ||

|| || || || || || || || ||

|| Demography || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Crude rate of natural change of population (natural growth rate): number of births minus deaths (per thousand inhabitants) || || 5.5 || 4.4 || 2.9b || 2.2 || 2.5 || 2.5 ||

|| Infant mortality rate deaths of children under one year of age (per thousand live births) || || 14.6 || 5.7 || 6.7b || 4.4 || 4.4 || 4.4 ||

|| Life expectancy at birth: male (years) || || : || 72.9 || 73.6 || 73.4 || 74.3 || 74.1 ||

|| Life expectancy at birth: female (years) || || : || 77.6 || 78.5 || 78.9 || 78.4 || 79.0 ||

|| || || || || || || || ||

|| Labour market || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Economic activity rate for persons aged 20–64: proportion of the population aged 20–64 that is economically active (%) || || : || : || : || : || : || 65.1 ||

|| \*Employment rate for persons aged 20–64: proportion of the population aged 20–64 that are in employment (%) || || : || : || : || : || : || 52.6 ||

|| Male employment rate for persons aged 20–64 (%) || || : || : || : || : || : || 57.8 ||

|| Female employment rate for persons aged 20–64 (%) || || : || : || : || : || : || 47.5 ||

|| Employment rate for persons aged 55–64: proportion of the population aged 55–64 that are in employment (%) || || : || : || : || : || : || 38.7 ||

|| Employment by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || || : || : || : || 5.6 || 5.7 || 4.5 ||

|| Industry (%) || || : || : || : || 13.0 || 11.7 || 11.9 ||

|| Construction (%) || || : || : || : || 6.0 || 5.7 || 5.9 ||

|| Services (%) || || : || : || : || 75.5 || 76.9 || 77.7 ||

|| Unemployment rate: proportion of the labour force that is unemployed (%) || || 21.2 || 19.1b || 19.7 || 19.7 || 19.7 || 19.5 ||

|| Male unemployment rate (%) || || : || 18.0 || 18.9 || 19.5 || 19.3 || 20.1 ||

|| Female unemployment rate (%) || || : || 20.4 || 20.7 || 20.0 || 20.3 || 18.8 ||

|| Youth unemployment rate: proportion of the labour force aged 15–24 that is unemployed (%) || || : || : || : || : || 43.7 || 41.6 ||

|| Long-term unemployment rate: proportion of the labour force that has been unemployed for 12 months or more (%) || || : || 15.6 || 15.5 || 15.7 || 15.6 || 16.0 ||

|| || || || || || || || ||

|| Social cohesion || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Average nominal monthly wages and salaries (national currency) || 4) || 211 || 463 || 479 || 484 || 487 || 479 ||

|| Index of real wages and salaries (index of nominal wages and salaries divided by the inflation index) (2000 = 100) || || 91.6 || 219.6 || 226.1 || 221.6 || 214.3 || 206.1 ||

|| \*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 || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Number of passenger cars relative to population size (number per thousand population) || || 161.0 || 283.9 || 267.1b || 278.2 || 279.9 || 287.0 ||

|| Number of mobile phone subscriptions relative to population size (number per thousand population) || || 639.6 || 2 496.5 || 2 260.3b || 1 875.0 || 1 595.0 || : ||

|| || || || || || || || ||

|| Infrastructure || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Density of railway network (lines in operation per thousand km²) || || 18.1 || 18.1 || 18.1 || 18.1 || 18.1 || 18.1 ||

|| Length of motorways (kilometres) || || 0 || 0 || 0 || 0 || 0 || 0 ||

|| || || || || || || || ||

|| Innovation and research || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Public expenditure on education relative to GDP (%) || || : || : || : || : || : || : ||

|| \*Gross domestic expenditure on R&D relative to GDP (%) || || 0.75 || 1.12 || : || 0.41 || : || : ||

|| Percentage of households who have internet access at home (%) || || : || : || : || 51.4e || 55.0e || 55.8e ||

|| || || || || || || || ||

|| Environment || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| \*Index of greenhouse gas emissions, CO2 equivalent (1990 = 100) || || : || : || : || : || : || : ||

|| Energy intensity of the economy (kg of oil equivalent per 1 000 euro GDP at 2000 constant prices) || || : || : || : || : || : || : ||

|| Electricity generated from renewable sources relative to gross electricity consumption (%) || || : || : || : || : || 44.4 || : ||

|| Road share of inland freight transport (based on tonne-km) (%) || || 60.3 || 64.1 || 52.5 || 43.1 || 51.0 || : ||

|| || || || || || || || ||

|| Energy || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Primary production of all energy products (thousand TOE) || || : || 423 || 690 || 700 || 684 || : ||

|| Primary production of crude oil (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || : ||

|| Primary production of hard coal and lignite (thousand TOE) || || : || 211 || 426 || 434 || 393 || : ||

|| Primary production of natural gas (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || : ||

|| Net imports of all energy products (thousand TOE) || || : || 416 || 305 || 443 || 394 || : ||

|| Gross inland energy consumption (thousand TOE) || || : || 845 || 994 || 1 143 || 1 078 || : ||

|| Electricity generation (thousand GWh) || || 2.5 || 2.8 || 4.0 || 2.7 || 2.8 || : ||

|| || || || || || || || ||

|| Agriculture || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Agricultural production volume index of goods and services (at producer prices) (previous year = 100) || || 107 || : || : || : || : || : ||

|| Utilised agricultural area (thousand hectares) || 5) || 518p || 516 || 516 || 516 || : || : ||

|| Livestock numbers: live bovine animals (thousand heads, end of period) || 6) || 178e || 101 || 96 || 87 || 85 || 89 ||

|| Livestock numbers: live swine (thousand heads, end of period) || 6) || 21e || 12 || 11 || 21 || 18 || 20 ||

|| Livestock numbers: live sheep and live goats (thousand heads, end of period) || 6) || 244e || 200 || 198 || 232 || 230 || 220 ||

|| Production and utilisation of milk on the farm (total whole milk) (thousand tonnes) || 7) || 194e || 152 || 143 || 202 || 159 || : ||

|| Harvested crop production: cereals (including rice) (thousand tonnes) || 8) || 4p || 3 || 17b || 18 || : || : ||

|| Harvested crop production: sugar beet (thousand tonnes) || || : || : || : || : || : || : ||

|| Harvested crop production: vegetables (thousand tonnes) || 9) || : || : || 151 || 150 || : || : ||

: = not available

b = break in series

e = estimated value

p = provisional

\* = Europe 2020 indicator

\*\* = Macroeconomic Imbalance Procedure (MIP) indicator

Footnotes:

1) Excluding financial intermediation services indirectly measured (FISIM).

2) 2013: Based on BPM6 (balance of payments manual edition 6).

3) 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).

4) 2001: in German marks (DEM).

5) Until 2010: agricultural area includes arable land, land area under pasture, fishponds and ponds. 2011: for private agricultural holdings, data on areas are estimates based on data from the Overall Cadastre; the data on area are obtained by estimates.

6) Including livestock held by enterprises, cooperatives and households.

7) Net quantity, from enterprises, cooperatives and households.

8) Including production of enterprises, cooperatives and households. Until 2009: wheat production only.

9) Including production of enterprises, cooperatives and households.

[1]               The
rapporteur for Montenegro is Mr Charles Tannock.

[2]               Enlargement
Strategy and Main Challenges 2014-2015, COM(2014) 700.

\*               This designation
is without prejudice to positions on status, and is in line with UNSCR 1244/99
and the ICJ Opinion on the Kosovo declaration of independence.

[3]               Note:
the introduction of international accounting standards (IAS) in the banking
sector as of January 2013 hinders data comparability.

[4]               To
illustrate the mismatch between demand and supply, note that in 2013 there were
48 900 unemployed persons despite an offer of 37 869 job vacancies.
In addition, 22 498 work permits for foreign workers were delivered to
cover employers’ needs.

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